5 Things To Ponder: Reading While Waiting List

Tyler Durden's picture

Submitted by Lance Roberts via STA Wealth Management,

This past week has been much the same as the last couple of months - boring. It has been more interesting trying to count carpet fibers in my office than watching the markets.

However, there has been some excitement in domestic bond yields that have SURGED over the last couple of weeks. Well, as I discussed earlier this week, its a surge alright, you just need a magnifying glass to actually see it.

"The chart below is a 40-year history of the 10-year Treasury interest rate. The dashed red lines denote the long-term downtrend in interest rates."


"The recent SURGE in interest rates is hardly noticeable when put into a long-term perspective. After rates dropped to their second lowest level in history of 1.68%, only exceeded by the "great debt ceiling default crisis of 2012" level of 1.46%, the recent bounce to 2.26% was expected"

There also has been the divergence in economic data, some good, but mostly not. This has been good for the stock market as "bad news" means the Federal Reserve has no reason to raise rates in the near future. This is particularly the case with first quarter's GDP printing negative and second quarter's falling below 1%.

This leaves investors in a precarious position of remaining invested as the financial markets levitate away from underlying economic realities. In fact, as recently pointed out by Tyler Durden at Zerohedge, the deviation of the markets from the economic data is one of the largest since the turn of the century.


For now, however, we wait for the market to decide its next action. Will be a resumption of the "bull run" as the vast majority expect or will the contrarian side of the markets finally prevail? I think we will have that answer very soon.

While we await that answer, I have compiled a this week's reading list to include a smattering of articles on everything from the markets, to investing, to the Fed to the economy.

1) Bond Rout Puts Bears On Wrong Side Of Fed by Simon Kennedy via Bloomberg Business

"Keeping monetary policy loose is still justified to economists at JPMorgan Chase & Co. They reckon global economic growth of 1.2 percent in the first quarter was the second weakest outside of a recession in the past 25 years and worldwide inflation of 0.4 percent was the lowest.


Torsten Slok, chief international economist at Deutsche Bank AG, told clients that "the QE trade is not over" and yields should soon reverse their rise once markets stabilize.


'What we have seen in markets over the past two weeks has been triggered by fear and not by a change in the outlook for economic fundamentals,' said Slok. 'I continue to see U.S. rates under downward pressure as a result of money printing abroad.'"

Read Also: 4 Charts Why The Fed Not Likely To Raise Rates This Year via Streettalklive


2) High Share of Part-Time Workers Explain Weak Wage Growth by Kathleen Madigan via WSJ

"One possible explanation is that more companies have restructured their staffing to focus on part-time workers. Because of that, there is slightly more slack in the labor markets than the jobless rate indicates. And these part-timers have less bargaining power to negotiate higher wages.


To be sure, most of the jobs created in this expansion (as reported in the household survey) are full-time positions. But part-time spots, less than 35 hours a week, now account for a larger share of total employment than they did before the recession. That's true for total part-time workers and for part-time workers who would prefer a full-time position."


Read Also: Riddle Me This: Difference Between Headlines & Reality by Streettalklive


3) The Federal Reserve's Asset Bubble Machine by Ruchir Sharma via WSJ Opinion

"At Morgan Stanley Investment Management, we have analyzed data going back two centuries and found that until the past decade no major central bank had ever before set short-term interest rates at zero, even in periods of deflation.


To critics who warn that pumping trillions of dollars into the economy in a short period is bound to drive up inflation, today's central bankers point to stagnant consumer prices and say, 'Look, Ma, no inflation.' But this ignores the fact that when money is nominally free, strange things happen, and today record-low rates are fueling an unprecedented bout of inflation across asset prices."

Read Also: What Equity Market Bubble by Scott Grannis via Califia Beach Pundit


4) Even Among The Richest, Fortunes Diverge by Annie Lowrey via NY Times

"It found that in 2012, the average household in the bottom 90 percent of the income distribution earned about $30,997. For the average household in the top 1 percent, the figure is $1,264,065, and for the top 0.1 percent, about $6,373,782.


Put another way, our 0.1 percent household made about 206 times, and our 1 percent household about 41 times, what our average household did. That gap has yawned over time. In 1990, for instance, the same multiples were 87 and 21. In 1980, they were 47 and 14."


