Tuesday, December 29, 2015
So Lemmy passed away last night, 4 days after his 70th birthday.
And there's a lesson we can all take from this: if you've been drinking a bottle of Jack Daniels every day for the past 50 years, for the love of god don't switch to vodka at age 69 "for your health".
Anyway, here's some news:
Calculated Risk - chemical activity barometer ends year with modest uptick. Which should mean industrial production goes positive again soon.
Robert's Stochastic Thoughts - there is no such thing as NAWRU. Yup, turns out that the data proves the Phillips curve is horizontal. The supposed correspondence between inflation and unemployment is based on a "spherical cow" assumption that output is employment; but did the macroeconomists ever scare up the slightest piece of data to prove it?
Bloomberg - Finland finally realizes it should never have joined the Euro common currency union. And what's great about this is that Finland has spent the past five years goose-stepping in line with Schauble, demanding austerity from the EZ periphery. Well, guys, now that the Nokia cash cow is gone, I guess you're just going to have to impose an internal devaluation on yourselves, eh? Fire all civil servants, privatize all industry, ban unions, jack up unemployment by 20%, eliminate all benefits, cut pensions, y'know? Karma's a bitch, Finland.
Fortune - the highest selling books in the US are adult colouring books. And thus Donald Trump becomes President.
National Interest - Moldova's drama on the Dniester. WHO THE FUCK CARES. Y'know, there are some countries that aren't even worth the electrons, and Moldova right now is three of them.
The Force.net - the Ewoks are dead. All of them. OK, that's good.
Friday, December 25, 2015
Wednesday, December 23, 2015
This post was written almost a year ago and scheduled for today.
It's just a reminder that there's been a very reliable pop in the price of gold (and miners) every January and February over the past decade.
This is a chance to make a quick 50% profit, even if you just buy an ETF. And any chance to buy a 50% pop over 2 months is something you just gotta jump at.
So watch the chart, and buy that breakout when it comes!
Monday, December 21, 2015
Elliott Wave International - ooh look at that bank index shart! Where they give us this bank index shart and ask us to look at it:
And y'know what? Maybe the reason the bank index is still below the 2007 high is because banks like BofA had to dilute like fuck in 2009 to stay solvent. Plus the whole "hard to earn a profit lending at 0% real rates when the housing market is a shadow of its 2007 self" bit.
And I'm not surprised the global hedge fund index has underperformed the S&P 500: 90% of these clowns underperform the S&P 500, and then they even take their 2% & 20% vig from that. I'm only amazed that the clowns have only turned in a 20% return since the 2009 low, y'know, with the whole S&P up 200% thing. But I guess when you're a kleptocrat you don't care how much you suck as long as you can keep snorting hookers off cocaine's ass, and fuck CalPERS and the Harvard endowment for being dumb enough to invest with you instead of buying SPY.
And I guess if you're a clueless fucking moron you can read this Elliott Wave blather and find it clever and interesting and insightful.
So I breathlessly await this "C wave down".
Not not really I don't.
James Kunstler - OMG DOOOOOM. Quote:
As it were, all credit these days looks shopworn and threadbare, as if the capital markets had by stealth turned into a swap meet of previously-owned optimism. Who believes in anything these days besides the allure of fraud? Capital is supposedly plentiful these days — look how much has rushed into the dollar from the nervous former go-go nations with their wobbling ziggurats of bad loans and surfeit of production capacity — but what actually constitutes that capital? Answer: the dwindling faith anyone will pay you back next Tuesday for a hamburger today.
We now enter the “discovery” phase of financial collapse, where things labeled “capital” and “credit” turn out to be mere holograms. Fed Chair Janet Yellen herself had a sort of hologramatic look last Wednesday when she stepped onto her Delphic platform to reveal the long-heralded interest rate news. Perhaps Mrs. Yellen is a figment conjured by George Lucas’s Industrial Light & Magic shop (now owned by Disney). What could be more fitting in a smoke-and-mirrors culture? Anyway, the rude discovery that capital is not what it has appeared to be is now underway, with the power to derail political systems and societies.
Yeah buddy, that's why 10Y USTs are trading at around 2.2%. Because all credit looks shopworn and threadbare.
And inflation at zero percent totally for sure indicates that there is dwindling faith anyone will pay you back next Tuesday for a hamburger today.
I eagerly await your "discovery" phase of financial collapse. I wonder if it's going to look anything like a massive repudiation of debt as a dishonest system comes apart at the seams? What, has this guy become besties with Gary Wordsalad? He sure is laying the linguistic diarrhea on thick. Is this going to be as epic as Mr. Losemoney's epic crash-call bottom-tick of June 24, 2013?
What a fucking queer. I guess Kunstler's joined the rest of the tea partiers and started working for Vladimir Putin.
Dean Baker - working paper on rents. Why yes, of course economic rents are the mechanism for upward redistribution of income. How the hell else do you expect the kleptocratic ruling class to make money? Wise investment and hard work?
Ha ha ha ha ha!
This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.
Wait. Wait a sec. You're saying this is a paper by an actual economist?
Yes, apparently Dean Baker is a former professor of macroeconomics, as well as a founder of CEPR.
So hasn't this guy heard of Douglass North? That's kinda an important economist there, and he explains in detail how rents are produced by institutions. You could basically sum up the entire paragraph above, and much of the rest of the paper, as "go read Douglass North".
The people with power influence the political process to gain the ability to confiscate wealth from the economy. Basic fact. So obviously the ability to confiscate rents has nothing to do with capitalism, per se, but is actually just a feature of corrupt societies in general.
You don't have to limit your analysis to patents, financial sector, CEO pay and professional organizations, either; basically every institutional structure in every economy can be altered to feed more money to the kleptocrats. Union-busting legislation in the US, government subsidy of subsistence wages at Walmart, 2%-20% hedge fund fee structures, corn ethanol subsidies, and the military-industrial complex are all areas where money is taken out of the American economy and handed over to a kleptocratic elite who provide nothing of value.
In fact, given John Kenneth Galbraith's explanation of the positive effects of oligopoly, the problem is not so much government granting of oligopolistic power to corporations: the real problem is government granting of kleptocratic power to the rentier class.
So I guess the article isn't actually a paper by an economist as it is just another political screed. Oh well, that's fine. I guess that's what CEPR does.
Well, I was pissed off cos I needed a 95 on the exam to get an A+ in polisci. But then I sat down at the table, opened it up, and...
I'd studied the Washington Consensus, in fact I've read Stiglitz's Globalization and its Discontents, andwouldn't you know it that was one of the essay questions.
The other was on critical theory, and dammit all wouldn't you know I've already studied everything from constructionism to Foucault in detail.
So it's quite possible I got a perfect score on that exam. Then again, the TAs seem to not want to give a mark higher than 90 to anyone who demonstrably knows even more than them on the topic. "Gee, you explained the central thesis of post-modernism better than any of our polisci profs can, because you actually read 1000 pages of Foucault and Lyotard, but we're going to dock 5% because your paragraphs are too short."
Oh well. All that's left is a stats exam on Tuesday, and I just can't be arsed to study for it. So here's some of the news that's been piling up:
New Deal Demoncrat - weekly indicators. Again, real estate, M1 & M2, tax withholding.
Calculated Risk - LA port traffic increased yoy in November. Again, that's the US economy right there.
Macro Musings - the Fed wants a 1%-2% inflation corridor. Quote:
Yes, even though the Fed has an official 2 percent inflation target revealed preferences indicate the real force shaping Fed policy has been a 1-2 percent inflation target corridor over the past seven years. Once you understand this point all other Fed mysteries begin to clear up.Well, they must not be all that concerned about zeroing the inflation expectations term if they're pursuing a 1%-2% corridor instead of accepting temporary overshoots of 2%. Personally I think it's awful gutsy to tiptoe along the knife-edge of deflation this way: maybe they're worried that Summers' "secular stagnation" could progress into stagflation unless they nail inflation down at zero?
