The
more things change, the more things stay the same. The Great Depression
actually started in 1929, but as you will see below, as late as 1933 the
Associated Press was still pumping out lots of news stories with optimistic
economic headlines and many Americans still did not believe that we were
actually in a depression. And of course we are experiencing a very similar
thing today. The United States is in the worst financial shape that it has ever
been in, our economic infrastructure is being systematically gutted, and poverty is absolutely exploding. Since the stock
market crash of 2008, the Federal Reserve has been wildly printing money and
the federal government has been running trillion dollar deficits in a desperate
attempt to stabilize things, but in the process they have made our long-term
economic problems far worse. It would be hard to overstate how dire our
situation is, and yet the mainstream media continues to assure us that
everything is just fine and that happy days are here again. (Read More....)
{ I’m
about half-way through Dr. Michael Crichton’s ‘State of Fear’, which deals with
exactly that ‘Orwellian’ stratagem and fraud … Never light reading from the masterful
Doctor (I forced myself to get through his first offering, viz., ‘Andromeda
Strain’ when it first came out… he’s worth your time … ) }
Back
in April, we saw that merely asking the local economy minister what
Argentina's rate of inflation is, was enough to prematurely terminate any
interview and result in a mocking,
viral twitter meme. Since then, things for Argentina haven't exactly worked
out too well: a
recent Appeals court ruling found in favor of Elliott and the holdout
bondholders, resulting in a downgrade of the country to CCC+, and leaving it
with the possibility of having to fund billions in deferred obligations.
"The lawsuit could result in the interruption of payments on bonds
currently under New York jurisdiction, or it could prompt Argentina to
undertake a debt exchange that we could view as distressed," S&P said
in the statement. "There is at least a one-in-three chance of either
occurring within the coming 12 months." Of course, to many the fact that
Argentina has still not redefaulted is even more surprising. The reason for
that is that despite president Fernandez ongoing rose-colored glasses PR
campaign, the domestic economy has been deteriorating at an accelerating pace
with runaway inflation destroying local purchasing power for years. As a result
of the ongoing authoritarian crackdown on not only individual liberties, but
economic data, it has gotten
to the point that the government is criminally prosecuting anyone who dares to
publish independent inflation data.
Like
many Americans since the recession hit, you have likely wondered if relocating
to another state would be a good financial move. In this expansive interactive
infographic below, we compare just how well each state is fairing in these
challenging times. How does your state rank?
The graphic is interactive - choose
from across the top indicators of health, and select individual states for more
details...
Five
years after the collapse of Lehman Brothers triggered the largest global
financial crisis since the Great Depression, outsize banking sectors have left economies shattered in
Ireland, Iceland, and Cyprus. Banks in Italy, Spain, and elsewhere are not
lending enough. China’s credit binge is turning into a bust. In short, the
world’s financial system remains dangerous and dysfunctional. Worse, despite
years of debate, no consensus about the nature of the financial system’s
problems – much less how to fix them – has emerged. And that appears to reflect the banks’ political power.
Unfortunately, despite the enormous harm from the financial crisis, little has
changed in the politics of banking. Too many politicians and regulators
put their own interests and those of “their” banks ahead of their duty to
protect taxpayers and citizens. We must demand better.
As we
head for the fateful FOMC announcement on September 18, US data have continued
to moderate. Accordingly, the consensus
seems to be converging on a $10-15 billion initial reduction in monthly
purchases (mostly focused on the Treasury side and less so on
MBS) with any 'tightening' talk tempered by exaggerated forward-guidance
discussions and the potential to drop thresholds to appear more easy for
longer, since as CS notes, assuming Fed policymakers have learned anything in
the last four months, they must know that the markets view “tapering” as
“tightening,” even though they themselves for the most part do not. Thus, they are going to need to sugar-coat the
message of tapering somehow. But as UBS notes, political risks
have grown and there is little clarity on the Fed's thinking about the housing
market. This leaves 3 crucial
surprise scenarios for the FOMC "Taper" outcome.
A few days ago, when
we reported that the largest federation of unions, the AFL-CIO, had figured
out that Obamacare was not all it was craked up to be and demanded changes be
implemented to appease their constituency as pertains to multi-employer group
health plans, many wondered if the administration would not simply cave and
pass an exemption giving unions a sidedeal at the expense of all other
participants. Last night that option was taken off the table when the Obama
administration appeared to rule out giving unions a special deal to offer their
workers extra ObamaCare subsidies. As AP
reports, "on Friday night, the White House said the Treasury
Department had issued a letter making clear that it does not see a legal way for individuals in
multi-employer group health plans to receive individual market tax credits as
well as the favorable tax treatment associated with employer-provided health
insurance at the same time."
