Archive - Dec 2014

Forget the middle-aged belt-and braces stockbroker who 'knows' a good stock. Ignore the 5-star tech analysts who never saw a startup he didn't like (with your money). Meet 25-year-old math PhD Sam Barnett, CEO of SBB Research - a quant hedge fund - who, instead of wild extrapolations and Keynesian hockey-sticks, trades the market by "using data to mine information before it is encoded into the markets." While several of the CNBC team flounders to show why their commissions are worth it, and why a 25-year-old could not possibly 'know' anything, we for once agree with their premise - this IS the future of trading - 25-year-old math PhDs mining data faster than a fat finger can press buy.

It's not just the exponential rise in US debt that threatens the future 'freedom' of Americans...

Following the start of Abenomics in 2012, Japan moved back to the center of attention of global financial markets. After two and a half decades of economic stagnation, hopes were high that Japan would escape its long stagnation and deflation. Plenty of economists around the globe hoped that, in so doing, Japan would show the western world, mainly the Eurozone, the way to do the same and avoid a similar long period of low growth and stagnating incomes. Conversely, the failure of Abe’s plan for Japan’s recovery would not only be a disaster for the country of the rising sun. It would also be very bad news for central bankers and politicians in the west as well. It would prove that Keynesian policies don’t work in a world of too much debt and shrinking populations.

"Because moar is always betterer..."

New Yokr Mayor de Blasio had strong 'not-my-fault' words for the media during today's press conference about the assassination of 2 NYPD cops over the weekend. De Blasio begins blasting media, "What are you guys gonna do? ... Are you going to keep dividing us?" He then gets on a roll and blames reporters for inciting protesters to confront police - "you all [reporters] enable that [racial divide]... that's how you want to portray the world." Yep - all their fault...

The key is to understand why real median household incomes continue to decline and then how to correct it.  It all comes back to financial policies that incentivize investors to avoid economy-boosting investments and toward financial investments that have no economic benefit.  The result is a narrowing of income distribution exasperating the down spiral, while inflating wealth to the already wealthy.  As long as these policies remain intact the American quality of life will continue to spiral downward while the wealth at the top continues to accelerate until one day when the top pops off and all that wealth goes abroad.  And that Mr. Liesman is what we call economics.

When all is said and done, the swing factor in the decision to work (or not work) is the income it generates (and lifestyle it supports). So we found it intriguing that, as the following chart shows, the number of hours or work required for the average American to buy the S&P 500 has never been higher...

"People should not be worried," explained Kazakhstan President Nursultan Nazarbayev in a TV address over the weekend, "we have a plan in place if oil prices are $40 per barrel." Kazakhstan, the second largest ex-Soviet oil producer after Russia, explains "there are reserves which could support people, preventing living conditions from worsening." However, if A. Gary Schilling's reality check of $20 oil being possible comes to fruition, as he explains, what matters are marginal costs - the expense of retrieving oil once the holes have been drilled and pipelines laid. That number is more like $10 to $20 a barrel in the Persian Gulf... We wonder who has a plan for that?

The next time anyone is stupid enough to mention monetary policy "normalization", just show them this.

No 'Surprise"...

Natural Gas prices are down over 11.5% in the last 2 days, falling to their lowest price since January 2013, as a familiar tale of excess production in the face of ebbing demand looms large. As WSJ reports, BNP Paribas' Teri Viswanath notes "the delayed return of cold weather has simply curbed all buying interest," and this was exaggerated by technical selling as the market broke previous support around 3.50. Ironically, given its detrimental impact on GDP, Macquarie points out, "it is increasingly apparent to us that weather will need to bail the market out again this winter - otherwise prices could see material downside during the spring and summer months."

WWII is still reshaping our economic reality. The subsequent baby booms in the US and globally in Japan, Europe, and so many more locations which were affected by the war created a “pig in the python” moment. This unusually large wave of population growth from ’45-’55 was “pent up demand” from the war. But society and its leaders assumed this baby boom anomaly to be the new reality.  The “pig is passing” from the American and global workforce into retirement and now the wreckage and folly of such basic misnomers has come home to roost…and will get far worse.

Coincidence? Maybe not. Just hours after President Obama de-escalated himself from war to vandalism on the alleged North korea hacking of Sony, DYN Research reports North Korea's internet connectivity with the rest of the world has been spotty all day. As North Korea Tech blogs reports, North Korea’s Internet connection does suffer from periodic outages. but “I haven’t seen such a steady beat of routing instability and outages in KP before,” said DYN's Doug Madory.