Saturday, January 31, 2015


I read an article on der Spargel's website this weekend that included this:

The dispute between Berlin and Paris was of a fundamental nature -- a conflict between two mentalities, but also between two schools of economic thought. Whereas the Germans were of the opinion that the supply side had to be strengthened and conditions for investment improved through reforms, the French called for buttressing the demand side. In times of recession, the French argued, the state must invest.

Although the Germans called it savings, a term with positive connotations, across the rest of Europe, many considered it to be the specter of "austerity," a cold-blooded, anti-growth policy. "The Body Economic: Why Austerity Kills," a book by Oxford Professor David Stuckler, has become a kind of bible for opponents of austerity. It's a brand of thinking that really hasn't taken hold in Germany, even though it is dominating the public debate in large swaths of Europe. It also shows just how far apart the Europeans really are from each other, despite being linked by a common currency.

By "brand of thinking" they mean "empirically verified economic theory", y'know.

I guess Kruggers must read der Spargel too, because he just came out with this:

Paul Krugman - I keep saying that Keynesian economics is right but the Germans won't listen. Wherein he says:

I’m scrambling on last-minute course prep, so not much blogging today. But yesterday’s Steve Rattner article, misuse of labor cost data aside, had me thinking about an issue that has had me annoyed ever since this crisis began: the constant efforts on the part of Very Serious People to turn discussions away from monetary and fiscal policy, recessions and sluggish recoveries, to the supposedly more fundamental issues of structural reform and long-term growth. Rattner dismisses the austerity/stimulus debate as “simplistic”; Jeff Sachs calls Keynesian concerns “crude”; many, many people (I’d guess an especially large fraction of those at Davos) are eager to get away from all this deflation stuff and talk about how what they imagine to be, or wish were, the really important issues like Big Data and a world that’s even flatter.

There were people like that during the Great Depression too — dismissing as naive any notion that you could put the unemployed back to work just by spending more, and surely technological unemployment was the real story, and anyway we should be looking at the broad sweep of history and institutions, right?

The Merkel smackdown alarm is sounding....

Second, more or less Keynesian macroeconomics — the macroeconomics of short-run fluctuations driven by aggregate demand — has worked very well in this long slump. While people were very seriously intoning that it was simplistic and crude to think that those little models could be of any use in a changing world yada yada, macroeconomists were making remarkable, counterintuitive predictions — about inflation (or the lack thereof), about interest rates, about the effects of austerity — that came true and were, if you think about it, an intellectual triumph. Yes, good macro tends to be simple, at least conceptually; but simple and simplistic aren’t the same thing, and by and large people who solemnly declared that things are more complicated than that ended up with lots of egg on their faces.

Oh cripes! He breaks out the nuclear weapon of empirical truth!

Merkel smackdown in 3, 2, 1...

Third, what’s really striking about all the talk about how long-run structural issues are the real thing is how fuzzy the thinking is. In a world that is short of demand, how, exactly, is structural reform that enhances the supply side (if it does) supposed to solve the problem?


If Europe’s problem is lack of competitiveness, why doesn’t a weaker euro solve it — and for that matter, why is Europe as a whole, and Germany in particular in trade surplus? For people who are supposedly so serious, the Very Serious seem remarkably casual about thinking things through.

Sometimes it takes a professor to sufficiently mock the fuzzy thinkers.

But of course Germans are famous for their thick skulls and bullheadedness, so don't expect them to clue in and thence save Europe for... I dunno, at least another ten years?

Or until, yet again, they leave Europe as a smouldering ruin with millions dead and millions more starving.

So here's some weekend news

Here's some weekend news, including several links especially for new commenter Tim Harrington:

Calculated Risk - real Q4 GDP at 2.6%. However, PCE increased at 4.3%, and there was even a 0.3% decline in prices paid which means an improvement in real income. The damage was done by a 1% drop in trade (which you already expected, right?) and yet another drop in government spending, which conservatives want anyway so what's the problem?

