Porsche

Things change fast in the technology world. 

• Lawmakers, Obama in last chance talks on "fiscal cliff" (Reuters)
• Obama Summons Congress Leaders as Budget Deadline Nears (BBG)
• Hopes for fiscal cliff deal fade  (FT)
• Iran starts navy drills in Strait of Hormuz (Reuters)
• Looming Port Strike Deadline Pressures Obama to Intervene (BBG)
• Home Depot to Lowe’s Busiest Season Threatened by Strike (BBG)
• 'Whale' Capsized Banks' Rule Effort (WSJ)
• China tightens Internet controls, legalizes post deletion (Reuters)
• Goldman Sachs Buying Japan’s Exporters on Abe Policy Bets (BBG) and preparing one Goldman alumnus to take over the BOJ
• IPOs Slump to Lowest Level Since Financial Crisis After Facebook (BBG)
• Blackstone seen sticking with SAC despite insider trading probe (Reuters) - what a shock
• Mistry at Tata Helm as Investors Query $500 Billion Goal (BBG)
• High-Speed Traders Race to Fend Off Regulators (WSJ)

• IMF Demands Partial Default for Cyprus (Spiegel)
• Boehner's 'Plan B' Gets Pushback (WSJ)
• Beijing criticises US ‘political checks’ (FT)
• White House Said to Tell Business Groups Talks Stall (BBG)
• NYSE tries to get hitched again: IntercontinentalExchange in talks to buy NYSE (Reuters) -> N-Ice coming?
• Greece faces ‘make or break’ year (FT)
• Fed rejects idea of consensus forecasts, "maybe forever": Fisher (Reuters)
• Rajoy Drives Spanish Revolution With Low-Cost Manufacture (BBG)
• Italian Senate Set for Budget Vote Before Monti Resigns (BBG)
• BOJ Loosens With Pledge to Review Inflation Objectives (BBG)
• Bowing To Abe, BOJ To Review Price Goal (WSJ)

Is it safe yet?

Even domestic demand is getting hit, and the Draghi-Bernanke effect has kicked in.

• Europe’s crisis will be followed by a more devastating one, likely beginning in Japan. (Simon Johnson)
• Porsche, Daimler Indicate Europe’s Car Crisis Spreading (Bloomberg)
• No progress in Catalonia-Madrid talks (FT)
• Hilsenrath speaks: Fed's Kocherlakota Shifts on Unemployment (WSJ) - luckily QEternity made both obsolete
• Lenders Reportedly Consider New Greek Haircut (Spiegel)
• Fed Officials Highlight Benefits of Bond-Buying (WSJ)
• ESM to Launch without Leverage Vehicle Options (WSJ)
• Japanese companies report China delays (FT)
• Borg Says Swedish Taxes Can’t Go Into Ill-Managed European Banks (Bloomberg)
• Greek Leaders Struggle With Spending Reductions (Bloomberg)
• Asian Stocks Rise as iPhone 5 Debut Boosts Tech Shares (Bloomberg)
• China government's hand seen in anti-Japan protests (LA Times)

I have often identified Keynesian economists and the Federal Reserve as cargo cults. After the U.S. won World War II in the Pacific Theater, its forces left huge stockpiles of goods behind on remote South Pacific islands because it wasn’t worth taking it all back to America. After the Americans left, some islanders, nostalgic for the seemingly endless fleet of ships loaded with technological goodies, started Cargo Cults that believed magical rituals and incantations would bring the ships of “free” wealth back. Some mimicked technology by painting radio dials on rocks and using the phantom radio to “call back” the “free wealth” ships. The Keynesians are like deluded members of a Cargo Cult. They ignore the reality of debt, rising interest payments and the resulting debt-serfdom in their belief that money spent indiscriminately on friction, fraud, speculation and malinvestment will magically call back the fleet of rapid growth. To the Keynesian, a Bridge to Nowhere is equally worthy of borrowed money as a high-tech factory. They are unable to distinguish between sterile sand and fertilizer, and unable to grasp the fact that ever-rising debt leaves America a nation of wealthy banks and increasingly impoverished debt-serfs.

