Archive - Oct 18, 2014

Those who got sick, and there were many, developed large, dark blisters that oozed pus and blood. Later came fever and bloody vomiting. Long before Ebola, there was the Black Death, which killed millions in the 14th century. And as with Ebola, nervous officials tried to keep the sick from entering their cities. Venetian authorities held ships at bay for 40 days - hence the word quarantine - to check for infections. Still, the disease ravaged the republic. Today countries are screening air passengers arriving from the places affected by Ebola. Will these efforts prove more effective?

If someone would suggest today to break up the USA, because its present status contradicts that which the Founding Fathers had in mind (and there are plenty of arguments to be made that such contradictions exist in plain view), (s)he would not even be sent to a nuthouse, because no-one would take him/her serious enough to do so. But wealth inequality still rises rapidly within America, and it doesn’t serve the people. So why does it happen, and why do we let it? Because the inequality that matters most is not wealth, but power. And we’ve been made to believe that we still have that power, but we don’t. Voting in elections has the same function today as singing around a Christmas tree: everyone feels a strong emotional connection, but it’s all just become one giant TV commercial...

"There is no crueler tyranny than that which is perpetuated under the shield of law and in the name of justice." —Charles de Montesquieu

If there was any silver lining to the horrifying events that took place in Ferguson, Missouri which riled the month of August, it has finally brought the issue of police militarization to the forefront. How did this happen?

Ever since Abenomics was announced in late 2012, we have explained very clearly that the whole "shock and awe" approach to stimulating the economy by sending inflation into borderline "hyper" mode was doomed to failure. Very serious sellsiders, economists and pundits disagreed and commended Abe on his second attempt at fixing the country by doing more of what has not only failed to work for 30 years, but made the problem worse and worse. Well, nearly two years later, or roughly the usual delay before the rest of the world catches up to this website's "conspiratorial" ramblings, the leader of the very serious economist crew, none other than Goldman Sachs, formally admits that Abenomics was a failure. So what happened with Abenomics, and why did Goldman, initially a fervent supporter and huge fan - and beneficiary because those trillions in fungible BOJ liquidity injections made their way first and foremost into Goldman year end bonuses  - change its tune so dramatically? Here is the answer from Goldman Sachs.

Not everything is as it seems. While the PBOC may be taking a stand on monetarism and its character, it has been very curious that the yuan has not fully participated in the dollar turmoil marking so many other “dollar” dependent nations. While the yuan’s appreciation trend may have been altered, that has not led again to the kind of disorder that marked the currency earlier in the year. Maybe that is due, at least in part, to these expectations that the PBOC will eventually relent on its new approach, but we also think that the PBOC is at least looking the other way on some of the “old tricks” that supported the Chinese version of the dollar short.

Any time you feel like all the endless crime, rigging and cronyism on Wall Street and its lobbied puppets in the Capitol is something new, look at these cartoons from about 100 years ago. You will feel better that this time is not different... and much worse that in 100 years absolutely nothing has changed.

The CBOE's VVIX Index, "an indicator of the expected volatility of the 30-day forward price of the VIX" reached extreme levels this week. While all eyes are firmly focused on the to-ing and fro-ing of VIX (the so-called 'fear' indicator), it is the uncertainty of that fear (or greed) that is exploding as VVIX measures. Simply put, the chance of VIX doubling, or tripling, in the next 30 days (which include the final POMO and Fed 'end of QE' meeting), has never been higher.

The level of micro-management by the Fed appears to have reached a new shockingly high plateau. Recently prices have been driven more by liquidity, fear, greed, and Fed policy, than by valuation.  It is time that the Fed stops being a source of interference and confusion. There are also two less obvious or less discussed economic reasons why the Obama administration may be urgently focusing more on the Ebola crises.

No heavy ideological axe to griind or conspiracy theories to propound, just a simple look at the price action in the capital markets.

The surge in foreigners buying up U.S. real estate has been well documented in recent years. Of all this buying, no nation has demonstrated a bigger increase in purchases than China. In fact, it is estimated that 24% of all foreign purchases of domestic real estate this year have come from China, up 72% from last year. In some California communities, 90% of real estate buyers are from China. Yes, 90%. Naturally, many of them are buying multi-million dollar homes in “all cash” transactions. Well it appears that one of those communities is the 57,000 person Los Angeles suburb known as Arcadia. The suburb had a relatively insignificant Asian population of 4% in 1980, but it is now 59%.

Regardless of the origins of the Ebola crisis, whether it be conspiracy or gross incompetence, there are a number of aspects to the entire situation which simply do not add up. While one would not argue that preparedness on the part of the federal government regarding a possible pandemic is a bad thing, its behavior thus far has exuded anything but preparedness. Considering America’s sordid history with national emergency exercises, the ongoing FEMA pandemic exercise cannot help but raise red flags.

From exuberant escape velocity 'expansion' hopes and dreams in June, to 'slowing' in September, and 'drastic downward revisions' in early October, the Goldman Sachs Global Leading Indicator has had a very troubled recent past (as QE is just 4 POMOs away from coming to an end). But nothing could prepare the avid reader for what happened to the infamous Goldman "swirlogram" this month - an epic, total collapse. As Goldman 'politely' notes, "the October Advanced reading places the global cycle deeper in the ‘Slowdown’ phase, with momentum (barely) positive and declining."

Put another way, those individuals responsible for running the largest companies in the US, who know more about their companies’ growth prospects and the economy have used the Fed’s policies to cash out.

"Yes, we did extremely well in 1987... What really scared me in October of 1987 was that after Monday’s crash, there was a lot of concern about not getting paid, that brokerage firms would have to liquidate. That was a wake-up call that really helped us to protect ourselves later during the crisis in 2008... [because] you are an unsecured creditor of a brokerage firm... That lesson also shaped my understanding of how fragile the system was. I believe the system was much closer to going down in two days in 1987 than at any point in 2008."