Austria’s Constitutional Court Decides to Uphold Property Rights

To everybody’s vast surprise, Austria’s constitutional court has decided not to side with the government in the infamous Hypo Alpe Adria (HAA) case. The bank went belly-up after the 2008 crisis and slowly but surely it emerged that it represented a financial catastrophe of truly stunning proportions.

Incompetence on a rarely seen scale, but also probably also fraud (although that angle has yet to be pursued by the judiciary) ultimately produced the biggest de facto (if not de iure, yet) insolvency in Austria’s history.

 

Hypo_Centar_7_downloadHypo Alpe Adria – a giant house of cards that imploded in the course of the financial crisis.

Photo credit: hypo-alpe-adria.hr

 

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Taxpayer-Funded Garbage

The Federal Reserve recently released a research article titled “How Sensitive Is Housing Demand to Down Payment Requirements and Mortgage Rates?

 

ben-bernankeFormerly ruling over rooms full of really smart guys: ex-Fed chairman Ben Bernanke

Photo credit: Karen Bleier / AFP

 

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Greece’s Citizens Know More than Paul Krugman

One of the interesting dynamics in Greece is the continued attachment of the Greek population to the Euro. All the polls show 60-70% majorities for staying in the euro zone, notwithstanding the ravages of austerity. But there is a very simple explanation for this paradox. As much as the Greeks blame the rest of Europe, and especially the Germans, for their problems, they understand very well that nothing is worse than their home-grown politicians.

 

091926b1-b5eb-4886-ba1a-cf61b07e64eb-2060x1236We generally don’t make the mistake of overestimating the competence of Paul Krugman on this site (PT) …

Photo credit: David Levene

 

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Easy Money … Hard Times

VANCOUVER, Canada – What would the world do without well-intentioned, earnest, and intelligent public servants like Hillary Clinton? We don’t know. But we’d like to find out!

 

Billary“And this afternoon, right after I’ve saved the planet from catastrophic anthropogenic global warming, I will save capitalism too…” What would capitalism do without Hillary Clinton?

Photo credit: Becker / AP

 

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Equity Risk Is Increasingly Non-Existent… By The Numbers

The concept of risk for hedge fund managers is a constant concern. The internal monologue goes something like this…what’s my downside if I initiate this position…how much can I lose if I am not right?”

The real answer is that you really have no idea…despite best efforts…even with stop losses [which I abhor]. The true, measurable risk of any position is only exactly known after you liquidate the position. Plus, risk management is more capital management than single stock management.

 

Beer-StierLittle did he know how it would all end …

Cartoon via wallstreetsurvivor.com

 

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No Trend Uniformity

As John Hussman points out in his most recent weekly missive, the stock market currently reflects all the characteristics observed near previous major market peaks. Apart from the more obvious ones, such as overvaluation and lopsidedly bullish sentiment which have been with us for some time, the market’s internals continue to deteriorate. This makes the current situation especially dangerous. As Hussman notes:

 

When extreme valuations and lopsided bullish sentiment are joined by deterioration in market internals, one faces an environment that couples compressed risk premiums with increasing risk aversion. Throughout history, severe market losses and crashes have nearly always been the result of an upward spike in previously compressed risk premiums.”

 

(emphasis added)

 

trader_1963744bPhoto credit: Alamy

 

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The Sword of Damocles

Dear Prime Minister Tsipras,

First, congratulations for mustering the popular support to say “no” to the troika. The euro has long offered Greece a perverse incentive to borrow, and now your country is trapped in debt. By any conventional means, Greece cannot repay (I propose an unconventional way, below). The sooner everyone acknowledges this simple fact the better.

 

Parliament backing will allow Tsipras to negotiate his package of economic reforms with Greece's European creditorsWhat to do, what to do … Greek prime minister Alexis Tsipras in contemplation mode

Photo credit: Christian Hartmann / Reuters

 

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Slowing Down

VANCOUVER, Canada – When we left you at the end of last week the world was falling apart. As you know, the economy functions on electronic credit… not cold, hard cash. Without the banks pumping more credit into the system – by way of loans – it sags.

The Dow fell 163 points – or about 1% – on Friday. More significant is the action in the gold market. At this morning’s price of $1,103 an ounce, gold is now trading $100 below what we thought was the “floor” under the price. Why?

It could be that gold is signaling a global recession/depression. People tend to buy gold when they fear inflation. All they see today is a global deflationary slump.

The People’s Daily newspaper – the official organ of the Communist Party – tells us that Chinese electricity consumption is accelerating at the slowest rate in 30 years.

 

ghost-cities-of-chinatown2Build it and they will come! Or not…a picture of one of China’s infamous “ghost cities”. This exercise in Keynesian pyramid building on a colossal scale is now coming back to haunt China. It is probably the most egregious case of capital malinvestment in human history. Rothbard once said that the only good thing about the Marxists is that they aren’t Keynesians. In China the two species have interbred.

Photo credit: Tim Franco

 

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Another “Oops!” Moment in Shanghai

Is there anything the Chinese authorities haven’t tried yet in their attempt to manipulate the Shanghai stock market back up again? Off the cuff there’s nothing we can think of, except maybe shutting the market down entirely.

As we have previously pointed out, Chinese investors have fallen prey to the “potent directors fallacy” (a fortuitous term once coined by Robert Prechter) – in fact, China is currently a prime example of this fallacy in action. The term essentially describes the misguided belief that political authorities can somehow suspend economic laws or will always be successful in manipulating financial market trends.

 

An investor looks at an electronic board showing stock information at a brokerage house in Nanjing, Jiangsu province, China, July 24, 2015. REUTERS/China DailyA Chinese retail investor, evidently shocked that the potent directors still can’t keep prices from falling

Photo credit: China Daily / REUTERS

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Vade Retro, Pet Rock!

For those who are speculating on the dollar—i.e. most people—there was good news this week. The dollar rose almost a milligram, to 28.3mg gold. That’s a big gain, and welcome news for those who keep all of their eggs in the one dollar basket, perhaps because they don’t want to risk any of it on pet rocks.

Yes, Jason Zweig at the Wall Street Journal actually said that. He couldn’t be more wrong—and yet he had a point. Wrong? Let me count the ways.

 

lingote-sujeta-puertas-01It’s not a pet rock, Mr. Zweig – it’s a door stop! We thought everybody knows this… (PT)

Photo via tiendasmayoristas.com

 

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