Have you heard the news? Auto sales are booming. Total sales for the month of August were 1,285,202 vehicles, according to Autodata Corp, the highest monthly sales figure for any August since 2007, when 1.47 million autos were sold in the United States. Year to date auto sales have totaled 9.7 million and are on track to reach 14.5 million. Between 2006 and 2007, auto sales ranged between 16 million and 18 million. They crashed below 10 million in 2009. The Keynesians running our government have pulled out all the stops to restart this engine of consumer spending. First they wasted $3 billion of taxpayer funds on the Cash for Clunkers debacle. Almost 700,000 perfectly good cars were destroyed in order to keep union workers happy.  This Keynesian brain fart distorted the used car market for two years, raising prices for cars needed by the working poor. After that miserable failure, they realized the true secret to selling vehicles is to give them away to anyone that can scratch an X on a loan document, with 0% interest for 60 months, financed by Federal government controlled banking interests. Add in some massive channel stuffing and presto!!! – You’ve got an auto sales boom.... This is America, land of the delusional and home of the vain. The appearance of success is more important than actual success.

A question on the minds of many people today (increasingly those who manage or invest money professionally) is this: How do I preserve wealth during a period of intense official intervention in and manipulation of money supply, price, and asset markets? As every effort to re-inflate and perpetuate the credit bubble is made, the words of Austrian economist Ludwig Von Mises lurk ominously nearby: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved." Because every effort is being made to avoid abandoning the credit expansion process -- with central banks and governments lending and borrowing furiously to make up for private shortfalls -- we are left with the growing prospect that the outcome will involve some form of "final catastrophe of the currency system"(s). This report explores what the dimensions of that risk are.

• Finland (which with Holland account for 50% of the Eurozone's AAA rated countries), just says "Ei" to stripping ESM subordination (Bloomberg)
• Libor Rate Scandal Set to Spread (WSJ)
• #ByeBarclays flashmob descends on bank (FinExtra)
• What is financial reform in China? (Pettis)
• Cities Consider Seizing Mortgages (WSJ)
• China Beige Book Shows Pickup Unseen in Official Data (BBG)
• China’s New Rules May Curb Credit Growth, CBRC Official Says (BBG)
• India Said to Pay in Euros for Iranian Oil Due to Rupee Hurdles (BBG)
• Wealthy Hit Hardest as France Raises Taxes (FT)
• Euro Bank Supervisor Faces Hurdles (WSJ)

Better late than never. All you need to read. 

• Hollande Says Germany Can’t Make Europe’s Decisions Alone (BBG)
• Monti Hits at Eurozone Austerity Push (FT)
• Firm that made loans to Chesapeake CEO defends them (Reuters)
• Bo Xilai's Son Doesn't Drive a Ferrari. He drives a Porsche (WSJ)
• Geithner Urges China to Loosen Hold on Finance System (BBG)
• and yet... Son of Bo Xilai Says Father’s Ouster ‘Destroyed My Life’ (BBG)
• U.S. growth slows as inventory accumulation wanes (Reuters)
• S&P 500 Dividend Payers Climb to Highest in 12 Years (BBG)
• Lacker Sees Fed May Need to Raise Rates in Mid-2013 (BBG)
• Ireland Passes Latest Bailout Review (WSJ)

And the US fell to second place. Nothing is gradual in modern China.

Everybody has their own "on the ground" recession indicators: the mall parking lot, the tony restaurant that used to be packed every weekend, and so on. I have two favorites: freight trains rumbling south down the main line of the West Coast and "sell your own car" used car lots. The freight trains are self-explanatory: at the top of the housing bubble, they were loaded with flatcars of lumber. Now? A lot of empty flatcars and container flats. A lot. Yes, the official statistics indicate rising rail traffic, but they must mean one more car has a load in a 100-car train and there's only 20 empties. The freight trains I see are still running with beaucoup empty cars. There may be some explanation of why this is so, but I can report that these trains pulled no empties in 2007. "Sell your own car" lots reflect the "private market" for used cars. If you want to know what people are trading in for new cars, then go look at new car dealers' used lots. At the local Honda dealer, I saw a number of Lexus SUVs on their used lot; people trading down to save on gasoline?

We all want to be the kid who gets rich quick and drives away in the Porsche.