Archive - 2013

Or did I mean Commem-Mooning a moron idea?

As 1.4 million people have been kicked off the 99 week unemployment rolls, the number of people applying for SSDI skyrocketed. Just because the scumbags on Wall Street and in the rest of corporate America commit fraud on a massive scale does not mean we should look the other way when lowlifes in our community do the same thing on a smaller scale. The working middle class pays the bill for the cost of both frauds. More than 90% of all the people who go onto SSDI never go back to work. This program was supposed to be short term until people could recover and go back to work. There are now 8.83 million people so disabled, they supposedly can’t work. There are only 12 million officially unemployed people in the country. The government is so incompetent, they barely check the applications for SSDI. Anyone with an ounce of brain power (this disqualifies anyone on MSNBC) knows that at least 50% of the people on SSDI are capable of some form of employment.

Need just one chart to avoid anyone who says they have any idea where the S&P will close in three years... or two... or one? Here it is: the graphic below shows that when it comes to predicting the closing level of the S&P several years into the future, absolutely nobody, and certainly not the consensus outlook, has any clue. However, they sure make up for lack of accuracy and insight with hope, optimism, and relentless persistence and enthusiasm to be wrong again and again and again.

Think about it – a substance which makes one feel good, promotes a feeling of well-being and confidence…..what is the problem with that? The problem, as I explained to all my teenagers, is not that drugs are inherently bad per se, it is the medium to long term consequences of drug use that inevitably leave one worse off and forces one to make decisions one would not normally make e.g. selling your mother’s wedding ring for drug money. Like the good pseudo-parents they are, the governments have (probably correctly) stepped in and outlawed drugs and their use. But there are other substances which also make one feel good, promote a feeling of well-being and confidence but is just as dangerous. With this substance the government does NOT limit use but promotes it! It is in fact the grower and distributor! What is this stuff? Hint …. Comes in two flavours: money (present money) and credit (future money).

Who would have thought that ultra-rapid industrialization, building entire empty cities to goalseek a supply-driven GDP number that has no reflection on demand reality, and ramming an entire country's industrial output into overdrive without any concern for the environmental impact would have a disastrous effect on smog levels. Certainly not China. Which is why earlier today people across much of northern China were warned to stay indoors as the entire region was put on health alert to avoid air pollution that, in the Beijing area, was among the worst for a decade and possibly ever, is literally off the charts and has in many areas reduced visibility to under 50 metres.

America Sets Its Sights On Controlling African Resources … And Reducing Chinese Influence

And just like that the most surreal two weeks of sheer monetary idiocy is over, with the Treasury and the Fed both formally announcing the death of the trillion trollin' dollar platinum  coin idea, which was nothing but a cheap charlatan trick devised by page view-desperate media outlets to dumb down their already confused audience and distract from the fact that the US is, sadly, once again on the verge of bankruptcy.

There are very few free lunches in the world, there will be some costs or unintended consequences of this newfound commitment towards a weaker Yen.

In May 2011, Belarus surprised its citizens by devaluing its currency by 50% overnight in an attempt to kickstart its economy, leading to swift and brutal hyperinflation. And while written narratives of the most recent episode of monetary collapse are one thing, nothing is quite as amusing, and grounding for those attempting to "value" money (such as Nobel prize winning economists writing out of their steel exoskeletal ivory towers), as watching a bag of cash be used to pay for seven boxes of beer. And nothing is quite a cathartic as spending several hours trying to count said cash - cash backed by the "full faith and credit" of the Belarus central bank...

Probability estimation is non-intuitive. If you need to make an important decision about the odds of something occurring, don't go with your gut. It will be often wrong (sometimes wildly so). Get data, crunch the numbers, and consult a professional if you can't figure things out on your own. This caution with regard to decision-making has served me well over my career. I've lost count of the number of times I began with a strongly-felt guesstimate that was torn to shreds by the time I did the math and learned how far reality was from my gut instinct. And what worries me – scares me, is more accurate – is that I don't observe this same caution in the actions of the people making the truly big decisions. Like the Fed, Congress, and many of our state governors. Instead, I see people – many of whom don't have strong empirical skills or practical business experience – making rash decisions about debt, deficits, taxes, money supply, interest rates, pensions, etc. that will have implications on a staggering order of magnitude. I myself can't wrap my brain fully around some of these (classic example: The Crash Course Chapter 11: How Much Is a Trillion?). And even though I'm by no means the smartest guy in the room, I have little confidence that a career politician is able to comprehend these gargantuan repercussions at a materially higher level than I can.

Even if you’re white, insured, educated, or in upper-income groups and live a healthy lifestyle, you’re still getting the short end of the stick

It's been a while since the Syntagma square riotcam was broadcasting live from Athens. After all, despite the ongoing collapse in its economy, where only 3.7 million people have jobs compared to 4.7 million who are unemployed or inactive, the general sentiment was that "austerity" measures have been put on hiatus, and no more tax, pension, or benefits cuts are on the table. That changed last night when Greece was the latest country to become the US, following a tax hike on its highest earners. However, unlike the US, this increase in "rich" taxes is being offset by at least some spending cuts such as tighter control of the budgets of ministries and state utilities, and the reduction of parliamentary employees’ wages in line with cuts to the wages of other civil servants. In other words, it is almost time for the Syntagma square daily pay-per-view daily webcast. The good news, at least for Greece, is that it does not have a debt ceiling to worry about. Then again, when all your debt is zero coupon perpetuals in the hands of the ECB and other "official" institutions, the balance sheet is the last thing you have to worry about. It's the income statement, one where not even all the one-time charges or loan loss reserve releases in the world will do any difference, that suddenly matters far more.

Almost a year ago, in February 2012, Zero Hedge decided to "think outside the box" and take Keynesianism and post-Chartalism (or whatever three letter acronym it is better known as these days) to their absurd, thought-experimental limits with "A Modest Proposal To Boost US GDP By $852 Quadrillion: Build The Imperial Death Star" - a suggestion that instead of growing US debt in dribs and drabs (because as any Ivy league tenured econ Ph.D will tell you, "debt is wealth"), that the US should go the whole hog and just splurge some $852 quadrillion in new debt (don't worry, MMT says that's just a token, no pun intended, amount) to build an Imperial Death Star, a project that would immediately hike US GDP by a factor of 56,000 and create several trillion new jobs, ensuring economic utopia in perpetuity, not to mention galactic dominance. We were mostly joking. We also assume that the creator of a White House petition launched in November to "Secure resources and funding, and begin construction of a Death Star by 2016" was also mostly joking. However, as that petition promptly accumulated well over 34,000 signatures, the White House had no choice but to respond. Here are the White House's thoughts on becoming the next iteration of the Galactic Empire (and, by implication, Barack Obama becoming Emperor Palpatine reincarnated).

If you try to sit on a four-legged stool that has one busted leg, you fall on your ass, look surprised or stupid, and maybe get hurt.

There have been some large moves in the foreign exchange market in recent days.  The euro posted its largest rally in four months last week.  The yen has fallen to its lowest level against the dollar since June 2010 and extended the declining streak to nine consecutive weeks, something not seen since 1989.  The Canadian and Australian dollar rose to multi-moth highs, as did the Mexican peso.  

In last week's technical note, we suggested the key question whether the sharp drop in the major foreign currencies following the avoidance of the full fiscal cliff in the US was trend reversal or overdue correction.  We favored the latter and looked for the underlying trends to continue.   They did.  

Now market participants face a different question.  Given the out-sized moves, have the trends become stretched?  The answer, we propose, is more nuanced than last week.  There is not one answer for all the major currencies we review here.