Archive - Oct 2014

What can popular television programs tell us about the zeitgeist (spirit of the age) of our culture and economy? It’s an interesting question, as all mass media both responds to and shapes our interpretations and explanations of changing times. It’s also an important question, as mass media trends crystallize and express new ways of understanding our era. Those who shape our interpretation of events also shape our responses. This of course is the goal of propaganda: Shape the interpretation, and the response predictably follows.

While money (reportedly) can't buy love, it appears, according to The WSJ, that it can buy brains.On average, based on calculations from FairTest, students in 2014 in every income bracket outscored students in a lower bracket on every section of the test. Rather stunningly, students from the wealthiest families outscored those from the poorest by just shy of 400 points. As WSJ's Josh Zumbrun so poetically notes, perhaps SAT should more appropriately stand for Student Affluence Test.

"I think we're looking at kind of a 30-year war... one that will have to extend beyond Islamic State to include emerging threats in Nigeria, Somalia, Yemen, Libya and elsewhere.

From an alarming increase in government seizure of private property under the guise of eminent domain, to blatant disregard for the property rights of bondholders during bailouts, the US has plunged to #36 in the world in respecting property rights (from 9th in 2005). The decline of economic freedom in the US has destroyed opportunities, growth, and wealth creation along with it. Is this as bad as Argentina, Equatorial Guinea, or Venezuela? No. But it’s not about where you’re at. It’s about where you’re going. And the trajectory is clearly negative.

Investors - at least the carbon-based variety not the vacuum tube-driven algos, assuming there are any left - are in a state of complete shock!

The S&P swung 44 points from low-to-high today as panic-buying lifted stocks vertically on the back of an utter VIXtermination (from over 18 to under 15). Nasdaq surged over 2.5% from its lows before FOMC Minutes - the biggest swing since May 2012 (and biggest daily gains in a year). 10Y Yields closed at 2.33% (2.3249% lows) - the lowest since June 2013. The TSY curve steepened dramatically post-FOMC with 5Y now -18bps on the week and 30Y -7bps. The Dollar fell for the 3rd day in a row (-1.6%) - its biggest such drop in 15 months. Initial weakness in commodities was wiped away post-FOMC leaving Silver +3.3% on the week (Gold +2.3%). Oil saw no bounce closing at April 2013 lows (WTI below $87.50). The S&P and Dow managed to get to green on the week in the last few minutes (only the S&P held it into close). So in summary: FOMC Minutes sent Stocks Up, Bonds Up, and Gold & Silver Up; VIX down, USD down, and Oil down.

Following the sad death of Thomas Duncan this morning, CBS is now reporting that a possible second case of Ebola has been discovered in a suburb of Dallas:

*DALLAS AREA PATIENT SHOWS EBOLA SYMPTOMS: CBS

The patient claims to have had contact with Thomas Eric Duncan, referred to as Dallas ‘patient zero', and also confirmed travel to West Africa.

"Don’t let the occasional 50-60% crashes disturb your peace of mind! You will always win in the long run! Long term bear markets don’t exist... well, maybe except in Japan. And much of the 18th century. But other than that, nothing can go wrong..."

If you liked King Dollar, you'll love Dumping Dollar... Gold, Treasuries, and Stocks are surging after the release of the FOMC minutes suggested The Fed will keep rates lower longer. The USDollar is dumping - just as The Fed suggested it was worried about a strong dollar. Stocks remain negative on the week and below the levels of the last FOMC...

Federal Reserve officials have become more concerned about weak growth overseas and the impact of a strengthening U.S. dollar on the domestic economy, warns WSJ Fed-whisperer Jon Hilsenrath, adding that, the stronger currency, by reducing the cost of imported goods and services, could hold U.S. inflation below the Fed’s 2% objective. Fed staff also reduced its projection for medium-run growth in part because of these concerns. The minutes showed more clearly than before that concerns about global growth and the disinflationary impact of a strong currency are giving officials additional pause about moving quickly on rates.

With the S&P down over 3% from September's FOMC statement, the market needed some 'good' news from the Fed minutes to save the 'wealth' that has been created...

• *FED OFFICIALS SAW GLOBAL SLOWDOWN AMONG RISKS TO U.S. OUTLOOK (growth)
  
• *FOMC SAID SOME DEVELOPMENTS COULD UNDERMINE FINANCIAL STABILITY (bubbles)
  
• *FED SAW RISING DOLLAR AS RISK TO EXPORTS, GROWTH, MINUTES SHOW (jawbone USD)
  

So The Fed fears bubbles, fears growth slowing down, and appears to be talking down the dollar. In other word, dovish minutes confirming the dovish statement was indeed dovish.

The U.S. Backed the Dictators Whose Rampant War Crimes Destroyed their Healthcare System

If you like your 'disappointing' government-sponsored wage growth data, you can keep it... but if you are an ambitious talking-head economist looking to boost confidence in the economy in the hopes of a career in the administration, then ADP has just the 'tool' for you. Behold, the "ADP Workforce Vitality Index" - which measures the total real wages paid to the US private sector workforce, implying that the BLS is not measuring wage growth correctly as it is actually notably higher. In Q3, the ADP data grew 0.77% which they argue "is a good sign that may lead to increased consumer spending and a boost for the economy," and implicitly means The Fed should be hiking rates sooner as ADP warns "real wages are accelerating." Zandi the optimistic hawk?