Wednesday, March 31, 2010
Visual Update Of The British Pound And Euro, Timely Concerns About Britain And Conspiracy Theorists
Over the last few years I have remarked on quite a few occasions that I think the British pound is in serious trouble. We haven't really explored those statements in any detail as I said we would. Let's take a moment and delve into my concerns re the pound. (Added to my euro, ruble, yuan and every other emerging market currency concerns.)
First of all, I believe Britain is one of a few candidates for a hyperinflationary collapse. I don't remember if I actually articulated that in my prior posts regarding the pound and I'm too lazy to go back and look at the moment. This is not a prediction. It's a statement of risk. And I don't expect it to be anything that will develop imminently. As a point of reference, there is no one who is currently talking about hyperinflation in the U.S. or Japan who has gotten any currency specifics correct in advance of this crisis. In other words, I don't see any evidence the hyperinflationistas predicting doom for the dollar or yen really understand what dynamics actually cause a hyperinflationary currency collapse. That is, beyond the incessant babble of printing endless money as Zimbabwe has. That clearly is not going to happen. These comparisons to Zimbabwe are either made tongue in cheek as a joke or are made by people who have absolutely no idea what they are talking about. Most people anticipating hyperinflation seem to use profligacy as a primary predictor. That is a fool's game with no legitimacy. Every bureaucracy is profligate. And that will never change. This is a primary example of why opinions are worthless and one must understand the data and a qualitative interpretation of building fundamentals.
So, here's a few remarks you won't read from the general hyperinflation carnival barkers. Hyperinflation caused by a currency collapse will only have a chance to develop under some very necessary but not sufficient dynamics. Here are five to consider:
1) A currency that involves very substantial financial speculation. Speculation made available by a government which makes excess currency available to financial speculators.
2) A currency that has little to no intrinsic demand outside of a country's borders.
3) A currency that involves a substantial debtor nation with that debt held outside its borders.
4) A currency which allows unregulated capital flows.
5) A currency in which the government is willing to print money beyond the capital formation demands of a domestic economy.
These five dynamics are necessary but not sufficient. They also existed in Iceland and Weimar Germany. They also exist in Britain today. Let me give you an example of a particular statistic as it relates to one of the five points above. Both Britain's long term and short term gross debt to GDP ratios held abroad are more than 800% higher than Japan. That's right. 800%. I think we can discount Japan as a hyperinflationary threat as now seems to be the most common prediction of the financial community.
There is a chain of events of some sorts that needs to unfold for a currency collapse. These dynamics are nearly impossible to predict far in advance. But I have been watching the financial and political idiots across the pond quite closely. (My God are their politicians even more stupid than ours. Haha.) Regardless Britain is surely in serious trouble without new policies.
Here is the reality. Everything is in plain sight for everyone to witness. What we are experiencing around the world today is utter incompetence on a grand scale. Incompetence by a self-appointed bureaucratic class of mental morons. A timeless pastime of those who somehow believe in their superior abilities comparative to us poor peasants and conclude they must tell us boneheads how we are going to lead our lives. (A strong case for a federal government's limited powers as outlined in the Constitution. Or at least limited powers without complete transparency into all federal government dealings and affairs.) Contrarily, people who seek power (control) are seldom brilliant. Where is the source of brilliance within the political or bureaucratic class today anywhere in the world? It simply does not exist. All we see is systemic incompetence. To assign theoretical brilliance required to plan these massive conspiracies is simply an overactive imagination. This environment is because incompetent bureaucrats (bankers, politicians, CEOs, the state) have completely screwed up the world with their laughable elitist ideology.
Tuesday, March 30, 2010
President Obama & Health Care Reform - The President Of Big Business, Back Room Deals And Special Favors
FrankenTrout - The Future Of Global Food Production?
Update On Private Equity's Scam And Wall Street Screwing Of Our States & Municipalities
How does any of this make your life better? Even remotely? Investment banks, private equity (or as we labeled it years ago, private debt) and Wall Street in its current form serve absolutely no constructive purpose to society.
