Author Archives: Pater Tenebrarum

     

 

 

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.).

 

puzzled-man-scratching-headUnknown veteran trader experiences another WTF moment.

Photo credit: Everett Collection

 

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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.

 

Helicopter_money_05.20.2016_largeThe 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

 

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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.

 

Perfect-InvestmentThe perfect investment for modern times: interest-free risk!

Illuustration by Howard McWilliam

 

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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.

 

storming the storeEager consumers storming a store

Photo credit: Daniel Acker / Bloomberg

 

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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).

 

Mark Carney starts work as Bank of England governor in Dave Simonds cartoonThis is how Mark Carney is seen by the press. A few decades ago no-one would have thought that the drab bureaucrats inhabiting central banks would ever get this much attention, and yet, here we are. It’s like living in a really bad B-movie.

Cartoon via theguardian.com

 

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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?

 

Factories, new vs oldQuo vadis, economy?

Image credit: Paul Raphaelson

 

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Unknowable Degrees of Bubble Insanity

Back in February, we brought you an update on the truly insane real estate bubble in Australia (see: “Australia’s Housing Bubble – In the Grip of Insanity” for details) in the wake of Jonathan Tepper of Variant Perception reporting on an eye-opening fact-finding tour in Sydney.

 

shackThis rotting shack in Sydney and its tiny plot of land sold for nearly $1 million in May of 2014 – more than two years ago.  Since then, house prices in Australia have increased even further. Yes, it is an insane bubble, no doubt about it.

Photo credit: Attila Szilvasi

 

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Champion of the Downtrodden?

 

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

H.L. Mencken

 

A mass e-mail has been making the rounds lately, and it is quite possible that many of our readers have already seen this. For those who haven’t, we wanted to share this moment of hilarity provided to us by Deep State candidate Hillary Clinton. It revolves around this picture:

 

HillarmaniHillary Clinton delivers a speech – the topic was reportedly “inequality”.

Photo credit: Getty Images

 

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Anecdotal Skepticism vs. Actual Data

About one month ago we read that risk parity and volatility targeting funds had record exposure to US equities. It seems unlikely that this has changed – what is likely though is that the exposure of CTAs has in the meantime increased as well, as the recent breakout in the SPX and the Dow Jones Industrial Average to new highs should be delivering the required technical signals.

 robot tradersThe bots keep buying…

Illustration via carolublog.wordpress.com

 

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Chopper Pilot Descends on Nippon

Readers are probably aware of recent events in Japan, the global laboratory for interventionist experiments. The theories of assorted fiscal and monetary cranks have been implemented in spades for more than a quarter of a century in the country, to appropriately catastrophic effect. Amid stubbornly stagnating economic output, Japan has amassed a debt pile so vast since the bursting of its 1980s asset bubble, it beggars the imagination.

 

2007A bridge to nowhere near Kyoto (there is a second, similar bridge nearby, which for differentiation reasons has been dubbed “the bridge from nowhere”). We hasten to stress that such monuments to bureaucratic insanity are by no means unique to Japan – they can be found all over the world (just not in a similar density). The one question etatistes always ask and which supporters of a free society have no satisfactory answer for is: “If there were no government, who would build the bridges to nowhere?” :)

Photo credit: Jeffrey Friedl

 

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“Tough Negotiations”

The European press informs us that a delegation of EU Commission minions, including Mr. JC Juncker (who according to a euphemistically worded description by one of his critics at the Commission “seems often befuddled and tired, not really quite present”)  and European Council president Donald Tusk, has made landfall in Beijing. Their mission was to berate prime minister Li Keqiang over alleged “steel dumping” by China and get him to cease and desist.

 

Juncker, Keqiang, Tusk 2China’s economy czar & prime minister Li Keqiang, JC “not quite present & often befuddled” Juncker, and a perplexed looking Donald Tusk are shaking hands on a new trade deal in Beijing. Only one of them looks really happy, so it seems the Chinese got the better of the Europeans, and the two EC minions appear to be well aware of it. In fact, we have it on good authority that later that day, in the hotel bar, a slightly tipsy JC remarked (in French): “Donnie, they pulled a fast one on us. I know it!” Tusk is said to have replied: “Can you say that again in English please?”

Photo credit: Yves Herman / Reuters

 

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Gold Continues to Mimic the 1970s

Ask and ye shall receive… we promised we would update the comparison chart we last showed in late November in an article that kind of insinuated that it might be a good time to buy gold and gold stocks (see: “Gold and Gold Stocks – It Gets Even More Interesting” for the details). We are hereby delivering on that promise.

 

croesus_av_stater_1A Lydian gold stater from the time of the famously rich King Croesus, approx. 570 BC. It seems they already had this bull/bear thing going at the time…

Photo via ancientmoney.org

 

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