The question is, what does the next Fed do for an encore 10 years from now? Nail down a 0.2%-0.4% corridor? At some point Feds have to accept higher inflation than was around before.
WaPo - women are dumbasses at assembling Ikea furniture. Hey sweet-tits, maybe the reason we guys don't follow the instructions is because we're not idiots?
Friday, December 18, 2015
Here's a documentary about how the Justified Ancients of Mu-Mu founded the nation of America, in a Viking boat, led by the singer from Deep Purple and two guys in trashcan helmets not pretending very well to play guitar because why bother:
Why the hell isn't anyone doing anything as joyously, absurdly nuts as this anymore? I wanna time-travel back to 1989 and start a KLF rip-off trance act now.
Thursday, December 17, 2015
Just to remind you, it's really been a whole year since Pharmasave Dave quit his blog.
We never found out how he fared on the Casey Cruise.
Maybe he was dumped overboard. Who knows? In whose rational self-interest would that have been? Hasn't Rick Rule been acting a little suspiciously all year?
Yeah no actually now he writes about speakers and stuff.
at 9:21 AM
Tuesday, December 15, 2015
Well, I got my micro exam done. I pretty much sucked for the last month of stuff, but since I had a 95 going into the exam I'm not too concerned. I'd need to get more than 23/90 wrong to get less than an A. I doubt I sucked that bad.
Today is my macro exam, so I'm basically stuck trying to cram Mundell-Fleming and the Phillips curve for the next few hours. But why not a bit of news first?
Noah Smith - academic BS as barrier to entry. He wonders if the newspeak of critical theory serves as a barrier to entry. The idea is that since the US turns out an insanely high number of Ph.D.s who have no job prospects except to compete for university teaching positions, something must be used to select out most of that crowd, and critspeak does the job.
As far as pomo is concerned, btw, I was at university during the grand old days of Andrea Dworkin and Helene Cixous. I can quote verbatim a hilarious passage from Lyotard, even today:
It is once more around the anus that the revolution of the disjunctive bar will grow furious to the point that the president's arse will glow like the sun.
Yes, that was 80s postmodern scholarship! And this is from the same guy who formulated the most intelligible and succinct definition of postmodernism, "an incredulity toward metanarratives".
I'm back at uni doing a second degree now, and it really does look to me like much of the silly French academy excesses of the old pomo have been stripped away, and nowadays you can do pomo without sounding like a fruit.
"Post-modernism" is really just a rejection of the modernist way of thinking (yes, I can explain what I mean, and yes in a way that would make sense to you). The silly blather associated with the 80s-90s era writing wasn't specifically pomo: it was specifically bourgeois French academy bullshit. Heck, 100 years ago Emile Durkheim fled the French education system for Germany because he actually wanted to study sociology and not just spend a career trying to sound clever. The French academy has always had a reputation for vacuous bourgeois bullshit. Pomo is just yet another field that they corrupted.
I'd agree strongly that obscurant critspeak is just a way of trying to sound clever without having any real ideas. This was what the Sokal affair threw into the spotlight 20 years ago. So maybe it's not so much a selection mechanism as it is a coping strategy?
I bet all the pomo profs who were given tenure 25 years ago because every faculty needed a token pomo (though, and because, nobody could understand a bloody word they were saying) are probably on selection committees now, and so they want to take on new faculty who make them look less stupid and useless.
But here's an idea: pomo, without the bullshit, is actually immeasurably important to understand if you're in the humanities or social sciences (except in economics where you're still stuck in the modernist, rationalist, non-self-reflective fucking mid-19th century). Social constructionism is important, post-structuralism is important, seeing the author behind the narrative is important, paying attention to power structures is important. Fuck, all this stuff was invented by Nietzsche in the 1880s, and for damn good reason.
So maybe understanding of pomo is necessary to be a professor: but since most Ph.D.s are coddled bourgeois children who've never had to work for a living in the real world - and are thus stuck at an adolescent level of development with a few severe psychiatric disorders on the side - they just can't understand how to do pomo sensibly, and so they instead try to ape the writing of the 80s French pomo brigade, and thus they end up sounding like bullshit.
at 8:31 AM
Monday, December 14, 2015
Yes yes, let's puke a stock that yields 5% and has worldwide market exposure.
A rational reason to puke this would be a fear that the US economy is about to collapse, a recession is nigh, and thus sell anything that manufactures durables.
A rational reason to believe a recession is nigh is not a belief that Janet wants to destroy America, or that she's incompetent, or that some high-yield fund invested exclusively in CCCs is going under.
A rational reason to believe a recession is nigh would be decelerating M1 and M2, a collapse in home purchase applications, a collapse in hiring, dwindling tax withholding, unserviceable consumer debt, or those other sorts of things that we're not seeing at all.
I think I should put in a stink bid for $11. Hey, someone made money last time, didn't they?
25.5 already this morning, with 2 days to go yet til Janet Yellen destroys America in the name of socialist Islamism. Or whatever.
The $VIX monthly futures curve has flattened out in a matter of days too. It'll be interesting to see how this ends up.
Sunday, December 13, 2015
Saturday, December 12, 2015
New Deal Demoncrat - weekly indicators. Purchase applications, real estate loans, M1, M2 and tax withholding are all positive. Those are the actual US domestic economy, people. Industrial and world economy all suck, but the US is a service economy and a net importer so fuck knows why people get worked up about industrial and commodities.
WSJ RTE - quits and layoffs finally get to where Janet Yellen wants them. I guess the argument is (barring continued commodity collapse) inflation should begin to accelerate with unemployment down to its natural rate, and s/(f+s) gives you some sort of clue where the natural rate is? I'd still say she's probably smart enough to not fuck up the economy, unlike that clown at Stifel who came out this weekend saying "Yellen painted herself into a corner this summer and now she's going to wreck everything". Cos, y'know, one of these two people heads the Federal Reserve, and the other is a fucking sellside retard at Stifel.
New Deal Demoncrat - gas prices already below last year's low. Yes, therefore we should puke the S&P 500, because consumers have more money in their pockets.
WSJ RTE - could higher interest rates lead to higher inflation? I dunno about neo-Fisherism, but I'd like someone to tell me whether a higher Fed Funds rate will increase the cost of holding money enough to drive cash back into investment.
FT Alphaville - India's suspicious GDP deflator. Don't believe the India GDP headlines.
Vox EU - on sub-Saharan Africa's low adoption of high-tech farm inputs.
This was a really interesting study, and I encourage you to go beyond the Vox EU abstract and read the actual article.
African farming has not seen the productivity revolution that has occurred elsewhere in the world; and, summing up, the reason is that all the fertilizer and hybrid seeds available for purchase have been adulterated and diluted to the point that any farmer using them will experience a net loss.
I.e., it doesn't even pay to buy hybrid seeds or fertilizer, because the stuff available in local stores isn't even what it's supposed to be. And all the farmers know this.
Douglass North actually explains why this happens in detail. I've been reading his Institutions, Institutional Change and Economic Performance during exam period. It's very sad that here's yet another pioneering, Nobel-winning economist that I won't even be allowed to study in grad school.
Unless I go into political economy instead of economics.
Well, it's been a couple months now, so I've kinda formed a first impression of Prime Minister Jr.; and I think it's safe to say that so far, he's shocking the hell out of all Canadians.
We've had a decade of a PM motivated entirely by an ideology of selfishness and viciousness, who really left no doubt in anyone's mind that he considered them personal enemies if they didn't march in lockstep.