Calculated Risk - there is no problem. Quote:
Residential investment (RI) increased at a 4.1% annual rate in Q4. Equipment investment decreased at a 1.9% annual rate, and investment in non-residential structures increased at a 2.6% annual rate. On a 3 quarter trailing average basis, RI is moving up (red), equipment is moving sideways (green), and nonresidential structures dipped a little (blue).

Note: Nonresidential investment in structures typically lags the recovery, however investment in energy and power provided a boost early in this recovery.

I expect investment to be solid going forward (except for energy and power), and for the economy to grow at a solid pace in 2015.
So quit piddling your frilly pink panties and buy the damn S&P 500.

Bespoke - most negative revisions since the depths of the financial crisis. However, importantly, you and the rest of the market already bloody well know this and have already sold everything off accordingly, so:
the spread so far this season is much worse than any of the other negative spreads seen in recent years. It looks like either companies were caught way off guard or they are throwing in the towel on 2015. Looking on the bright side, though, this gives the market a big opportunity to surprise on the upside.
Or, of course, you could just keep piddling your frilly pink panties as the market corrects a whole damn 5% lower from here. Oh god won't that be horrible! A 5% loss! Sorta like owning B2Gold for a whole day!

Bonddad - just how strong is the US economy? Well, how's about we check the data instead of the clickbait crap from Business Insider? Household debt to GDP continues to go down, consumer spending has constantly been improving, gross private domestic investment has constantly been improving, the four primary coincident indicators remain positive, and the LEIs are still positive. There is nothing here to worry about. Nothing.

Calculated Risk - restaurant performance index is awesome. It's only a minor indicator of discretionary spending, but it's the best it's been since 2004, and so confirms everything else above. Panties, frilly pink (n): quit piddling them.

Reuters - Mastercard beats expectations as customers spend more. But I would like to point out that MA is down 2% since AXP reported their earnings. Why? Because Wall Street Whitey keeps looking for reasons to sell. He's forgotten that MA has gone up by 270% over the past 5 years, which is triple the return of SPY and far better than AXP. Probably because Whitey pays too much attention to bullshit hype from Ray Dalio, who has significantly underperformed the S&P 500 over the past 5 years, though of course he still gets to charge 2%/20% to all the suckers who let him throw their money down the fucking bottomless hole that is his fucking executive compensation.

And by the way, our swarthy deep-voiced investor friend with the supposedly-private RSS feed says the employment and credit growth data out of Japan suggest their economy is about to accelerate.

Reuters - EU wins Greek backing to extend sanctions. Contrary to the gloating Soviet-funded pro-Putin propaganda at Zerohedge,
According to Italy's foreign minister, Kotzias announced to the meeting: "I am not a Russian puppet."
which makes Kotzias a hundred times more principled than the insider-trading Soviet-funded son of a Bulgarian secret service agent who ran an article suggesting Greece was about to leave the EZ and join the Soviet sphere of influence. Who's a Russian puppet, Danny? That's right, you are! - consensus 2015 gold forecast is down. Yeah? And yet, how many of these guys predicted that gold would ding $1300 in January? I mean, I know I did, I know I told you all to buy, but apparently the LBMA doesn't consider me to be a significant enough "gold analyst" to include me in their little survey. So I guess we can just ignore them.

Geekologie - gay dinosaur erotica available on Amazon. With titles like Gay T-Rex Law Firm Executive Boner and My Billionaire Triceratops Craves Gay Ass, you've just got to admit you've now heard every single utterable sequence of words in English and will have to learn a new language before you can continue the adventure of life. Note to all you banksters reading my blog: feel free to click through, the link is certainly safe for work!

Friday, January 30, 2015


I was looking at horrible charts today, and took at a gander at Keek:

Corporate anti-violence policies: a primer

Those of you who are professionals working at large corporations probably already know this, but just to be sure:

As long-time readers know, I used to work at an S&P-listed engineering consultant. Anyway, every HR and Legal department in Canada (and maybe at least the more enlightened parts of the US, I'm not sure) has been spending the past few years churning out document after document of policies and practices meant to stop the company from getting their honky ass sued.

