Saturday, September 26, 2015

Some Saturday news

Here's some news, then it's off to either doing homework or avoiding doing homework:

Gavyn Davies - financial conditions for the Fed. The main takeaway is that exogenous conditions alone have
resulted in a reduction in US GDP growth of 0.5 per cent (year on year); and this drag will increase to 0.8 per cent by 2015 Q4.
However, the Fed members (or at least the ones who aren't idiots) determine when to raise based on its expectations of where things will be going a year from now.

Calculated Risk - Q2 GDP revised upward to 3.9%. But you go ahead and keep dumping stock based on some supposed coming armageddon, Whitey!

US BEA - the Q2 GDP NR. Here, let's quote some stuff:
The increase in real GDP in the second quarter primarily reflected positive contributions from PCE, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
Is that good? Well, why don't you ask some clown with a doomer blog somewhere to explain it to you?

New Deal Demoncrat - new home prices psf show an affluent-centred market, not a bubble. They still aren't building homes for poor people.

The Krugginator - Chinese spillovers. K-dog goes into some basic international trade economics to 'splain how even a 5% drop in Chinese GDP wouldn't be a world-shaking event and therefore Willem Buiter should quit piddling his frilly little pink girl-panties. He includes a picture of a giant New-York-destroying tsunami as a hat-tip to Business Insider who would never publish any insightful opinion from anyone anyway.

BTW, I would suggest that P-to-the-K should read Joe Stiglitz's Globalization and its Discontents for a boots-on-the-ground explanation of how the 1998 Asian crisis unfolded: in fact, most of the contagion was caused by IMF policies, and now enough people over there have heard of Mahathir Mohamad that they'll be more cautious today in accepting the incompetent bullshit that White-ass honky slave-dealers pass off as "competent advice".

Global Times - NDRC defends credibility of China GDP data. Quote:
A Bloomberg report on August 18 suggested that the Chinese economy was growing more slowly than the official data had indicated, citing a survey it conducted among 11 economists.

The survey indicated that the first half growth rate was 6.3 percent, rather than the official 7 percent, according to Bloomberg.

The NDRC's post on Wednesday dismissed such media reports and surveys as being "too arbitrary."

The NDRC also noted that electricity usage, volume of freight and other goods indexes can not determine whether the Chinese economy is growing more slowly, because the services sector and the pharmaceutical, electronic, telecommunications and high tech industries account for an increasing proportion of the Chinese economy.

Zhong Dajun, director of the Beijing Dajun Institute for Economic Observation, also said that measuring China's economic growth just by looking at energy consumption and other "old economic indexes" is not accurate.

"As China's economy is moving toward being more high-tech and energy-efficient, those indexes we used before can't draw a full picture of the economy anymore," Zhong told the Global Times Wednesday, adding that the official GDP data was "reasonable and accurate."

However, Zhong noted that for a country "as large as China, and with an economy as complex as China's, it's normal that economic statistics have a margin of error."

Xu Hongcai, an expert at the China Center for International Economic Exchanges, said it is true that energy consumption, exports and some other indexes are falling, but booming industries such as e-commerce and the services sector should not be overlooked.

"As China continues to optimize its economic structure, we need to look at it differently," Xu told the Global Times on Wednesday.

"We should also look at the new industries and take new technologies and innovations into account," Xu said.
With the caveat that of course the Chinese government would say this. Still, I'd rather hear opinion on China data from the mouth of a proper economist who actually compiles and analyzes data, instead of from some coke-snorting hedge fund kleptocrat who once read an article on BI about the "Li Keqiang index".

I would link to a Jim O'Neill article, but my opinion on him has gone downhill now that he works for that douchenozzle crypto-Nazi with the eminently-punchable face, George Osborne. Don't ever come back to Manchester, Jim: they won't want you now that you're a traitor.

Chronicles of Brodrick - OMG gold chart breakout!!!!1! Uh, no, Sean. At best all you can say is the brutal downtrend of the summer has slowed. Up/down volume bars still look fucking horrible.

