Archive - Jun 2014 - Story

Economic science has long shown that labor is not magically exempted from the laws of supply and demand. Therefore, minimum wage laws hurt rather than help workers, especially those with few skills or those just starting out, who are on the lowest rungs of the ladder. If one wants to raise youth unemployment and price unskilled workers out of the market, there is no surer way than introducing a minimum wage – especially one that is far higher than what the market can bear. Seattle is one of the few municipalities in the US boasting of an openly socialist council member, Ksahma Sawant. One of her central demands was the introduction of a $15/hr minimum wage in Seattle. The city council has now bowed to this demand, a decision that is likely to prove extremely destructive, especially to small businesses. Seattle seems eager to become the next Detroit.

E Pluribus, Unum!

The great mystery of the endlessly levitating market continues to confound everyone, even Goldman Sachs. Because while the market soared in May (and has continue to surge in June) contrary to the sell in May mantra, when peeking beneath the market's covers, Goldman has found that most investor groups did just as they are supposed to do for this time of the year: they sold!

While Morgan Stanley's lower-than-consensus economic expectations for the US economy splits the difference between an economy where people remain hesitant to take on risk, essentially extending the post-crisis pall, and one where they embrace risk in the manner of a more typical post-WWII cyclical expansion; their alternative scenarios (at either corner of the goldilocks world) make one wonder just what the catalyst will be to release the kraken of better-than-subpar growth...

Risk is no longer priced into anything. Volatility has gone to sleep. Uniformity of thought has taken over the stock market. Complacency has reached a point where even central banks have begun to worry about it: the idea that markets can only go up – once entrenched, which it is – leads to financial instability because no one is prepared when that theory suddenly snaps. But all this bullishness, this complacency is only skin deep. Beneath the layer of the largest stocks, volatility has taken over ruthlessly, the market is in turmoil, people are dumping stocks wholesale, and dreams and hopes are drowning in red ink.

UPDATE: Las Vegas Review reports 5 dead: 2 cops, 1 civilian, 2 suspects

Multiple shootings and at least one death has been reported after two people (a man and a woman) shot two Law Vegas police officers, stole their gear, and entered a nearby Wal-Mart. As KLAS-TV reports, police say witnesses told them the suspects took the police officers' gear and, as they were walking out of the restaurant after the shooting, they said, "tell the police the revolution has begun." As Las Vegas Review Journal reports, the shooters were still at large as of noon.

With call-signs "Death 11" and "Death 12", we suspect the deployment by the US Air Force of 2 B-2 Stealth Bombers to the UK's RAF base in Fairford is for anything but simple sight-seeing. As The Aviationist notes, B-2s don’t move from Whiteman AFB, in Missouri, too often as they are trained to conduct very long round-trip missions from their homebase; which is why the deployment of two Spirit bombers with the 509th Bomb Wing to the UK is, at least, noteworthy. The question is... what will Putin's retaliatory sabre-rattle be?

Government intervention in the economy manipulates the buying decisions of the population. The resulting malinvestment quickly turns into malinformation and imbalanced marketing messages. Our minds are dominated by the marketing messages of malinvestment which blankets our economy in a dark fog of partial truths. Partial truths masquerade as the whole story, granting subpar products and services unchallenged attention and popularity. Oscar Wilde was right: “Everything popular is wrong.”

Mario Draghi unleashed his ultimate "spend-it-all-now-or-you'll-lose-it" Keynesian demand-pull bazooka this week when he went full negative-rate-tard. While plenty of time has been spent discussing the "low-flation" and the total lack of credit creation (Keynes ultimate kryptonite), we thought the following three charts might bring home just how entirely broken (and dependent) Europe's economy/market has become...

Much has been made about the role that hydraulic fracturing – or fracking -- has played in revolutionizing the energy landscape, unlocking vast new reserves of oil trapped in shale rock. This “tight oil” is pouring into the global pool of oil supplies at a crucial time, preventing oil prices from spiking in an age of high demand and geopolitical turmoil. But the world still relies overwhelmingly on conventional oil production from existing fields, many of which are in decline. The Middle East has dominated the world of oil for half a century and as the list below shows, it remains king. Here are the top five most important oil fields in the world.

• Only 28% of respondents knew that if student loans aren’t repaid, the U.S. government can garnish wages, withhold Social Security payments and tax refunds, and report the debt to credit bureaus.
• Even more people—35%—incorrectly thought the government couldn’t do any of those things or said they didn’t know what the government could do.
• Only 37% of those surveyed knew that students loans are extremely hard to shed in bankruptcy, a reality that differentiates student loans from other debts, such as mortgages and credit cards.
• About half of those with higher-than-average student debt didn’t have high comprehension of the issue.

Not much is known about Igor Strelkov, the man AP dubbed "the face of the insurgency in eastern Ukraine", and the fact that he keeps an ultra low profile certainly doesn't help his public image, if certainly boosting his shadowy, mystical status. However, yesterday in the aftermath of the swearing in of Ukraine's new president Poroshenko, Strelkov gave an extensive interview in which he laid out not only the "separatists" take on recent events in Ukraine but how they view the armed resistance strategically, and what, if any, the endgame is. In any event, the following interview will certainly not be available on any western media outlets so for those who believe in hearing both sides of the story to development an informed opinion, read on.

Following Obama and Putin's "caught on tape" meeting Vine'd by the French President, we can't help but wonder if the Russian leaders comments were something akin to "this is not over yet." With "De-Dollarization" efforts already broadly under discussion, ITAR-TASS reports that Gazprom had signed additional agreements for clients to switch from dollars to euros and renminbi, "nine of ten consumer had agreed to switch."

With Abenomics facing severe 'reality check' problems as base wages tumble for the 24th month in a row, inflation surges, and the "Misery Index" soars to 33 year highs, this week's release of the annual report from Japan's Ministry of Health, Labor and Welfare paints a very grim picture of Japan's population problem.

The central banks have created moral hazard on a scale which is simply unbelievable and set a stage for a bonfire of the vanities seldom, if ever, seen in history. Professional Investors who have spent a lifetime playing these contrarian opportunities offered by human behavior are being carried out on stretchers as historic market behaviors fail to materialize. "Never in my 30+ year career as a market observer have I seen so many out on a limb which is about to be sawed off." Those who live within the matrix are fully loaded for a recovery which is not and will not appear. But when the leverage fails, the world’s developed economies will be thrust into the next leg of the cleansing process of deleveraging and the destruction of it will be equally bigger. This conclusion is firmly on the horizon; let’s call it the great insanity.