If Fed
governor Jeremy Stein had concerns about a resurgent credit bubble in February
when he wrote his warning about "Overheating
in Credit Markets: Origins, Measurement, and Policy Responses" then he
should certainly not look at the bubbly ferocity that is taking place in the
bond world just half a year after his letter failed to make any dent in the
yield-chasing animal spirits.
As economist Jesús Huerta de Soto
documents in his tour de force Money,
Bank Credit, and Economic Cycles, government has played a leading role
in fostering this banking fraud for centuries. The state is forever on the
search for more resources to carry out its bidding. Cooperation with the
leading money-lending institutions was an obvious route for subverting the
moral means to wealth creation. Since the days of classical Greece, it was well
understood that transactions of present goods fundamentally differed from those
involving future goods. In practical terms, deposits for safekeeping were of
considerable difference to those made for the strict purpose of lending out and
garnering a return. Bankers who misappropriated funds were often found guilty
of fraud and forced to pay restitution. In one recorded episode, ancient
Grecian legal scholar Isocrates lambasted Athenian banker Passio for reneging
on a client’s depository claim. After being entrusted to hold a select amount
of money, the sly banker loaned out a portion of the funds in the hopes of
earning a profit. When asked to make due on the deposit, the timid Passio
pleaded to his accuser to keep the transgression “a secret so it would not be
discovered he had committed fraud.”
Following
two days of negotiations in Geneva, this morning John Kerry and his Russian
counterpart Sergey Lavrov announced they have reached an agreement for a
framework on how Syria would destroy its chemical weapons, and would also seek
a UN Security Council resolution that would authorize sanctions, but not
military action as per Russia's demand, if Assad failed to comply. The
diplomats announced on the third day of intense negotiations in Geneva that
some elements of the deal include a timetable and how Syria must comply. At a
news conference at the Intercontinental Hotel in Geneva, Kerry said the
inspectors must be on the ground by November and destruction or removal of the
chemical weapons must be completed by mid-2014.
It’s
always a good sign for an empire’s fortunes when the commander in chief of the
armed forces completely loses
the confidence and trust of the troops.
To say that bonds are under pressure would
be an understatement. Over the last few months, sentiment about
fixed income has flipped dramatically: from a favored investment destination
that is deemed to benefit from exceptional support from central banks, to an
asset class experiencing large outflows, negative returns and reduced standing
as an anchor of a well-diversified asset allocation. Similar to prior
periods, history will regard the ongoing phase of dislocations in the bond
market as a transitional period of adjustment triggered by changing
expectations about policy, the economy and asset preferences – all of which
have been significantly turbocharged by a set of temporary and ultimately
reversible technical factors. By contrast, history is unlikely to record a
change in the important role that fixed income plays over time in prudent asset
allocations and diversified investment portfolios – in generating returns,
reducing volatility and lowering the risk of severe capital loss.Understanding well what created this change
is critical to how investors may think about the future.
Despite Hank Paulson's recent
re-emergence basking in the glory of his miracle, the 'too-big-to-fail' problem
is bigger and more prone to fail than ever before (M&A dominance, capital
cost advantages, major AFS loss potential and huge reliance on repo funding).
The following excellent infographic from The FT succinctly summarises the reasons why banks failed last time... and
what lessons - if any - we have learnt...
Faber
begins by noting that "a deflationary bust, whenever it may happen
(tomorrow or 10 years), is inevitable; and is the opposite of an increase in
prices from inflation." Of course, it is the central banks'
response to even the fears of that bust (e.g. whether it washes around the
world - from EM to DM) that will turn an asset-deflationary bust into a
hyperinflationary collapse in fiat currencies; and focused on the long-term,
'Gloom, Boom, & Doom Report's' Marc Faber looks at how to preserve wealth through this
as he ranges from the obsolescence risk of equities to the political risk of
real estate and banking risks of cash and deposits. Faber reflects on various
lessons from the past (hyperinflations, wars, banking crises) and geographies
as he moves from asset class to asset class highlighting the pros and cons of
each. Preferring a mix of gold and diversified real estate (and not government
bonds), Faber warns investors
to be highly skeptical of anyone who believes they can forecast what is going
to happen over the next 5-10 years.
