Archive - Sep 2015

A federal shutdown due to a funding lapse looks no less likely than it did two weeks ago, and Goldman Sachs believes the probability is nearly 50%. The Senate is expected to begin voting later this week on a funding extension, but the House looks unlikely to act until shortly before the September 30 deadline. The following attempts to answer the main questions surrounding the shutdown, debt limit deadlines, and ramifications...

If you have ever felt that in addition to being a quasi cargo cult (which in the case of central planners borders on religious dogma) rather than an actual science, not to mention far more destructive, economics was purposefully obtuse and opaque, meant to sound sophisticated and generally "baffle with bullshit" when in reality it was hollow, often contradictory and sometimes meaningless by design, then the following confession by David Hakes, professor of economics at the University of Northern Iowa is for you. In it the economist explains how he was turned down when he wrote articles that could easily be understood by a broad audience. So he made them more difficult to understand and got published immediately.

"The American people have no reason to believe that they’ve heard the full story and every reason to believe that Washington assumes they are too stupid or preoccupied to care about cyber security."

Japan is a useful analog in so many ways, not just about what the US and global economy can (has already?) become if allowed to follow into this same circle of Hell. It pretty much proves the incapacity of orthodoxists toward anything outside of their so very limited understanding and appreciation.

For those who have had the nagging feeling that something in the market has changed dramatically in the past few months, you are absolutely correct. Here is the full explanation.

It's all clear now...

There is blood on the streets wherever you look in Brazil today, but probably of most interest to the hundreds of US asset managers (the ones managing your mutual funds) is what happens to Petrobras as it remains so widely held. As we noted below, bond prices are collapsing and default risk is soaring, and with the nation's currency collapsing amid the lower-for-longer oil prices, $90 billion of dollar-denominated debt could soon potentially be too burdensome for the company to repay.

News That Matters

In case anyone should ask you to explain Fed reflexivity in under 100 words, here is the answer...

As powerful as the Fed is, it isn’t stronger than the markets. And the longer the Fed tries to sustain abnormalities like QE and 0% interest rates, the more likely it is that the whole business will end with the markets crushing the Fed. At the next sign of a market swoon or of a weakening economy, or with the next episode of deflationary jitters, the Fed will do whatever it takes, no matter what the eventual damage to the dollar’s value. Whatever the details, one thing should be clear. This politburo of unaccountable central planners is the greatest risk to your financial wellbeing today.

It appears Darwin was on to something after all. In the most stunning statistic of the new narcissistic normal's sharing economy, The Sydney Morning Herald reports that, since 2013, deaths from shark attacks have been outnumbered by deaths while taking a selfie. In Russia, the danger has apparently become so acute that in July police launched a campaign urging people to take care after about 100 people were reportedly injured while taking selfies.

And just like that Weimar 2.0 is born.

Great companies like Hewlett-Packard are now being run not by adult professionals but day-trading punters. Carly Fiorina was one of the latter. She excelled at mastering her flash cards and pitching financial bubbles from the time of the misbegotten Lucent IPO, to her campaign for the Compaq acquisition, to her final days at Hewlett-Packard. What she didn’t excel at was learning a single thing that qualifies her to be President of the United States - not the least of which is humility. Fiorina needs to shut-up, sit down and flush her flash cards. The furtherance of liberty, prosperity and peace are not what Torquemada’s do.