In my corporation's case, all we had to do was sign a form saying that we read them - that was a big sticking point with me, because (after consulting with my brother, who's been a senior managing engineer himself) I knew that simply having an employee's signature on a form is worth nothing: you have to have proof that he's read and understood it. (In my office, I had to spend about 2 weeks just to read through all the forms.)

One that we had was a corporate anti-violence policy. It addressed all the usual stuff - threatening behaviour, racism, sexism, bullying, dealing with the public e.g. at demonstrations, violence outside the office, and so on.

Well, one section that I remembered dealt with "violence" (term always broadly used in this policy) from clients.

I remembered it because we had a project where we were a subconsultant to an American engineering company whose lead project manager (let's just call him "Steve") was threatening and rude to staff at our office. He never hit anyone, he'd only call over the phone, but he was definitely one of those bosses whose behaviour was well over the line. One of our staff quit partially because of him, and there was also a secretary who disappeared from our office after the project ended who was said (I got this from the boss) to have thereafter brought a suit against us (I wasn't told the reason).

So I was very interested when a couple years later I saw that our corporate anti-violence policy said the following (not quoting verbatim, remember they laid me off):

When any employee is faced with violent, aggressive, discriminatory or threatening behaviour from a client, it must be reported immediately. Our company's management shall:

1) immediately stop all work on the project,
2) inform that threatening person's supervisor that our company will no longer perform any work for that client unless they immediately remove that individual from any contact with our company.

Now this is engineering. You do not stop work on a project, period. But, I guess there had been sufficient problems with clients - or at least enough lawsuits, cos you know it's the lawyers that ultimately draft policy documents - that my company felt they had to institute this policy.

Given the recent newsflow, I'd just like to remind all the banksters reading this blog that they do, most likely, have a corporate anti-violence policy, they signed off on it, and they should go familiarize themselves with the damn thing in case, y'know, they get punched by a client.

Saudis told us they were going to break the price of oil in 2012.

I've been following my blog stats these past couple days, making a list of all the financial services corporations who've been coming here looking for Clive Johnson news, and noticed someone hitting on an old post of mine from 2012:

this blog - oil will go to $60 or lower. says who? the Saudis.

Huh! Who woulda thunkit, eh? Here's a quote reprinted from the original article:

“… you have to understand our geo-political equation and vulnerability. Our two most dangerous enemies are Iraq and Iran. Both are Shia, and both are trying to destabilize the Arab world and our Sunni kingdom by funding terrorism. Our only weapons against them are our wealth and our oil. Their current vulnerability is their financial fragility. Their financial reserves are a fraction of ours, and they desperately need money to prop up their economies. The ruling council has decided that over the next two years we have a brief window of opportunity to impoverish and weaken them by driving down the price of oil. Iraq and Iran need to produce and sell their oil at well over one hundred dollars a barrel. In the next twenty four months, we will gradually increase our production with the objective of breaking the price of crude down to sixty dollars a barrel. Aramco is raising its capacity to produce significantly more crude. Note that at the same time Iraq, Russia, and Libya are already increasing their exports, and Iran and Venezuela also need to sell more. Strategic reserves in the consuming countries all over the world have been topped out, and large amounts of oil are stored in tankers.”

“… we have the wind at our backs because of Europe’s problems and the weak global economy. Under normal recessionary circumstances, we would be reducing production to maintain current prices. Instead, we will be flooding a weak market already suffering indigestion.”

Whether or not the quote is believable is up to you - it was unattributed. However, if you can see it being true, then you should quit fucking piddling your panties about an imminent recession and global economic collapse.

Peter Brandt still doesn't impress me

Peter Brandt - major eruption ready to occur in global markets. Euch. Look how he starts off:

I have for several weeks and months maintained that the NYSE Composite will be the bell-weather for U.S. stocks. It has the clearest chart picture. The NYSE Composite is forming a near textbook continuation H&S pattern. The key upside levels are indicated on the chart. An upside penetration of these chart levels will usher in a sustained advance in U.S. equity prices.


