Archive - Dec 2013

While some may think trading these manipulated capital markets has become a leading cause of premature death over the past year, that is not the case. At least not yet. Instead, the leading causes of early death are shown on the chart below compiled by Wired. It maps "the global cost of early mortality - some 1.7 billion years of potential human life forefited annually - sorted by cause of death."

Following yesterday's polls, we suspect this cartoon sums up the view of many 'faithful' as they head into the new year. Of course, no matter what faces change next year, the Fed will always be there...

See why the Fed is unlikely to taper in December, but Q1 14 is much more likely.  Read a preview of the highlights from the week ahead.  

Following China's unveiling of its air defense identification zone (ADIZ) in the East China Sea, overlapping a large expanse of territory also claimed by Japan, the Japanese media has, as The Japan Times reports, had a dramatically visceral reaction on the various scenarios of a shooting war. From Sunday Mainichi's "Sino-Japanese war to break out in January," to Flash's "Simulated breakout of war over the Senkakus," the nationalism (that Kyle Bass so notably commented on) is rising. Which side, wonders Shukan Gendai ominously, will respond to a provocation by pulling the trigger? The game of chicken between two great superpowers is about to begin has begun.

Regardless of the arbitrage opportunities available to "all cash" buyers, who would be happy to park some cash in real estate, the fact that ultraluxury foreclosures are soaring also means that even the "1%" is starting to succumb to reality and beginning to feel the pressure of a financial reality in which only the "too biggest" can never fail. So what are the properties in question? The photo gallery below, courtesy of RealtyTrac, shows just where any given $5 million + property stopped making its mortgage payments.

"The shale oil plays are going to be probably much less than a 10-year flash in the pan. They are very dependent on a lot of different things, including low interest rates and the ability to keep borrowing - which could turn around very quickly. Lower oil prices would tend to do the same thing. But even if you hypothesize that we can keep the low interest rates and that the oil price will stay up there, under the best of circumstances, the Barnett data says they probably will not go for very long... And so these companies put together optimistic financial statements that have the benefit of these extremely low interest rates. They keep adding debt onto debt onto debt. How long can they continue to get more debt to finance this whole operation? It's not a model that anybody who is very sensible would follow."

Having discussed the advantages and disadvantages of the crypto-currency and noted the extreme volatility of the last few weeks, it seemed only a matter of time before some ambitious entrepreneur tried to monetize the volatility. What better way to "manage the risk" of your virtual currency horde than buying (or selling) options (in a more levered way). Predictious, the Dublin-based prediction market, this week unveiled Bitcoin Option Spreads enabling both long- and short-positions to be constructed on the already extremely volatile 'asset'. Regulatory clamp-down in 3..2..1...

According to Hong Kong customs data, in the month of October (with the usual one month delay), China imported 148 total tons of gold in a month in which the price of gold, once again plunged. Curiously, unlike momentum chasers of paper ETF promises to get gold delivery, China continues to BTFD in gold, and the 148 tons of import in the past month was the second highest monthly import ever through Hong Kong, second only to the 224 tons imported in March of 2013. Compared to a year ago, when the price of gold was over 30% higher, China has imported over 200% more than the 48 tons it bought through Hong Kong a year ago. At least someone is grateful for plunging gold prices.

Thinking like the Fed

To know your enemy, you must become your enemy  -Sun Tzu

In war, poker, chess and many other endeavors, wise old hands will advise you to think like your opponent. We’ll try a related idea here by seeing if we can think like the members of the Federal Open Market Committee (FOMC). Specifically, we’ll pretend to write part of the statement for the FOMC’s December 17/18 meeting.

Janet Yellen is readying herself to take over the duties of Ben Bernanke. What can we expect from her?

Now that Athens' Syntagma square has been put on indefinite hiatus since everyone has finally figured out the game between Greece and Athens (Greece grudgingly promises to reform but doesn't, at the same time Troika grudgingly threatens to cut off funding for Greece unless reforms are implemented but doesn't... even as the fate of the people gets worse), a new square has emerged as the focal point in the fight for (and against) Europe - Kiev's Independence Square.

With all the excitement about Japan's soaring stock market (if plunging wages), crashing non-digital currency (leading to soaring energy prices), recent passage of an arbitrary secrecy bill ("Designed by Kafka & Inspired By Hitler"), and ongoing territorial spat with China, it is almost as if the Abe administration is desperately doing everything in its power, including some of the most ridiculous decisions taken by a government in recent history, to hide some key development behind the scenes. Such as this one perhaps: NHK reported today that TEPCO said radiation levels are extremely high in an area near a ventilation pipe at the crippled Fukushima Daiichi nuclear power plant. TEPCO found radiation of 25 sieverts an hour on a duct, which connects reactor buildings and the 120-meter-tall ventilation pipe. Putting this number in context the estimated radiation level is the highest ever detected outside reactor buildings. People exposed to this level of radiation would die within 20 minutes.

The reigning paper money system is at the center of the growing income inequality and expanding poverty rates we find in many countries today. Nevertheless, states continue to grow in power in the name of taming the market system that has supposedly caused the impoverishment actually caused by the state and its allies. If those who claim to speak for social justice do nothing to protest this, their silence can only have two possible reasons. They either don’t understand how our monetary system functions, in which case, they should do their research and learn about it; or they do understand it and are cynically ignoring a major source of poverty because they may in fact be benefiting from the paper money system themselves.

Toner!  Toner!  Toner!

We recently questioned whether things were falling apart in US-Asia relations...as the Trans-Pacific Partnership lies battered on the floor; this seemed to sum it up rather well...