Fast forward to today when we are about to learn that Newton's third law of Keynesian economics states that every boom, has an equal and opposite bust. Which brings us to Texas, the one state that more than any other, has benefited over the past 5 years from the Shale miracle. And now with crude sinking by the day, it is time to unwind all those gains, and give back all those jobs. Did we mention: highly compensated, very well-paying jobs, not the restaurant, clerical, waiter, retail, part-time minimum-wage jobs the "recovery" has been flooded with. Here is JPM's Michael Feroli explaining why Houston suddenly has a very big problem.
The Global Monetary Reset is under way, but people have not noticed it yet. The key is the move to zero interest rates.
When the conventional media ordains oil inevitably dropping to $40/barrel, we start looking for something else to happen - like oil going to $70/barrel. There are number of reasons this isn't as farfetched as it might seem at the moment.
Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."
"I’m tired of being outraged!"
George Orwell once said that “during times of universal deceit, telling the truth becomes a revolutionary act“. That perfectly describes the era that we are currently living in. The truth does not bring fear and despair. Rather, the truth brings hope and it sets people free.
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..."
"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.
Virtually every day there is an eruption of lunacy from one central bank or another somewhere in the world. In short, the central banks of the world are embroiled in a group-think mania so extreme and irrational that it puts one in mind of the spasm of witchcraft trials that erupted in the Massachusetts Bay Colony nearly four centuries ago. As a practical matter, this mania amounts to a race to the currency bottom and the final extinguishment of the price discovery mechanism in every financial market on the planet. Flying blind, the financial markets are thus bubbling - in the delirium phase - like never before. That is, until they don’t.
"...so many still maintain that America is the greatest nation in the world. They swear that America represents all that is good; freedom, democracy, merit based capitalism and the rights of the individual. That is true America does represent such things. However, it is fraudulent to consider our current nation America. America was a concept that promoted all that is good. And so it would seem that the nation in which they find themselves cannot be America. Their nation today represents the will of the political class at all costs, period. Their sole motivation is themselves. Very different from America. And so perhaps a renaming on the nation is required, at least until or if the people decide to take it back and reintroduce the world to the concept that is America for as discussed below you cannot destroy a concept and so there is hope to bring her back. But until then we need a name for this geographic region and its new societal system... It seems"Neoconica" is most fitting."
It's jolly good fun to discuss alternatives to the doomed status quo, but what choice do most of us have to participating in the current system, even if we loathe it? The lack of choice is of course a key characteristic of the status quo-- if alternatives were plentiful, how many would opt out of Corporate America and the Financial Nobility's manor house of debt servitude?
Has too much bearish sentiment been priced in too fast in the price of oil?
The story here is not Oil; it’s about a massive bubble in risk assets fueled by borrowed Dollars blowing up. The last time around it was a housing bubble. This time it’s an EVERYTHING bubble. And Oil is just the canary in the coalmine.
The Japanese economy may well be getting crushed under the weight of Abenomics (courtesy of an unprecedented in history quadruple-dip recession and a record number of Japanese corporate bankruptcies due to the plunging Yen), but as we wrote previously, Abe has effectively hijacked the nation to his (and Paul Krugman's) stock-market levitating policies and has given Japan a simple choice: either you let us see this disastrous experiment in trickle-down monetarism to its tragic end, or all your pensions are toast. Not much of a choice for a population which has more retirees than any developed nation. And it's not like Japan has much a chance anyway. Which is why the outcome of tomorrow's vote for Abenomics is completely irrelevant, and which the local press says will "unquestionably" be won by Abe in an absolute majority.
Simply put, the US government has reached a point of no return.