Friday, September 25, 2015

CONGRESS JUST LOST ITS BOEHNER: yeah I couldn't stop myself

WSJ RTE - new economic uncertainty on loss of Boehner.

Yeah I couldn't help myself.

As for the government shutdown bugaboo, it's yet another arrow in the quiver of the market permadoomers. I'm bored. None of the Republican presidential candidates is going to want to have to explain why their idiot party shut the DMV down. Between them they have enough power to beat the mouth-breathers into line.

I have no prediction on how this will affect the dong, though.

GDX chart - interesting


GDX has been banging into the SMA(50) for the past month, then falling back. And the SMA(50) is a magical TA line with mystical properties.

There's been nice volume down at this level too. GDX and the miners now have a bunch of new holders who are in at a lower price, and that's good for the market in gold miner stocks.

My own oogity-boogity rule is that the third time something happens, it'll end differently than the first two times.

It might be a great place to get into GDX if you think the miners are done crashing!

On the palpable sense of fear, and the goldbugs' great hope

I haven't bothered to give my readers the links, because I don't like wasting their time, but there's been a palpable sense of fear in the market commentary recently: not just from the doomer end of the spectrum (Business Insider), but even at places like Financial Times.

Let me summarize the various theses:

1. Blah blah China slowdown worse than they will admit. As if even only 5% growth in China, with higher growth of the consumer sector, is a bad thing for the rest of the world.

2. Blah blah China currency outflows, despite the Chinese central bank already having told us that all that's happened is they've moved some of their US reserves to the banking sector.

3. Blah blah worldwide recession imminent. No really. The neocons demand contractionary policy worldwide and then they bitch about the recession they've caused.

4. Blah blah S&P 500 earnings recession. Yes, with 3.9% revised Q2 GDP and no signs of economic slowdown in the US, as you'll know because I have been giving you that data.

5. Blah blah China stock market crash - and indeed $SSEC did crash, all the way back to where it was this February. Wake me when it actually does something.

6. Blah blah Shiller P/E. No, seriously, they're trotting that old pony out again.

7. Meh, I dunno. Bunnies. Bond market liquidity crisis. Whatever.

Now, if the S&P 500 dropped as the manifestation of those palpable fears, instead of as a result of VaR models, you'd have to ask yourself where is that money flowing to, right?

And in fact if the world was worried about some systemic crisis driving the US into a recession or justifying lower equity valuations, you'd think there would be a money inflow into some, I dunno, more traditional store of wealth? Y'know, something that can't drop 50% like a stock market can? Something you diversify into, that (as Ben Bernanke said) acts as a hedge against fat tail risk?

Like, maybe, some shiny yellow metal of some sort?

No honky cracker inflow into gold means there's no real fear of anything anywhere. This has all been one great big VaR model hiccup.

I'm sure if there was a real crisis, gold would spike to $1500 quickly, considering Whitey just finished emptying out the entire Western market and dumping it into the laps of the Indians and Chinese. Then all you goldbugs will make a fortune on your gold miners.

You probably will anyway, longer-term, but don't expect Josh Brown's latest tantrum to signify the beginning.

Friday videos: Dum Dum Girls

Wow, it's 1984 again.

Seriously. Someone track down Alan McGee's few remaining brain cells and let them know it's 1984 again.

Wednesday, September 23, 2015

5.6 million fingerprints stolen

Yahoo - China just stole 5.6 million fingerprints. Quote:

The Obama administration says the fingerprints of 5.6 million people who applied for or received a federal security clearance were stolen — not 1.1 million as first believed.

That sobering news comes from the Office of Personnel Management, the federal personnel agency whose data was hacked in what officials believe was a Chinese espionage operation.

An estimated 21.5 million current and former federal employees or job applicants were affected in a data theft that experts say will give Chinese intelligence a huge leg up in recruiting informants.

You can damn well bet I'm sending this article to my company's "privacy officer", along with a letter along the lines of "this is why I told the PM to go fuck himself when he demanded I apply for US security clearance to design fucking roadway lighting for a residential street beside a fucking duty-free plaza".