Monday, March 29, 2010
Private For-Profit Monopoly Insurance Companies Already Start Gaming The New Health Insurance Law Passed By Our Corporatist Government
We'll see more of this crookery as time goes on. That's a guarantee. You cannot give the keys to the castle to an industry that has been empowered by our government to cheat, lie, steal and kill people and expect that they will somehow wake up and smell the roses of virtuous Pax Healthcaria.
Sign Alan Grayson's "Medicare For All" Petition
Friday, March 26, 2010
Key Banking Committee Senator Corker Asks Wall Street To Stuff His Pockets While He Should Be Focusing On Finance Reform
Volatility Update - For The First Time In Over 200 Years Iceland's Eyjafjallajokull Is On Fire
The cycle of volatility continues.
Thursday, March 25, 2010
Stephen Roach And Paul Krugman Are Boxing With Shadows In The Dark With Regards To China
In this recent interview, Roach again is completely wrong in his analysis of the United States and what needs to happen in our economy. His belief that the United States needs to raise its savings rate shows a complete misunderstanding of basic economics. This from one of our favorite surly men. (We like surly women on here too. Haha. )
The United States had the world's highest savings rate before the Great Depression. How'd that work out for you? 30% unemployment, 5,000 municipal bond defaults, 5,000+ bank failures, complete economic chaos and on and on and on. Today, China has one of the world's highest savings rates. Yet it is no coincidence we have remarked repeatedly that emerging markets, including China, with high savings rates are doomed. Continue to watch as the world unfolds. You'll witness history repeating itself firsthand.
Simplistically, from a macro perspective the U.S. economy today can cumulatively be compared to an unemployed individual. So, let me ask you. How many people do you know who are unemployed who are able to save their way to prosperity as Roach suggests? It's a defenseless position of ridiculous jabberwocky.
Savings are completely irrelevant to any discussion of economic recovery. Roach and Krugman (who Roach is actually arguing with in his defense of China's yuan policies) arguing about the yuan or what the United States should do to China is completely irrelevant. These two are in left field arguing about potato salad. Two economists boxing with shadows in the dark. But then, both of them missed this crisis, so why should we listen to their ideas on how to fix it? They still don't even know what the problem is.
Roach is indeed right on one point. The U.S. cannot dictate to another country how to manage their currency. This is indicative of the supreme arrogance of our federal government and its attempt to insert itself in the sovereignty and decision making of every country on earth. The hubris of American imperialism. In the end, the U.S. will eventually implement economic policies that make this matter moot.
Wednesday, March 24, 2010
GM's En-V Urban Concept
Manufacturers need to segment their markets to reach the latent demand of transportation products not met by mass produced automobiles. We pretty much still build automobiles the way Henry Ford built the Model T. ie, You can have every color you want as long as it is black. Today, that statement can be modified to state, you can have any form of transportation you want as long as it has four wheels and a steering wheel.
There is a very reasonable chance demand and manufacturing advances will usher in a new transportation industry with substantial numbers of new competitors in coming decades. Remember one of our posts regarding Wal-mart some years ago was that mass merchandising and mass production were in for a rude awakening as new manufacturing methods, quick change tools, new lower cost manufacturing techniques & technologies and personalization are being introduced into the market place. I no longer need $20 billion to create a transportation startup in the United States to compete with Ford and GM. These legacy business models, while still valid, no longer represent what is achievable with the latest technology. That statement includes both in manufacturing methods and with regards to end product.
Ultimately this type of dynamic will eventually kill the beast that is monopoly in all segments of the economy be it the federal government, banking, computers, mass retailing or whatnot. The only dynamic which is consistent is change. There was once a time when Kmart and Sears were both considered invincible. Wal-mart, as an example, will eventually join these has-beens as yesterday's news as we cited a few years ago. That doesn't mean Wal-mart is going to declare bankruptcy any time in the foreseeable future. If you want to read more on this dynamic, search on Wal-mart in the upper left-hand search box. I can't recall the name of the post right now but you will recognize it when you see it.
Story link here.
