We are all living in Hybrid War time. From R2P (“responsibility to protect”) to color revolutions, from currency attacks to stock market manipulations. From judicial-financial-political-media enabled “soft” coups – as in Brazil – to support for “moderate” jihadis, multiple stages of Hybrid War now cross-pollinate and generate a vortex of new mutant viruses. This is the new normal; Cold War 2.0, 24/7.
We’ve argued for many years that a breakdown and bifurcation in the gold market between physical and paper gold substitutes would be necessary for accurate price discovery of physical gold bullion. The lead article in the January 2016 edition of the LBMA’s quarterly magazine was titled “Wholesale Physical Markets are Broken”, which might be confirmation that this process is reaching an advanced stage.
Scott Adams - creator of the infamous Dilbert cartoons - believes Donald Trump will win the presidency in a landslide. Trump's "meticulously plotted domination," as Adams explains to The Washington Post, stems from his running on our emotions and sly appeals to our own human irrationality. as the following six points make clear, Adams views Trump as "a master persuader" who will rhetorically dismantle Clinton’s candidacy next.
“What this means for the Fed’s reaction function isn’t clear,” Pozsar concludes. “But our instinct tells us that we will deal with a Fed inherently more sensitive to global financial conditions, inherently more sensitive to global growth and inherently more dovish than in the past…” Far be it from yours truly to worry. Still, it’s hard to take comfort in the knowledge that the Drano we’ve all come to know, though maybe not love, is now off the market.
If we are getting so much productivity out of the current range of offerings from Silicon Valley, I have a question: why aren’t these products really expensive, as the technology of the 1920s clearly was? In fairness, a cell phone is costly – good monthly deals from major carriers usually make you pay about $600 for the phone. Which, funny enough, is what the typewriter cost (inflation adjusted) exactly 100 years ago. But what about all the free apps and services? Even Uber has to pay bonuses to recruit drivers. Why is that, if the model is so good? Yes, getting to scale is important for the service, but shouldn’t drivers come running if their productivity is so much better in the new model? Something is off.
If Elon Musk’s various projects are so Iron Man fabulous, why do they all need so much government “help”? Shouldn’t Tesla – and Solar City and SpaceX – be able to stand on their merits… if they actually have merit?
When it comes to the economic future, a Trump presidency could bring either a shitstorm or salvation. Regrettably, the odds of the former are immensely the higher. That’s because Trump is a welcome, but extremely unguided missile.
How poor have the election forecasters been this year? It is a topic many are discussing given the large number of upsets we've had during the Primaries. For example, statistician Nate Silver (who started the campaign season proclaiming Trump had <2% chance of being nominated) by March 1 predicted with 94% probability that Trump would win Alaska (he lost).
BofAML's Mike Cantopoulos' distaste for corporate fundamentals, displeasure with the efficacy of QE and easy monetary policy on spurring growth and inflation, and concerns that a further deterioration in credit conditions will create deeper economic troubles not appreciated by many have left credit markets with poor default adjusted valuations and little room to absorb a negative shock. He highlights nine key reasons below why BofAML believes this rally won't last (and in fact may have already seen its end).
In what may be one of the least relevant payroll reports in a long time as the Fed already knows the labor market is doing better quantiatively (qualitatively it has been all about low-paying jobs gaining at the expense of higher paying manufacturing and info-tech positions) and as has further demonstrated it is no longer jobs data dependent, here is what Wall Street consensus expects: total payrolls +200,000, down from 215K in March; a 4.9% unemployment rate; average hourly earnings rising 0.3% (last 0.3%) M/M and 2.4% Y/Y (last 2.3%); on labor force participation of 63%.
In an oddly ironic twist, today Donald Trump announced that he has picked as chairman of his newly launched fundraising operation none other than a former employee of the bank he has repeatedly criticized in the past, and which he used as a foil to criticize Ted Cruz: Goldman Sachs. In addition to Goldman, Mnuchin also worked for Soros previously. Where it gets even more ironic is that Mnuchin has donated frequently to Democrats, including to Clinton and Barack Obama.
"... there is nothing new under the sun that shines in the Policy Activists' Universe. Negative interest rates sound new and 'unconventional,' but they are nothing more than an extension of this nostrum. Undertaken in the name of promoting inflation, they are really nothing more than taxation of (and ultimately confiscation of) liquid wealth. They are 'unconventional' only in the context that as time goes on, the policies of state acquisition of wealth must become ever more creative...the growth of societies trying these schemes diminishes. Long-term capital moves from growth-enhancing productive investment, which dries up as it increasingly gets channeled into the hands of the state. The fibers of the economic morality that drive growth get frayed..."
If an economic system collapses in the woods and no one is paying attention, are there any consequences outside the woods? Well, yes, of course. As with most situations financial and global, however, consequences are not usually taken very seriously until they have spawned a vast bog of sewage we all have to then swim through. The issue is and always will be “interdependency,” and the dissolution of sovereign borders. The European Union dynamic, for example, can only end in one of two ways - the complete dismantling of the supranational body and a return to sovereignty, or, a socio-economic crisis followed by even more centralization and the end of all remnants of sovereignty. Either way, the consequences will not be pretty. The same strategy may also be used in the Western hemisphere; more specifically, the collapse in South America that almost no one in the mainstream seems to be paying much attention to.
"none of the structural headwinds that seem to have plagued the global economy in recent years (a mix of excessive indebtedness, deteriorating demographics, rising political uncertainty as well as the end of the China growth miracle and the commodity supercycle) have been resolved."
As another political crisis appears ready to grip Turkey, moments ago we got confirmation that the latest scandal, this time one involving the president and the prime minister, is about to become acute and will likely lead to a party Convention as well as the resignation of the Prime Minister. The immediate response: the biggest crash in the Turkish Lira since October 2008.