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The Window of Opportunity: BLOWN! w/ CHARLES HUGH SMITH 32 Minutes with 34 Slides
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Nominal GDP (Removing the Manipulated 'Deflator') Tells the Real Story This suggests that the Deflator should approximate 5% and THEN NORMALLY warns of Recession conditions. |
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COLLATERAL TRANSFORMATION - Quality Collateral Supply Is Determining "TAPER" Schedule From Less Repo, To Less Collateral Transformation, To Less Quantiative Easing In One Shadowy Step 08-05-13 Zero Hedge First it was the TBAC's May presentation "Availability of High Quality Collateral" piggybacking on reasoning presented previously by Credit Suisse. Then JPM's resident "flow and liquidity" expert Nikolaos Panigirtzoglou rang the bell on regulatory changes to shadow banking and how they would impact the repo market and collateral availability (and transformation) in an adverse fashion. Now, it is the turn of Barclays' own repo chief Joseph Abate to highlight a topic we have discussed since 2009: the ongoing contraction in quality collateral as a result of transformations in shadow banking and the Fed's extraction of quality collateral from traditional liquidity conduits (i.e., QE's monetization of bonds). To wit: "Several recent regulatory proposals will increase the pressure on banks to reduce assets that carry low risk weights. Repurchase agreements are a large source of banks’ low-risk assets, and we expect banks to reduce their matched book operations in response to these proposals." Abate's highlights:
What this means explicitly for repo volumes is nothing new and has been covered here extensively in the past, and can be seen quite vividly in the periodic slide of OTR repo into "special" status, usually just ahead of Treasury auctions:
The danger from the imposition of a "higher supplementary leverage ratio" is that while on the surface banks may demonstrate stronger balance sheets and less counterparty exposure, it will simply force them to seek "near-substitutes" that behave not exactly according to plan. See Lehman.
Digging into the implications of "thinner dealer inventories" which is already a direct result of changes in the repo market:
Finally, and getting straight to the heart of the TBAC's May warning, we focus on the biggest issue of all: collateral transformation, or literally getting something from nothing (or absolute junk) courtesy of the murky, off-balance sheet transformations that take place in the shadow banking system:
Note the highlighted, underlined text above, because it gets to the bottom of the tapering discussion: in a world in which "deficits persist", the Fed has all the liberty to do as much QE as needed, and absorb quality collateral as much as new gross collateral is injected via the Treasury (i.e., deficit funding). However, as deficits decline, as they have been in the US for the past few quarter (at least until the housing picture inevitably deteriorates again and the GSEs go from source of government funding back to use, and the demographic crunch hits in 2015 and deficits explode higher once again), ongoing monetization means collapsing the high quality collateral pool of assets far more than the TBAC advises. In fact, it is the TBAC that is pulling the strings on the Fed and making it clear, as it did in May, that the Fed has no choice but to taper as long as deficits don't return on their normal, upward trajectory (whether this means a war is inevitable to boost contracting defense spending remains to be decided). However, it is this aspect of the Fed "cornering itself" that is the underlying driver of all behind the scenes tapering discussions, which have nothing to do with the economy. Because while all the rhetoric and regulatory discussion focuses on the economy, the open markets, and deficits - this is all for general popular consumption. What the Fed and the BIS are truly concerned about, and have been for the past four years, is ongoing instability in the repo world, and other aspects of shadow banking. The last thing the Fed, and Treasury, will want to do is override the TBAC on its advice to moderate collateral extraction and plough on with even more quality asset imbalances in shadow banking. And this is why, at least until the Treasury proceeds to spend itself back into "drunken sailor" mode, that all hopes that the Fed will monetize everything that is not nailed down, will have to be deferred indefinitely. And with Credit Suisse, the TBAC, JPM and Barclays all having now covered this issue, we look forward to that final "liquidity" guru, Citi's Matt King to chime in on precisely this topic, and make it clear just what the real considerations driving the Fed's tapering "logic" are at this moment. |
08-06-13 | RISK MATA STUDY
US MONETARY |
1 - Risk Reversal |
CHINA - Sustainability Requires A Slowdown in Investment China’s Sustainability Requires Slowdown in Investment 08-05-13 Mark Williams, Chief Asia economist at Capital Economics in London. There has been a sea change recently in how investors view China’s economic prospects, with a growing belief that the slowdown reflects structural constraints rather than cyclical weakness. These constraints are often linked to demographic changes such as the fact that the working-age population last year declined for the first time in the modern era. However, population growth was never a big part of China’s growth story. Demographic changes this decade will account for only about 1 percentage point of the slowdown in economic growth. The roots of the continuing slowdown lie elsewhere, mostly in investment spending. Investment has increased to 46 percent of total spending from 36 percent in the last 10 years, well above the emergingworld average of 30 percent of GDP. There are three reasons why such a high rate is a problem.