But now we have a new PM who seems to be following the boring old-fashioned Clark-Trudeau era political ideal of "Canada is a nice country full of nice people who do nice things for people, because it's nice to be nice" - and we really don't know what to make of it. We're reconnecting to old ideals as if for the first time.
It's like eating chocolate after 10 years of bread and water, or a tropical vacation after 10 years in a Siberian death camp.
I'm sure his party will fuck it all up eventually - the old Martin-era mandarins are probably still lurking in the shadows, I don't expect Jr. to whip them all into line (though more power to him if he does beat the kleptocratic fuckers down) - but by the next election, I think the real question will be not whether Jr.'s party did a few bad things, but whether everyone will have forgotten the ten years of malignant hatred that preceded him.
Justin Trudeau's reminding people that the Canadian prime minister (and by extension, Canada) doesn't have to be a cunt. Good for him.
Friday, December 11, 2015
Vox - Finland's experiment in basic income. This is an exciting idea, not just from a redistributive point of view, but even from a traditional (not-stupid) conservative one: if you institute a basic income, then you can eliminate a huge number of bureaucratic jobs dedicated to administering the various programs.
Though I would suggest that Finland monitor consumer staples prices in the pilot project communities: as the poorest end of the spectrum becomes less poor, it seems prices for staples (rent, basic food) skyrocket. Because a limit to these prices (i.e. all the consumers being fucking dirt-poor) gets lifted.
Then again, I expect Finland doesn't have the same kind of abject poverty we have in North America, where people have so little money that they're stuck living on a sack of budget pasta for 2 weeks out of the month, assuming they can carry it home 2 miles from a grocery store, and there are large segments of the population who can't even amass the few dollars' worth of savings necessary to open a bank account.
Personally, I like basic income from an anarchist standpoint: the State should be required to pay citizens bribes for our continued approval.
Simon Wren-Lewis - basic macroeconomics of
[...] for a country with a flexible exchange rate, you will not increase your international competitiveness by cutting domestic wages and prices. The reason is that the exchange rate moves in a way that offsets this change. This is what economists might call a basic neutrality proposition, and there is plenty of evidence to support it. The Eurozone as a whole is like a flexible exchange rate economy. So if wages and prices fall by, say, 3%, then the Euro will appreciate by 3%.
So what happens if just one country within the Eurozone, like Germany, cuts wages and prices by 3%. If Germany makes up a third of the monetary union, then overall EZ prices and wages will fall by 1%. Given the logic in the previous paragraph, the Euro will appreciate by 1%. That means that Germany gains a competitive advantage with respect to all its union neighbours of 3%, plus an advantage of 2% against the rest of the world. Its neighbours will lose competitiveness both within the union and to a lesser extent against the rest of the world.
The point being that the 1990s-2000s German internal devaluation should not have been allowed, if Europe wanted to avoid the outbound capital flows that fueled the property bubbles in the periphery, and the subsequent need for harsh internal devaluation of the periphery that's going on now. If anything, Germany should have made its economy less competitive.
Or, y'know, adopt the fiscal federalism that we see in Canada, where weak local economies receive fiscal transfers from the strong centre in order to balance everything out.
Ha ha ha! As if the miserly Germans would ever agree to transferring their money to the periphery.
I had jotted down somewhere a while ago a note that I should probably read up on "new institutional economics" someday, because I'd come across an article or something that looked interesting. Then I forgot.
Upon reading that Douglass North died, I picked up a copy of one of his books from the university library, and I'm hooked.
Washington Post - Douglass North was a visionary.
And here's a good talk he did, at the FCC and not at any economics conference because economists are scared of him:
With Christmas just around the corner, you've got to ask yourself: What Time Is Love?
KLF doesn't have the answer, but at least they're asking the question:
I think that's Cressida Cauty* in the red dress but it's a little blurry.
* - Long-time readers of this blog know that I can't stop prattling on about Cressida Cauty, mainly just because she seems to have had a freaky awesome life - first in the KLF, now apparently doing research into liver cancer for the love of god. And it turns out a lot of other people care about her, since that link is always (no seriously) one of the most popular posts here - apparently one person a day Googles "Whatever happened to Cressida Cauty".
Wednesday, December 9, 2015
US dollars aren't fiat currency.
They're not because you can use them to pay your taxes. Therefore they have intrinsic value.
Bitcoin, however, is only worth what people will pay for it, and you can't use it to pay taxes. Therefore bitcoin is fiat currency.
Calculon's Rivets - I wear my sunglasses at night. Bill McBride's still not worried about the US economy. Let's go through all his data points, one by one, and I'll simulate a retarded hedge fund MBA crackhead's typical response:
Demographics and household formation suggests starts will increase to around 1.5 million over the next few years. That means starts will probably increase another 40% or so from the October 2015 level of 1.06 million starts (SAAR).
Residential investment and housing starts are usually the best leading indicator for the economy, so this suggests the economy will continue to grow in 2016.
OMG! Residential investment and housing starts are a leading indicator! Sell sell sell!
In 2013, state and local government employment increased slightly, and in 2014, state and local government employment increased by 85,000.
This year, through November 2015, state and local employment is up 70,000. So, in the aggregate, state and local government layoffs are over - and the economic drag on the economy is over. However state and local government employment is still 561,000 below the pre-recession peak.
OMG! The government employment drag on the economy is over! Sell sell sell!
There will be some more deleveraging ahead for certain households (mostly from foreclosures and distressed sales), but in the aggregate, household deleveraging ended more than 2 years ago.
OMG! Household deleveraging ended 2 years ago! Sell sell sell!
The overall Debt Service Ratio has been moving sideways and is near the record low. Note: The financial obligation ratio (FOR) is also near a record low.
Also the DSR for mortgages (blue) are near the low for the last 30 years. This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.
This data suggests household cash flow is in much better shape than several years ago.
OMG! Household cash flow is in better shape! Sell sell sell!
And for commercial real estate, here is the AIA Architecture Billings Index. This is usually a leading indicator for commercial real estate, and the readings over the last year suggest more increases in CRE investment in 2016 (except oil and power with the recent decline in oil prices).
OMG! The billing index suggests more increases in CRE investment! Sell sell sell!
The prime working age population peaked in 2007, and appears to have bottomed at the end of 2012. The good news is the prime working age group has started to grow again, and should be growing solidly by 2020 - and this should boost economic activity in the years ahead.
OMG! The prime working age group has started to grow again! Sell sell sell!
Now, yes it's understandable to get all worked up about rising interest rates. First, most of these hedge fund clowns probably didn't start trading until 2007, so they've never seen a rate increase; second, usually in the past the Fed has raised rates with the explicit intent of pushing the US economy into a recession, so it's understandable traders would be piddling themselves.
But in this case, J-dog is raising rates to end accommodationary policy because she thinks the US economy has made it out of its huge hole and is operating at capacity again. At this point she needs to start moving rates back to a neutral level, otherwise output goes above its natural rate and you start to get accelerating inflation.
And she has data, and as one of the better economists out there she probably likes to read it. And heck, she probably even understands it.
But hedgies are cokeheads, and (as you've probably learned) being a cokehead means having a massive fucking ego, and so all the hedge fund clowns think they're smarter than Janet.
(And of course the peanut-gallery bloggers also think they're all smarter than Janet, because she's full of that Manhattan Jew book-larnin' while these boys have gool ol' Yankee Doodle common sense. And the cokeheads love reading them blogs.)
Monday, December 7, 2015
Here's a good article:
Psychology Today - ISIS and the victim mentality.
It's very easy to butcher and rape thousands when you feel you're morally superior to them. There's no such thing as a "psychopath", just someone who feels their evil is justified.
Every human is a "psychopath" down deep. Religion just provides the justification.
