Archive - Jan 2014

Rising U.S. inflation expectations ... suggesting inflation is around the corner. But we're not buying it just yet.

Is it all about expectations about tapering, again?

With over 1,000 new merchants adopting Bitcoin every week, it is perhaps not surprising that, as NY Post reports, the first Bitcoin ATM is about to debut in New York City. Following success in Canada and Europe, Brooklyn native Willard Ling, 30, is set to introduce the first bitcoin ATM to New York City at the East Village bubble tea shop 'Just Sweet'. State regulators with the Department of Financial Services are expected to hold hearings later this month to discuss how the digital currency should be regulated; and until then, Ling’s bitcoin ATM will sit in his apartment.

Do I hold my nose and just buy, or do I get out now and protect myself from the Fed inspired asset bubble that inevitably gets pricked? 

Do I hold my nose and just buy, or do I get out now and protect myself from the Fed inspired asset bubble that inevitably gets pricked? 

When it comes to socialism, the world's premier promoter of egalite - France's Francois Hollande - is very aware that in a socialist utopia, no property is private. Hence everything can be shared, such as actress Julie Gayet with whom it was revealed last week he had an affair. The problem is that the First Lady, er, Girlfriend of France, Valerie Trierweiler, 48, did not share her boyfriend's Marxist view. And, as Reuters reports, when Trierweiler found out about an affair between Francois Hollande and the aforementioned Julie Gayet, 41, she was hospitalized on Sunday morning "because of exhaustion." But before readers cry for Madame Trierweiler, recall that while Hollande is a fervent fan of socialism, the former first girlfriend some far more interested in being more equal than others. Per the Mail: "She currently has five staff working for her at her office as well as numerous other taxpayer-funded perks, including homes across France, private jets and limousines. As anger at the scandal grew, politicians suggested Miss Trierweiler’s position was already untenable."

As we reported several days ago, for the first time in history the majority of members of Congress currently have a net worth over $1,000,000. Of course, this also means that just under half are still aspiring to get in Wall Street's "preferred politician" rolodex, and says nothing about any one politico's individual's assets. So for all those curious how much their congressional representative is worth, the following comprehensive summary infographic from Vizual Statistix has the answers.

Gross: The age of getting rich quickly is over as is (most likely) the age of getting rich slowly.

— PIMCO (@PIMCO) January 12, 2014

By now most are aware that the primary reason there was EPS growth last year was the relentless buying back of their own stock by corporate treasurers, accounting for 75% of the increase in S&P500 earnings per share even as revenues stagnated for the second year in a row and actual earnings growth was comatose at best. At $500 billion in net stock buybacks in 2013, this was an immense amount of bidding power, equal to half of the Fed's entire annual liquidity injection. And while EPS was artificially boosted by an allocation of capital that most would say is the least efficient in terms of future growth (remember when companies spent on capital expenditures to fund long-term growth, not satisfy activist shareholders?) the only good thing that could be said about the second highest annual corporate buyback in history was that companies still saw their stocks as cheap: after all, not even the most aggressive of CFOs would greenlight a massive buyback campaign if they expected their stock to plunge. That is no longer the case.

If you thought that you got rid of the IMF as a diligent saver, we have bad news for you.

Extra cheese anyone?

It is a slow Saturday with virtually no financial, economic or any other news, so what better way to spend it than looking at the coolest non-finance related images of the past year. Without further ado, here they are, courtesy of Wired: the best scientific visualizations of 2013.

It has been commonplace to speak of central bank independence - as if it were both a reality and a necessity. Discussions of the Fed invariably refer to legislated independence and often to the famous 1951 Accord that apparently settled the matter. [1] While everyone recognizes the Congressionally-imposed dual mandate, the Fed has substantial discretion in its interpretation of the vague call for high employment and low inflation. It is, then, perhaps a good time to reexamine the thinking behind central bank independence. There are several related issues.

• First, can a central bank really be independent? In what sense? Political? Operational? Policy formation?
  
• Second, should a central bank be independent? In a democracy should monetary policy—purportedly as important as or even more important than fiscal policy—be unaccountable? Why?
• Finally, what are the potential problems faced if a central bank is not independent? Inflation? Insolvency?

Money well-spent, we are sure some would suggest; but when the National Institute of Health spends $224,863 to test 95 "custom-fitted" condoms so every hard-working American man can choose the one that fits 'just right', we suggest the government is stretching the tax dollar a little too far. As NY Post reports, the study was prompted by concern that despite the wide-scale promotion of latex condoms to help prevent the spread of HIV, their use remains "disappointingly low," because, the government says, one-third to one-half of men complain of poor-fitting prophylactics and are less likely to use them... apparently. Of course, we assume, when questioned, all said the condom was 'too small'.

We noted on Thursday, when Alcoa reported, that "non-recurring, one-time" charges are anything but; indicating just how freely the company abuses the non-GAAP EPS definition, and how adding back charges has become ordinary course of business. But it's not just Alcoa, and as David Stockman, author The Gret Deformation, notes Wall Street’s institutionalized fiddle of GAAP earnings made P/E multiples appear far lower than they actually are, and thereby helps perpetuate the myth that the market is "cheap."