Repost Of Last Year's Remarks On Risks To The European Union And Germany Plus Some New Comments
Germany's reliance on industrial exports will cause substantially more economic pain than is being discussed today. Amongst many other reasons, Germany's relative position on the global supply chain guarantees it will experience very substantial impacts of the global crisis well after the initial credit effects are felt. Possibly semi-permanent effects. It will also experience greater negative consequences because of the Bullwhip Effect - a term coined in the last decade or so but an effect well understood by those in the supply-chain business for most of the twentieth century. Just not understood and appreciated by the money changers on Wall Street - one of many reason Wall Street has been completely caught off guard by the impacts of this cycle and remains in the dark about future prospects. It's also one reason why this liquidity-driven rally is not based in any form of economic reality. We have written of supply-chain shocks before but remember these effects applies not only to countries but to industrial companies, their equities & bonds and their suppliers. Two such suppliers that remains a Wall Street favorite are the energy business and the commodities bubble. Needless to say, I remain highly negative on both and expect a complete bust is very likely. Remember, many of these investments, including industrial commodities and energy, are being purchased and even propped up by excess liquidity in anticipation of a re-ignition of globalization. Most will have to witness the bust that will occur in order to believe it. All in due time. (March 24, 2010. Hold your horses. This stress is still coming to a Germany near you. That will make the EU dynamics even more unsustainable when larger EU nations come panhandling to the German people.)
Germany has the wherewithal to weather a substantial economic decline were that the only issue before it. But at some point in time the demands placed on the people of Germany by the European Union and German bureaucrats will cross paths with the substantial collapse in global demand for Germany's economic output, its substantial ongoing costs of reunification and its highly leveraged social safety nets. This has not yet developed. It will. And, that means any calls for EU bailouts to be backed primarily by the balance sheets of France and Germany will clash against the sovereign needs of domestic economies. Therein lies a serious risk and future tipping point in the making. (Again, March 24, 2010 remarks. Ahem. Is this not exactly what is happening today? The EU and German bureaucrats are trying to pin the bailout on German citizens? Tyranny of no small order. Don't expect any bailouts to be too trustworthy if the EU continues down the road to ruin. The people of Germany will not sit back and allow the debt slaves to continually mound more burdens of bailing out other nations on their shoulders.)
The EU and German bureaucrats pushing EU unification are elitists who wish to return the people's sovereignty to the Europe of old where cronyism - lords - determine the fate of a feudal society through knuckle-dragging policies of rhetoric and tyranny. Maybe not consciously so in today's environment. But by implementing policies crafted to benefit a very few rather than by or for the sovereign of Germany or any other EU country. Unfortunately, this inbred elitism has never been vanquished from European culture. Oddly enough, this elitism remains a primary driver for the success of America as it has for the past three hundred years. Though now we also see this same level of cronyism building to a systemic level in Washington over the last handful of decades. Regardless, I'm quite confident the American people are going to take care business. And, I'm actually becoming more confident many in Europe are finally going to do the same.
Throw in the political concerns of sovereign countries yielding to demands by France or Germany or the EU in exchange for possible financial aid and you have a healthy brewing cauldron of future volatility. One that the European Central Bank and European Union arrogantly believes it has under control. Of course, they also thought they had the situation well under control in, say, 1789. At that time it was also generally believed that it was good to be the king. As we enter the depths of a brave new world, is it once again good to be the king? Let's ask the EU leaders as this crisis gathers momentum. I suspect the answer is it "was" good to be the king.
Tuesday, March 23, 2010
Al Gore - An Inconvenient Fraud?
Monday, March 22, 2010
The Ultimate Expression Of Corporatism Or Fascism - The Orwellian State Becomes The Enforcement Agency For A Private Corporate Tax On Every American
Sunday, March 21, 2010
Constitutional Lawyer And Former Federal Judge - The Process By Which The Health Care Bill Is Being Passed Appears Unconstitutional
Saturday, March 20, 2010
At Least 37 States May Challenge Tyrannical For-Profit Health Insurance Mandate In The Courts
Friday, March 19, 2010
Federal Reserve Loses Appeal - Show Me The Money
More NutJob Politics In Washington - Neoliberal Elites Seek To Pass Acts Of Terror Against American Citizens Into Law
Republican Leaders Love Banking Lobbyists And Apparently Don't Want Real Financial Reform. Get Your Lobbyist Money In My Belly.
