Archive - May 2014 - Story

Normally, prices are self-limiting, notes Citi's Matt King: yields rise - inflows hit - prices rise - yields drop - outflows hit - price drops, and back to yields rising. But, it appears for now that we are in a positive feedback (or hyperbolic) loop, where - thanks to central banks pushing too much money to chase too few assets - prices rising implores inflows creates "higher returns" which in turn encourages more inflows (as risk is ignored). King's analogy for this precaiorus situation is pulling a brick with a piece of elastic - nothing happens for a long time... and then - all of a sudden - woosh. Ring any bells?

As the price of meat continues to skyrocket, will it soon be considered a "luxury item" for most American families? This week we learned that the price of meat in the United States rose at the fastest pace in more than 10 years last month. This is really bad news if you like to eat meat. The truth is that the coming "meat crisis" is already here, and it looks like it is going to get a lot worse in the months ahead. Could rapidly rising food prices cause civil unrest in the United States eventually? It won't happen today, and it won't happen tomorrow, but some day it might. Meanwhile, you might want to start carving out a significantly larger portion of the family budget for food for the foreseeable future.

Welcome to the real world, debt serfs...

The world is overpopulated. The street are clogged, traffic is in a snarl, and people are living – both figuratively and literally – right on top of each other. There’s hardly enough room to swing a cat these days, right? Wrong.

There are a few images that scream to mind when one thinks about Brazil - dazzling soccer footskills, illustrious dancing, and of course dark-skinned, scantily-clad females... but as The World Cup draws near for the soccer-savvy nation, there will be another image that will likely dominate the headlines...

Since the Fed can't be bothered with an objective analysis covering both sides the most important debt issue for America, we go to Pew which recently concluded an analysis on the impact of student debt and found that "Student debt burdens are weighing on the economic fortunes of younger Americans, as households headed by young adults owing student debt lag far behind their peers in terms of wealth accumulation." 

American foreign policy is mindlessly driven by the machinery of our Warfare State - a vast accretion of economic, diplomatic, spying and military capabilities which are ceaselessly in search of missions and justifications for their colossal call on the nation’s resources. Absent a dismantlement of the Warfare State machinery, giant policy errors like the Bill Clinton’s double-cross on NATO and Obama’s foolish present confrontation with Putin are nearly guaranteed to recur.

Given the surge in India's stock market, echoing the reflexive pro-business exuberance of last year's Japanese stock market, the similarities between India's newly-elected PM Narendra Modi and Japan's Shinzo Abe are coming thick and fast... some good (pro-business), some bad (potential dislike of the US) and some potentially ugly (strong nationalist tendencies).

While the golden beaches and bronzed beauties may attract the world's eaters, drinkers, and smokers to Australia's shores, Melbourne and Sydney are the most expensive place in the world to partake of these life necessities. Close behind is that other paradise... Caracas, Venezuela. But if all you want to do is eat... the socialist safe haven of Venezuela is not where you want to end up as a loaf of bread costs on average over $11. It hasn't always been that way... the cost of eating, drinking, and smoking in Caracas has soared almost 400% in the last 10 years.

Have you ever given food to a homeless person? Well, if you do it again in the future it might be a criminal act depending on where you live. Right now, there are dozens of major U.S. cities that have already passed laws against feeding the homeless.

"The DEA doesn’t want the drug war to end,” said Nelson, when asked about a possible connection between the agency’s hatred of legal pot and its buddies in Sinaloa. “If it ends, they don’t get their toys and their budgets. Once it ends, they aren’t going to have the kind of influence in foreign government. I’m not a conspiracy theorist, but where there’s smoke there’s probably fire.”

“We’ve spent 1.3 trillion since 1972 on the drug war. What have we gotten for that? Drugs are cheaper and easier to get than ever before,”

However, the Mexican drug cartels have been bailed out by America’s drug warriors who have cracked down on prescription pain killers.

In November we showed a chart showing the yawning chasm of exuberant faith-in-Draghi hope that was 2013-to-2014 earnings growth expectations in Europe. At the time we remarked - now prophetically - how it would seem Draghi's "whatever it takes" confidence-inspiring orgy of European asset-buying had driven the EUR almost 20% higher from the 2012 crisis lows... and in the meantime had crushed European competitiveness. The hockey-stock hope at the end of 2013 has not materialized - surprise - in fact earnings growth expectations have utterly collapsed in the last 2 months... time for a "whatever it takes" to weaken the EUR jawboning soon (all without the aid of a fallacious and Treaty-busting OMT).

After losing $4 billion as both a lender and equity-holder, Deutsche Bank has decided now is the time to sell The Cosmopolitan of Las Vegas. The lucky buyer of the 3000-room hotel and casino... none other than America's largest landlord - Blackstone Group. The formerly biggest "buy-to-rent" private equity firm is paying $1.7 billion for the Vegas hotspot after having piled $3.5 billion into property across the city and other parts of Nevada. It is ironic that it was Steve Wynn, another Vegas magnate, who recently noted just how great times were for the 'big guy' seeking cheap financing (and, unfortunately, just how bad it was for the average joe).

When is marginable collateral not marginable collateral? When it is an ETN, or Exchange Trade Note: the cousin of the Exchange Traded Fund (ETF). The very mutated, and unabashedly evil cousin of the ETF that is. At least such is the view of US brokerage Interactive Brokers " Pursuant to a recent decision by FINRA whereby Exchange Traded Notes (ETNs) will no longer be eligible for Portfolio Margining, these securities, including options having an ETN as an underlying, will be phased out of the program by OCC during the week of May 19, 2014."

Take a moment and look at your hands. Specifically, compare the length of your ring finger to the one you use to point.  Is the ring finger longer or shorter than your pointer, and by how much?  It turns out that the answer to that question can tell a lot about your mental abilities and appetite for risk. As ConvergEx's Nick Colas details, a 2009 study of mostly male traders working in London found that the ones with longer ring fingers were generally more profitable than those with shorter ones. Traders with the largest fourth finger/second (pointer) finger ratios actually made 11 times more than those with the smallest.