The Krugginator - economic factors and right-wing extremism. Quote:
A few years ago de Bromhead, Eichengreen, and O’Rourke looked at the determinants of right-wing extremism in the 1930s. They found that economic factors mattered a lot; specifically,what mattered was not the current growth of the economy but cumulative growth or, more to the point, the depth of the cumulative recession. One year of contraction was not enough to significantly boost extremism, in other words, but a depression that persisted for years was.How’s Europe doing on that basis?
And now the National Front has scored a first-place finish in regional elections, and will probably take a couple of regions in the second round. Economics isn’t the only factor; immigration, refugees, and terrorism play into the mix. But Europe’s underperformance is slowly eroding the legitimacy, not just of the European project, but of the open society itself.
But K-dog is far too polite to point out that the right-wing plutocrats in Europe have always been okay with Nazism. So don't expect any tut-tutting from the Davros VSPs: they want to enslave the world under the jackboot of totalitarianism.
Calculon's Risk - the endless parade of recession calls. OK, first I enjoyed how quickly he smacked down Citi's idiotic piece:
Also on Friday I posted an excerpt from a Citi's research piece also suggesting a 65% chance of a recession in 2016. [...]
This is just an historical statistical approach based on elapsed time.
Which really is a well-deserved, quick, devastating mocking of a "blah blah secular bulls last X years on average, oh look where we are now, therefore dooooom" call.
Really, truly, nobody should ever pull that "historically..." bullshit unless they (1) have a statistically significant dataset (which nobody has) and (2) can show that there's nothing different going on beneath the surface this time (which there is).
But this next bit concerned me:
Raoul Pal, the publisher of The Global Macro Investor, reiterated his bearishness ... "The economic situation is deteriorating fast." ... [The ISM report] "is showing that the U.S. economy is almost at stall speed now," Pal said. "It gives us a 65 percent chance of a recession in the U.S."
Goddamn it Bill, aren't you reaching awfully hard there? Are there so few bear calls out there that you had to quote a CNBC interview with fruitcake Raoul Pal?
You've never heard of him?
He's Mr. Bottom-Tick himself. Last time he called for doom was June 2012; the market then went up a further 50%.* Grant Williams and John Mauldin use his bullshit to pump to their lemmings. And he lurves pumping that bitcoin.
Bill, just ignore that clown. Your blog is above mentioning that sort of person.
* - it is interesting to note that Gary Wordsalad loves Raoul Pal's bullshit too. Says something about his judgment.
Just... wow. Woke up this morning, tuned in CNBC for my first morning smoke, and saw an ad for gold coins at 7:55 AM.
Either they're having a problem selling ads, or the whole world has gone turvy topsy.
Then again, gold coin ads should be par for the course whenever some Republitard clown like Joe Kernen is on TV.
Anyway, here's a bit of news:
New Deal Demoncrat - weekly indicators. Purchase applications, real estate loans, M1, M2 and tax withholding are all good. Commodities dumping is bad, but only for miners and oilmen - for the rest of the world it's great. Quit whining.
WSJ RTE - if USD goes down, will the US get inflation? I guess. USD has gone up too far too fast, and last week's breakdown shouldn't be something it recovers from.
Reuters - world's largest Hindu temple may move its gold to Modi's new program! Er mah gerd!:
But the Sri Venkateswara Swamy Temple, popularly known as the Tirupati Temple that is believed to have been the abode of Lord Vekateswara for 5,000 years, may become the biggest contributor with more than 5.5 tonnes of gold.Oh. Only 5.5 tons then? I was worried there for a minute.
Tirupati has already deposited most of its gold with banks under previous monetisation schemes that offer interest of about 1 percent, said D. Sambasiva Rao, executive officer of the trust that manages the temple.Oh. So it was already dumped on the market years ago, then? OK, nevermind. I thought this was news.
Sunday, December 6, 2015
Mining.com - OMG miners trading at 4% of in situ metal value LOL.
What kind of fucking idiocy is this?:
The reason they trade at a fraction of their "in situ metal value" is because they're only worth the discounted NPV of the profit they can earn on the metal.
So of course they're trading at close to 0% of in situ value. Because gold miners don't make a fucking cent in profit.
Friday, December 4, 2015
And just like that, all those reasons given yesterday for puking the US markets (oh no Yellen is hawkish, oh no Draghi failed to deliver, oh no another boring mass murder) have apparently disappeared as of this morning.
This is why regular drug testing should be mandatory for anyone with a Series 7.
90s Shimmy Disc artist Lida Husik:
Trivia: her cousin Anne Husick played in the brilliantly noisy Band of Susans, which says something good about their family pedigree I think.
As for Shimmy Disc, yes they had a lot of silly worthless bollocks like Gwar and King Missile on the label, but every other artist was something weird and interesting like this.
Thursday, December 3, 2015
Blog stats are still fun. Check this out:
|click to enhugeify|
And I think they were probably disappointed with the answer.
I guess they could google whether Brent Cook is Otto Rock. But that wouldn't help much either. Doesn't matter anyway, most of the world now knows that Brent Cook is actually Mickey Fulp.
Good work with the googling, guys. Nice to know there's such a low bar for law degrees nowadays.
And no, I haven't heard a peep from him in months.
Angry Bear - giving $45 billion to charity is old hat. Y'know, he has a point:
Facebook founder and his wife have decided to give away 99% of their fortune. That is $45 billion.
I have a better idea. If what is wanted is for this money to work for all, if we are to achieve the Donald’s directive of everyone moving into the upper stratum, that wages are too high (as even Caterpillar has acted on multiple times), then we have change our idea about what a billionaire should be doing when they decide to give away their excess wealth from unearned income.
Put it in a trust fund for their employees. Think about it. Facebook has (most recent count I could find) 11,996 employees. They could just distribute it to all of them for a share of $3,751,250.42 each. Ok, but not the most assured security for their employees. Instead, they could put it in a trust fund that then distributes its earnings. You know, kind of like that old fashioned pension system - only for active employees. If it earned 5%/year, the employees would receive $187,562.52 each per year. Heck, put it in tax free bonds and make it a real Xmas gift each year (less earnings but…)
Even if they only put 10% of the $45 billion in a fund to be distributed you’re talking about $18,756.25 per year (5% earnings). That would go a long way toward helping their employees make ends meet.
Consider also what all that money being spent by the 11,996 employees would do for their local economy and on whole the US economy. At 5% earnings distributed to the employees we’re talking $2,250,000,000 a year additional economic activity. Ok, let’s say 5% is wishful thinking. Then cut it in half. It’s still one S@#$ load of money.
Come on Zuckerberg. You’re supposed to be some kind of hot shot forward thinker. Think about the contributions your employees made toward your amassing this pile of earnings/wealth compared to what you paid them. Think about what you would have been paying them if we still had a system in place that assured wages tracked equally with productivity as in the past.
But I'm sure it's no big deal what Zuckerberg does. After all, I bet his employees will be happy about all that charitable giving the company did when they're in their 60s and living in a cardboard box under a bridge, eating cat food.
John Quiggin - to what extent is secular stagnation just an available heuristic? Wherein he quotes himself from a much longer article that shoots down the theory that the internet is a generator of inequality. But it's this aside below that is worth more than the rest of that article combined:
A further reason for scepticism about technological stagnation is that this explanation has been advanced in recessions and depressions ever since the beginning of the capitalist business cycle in the nineteenth century. Such claims represent the flipside of the equally common claim, made during every period of sustained expansion, that the economy has entered a New Era of untrammelled growth. The most recent episode of this kind was the ‘irrational exuberance’ of the 1990s, fuelled by optimistic claims about the potential economic implications of the Internet, which was opened to commercial use by the US Congress in 1992, and by capitalist triumphalism exemplified by Fukuyama’s The End of History.The collapse of the ‘dotcom’ bubble was softened by the housing bubble that developed shortly afterwards (again, not at all a new phenomenon), but the result was only to worsen the inevitable crash in 2008. The similarity of these events to previous bubbles and busts is good reason to doubt that they represent, or that they have inaugurated, a new phase in the evolution of capitalism.