Still believe in humans buying and
selling stocks, influencing the machinations of broad-based equity valuations
based on their aggregate (rational, frictionless, technical, fundamental, and
infinitely liquid) beliefs... then what the f**k is this?
Until
six days before Lehman Brothers collapsed five years ago, the ratings agency
Standard & Poor’s maintained the firm’s investment-grade rating of “A.”
Moody’s waited even longer, downgrading Lehman one business day before it
collapsed. How could reputable ratings agencies – and investment banks –
misjudge things so badly? Regulators, bankers, and ratings agencies bear much
of the blame for the crisis. But the near-meltdown was not so much a failure of capitalism as it
was a failure of contemporary economic models’ understanding of the role and
functioning of financial markets – and, more broadly,
instability – in capitalist economies. Yet the mainstream of the economics
profession insists that such mechanistic models retain validity.
While we await Obama's response to
the Putin
NYT op-ed from Wednesday night, the "pen-pal by proxy"
pissing contest just got a new contender: the Tea Party's own, and current
Heritage foundation president, Jim DeMint. And while DeMint's thesis is
certainly admirable, namely that America is exceptional, his argument is that this is
due to the... limited power of government!? Jim, and the NSA
probably had the same question ahead of us when it was intercepting this letter
as it was being transmitted in TCP/IP space and then saved among a plethora of
cloud servers, we wonder: wasn't the point to refute Putin, not admit
he is correct?
Despite Hank Paulson's recent
re-emergence basking in the glory of his miracle, the 'too-big-to-fail' problem
is bigger and more prone to fail than ever before (M&A dominance, capital
cost advantages, major AFS loss potential and huge reliance on repo funding).
The following excellent infographic from The FT succinctly summarises the reasons why banks failed last time... and
what lessons - if any - we have learnt...
Faber
begins by noting that "a deflationary bust, whenever it may happen
(tomorrow or 10 years), is inevitable; and is the opposite of an increase in
prices from inflation." Of course, it is the central banks'
response to even the fears of that bust (e.g. whether it washes around the world
- from EM to DM) that will turn an asset-deflationary bust into a
hyperinflationary collapse in fiat currencies; and focused on the long-term,
'Gloom, Boom, & Doom Report's' Marc Faber looks at how to preserve wealth through
this as he ranges from the obsolescence risk of equities to the political risk
of real estate and banking risks of cash and deposits. Faber reflects on
various lessons from the past (hyperinflations, wars, banking crises) and
geographies as he moves from asset class to asset class highlighting the pros
and cons of each. Preferring a mix of gold and diversified real estate (and not
government bonds), Faber
warns investors to be highly skeptical of anyone who believes they can forecast
what is going to happen over the next 5-10 years.
Still believe in humans buying and
selling stocks, influencing the machinations of broad-based equity valuations
based on their aggregate (rational, frictionless, technical, fundamental, and
infinitely liquid) beliefs... then what the f**k is this?
Until
six days before Lehman Brothers collapsed five years ago, the ratings agency
Standard & Poor’s maintained the firm’s investment-grade rating of “A.”
Moody’s waited even longer, downgrading Lehman one business day before it
collapsed. How could reputable ratings agencies – and investment banks –
misjudge things so badly? Regulators, bankers, and ratings agencies bear much
of the blame for the crisis. But the near-meltdown was not so much a failure of capitalism as it
was a failure of contemporary economic models’ understanding of the role and
functioning of financial markets – and, more broadly,
instability – in capitalist economies. Yet the mainstream of the economics
profession insists that such mechanistic models retain validity.
"The Bank of England now has the ability to
take the froth out of future housing market booms, without
having to resort to interest rate increases," is the way the UK's realtor
association explains their demand
that the BoE limit national house price growth to 5% a year. While
they would benefit from short-term gains, it seems the Royal Institution of
Chartered Surveyors (RICS) sees the dangers of another unsustainable housing
boom outweigh them. As The
FT reports, RICS adds, "this cap would send a clear and simple
statement to the public and the banking sector, managing expectations as to how
much future house prices are going to rise. We believe firmly anchored
house price expectations would limit excessive risk taking and, as a result,
limit an unsustainable rise in debt." Or will it merely lead to
further financial engineering and leverage?
