Ukraine bond prices have crashed to new record lows this morning - with even 2015 maturing debt trading at a 25% discount to face - following calls (admissions) by Ukraine's new (Lithuanian) economy minister that the government will need more IMF help on top oif its current $17 billion package. The country may need another $19 billion next year!!!
Friday gave us a rare glimpse inside one of the Bureau of Labor Statistics Jobs Centers (courtesy of CNBC)... Perhaps, as the following screengrab indicates, this is why the American unemployed's "re-training" is not preparing them for life in the new economy?
Presented with little comment aside to suspect the answer to our implicit question is something like "it's the new economy" or "you don't understand the new valuation metrics"
It’s not supposed to be like this. We’ve all been told earnings are great, corporate profits are great, analysts estimates have been rising. As a matter of fact, if one dared to question any of these metrics we were referred to as “idiots.” (And that is an actual quote.) Today as we enter this earnings cycle we have a new phrase that I’m sure will enter the lexicon of the lay person in reference to stocks, but will send shivers down actual Wall Street’ers as they have to defend, argue, or give a smoke and mirrors story that will have a chance of being believed. That phrase will be “a trap door event.”
Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression. Japan is the global bellwether in social depression, and we can already see the same symptoms and official panic to mask these symptoms in Europe, China and the U.S.
- Bond Anxiety in $1.6 Trillion Repo Market as Failures Soar (BBG), as reported first by Zero Hedge
- As Food Prices Rise, Fed Keeps a Watchful Eye (WSJ)
- Yellen’s Economy Echoes Arthur Burns More Than Greenspan (BBG)
- Draghi’s $1.4 Trillion Shot: Silver Bullet or Misfire? (BBG)
- Israel's Netanyahu phones father of murdered Palestinian teen (Reuters)
- Ukraine says forces will press forward after taking rebel stronghold (Reuters)
- Goldman Sachs Brings Forward Rate Forecast as Treasuries Drop (BBG)... you mean rise?
- Super typhoon takes aim at Japan (Reuters)
- Kidnapped Nigerian girls 'escape from Boko Haram abductors' (Independent)
- Merkel says U.S. spying allegations are serious (Reuters)
We hear a lot about climate change, especially now that the Intergovernmental Panel on Climate Change (IPCC) has recently published another report. At the same time, oil is reaching limits, and this has an effect as well. How do the two issues fit together? Unfortunately, the real situation is that the laws of physics, rather than humans, are in charge. Basically, as economies grow, it takes increasing complexity to fix problems, as Joseph Tainter explained in his book, The Collapse of Complex Societies. Now we are reaching limits in many ways, but we can’t - or dare not - model how all of these limits are hitting.
Market bears take the position that stocks are expensive, citing a variety of indicators and arguing that profit margins should “mean revert” from record highs. On the other side, market bulls dispute the indicators and propose that fat margins are no big deal – they might just remain at record highs indefinitely.
“High margins reflect a long-term structural change, not a short-term cyclical one,” according to one account of a popular position. Or “It’s a mistake to think that margins will revert to a long-term mean just for the sake of reverting to a mean.”
The message seems to be that mean reversion is for losers. This is a new era, or it’s a new economy, or whatever. We're paraphrasing, but the story sounds a lot like the capital letter New Economy of the late 1990s. There’s even a technology angle once again, along with huge confidence in monetary policy and recession-free growth. Above all, there’s a notion that the world might be different. Needless to say, the new, new economy story comes with plenty of red flags.
This past week has seen the market struggle due to continued weak economic data, rising tensions between Russia and the Ukraine and an extended bull market run. Market internals are showing some early signs of deterioration even though the longer term bullish trajectory remains intact. Therefore, this week's "Things To Ponder" wades through some broader macro investment thoughts, from the safety of your investments to how market tops are made.
One of the key insights from recent work in psychology is that humans tend to substitute easier problems rather than solve difficult problems. Daniel Kahneman explained this dynamic in his recent book Thinking, Fast and Slow. To "solve" a difficult problem we are unfamiliar with, we substitute a lesser problem we already know the answer to, and then declare we've "solved" the original (often knotty, complex) problem. The real problem then festers, unsolved and addressed, while the misguided "solution" only drains resources and exacerbates the real problem. An excellent example of this dynamic is higher education: the real problems are soaring costs and sharply declining yields in actual learning and in the real-world value of a diploma.
Despite Erdogan's paranoia over "an interest rate" lobby or blaming the Lira's collapse on the Fed, as Gavekal's Nick Andrews notes, Turkey is showing no signs of stabilization. As the sell-side scrambles to explain how this is all priced in and "contained," it is very apparent from the following chart just how vulnerable to contagion the world is if Turkey defaults. The country's liabilities have multipled dramatically in recent years with over $350 billion of foreign bank exposure to Turkey on an ultimate risk basis.
Have you seen the economic recovery? We haven’t either. But it is bound to be around here somewhere, because the National Bureau of Economic Research spotted it in June 2009, four and one-half years ago. It is a shy and reclusive recovery, like the “New Economy” and all those promised new economy jobs. I haven’t seen them either, but we know they are here, somewhere, because the economists said so. At a time when most Americans are running out of coping mechanisms, the US faces a possible financial collapse and a high rate of inflation from dollar depreciation as the Fed pours out newly created money in an effort to support the rigged financial markets. It remains to be seen whether the chickens can be kept from coming home to roost for another year.
Bitcoin Catches Attention Of Goldman Sachs (And Walmart, And Cisco): Goldman Director Joins Bitcoin StartupSubmitted by Tyler Durden on 12/28/2013 11:14 -0500
When Bitcoin fans were hoping for fast track adoption by the mainstream, catching the attention of the all-seeing eye of Sauron Goldman Sachs was probably low on their list of action items. Yet that is precisely what they got with the arrival of a Goldman Sachs board member Michele Burns, who recently joined the board of Boston-based Bitcoin payment processing system startup Circle Internet Financial. As Fortune reports "Circle launched earlier this year, and was founded by Jeremy Allaire, who has led other Internet start-ups, but recently has become a Bitcoin evangelist. The company got $9 million in funding from a number of venture capitalist firms. Jim Breyer, a partner at Accel and an early backer of Facebook (FB), is also on Circle's board, as is Raj Date, who recently left a top post at the Consumer Financial Protection Bureau. Circle declined to comment about Burns. Two sources with knowledge of her move confirmed it."
There is a profound disconnect between the Higher Education cartel and the economy and what higher education should cost in a world where information, instruction, and knowledge have fallen to the cost of bandwidth; i.e., near zero. What was once costly and scarce (knowledge and instruction) is now nearly free and abundant, readily available on any digital device anywhere in the world with a connection to the Web. There is no need to concentrate students in a campus with a library; every web-connected digital device is a library and university combined. The Higher Education cartel is perfectly happy to encourage degree inflation (at enormous expense, of course), but this zeal for issuing student-loan-funded diplomas fails to address two structural disparities: the one between the skills needed to prosper in the emerging economy and the skills colleges are providing students, and the widening income/wealth/education gap between the wealthy and the non-wealthy.