Friday, November 27, 2015
Well, QQQ and SPY have already recovered from recent dooooom, and $TRAN is close behind.
So here's the last US index to begin its move back to previous highs:
Maybe this is the liftoff of a Xmas bull run?
It's simultaneously the greatest and worst video of all time:
Wednesday, November 25, 2015
Growth economics blog - describing the decline of capital per worker. Hey, here's an idea: maybe the decline in capital investment is a rational response to the obvious end of government investment in public capital?
Cuz why would you bother to invest in new plant and machinery when you know that 30 years from now the United States is going to have devolved into a medieval theocracy with dirt roads where there used to be an interstate system?
I'm only saying.
at 1:36 PM
Did my polisci presentation yesterday, so now I'm done most of my work til the finals.
Here's some news:
Calculated Risk - chemical activity barometer stabilizes. So is that the end of the industrial recession?
Bespoke - jobless claims at 260k. So there's no imminent dooooom, then?
Calculated Risk - personal income and PCE. So can we stop puking the S&P now, please?
Simon Wren-Lewis - economists and political capture. Quote:
Why is it necessary to repeat once again what is a consensus position among most economists? Alas there are powerful political interests within the Eurozone that want to foster an alternative narrative, which sees every country like Greece. This erroneous narrative has already done great damage, creating a second recession from excessive fiscal tightening and insufficient monetary easing across the Eurozone.Keep it up, Simon! Maybe one day people will listen to reason instead of the banksters. Haha no seriously.
It is natural at this point to talk about Germany, and the fact that as a result of low wage increases undercutting Eurozone neighbours before the recession, Germany is not suffering as much from this recession as other countries. But I have often tried to avoid stopping there, and instead to ask whether Germany's strange stance on these macro issues simply reflects this different conjunctural position. I think the answer is no.
I'm increasingly drawn to the view that Germany's stance reflects similar political economy pressures as you will find in other OECD economies: there is no German exceptionalism, but rather that the forces that everywhere are pushing austerity and tighter monetary policy happen for various reasons to be stronger in Germany. From this perspective, this post from Frances Coppola is particularly interesting. Perhaps the problem at the heart of the Eurozone is that economic policy advice in Germany has been effectively captured by employers' interests, and perhaps the interests of banks in particular.
Tuesday, November 24, 2015
Here's some reading and stuff to keep you occupied:
New Deal Demoncrat - one long-term indicator changes to yellow. He's worried about mortgage rates. Though to be fair, if rates are still very low compared to the past 50 years, and there's a global savings glut that will keep mortgage rates pinned for decades, then how likely is it really that there is anything to worry about?
FT Alphaville - David Keohane laughs at Izzy Kamizzy. Another story about India's fantastic gold monetization scheme and its one pound take. Hey, why wouldn't you want to earn 2% on gold? Maybe because you're being paid in rupees, and gold is the perfect hedge against rupee currency risk? Anyone living in India is already long rupees by virtue of their location: why would you sell a hedge and go double-long rupees?
Jeffrey Kleintop - India is the fastest growing economy in the world. Unfortunately, with a BA in Business Admin, an MBA and a CFA, he obviously never learned about long-term determinants of productivity, else he would flag in his article that India has a massive infrastructure deficit that is proving impossible to solve. Hey, Jeffy! How does an economy manage to continue growing when it's impossible to move goods?
Mining.com - hedge funds can't exit gold market fast enough. Yay! They dumped 368 tons of gold in the past three weeks and drove the price all the way down to $1065! Go shorter gold, guys! Do it! Dump another 1000 tons! After all, you'll never have to buy it back!
Sunday, November 22, 2015
Here's some stuff to read today:
New Deal Demoncrat - weekly indicators. Broad economic measures look fine, while industrial measures still stink. Which is what you should expect, no? Speaking of which, I wonder if there's an "industrial recession" if measured in quantities of goods instead of in dollars. Is the veil of money getting in the way, here?
The Krugginator - the expansionary austerity zombie.
Larry Summers - on lower productivity growth and disemployment (pdf). While he admits at the start that productivity isn't one of his areas of expertise, he has nevertheless stimulated a lot of discussion in the macro world.
