Archive - Jul 2015 - Story

"Ugly brown rings where waves used to lap at the shore. Dry docks lying on desiccated silt. Barren boat ramps. Trickles of water." Those are just some of the disturbing images California's Department of Water Resources team saw in an aerial tour of Northern California's Folsom Lake, Lake Oroville and Shasta reservoirs released this week...

As goes the world, so goes America (according to 30 years of historical data), and so when world trade volumes drop over 2% (the biggest drop since 2009) in the last six months to the weakest since June 2014, the "US recession imminent" canary in the coalmine is drawing her last breath...

The great lesson from history that each consecutive generations seems to forget is that the tools of tyranny used outward will inevitably be turned inward. That is to say, the laws and weapons governments devise for supposed enemies abroad will ALWAYS and eventually be used against the people they are mandated to protect. There is no centralized system so trustworthy, no political establishment so free of corruption that the blind faith of the citizenry is warranted. If free people do not remain vigilant they will be made slaves by their own leadership. This is the rule, not the exception, and it applies to America as much as any other society.

As Bridgewater talks back its now widely discussed bearish position on fallout from China's equity market collapse, Chinese stocks rose at the open (before fading after ugly manufacturing data). However, liquidations continue across the commodity complex in copper, gold, and silver. Though not on the scale to Sunday night's collapse, the China open brought another 'flash-crash' in precious metals. All signs point to CCFD unwinds, and forced liquidations as under the surface something smells rotten in China, which has just been confirmed by the lowest Manufacturing PMI print in 15 months.

If itsy bitsy pie slice – Greece (.33%) – can create this much worldwide economic havoc because of their unpayble level of debt, imagine what will happen when the truth is revealed about France (3.81%), Italy (2.88%), and Spain (1.88%).

The pantsuit revolutionary is at it again. Once again demonstrating her populist chops by employing the services of lobbyists to bundle millions in campaign funds. It’s no wonder opinion polls on her have been plunging as of late.

If this is what is happening to a daisy now... good luck to the Olympic athletes in 5 years...

Many investors still view gold as a safe-haven investment, but there remains much confusion regarding the extent to which the gold market is vulnerable to manipulation through short-term rigged market trades, and long-arm central bank interventions. First, much of the gold that is being sold as shares, in certificates, or for physical hoarding in dubious "vaults" just isn't there. Second, paper gold can be printed into infinity just like regular currency. Third, new electronic gold pricing — replacing, as of this past February, the traditional five-bank phone-call of the London Gold Fix in place since 1919 — has not necessarily proved a more trustworthy model. Fourth, there looms the specter of the central bank, particularly in the form of volume trading discounts that commodity exchanges offer them.Today, there is no “official” price for gold, nor any “gold-exchange standard” competing with a semi-underground free gold market. There is, however, a material legacy of “real versus pseudo” gold that remains a terrible menace. Buyer beware of the pivotal difference between the two.

"What Japan did provokes confrontation between the two countries, and is not constructive at all to the management of the East China Sea situation and the improvement of bilateral relations."

In almost all cases, including the most recent rise, the intermittent change in psychology that drove interest rates higher in the short run, occurred despite weakening inflation. There was, however, always a strong sentiment that the rise marked the end of the bull market, and a major trend reversal was taking place. This is also the case today. Presently, four misperceptions have pushed Treasury bond yields to levels that represent significant value for long-term investors. While Treasury bond yields have repeatedly shown the ability to rise in response to a multitude of short-run concerns that fade in and out of the bond market on a regular basis, the secular low in Treasury bond yields is not likely to occur until inflation troughs and real yields are well below long-run mean values.

File this one away in the "when populism backfires" folder. A little over a month after announcing that the Zimbabwean dollar - which, you’re reminded, was phased out in 2009 after inflation rose modestly to 500 billion percent - would be demonetized and exchanged at a generous rate of $5 for every 175 quadrillion, Zimbabwe will for the first time rethink the sweeping land grabs which began in 2000 and subsequently crippled the country’s economy.

The real reason why retail investors weren't impacted by the NYSE's halt is a hard truth... to retail investors, the NYSE is always dark

Where Do Retail Investor Orders Go? The simple answer: to the highest contracted bidder. Stock "wholesalers" or internalizers like Citadel or Knight pay retail brokers lots of cash to execute retail trades, essentially creating a "third market". Why? Because in a high frequency trading world, where stock prices have never been more fuzzy to the end user, but crystal clear to those that spend enormous sums on colocation and PhD employees, it's never been easier to print money (not unlike Bernie Madoff's scheme in the 90's). But that is the subject of a much, much longer story. Someone should write a book.

Sometime this fall, the Federal Reserve will begin a new tightening cycle. Publicly, Federal Reserve officials appear to be confident that the American labor market may be overheating or that inflation may be on the way in. Is this the case? In looking at Employment, Industrial Production, Consumer Prices, Capacity Utilization, Retail Sales, and the West Texas Intermediate price of oil, there's no evidence that the Fed should raise rates. What is the Fed worried about? Probably, and almost exclusively, it's financial asset price appreciation.

The moment everyone has been waiting for has finally arrived, by which of course, we mean the moment when the market cap of AMZN would finally surpass Wal-Mart.