Better the Devil You Know?
We are providing around-the-clock nursing care to our invalid wife, who is back at home, with cracked ribs, unable to move. We are upstairs in the bedroom – the shutters closed against the heat (we have no air-conditioning) – taking a few minutes to update our Diary… but with nothing important to say.
Every day, we look at the headlines, think about what is going on in the big wide world and try to connect a dot or two. It is probably the same in your life. You go about your business. You have work to do. Projects, goals, deadlines. Your priorities. Your investments. Your schedule. Your plan.
Cartoon by Ramirez
OUZILLY, France – Poor Donald Trump. He has had to apologize for hurt feelings. He has had to reshuffle his campaign team. He has been kicked so often by the press that he is starting to hide behind chairs, like a university president. Here at the Diary, we favor lost causes, diehards, and underdogs. “The Donald” may soon qualify on all three counts.
Underdog spotted! But is he really such a “lost cause?” He may not be, actually… in spite of his uncanny ability to occasionally put his foot in his mouth.
Distortions and Crazy Ideas
We have come across a few articles recently that discuss some of the strategies investors are using or contemplating to use as a result of the market distortions caused by current central bank policies. Readers have no doubt noticed that numerous inter-market correlations seem to have been suspended lately, and that many things are happening that superficially seem to make little sense (e.g. falling junk bond yields while defaults are surging; the yen rising since the BoJ adopted negative rates; stocks rising amid a persistent decline in earnings growth; bonds, gold and stocks moving in unison, etc., etc.).
Unknown veteran trader experiences another WTF moment.
Photo credit: Everett Collection
No CPI Change
Several ill-defined economic data points were unveiled this week. Namely, the Labor Department’s July consumer price index report. According to the government data, on whole, consumer prices for the month didn’t change one iota.
AEP Speaks for Himself
“We are all Keynesians now, so let’s get fiscal.” This is one view according to Ambrose Evans-Pritchard from The Telegraph who believes the time is right for the UK government to loosen its fiscal stance.
Ambrose Evans-Pritchard is channeling JM Keynes these days (depicted above). Alternative media long regarded AEP as a rare exception in the mainstream press, willing to take on economic orthodoxy. We are happy to report that we had his number early on. First he outed himself as a monetarist and advocated money printing, and now he has apparently moved over to Keynesianism. Readers may want to review some earlier articles in this context: Parade of the Inflationists, Tapering Paranoia, and Anglo-Saxon Central Banking Socialism = Free Lunch.
Photo credit: Keystone/DPA
When Will the Helicopter Take Off?
The quarterly meeting of the Incrementum Fund’s advisory board was held on July 19. A pdf transcript of the discussion can be downloaded via the link below. We were once again joined by special guest Brent Johnson, the CEO of Santiago Capital.
The new obsession of liquidity junkies around the globe: helicopter money! This should cement the “TINA” rationalizations for buying hopelessly overvalued stocks and bonds, right?
Cartoon by Bob Rich
A fall in the US velocity of money M2 to 1.44 in June from 1.51 in June last year and 2.2 in May 1997 has alarmed many experts. Note that the June figure is the lowest since January 1959.
Money velocity is widely considered “too slow”. But what does the formula really tell us?
Lies and Distortions
Despite trillions of paper currency units poured into the world economies since the start of the financial crisis, there has been no recovery, in fact, all legitimate indicators have shown worsening conditions except, of course, for the pocketbooks of the politically – connected financial elites.
A comparison of average annual GDP growth in different time periods since 1949. The last bar shows Q2 2016, the one before it the time period 2009 – 2016. In this time period, the by far biggest fiscal and monetary stimulus of the entire post WW2 era was applied. Obviously, it hasn’t worked as advertised. Growth wasn’t so weak in spite of, but because of these policies (keep in mind that “measuring” aggregate growth in an inflationary system is even more flawed than it would otherwise be).
Most read in the last 20 days:
- A Date Which Will Live in Infamy
President Nixon’s Decision to Abandon the Gold Standard Franklin Delano Roosevelt called the Japanese “surprise” attack on the U.S. occupied territory of Hawaii and its naval base Pearl Harbor, “A Date Which Will Live in Infamy.” Similar words should be used for President Nixon’s draconian decision 45 years ago this month that removed America from the last vestiges of the gold standard. Nixon points out where numerous evil speculators were suspected to be...
