Archive - Jul 2014

Want to hear the worst idea in the history of horrible ideas? How about we take the industry responsible for destroying the U.S. economy and wrecking the lives of tens of millions of people, and then allow it to create a “government-industry cyber war council.” It appears that trillions in taxpayer bailouts simply wasn’t enough for Wall Street. Noting that it can seemingly get whatever it wants whenever it wants, the industry is now positioning itself to overtly control U.S. “cyber” policy. What could go wrong?

As most Fed watchers know, last week was interesting because Janet Yellen, speaking at IMF came out and said something quite surprising. In a nutshell, she said “It’s not the Fed’s job to pop bubbles”. While many market participants immediately took this to mean, “To the moon, Alice!” and started buying equities hand over fist, there’s another possible explanation for Mrs. Yellen’s proclamation of unwillingness: The Fed could be preparing to do exactly what it said it wouldn’t. Bringing forward the next leg of the cycle, may well be on the Fed’s agenda.

The distinction between the world's only two types of traders (good vs bad) has been a very vague one. Until now. According to a new study by researchers at Caltech and Virginia Tech that looked at the brain activity and behavior of people trading in experimental markets where price bubbles formed, an early warning signal tips off smart traders when to get out even as the "dumb" ones keep ploughing in and chasing the momentum wave. In such markets, where price far outpaces actual value, it appears that wise traders receive an early warning signal from their brains—a warning that makes them feel uncomfortable and urges them to sell, sell, sell.

The venture capital world is currently paying inordinate amounts of money for software companies which are making a lot of noise and not much else!

Here’s a radical suggestion to help counter to the pro-crony forces: be upfront about the true sinister nature of organizations like the Ex-Im Bank. Let’s call a spade a spade, and finally describe the Ex-Im Bank what it truly is: fascism. Such a word comes off as a boogey man term used to rile up emotions. But in the battle of ideas, sophistry always comes up short. Just as the shortest distance between two points is a straight line, precise words are better than vague words when it comes to making a point.

"There is a colossal bubble in all asset prices and eventually it will burst," is the subtle recurring message from The Gloom, Boom, & Doom Report's Marc Faber, warnings that "maybe has begun to burst already." While Faber admits he has called for such a correction previously, he notes that the difference now is that "valuations are so much higher; and contrary to what the mainstream economists believe, I don't believe the global economy is strengthening; in fact I believe it is weakening." Furthermore, while "you never know what will trigger for a bull market or bear market is until after the fact," Faber offers 3 factors (aside from the Fed) that could trigger a 30% crash or more... beginning with "a) In The White House we have a very poor President - which will lead to political issues domestically in the US," which are not priced in.

Gun ownership and gun control are very controversial topics. If more people own guns then will there be more violence and more crime? If everyone is allowed to own guns then will there be negative consequences? Both of these questions are debateable and each of them has its proponents and opponents.  In this article we’ll take a look at some interesting gun statistics from an objective viewpoint. The point is not to argue for or against gun ownership and or gun control. With that said, let’s look at the good, the bad, and the ugly gun statistics.

Ripped from the pages of the Wall Street Journal in July 1889 - it's never different this time...

"America is a marvelous idea, a unique idea, fantastic idea. I’m extremely pro-American. But America has ceased to exist,” says Doug Casey in this fascinating interview with Reason TV’s Nick Gillespie. Casey warns of the political, social, and economic challenges the US must conquer as well as lessons we can learn from failed states.

"I’m not exactly sure how my life will be at $15 per hour. I’ve never made that much money, and I’ve been doing custodial work since I was 15."

When the CEO of the world's biggest company doubts the veracity of US economic data, you know you have a problem. After quarters of disappointing growth in the face of miraculous equity market performance; Wal-Mart CEO Bill Simon warns that shoppers aren’t returning at the pace one might expect years after the recession peaked, despite mainstream media interpretation of the data showing unequivocal growth. Simply put, he exclaims, "the unemployment numbers particularly have been difficult to read with the number of people dropping out of the work force," adding that if we see a further drop in the participation rate it would fit with the fact that "middle-class and lower-class are still economically challenged, only spending during holidays and for family occasions," adding that traction has only come at the top-end.

The trouble with capitalism’s guardians is that they have no respect for it. Markets have been around for at least 2,000 years. Since then they have evolved in many directions, with fancy and sophisticated techniques… and elaborate systems and complicated instruments that take a PhD to understand. But despite all the brain power put into trying to figure them out, markets still surprise, confound and puzzle everyone. You’d think Janet Yellen and other central bankers would take a step back and stand in awe. Heaven and hell are full of people who thought they could take the risk out of markets. Some went broke. Some blew their brains out... others both.

Braveheart's William Wallace would be proud...

Many seem to believe that if we worked our way out of debt problems in the past, we can do the same thing again. The same assets may have new owners, but everything will work together in the long run. Businesses will continue operating, and people will continue to have jobs. We may have to adjust monetary policy, or perhaps regulation of financial institutions, but that is about all. I think this is where the story goes wrong. The situation we have now is very different, and far worse, than what happened in the past. We live in a much more tightly networked economy. This time, our problems are tied to the need for cheap, high quality energy products. The comfort we get from everything eventually working out in the past is false comfort.

While the world was busy preparing to watch the Brazilian drubbing in the world cup, one which Goldman did not predict, this is what happened in Gaza today.