Thursday, March 18, 2010
General Ramblings About Markets And Another Possible Brick In The Wall Of A Stock Market Topping Process
Remember when we wrote than sentiment was going to fail as an investment tool years before the financial markets collapsed? Guess what? It completely failed when all financial and commodity markets collapsed in 2008 and early 2009. It failed because there was a lack of demand. The lack of demand we would easily be able to anticipate if we understood fundamentals. We do. We did. Sentiment can become very negative yet prices keep falling due to a lack of demand. Just as sentiment can become bullish and stay bullish while prices shoot into the stratosphere. That is exactly what happened in 2008 and early 2009 when markets collapsed. No matter how bad sentiment got the market kept going lower because there was no demand. In other words, negative sentiment simply became more negative sentiment and fools who were rushing in were buried over and over again. We wrote as the market kept going down and people kept calling a bottom that they were all wrong. And indeed they were. There never would have been any demand until we reached some type of value point were the Federal Reserve not to open up the spigots of free money to speculators in early 2009. In other words, without the Federal Reserve opening the spigots to speculators, the market would have kept falling until stock prices reflected fundamentals. That would have been 200-450 on the S&P, which remains our downside target. Is it bullish that the individual is out of this market when considering demand? Hardly. Get your facts straight, understand monetary policy and economics and you'll never rely on this or the other types of endless rubbish perpetuated by Wall Street, financial commenteurs or market technicians.
Mark Cook, a professional trader who won some national trading competitions a few decades ago made tick data famous with some of his algorithms. But back in 2008 before financial markets crashed, we uniquely wrote "We are witnessing the true potential for some type of disaster....We have not seen this type of environment since the Great Depression." Around that time Mark Cook was calling for a new bull market. I think we see what tick data is capable of if not interpreted properly. If Cook held through the collapse, he probably is foraging for grubs in the city sewer system like Wall Street would be without taxpayer bailouts. Qualitative interpretations are most often more important than quantitative interpretations. In other words, there is little incontrovertible truth, even in science, and therefore the world truly is a very subjective place most often very open to the correct interpretation - something not taken into consideration by Wall Street's erroneous new quantitative finance savants. A perfect example is tick data. If Mark Cook and I were looking at the same data back in 2008 and he was calling a new bull market and I was calling for a possible collapse, then there was something wrong with someone's models or the qualitative interpretation of them or both. We see this dynamic at work again today with many financial savants claiming this crisis has passed and that stocks represent a great buy. Two massive lies. Why would we expect an accurate qualitative interpretation from the same yammering clowns who never saw the freight train coming down the track in the first place?
This brings up a timely point. The environment today is eerily similar to that of times past including 1987 and then in 2008 before financial markets collapsed. In 2007 and 2008 nearly everyone on Wall Street, and for that matter in society, thought the Federal Reserve was going to save the stock market, Wall Street, the economy, every other nation's economy, save Jesus Christ from persecution and save the Dalai Lama from the Chinese communists. My point is there is an incredible amount of lax behavior and ramped up risk-taking in all financial markets around the globe. All of this done by people proven to be completely financially illiterate and incompetent. The status quo and many bears now believe this perception of Federal Reserve free money will keep any future crises from developing or impacting financial markets.
That no one thinks the market can collapse again or even retest old lows or make new lows shows a vast and substantial misunderstanding of the countless dynamics which drive financial markets and the scale of this crisis. It's so boringly rote and ignorant to claim the Federal Reserve is going to crank up the printing presses and that will save financial markets. First off, that's not how the Federal Reserve currently works, that's not how financial markets work and even were this the case, it's highly unlikely to happen since it has not happened yet. Such a move would damage the very markets and firms the Federal Reserve is trying to save. It may help you are me but it would not help the people benefiting from the status quo. And those are the people the Federal Reserve is concerned with saving.