Personally, I think the "mismeasurement" thesis is utter bullshit: consumer surplus is entirely theoretical, and if you can't measure it with money then it doesn't exist. And we are measuring it with money in a lot of places: boarding passes on cellphones mean a lower price for providing air flight service. 2015 American medical care (to the extent you're not black) means longer lifespans, higher worker productivity, and more consumption. Price indices don't overstate inflation, they are inflation - the only way they're not is if you've invented some new thing to take the place of money.
Things simply don't happen in economics if there's no money changing hands, Larry. If you reject that, then you're going to have to address the feminist economic critique brought by Marilyn Waring 30 years ago, and we know you won't enjoy that given how much you hate women.
Krebs on Security - ISIS Jihadi help desk. Yeah, I saw the ending coming.
Friday, November 20, 2015
Here's some Friday night news:
LA Times - this el Nino will be most powerful on record. As long as I don't have to suffer through another fucking deep freeze, the millions threatened by drought can go fuck themselves.
Martin Wolf - corporate surpluses are contributing to the global savings glut. So you know what you should do? Let the government tax retained earnings away, and spend that money on public capital. Either that or slip into a new dark age. I know which choice the plutocrats will go for.
Reuters - Modi's gold deposit scheme has attracted one whole shiny pound of gold so far. And no, it's not because they don't have enough assay labs or refineries. It's because it's not meant to take in gold, it's meant to be a subsidy program for banks.
BI - Bill Ackman's lost 24.5% this year. So why do people continue to listen to this idiot, if he can't even outperform the S&P 500 index?
Wednesday, November 18, 2015
Accuweather - winter 2016 will be warmer than usual across Canada.
Northern Ontario Travel - oh fuck off, Farmer's Almanac.
I would really like it to not be a fucking hideous polar deep freeze this year.
BI - this is what happens when you get your Fed commentary from a website of idiots.
I'm not linking to it because of any contribution from Akin Oyedele, because he's just some idiot with a BA in journalism so he shouldn't be expected to make any intelligent contribution whatsoever.
I'm linking to it because the Fed saw fit to include a discussion on the world real interest rate, r*.
What the hell is r*?
Well, it's a theoretical variable that doesn't actually exist in the real world, which forms the basis of things like the Mundell-Fleming open economy model. Basically, it's the theoretical world real interest rate upon which all other interest rates depend.
And the Fed says right in their minutes that they think it's interesting r* has been negative for ages, and doesn't look like it'll ever not be negative again. Quote:
With respect to longer-run trends, the staff noted that multiyear averages of short-term real interest rates had been declining not only in the United States, but also in many other large economies for the past quarter-century and stood near zero in most of those economies. Moreover, economic theory indicates that the equilibrium level of short-term real interest rates would likely remain low relative to estimates of its level before the financial crisis if trend growth of total factor productivity does not pick up and if demographic projections for slow growth in working-age populations are borne out. Finally, the staff discussed the implications of uncertainty about the level of the equilibrium real rate for using estimates of short-run r* as a guideline for appropriate monetary policy.
This is fucking huge. It means the Fed has finally caught up with reality and are possibly about to change their opinions about very important things. Here's just one of the problems they're now going to be paying attention to:
A lower long-run level of r* would also imply that the gap between the actual level of the federal funds rate and its near-zero effective lower bound would be smaller on average. A smaller gap might increase the frequency of episodes in which policymakers would not be able to reduce the federal funds rate enough to promote a strong economic recovery and rapid return to maximum employment or to maintain price stability in the aftermath of negative shocks to aggregate demand. Some participants noted that it would be prudent to have additional policy tools that could be used in such situations.
I'm going to leave writing any more about this, because I'm only just learning Mundell-Fleming right now, and anyway I still have to polish off my essay. But I can damn well guarantee you that I'll be giving you some links in the next couple days to proper economists who will be explaining just what's so important about the Fed discovering that r* < 0.
In any case, you can be damn fucking sure no hedge fund clown understands the first thing about Mundell-Fleming.
Still not finished my essay, but I have about 4 of 10 pages written, so the rest should fall in line today. It's due at 11:59PM, and late papers are only docked 2%/day in this modern world because nobody wants to hurt the precious snowflakes.