Evidence on how bad the problem of misallocation is in China is mixed. One way to think about this is to ask what the current return is on capital. If a lot of investment is going into areas where it is not used productively, then profits will be hurt.
PESSIMISM OF OVERCAPACITY: Against the backdrop of increasing pessimism, such evidence of overcapacity is fueling talk of an imminent crisis. Even so, the troubles of individual sectors do not tell the story of the whole economy. Stepping back to look at industry overall, profit margins continue to hold up relatively well. There has been no repeat of the margin compression of 2009, let alone a return to the despair of the late 1990s, when overcapacity and investment misallocation in state-owned industry forced a wholesale restructuring. Similarly, there has been only a small decline recently in the returns firms generate on capital. And, unlike in previous downturns, there has been no industry-wide spike in inventories. Indeed, there are a couple of reasons to believe growth may stabilize or even pick up a little in the short term. Credit is still expanding at a 20 percent annual rate and there are tentative signs this is finally feeding into stronger activity. Meanwhile, the government has signaled it intends to keep growth above 7 percent and has announced some targeted measures to boost spending. We expect policy makers to do more over coming months and years to steer the economy onto a new path. While this will be a healthy development, it almost certainly means that the pace of growth will slow further. One important feature of the slowdown so far is that, although it has been led by weakening investment, this has still not been enough to pull down investment’s share of GDP. As long as investment remains the main driver of growth, the risks will loom large. |
08-06-13 | CHINA | 6 - China Hard Landing |
US BUDGET - Everyone Hates Sequestration, But Few Can Agree On What to Cut The GOP's Entire Budget Strategy Collapsed Yesterday, And Almost No One Noticed 08-01-13 BI House Republicans' latest fiasco confirms the suspicion: The GOP loves the Paul Ryan budget in theory, but even Republicans can't get it to work in practice. That was the result of a seemingly nonchalant debate over a bill to fund the Departments of Transportation, and Housing and Urban Development, which blew up in House Republicans' faces on Wednesday. The THUD bill was, well, a thud, and it was pulled from the House floor amid the realization that it did not have close to the 218 votes of GOP support it needed. Republicans couldn't garner the votes while abiding by their standards — billions in cuts on top of the levels of spending under sequestration. House Majority Leader Eric Cantor said that the House will return to appropriating the bill after Congress' August recess. But a furious House Appropriations Committee Chairman Hal Rogers said that was "bleak at best," and other GOP sources said there's little chance of that, as well. What happened here? This bill to fund the THUD served as Republicans' starting point in negotiations with Democrats. The GOP used the Ryan budget — which it passed more than four months ago — as a blueprint for the cuts they would need to make. But the problem with Ryan's budget is that it works in abstractions, and is never binding. And Republicans learned that, for the sake of saving face while going back to their districts, the heavy cuts projected in the Ryan budget just weren't workable. In a scathing statement, the normally measured Rogers blasted his colleagues.