I'll then add "maybe the project managers shouldn't demand fucking security clearance for every single fucking project team member listed in the RFP whenever we work on a stupid fucking US-Canada border project, considering the Chinese secret police now have all your employees' fingerprints."

"Are the bankers evil or stupid?" HOW ABOUT BOTH - the argument for higher rates: are the bankers evil or stupid? Yes:

An unexpected rise in the inflation rate is clearly harmful to banks' bottom line. This will lead to a rise in long-term interest rates and loss in the value of their outstanding debt. This is very bad news for them.

While we (the three of us) can agree that such a jump in inflation is highly unlikely in the current economic situation, it is not zero. Furthermore, a stronger economy increases this risk. If we assume that the banks care little about lower unemployment (they may not be bothered by lower unemployment, but high unemployment is not something they wake up every morning worrying about), then they are faced with a trade-off between a greater risk of something they really fear and something to which they are largely indifferent. It shouldn't be surprising that they want to the Fed to act to ensure the event they really fear (higher inflation) does not happen. Hence the push to raise interest rates.

I truly am stunned that K-dog doesn't get this.

We learned it in first year Intro Macro.

From a textbook by Greg Mankiw for the love of Christ!!!

Anyway, there is a second point to make, one more sociological and less first-year-microeconomics-y:

I suspect also there is a strong desire to head off any idea that the government can shape the economy in important ways. There is enormous value for the rich to believe that they got where they are through their talent and hard work and that those facing difficult economic times lack these qualities.

Any government intervention in the economy is Keynesian socialism for these guys.

Any intervention in the economy, that is, other than cutting taxes, banning unions, abolishing the minimum wage, eliminating laws and defunding regulators. Oh and establishing charter schools and closing universities and demanding forced transvaginal ultrasounds.

As an addendum, the academics need to remember that the Fed is forever associated in everyone's mind with fractional reserve banking, which is one of the perennial bugaboos of the John Birch Society and young-earth economists.

Europe's flow of migrants is economic good news - uh, if they let it be good news, that is

BI - Credit Suisse explains why the flood of economic migrants to Europe is a good thing. Quote:

"In the short term, it should add to economic growth," says the note. "The multiplier of public outlays required to house, feed and otherwise provide for asylum seekers is roughly equal to one. Fiscal expenditure could thus add 0.2pp-0.3pp to [euro area] GDP growth next year."

The multiplier is good news as that money would go directly back into the economy instead of the savings accounts of consumers and businesses.

"[A]ll money spent on migrant's basic necessities is likely to fully find its way back into the economy."

The multiplier is greater than one, actually, but whatever.

It's also good news because the EU's continued economic depression is being caused by a glut of saving, exacerbated by misguided cuts in government spending - exactly what you need to do to turn a crash into a decades-long depression. Spending a few tens of billions of euros on good deeds for the landless will provide just a little bit of stimulus, but still enough to make Europe's situation slightly less dire.

But it gets better:

The bigger contribution, however, is in the long-run impact on the labor market of the continent.

Europe's population is getting older, notably in Germany and Italy, increasing the number of retirees that rely on public benefits to live. Since the taxes of the working population help fund these services, the "dependency ratio" of elderly to working age is increasing.

"When it comes to potential GDP growth, European demographics are partly to blame for the subdued outlook," said the note. "The European Commission (EC) estimates growth will average 1.1% over 2015-2023, and this is partly due to the very subdued labor input contribution which the Commission estimates stands at a mere 0.2pp."

Migrants, say the analysts, could be the solution.

"Adding young migrant labor to the aging workforce in Europe pushes up its long-term growth potential," said the analysts. "More than three-quarters of migrants are of working age and thus provide a boost to labor supply in the potential growth estimates."

Based on their analysis, the contribution of labor to potential output growth for the euro area will double from 0.2% to 0.4% annually on average from 2015 to 2023, raising potential output from 1.1% annual growth to 1.3% annual growth.

Suddenly the Europeans will have a young workforce who can pay the taxes needed to fund their generous pensions.

