Astonishingly, Newton’s Third Law seems to be either forgotten or dismissed altogether, and this is a shame because the world’s financial pendulum is in the process of reaching that ever so brief pause, after which it then begins to swing in the other direction. To many thoughtful investors, it has become crystal clear that the world is indeed on the cusp of a dramatic change in direction. There will be extreme cases of financial, social, political and economic losses. But there will also be extreme cases of financial gains – the secret is understanding how and where global capital will flow.
Another day, another record for the Dow Jones Industrial Average, Main Street’s favorite measure of Wall Street stock performance. How did we get here? The answer sits in a comfortable blend of good returns from a range of industry sectors. Seven of the Dow 30 names have added over 100 points to the total 1,303 point gain for the Average this year: Visa (251 points), UnitedHealth (185), Nike (136), 3M (129), Disney (116), Johnson & Johnson (111) and Home Depot (106). By contrast, there is just one 100 point loser: IBM (negative 137 points). The collapse in energy stocks hasn’t hurt the Dow very much – just 113 points year to date related to declines in ExxonMobil and Chevron. And to satisfy the most common “What if” scenarios we hear: adding Apple on its split day this June would have added an estimated 166 points, and Facebook’s whole-year 2014 performance would have pushed the Average higher by 162 points.
Overnight, two hostages including an American photojournalist, 33-year-old Luke Sommers, who was held for more than a year by al Qaeda's Yemen branch, as well as a South African teacher, Pierre Korkie, were killed in a botched rescue attempt by US special operations forces. This was the second rescue attempt in as many weeks. According to the WSJ, Luke Somers, 33 years old, was killed by militants, U.S. Defense Secretary Chuck Hagel said Saturday. Several members of al Qaeda in the Arabian Peninsula, or AQAP, were also killed in the raid.
Yesterday the US House passed what I consider to be one of the worst pieces of legislation ever. H. Res. 758 was billed as a resolution “strongly condemning the actions of the Russian Federation, under President Vladimir Putin, which has carried out a policy of aggression against neighboring countries aimed at political and economic domination.” In fact, the bill was 16 pages of war propaganda that should have made even neocons blush, if they were capable of such a thing.
In a healthy, moral and civilized society defined by the rule of law, police can play an important role. They should be people who come from the communities they promise to “protect and serve.” They should view themselves as a part of these communities, not as something separate and distinct. Police should see their jobs as having a great degree of risk, and must be willing to accept that risk. This means not pretending to be a solider at war, not choosing the most violent solution to every problem, and not viewing the citizenry as milk cows ready and willing to be drained of their assets via civil forfeiture.
Unfortunately, this isn’t the state of the police in America in 2014, and it’s quickly becoming obvious to everyone.
The best option, the only option when faced with a conundrum like Ferguson, is for residents to kick government out of the picture completely. Whatever problems might be encountered during such a transition would be a happy trade over the constant crisis wrought by political “mismanagement” or manipulation. In the end, corrupt government will never go away unless we stop handing our responsibilities over to them — and this includes security. We must stop trying to change the system by following the rules that perpetually benefit the system. If we are ever going to get rid of elitist control, we have to step outside the false paradigm and play our own game by our own rules.
Do you ever feel like you are living in a “Bizarro World”?
In 1943, it appears, saving was not banned and deflation was not an ogre...
While the clear narrative forced upon the investing (and consuming) public is that lower oil prices are great for the economy - which is utter crap (as we have explained here and here) - the fact of the matter both primary and secondary effects are extremely significant... and already occurring. As Reuters reports, global oil and gas exploration projects worth more than $150 billion are likely to be put on hold next year as plunging oil prices render them uneconomic as the cost of production has risen sharply given the rising cost of raw materials and the need for expensive new technology to reach the oil. As one analyst notes, "at $70 a barrel, half of the overall volumes are at risk."
When no lesser establishmentarian than Obama's former chief economist Jared Bernstein called for an end to the US Dollar's reserve status, it raised a few eyebrows, but as the WSJ recently noted, the voices discussing how the burden of being the world's reserve currency harms America, more than just Vladimir Putin is paying attention. While some argue that “no other global currency is ready to replace the U.S. dollar.” That is true of other paper and credit currencies, but the world’s monetary authorities still hold nearly 900 million ounces of gold, which is enough to restore, at the appropriate parity, the classical gold standard: the least imperfect monetary system of history.
"The nation was leery of a national bank with seemingly endless power to manipulate the money supply and the Second National Bank of the United States was attacked by both the expansionists and the sound money opponents. It was during this period that future President Andrew Jackson shaped his anti-Bank views in Tennessee while his future hard-money arm in the Senate, Thomas Hart Benton (Old Bullion), shaped his views in Missouri, two of the hardest-hit states. The debate over central banking, and the concern over deflation and inflation, continue two hundred years later."
Having opened more than a few eyes to the rise of extreme wealth among Chinese billionaire's children in America, particularly Southern California, we thought the following brief clip would provide some more color on the the so-called "Chinese Beverly Hills". Welcome to Arcadia - also known as "Mistress City" - where uber-wealthy Chinese hide their money, kids, and dalliances overseas to escape the corruption probes and controls of their home nations...
When we first explained to the public here, that the excessive leverage and currently squeezed cashflow of many US oil producers could "trigger a broader high-yield market default cycle," the world's smartest TV-anchors shrugged off lower oil prices as 'unequivocally good' for all. Now, as a 40% collapse in new well permits and liquidations occurring at the well-head, the world outside of credit markets is starting to comprehend the seriousness of the crash of a sector that was responsible for 93% of jobs created in this 'recovery'. The credit risk of HY energy corporates has more than doubled to a record 815bps (over risk-free-rates) crushing any hopes of cheap funding/rolling debt loads. Suddenly expectations of 1/3rd of energy firms restructuring is not so crazy...
Investors have been lulled into a state of complacency due to a seemingly "unstoppable" rise in the financial markets. Bad news remains good news, and even small drawdowns are quickly reversed sending stocks surging higher. Eventually, the paradox of what happens when a seemingly unstoppable force collides with an immovable will be answered. Historically, such realizations have not been kind to investors. This weekend's reading list takes a look at the reasons why stocks could rise higher, and the potential they won't. The question to be answered is "What will you do when the immovable object is met."