Below is an algorithm calculated using tick data laid on top of the S&P for viewing purposes. We have now reached the second highest algorithm reading in the last twenty years. The highest reading is also shown on the chart right before the market collapse in 2008. Is this bad news? Well, that depends. We aren't making substantial new highs. The economy is not recovering. China is raising its banking reserve requirements, the economy is not throwing off any excess cash flow to fund more Wall Street Ponzi schemes, just about every measure of Wall Street bullish activity (not sentiment but actual activity) is off the charts, all of Wall Street is levered to the hilt again and the dollar is once again very strong. If you understand why the dollar is strong, you should be worried for that reason alone. And it isn't just because the yuan, ruble and most other currencies are terrible comparative to the dollar, although they most certainly are. It's because money is being sucked out of the global economy at an alarming rate. A very ominous eventuality for financial markets and global trade. Well, and Wall Street idiots. Oh, and all of this is happening without making a substantial new stock market high. I don't count 5 or 10 or even 50 S&P points higher than any prior high as anything other than a statistically insignificant event with so many incredible risks in the global economy.
On the below graphic the tick algorithm is in blue. In red, I have included upper and lower volatility bands which highlight statistical out-of-bound occurrences of this algorithm's movement. In other words, excessive readings to the upside and downside lie outside of the volatility bands. I personally wouldn't want to be jumping all over this market or any financial market for that matter. There are countless dynamics which could lead to a substantial correction, a new protracted down leg lasting months or even years or even a market collapse. While I don't see any of those as imminent (yet), the enthusiasm for financial stupidity remains at multi-decade highs. And I'll say it again. This market is more expensive than was the market in 1929, a statement we have made countless times over the last five years. Even though the market is now substantially lower than its peak, valuations are still well beyond 1929 and in fact are insane. Forget about price to earnings ratios. That is for yammering idiots like Jim Cramer. Remember, the price to earnings ratio went from 12 or whatever it was before the 2008 crash to over 100 after the crash. Price to earnings ratios are to be only used for toilet paper.
So let's look at another confirming data point of the tick algorithm. What I believe is possibly a rampant blow off in risky behavior contributing to the possibility of a building top. That is the Nasdaq Transportation Index or NTI. The NTI is far more representative of three dynamics versus the Dow Transports. One, it is much more representative of commerce specifically in the United States. And two, it is substantially more speculative being the companies are much smaller and riskier companies tied closely to the credit cycle and to economic activity. And three, unlike the Dow Transports, this index is actually representative of companies which are actually tied to industrial output.
Wednesday, March 17, 2010
Localization Takes Hold In A Repudiation Of Globalization And Big Business - Cities And States Tell Wall Street To Stick It
The Rallying Cry Of Resistance For State Lawmakers - Finally A "Neutral" State's Rights Article By The Mainstream Media
Tuesday, March 16, 2010
Federal Government Transparency Goes From A Joke Under Bush To An Even Bigger Joke Under Obama
Call Your Congressperson And Demand A Public Option For Health Insurance
Democracy Is Starting To Stretch Its Legs - Congresspersons Seek To Repeal NAFTA
"Peace, commerce, and honest friendship with all nations, entangling alliances with none." -- Thomas Jefferson
Monday, March 15, 2010
Michael Lewis - Inside The Fraudulent Collapse Of Wall Street
Friday, March 12, 2010
State's Rights And State Banking - A Repudiation Of The Washington/Wall Street Fascist Corporatocracy. Kill The Beast That Is Wall Street.
I have remarked repeatedly that the U.S. economy would roar with the right policies. We could be back to near zero unemployment within five years. I haven't told you explicitly what policy decisions that would take or what fundamentals would be required but if you have been reading my blog since it's inception, I pretty much have told you indirectly exactly how that is possible with countless posts on a wide array of topics. I'm not ready to put it all together but needless to say we are far from a constructive outcome. Yet. We will more than likely have to see some type of collapse or incredible crisis first. As we have said before, I am not bullish on the future of America because I have faith in political idiots or because we have elected a brilliant Savior as President. Contrarily, I am bullish on America's future because I am bullish on the American people. This during a period of our existence that the media and Wall Street generally portrays Americans as uncompetitive, uneducated, unskilled, fat, dumb and lazy. This from the most incompetence and uneducated leaders in our history. A complete and utter lie.