Of course, that doesn't work if you strand them all in concentration camps in a shithole like Orban's Hungary: the migrants need to go where their earnings potential will be highest, like Germany.

And, of course, they need to be treated like human beings with labour rights, not used as pawns to suppress German wages. Which is what the Germans will probably do.

So good for you, Credit Suisse! You've presented the most persuasive argument for Germans taking in a million refugees: it'll make them wealthy. Because that's all that Germans ever care about. We can tell this because despite all the blather about Merkel being a sweetiepie, they've still instituted border controls this week.

Here in Canada, of course, we took in a quarter million European refugees after WWII - that was well over 1% of our population at that time. That included loads of Italians, Yugoslavians, Dutch, Lithuanians and Hungarians in my city, for example - and all of them contributed well to building our country. It worked out quite well for us.

BILLY BISHOP'S BACK! Here's what you need to know

Sinocism - hi, I'm finally posting again. He's moved to Washington and finally restarted his blog, so our #1 news source for intelligent China commentary is finally back. Quote:

We missed a lot, from the popping of the stock market bubble and the RMB revaluation to the now widespread belief that China’s policymakers are far less competent than assumed. I do not remember sentiment towards the leadership and the economy ever being this bearish in the ten years I lived in Beijing. I do think the negativity is a bit overdone but clearly the challenges are massive and something has broken in the policymaking process.

Perhaps Xi does not actually have the bandwidth to be in charge of everything, and/or perhaps renewed study of dialectical materialism, creation of an atmosphere of paralyzing uncertainty and a campaign of de-Westernization are not conducive to managing a modern economy? Or, as some of the more bearish argue, the place is such a mess that there is nothing they can do in the short-term?

Yeah, or alternately, perhaps white-ass honky cracker hedge fund dolts and their puppets in the lamestream media don't know the first damn thing about China and you should simply ignore them from now on?

I've been using a "China Doom 201X" tag on this blog for the past four years, y'know.

Let's check in on glorious Europe, shall we?

Haven't posted charts in a while, let's do some of that now.


Yup, them swarthy Mediterraneans are so corrupt and unproductive that their market has gone down 30% in a year. If only they'd behave more like Anglo-Saxons.


Yup, them cheese-eating surrender monkeys are also in a 20% bear market since last summer. That's what you get for refusing to submit to German economic orthodoxy. Yay capitalism, boo sociamalism!

Meanwhile just check out the superior performance of David Cameron's glorious UK:

Wait, what's that? UK has also been in a 20% bear market since last summer? B...b...but they're not sociamalist, are they? Doesn't the UK have a fabulously productive economy? I mean, they kill poor people and expel refugees and everything, don't they?

Germany, the land of killing people by poison gas:

Wow! Another 20% bear market!

Gee, it's almost as if Europe's German-led omnipresent fiscal tightening in the face of continent-wide economic depression has gotten them absolutely nowhere for 18 months now! I'd feel sorry for the investors, if it were not for the fact that it's only Republican government-hating wackaloons who have been investing in Europe for the past year.

That's what you get for hating Keynes, bitches!

Tuesday, September 22, 2015

MICKEYMAN VISITS A "CHINESE GHOST CITY": you won't believe what happened next!

World Complex - Zhengdong New District: is it a ghost city? Here's what you need to know! Far as I'm concerned, if smarmy self-important honkies are still blathering on about "ghost cities" then they don't live in China: both Mickeyman and Billy Bishop have been calling bullshit on that idea for years now.

Far as I'm concerned, anyone with a clue already knows that a big headwind for emerging market development is capital investment: a central planner is wise to look ahead five years and build the needed structural capital well ahead of time, or else his country turns into India, where lack of physical capital will forever doom the nation to low productivity.

Not centrally planning makes it even worse: your cities turn into a chaotic slums.

Even if there's some excess build that turns out ten years from now to have been a waste, it will probably still cost less than the future opportunity cost incurred by not building enough today. Mainly because the future value of present build is, in a growth environment, always going to be exceedingly higher than PV.