- Insanity, Oddities and Dark Clouds in Credit-Land
Insanity Rules Bond markets are certainly displaying a lot of enthusiasm at the moment – and it doesn't matter which bonds one looks at, as the famous “hunt for yield” continues to obliterate interest returns across the board like a steamroller. Corporate and government debt have been soaring for years, but investor appetite for such debt has evidently grown even more. The perfect investment for modern times: interest-free risk! Illuustration by Howard...
- US Economy – Something is not Right
Another Strong Payrolls Report – is it Meaningful? This morning the punters in the casino were cheered up by yet another strong payrolls report, the second in a row. Leaving aside the fact that it will be revised out of all recognition when all is said and done, does it actually mean the economy is strong? Quo vadis, economy? Image credit: Paul Raphaelson As we usually point out at this juncture: apart from the problem that US labor force participation has...
- Trump's Tax Plan, Clinton Corruption and Mainstream Media Propaganda
Fake Money, Fake Capital OUZILLY, France – Little change in the markets on Monday. We are in the middle of vacation season. Who wants to think too much about the stock market? Not us! Yesterday, Republican presidential candidate Donald Trump promised to reform the U.S. tax system. This should actually even appeal to supporters of Bernie Sanders: the lowest income groups will be completely exempt from income and capital gains taxes under Trump's plan. We expect to hear...
- The Great Stock Market Swindle
Short Circuited Feedback Loops Finding and filling gaps in the market is one avenue for entrepreneurial success. Obviously, the first to tap into an unmet consumer demand can unlock massive profits. But unless there’s some comparative advantage, competition will quickly commoditize the market and profit margins will decline to just above breakeven. Example of a “commoditized” market – hard-drive storage costs per GB. This is actually the essence of economic...
- Bank of England QE and the Imaginary “Brexit Shock”
Mark Carney, Wrecking Ball For reasons we cannot even begin to fathom, Mark Carney is considered a “superstar” among central bankers. Presumably this was one of the reasons why the British government helped him to execute a well-timed exit from the Bank of Canada by hiring him to head the Bank of England (well-timed because he disappeared from Canada with its bubble economy seemingly still intact, leaving his successor to take the blame). This is how Mark Carney is seen by...
- An Old Friend Returns
A Rare Apparition An old friend suddenly showed up out of the blue yesterday and I’m not talking about a contributor who had washed out and, after years of ‘working for the man’, decided to return for another whack at beating the market. Instead I am delighted to report that I am looking at a bona fide confirmed VIX sell signal which we haven’t seen for ages here. Hello, old friend. Professor X and Magneto staring each other down in the plastic...
- News from TINA Land
Distortions and Crazy Ideas We have come across a few articles recently that discuss some of the strategies investors are using or contemplating to use as a result of the market distortions caused by current central bank policies. Readers have no doubt noticed that numerous inter-market correlations seem to have been suspended lately, and that many things are happening that superficially seem to make little sense (e.g. falling junk bond yields while defaults are surging; the yen rising...
- The Fabian Society and the Gradual Rise of Statist Socialism
The “Third Way” “Stealth, intrigue, subversion, and the deception of never calling socialism by its right name” – George Bernard Shaw An emblem of the Fabian Society: a wolf in sheep's clothing The Brexit referendum has revealed the existence of a deep polarization in British politics. Apart from the public faces of the opposing campaigns, there were however also undisclosed parties with a vested interest which few people have heard about. And...
- Retail Snails
Second Half Recovery Dented by “Resurgent Consumer” We normally don't comment in real time on individual economic data releases. Generally we believe it makes more sense to occasionally look at a bigger picture overview, once at least some of the inevitable revisions have been made. The update we posted last week (“US Economy, Something is Not Right”) is an example. Eager consumers storming a store Photo credit: Daniel Acker / Bloomberg We'll make an...
- The Fed’s “Waterloo” Moment
Corrupt and Unsustainable James has been a big help. Trying to get him to sleep at night, we have been telling him fantastic and unbelievable bedtime stories – full of grotesque monsters... evil maniacs... and events that couldn’t possibly be true (catch up here and here). He turned his head until his gaze came to rest on the barred windows of the main building. Finally, he spoke; as far as I was aware these were the first words he had uttered in more than five years....
- Silver is in a Different World
The Lighthouse Problem Measured in gold, the price of the dollar hardly budged this week. It fell less than one tenth of a milligram, from 23.29 to 23.20mg. However, in silver terms, it’s a different story. The dollar became more valuable, rising from 1.58 to 1.61 grams. Who put that bobbing lighthouse there? Image credit: John Lund / Corbis Most people would say that gold went up $6 and silver went down 43 cents. We wonder, if they were on a sinking boat,...