White House

"The US recovery must overcome the European divorce and the China slowdown in order for the US to grow more than 2%" is how JPMorgan's Michael Cembalest describes the reality of an un-decoupled world. There is some divergence  as while the US economy if only growing at 2.0% and regional manufacturing surveys have rolled over, other economic indicators (JOLTS, railcar loadings, even select housing markets) are picking up. His point being that these trends will need to coalesce into more household spending (not just on cars) and capital spending in order for the US growth to grow more than 2%. For that to happen, some clarity may be needed on both the “2013 fiscal cliff’ and the “long term entitlement bomb”, which unfortunately calls for opposing fiscal measures to mitigate them. It will be hard for the world to grow if China depends on Europe which depends on China which depends on the US which depends on China and Europe. It’s an odd market: in the US, 98% of the S&P 500’s cumulative 27% return since January 2010 occurred either during corporate earnings season, or right after QE programs. The rest of the time, the S&P 500 is flat, since the economic news has not been that good.

Someone has to take the other side of the JPM debate. I'll try.

All yopu need to read.

What we have is a Central State and an economy that has borrowed and squandered trillions of dollars on consumption and malinvestment in unproductive "stranded" assets. The debt and risk pile up, while the labor that results from consumption is temporary and does not create wealth or permanent employment. Figuratively speaking, we're stranded in a McMansion in the middle of nowhere, a showy malinvestment that produces no wealth or value, and we're wondering how we're going to pay the gargantuan mortgage and student loans. Debt and the risk generated by rising debt create a death-spiral when the money is squandered on consumption, phantom assets, speculation and malinvestments. Sadly, that systemic misallocation of capital puts the job market in a death spiral, too.

Today it was widely reported that the CIA thwarted a “plot by al Qaeda’s affiliate in Yemen to destroy a U.S.-bound airliner using a bomb.”  This bomb, which was to be concealed in a pair of underwear, was designed as an improvement over what Umar Farouk Abdulmutallab attempted to use to blow up an airliner over Detroit on Christmas Day of 2009.  This bomb was upgraded and designed to specifically avoid metal detectors. At first glance it would appear to be a job well done by the world’s leading domestic affairs meddlers. The truth was finally revealed as the would-be bomber was, in fact, a double agent of the CIA. When considering the nature of the state, this new instance of government supported terrorism is unsurprisingly comparable to previous cases. The alleged Yemen “underwear” bomber was just another fabricated spook in the long line of mounting justifications to keep the war on terror and its profiteers going; no matter the cost.  As long as the American people are still easily whipped into a frenzy over forged menaces from afar, their blood and treasure will go on to be squandered on military boondoggles and redundant intelligence agencies.  War and fear end up becoming a way of life.  And so does the state’s command over what could be a life of peace and tranquility for the nation it supposedly protects. This isn’t conspiracy theory; just a recognition of the various hobgoblins, as H.L. Mencken described them, invented to justify encroaching totalitarianism.

Irradiation is bullish ... and the glow-in-the-dark thing reduces lighting bills

One of the best definitions of fascism – the one used by Mussolini himself – is the “merger of state and corporate power“. We’re pretty much there …

Concluding last night's post on the PBS Frontline "Money, Power, & Wall Street" mini-series, the remaining two episodes below take us from the market lows to the current euphoric highs. From Obama's decision for more of the same on his economic team to the Stress Tests, from Larry Summers cavorting arrogance to the Public's rising anger, these two 'post-crisis' episodes seem to have less revisionism than the first two and proceed beyond the US to Europe's 'hiding of the truth' and whether the system can ever be truly reformed - not a pretty picture (especially with the mutually assured destruction argument already being played by the banks in their discussions with the Fed on Dodd-Frank today). No Blythe Masters' pool-side this time but Larry Summers is always happy to please.

Americans feel “gold is the safest long term investment” today, a Gallup survey has found. Gold was favoured over four other types of investments perceived as the best long term choice for American investors today. 28% of the American public choose gold as their favoured investment of choice today.  Real estate followed in second place, with 20% seeing it as the best long term investment. Paper  assets were less popular with savings accounts and certificates of deposits (CDs) tied with stocks and mutual funds at 19%. Bonds came last at 8%.  This suggests that the American public may not be as uninformed when it comes to investing as is often suggested. According to Gallup, "investing in gold has gained in popularity in recent years as low interest rates have made traditional savings instruments less attractive, and instability in the stock and real estate markets has undermined the mass appeal of those options."  "Meanwhile, the rising trajectory of the price of gold over the past several years apparently offers more of the returns and stability investors seek." While some may find the Gallup poll findings worrisome from a contrarian perspective, it is not.

Thoughts on last and next week.

At least call it what it is - a cut to SS benefits and a reduction in standard of living. 

9 Torture Myths DeBUNKED

Inside sources are reporting that there's a new drug of choice circulating in the hallways of power--the White House, Federal Reserve and the Treasury Department--and it's a perfectly legal prescription psychotropic: Delusionol (tm). Delusionol works by activating the parts of the brain that replace cognition and reasoning with positive fantasies. For example, a driver on Delusionol might run over a person in a wheelchair, bounce off a fire hydrant and send a baby carriage hurtling into a brick wall, and they would be happily convinced that they were an excellent driver. Now you understand why Delusionol is being gulped in vast quantities in the halls of power: the guys (and yes, it's mostly guys) really want to believe the "economic recovery" they've been hyping, and since it's rationally preposterous, they need a drug to suppress recognition that their policies have only made the financial disease worse and stimulate a delusional belief in the fantasy of "recovery."

The numeric implications as well as the magnitude of the student loan bubble have been discussed extensively before. Yet just like most people's eyes gloss over when they hear billions, trillions or quadrillions, so seeing the exponential chart of Federal Student debt merely brings up memories of a math lesson from high school, or at best, makes one think of statistics. And as we all know statistics are faceless, nameless and can never apply to anyone else. It is the individual case studies that have the most impact. Which is why we would like to introduce you to Devin and Sarah Stang - student loan debt slaves in perpetuity.