On a
day when the CBOE was struggling to disseminate data, exchanges proclaiming
self-help against one another, weekly expirations and an AAPL share price well
below early week pin-risk levels, it makes perfect sense that it would be a VIX-sparked momentum ignition algo that
would lift a super-low-volume day in US stocks from perfectly at VWAP to close
at their highs (banging them 0.25% higher in the last 3 minutes
of the day)... all we can say is WTF...
"A
broad-based tax cut, for example, accommodated by a program of open-market
purchases to alleviate any tendency for interest rates to increase, would
almost certainly be an effective stimulant to consumption and hence to prices.
Even if households decided not to increase consumption but instead re-balanced
their portfolios by using their extra cash to acquire real and financial
assets, the resulting increase in asset values would lower the cost of capital
and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially
equivalent to Milton Friedman's famous "helicopter drop" of money ."
What do
you do when there are some of the biggest and most catalyzing events in recent
years waiting just around the corner? Why you buy stocks of course with both
hands and feet... The Dow
gained around 3% on the week - its best since the first week of January
- outperforming its higher-beta peers (as AAPL lost over 6% for its 3rd worst
week of the year). This was the lowest non-holiday week volume of the year.
It seems weak retail sales and a collapse in confidence also spurred buying
(and yet more short-covering: Shorts
+0.5%, RUT +0.17%) and the opposite-world of QE rules the
day/week (until next week perhaps). Bonds rallied (best week in 4 months), the USD dropped its most in a month,
and VIX had its biggest weekly drop in 6 weeks. Gold and Silver were clubbed
like baby-seals this week until lunchtime today - when they started to surge
green on the day.
The American public is
"just too darn stupid to get it." That is the message that CNBC's Rick Santelli hears from the
mainstream media when discussing polls that suggest US citizens are against a
rise in the debt ceiling. Perhaps, as he exclaims, "we should only poll
the Harvard and Princeton professors," since they have such a good grasp
of reality. But, it is the "giant
leap of faith" that the Fed can really move unemployment and keep the
economy humming along to support the level of equities that has the Chicagoan
irate. Congress - listen up - he explodes, "70% of
Americans oppose raising the debt ceiling, and 55% oppose it even if it means
default." With the mid-terms not so far away, Santelli warns, "Americans know exactly what they want and
they are not getting it from the current Congress."
Financial
circles in Hong Kong are buzzing today on the new Goldman Sachs projection that
gold may drop below $1,000 an ounce. The central thess: since the US economy is out of the woods,
there’s no longer a need for gold as a risk hedge. But as one
senior-level manager at a major investment bank noted, "Nobody knows
what the f**k is going on..." However, this mentality entirely misses
the point of precious metals. When
the hopes and dreams of the entire global financial system rest on the lies of
politicians, the whims of central bankers, and the mountains of debt they have
all accumulated, things could turn on a dime... tomorrow. Gold
is an insurance policy. It’s a form of money that you might never need to use.
But should that need ever arise, you’ll be so much better off for owning it.
It
seems this morning's trial balloon has set the gamblers off as PaddyPower shows
that the probability of Larry
Summers becoming the next Fed Chair has soared to over 85%.
Just six short weeks ago Summers was a long-shot 20% probability and Yellen the
shoe-in at 75%. In the meantime, despite over 300 economists putting pen to
paper to demand more of the same monetary policy that has not worked; Summers
is now more probable that Yellen was at the start. Of course, given today's
reaction, traders may start to position for the seemingly inevitable though we
suspect that - as usual - we will be told that stocks near their highs are
already discounting this and any other potential change.
Following
this morning's miss
on retail sales and plunge
in consumer confidence, Bloomberg's Rich Yamarone points out that retailers
remain anxious about the outlook as they see consumers cautious and expect a spending slowdown. The
following quotes from some of the largest and most belwether names may help
shed some light on the reality of the hope that is priced into markets about
consumption relative to actual business expectations... perhaps best summed by
Sealed Air's CEO, "we are in the fourth year of the recovery and it
doesn’t feel like a recovery. Because it’s the first time ever that things, four years within a recovery, are
feeling so iffy."
Even
as the popular press if focused on the 5 year anniversary of Lehman, we decided
to go back double that period, and take a look at what happened to the
developed world economy in the past decade, starting with 2003. What we found
was interesting.