Personally, I still think that secstag, to the extent it exists, is entirely the product of right-wing ideology:
1. Excess saving beyond the demand for investment creates a ZLB problem, but the Asian part of excess saving was demanded by the IMF, and the kleptocratic elite/corporate side of excess saving is facilitated by right-wing kleptocratic international tax arbitrage.
2. Government investment demand can fix things; yet right-wingers demand not only that governments avoid deficit spending to fight their way out of recessions, but also (in the case of Europe) demand that countries balance budgets in the midst of contractions.
3. Similarly, right-wing austerianism has encouraged a worldwide deficit in public infrastructure spending. Sorry, but you can't have economic growth without public infrastructure.
4. (I've only just learned Mundell-Fleming, but) If Y-bar really equals Af(K,L), or more precisely Af(K,L,G,H) where G is public infrastructure and H is human capital, then obviously the long-term trend in Y-bar will drop to zero as right-wingers demand less and less investment in infrastructure and human capital. These capital deficits add up.
5. Even moreso (still with Mundell-Fleming), the right-wing demand for excess central bank fixation on deviations of Y above Y-bar will mean dragging the long-term trend down. You can't speed up when you're always tapping on the brake.
Sounds like a great basis for a mass-market economics book.
But I'd still accept Quiggin's observation that this whole secstag thing might just be cyclical. I'd say it's not a "recency effect" problem, but rather that there are long-run cycles where economic policy slowly oscillates from stupidity to common sense.
In which case, there's no point wasting time writing the book, since it'll probably all fix itself eventually.
WSJ RTE - statisticians' plea: please pick up the phone. I worked in market research surveys when I was a kid, and we had a nasty refusal rate even back then; apparently it's gotten worse now, to the point where the data being collected is utterly useless:
Surveys of businesses and households make up the bulk of data sources handled by government statisticians. To compile economic growth figures, the U.K.’s Office for National Statistics polls about 350,000 businesses a year, a third of which are contacted more than once. For unemployment data, roughly 36,000 interviews of households are conducted each quarter by Britain’s official statistics agency.
Unlike business surveys, households are not required to answer the questions posed by statisticians over the phone or face-to-face, except when it comes to the census. Sometimes, officials fail to contact those people they randomly select to answer the survey. But more often than that, respondents refuse to participate—and they are increasingly doing so.
“Were response rates to continue to fall it would constitute a threat to the representativeness and quality of the data,” the report warned Wednesday, as very often those who don’t participate have specific reasons to do so—or features that set them apart.
So, here's the thing: if the quality of the data is dependent on the response rate, and the data is vital to the continued operation of the economy, then someone's making money off every response, right?
So why the fuck aren't you paying respondents for their valuable information?
You've been telling us in the peasant class that there's no such thing as a free ride, and we all have to earn our keep, and we have to pay for every "service" provided, and the government and our employers will leave us in a fucking ditch to bleed to death if they ever get a chance.
So why are you then expecting us to give you free information? You want us to subsidize the capitalist kleptocracy with our time, do you?
According to Berta Barbet, political science researcher at the University of Leicester, the IT revolution has helped connect people, but at the same time makes them increasingly weary of picking up the phone when an unknown number is calling—or even open the door to a stranger. “The photo we get is less representative of what reality looks like,” she added.
Wanna know why we don't open our doors to strangers? Maybe it's because most everyone who comes to our door is explicitly looking to fuck us over. The capitalist kleptocracy is brainwashing university students to act like psychopaths by going door to door, tricking little old ladies into signing up for criminally-priced long-term utility contracts. And there is now an army of Pakistanis phoning the entire western world every Friday afternoon, trying to get us to sign up for air duct cleaning.
The irony is that, as far as the average homeowner is concerned, your government survey staff are doing exactly the same thing: trying to screw us out of stuff (in this case, information) for free.
Fuck you. This is the point where you better start living by the neocon economics that you preach to us whenever you fuck us out of our pensions. Start paying respondents. Your free ride has ended.
Simon Wren-Lewis - was German undercutting deliberate?
Here's Simon Wren-Lewis (who's a British economist, not an American media clown) on how the German internal devaluation contributed to the EZ crisis:
It is hard to overstate the importance of all this. German employers and employees connived in a policy that would take jobs away from their Eurozone partners. Whether this was done knowingly, or because of a belief is some kind of wage-fund doctrine, or something else I do not know. But it makes Germany, a country with perhaps a unique ability to cooperate on an internal devaluation of this kind, a dangerous country to form a currency union with. The thing I find extraordinary about all this is that Germany’s neighbours seemed to have let it happen without a whisper of recognition or complaint.And if you weren't paying attention yesterday, he's commenting on this report by Peter Bofinger, one of the five members of Germany’s Council of Economic Experts, who is German and therefore not an American:
An EZ Crisis narrative that does not that does not account for the effects of the German wage moderation is incomplete. Germany is by far the largest EZ economy and it is a very open economy with strong trade links to all other EZ member states. It would be difficult to explain why such a strong internal devaluation, which is regarded as a key determinant of Germany’s success story in the 2000s (Dustmann et al. 2014), did not have significant repercussions for the rest of the EZ.Read the article.
Wage moderation led to decline in unit labour costs and to a German HICP inflation rate below the ECB’s target value. As this compensated for above target inflation in the rest of the EZ, the ECB was not able to increase its policy rate although there were signs of overheating in the deficit countries. Wage moderation caused stagnation in German domestic demand, which had a negative impact on the German demand for goods and services from the rest of EZ. Wage moderation improved the price competitiveness of Germany gradually which led to a deterioration of the bilateral current account of the rest of the EZ. Finally, wage moderation caused higher profits in the corporate sector, which led to a higher saving rate of this sector.
Here are some more of the cold, hard economic data points that coke-snorting hedge fund morons and equity "strategists" aren't paying attention to:
Calculated Risk - US light vehicle sales at all time high. OMG US light vehicle sales are at an all-time high! This is it! Assume crash position!
New Deal Demoncrat - the importance of record November vehicle sales. Quote:
If the global downturn were being imported into the US via the stronger $ with sufficient force to cause not just a more pronounced slowdown, but an outright contraction, it would show up in fewer vehicle purchases. We're simply not there.OMG we're simply not there! Sell sell sell!
Calculated Risk - construction spending up 13% yoy. OMG construction spending is up! It's the top! Sell sell sell!
Wednesday, December 2, 2015
Janet Yellen - speech at the Economic Club of Washington DC.
Let me now turn to where I see the economy is likely headed over the next several years. To summarize, I anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labor market slack, and a rise in inflation to our 2 percent objective. I expect that the fundamental factors supporting domestic spending that I have enumerated today will continue to do so, while the drag from some of the factors that have been weighing on economic growth should begin to lessen next year. Although the economic outlook, as always, is uncertain, I currently see the risks to the outlook for economic activity and the labor market as very close to balanced.
And she also admits the US isn't close to full employment, and the inflation rate is still below target.
Among emerging market economies, recent data support the view that the slowdown in the Chinese economy, which has received considerable attention, will likely continue to be modest and gradual. China has taken actions to stimulate its economy this year and could do more if necessary. A number of other emerging market economies have eased monetary and fiscal policy this year, and economic activity in these economies has improved of late. Accommodative monetary policy is also supporting economic growth in the advanced economies. A pickup in demand in many advanced economies and a stabilization in commodity prices should, in turn, boost the growth prospects of emerging market economies.
