• Tim Knight from...
    12/21/2014 - 09:37
    The five remaining equity bears on Earth are all saying the same thing: "We'll get 'em in 2015." To which I ask: why? What's going to change?

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Credit Doesn't Care What the FOMC Says: The "Recovery" That Never Was Is Over

The stock market takes off in holiday celebration of the FOMC being even less clear than it really has been in some time; perhaps going all the way back to Alan Greenspan’s intentional mush. Equity “investors” are happy that the Fed may be happy about the economy, even though there is nothing in actual markets (outside of stocks) to suggest that anything the Fed proclaims carries even the slightest validity. The recovery is over because it never was. The Fed is now kamikaze and stuck on this course, having painted itself into a smaller and smaller corner in which to operate. Their only hope is that their confidence turns into your confidence, but credit and funding markets are impenetrable at this moment to such utter nonsense. For many places, it is already “look out below.”

 



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Bond Yields Set To Plunge In 2015: Next Year Global Treasury Supply Will Tumble By 20% As ECB Joins The Party

According to Goldman's own calculations, the demand squeeze for the High Quality Collateral that is global "Developed Market" Treasurys is about to go through the roof mostly thanks to central banks which will - even in the Fed's temporary hiatus from the monetization scene - soak up an unprecedented amount of Treasury collateral from both the primary issuance and secondary private market in their scramble to push global equity prices to unseen bubble levels and achieve the kind of Keynes-vindicating, demand-pull inflation that Russia was delighted to enjoy in the past several weeks.
How much?  The answer: a lot, as in a whopping 20% collapse in supply, once the ECB joins the fray!



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Jim Grant: "The Fed Has A 3rd Mandate... The Administration Of American Equity Prices"

Having recently given us a two paragraph synopsis of all that is wrong with our financial market faith in fed officialdom, Jim Grant unleashes his critical wit and insight on CNBC to explain the Fed's new remit, as Bill Dudley recently explained, "the administration of American equity prices." The Fed will find it difficult ro raise rates - both technically (for reasons we have explained in detail previously) and "they will find many blocks in the way having to do with financial markets' reaction." Simply put, the Fed wants to raise rates but mostly it wants peace and quiet, which it does not have: "The Fed is America's central bank but it is the steward of the world's currency," and as Grant concludes, "it is raining currencies around the world... and the Fed must be coginizant of that."



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2014 Year In Review (Part 1): The Final Throes Of A Geopolitical Game Of Tetris

Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."



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The False Promises Of 2% Inflation

A specter is haunting the world, the specter of two percent inflationism. Whether pronounced by the U.S. Federal Reserve or the European Central Bank, or from the Bank of Japan, many monetary central planners have declared their determination to impose a certain minimum of rising prices on their societies and economies. One of the oldest of economic fallacies continues to dominate and guide the thinking of monetary policy makers: that printing money is the magic elixir for the creating of sustainable prosperity. Once the inflationary monetary expansion ends or is slowed down, it is discovered that the artificially created supply and demand patterns and relative price and wage structure are inconsistent with non-inflationary market conditions. Governments and their monetary central planners, therefore, are the cause and not the solution to the instabilities and hardships of inflations and recessions.



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It Cost Ukraine's Government $4 Billion To Get Re-Elected

As the world grows used to hearing of reserve depletion among less-developed nations defending their currencies from collapse, we thought the following chart might open a few eyes as to the real driver of attempting to create 'stability' by intervention. In the run-up to October's parliamentary election in Ukraine, the Hryvnia became oddly stable - signaling to the world that the current government had everything under control and should be re-elected. Since the re-election, the Ukrainian currency has re-collapsed to record lows. How did the Ukrainian government 'ensure' re-election via 'stability'? By blowing almost $4bn (a record 23% of reserves) in one month to maintain the currency's level...



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Defiant North Korea Says Can Prove It Is Not Behind Hack "Without Resorting To Torture Like The CIA"

Surely, the punchline is that even a tiny backwater, dictatorship can now make fun of US "moral high ground" courtesy of the recent CIA torture disclosure. “We have a way to prove that we have nothing to do with the case without resorting to torture, as what the C.I.A. does,the North Korea statement said. Oops.



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Just What Is China Buying?

Something strange is going on in China.



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The Biggest Economic Story Going Into 2015 Is Not Oil

Once again oil is not even the biggest story today. It’s plenty big enough by itself to bring down large swaths of the economy, but in the background there’s an even bigger tale a-waiting. Not entirely unconnected, but by no means the exact same story either. It’s like them tsunami waves as they come rolling in. It’s exactly like that. That is, in the wake of the oil tsunami, which is a long way away from having finished washing down our shores, there’s the demise of emerging markets. And we're not talking Putin, he’ll be fine, as he showed again yesterday in his big press-op. It’s the other, smaller, emerging countries that will blow up in spectacular fashion, and then spread their mayhem around. And make no mistake: to be a contender for bigger story than oil going into 2015, you have to be major league large. This one is.



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The Burning Questions For 2015

"Most investors go about their job trying to identify ‘winners’. But more often than not, investing is about avoiding losers. Like successful gamblers at the racing track, an investor’s starting point should be to eliminate the assets that do not stand a chance, and then spread the rest of one’s capital amongst the remainder." So as the year draws to a close, it may be helpful if we recap the main questions confronting investors and the themes we strongly believe in, region by region.



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Gun Violence In America (In 6 Uncomfortable Charts)

A recent report, The Annual Review of Public Health, summarizes the basic facts of firearm violence, a large and costly public health problem in the United States for which the mortality rate has remained unchanged for more than a decade. It presents findings for the present in light of recent trends. Risk for firearm violence varies substantially across demographic subsets of the population and between states in patterns that are quite different for suicide and homicide. Suicide is far more common than homicide and its rate is increasing; the homicide rate is decreasing. As with other important health problems, most cases of fatal firearm violence arise from large but low-risk subsets of the population; risk and burden of illness are not distributed symmetrically. Compared with other industrialized nations, the United States has uniquely high mortality rates from firearm violence.



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Archaea Capital's 5 Bad Trades To Avoid Next Year

Blind faith in policymakers remains a bad trade that’s still widely held. Pressure builds everywhere we look. Not as a consequence of the Fed’s ineptitude (which is a constant in the equation, not a variable), but through the blind faith markets continuing to place bets on the very low probability outcome – that everything will turn out well this time around. And so the pressure keeps rising. Managers are under pressure to perform and missing more targets, levering up on hope. Without further delay we present our slightly unconventional annual list. Instead of the usual what you should do, we prefer the more helpful (for us at least) what we probably wouldn’t do. Five fresh new contenders for what could become some very bad trades in the coming year.



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The Annotated History Of Russian Crises Since 1860

While the current episode of Russian geopolitical and economic turmoil may seem significant, the following chart from Goldman Sachs shows the tempestuous time the nation has had over the past 150 years...



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I'm Not Buying It - Not The Wall Street Rip, Nor The Keynesian Rap

The current illusion of recovery is a result mainly of windfalls to the financial asset owning upper strata, the explosion of transfer payments funded with borrowed public money and another supply-side bubble - this time in the energy sector and its suppliers and infrastructure. But that’s not real growth or wealth. Indeed, the desultory truth about the latter is better revealed by the fact that the American economy is not even maintaining its 20th century level of breadwinner jobs. And the real state of affairs is further testified to by the lamentable trend in real median household incomes. That figure - not distorted by the bubble at the top of the income ladder - is still lower than it was two decades ago. So much for the Keynesian rap. Yet that’s about all that underpins the latest Wall Street rip.



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