But Whitey doesn't know that because he's still got his head up the ass of the classical economists.

A bit more news

Some more stuff:

Reuters - Volkswagen shares plunge on emissions scandal. The company has finally admitted that they were breaking the law and committing fraud: if you read this article between the lines, it seems reasonable to assume the change in tack was demanded by Sigmar Gabriel, or the German government more generally.

WSJ - US faces construction worker shortage because they hate Mexicans. A whopping 570 thousand Mexican construction workers have gone home and aren't interested in returning. I guess Whitey is going to have to learn how to frame and lay brick himself, eh? That's the free market, bitches!

Brad DeLong - another Fed official with his head up his ass: Lacker. DeLong mocks Lacker for being perpetu-wrong about interest rates since the beginning of time. He's therefore one more Fed official whose pronouncements in the gutter press can be ignored from now on, because there's no way in hell Yellen is going to take his idiot opinions into account. Though of course the permahawks in investment banking will always insist Lacker is the true genius.

John Cochrane - is the Fed "suppressing" interest rates? Again with the disproof of the idiot blogosphere idea that the Fed "suppresses" rates: as a matter of fact, they've spent the past several years keeping them artificially high. Quote:
Is the Fed in fact "holding down" interest rates? Is there some sort of natural market equilibrium that features higher rates now, but the Fed is pushing down rates? That's the conventional view, clearly expressed in Mary's questions.

Well, let's think about that. If a central bank were holding down rates, what would it do? Answer, it would lend a lot of money at low rates. Money would be flowing out the discount window (that's where the Fed lends to banks), to banks, and through banks to the rest of the economy, flooding the place with low-rate loans. The interest rate the Fed pays on reserves and banks pay to borrow from the Fed would be low compared to market rates; credit and term spreads would be large, as the Fed would be trying to drag down those market rates.

That is, of course, the exact opposite of what's happening now. Banks are lending the Fed about $3 trillion worth of reserves, reserves the banks could go out and lend elsewhere if the market were producing great opportunities. Spreads of other rates over the rates banks lend to or borrow from the Fed are very low, not very high. Deposits are flooding in to banks, not loans out of banks.
Or you could listen to the clown who learned everything he knows about economics from Russian-funded disinformation agents like Ron Paul and Zerohedge.

Monday, September 21, 2015

Some news

Had to do a lot of reading this weekend, and now it's back to school, so hopefully this news will tide you over til next I post:

New Deal Demoncrat - weekly indicators. Still no problems. Tax withholding is still indicating a strong US economy, as are gasoline prices, intermodal, and total railloads ex coal.

New Deal Demoncrat - the housing permit surge reappears. Quote:
I'm gratified that the corrected information shows new highs in permits, and that August is still higher than any other month except for the May-June spike. Along with real retail sales per capita and real money supply, this is why I am increasingly confident that our economic expansion will continue through the third quarter of next year.
That's because new housing is a large component of investment, and Y=C+I+G+NX. With real retail sales per capita (C) also up, and NX no longer facing a USD headwind (see below), the only problem left is G, which (wouldn't you know) continues to be attacked by Republican saboteurs. Because they hate America.

Chronicles of Brodrick - about that US dollar "uptrend". There hasn't been one since March. Um, Sean... I think I've been pointing that out since maybe April. But hey, if it's one thing you can be sure of, it's that there'll always be loads of empty space on my bandwagon.

Tim Oliver - half of development-stage NI 43-101 studies lack engineering rigour. I might send this to my own company's mining engineering department - though I'd expect we're not the problem in the industry, given the famous Sudbury-area mining engineering firm we bought out years ago.

Bob Lefsetz - ad blocking. I'd like to note that until I bought a wifi-capable tablet I didn't even know that YouTube had pre-roll ads! Maybe that's due to my desktop having had Adblock Plus, Ghostery and NoScript installed on it since the beginning of time? Wow, you guys have had a really sucky internet experience all this time, haven't you?

