Archive - 2015 - Story

The author of what Paul Krugman called "the most important economics book of the year - and maybe the decade," has turned down a prestigious award from the French government because, he does "not think it is the government's role to decide who is honorable." The irony of Thomas Piketty's revulsion at the Legion d'Honneur award is juxtaposed with his socialist epithets that government should decide everything else... like confiscatory taxes, big government, and, as Mish perfectly describes it, the "save the local bookstore mentality." Even more ironic though, Piketty's rejection of the award occurred on the same day that Hollande finbally gave up on his 75% supertax scheme (which has led to record unemployment).

With Western economic sanctions against Russia, Iran, and Cuba in the news, Ken Rogoff thought it was a good time to take stock of the debate on just how well such measures work. The short answer is that economic sanctions usually have only modest effects at best. In a world where nuclear proliferation has rendered global conventional war unthinkable, economic sanctions and sabotage are likely to play a large role in twenty-first-century geopolitics. Rather than preventing conflict, Pericles’s sanctions in ancient Greece ultimately helped to trigger the Peloponnesian War. One can only hope that in this century, wiser heads will prevail, and that economic sanctions lead to bargaining, not violence.

Commodities broke first because there was the direct link to actual rather than imagined activity; inflation breakevens next; followed by the yield curve in November 2013. Either stocks have permanently decoupled, continuing exclusively within the realm of central bank omniscience that has been rebuked time and again, or there will be a period soon where full harmony is restored; that is everyone’s greatest fear.

"Customers who used to wager on casino tables are probably now sitting at home betting on stocks,” said Tai Hui, Hong Kong-based chief Asia market strategist at JPMorgan Asset Management. “Investors are levering up on margin trading, or ‘using a small knife to cut a large tree.’"

"the West has maintained the dominant narrative of 'Russia in Crimea' whereas the true narrative is 'USA in Ukraine.' The truth is not being aired in the West. It’s a surreal perversion of history that’s going on once again, as in the Bush pre-Iraq ‘WMD’ [Weapons of Mass Destruction] campaign... with CIA fingerprints on it."

Fasten your seatbelts; 2015 will be a whirlwind pitting China, Russia and Iran against what I have described as the Empire of Chaos.

Having exposed the 20+1 charts of China's demise previously, we move to Exhibit (a) in the "illusion of prosperity" that keeps the dream (looking) alive to the outside (mostly Western get-rich-quick fast-money) world - China's Zombie Factories...

Meet Emerge Energy Services: the poster boy for the “irrational exuberance” that has become institutionalized throughout the length and breadth of the Wall Street casino. Today’s Wall Street Journal story coming just five months after last summers potboiler is therefore not simply an update on a speculation gone horribly wrong. It’s actually a template for the deluge to come.

Obama + Vacation = ...

Rather conveniently, the much-heralded statement by Mario Draghi today with regard the looming need for sovereign QE in Europe contained not one, not two, but four fantastical Keynesian fallacies...

On the chart below, spot where Bill Gross quit and led to a third (so far) of PIMCO's TRF getting redeemed.

In Canada, there seems to be a cult belief that housing simply will not correct. They are full on drinking the good old tasting real estate Kool-Aid. Canada has enjoyed many years of the global commodities boom and now finds itself contending with a market full of debt and inflated housing values. Short of oil rising back up to $80 a barrel or higher, Canada is likely going to face some short-term pain. The housing market is due for a correction.

"Fixed..."

"Don't fall for the trap of myopically following yesterday's winners. Protect yourself, keep your powder dry, and wait for a better day. Think more about getting rich in 2020 or beyond... The Fed has turned the entire investing population into zombies (with a gambling addiction, I might add) wandering aimlessly in search of any tiny extra return to ravenously consume... This has left stock markets as elevated and overvalued as they’ve been since the dot-com mania (and more than they were in 1929 and 2007), which history has shown will likely lead to significant declines ahead."