Archive - Nov 27, 2014

Recently we posted the following article commenting on the impact of USD appreciation and dollar circulation among oil exporters, as well as how the collapsing price of oil is set to reverberate across the entire oil-exporting world, where sticky high oil prices were a key reason for social stability. Following today's shocking OPEC announcement and the epic collapse in crude prices, it is time to repost it now that everyone is desperate to become a bear market oil expert, if only on Twitter...

When Americans celebrate Thanksgiving, they don’t know what they are celebrating.

In light of the recent epidemic of shady civil asset forfeitures, what many people fail to realize, is that you aren’t obligated to have casual conversations with police when you have been pulled over. In fact, such conversations are often used solely to manufacture an excuse for further action against you.

Just do it!

While some are already neck deep in Black Friday-eve shopping, we hope more than a few will be relaxing at home watching a movie, dozing in a tryptophanic trance... we suggest the following in preparation for tomorrow's markets...

In some respects we’re in danger of running out of appropriate descriptive superlatives for the current bout of “irrational exuberance” (we’re open for suggestions). The current asset bubble is in many respects reminiscent of the late 1990s tech bubble, but it also differs from it in a number of ways. One of the major differences is that the exuberance recorded in the data is largely confined to professional investors, while the broader public is still licking its wounds from the demise of the previous two asset bubbles and remains largely disengaged (although this has actually changed a bit this year). Monetary pumping merely redistributes existing real wealth (no additional wealth can be created by money printing) and falsifies economic calculation. This in turn distorts the economy’s production structure and leads to capital consumption, thus the foundation of real wealth that allows the policy to seemingly “work” is consistently undermined. At some point, the economy’s pool of real funding will be in grave trouble (in fact, there are a number of signs that this is already the case). Widespread recognition of such a development can lead to the demise of an asset bubble as well.

With Ukraine, according to President Poroshenko, on the verge of World War III, it appears the people of the divided nation face another all too familiar war... on their living standards. As Hyrvnia continues to collapse to record-er lows, Ukraine's Central Bank warns of further stress and FX (think USDollar or EUR) demand because the "population is in panic." With a 19.8% inflation rate last month and a 48% devaluation in the currency this year, Bloomberg reports the costs of imported goods from gasoline to fruit and from medicine to meat is soaring. One store-owner reflected that she "feels the hryvnia devaluation everywhere," and another noted "I can't imagine how people survive on a single pension. We can’t even go to the drug store. We try to use herbs instead." The Central bank expects inflation to keep rising (having previously peaked at 10,256% in 1993 as the Soviet economy was dismantled). "Inflation is the same as the war," warns one analyst, "it may lead to protests if people blame the authorities for failing to conduct proper policies."

As we prepare for the annual food fest, and post-Thanksgiving tryptophan-induced food coma; we thought this weekend's reading list should be a bit of a smorgasbord of interesting topics to stimulate your brain cells between naps and football.

While not hyperinflating, the slow and insidious diminishment of the fiat US Dollar's purchasing power (and thus the living standards of lower- and middle-class Americans - who are not balls deep invested in the US stock 'market') is nowhere more evident than in the soaring costs of Thanksgiving Day dinner during the Fed's 100 year reign...

"Gold is the world’s most persistent bubble: 6,000 years old and going strong" - Citigroup's Willem Buiter.

Dear Willem, thank you for that valiant effort. After reading a few thousands words of shallow propaganda we understand your "confusion": our advice, if you want to understand what gold really is, read the following from Kyle Bass: "Buying gold is just buying a put against the idiocy of the political cycle. It's That Simple." Because if there is a bubble that is even bigger and longer than the "6000-year-old gold bubble" it is that of human corruption, greed, and idiocy. And that doesn't even include the stupidity of those who don't grasp this simple truth.

Presented with no comment...

There is a saying that you don’t ring bells at the top. It’s not really true. Every time the market forms a major peak, at least in the last 15 years, there are usually a preponderance of signs of excessive speculation and leverage.

Watt will you do when the well runs dry?

A recent article argues that the increasing demand for consumer credit is an indicator of increasing consumer confidence. The argument seems reasonable due to the way it is presented--there is an entirely different conclusion one would draw were the argument presented differently.

Giant Banks Take Over Real Economy As Well As Financial System … Enabling Manipulation On a Vast Scale