Archive - Jun 2014

Believe it or not, the main driver of risk overnight had nothing to do with Iraq, with the global economy or even with hopes for more liquidity, and everything to do with a largely meaningless component of Japan's future tax policy, namely whether or not Abe (who at this pace of soaring imported inflation and plunging wages won't have to worry much about 2015 as he won't be PM then) should cut the corporate tax rate in 2015. As Bloomberg reported, Abe, speaking to reporters in Tokyo today after a meeting with Finance Minister Taro Aso and Economy Minister Akira Amari, said the plan would bring the rate under 30 percent in a few years. He said alternative revenue will be secured for the move, which requires approval from the Diet.

We all knew just how wrong it was as we sat there and listened to the World Bank going on in January about how world economic growth would top 3.2%. Today the World Bank has downgraded economic growth to 2.8%, which some might say is even over the odds

This is the story of Ethan Chaplin, who back in April was twirling a pencil in his 7th grade class in Vernon, NJ. One of the class bullies saw an opportunity to be a jerk and yelled: "He’s making gun motions, send him to juvie." Rather than demonstrating any sort of common sense, the teacher apparently had a panic attack and reported him, which resulted in a two-day suspension. As if that part of the story isn’t bizarre enough, Ethan wasn’t allowed to return to class until he underwent a psychological evaluation. Amazingly, the saga manages to get even worse. Just today, we find out that New Jersey is threatening to take Ethan away from his father. Incredibly, the state is claiming that the prior psychological evaluation wasn’t sufficient and more testing needs to be done. Since his father Michael is pushing back, the loss of custodianship has been threatened.

America’s and the world’s appetite for drugs is insatiable. Billions upon billions of dollars have been spent on both the consumption of illicit drugs and fighting the war on drugs. At first glance as an investor, you probably don’t think this affects you (that is, if you don’t use or sell drugs). But a closer look will reveal the enormous economic impact that the war on drugs has on America. Prepare yourself for some very alarming numbers.

“Go and get educated, you weakly fools, learn to compete; it’s a tough world out there.” And with that push by the Knightly Elite, Americans by the millions have entered a path offering them skills or greater opportunity, instead of taking the alternate route to an almost guaranteed permanent welfare. In their obsequious tradition of creating self-serving opportunities and promoting waste, legislators have allowed the creation of a field of uncontrolled helter-skelter, unqualified schools (new or existing) offering shelter to mostly unemployed or unemployable men and women wearing student uniforms. Yet, as this throw-away part of society gets “educated” there are none-to-few jobs waiting for them. These “money advances,” appear as the only way to subsist. For now... we’ll just wait until this bubble bursts.

The next time you are stuck alone in a room with Vladimir Putin and that awkward silence strikes, just ask him about NATO's missile shield being for protection against Iran (and not Russia)... and that should break the ice nicely. As the following interviewer found, the iron fist of Russia has a lighter side... we think...

"At the height of the Cold War I do not remember them getting this close," notes a retired Air Force Lt. Gen. as The Washington Free Beacon reports that four Russian strategic bombers triggered U.S. air defense systems while conducting practice bombing runs near Alaska this week, with two of the Tu-95 Bear H aircraft coming within 50 miles of the California coast, the North American Aerospace Defense Command (Norad) confirmed Wednesday. Two U.S. Air Force F-22 jets were scrambled and intercepted the bombers over the Aleutians but the remaining two nuclear-capable bombers then flew southeast and entered the U.S. northern air defense zone off the coast of Northern California, before 2 more F-15s were scrambled. As House Armed Services Committee member Connaway ranted, "truth of the matter is we would have squashed either one of those [bombers] like baby seals." McInerney said no American president has been treated with such disrespect in U.S. history.

The sun has had three major "X-Class" solar flares on its surface in the past two days that have affected communications on Earth and could send a shockwave through Earth this Friday (the 13th), according to the National Oceanic and Atmospheric Administration. As ABC reports, the “solar events” caused brief blackouts in high frequency communications when they struck, twice on Tuesday morning and once this morning. One of the flares created a “coronal mass ejection” that actually could come into contact with Earth on Friday, according to NOAA, and could cause a minor geo-magnetic storm.

The numbers that you are about to see are likely to shock you. They prove that the global financial Ponzi scheme is far more extensive than most people would ever dare to imagine. The truth is that our financial system is little more than a giant pyramid scheme that is based on debt and paper promises. It is literally a miracle that it has survived for so long without collapsing already. But at some point a day of reckoning is coming, and when it arrives it is going to be the most painful financial crisis the world has ever seen.

Because drones have done so much for the "we love American exceptionalism" belief across the middle east, the US decided that since last year, secretly flying unmanned surveillance aircraft over Iraq - to collect intelligence of insurgents - would be good idea. The intelligence (and use the term loosely) was share with Iraqi forces but as WSJ reports, one secnior US official admitted "It's not like it did any good," as the rapid territorial gains by the Islamist forces loyal to Islamic State of Iraq and al-Sham, or ISIS, an al Qaeda offshoot, caught the U.S. by surprise.

Fed's Williams recently warned of "irrational" investors getting "carried away" by "assuming a pattern (rising stocks) will persist." If financial stability is really the Fed's concern then one look at the chart below shows they have totally and utterly failed...

To summarize: the US was arming and training the same Al Qaeda/ISIS groups of Jihadists, that it concurrently gave Iraq weapons to fight. And since the Iraq army has so far proven utterly incapable of any resistance, it is now up to US drones to "fight" the same "rebels" that the US itself was collaborating with until a month or so ago.

As human beings, we are remarkably poor at predicting our future selves.  We know that our personalities, preferences and values have certainly changed in the past, but, as ConvergEx's Nick Colas explains, we tend to dramatically underestimate what changes might be in store on these fronts in the future.  That’s the upshot of a recent bit of research by Harvard psychologist Daniel Gilbert, and it helps explain how we process decisions as varied as whether to get a tattoo or how we invest financial capital.  Stasis is our default setting when it comes to considering our futures, and that lack of imagination seems to inform how much we can predict about how other people and systems will change as well.  The most important takeaway: no matter how much you think your life will remain the same, you are almost certainly wrong.  And the same goes for capital markets.

If capital is not treated equally, political equality is an illusion, for capital buys political influence and power. Capital that can buy political power gains political protection of its extraordinary privileges to control rentier income streams, income which furthers its political power.