Read Also:  Consumer Recession Arrives As Retail Sales Fail To Emerge by Jeffrey Snider via Alhambra Partners

Read Also:  How We Will Cope With Another Downturn by Buttonwood via The Economist


5) The Cardinal Sin - Missing Out by Charlie Bilello via Pension Partners

(Note: This could also be titled: Why you will be hammered during the next downturn)

'The greatest fear in the investment management industry is not what one might expect. It is not losing money but the fear of not making enough money when the market is moving relentlessly higher. This "fear of missing out" strikes terror into the heart of portfolio managers as clients will simply not tolerate it; it is the cardinal sin of the business.


The thinking was explained to me as follows. Lose money when the markets are going down and everyone else is suffering and you'll be just fine. But fail to capture maximum upside during a raging bull market and you'll soon be out of a job."

Read Also: Bulls Should Not Expect Help From The Fed by Cam Hui via Humble Student Of The Markets


A Dozen Things I Learned From Julian Robertson About Investing via 25iq

"A colleague of Robertson once said: 'When he is convinced that he is right, Julian bets the farm.' George Soros and Stanley Druckenmiller are similar. Big mispriced bets don't appear very often and when they do people like Julian Robertson bet big. This is not what he has called a 'gun slinging' approach, but rather a patient approach which seeks bets with odds that are substantially in his favor. Research and critical analysis are critical for Julian Robertson. Being patient, disciplined and yet aggressive is a rare combination and Robertson has proven he has each of these qualities."

What Peter Schiff Said To Ben Bernanke by Tyler Durden via ZeroHedge


Moore's Law Turns 50 by Thomas L. Friedman via WSJ Opinion

"But what an exponential it's been. In introducing the evening, Intel's C.E.O., Brian Krzanich summarized where Moore's Law has taken us. If you took Intel's first generation microchip, the 1971 4004, and the latest chip Intel has on the market today, the fifth-generation Core i5 processor, he said, you can see the power of Moore's Law at work: Intel's latest chip offers 3,500 times more performance, is 90,000 times more energy efficient and about 60,000 times lower cost."

"If you think nobody cares if you're alive, try missing a couple of car payments." – Earl Wilson

Have a great weekend.

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LawsofPhysics's picture

Was just saying this to a banker friend.  Now that collateral is not required for money creation, in fact there isn't any fucking connnection to reality, I told him that I have been encouraging anyone with a printer/computer to finance themselves.


I told him that he is now experiencing what most manufacturers already experienced, he has made himself obsolete.

In the new normal, bankers/financiers are now nothing but useless overcompensated middlemen between the printer/computer and the real economy (consumer/producer). Yes we were joking, but he had a distinctly nervous laugh.

under my breath I simple said... tick tock motherfucker...

Relentless101's picture

Moore's Law is a joke! Intel has been moving the goal post on that thing for years! They just keep redifining the shit so it stays alive.

MonetaryApostate's picture

Money Printing & Bond Buying has historically happened before big wars....

Can you see any validity to this in the news?

LawsofPhysics's picture

We'll see.  Like I said, very nervous laugh.

Adapt or die, it's been like this forever.  Got a better system? Let's hear it.

acetinker's picture

Let's say you're Aaron Burr, and he's Alexander Hamilton.  You'll both think you're friends right up 'til the morning of the duel.  Burr (you) were righteous, and in that moment victorious.  Did your face wind up on the $10 bill?

No, your banker 'friend' did.  It's a long game.  Play accordingly.

Likewise, I reckon if Jesus ever returns, He'll have Andy Jackson in tow, ready to kick the mofo's ass who put his mug on the twenty- of the 'bank' he so famously 'killed'.

If there's one thing we need to know about our enemy;  It's that he never sleeps.

Clesthenes's picture

“Now that collateral is not required for money creation…”

Sorry, but you missed that one.

The fact is, gold is still the ultimate collateral; and it is well-buried under piles of intermediate bad paper.  (One and Two)  If you have evidence to the contrary, you need to contact the Federal Reserve and US Treasury and tell them to quit publishing financial statements with gold, gold-certificates and gold swaps at the top of their asset statements.

CarpetShag's picture

So you are suggesting aggressive waiting?

LawsofPhysics's picture

I don't know who you were asking, but I am saying these most certainly are interesting times with great opportunity.

No risk, no reward.  Personally I would not want it any other way.

CarpetShag's picture

Appreciate the response, in fact the comment was addressed to the author of the piece, who writes thousands of words with pimped-up-to-the-max graphics but never says what he is actually doing with his funds.