Got even more, J-dog?
Also, the budget situation for many state and local governments has improved as the economic expansion has increased the revenues of these governments, allowing them to increase their hiring and spending after a number of years of cuts in the wake of the Great Recession. Looking ahead, I anticipate that total real government purchases of goods and services should have a modest positive effect on economic growth over the next few years.
And so on and so on.
You can either listen to a professional economist who hangs out with professional economists and is respected by professional economists, or you can listen to whatever clown is talking to Business Insider because he's worried he's about to get the chop at his shitty underperforming bank.
WTF is this news from October:
Reuters - Credit Suisse to raise $6.3 billion in share offering.
You've got to be shitting me! I thought only crappy gold miners do dilutive share offerings!
Credit Suisse plans to raise 6 billion Swiss francs ($6.3 billion) from investors, slim down its investment bank and cut jobs as new chief Tidjane Thiam embarks on the biggest overhaul of the Swiss bank in almost a decade.
Credit Suisse is emphasising wealth management and growing in Asia, echoing moves by rival UBS. It joins rivals including Barclays and Deutsche Bank as well as UBS in scaling back investment banking as tougher regulations squeeze profitability.
Thiam, 53, hired from insurer Prudential, also said he will float shares in Credit Suisse's domestic Swiss bank and cut 2 billion francs in annual costs, giving his vision for Switzerland's second-biggest bank almost four months into the job.
He is raising cash to bolster the bank's capital position, which is one of the weakest in the sector. Thiam said the decision had gone down well with regulators in a meeting.
Seriously? This raises some interesting questions:
1. Why the hell is your capital position so terrible?
2. Aren't all your costs, including the $2B that Thiam is cutting, supposed to be covered by earnings? I mean, you're a fucking bank. You take deposits, lend them out, and collect your vig. How the fuck hard is this? You having trouble mastering the business of being a fucking bank? Royal, TD/Canada Trust, Scotia and BMO have no fucking problem turning a profit every year, year in and year out, whether boom or recession; why is it so difficult for you guys? Is it just that the Swiss are fucking terrible with money?
3. If you really need capital so much, why not borrow the $6B? Haven't you heard that borrowing rates are at a millenial low? Why not issue a bond? I mean, maybe if you were a grossly unprofitable fucking clowncar of a company like the average gold miner, where you were pretty sure you were never going to turn a profit again, then I could understand why you would prefer dilution; but a bank? Isn't there a lineup of people out there who'd love to lend $6B to a bank at, say, a 2% coupon for 10 years? Y'know, with the global savings glut and all?
Message for Tidjane Thiam: if you want help deciding who to lay off, I have four words for you. Mandatory random drug testing.
Ah, it's just like the good ol' days:
I guess the 2438x1029 resolution is one of the corner office guys.
Check out how it's broken out to an all-time high.
I guess maybe the US consumer really is important, the US dollar doesn't mean much, the supposed black Friday sales collapse is meaningless, and generally the bears are just a bunch of idiots who are in a snit because they haven't made money all year and maybe some of their smarter clients are starting to ask uncomfortable questions.
Cos the bears were the titclowns who puked QQQ to $85 just 3 months ago, probably. Because they have no fucking clue how to manage money.
They don't need to have any clue, because they get 2% & 20% just for being bourgeois parasite scum.
Vox EU - German wage moderation and the EZ crisis. Nothing new here, but if you're one of the newcomers to my blog, it's still educational reading for you.
Basically, the strongest economy in a
That is, if it doesn't want to sabotage everyone else's economy.
What I don't get is why German workers were stupid enough to give away all their money to the kleptocratic elite.
Oh wait. I do get it. Germans are obedient lemmings.
I like this new style of mine, giving you individual article links with snarky commentary underneath. I suspect nobody was interested in reading my news summary posts all the way to the end, anyway.
Calculated Risk - Restaurant Performance Index indicates faster expansion in October. Quote:
Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. This index is indicated decent expansion in October, and it appears restaurants are benefiting from lower gasoline prices and the improved labor market.But remember that Andy Garthwaite at Credit Suisse thinks restaurants aren't businesses, consumers aren't aggregate demand, and the labour market is nothing but a den of sociamalism that exists only to suck money out of the pockets of investors.
Because that's exactly what an ignorant uneducated bourgeois parasite would think.
BI - Credit Suisse is the
With valuations offering little upside and a myriad of risks offering plenty of downside, Credit Suisse thinks now's a good time to cut back on your portfolio's exposure to stocks.
"We reduce our weighting in equities to a small overweight, our most bearish strategic stance on the asset class in seven years," Credit Suisse's Andrew Garthwaite said in a new note to clients.
So if you're reducing exposure to US equities, where are you putting your money, Andrew? Hm? What else offers a higher rate of return? Or are you advocating high cash? Do you take one look at interest rates and think "gee, cash and bonds is the place to be right now"? Because everyone else is already there to the tune of trillions of dollars worldwide? Is that why you want to join them?
"Consequently, we reduce our mid-2016 target for the S&P 500 to 2,150 (from 2,200), and introduce a 2016 year-end target of 2,150," Garthwaite wrote.
You sure you're not just projecting 0% gain because that's all you've seen this year, and you think the trend will continue? Because you think a midcycle correction is the new normal?
"Our concerns are: increasing macro headwinds (deflation exported by China, the first Fed rate rise in 9.5 years);
God DAMN! China again? And you're really piddling your panties about a Fed rate hike, aren't you? I guess you'd rather have inflation? Is that what you want? Will that be better for your added weight to bonds & cash? Hm?
US equity valuations are now at fair value;
And earnings aren't going to grow? Or are you just hooked on the crack of investing in a market where P/E ratios were rising from a generational low, and because it's been 10 years of either a crash or this, you now have no clue how to invest in a normal market anymore? Are you that much of an idiot, or just a newbie? Aren't there any old greyhairs at CS who can teach you how to invest clients' money properly?
there are several warning signals (credit spreads widening, buybacks as a style underperforming, M&A activity reaching problematic levels, a decline in market breadth, earnings momentum at a 4-year low);
Um... is any one of those a real leading indicator of anything? Cos I can see at least two of those being nothing more than lagging indicators of a mid-cycle correction, you dumbshit.
the shift of power from capital to labour;
OK, and since "labour" is the US consumer, isn't that a good thing? Because you need consumers, don't you? Isn't that where US aggregate demand comes from? And don't you "strategist" types love to whine about low aggregate demand being the cause of low capital investment?
Or do you just hate the working class, you filthy bourgeois parasite?
Currently, the S&P 500 is trading at a P/E multiple of around 16.6, which is higher than average, but less than the 1.2 standard deviations away from the peak that we've seen historically.
And, dumbshit, in a secular bull market the S&P tends to trade at high valuations. Why? Do you not know why, Andy?
Colm McCarthy - the Euro union is not a monetary union. This is important to remember:
Defenders of the Eurozone’s initial design, subsequent management and purported reform invariably refer to the system as a ‘monetary union’. So do academic commentators including the authors of the recent Vox piece on the origins of the crisis. Whether intended or unconscious, this is an abuse of language.
Monetary unions do not experience selective bank closures, the re-introduction of exchange controls or the numerous other manifestations of financial fragmentation that have occurred before and after the Eurozone ‘reforms’. Germany is a monetary union. In 1974 the Herstatt Bank collapsed in Cologne and several banks based in Dusseldorf went down in the recent crisis. Both cities are in Nordrhein Westfalen, but there was no closure of bank branches in the state nor were exchange controls introduced by the state authorities on either occasion. Interest rates in Nordrhein Westfalen did not detach from rates elsewhere in Germany nor did bank deposits flee the state.