It should be noted that this exact price configuration has produced giant price advances in the past. Charts of Gold and the DJIA are shown as examples.


OK, right there he's already made four mistakes.

1. The NYSE Composite (nowadays, at least) includes a large number of non-equities. It is its own beast, part bond and part equity. Don't try comparing it to things, you'll get burned.

2. He then compared a 6-month consolidation in the NYSE with an eighteen year consolidation in the DJIA.

3. Oh and the 18-year Dow consolidation had a fundamental basis that the 6-month NYSE consolidation doesn't.

4. And anyway, the H&S is not a continuation pattern.

I like the other things he says in the post, and can see a fundamental basis for thinking them, but as far as TA goes this just makes me shake my head.

Cam Hui with a great post on commodities

Humble Student of the Markets - on the commodity downturn. He addresses commodity definancialization, and Isabella Kaminska's argument that USD strength indicates withdrawal of US liquidity to the world which results in commodity collapse, I guess.

Supply and demand theory, when applied to currencies in this way, really makes me feel uneasy. Part of the reason is that US economic strength correlates positively with a strong US dollar, so sure US dollar strength means excess demand for USD but it doesn't mean the rest of the world is entering a depression.

Though yes, EMs correlate positively with commodities, so sure the EMs will be entering a secular bear market, partially because they make money exploiting commodity production and partially because they need cheap US capital to subsidize growth and (I keep harping on this) Jim Rogers came up with all that ten years ago so it's not exactly news.

And yeah, some other smart guy also just posted that he thinks all the negative EZ and Japan news is baked in, so we should expect upside surprises to global growth this year from the developed world, who after all are the biggest chunk of the world economy. And I'd add that China is not an emerging market anymore.

Still, this post is a great read and will hopefully foster a constructive frame of mind re commodities, so do please go read it.

It's still all about The Clive

Blog stats:

Seriously, don't all you analysts have any real work to do?

I mean, a bunch of crappy juniors just announced dilutive financings! Aren't you supposed to be flogging those worthless stocks to all your big-shot clients?

Friday videos: again with the new york noisecore revival

Here's Autodrone:

Remind me more of Band of Susans more than anything else, I'd say.

Thursday, January 29, 2015

Wow, something of note from the Fraser Institute

Financial Post - low rates are the new normal. Michael Walker is a senior fellow at the Fraser Institute, so you'd expect him to cynically spew fascist right-wing propaganda advocating the enslavement of the working class and the handing over of the country to the kleptocratic elites.

But instead, he writes this:

The false hopes and predictions of economists arise from the application to current circumstances of a model about economic behaviour that was built for a period of history that had a very different structure. All of the models and most of the theory behind them were built for an epoch of history – the first two thirds of the 20th century — in which brisk population growth was a constant. While some model architects knew that constant population growth was necessary for the models to work, none of the current users seem to grasp it.

Why does population growth and its fluctuations matter for interest rates? Because it determines the relative number of (net) savers and borrowers in the population of a country. Young people are generally borrowers. Middle aged and old people are generally savers. The relative number of savers and borrowers and the size of their need for one or the other have a determinative impact on the market for loanable funds.

It is a very intriguing theory, and he supplies a nice table that shows that average interest rates for countries with different age/population makeups. So there's correlation backing him up. Which is weak in itself, except that demographics is an overpowering force in economics.

Then again, I'd like to know how much of the supply of loan capital comes from "old people" as opposed to the capitalist oligarchs, banks and corporations.

Because, after all, ultra-low interest rates and transfixion at the zero bound might all just be the end-point of Piketty's r>g.

Maybe you should run a second analysis to see if there's any correlation between a country's 10Y rates and, say, the percentage of national wealth owned by the 1%?