Wild Theories's picture

come now, everyone needs to earn to living, no need to push detail questions like that.

kchrisc's picture

Imagine a cave full of gold and treasure. At first, easy to plunder. Each load heavy, but rich with loot. Then, after some time, each load becomes lighter and lighter, and poorer in value. Ultimately, one must scour the cave on hands and knees searching for any and all loose coins, or even flakes, that can be used to sustain oneself for just one more day.

Liberty is a demand. Tyranny is submission..


Tyranny, sustains itself on gold and blood.

LawsofPhysics's picture

Bingo, and the laws of Nature and physics really don't give a shit either way.

TeethVillage88s's picture

"2) High Share of Part-Time Workers Explain Weak Wage Growth by Kathleen Madigan via WSJ"

- Of Course we would not expect 'her' to say the whole deck is being stacked against the US Middle Class and their kids and their Grandkids, nor to confess that the 'Gaming' of the Federal Govt by Lobbyists, the Money Trust, Transnationals, and the old Wealthy Families have lead to an era of debt from which we can not recover, nor can our Federal Government Survive for much longer.

- We wouldn't expect her to say Banks and Corporations are Convinced that the USA is not the best place to Expand or Invest in today's Global Markets

Clesthenes's picture

“Liberty is a demand.”

So says “kchrisc”.

Is that all?

In civilized forums of redress, a complaint includes a list of grievances, followed by a request/demand for redress/restitution… preferably a historically-proven redress.

The Declaration of Independence is an example.  And, it seems, there’s hardly an American who knows it; at least, I have not seen any example of it.

GreatUncle's picture

Liberty is a tradeable commodity and the currency is blood, sweat and tears. It does not come from governments giving liberty the payment has to be earned by a population and normally is is through war and unrest.

To obtain a little bit of liberty somebody normally an elite loses a little bit of power and of the elite gets a little bit more chances are you as a serf lost it.

Once you figure that bit ask who wants and does not want liberty. (government if run by elites)

After that see how easy it can be taken away.(sheep bribed with nice trinkets gift it away)

Read this http://www.historylearningsite.co.uk/peasants_revolt.htm - very short read and now apply that to a modern society the same underlying mechanism applies.

What should the peasants do next time? Kill the fucking king...

Clesthenes's picture

What should they do?  They should learn lessons of the four Johns: Hampden, Pym, Elliot, and Locke – all good Englishmen.  And each one did his part in laying the foundation for the American Revolution.

durablefaith's picture

Long cast iron, compost, and bear traps.

Clesthenes's picture

‘Look, Ma, no inflation.’  But this ignores the fact that when money is nominally free, strange things happen, and today record-low rates are fueling an unprecedented bout of inflation across asset prices.

Well, true (“unprecedented bout of inflation across asset prices”)… but, there’s more… much more.

When we buy goods from foreign nations, the part not paid by exported goods is paid by US Treasuries… and this amounts to exporting inflation.  When those Treasuries come back… or are repudiated, then you will see hyperinflation on a global scale (since the dollar is the reserve currency of the world).

Now, the “much more.”

We are heading for an unprecedented economic slaughter.  This conclusion is even confirmed by the US Government.


I recently examined a Financial Report of the US Government… did I ever uncover a pile of… well, I found a few confusions and confessions and accounting fairy tales.

I found, for example, that the GDP includes components that subtract from production; that government accountants made 75-year projections as if the government would not pay interest on its debt instruments during that time.

And then there were street gangs and drug cartels, the government’s role in arming, protecting and forming alliances with such gangs and cartels… and a dozen or so other items.  They all point to a conclusion that a vast operation is being perpetrated…  I began this Part 2 (of my examination) with the question, ‘What financial shock do Judeo-Bolsheviks plan?  (Part one and Part two)  Do they plan to inflate the dollar to zero… repudiate the federal debt… Issue Treasury bank notes…?’…  And, how do China’s ghost cities fit into this unprecedented operation?...  I would like to think that Americans could stop this horror; but, I don’t think it’s possible.  They are a conquered nation; not by ordinary means, but by a lethargy induced my medication, an ignorance molded by indoctrination, and a corruption brought on by a mania for dope, foul language and perverted sex.


NotApplicable's picture

I'm of the opinion that the ghost cities serve the exact same purpose as over production of autos/buildings/etc in the US.

They exist as both a cause and effect of financialization in order to give something tangible to claim as collateral for the loans as the wealth is transferred to the banking class.

Without "free money" none of this shit is possible on the scale we're witnessing.

May we live in interesting times...

q99x2's picture

Without free money, I'd never be able to study Melville.