Central Banks

     

 

 

Ridiculous Minutia

Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job.  He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer.  He still doesn’t know what roach coach menu items induce a heinous gut bomb.

 


The perpetually slightly worried looking new Fed chairman Jerome Powell, here seen warily inspecting the Rose Garden at the White House. Everybody wants to know if he has a “better plan” – but there is no better plan, thus no-one has one. [PT]

Photo credit: A. Brandon / AP

 

Read the rest of this entry »

     

 

 

Contradictory Palaver

The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.

 

A modern-day reenactment of the famous “our currency, your problem” play that went over so extremely well in the 1970s… [PT]

 

Read the rest of this entry »

     

 

 

Something for Nothing

The world is full of bad ideas.  Just look around.  One can hardly blink without a multitude of bad ideas coming into view.  What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor.  It’s nearly as destructive as prescription pain killers.  Yet people chug it down with reckless abandon.

 

Looking at the expression of this Mickey’s Malt Liquor tester one might initially get the impression that he is disappointed. We assure you that is not the case – this is actually his happy face, he is probably just about to enter Nirvana. Countless taste tests prove it, see this comparison of the “entire bottom shelf” of malt liquors, or these cost-conscious routiniers. Not to forget, it comes either in cans or in shatterproof plastic bottles. [PT]

 

Read the rest of this entry »

     

 

 

FOMC Strategy Revisited

As readers know, investment and trading decisions can be optimized with the help of statistics. One way of doing so is offered by the FOMC meeting strategy.

 

The rate hikes are actually leading somewhere – after the Wile E. Coyote moment, the FOMC meeting strategy is especially useful [PT]

 

Read the rest of this entry »

     

 

 

Controlled Inflation

American consumers are not only feeling good.  They are feeling great. They are borrowing money – and spending it – like tomorrow will never come.

 

After an extended period of indulging in excessive moderation (left), the US consumer makes his innermost wishes known (right). [PT]

 

Read the rest of this entry »

     

 

 

Remarkable and Extraordinary Growth

Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?

 

Here’s what really happened: the government’s minions confiscated everything Santa had on him when he crossed the border and then added it to GDP. You know how it is… if something feels too good to be true… [PT]

 

Read the rest of this entry »

     

 

 

Bogus Jobs Pay Big Bucks

The political differences of today’s two leading parties are not over ultimate questions of principle.  Rather, they are over opposing answers to the question of how a goal can be achieved with the least sacrifice.  For lawmakers, the goal is to promise the populace something for nothing, while pretending to make good on it.

 

The short and sweet definition of democratic elections by eminent American wordsmith and political philosopher H.L. Mencken [PT]

 

Read the rest of this entry »

     

 

 

An Astonishing Statistic

As the final FOMC announcement of the year approaches, we want to briefly return to the topic of how the meeting tends to affect the stock market from a statistical perspective. As long time readers may recall, the typical performance of the stock market in the trading days immediately ahead of FOMC announcements was quite remarkable in recent decades. We are referring to the Seaonax event study of the average (or seasonal) performance across a very large number of events, namely the past 160 monetary policy announcements and the 10 trading days surrounding them. It looks as follows:

 

We have highlighted the period of maximum profit over the past 20 years in dark gray, which is achieved over a holding period of  8 trading days and amounts to an average of 60 basis points. At first glance that may not look like much, but it actually works out to a 21.89 percent annualized gain, which exceeds the gain generated in the “rest of the time” by a vast margin. As the detailed returns in individual years at the bottom show, in some years particularly large gains were posted around FOMC meetings – these were as a rule associated with new cyclical bull markets just after the end of major bear markets. The largest losses were obviously primarily associated with bear market periods, but they are both much fewer in number than the gains and much smaller on average – click to enlarge.

 

Read the rest of this entry »

     

 

 

Economic Nirvana

“Inflation is always and everywhere a monetary phenomenon,” economist and Nobel Prize recipient Milton Friedman once remarked.  He likely meant that inflation is the more rapid increase in the supply of money relative to the output of goods and services which money is traded for.