We have written extensively on here about State's Rights. And not for the hell of it. There aren't any economists out there who have been writing about State's Rights over the last five years. Yet, it is an enormous dynamic in economics that is going to blind side the status quo.
The Nation just put up a piece on state banking. This is a prime example of States asserting their rights and sovereignty in a repudiation of the fraud in Washington and Wall Street. For every action, there is an equal but opposite reaction. As we have asserted countless times, public banking is the only legitimate form of democratic banking. Period. There is no plausible argument to the contrary. None. I can repudiate any argument put forth for private banking and democracy. Anyone who supports private banking is either an ideologue, uninformed, lacks an understanding of public banking or is putting capitalism before democracy. That last reason is why our economy is collapsing in the first place. And please don't tell me a public bureaucrat is not capable of being as good a banker as a private bureaucrat. Do you like your Medicare? Social Security? Your fire department? NASA? Our brilliant public scientific labs? Our State universities? If any bureaucrat, aka banker, was brilliant, they wouldn't be a banker. They would be part of the creative energy of society. The creative energy which drives society's wealth. Banking is a necessary, even potentially noble, but mundane business. A public banker is just as capable of guessing whether a business plan is viable and employing the same risk controls as a banker on Wall Street. A public banker is just as qualified to process a student loan application. Let's get real. This isn't rocket science. And if we have public labs employing rocket scientists doing brilliant work, we can sure as hell have a competent public banker.
This article doesn't describe the type of public banking system I would envision but it's a start. One brick at a time. We'll write about public banking in some detail at some point but for now this article will suffice as showing one of the great transformations taking place in America. There are many. They are all exciting.
The consequences of this action are absolutely incredible. If you think through this dynamic, every single piece of our economy would change forever. For the better. If every state creates it's own bank, Wall Street will never recover. Ever. And, that is as it should be. Wall Street's monopoly on capital in a democratic society can be classified as nothing short of tyranny. It breeds racism, lack of economic opportunity and perpetual underachievement for many capable people who are denied access to capital.
Long live democracy. The sooner Wall Street dies, the better.
Update On Credit Default Swaps And The Great Wall Street Scam
I saw Jason Trennert comment one time on the ability to create a "run" on a company using CDS contracts. (Applicable to creating a run on Greece in this instance.) He said it was akin to taking out a life insurance policy on someone and then killing them to collect the policy. And, doing it legally. Unfriendly governments attempting to destabilize the U.S. or hedge funds raiding a targeted firm or Wall Street firms attempting to destabilize a competitor could possibly attempt to manipulate the CDS market. It is almost a surety that illegal activity in the CDS market has led to the demise or financial instability of at least one firm. But we don't know because no one knows anything about this market. It is completely deregulated. There were even rumors some of the recent panics created by the CDS market came from overseas locations friendly to terrorists. Legal shorting methods cannot cause insolvency. Illegal shorting coupled with manipulation of the CDS market does have the potential to literally destroy a firm that might otherwise survive. So, what does the SEC do? They leave the CDS market unregulated and ban legal short selling. I wonder what role lobbying played in these decisions.
The CDS market is just a sample of the concerted efforts at removing transparency from financial markets. Lack of transparency extends into nearly every financial market and has fueled remarkable and completely unsustainable profits for Wall Street. Profits that were often achieved at the expense of some legitimate concern be it a municipality, a homeowner, an individual investor, the taxpayer, governments and on and on and on. Even stock trading is being removed from public view. Lack of transparency is systemic and has no basis I can find except for criminal intent. Why? Because it fuels massive profits. Who cares if they are sustainable or even ethical.
One must understand an environment lacking in transparency to understand why firms would spend billions lobbying government and even more billions creating vehicles outside of the scope of transparency. These schemes present tremendous opportunity for profit by anyone who controls the flow of market information - that typically being a monopoly or someone able to distort market forces by subverting government oversight. In this case, that would be Wall Street who has monopoly access to capital. Restricted access to transparency creates an environment where manipulation and substantial profit is possible at the expense of any counter party be it individual investors, governments, businesses, school districts or anyone else partaking in the scam.