I only really settled on the thesis last night: it's a comparison of cultural realist and post-structuralist interpretations of Samuel Huntington's "Clash of Civilizations" thesis as an explanatory tool for the Russia-Ukraine conflict. I was originally going to write it about the US-Islam conflict instead, but a) recent events and b) I had too many notes on the Islamic bit, while the Ukraine bit is more interesting and c) the Islam slant is too damn easy.
Anyway, here's some news:
New Deal Demoncrat - industrial production only sucks in oil and mining. More invaluable commentary from NDD.
FT Alphaville - if you can be short dollar when all men doubt you. Good god damn, that's going to be a heck of a monster when it unwinds. Now hey, long USD-short EM equity/short commodity/short EM FX is certainly a brainless trade, but that doesn't mean it's so simple that it could accommodate every hedge fund cokehead with a psychosis about how clever he is.
And then they remind us that Fed minutes are coming today at 2PM. Yay!
NYT - which socialist philosopher said government must tax the indolent rich and spend on roads? Well, no other than Adam Smith!
FT Alphaville - the world has a multi-trillion dollar accumulated current account deficit. And the only explanation is that the world's ultra-rich, from the Russian mafia and Latin American politicians to the wealthiest corporations, has accumulated a multi trillion dollar current account surplus, which they've now squirreled away in every private bank in the world.
And guess what? Since that money hasn't been invested in private capital, and since these paleoconservative robber barons demand that governments don't spend the money on public capital, there is thus no possibility for long-run world economic growth in the aggregate. Sorry, neocon criminals, but Y = aF(K,L,[...]).
That is why you need to tax the rich and spend the money on highways and education, assholes. The alternative is to slip into a new millenium-long dark age.
Tim Taylor - why more humanitarian aid should be given in cash. This is actually a well-understood principle within the humanitarian movement already; it's just that the idea leaves the bureaucrats out in the cold.
And since it's Xmas coming up and some people actually care about this charity kind of stuff, I'll let you know that you yourself can give directly to the poor just by going through something like givedirectly.org. It feels more like an Xmas present, and given the insane difference in price levels between our world and the poor world it packs a huge bang for the buck. That $50 you were going to spend on a tie for some asshole would go really, really far in Burkina Faso.
Tuesday, November 17, 2015
I've got an essay to finish, so bugger off.
Bloomberg - debt market distortions go global as nothing makes sense anymore. It's weird enough to freak out Michael Shaoul, and maybe it was one reason for the recent market insanity. Personally, I think if swaps are priced stupidly right now, that's because some hedgefund cokehead plopped half a trillion OPM into a market too small to mop up that size move. Let him get fucking burned. It's not going to destroy Western civilization, just his idiot clients, and they've already taken too much money out of the capitalist system:
Another potential problem is that inverted swap spreads may ultimately cause investors and borrowers to lose confidence in the bond market’s ability to correctly price risk and provide capital to those who need it, according to Steve Major, head of fixed income research at HSBC Holdings Plc.Well, Steve, maybe the problem is that there's no longer enough debt to mop up all the cash out there, and this is what it looks like as the cup finally runneth over. How's about you quit demanding that your governments cut spending, and start rewarding investment in productive capital for once in your fucking lives?
“The role of the bond market is to provide funding at the right rates for the real economy,” Major said. “That’s why the bond market exists -- to help efficiently finance projects, businesses etcetera. If that efficiency is undermined, it’s not going to be a positive thing for the economy.”
Mining.com - Rick Rule just called the bottom on the miners. No really, he did:
With regards to precious metals and precious metals equities, I’m going to go out on a limb and say I think we’ve bottomed.And actually, he has some good points:
The high point in concentration in precious metals and precious metals equities occurred between 1980 and 1981, at the top of that great super cycle in precious metals.Yup, if nobody's owning right now, then maybe they will have to some time in the future?
About 8% of investible assets in the United States at that time were in precious metals or precious metals equity.
The same measurement today is .3%. The median and mean over the last three decades is between 1.5% and 2%. So in order for precious metals and precious metals equities allocations to get to the three-decade mean, they would have to go up 6-fold as a percentage of the total investible assets in the United States. So there is an awful lot of room to the upside.
Then again, most of that drop from 8% to 0.3% wasn't a drop in share allocation, Rick. It came from the stocks dropping 95%.