BTW, Carl Sagan predicted adblocking... can't find where right now, I think it was in Contact. In his version, a bright audio engineer notes that TV commercials are produced with an extremely high level of audio compression, which is what gives them a loud volume compared to regular programming.

The engineer builds a device (pretty simple to make actually, in theory at least) that, upon detecting audio volume above a certain dBFS, turns the TV sound and picture off and keeps it off til the loud ads are gone. He sells it and makes a fortune. TV advertisers scream blue murder until they realize they could just quit being cunts and turn the ad volume down to normal.

Krugman figgers something out about the dischord between the Fed and commercial bankers re: rate hikes

One reason why K-dog is a genius is that he manages to figure out strange goings-on in economics by referring to sociological theory - and in doing so, he gives us a fantastic way to go contra the herd:

The Krugginator - rate rage. Quote:

OK, I should have seen that one coming, but didn’t: the banking industry has responded to the Fed’s decision not to hike rates with a primal cry of rage. And that, I think, tells us what we need to know about the political economy of permahawkery.

The truth is, I’ve been getting this one wrong. I’ve tried to understand demands that rates go up despite the absence of inflation pressure in terms of broad class interests. And the trouble is that it’s not at all clear where these interests lie. The wealthy get a lot of interest income, which means that they are hurt by low rates; but they also own a lot of assets, whose prices go up when monetary policy is easy. You can try to figure out the net effect, but what matters for the politics is perception, and that’s surely murky.

But what we should be doing, I now realize, is focusing not on broad classes but on very specific business interests. In particular, commercial bankers really dislike a very low interest rate environment, because it’s hard for them to make profits: there’s a lower bound on the interest rates they can offer, and if lending rates are low that compresses their spread. So bankers keep demanding higher rates, and inventing stories about why that would make sense despite low inflation.

I would suggest to K-dog that the ultrarich own stocks not for capital appreciation, but for their dividend flows. Capital appreciation is nouveau-riche.

But still, P to the K nails it on the head. Why were we all deluded into thinking that the investment bankers' calls for higher rates were correct? Why did nobody listen to Kocherlakota? Why do they think Yellen is dumber than some hedge-fund clown?

It's because the bankers want higher interest rates, and they will profit from higher rates even if the rate hike tanks the economy.

Good work, Kruggers! You taught me something! And PS, since I know you read this blog, I will be happy to have you for my thesis advisor at CUNY, provided the CIA lets me over the border (doubtful due to my past terrorist affiliations) and you can find me a $5000/month job (Manhattan is expensive y'know).

Here's a couple more Krugginator articles around the topic, which also go into more general political-economy discussion, which I love because political economy proves mainstream economics to be just a childish fantasy:

The Krugmeister - more on the political economy of permahawkery. Quote:

So we’ve had a long discussion of the distributional effects of QE and all that, which are ambiguous but also, I now realize, irrelevant. Is QE good or bad for capital, for rentiers, whatever? No matter — it’s bad for bankers, because it leads to a compression of the net interest margin, the spread between deposit rates and lending rates. And that is why there’s so much agitation for rate hikes on the part of finance. Furthermore, while I don’t think institutions like the BIS are corrupt in any direct sense, they probably pick up by osmosis from all the bankers they meet the general prejudice against easy money, leading to increasingly baroque attempts to justify rate hikes despite low inflation.

Incidentally, this also means that the common claim that QE is a giveaway to bankers is the opposite of the truth; to the extent that journalists with close ties to bankers spread this story, it’s Orwellian. Remember, the Fed isn’t lending money at low interest to banks — banks, with their $2.5 trillion (!) of excess reserves, are lending vast sums at low interest to the Fed.

and, while we're on the topic:

The Kruggatollah - the receding NAIRU. Yo, K-dog - you think that maybe the plutocratic elite might also be worried about unemployment dropping too low? You think maybe 30 years of inflation-targeting Fed policy based on the Phillips curve might have had the effect of causing working-class wage losses and a falling labour share of income? You think maybe the kleptocrats are afraid of the possibility of an increase in market power for labour?