Archive - Nov 15, 2013

By now, thanks to Edward Snowden, it is common knowledge and not just conspiracy theory, that every bit of information sent out into the wired or wireless ether is scanned, probed, intercepted and ultimately recorded by the NSA and subsequently all such information is and can be used against any US citizen without a court of law (because the president's pet secret NISA "court" is anything but). Sadly, in a country in which courtesy of peak social networking, exhibitionism has become an art form, the vast majority of Americans not only could not care less about Snowden's sacrificial revelations, but in fact are delighted the at least someone, somewhere cares about that photo of last night's dinner. However, it turns out that far from being a passive listener and recorder, the NSA is quite an active participant in using the internet. The weaponized internet.

Within the last seven years 11 countries (Poland (2006), Russia (2008), Finland (2009), France (2009), Sweden (2010), Iceland (2011), Spain (2011), Denmark (2012), Singapore (2012), Canada (2012) and Japan (2013) have realized the need to appoint their own Arctic ambassadors. These ambassadors are used for analysis and situational assessments in the emerging “grand Arctic game,” with the ultimate aim of exploiting mineral resources and using the Arctic route for shipping cargo from Europe to Asia. At present, China’s Arctic initiatives suggest that Beijing is eager to camouflage its true interests in the region with environmental monitoring, Arctic life protection and concerns about indigenous peoples. At the same time, Beijing is dropping hints that China is not satisfied with the current balance of power in the Arctic region.

Mass Surveillance Is Destroying the American Economy

You know it's bad when...

With the market ebullient at the prospect of more "miracles" from Yellen, we thought it worth dusting off the following brief clip discussing what it would mean to "end the Fed." In order to answer this question, we examine countries throughout history that did not have an established central bank. So who performs the functions of a central bank in these countries? Professor White cites private institutions, including clearing house systems, banks, and financial companies, as the main actors in the monetary systems of countries without a central bank. Ultimately, he concludes that the Federal Reserve is not necessary. Evidence shows that nations can survive without a central bank. What the Federal Reserve does well can be done even better by private institutions, and the institution is capable of serious errors.

The third stage of bull markets, the mania phase, can last longer and go farther that logic would dictate.  However, the data suggests that the risk of a more meaningful reversion is rising.  It is unknown, unexpected and unanticipated events that strike the crucial blow that begins the market rout.  Unfortunately, due to the increased impact of high frequency and program trading, reversions are likely to occur faster than most can adequately respond to.  This is the danger that exists today. Are we in the third phase of a bull market?  Most who read this article will say "no."  However, those were the utterances made at the peak of every previous bull market cycle.

How many more quarters of this Einsteinian insanity will it take for investors to realize the sell-side analysts' "forecasts" are worse than useless...?

One of the biggest lies in finance is this perpetual deception that inflation is good. Ben Bernanke, the current high priest of US monetary policy, recently remarked that it’s “important to prevent US inflation from falling too low.” Well of course, we wouldn’t want that, would we? Just imagine the chaos and devastation that would ensue if the cost of living actually remained… you know… the same. One shudders at the mere thought of price stability.

The implication of this particular and quite unprecedented shadow banking circle jerk, which could very easily make even the direct wealth transfer resulting from trillions in QE pale by comparison, is so stunning that we leave it up to the reader to come to their own conclusion.

This objective report concisely summarizes important macro events over the past week. It is not geared to push an agenda. Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.

As we "forecast" this morning (and a month ago - if our extrapolation of the Fed's balance sheet is correct - i.e. no Taper - that the S&P 500 Fed L-A-B-I-A should be around 1800 by year-end), the Fed can be proud that they managed (remember it "costs" $3.25bn in POMO to create 1 S&P 500 point) to get the key US equity index - the S&P 500 - near the critical 1,800 level...

How could such a monetary disaster happen in a civilized and advanced society, leading to the total destruction of the currency? Many explanations have been put forward. It has been argued that, for instance, that reparation payments, chronic balance of payment deficits, and even the depreciation of the Papermark in the foreign exchange markets had actually caused the demise of the German currency. However, these explanations are not convincing. Looking at the world today - in which many economies have been using credit-produced paper monies for decades and where debt loads are overwhelmingly high, the current challenges are in a sense quite similar to those prevailing in the Weimar Republic more than 90 years ago. Now as then, a reform of the monetary order is badly needed; and the sooner the challenge of monetary reform is taken on, the smaller will be the costs of adjustment.

Yet another chart that perfectly tracks the performance of the S&P (or Fed balance sheet). Guess what it shows...

Would printing the cash to fund pensions for low-income retirees trigger inflation? It's more of an open question than we might imagine at first glance.

"We fumbled the rollout on this health-care law," could be President Obama's understatement of the century. In the month-or-so since Obamacare was unleashed 106,185 people enrolled (based on a loose re-definition by the White House). However, in that same period, the WSJ reports a stunning 4.02 million people received policy cancellations. So, in a month, a total of 3,918,205 fewer people are now 'enrolled' in a heathcare plan than before Obamacare. So far, California, Florida, and Washington are suffering the most under Obamacare...