 

Famous Monetarist School representative Milton Friedman thought the US should adopt a constitutional amendment limiting monetary inflation to 3% – 5% per year, putting inflation so to speak on autopilot. But why should there be any central bank-directed inflation at all? To his credit, in 1968 Friedman wrote the following in the American Economic Review: “[M]onetary action takes a longer time to affect the price level than to affect the monetary totals and both the time lag and the magnitude of effect vary with circumstances. As a result, we cannot predict at all accurately just what effect a monetary action will have on the price level and, equally important, just when it will have that effect. Attempting to control directly the price level is therefore likely to make monetary policy itself a source of economic disturbance because of false stops and starts.” This is quite correct and was the reason why he thought discretionary central bank policy should be replaced with some fixed rule, while naively adding thatPerhaps, as our understanding of monetary phenomena advances, the situation will change.” Of course the situation will never change – the failure of the bureaucracy to centrally plan money is simply a special case of the socialist calculation problem, which cannot be overcome (as an aside, it is not all clear why students of economic history should accept that central banks have been established for anything other than nefarious reasons). The most elegant solution would of course consist of simply replacing central planning with a truly free market in money. But that would mean abandoning a major tool of political and economic control that benefits the State and its cronies. Moreover, a great many economists would have little to do in such a free market, as central banks have essentially bought the entire profession. Naturally, most economists know better than to bite the hand that feeds them.

Photo via mises.ca

 

Read the rest of this entry »

     

 

 

Early Warning Signals in a Fragile System

[ed note: here is Part 1; if you have missed it, best go there and start reading from the beginning]

We recently received the following charts via email with a query whether they should worry stock market investors. They show two short term interest rates, namely the 2-year t-note yield and 3 month t-bill discount rate. Evidently the moves in short term rates over the past ~18 – 24 months were quite large, even if their absolute levels remain historically low.

 

Sizable moves higher in short term interest rates were recorded over the past two years. 2 year note yields only started moving up in mid 2016, but the surge in t-bill discount rates has been in train since late 2015 already. The moves in short term rates come from extremely low levels, but they are nevertheless quite noteworthy – click to enlarge.

 

Read the rest of this entry »

     

 

 

Incrementum Advisory Board Meeting Q4 2017 –  Special Guest Ben Hunt, Author and Editor of Epsilon Theory

The quarterly meeting of the Incrementum Fund’s Advisory Board took place on October 10 and we had the great pleasure to be joined by special guest Ben Hunt this time, who is probably known to many of our readers as the main author and editor of Epsilon Theory. He is also chief risk officer at investment management firm Salient Partners. As always, a transcript of the discussion is available for download below.

 

Ben Hunt, author of Epsilon Theory and chief risk officer of Salient Partners

 

Read the rest of this entry »

     

 

 

A Date with Dracula

The gray hue of dawn quickly slipped to a bright clear sky as we set out last Saturday morning.  The season’s autumn tinge abounded around us as the distant mountain peaks, and their mighty rifts, grew closer.  The nighttime chill stubbornly lingered in the crisp air.

 

“Who lives in yonder castle?” Harker asked. “Pardon, Sire?” Up front in the driver’s seat it was evidently hard to understand what was said over the racket made by the team of horses that drew their carriage over the Transylvanian collection of pot holes the natives quite audaciously referred to as a “road”. In fact, the thunderous clackety-clack of their hooves was slightly unnerving, not to mention the unsafe speed at which they were moving. “I said, who lives in yonder castle?”, Harker repeated, shouting this time. “Oh!”, Igor said, nodding (Igor was their coachman). “Why Sire, is castle of Count Orlok, of course”. Of course. Good thing we are about to visit Count Dracula and not Count Orlok, Harker thought. “Better known as Count Dracula”, Igor continued, still nodding, as though it needed to be emphasized. Crap. “So which is his real name?” Harker inquired, still shouting. “Depends on who you ask, Sire”, Igor informed him, “Murnau says…” Suddenly, a piercing sound rang in Harker’s ears. It was the howl of a wolf, coming from somewhere in the woods to their left. It could hardly have been louder if the wolf had been sitting in the coach right next to him. Good grief. What’s next?  To Igor he said, “Do you have lots of wolves here?” “Wolves?” Igor repeated, his tone of voice indicating mild concern. “Where wolves?” Why am I not surprised. “You have werewolves? Are there any horrors you don’t have in this shit-hole of a country?” And so it went… [PT]

 

Read the rest of this entry »

Most read in the last 20 days:

  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • Strange Economic Data
      Economic Activity Seems Brisk, But... Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) - but even then, we always stressed that no clear recession signal was in sight yet.   US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO...
  • US Equities – Retracement Levels and Market Psychology
      Fibonacci Retracements   Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown:   So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened...
  • Update on the Modified Davis Method
      Whipsawed Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).   The Nasdaq pillar...   As it turns out, the system was whipsawed,...
  • Market Efficiency? The Euro is Looking Forward to the Weekend!
      Peculiar Behavior As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index).   The quest for profitable foresight...[PT]   Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist