Saturday, December 12, 2015
New Deal Demoncrat - weekly indicators. Purchase applications, real estate loans, M1, M2 and tax withholding are all positive. Those are the actual US domestic economy, people. Industrial and world economy all suck, but the US is a service economy and a net importer so fuck knows why people get worked up about industrial and commodities.
WSJ RTE - quits and layoffs finally get to where Janet Yellen wants them. I guess the argument is (barring continued commodity collapse) inflation should begin to accelerate with unemployment down to its natural rate, and s/(f+s) gives you some sort of clue where the natural rate is? I'd still say she's probably smart enough to not fuck up the economy, unlike that clown at Stifel who came out this weekend saying "Yellen painted herself into a corner this summer and now she's going to wreck everything". Cos, y'know, one of these two people heads the Federal Reserve, and the other is a fucking sellside retard at Stifel.
New Deal Demoncrat - gas prices already below last year's low. Yes, therefore we should puke the S&P 500, because consumers have more money in their pockets.
WSJ RTE - could higher interest rates lead to higher inflation? I dunno about neo-Fisherism, but I'd like someone to tell me whether a higher Fed Funds rate will increase the cost of holding money enough to drive cash back into investment.
FT Alphaville - India's suspicious GDP deflator. Don't believe the India GDP headlines.
Vox EU - on sub-Saharan Africa's low adoption of high-tech farm inputs.
This was a really interesting study, and I encourage you to go beyond the Vox EU abstract and read the actual article.
African farming has not seen the productivity revolution that has occurred elsewhere in the world; and, summing up, the reason is that all the fertilizer and hybrid seeds available for purchase have been adulterated and diluted to the point that any farmer using them will experience a net loss.
I.e., it doesn't even pay to buy hybrid seeds or fertilizer, because the stuff available in local stores isn't even what it's supposed to be. And all the farmers know this.
Douglass North actually explains why this happens in detail. I've been reading his Institutions, Institutional Change and Economic Performance during exam period. It's very sad that here's yet another pioneering, Nobel-winning economist that I won't even be allowed to study in grad school.
Unless I go into political economy instead of economics.
Well, it's been a couple months now, so I've kinda formed a first impression of Prime Minister Jr.; and I think it's safe to say that so far, he's shocking the hell out of all Canadians.
We've had a decade of a PM motivated entirely by an ideology of selfishness and viciousness, who really left no doubt in anyone's mind that he considered them personal enemies if they didn't march in lockstep.
But now we have a new PM who seems to be following the boring old-fashioned Clark-Trudeau era political ideal of "Canada is a nice country full of nice people who do nice things for people, because it's nice to be nice" - and we really don't know what to make of it. We're reconnecting to old ideals as if for the first time.
It's like eating chocolate after 10 years of bread and water, or a tropical vacation after 10 years in a Siberian death camp.
I'm sure his party will fuck it all up eventually - the old Martin-era mandarins are probably still lurking in the shadows, I don't expect Jr. to whip them all into line (though more power to him if he does beat the kleptocratic fuckers down) - but by the next election, I think the real question will be not whether Jr.'s party did a few bad things, but whether everyone will have forgotten the ten years of malignant hatred that preceded him.
Justin Trudeau's reminding people that the Canadian prime minister (and by extension, Canada) doesn't have to be a cunt. Good for him.
Friday, December 11, 2015
Vox - Finland's experiment in basic income. This is an exciting idea, not just from a redistributive point of view, but even from a traditional (not-stupid) conservative one: if you institute a basic income, then you can eliminate a huge number of bureaucratic jobs dedicated to administering the various programs.
Though I would suggest that Finland monitor consumer staples prices in the pilot project communities: as the poorest end of the spectrum becomes less poor, it seems prices for staples (rent, basic food) skyrocket. Because a limit to these prices (i.e. all the consumers being fucking dirt-poor) gets lifted.
Then again, I expect Finland doesn't have the same kind of abject poverty we have in North America, where people have so little money that they're stuck living on a sack of budget pasta for 2 weeks out of the month, assuming they can carry it home 2 miles from a grocery store, and there are large segments of the population who can't even amass the few dollars' worth of savings necessary to open a bank account.
Personally, I like basic income from an anarchist standpoint: the State should be required to pay citizens bribes for our continued approval.
Simon Wren-Lewis - basic macroeconomics of
[...] for a country with a flexible exchange rate, you will not increase your international competitiveness by cutting domestic wages and prices. The reason is that the exchange rate moves in a way that offsets this change. This is what economists might call a basic neutrality proposition, and there is plenty of evidence to support it. The Eurozone as a whole is like a flexible exchange rate economy. So if wages and prices fall by, say, 3%, then the Euro will appreciate by 3%.
So what happens if just one country within the Eurozone, like Germany, cuts wages and prices by 3%. If Germany makes up a third of the monetary union, then overall EZ prices and wages will fall by 1%. Given the logic in the previous paragraph, the Euro will appreciate by 1%. That means that Germany gains a competitive advantage with respect to all its union neighbours of 3%, plus an advantage of 2% against the rest of the world. Its neighbours will lose competitiveness both within the union and to a lesser extent against the rest of the world.
The point being that the 1990s-2000s German internal devaluation should not have been allowed, if Europe wanted to avoid the outbound capital flows that fueled the property bubbles in the periphery, and the subsequent need for harsh internal devaluation of the periphery that's going on now. If anything, Germany should have made its economy less competitive.
Or, y'know, adopt the fiscal federalism that we see in Canada, where weak local economies receive fiscal transfers from the strong centre in order to balance everything out.
Ha ha ha! As if the miserly Germans would ever agree to transferring their money to the periphery.
I had jotted down somewhere a while ago a note that I should probably read up on "new institutional economics" someday, because I'd come across an article or something that looked interesting. Then I forgot.
Upon reading that Douglass North died, I picked up a copy of one of his books from the university library, and I'm hooked.
Washington Post - Douglass North was a visionary.
And here's a good talk he did, at the FCC and not at any economics conference because economists are scared of him:
With Christmas just around the corner, you've got to ask yourself: What Time Is Love?
KLF doesn't have the answer, but at least they're asking the question:
I think that's Cressida Cauty* in the red dress but it's a little blurry.
* - Long-time readers of this blog know that I can't stop prattling on about Cressida Cauty, mainly just because she seems to have had a freaky awesome life - first in the KLF, now apparently doing research into liver cancer for the love of god. And it turns out a lot of other people care about her, since that link is always (no seriously) one of the most popular posts here - apparently one person a day Googles "Whatever happened to Cressida Cauty".
Wednesday, December 9, 2015
US dollars aren't fiat currency.
They're not because you can use them to pay your taxes. Therefore they have intrinsic value.
Bitcoin, however, is only worth what people will pay for it, and you can't use it to pay taxes. Therefore bitcoin is fiat currency.
Calculon's Rivets - I wear my sunglasses at night. Bill McBride's still not worried about the US economy. Let's go through all his data points, one by one, and I'll simulate a retarded hedge fund MBA crackhead's typical response:
Demographics and household formation suggests starts will increase to around 1.5 million over the next few years. That means starts will probably increase another 40% or so from the October 2015 level of 1.06 million starts (SAAR).
Residential investment and housing starts are usually the best leading indicator for the economy, so this suggests the economy will continue to grow in 2016.
OMG! Residential investment and housing starts are a leading indicator! Sell sell sell!
In 2013, state and local government employment increased slightly, and in 2014, state and local government employment increased by 85,000.
This year, through November 2015, state and local employment is up 70,000. So, in the aggregate, state and local government layoffs are over - and the economic drag on the economy is over. However state and local government employment is still 561,000 below the pre-recession peak.
OMG! The government employment drag on the economy is over! Sell sell sell!
There will be some more deleveraging ahead for certain households (mostly from foreclosures and distressed sales), but in the aggregate, household deleveraging ended more than 2 years ago.
OMG! Household deleveraging ended 2 years ago! Sell sell sell!
The overall Debt Service Ratio has been moving sideways and is near the record low. Note: The financial obligation ratio (FOR) is also near a record low.
Also the DSR for mortgages (blue) are near the low for the last 30 years. This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.
This data suggests household cash flow is in much better shape than several years ago.
OMG! Household cash flow is in better shape! Sell sell sell!
And for commercial real estate, here is the AIA Architecture Billings Index. This is usually a leading indicator for commercial real estate, and the readings over the last year suggest more increases in CRE investment in 2016 (except oil and power with the recent decline in oil prices).
OMG! The billing index suggests more increases in CRE investment! Sell sell sell!
The prime working age population peaked in 2007, and appears to have bottomed at the end of 2012. The good news is the prime working age group has started to grow again, and should be growing solidly by 2020 - and this should boost economic activity in the years ahead.
OMG! The prime working age group has started to grow again! Sell sell sell!
Now, yes it's understandable to get all worked up about rising interest rates. First, most of these hedge fund clowns probably didn't start trading until 2007, so they've never seen a rate increase; second, usually in the past the Fed has raised rates with the explicit intent of pushing the US economy into a recession, so it's understandable traders would be piddling themselves.
But in this case, J-dog is raising rates to end accommodationary policy because she thinks the US economy has made it out of its huge hole and is operating at capacity again. At this point she needs to start moving rates back to a neutral level, otherwise output goes above its natural rate and you start to get accelerating inflation.
And she has data, and as one of the better economists out there she probably likes to read it. And heck, she probably even understands it.
But hedgies are cokeheads, and (as you've probably learned) being a cokehead means having a massive fucking ego, and so all the hedge fund clowns think they're smarter than Janet.
(And of course the peanut-gallery bloggers also think they're all smarter than Janet, because she's full of that Manhattan Jew book-larnin' while these boys have gool ol' Yankee Doodle common sense. And the cokeheads love reading them blogs.)
Monday, December 7, 2015
Here's a good article:
Psychology Today - ISIS and the victim mentality.
It's very easy to butcher and rape thousands when you feel you're morally superior to them. There's no such thing as a "psychopath", just someone who feels their evil is justified.
Every human is a "psychopath" down deep. Religion just provides the justification.
The Krugginator - economic factors and right-wing extremism. Quote:
A few years ago de Bromhead, Eichengreen, and O’Rourke looked at the determinants of right-wing extremism in the 1930s. They found that economic factors mattered a lot; specifically,what mattered was not the current growth of the economy but cumulative growth or, more to the point, the depth of the cumulative recession. One year of contraction was not enough to significantly boost extremism, in other words, but a depression that persisted for years was.How’s Europe doing on that basis?
And now the National Front has scored a first-place finish in regional elections, and will probably take a couple of regions in the second round. Economics isn’t the only factor; immigration, refugees, and terrorism play into the mix. But Europe’s underperformance is slowly eroding the legitimacy, not just of the European project, but of the open society itself.
But K-dog is far too polite to point out that the right-wing plutocrats in Europe have always been okay with Nazism. So don't expect any tut-tutting from the Davros VSPs: they want to enslave the world under the jackboot of totalitarianism.
Calculon's Risk - the endless parade of recession calls. OK, first I enjoyed how quickly he smacked down Citi's idiotic piece:
Also on Friday I posted an excerpt from a Citi's research piece also suggesting a 65% chance of a recession in 2016. [...]
This is just an historical statistical approach based on elapsed time.
Which really is a well-deserved, quick, devastating mocking of a "blah blah secular bulls last X years on average, oh look where we are now, therefore dooooom" call.
Really, truly, nobody should ever pull that "historically..." bullshit unless they (1) have a statistically significant dataset (which nobody has) and (2) can show that there's nothing different going on beneath the surface this time (which there is).
But this next bit concerned me:
Raoul Pal, the publisher of The Global Macro Investor, reiterated his bearishness ... "The economic situation is deteriorating fast." ... [The ISM report] "is showing that the U.S. economy is almost at stall speed now," Pal said. "It gives us a 65 percent chance of a recession in the U.S."
Goddamn it Bill, aren't you reaching awfully hard there? Are there so few bear calls out there that you had to quote a CNBC interview with fruitcake Raoul Pal?
You've never heard of him?
He's Mr. Bottom-Tick himself. Last time he called for doom was June 2012; the market then went up a further 50%.* Grant Williams and John Mauldin use his bullshit to pump to their lemmings. And he lurves pumping that bitcoin.
Bill, just ignore that clown. Your blog is above mentioning that sort of person.
* - it is interesting to note that Gary Wordsalad loves Raoul Pal's bullshit too. Says something about his judgment.
Just... wow. Woke up this morning, tuned in CNBC for my first morning smoke, and saw an ad for gold coins at 7:55 AM.
Either they're having a problem selling ads, or the whole world has gone turvy topsy.
Then again, gold coin ads should be par for the course whenever some Republitard clown like Joe Kernen is on TV.
Anyway, here's a bit of news:
New Deal Demoncrat - weekly indicators. Purchase applications, real estate loans, M1, M2 and tax withholding are all good. Commodities dumping is bad, but only for miners and oilmen - for the rest of the world it's great. Quit whining.
WSJ RTE - if USD goes down, will the US get inflation? I guess. USD has gone up too far too fast, and last week's breakdown shouldn't be something it recovers from.
Reuters - world's largest Hindu temple may move its gold to Modi's new program! Er mah gerd!:
But the Sri Venkateswara Swamy Temple, popularly known as the Tirupati Temple that is believed to have been the abode of Lord Vekateswara for 5,000 years, may become the biggest contributor with more than 5.5 tonnes of gold.Oh. Only 5.5 tons then? I was worried there for a minute.
Tirupati has already deposited most of its gold with banks under previous monetisation schemes that offer interest of about 1 percent, said D. Sambasiva Rao, executive officer of the trust that manages the temple.Oh. So it was already dumped on the market years ago, then? OK, nevermind. I thought this was news.
Sunday, December 6, 2015
Mining.com - OMG miners trading at 4% of in situ metal value LOL.
What kind of fucking idiocy is this?:
The reason they trade at a fraction of their "in situ metal value" is because they're only worth the discounted NPV of the profit they can earn on the metal.
So of course they're trading at close to 0% of in situ value. Because gold miners don't make a fucking cent in profit.