Over the past few days, there has
been a tremendous wave of optimism that it may be possible for war with Syria
to be averted. Unfortunately, it appears that a diplomatic solution to
the crisis in Syria is extremely unlikely. Assad is certainly willing to
give up his chemical weapons, but he wants the U.S. to accept a bunch of
concessions that it will never agree to. And it certainly sounds like the
Obama administration has already decided that “diplomacy” is going to fail, and
they continue to position military assets for the upcoming conflict with
Syria. Meanwhile, Saudi Arabia, Qatar and Turkey are all going to
continue to heavily pressure the Obama administration. They have invested
a huge amount of time and resources into the conflict in Syria, and they
desperately want the U.S. military to intervene. Fortunately,
overwhelming domestic and global opposition to an attack on Syria has slowed
down the march toward war for the moment, but unfortunately that probably will
not be enough to stop it completely. The following are ten reasons why
war is almost certainly coming… (Read More.....)
The
more things change, the more things stay the same. The Great Depression
actually started in 1929, but as you will see below, as late as 1933 the
Associated Press was still pumping out lots of news stories with optimistic
economic headlines and many Americans still did not believe that we were
actually in a depression. And of course we are experiencing a very similar
thing today. The United States is in the worst financial shape that it has ever
been in, our economic infrastructure is being systematically gutted, and poverty is absolutely exploding. Since the stock
market crash of 2008, the Federal Reserve has been wildly printing money and
the federal government has been running trillion dollar deficits in a desperate
attempt to stabilize things, but in the process they have made our long-term
economic problems far worse. It would be hard to overstate how dire our
situation is, and yet the mainstream media continues to assure us that
everything is just fine and that happy days are here again. (Read More....)
Back
in April, we saw that merely asking the local economy minister 
Like
many Americans since the recession hit, you have likely wondered if relocating
to another state would be a good financial move. In this expansive interactive
infographic below, we compare just how well each state is fairing in these
challenging times. How does your state rank?
Five
years after the collapse of Lehman Brothers triggered the largest global
financial crisis since the Great Depression, 
As we
head for the fateful FOMC announcement on September 18, US data have continued
to moderate. Accordingly, the 
If Fed
governor Jeremy Stein had concerns about a resurgent credit bubble in February
when he wrote his warning about "
It’s
always a good sign for an empire’s fortunes when the commander in chief of the
armed forces completely 
Faber
begins by noting that "a deflationary bust, whenever it may happen
(tomorrow or 10 years), is inevitable; and is the opposite of an increase in
prices from inflation." Of course, it is the central banks'
response to even the fears of that bust (e.g. whether it washes around the
world - from EM to DM) that will turn an asset-deflationary bust into a
hyperinflationary collapse in fiat currencies; and focused on the long-term,
'Gloom, Boom, & Doom Report's' Marc Faber looks at how to 
Until
six days before Lehman Brothers collapsed five years ago, the ratings agency
Standard & Poor’s maintained the firm’s investment-grade rating of “A.”
Moody’s waited even longer, downgrading Lehman one business day before it
collapsed. How could reputable ratings agencies – and investment banks –
misjudge things so badly? Regulators, bankers, and ratings agencies bear much
of the blame for the crisis. But the near-meltdown was 
"
On a
day when the CBOE was struggling to disseminate data, exchanges proclaiming
self-help against one another, weekly expirations and an AAPL share price well
below early week pin-risk levels, it makes perfect sense that it would be a
"A
broad-based tax cut, for example, accommodated by a program of open-market
purchases to alleviate any tendency for interest rates to increase, would
almost certainly be an effective stimulant to consumption and hence to prices.
Even if households decided not to increase consumption but instead re-balanced
their portfolios by using their extra cash to acquire real and financial
assets, the resulting increase in asset values would lower the cost of capital
and improve the balance sheet positions of potential borrowers. 
What do
you do when there are some of the biggest and most catalyzing events in recent
years waiting just around the corner? Why you buy stocks of course with both
hands and feet... 
Just
how will your great-grandchildren preserve their wealth - or are they
stockpiling condoms and gasoline now?
Financial
circles in Hong Kong are buzzing today on the new Goldman Sachs projection that
gold may drop below $1,000 an ounce. The central thess: 
It
seems this morning's trial balloon has set the gamblers off as PaddyPower shows
that 
Following
this morning's 
Even
as the popular press if focused on the 5 year anniversary of Lehman, we decided
to go back double that period, and take a look at what happened to the
developed world economy in the past decade, starting with 2003. What we found
was interesting.