Let me know when you put your paper out, Mike: I'll be at university then, and will certainly want to read it so I can write an essay on it and/or mock it openly. Hopefully it's a serious paper and the profs will let me take it seriously.


Financial Post - fisticuffs, blood at TD mining conference. Good, that should make it more memorable. Quote:

People who were there claim that Johnson was acting in a manner that Earle thought was not appropriate. In essence, Earle — who according to Bloomberg research, doesn’t cover the company (that’s done by his colleague Steven Green) — told Johnson that he should settle down a bit.

That message was something that Johnson allegedly wasn’t keen on hearing. As one witness claimed: “Dan said something to Clive who retaliated with a choke hold on Dan. The crowd broke up the initial altercation. Clive went back at him, threw a couple of punches which didn’t connect. Dan took a couple of shots, which very much connected to Clive’s right eye. His glasses were broken and Clive was bleeding.”

This witness added that after those two punches, the fight was broken up. The witness further claimed: “About 10-15 minutes later, Dan went to leave, Clive went after him but was restrained by staff at the restaurant. You expect that behavior from a bunch of 19-year olds not the CEO of a public company.”

Another witness alleged: “Clive sucker punched Dan twice in the face, Dan retaliated after the second one.”

What do the various parties say?

Reached by email, B2Gold’s Clive Johnson said, “there was a misunderstanding which was resolved. It was not business related.”

And TD said it was “aware of the incident. This is an internal matter and we are taking appropriate steps to address it.”

Damn right they're aware of the incident! I got 300 hits from TD alone today. Frankly I think they need to institute some sort of internet usage policy at that office. Probably should block my website too. I mean, I post videos of Ukrainian pole dancers.

As for Dan "The Hammer" Earle? Give the guy a raise for fuck's sake, TD. You didn't fire him for that disastrous fucking Canaco reccie, you shouldn't fire him for this.

HOW HARD IS IT TO STOMP A MUDHOLE IN CLIVE JOHNSON? here's what you need to know!

Here's all the news that's not fit to print:

Calculated Risk - weekly initial unemployed claims drop to what, now? Since that doesn't fit the "OMG deflation sell sell" narrative, expect it to be spun for a new "OMG the Fed will raise early sell sell" narrative.

Simon Wren-Lewis - dear journalists, quit pretending Conservatives are good for the economy. Yeah, forget it, doc. The media will always spin the "no, really, Conservatives don't destroy economies!" story. Because who owns the fucking media?

IKN - how Daniel Earle stomped a mudhole in Clive Johnson's ass and walked it dry. Aw god, Clive! You got spanked like a naughty little schoolgirl by a mining analyst. One who used to like Canaco for fuck's sake! The gossiping fishwives of the junior mining world are already all over this story, too: you don't want to see how many thousands of hits I got for that post.

So I guess we can expect you to be replaced by one of your underlings for the PDAC presentation, Tuesday at 2:40PM? - here's how metal-eating bacteria will make asteroid mining possible. Yeah, Cecilia, I'm really sure they figured out how to make bacteria survive without atmospheric pressure or water. Because those abilities would definitely have been evolved here on earth. Not gonna see their innards spontaneously explode. Pull the other one.

Charts of miners that suck™

Well, gold's decided that the big runup is completed, and so it's going to go back down for a while. Was that the end of the January pop? Or do we get another 50% pop before PDAC as usual?

I'd have to think this wasn't the end of it, except that all the hedgies apparently went long gold, and they're usually the last suckers in.

Anyway, here's some junior gold charts that have suddenly exhibited a stink:

 Not horrendous yet, there's worse.

 Asanko's cliffdiving. You think they'll be able to close the CAD$2.02 bought deal now?

Like I said, there's a big magnet at $2.20 for all those who are underwater BTO, which is everyone who bought since August 2010.

Did these guys announce a financing too? I feel smarter having sold at $2.35.

Oh well. I'll keep my fingers crossed for a second bounce - I came across an old post from last year and it turns out there was another mini-crash just like this in the last week of January 2014 too.