That last sentence is what Democrats have been saying since sequestration took effect in March. Predictably, House Democrats seized on the news, with Budget Committee ranking member Chris Van Hollen using Rogers' statement as proof of validation for Democrats. Talking Points Memo's Brian Beutler explains how this latest failure could affect the coming battle over the fight to fund the government with a complete continuing-resolution bill:
Republicans passed the unspecific outlines of the Ryan budget earlier this year, because they look good in abstraction. But when it comes to specifics, the knife cuts too deep. Meanwhile, the Senate will move Thursday to the next step in its version of the THUD bill. |
08-06-13 | US FISCAL | 9 - Global Governance Failure |
OBAMACARE - A Flawed Public Policy Implmentation America: Where Hard Working, Productive Members Of Society Pay For The Health Care Of Everyone Else 08-04-13 Michael Snyder of The Economic Collapse blog via ZH Everybody in America wants health care - but most Americans seem to want someone else to pay for it. In the United States today, the way that our system works is that the hard working, productive members of society pay for the health care of everyone else. At least under socialism everyone gets the same benefits. Our system of health care is a very twisted version of socialism where millions upon millions of very hard working people are forced to pay for the health care of others, but often can't afford to purchase decent health insurance for themselves. Personally, I don't have a big employer paying for my health care so I have to buy it myself, and I just got a letter from my health insurance company telling me that I have another massive rate increase coming up. Have you gotten a similar letter? Health insurance premiums are going up all over America, and this is just the beginning. In fact, the CEO of Aetna says that health insurance rates for many Americans will double when the major provisions of Obamacare kick in next year. It would be bad enough if hard working Americans just had to pay for their own health insurance. But no, they are also expected to pay for the health care of members of Congress, employees of the IRS and other federal agencies, state and local government employees, their adult kids (because they can't afford health insurance), the elderly, the poor, and now under Obamacare they will also be expected to subsidize the health plans of tens of millions of other Americans that are not poor enough to qualify for Medicaid. When you add it all up, the hard working, productive members of society are at least partially subsidizing the health care of well over half of all Americans while having to pay for their own health care at the same time. Needless to say, it isn't too hard to see who is getting the raw end of the deal. Members of Congress certainly don't want to pay for their own health care. There was panic in the halls of Congress recently when they started realizing that due to certain provisions in Obamacare they may soon be forced to pay for their own health insurance plans. There was widespread moaning and complaining about how they would be facing "thousands of dollars in additional premium payments" every year. Things got so bad that Barack Obama got personally involved in the effort to find a solution. Thankfully, members of Congress can relax because a ruling is being issued that will allow the federal government to continue to subsidize 75 percent of the cost of their health plans...
And the IRS, which has been put in charge of imposing the rules of Obamacare on all the rest of us, is freaking out about the fact that some members of Congress would like to force them to personally participate in Obamacare...
The following are some excerpts from a letter that the union that represents IRS employees sent to members of Congress...
This is just shameful. If the IRS is going to impose Obamacare on the rest of America, then it should be good enough for them too. Just check out acting IRS chief Danny Werfel begging for employees of his agency not to have to go on Obamacare... But we have always had to at least partially subsidize the health plans of federal, state and local government workers. The big change under Obamacare is that we will soon be subsidizing the health plans of tens of millions of our fellow Americans. CNN says that 26 million Americans will be eligible for health insurance subsidies, but others believe that the true number is far, far higher than that. For example, according to CNBC, a family of three in New York that earns $78,120 a year would be eligible for a subsidy of more than five thousand dollars...
So who pays for that? You and I do through our tax dollars. And if you can believe it, Obamacare actually provides an incentive to not work too hard, because if you make too much money you could lose your health insurance subsidy...
What a perverse system. And of course Obamacare will allow young adults to stay on the health insurance policies of their parents until they reach 26 years of age. As I mentioned the other day, 36 percent of all young adults in the 18 to 31 age bracket are currently living with their folks. In most of those cases, the parents have to end up footing the bill for health care because the kids simply cannot afford it. Medicaid continues to expand as well. Certainly helping the poor is a very good thing, but unfortunately the number of poor just continues to explode. Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. Right now, there are more than 56 million Americans on Medicaid, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls. It is going to take a whole lot of money to support 72 million Medicaid patients. And then of course there is Medicare. When Medicare was first established, we were told that it would cost about $12 billion a year by the time 1990 rolled around. Instead, it actually cost the federal government $110 billion in 1990, and it will cost the federal government close to $600 billion this year. But if you think this is bad, just wait until all of the Baby Boomers retire. It is being projected that the number of Americans on Medicare will grow from a little bit more than 50 million today to 73.2 million in 2025. By then, we would be spending well over a trillion dollars a year on Medicare. As you can see, under Obamacare the vast majority of all Americans will have their health care at least partially subsidized. And it expected that our tax dollars will somehow be enough to pay for all of this. The truth is that we have a deeply broken system. Costs are spiraling out of control and nobody is quite sure how to fix things. The following statistics come from one of my previous articles entitled "50 Signs That The U.S. Health Care System Is A Gigantic Money Making Scam"... -This year the American people will spend approximately 2.8 trillion dollars on health care, and it is being projected that Americans will spend 4.5 trillion dollars on health care in 2019. -The United States spends more on health care than Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia combined. -If the U.S. health care system was a country, it would be the 6th largest economy on the entire planet. -Back in 1960, an average of $147 was spent per person on health care in the United States. By 2009, that number had skyrocketed to $8,086. The sad thing is that many hard working Americans in the private sector are being forced to subsidize the health care of others, but they can't even afford decent health care for themselves. For example, I know of one hard working couple that has a health plan that has a $1,000 deductible. Even with that deductible, their health insurance premiums are absolutely ridiculous. Their health care strategy is simply to avoid going to the hospital or visiting a doctor as much as possible. And of course health insurance companies make money by providing as little health care as possible. Many Americans have discovered that when you need them the most, some health insurance companies will try to get out of covering you any way that they possibly can. The reality is that just because you have health insurance that does not mean that you are "covered". According to a study that was published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of all personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved people that actually did have health insurance. So what is the bottom line? The bottom line is the system stinks, and Obamacare is going to make things a whole lot worse. |
08-06-13 | US PUBLIC POLICY | 9 - Global Governance Failure |
HOUSING - Household Formation Drives Residential Real Estate Record 21 Million 'Young Adults' Now Live With Their Parents 08-02-13 PEW Research via ZH Just about a year ago we questioned the "demographic demand" thesis for why the US housing 'recovery' would become self-sustaining and lead to yet another fiscal and monetary 'nirvana'. However, while the 'household formation' meme remains front-and-center among bloviating Fed apologists; the sad facts are that not only is household formation actually still falling but, as a recent Pew Research study finds, a record 21 million young adults are now living at home with their parents. Since 2007, young adults have grown increasingly likely to live at home. This is a new trend with a stunning 45-year high 36% (21 million) of 18-31 year-olds back with mom-and-pop. By way of corollary, with one-third of all Italian adults living at home (and 61% of young-adults), it would seem arguing that a housing renaissance in the US is around the corner on the basis of demographics is risible at best. Household formation is falling among the young adults (a new trend)... as 18-31 year olds continue to be forced to move back in with their parents... But as we warned 10 months ago, there is massively more room for this to increase... as we see in Italy, it can get considerably worse...
So with mortgage rates up, household formation down, and the rotation from full-time to part-time jobs, we suspect the exuberance priced into a 'housing recovery'-based growth renaissance is as unlikely as Ron Paul becoming the next Fed Head. |
08-06-13 | INDICATORS CATALYSTS RESIDENTIAL REAL ESTATE |
15 - Residential Real Estate - Phase II |
EMPLOYMENT - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery Low-Wage Jobs Bias Continues to Hamper U.S. Recovery 08-05-13 Bloomberg Brief Economic data last week revealed the economy is plodding along at sub-par pace, incapable of engendering a solid pace of living-wage job creation. The Bureau of Economic Analysis estimates the U.S. economy advanced an annualized 1.7 percent in the second quarter, or a lowly 1.4 percent over the last year. This has traditionally raised recession alarms; since 1948, anytime the year-over-year pace has fallen this low, the economy has entered recession within three quarters. Low wages and incomes will probably continue to stymie household spending and business investment, and impede the recovery efforts. The economy’s weak path is consistent with findings in the Bloomberg Orange Book and its associated Orange Book Sentiment Index, which was at 49.26 during the week ended August 2 — the twenty-fifth consecutive sub-50 reading for this indicator. The economy added 162,000 jobs in July while the unemployment rate slipped a tenth of a percentage point to 7.1 percent. While these numbers were considered favorable by some pundits,
Even with the seemingly improved headline figures, the underlying jobs trends remain disheartening:
The risks to economic expansion are definitively to the downside since the slightest blow to the consumer or business sector would push growth rates of real GDP, incomes, and spending even lower, thus ensuring recession. |