When the Continental Illinois Bank went under in 1984, at the time the largest-ever US bank failure, the state of Illinois was not expected to handle the fall-out. In the recent crisis the state of Delaware, home to lehmans, and the state of North Carolina, home to Wachovia, were similarly spared. The USA is also a monetary union and there is federal responsibility for bank supervision, bank resolution and the protection of bank creditors.
The Eurozone in contrast was established in 1999 as no more than a common currency area, with a ‘central bank’ responsible only for monetary policy in the aggregate, in pursuit of an inflation target. To describe it as a ‘monetary union’ is to deny that there is any distinction between a common currency area and a monetary union. If the Eurozone really was a monetary union in 2008 the history of the crisis would have been very different.
And can you think of one reason why the European Union never became a monetary union?
Tuesday, December 1, 2015
Noah Smith - Japan's LOOMING DEBT NIGHTMARE OMG LOL BRB YKINMK IANALNDIPOOT.
Noah's freaking out about Japan's huge debt.
I think he's especially freaking out about the possibility that the global bankers get screwed in the long run, were Japan to follow the most intelligent policy of default, or at least partial-default-through-inflation:
Either a default or a hyperinflation would cause every Japanese financial institution, and most Japanese businesses, to fail. OMG BRB
Yeah, don't believe the hype from this guy. The only people to ever care about national default are the banksters.
And the banksters don't care because right now JGB 10Y has a 0.29% yield.
That's... uh... less than the world rate of inflation, in a currency that is in a long trend of depreciation. JBGs pay out in Yen, remember.
So even the banksters aren't concerned.
And do countries with >200% debt always default? Well, the United Kingdom never defaulted, and its debt was >200% of GDP after the Napoleonic Wars.
So the best course is to assume that Noah's written an article not even for the real banksters, but rather for the imaginary banksters who live in his head who vote Republican and chat people up on Fox News.
In other words, Noah Smith is a fucking useless parrot of insane fantasies and we can all ignore him from now on.
at 11:31 PM
Gavyn Davies - world growth bounces back a bit. Quote:
Global economic data published in November have shown a further uptick in worldwide activity growth after the significant dip that was reported after mid-year.
It now appears almost certain that the 2015 Q3 dip in world activity was not the precursor of a slide towards global recession. Instead, it seems to have been another of the minor mid-course corrections that have been a consistent feature of the moderate upswing in global activity that started in 2009.
So we shouldn't piddle our panties after all? Because mid-course corrections are okay, right?
China has not suffered a hard landing; but severe deflation in the manufacturing sector remains unchecked, and the economy is clearly slowing as rebalancing between old and new sectors takes effect.
Most other emerging economies are now embarking on a major deleveraging cycle, and this may drag on EM growth rates for several more years. Growth in the advanced economies as a whole has been stable at about trend rates throughout 2015; but underlying productivity growth remains extremely weak by past standards. Therefore the advanced economies do not appear sufficiently robust to withstand an intensification of the EM shock, should that occur.
Wait... you just said we're not supposed to piddle our panties. Is Jeffrey Fucking Kleintop injecting himself into your writeups too now, Gavyn?
Advanced economies aren't affected by hiccups in pissant little third world economies, Jeffy. We had no problem in 1998, we'll have no problem in the future. At worst, it'll mean more profit for Nike.
Within the advanced bloc, the most notable change has been the acceleration in the eurozone compared to the US. Many observers became pessimistic about growth in the eurozone when the China crisis occurred in August, on the grounds that exports from Europe (especially Germany) are more exposed to Chinese demand than is the US. These differences in trade exposures have been exaggerated, and in any event have been offset by fiscal and monetary easing in the eurozone, and the decline in the exchange rate.
Nevertheless, it is important to remember that even in the best of times, there has never been a European company worth investing in, so it's never paid to follow the hedgefund lemming brigade into Europe ETFs.
It's especially worse now, as Germany has proven happy to continually sabotage European growth in favour of more profits (and socialized losses) for Deutsche Bank.
at 7:16 PM
New Deal Demoncrat - intensified deflationary pulse. Two things, NDD. One, collapsing commodity prices is good deflation. Two, the Fed is concerned with what the trend will be a year from now, not what it is now: it takes that long for transmission.
But with that in mind, it'd make perfect sense for the Fed to not raise rates in December, because not only are they not going to be above their 2% inflation target in a year, but also 2% is supposed to be a target and not a hard limit. I hope Yellen has the intelligence to realize that.
And in any case, isn't this what the past 35 years of neocon fiscal and monetary policy has been aiming for? We now have zero inflation and real interest rates at zero, and all because of far more world savings than there is world debt to mop it up. Wasn't that what every decision since Volcker was aiming for? Isn't this the paradise that the capitalist elite set out to build?
And now you're trending down to zero world growth, because it's more important that you let the kleptocratic elite hide all their money in secret bank accounts in Switzerland and Florida and the Channel islands than it is to force them to reinvest that money to produce increased productivity.
Friday, November 27, 2015
Well, QQQ and SPY have already recovered from recent dooooom, and $TRAN is close behind.
So here's the last US index to begin its move back to previous highs:
Maybe this is the liftoff of a Xmas bull run?
It's simultaneously the greatest and worst video of all time:
Wednesday, November 25, 2015
Growth economics blog - describing the decline of capital per worker. Hey, here's an idea: maybe the decline in capital investment is a rational response to the obvious end of government investment in public capital?
Cuz why would you bother to invest in new plant and machinery when you know that 30 years from now the United States is going to have devolved into a medieval theocracy with dirt roads where there used to be an interstate system?
I'm only saying.
at 1:36 PM
Did my polisci presentation yesterday, so now I'm done most of my work til the finals.
Here's some news:
Calculated Risk - chemical activity barometer stabilizes. So is that the end of the industrial recession?
Bespoke - jobless claims at 260k. So there's no imminent dooooom, then?
Calculated Risk - personal income and PCE. So can we stop puking the S&P now, please?
Simon Wren-Lewis - economists and political capture. Quote:
Why is it necessary to repeat once again what is a consensus position among most economists? Alas there are powerful political interests within the Eurozone that want to foster an alternative narrative, which sees every country like Greece. This erroneous narrative has already done great damage, creating a second recession from excessive fiscal tightening and insufficient monetary easing across the Eurozone.Keep it up, Simon! Maybe one day people will listen to reason instead of the banksters. Haha no seriously.
It is natural at this point to talk about Germany, and the fact that as a result of low wage increases undercutting Eurozone neighbours before the recession, Germany is not suffering as much from this recession as other countries. But I have often tried to avoid stopping there, and instead to ask whether Germany's strange stance on these macro issues simply reflects this different conjunctural position. I think the answer is no.
I'm increasingly drawn to the view that Germany's stance reflects similar political economy pressures as you will find in other OECD economies: there is no German exceptionalism, but rather that the forces that everywhere are pushing austerity and tighter monetary policy happen for various reasons to be stronger in Germany. From this perspective, this post from Frances Coppola is particularly interesting. Perhaps the problem at the heart of the Eurozone is that economic policy advice in Germany has been effectively captured by employers' interests, and perhaps the interests of banks in particular.
Tuesday, November 24, 2015
Here's some reading and stuff to keep you occupied:
New Deal Demoncrat - one long-term indicator changes to yellow. He's worried about mortgage rates. Though to be fair, if rates are still very low compared to the past 50 years, and there's a global savings glut that will keep mortgage rates pinned for decades, then how likely is it really that there is anything to worry about?
FT Alphaville - David Keohane laughs at Izzy Kamizzy. Another story about India's fantastic gold monetization scheme and its one pound take. Hey, why wouldn't you want to earn 2% on gold? Maybe because you're being paid in rupees, and gold is the perfect hedge against rupee currency risk? Anyone living in India is already long rupees by virtue of their location: why would you sell a hedge and go double-long rupees?
Jeffrey Kleintop - India is the fastest growing economy in the world. Unfortunately, with a BA in Business Admin, an MBA and a CFA, he obviously never learned about long-term determinants of productivity, else he would flag in his article that India has a massive infrastructure deficit that is proving impossible to solve. Hey, Jeffy! How does an economy manage to continue growing when it's impossible to move goods?
Mining.com - hedge funds can't exit gold market fast enough. Yay! They dumped 368 tons of gold in the past three weeks and drove the price all the way down to $1065! Go shorter gold, guys! Do it! Dump another 1000 tons! After all, you'll never have to buy it back!
Sunday, November 22, 2015
Here's some stuff to read today:
New Deal Demoncrat - weekly indicators. Broad economic measures look fine, while industrial measures still stink. Which is what you should expect, no? Speaking of which, I wonder if there's an "industrial recession" if measured in quantities of goods instead of in dollars. Is the veil of money getting in the way, here?
The Krugginator - the expansionary austerity zombie.
Larry Summers - on lower productivity growth and disemployment (pdf). While he admits at the start that productivity isn't one of his areas of expertise, he has nevertheless stimulated a lot of discussion in the macro world.
Personally, I think the "mismeasurement" thesis is utter bullshit: consumer surplus is entirely theoretical, and if you can't measure it with money then it doesn't exist. And we are measuring it with money in a lot of places: boarding passes on cellphones mean a lower price for providing air flight service. 2015 American medical care (to the extent you're not black) means longer lifespans, higher worker productivity, and more consumption. Price indices don't overstate inflation, they are inflation - the only way they're not is if you've invented some new thing to take the place of money.
Things simply don't happen in economics if there's no money changing hands, Larry. If you reject that, then you're going to have to address the feminist economic critique brought by Marilyn Waring 30 years ago, and we know you won't enjoy that given how much you hate women.
Krebs on Security - ISIS Jihadi help desk. Yeah, I saw the ending coming.
Friday, November 20, 2015
Here's some Friday night news:
LA Times - this el Nino will be most powerful on record. As long as I don't have to suffer through another fucking deep freeze, the millions threatened by drought can go fuck themselves.
Martin Wolf - corporate surpluses are contributing to the global savings glut. So you know what you should do? Let the government tax retained earnings away, and spend that money on public capital. Either that or slip into a new dark age. I know which choice the plutocrats will go for.
Reuters - Modi's gold deposit scheme has attracted one whole shiny pound of gold so far. And no, it's not because they don't have enough assay labs or refineries. It's because it's not meant to take in gold, it's meant to be a subsidy program for banks.
BI - Bill Ackman's lost 24.5% this year. So why do people continue to listen to this idiot, if he can't even outperform the S&P 500 index?
Wednesday, November 18, 2015
Accuweather - winter 2016 will be warmer than usual across Canada.
Northern Ontario Travel - oh fuck off, Farmer's Almanac.
I would really like it to not be a fucking hideous polar deep freeze this year.
BI - this is what happens when you get your Fed commentary from a website of idiots.
I'm not linking to it because of any contribution from Akin Oyedele, because he's just some idiot with a BA in journalism so he shouldn't be expected to make any intelligent contribution whatsoever.
I'm linking to it because the Fed saw fit to include a discussion on the world real interest rate, r*.
What the hell is r*?
Well, it's a theoretical variable that doesn't actually exist in the real world, which forms the basis of things like the Mundell-Fleming open economy model. Basically, it's the theoretical world real interest rate upon which all other interest rates depend.
And the Fed says right in their minutes that they think it's interesting r* has been negative for ages, and doesn't look like it'll ever not be negative again. Quote:
With respect to longer-run trends, the staff noted that multiyear averages of short-term real interest rates had been declining not only in the United States, but also in many other large economies for the past quarter-century and stood near zero in most of those economies. Moreover, economic theory indicates that the equilibrium level of short-term real interest rates would likely remain low relative to estimates of its level before the financial crisis if trend growth of total factor productivity does not pick up and if demographic projections for slow growth in working-age populations are borne out. Finally, the staff discussed the implications of uncertainty about the level of the equilibrium real rate for using estimates of short-run r* as a guideline for appropriate monetary policy.
This is fucking huge. It means the Fed has finally caught up with reality and are possibly about to change their opinions about very important things. Here's just one of the problems they're now going to be paying attention to:
A lower long-run level of r* would also imply that the gap between the actual level of the federal funds rate and its near-zero effective lower bound would be smaller on average. A smaller gap might increase the frequency of episodes in which policymakers would not be able to reduce the federal funds rate enough to promote a strong economic recovery and rapid return to maximum employment or to maintain price stability in the aftermath of negative shocks to aggregate demand. Some participants noted that it would be prudent to have additional policy tools that could be used in such situations.
I'm going to leave writing any more about this, because I'm only just learning Mundell-Fleming right now, and anyway I still have to polish off my essay. But I can damn well guarantee you that I'll be giving you some links in the next couple days to proper economists who will be explaining just what's so important about the Fed discovering that r* < 0.
In any case, you can be damn fucking sure no hedge fund clown understands the first thing about Mundell-Fleming.
Still not finished my essay, but I have about 4 of 10 pages written, so the rest should fall in line today. It's due at 11:59PM, and late papers are only docked 2%/day in this modern world because nobody wants to hurt the precious snowflakes.
I only really settled on the thesis last night: it's a comparison of cultural realist and post-structuralist interpretations of Samuel Huntington's "Clash of Civilizations" thesis as an explanatory tool for the Russia-Ukraine conflict. I was originally going to write it about the US-Islam conflict instead, but a) recent events and b) I had too many notes on the Islamic bit, while the Ukraine bit is more interesting and c) the Islam slant is too damn easy.
Anyway, here's some news:
New Deal Demoncrat - industrial production only sucks in oil and mining. More invaluable commentary from NDD.
FT Alphaville - if you can be short dollar when all men doubt you. Good god damn, that's going to be a heck of a monster when it unwinds. Now hey, long USD-short EM equity/short commodity/short EM FX is certainly a brainless trade, but that doesn't mean it's so simple that it could accommodate every hedge fund cokehead with a psychosis about how clever he is.
And then they remind us that Fed minutes are coming today at 2PM. Yay!
NYT - which socialist philosopher said government must tax the indolent rich and spend on roads? Well, no other than Adam Smith!
FT Alphaville - the world has a multi-trillion dollar accumulated current account deficit. And the only explanation is that the world's ultra-rich, from the Russian mafia and Latin American politicians to the wealthiest corporations, has accumulated a multi trillion dollar current account surplus, which they've now squirreled away in every private bank in the world.
And guess what? Since that money hasn't been invested in private capital, and since these paleoconservative robber barons demand that governments don't spend the money on public capital, there is thus no possibility for long-run world economic growth in the aggregate. Sorry, neocon criminals, but Y = aF(K,L,[...]).
That is why you need to tax the rich and spend the money on highways and education, assholes. The alternative is to slip into a new millenium-long dark age.
Tim Taylor - why more humanitarian aid should be given in cash. This is actually a well-understood principle within the humanitarian movement already; it's just that the idea leaves the bureaucrats out in the cold.
And since it's Xmas coming up and some people actually care about this charity kind of stuff, I'll let you know that you yourself can give directly to the poor just by going through something like givedirectly.org. It feels more like an Xmas present, and given the insane difference in price levels between our world and the poor world it packs a huge bang for the buck. That $50 you were going to spend on a tie for some asshole would go really, really far in Burkina Faso.