08-06-13 | MATA AO8 RECESSION |
US ECONOMY |
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - August 4th - August 10th |
RISK REVERSAL | 1 | ||
JAPAN - DEBT DEFLATION | 2 | ||
BOND BUBBLE | 3 | ||
EU BANKING CRISIS |
4 |
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SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] | 5 | ||
CHINA BUBBLE | 6 | ||
SOUTH KOREA - Korean Peninsula a Black Swan Possibility A Korean Black Swan? 08-04-13 John Mauldin Last week I was in Newport, Rhode Island, at the Naval War College, where I participated in a summer study group focused on possible futures and how they might affect the strategy of the US Defense Department. The discussions were wide-ranging and mind-expanding, at least for me. As readers know, I believe that Japan has begun a long-term process of continually devaluing its currency. For reasons I have written about at length in previous letters, I think the yen could go to 200 to the dollar in the next five years. I don’t see a precipitous move, simply a steady erosion as Japan tries to bring back inflation and export its deflation. While the yen at its current valuation is not a particular problem for the rest of the world, when it One of the countries that I think is put into a most difficult situation is South Korea. Their options Protectionism will have little real effect vis-à-vis Japan. Remember that the Japanese yen was 357 Honing their competitive edge may also be the only real option for South Korea. But it is not an Now let’s shift our focus to North Korea. Everyone (including your humble analyst) is worried A side conversation at the study group began with an observation by a senior officer about the How capable is the North Korean military of actually mounting an offensive when their soldiers are While there is little ability for the North Korean population to actually stage a revolution, as they There were not many people forecasting the collapse of the USSR in 1987. Yet as we look back, the confluence of causes that resulted in its collapse seems rather obvious. Probably, the current If that were to happen it would be a humanitarian disaster. In the long run it might be better for the No matter how positively you would want to view Korean unification, the process would be And this could happen while the attention of South Korea is focused on dealing with the I’m not saying this will happen, but it is a possibility we need to keep an eye on. |
08-05-13 | RISK GEO- POLITICAL SIGNALS |
8 - Geo-Political Event |
TO TOP | |||
MACRO News Items of Importance - This Week | |||
GLOBAL MACRO REPORTS & ANALYSIS |
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US ECONOMIC REPORTS & ANALYSIS |
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CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES | |||
Market Analytics | |||
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VALUATIONS - Shiller PE of 24X Historically Signals An Approaching Top Can It Get Any Better Than This? 08-04-13 John Mauldin To many investors:
This kind of news would normally point to prosperity across the real economy and call for a celebration – but prices do not always reflect reality. Moreover, the combination of high and rising valuations, low volatility, and a weakening trend in real earnings growth is a proven recipe for poor long-term returns and market instability. Let’s take the S&P 500 as an example. It returned roughly 42% from September 1, 2011, through August 1, 2013, as the VIX Index fell to its lowest levels since the global financial crisis. Over that time frame, real earnings declined slightly (down about 2% through Q1 2013 earnings season), while the trailing 12-month price-to-earnings (P/E) ratio jumped 44%, from 13.5x to 19.5x. That means the majority of the recent gains in US equity markets were driven by multiple expansion in spite of negative real earnings growth. This is a clear sign that sentiment, rather than fundamentals, is driving the markets higher. Of course, the simple trailing 12-month P/E ratio can be misleading at critical turning points if you are trying to handicap the potential for long-term returns. For example, the collapse in real earnings during the global financial crisis sent the S&P 500’s trailing P/E multiple through the roof by March 2009. So, while trailing P/E is a useful tool for understanding what has already happened in the market, the “Shiller P/E” is far more useful for calculating a reasonable range of expected returns going forward. This approach won’t help you much with short-term market timing, but current valuations have historically proven extremely useful in forecasting long-term returns. In his book Irrational Exuberance (2005), Robert Shiller of Yale University shows how this approach “confirms that long-term investors – investors who commit their money to an investment for ten full years – did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well-advised, individually, to lower their exposure to the stock market when it is high … and to get into the market when it is low.” As you can see in Figure 6, compared to the more common trailing 12-month P/E ratio in Figure 5, the Shiller P/E metric essentially smooths out the series and helps us avoid false signals by dividing the market’s current price by the average inflation-adjusted earnings of the past ten years. \ Historically, this range has peaked and given way to major market declines at around 29x on average (or 26x excluding the dot-com bubble), and it has bottomed in the mid-single digits. Not only does today’s Shiller P/E of 24x suggest a seriously overvalued market, but the rapid multiple expansion of the last two years in the absence of earnings growth suggests that this market is also seriously overbought. John Hussman helps us keep current valuations in historical perspective:
While it may be impossible to accurately predict when this policy-driven market will break, history suggests it would be very reasonable for the secular bear to eventually bottom at a P/E multiple between 5x and 10x, opening up one of the rare wealth-creation opportunities to deploy capital at truly cheap prices. Some of these technical details are rather dry, but I hope you'll focus on the main idea: We are not talking about the potential for a modest 20% to 30% drawdown in the S&P 500. If history is any indication, we are talking about the potential for a 50%+ peak-to-trough drawdown and ten-year average annual returns as bad as -4.4%, according to the chart above from Cliff Asness at AQR. Such a result would fall in line with somewhat similar deleveraging periods such as the United States experienced in the 1930s and Japan has experienced since 1989. There is no way to sugarcoat it: too much equity risk can be unproductive and even destructive in this kind of economic environment. |
08-05-13 | ANALYTICS FUNDA-MENTALS VALUATIONS
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ANALYTICS |
PROFIT MARGINS - Revenue Recession and Eroding Operating Profits S&P 500 Profit Margins Plunge To Three Year Lows 08-03-13 Zero Hedge That S&P500 revenues are contracting for the second quarter in a row (i.e. a revenue recession) is by now well-known even to CNBC. This is just as we predicted in June of last year, because in a world devoid of growth capital expenditures (and judging by the amount of train, plane and other crashes lately, maintenance capex as well), there can be no organic growth. What, however, may come as a surprise to the market cheerleaders (who unknowingly, or knowingly, are merely cheering Ben Bernanke's magic bubble blowing machine, see final chart) is that that other key component of bottom line improvement, profit margins, are not only not at record highs contrary to what conventional wisdom may incorrectly believe, but have been consistently sliding for three years now, and while earnings margins are 'only' back to June 2011 levels at 8.7%, it is the far more critical Operating Margin which has tumbled in the past two years after peaking in Q3 2011 and is now back down to 8.4%, a level not seen since mid-2010. In other words, absent aggressive levered stock buybacks (which are virtually over with rates rising once again), the S&P500 EPS would now be in free fall. Don't worry though, just like in 2010, 2011, and 2012, there is a hockeystick for that. As the Goldman chart below shows, one just needs to believe in unicorns and that maybe, finally, this time things will simply surge higher just because the Fed wishes them to. What is even more disturbing is that a few more quarters of contraction and margins will slide right back to the levels last seen during the past peak of 2006-2007, when companies still had millions of full-time workers they could fire or simply replace with part-time equivalents. This time around, they don't have that gross profit-boosting luxury. And with interest rates once again rising, the benefits from refinancing corporate capital structures at ever lower rates are now forever gone. Of course, the charts above are completely irrelevant, as is all fundamental information in a centrally-planned world, as long as the one all important chart remains. The one shown below. |
08-05-13 | ANALYTICS FUNDA-MENTALS VALUATIONS STUDY REVENUE / OPERATING MARGINS
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ANALYTICS |
COMMODITY CORNER - HARD ASSETS | PORTFOLIO | ||
PRIVATE EQUITY - REAL ASSETS | PORTFOLIO | ||
AGRI-COMPLEX | PORTFOLIO | ||
SECURITY-SURVEILANCE COMPLEX | PORTFOLIO | ||
THESIS Themes | |||
2013 - STATISM |
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2012 - FINANCIAL REPRESSION |
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FINANCIAL REPRESSION - Manipulated Illusions
Manipulating Bad Financial DataBad government policy has created a years-long unemployment problem. But instead of fixing the problem, the government is trying to paper over it. We’ve known for a long time that the Bureau of Labor Statistics fudges the numbers to make unemployment look lower than it is really is. BLS itself has admitted that its “adjustments” skew unemployment data during recessions. Indeed, the former head of the BLS recently said BLS statistics are B.S. … and that unemployment is much higher than the government is letting on. The Bureau of Economic Analysis is revising 84 years of economic history … which will make the economy magically look better. The U.S. and British governments encouraged interest rate manipulation. And central banks have been directly manipulating interest rates for hundreds of years. Government agencies have helped banks manipulate commodities prices for decades. The government twisted statistics and intentionally lied when it pretended that the banks it was bailing out were solvent The government has long ignored energy and food prices when reporting on inflation. Fraud is Wall Street’s business model, which is – unfortunately – being supported by the government. The government helped cover up the crimes of the big banks, used claims of national security to keep everything in the dark, and changed basic rules and definitions to allow the game to continue. See this, this, this and this. It is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.Here are just a few of many potential examples:
Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith’s, definitive study of the Great Depression, The Great Crash, 1929:
Manipulating Bad Nuclear FactsWhen the Fukushima nuclear plant melted down, the government didn’t announce that these antiquated nuclear designs which were common throughout the United States were dangerous and needed to be scrapped. Instead, American (and Canadian) authorities virtually stopped monitoring airborn radiation, and are not testing fish for radiation. The U.S. government increased allowable radiation levels so that we could be exposed to radiation. The U.S. government pressured the Japanese government to re-start its nuclear program, and is allowing Fukushima seafood to be sold in the U.S. And U.S. nuclear regulators actually weakened safety standards for U.S. nuclear reactors after the Fukushima disaster. And the U.S. government has been covering up nuclear meltdowns for 50 years. Manipulating Oil Spill InfoWhen BP – through criminal negligence – blew out the Deepwater Horizon oil well, the government helped cover it up (and here). As just one example, the government approved the massive use of a highly-toxic dispersant to temporarily hide the oil. The government also changed the testing standards for seafood to pretend that higher levels of toxic PAHs in our food was business-as-usual. Manipulating Data on Other Environmental IssuesThe Bush administration covered up the health risks to New Orleans residents associated with polluted water from hurricane Katrina, and FEMA covered up the cancer risk from the toxic trailers which it provided to refugees of the hurricane. The Centers for Disease Control – the lead agency tasked with addressing disease in America – covered up lead poisoning in children in the Washington, D.C. area. The government also underplayed the huge Tennessee coal ash spill. As the New York Times noted in 2008:
(The former head of the National Mine Health and Safety Academy says that the government whitewashed the whole coal ash investigation.) And the government allegedly ordered Manhattan Project scientists to whitewash the toxicity of flouride (flouride is a byproduct in the production of weapons-grade plutonium and uranium). As Project Censored noted in 1999:
Manipulating Food Safety DataThe government’s response to the outbreak of mad cow disease was simple: it stopped testing for mad cow, and prevented cattle ranchers and meat processors from voluntarily testing their own cows (and see this and this) The EPA just raised the allowable amount of a dangerous pesticide by 3,000% … pretending that it won’t have adverse health effects. In response to new studies showing the substantial dangers of genetically modified foods, the government passed legislation more or less pushing it onto our plates. Manipulating Health Safety DataWhen one of the most respected radiologists in America – the former head of the radiology department at Yale University – attempted to blow the whistle on the fact that the FDA had approved a medical device manufactured by General Electric because it put out massive amounts of radiation, the FDA installed spyware to record his private emails and surfing activities (including installing cameras to snap pictures of his screen), and then used the information to smear him and other whistleblowers. After drug companies were busted for using fraudulent data for drug approval, the FDA allowed the potentially dangerous drugs to stay on the market. Manipulating Metrics for WarThe U.S. has drastically underestimated the amount of innocent civilians killed by drone, and repeatedly announces that it has just killed some terrorist that it had previously reported killing. When USA Today reporters busted the Pentagon for illegally targeting Americans with propaganda, the Pentagon launched a smear campaign against the reporters. When the American government got caught assassinating innocent civilians, it changed its definition of “enemy combatants” to include all young men – between the ages of say 15 and 35 - who happen to be in battle zones. When it got busted killing kids with drones, it changed the definition again to include kids as “enemy combatants”. After the U.S. congratulated the government of Yemen for killing Al Qaeda terrorists within its country – but a Yemeni journalist photographed the scene, discovering that the U.S. had fired a cruise missile to make the kill, and that children and other shepards will killed, instead of Al Qaeda – president Obama insisted that the journalist be indefinitely detained to shut him up (he was also tortured). Al Qaeda was labeled as the main enemy in the War on Terror. But now Al Qaeda and other terrorist groups have somehow become our close allies. They have somehow become the “good terrorists” which we are using to fight our enemies. Indeed, groups are listed as official “terrorist” organizations and then de-listed to suit the convenience and ambitions of particular U.S. political leaders. Indeed, the U.S. literally labels others as terrorists when they do exactly what we do (although no one does it to the extent we do). The Core ProblemCorruption at the top leads to lawlessness by the people. But – while conservatives blame the government for our problems, and liberals blame big corporations – the core problem is the malignant, synergistic intertwining between the two.
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08-05-13 | THESIS | |
2011 - BEGGAR-THY-NEIGHBOR -- CURRENCY WARS |
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2010 - EXTEN D & PRETEND |
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THEMES | |||
CORPORATOCRACY - CRONY CAPITALSIM | |||
GLOBAL FINANCIAL IMBALANCE | |||
SOCIAL UNREST |
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CENTRAL PLANNING |
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STANDARD OF LIVING |
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CORRUPTION & MALFEASANCE | |||
NATURE OF WORK | |||
CATALYSTS - FEAR & GREED | |||
GENERAL INTEREST |
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Tipping Points Life Cycle - Explained
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