09 October 2013

LInks To Macro-Economic News for Wednesday 9 Oct 13

08 October 2013


Researchers come closer to nuclear fusion ‘ignition’ (via Raw Story )

The National Ignition Facility (NIF) has crossed a major threshold in its goal of achieving nuclear fusion “ignition” following the results of a September 2013 experiment, BBC News reported on Monday. NIF researchers reportedly discovered that for…

Links to Macro-Economic News - Tuesday 8 Oct 13

Let Your Life Be A Friction To Stop The Machine

A short documentary on Predatory Capitalism with hundreds of historical political cartoons, photos and paintings overlaid with a spoken manifesto the 99% need to see and hear:


09 April 2013

Kyle Bass Interview With Bloomberg TV: "If Monetary Policy Is The Only Game In Town, Then We're In For A World Of Trouble"

Kyle Bass, whose Dallas-based hedge- fund firm Hayman Advisors LP made $500 million in 2007 betting against U.S. subprime mortgages, said the Bank of Japan's recent doubling of money is "the beginning of the end" for Japanese Government Bonds.

Bass has been short - long term - the JGBs for three years already and announces he's only betting 1-2% of his capital to possibly make 300 times his wager. This bet has been a loser so far, and it is called the "Widowmaker" bet by wags on Wall Street. Despite this, Bass is now more firmly committed to his view the JGBs will blow up sooner than later.

He thinks when the Japanese Government Bonds finally crash and burn, that it will happen rapidly and because they have  20 years of "buildup" behind them.

Bass made one observation which rings true: "The whole world is chasing yield." He points out the US stock market is being led by formerly big dividend paying utilities which are not the normal stocks to lead a rally. As he said, "Things that don't typically lead us into new highs, it's because of their dividend yields."

Another notable quote: A host asks Bass about other instruments with yield which are popular at this time. He observes, "With Bernanke pinning rates at zero," . . . "structured credit, and even mortgage credit, they're one of the most liquid areas of the marketplace today. People can't get enough of them. And think about sub-prime credit . . . 97% of the 20,000 line items are still rated below investment grade, they're still junk. The ratings based buyers aren't even there yet! The money is being mis-allocated by the printing press."



On Gold

On gold, Bass admits his firm has always had a position in gold. "Monetary policy is the only policy in town. I am perplexed as to why gold is as low as it is."

". . . The global monetary base is north of $70 Trillion, all the gold in existence is only $7 or $8 Trillion, there's only $2-$3 Trillion of investable gold . . . at some point in time, I'd rather own gold than paper. I just don't know when that time is."

Bass goes on about gold, "They can't print any more. They can mine some more. They can't (produce) at the rate the Central Banks are printing money. I just view gold as another currency, it's that simple. I don't view it as a commodity."

"If Monetary Policy is the only game in town, then we're in for a world of trouble."



On Housing

"We're not expecting housing to get materially better, but we're not expecting it to get materially worse."

"We think it (housing market) will marginally improve going forward.




On Interest Rates & Quantitative Easing In The USA

"One of my underlying beliefs is that the US rates can't go up. For a long time Bernanke said low for a long time, then he said low for two years. I think he means low forever, as long as he can keep them there. Every point of interest rates, every full one-hundred basis points of interest rates represents another $150 Billion in interest rate payments."

"It is crazy to think we can raise interest rates by 100, 200, 300 basis points." Bass suggests the Fed might only be able to raise rates 25 to 50 basis points tops, and says, "I don't think we can raise interest rates."

He explains because of his views on interest rates, he believes ". . . housing will have a bid."

". . . If rates go higher, all bets are off on my perspective in housing."

News & Views For Week Of April 7 - 13, 2013

Note: I will be adding the freshest news and opinion pieces to the top of this list, refreshing it daily, sometimes at night, somtimes (shudder) during daylight hours. - Rock

05 April 2013

All This Quantitative Easing . . . And The Lowest Money Velocity In 50 Years?

One picture speaks 10,000 words . . .


but I'll add a few anyway:



  1. The Fed has created $2.2 in new money since the 2008 crisis
  2. About half of this money is currently parked in the Federal Reserve by banks and is collecting interest
  3. Much of the other half of this money is sitting on banks' books to shore up new reserve requirements.
  4. Hence, the remainder of the money outstanding is changing hands more slowly than at any time in the past 50 years, meaning banks are not lending as readily as they have in past good times/bad times. Nor are consumers borrowing and spending as they once did
  5. As consumers pay off debt, money is "retired" and goes to money heaven
  6. When money is retired and evaporates to money heaven, it cannot be used as a basis for more fractional reserve lending. Hence, new money must be created with the hope banks will finally get up off that money and lend it to people who will start consuming again and increasing the exchange of said money (i.e., a pick up in "velocity" of money exchanges). We are a nation now addicted to consumption to boost GDP. Savers are anti-American.
  7. Hence the Fed will continue to create new money to try and get the banks to lend and the consumer to borrow and spend. Bernanke's heir apparent, Janet Yellen of the San Francisco Federal Reserve Bank, is already signalling she will focus on GDP growth as much as lower unemployment. To reignite growth, money must start circulating at a faster velocity.
  8. Hence, keep your eyes on this chart for any uptick in the near future
  9. Meanwhile, bet on QE to continue well into 2014 as M2 shows no basing as of yet on this chart

New Bank of Japan Governor Haruhiko Kuroda tells nation, “We are here to pump you up!”


In an astonishing display of throwing all caution into the crematory, the new Bank of Japan Governor, Haruhiko Kuroda, pledged to inject $1.4 Trillion of stimulus into the Japanese economy in the bold move can stop Japan’s decades old deflation.

Kuroda announced this audacious move, Thursday, April 4th and Japanese markets responded by going on a financial tear. From Reuters:


Financial markets liked what they saw.
The Nikkei stock index jumped 2.2 percent, finishing just shy of a 4-1/2-year closing high, while on Wall Street, U.S.-traded shares of Toyota Motor rose 4.6 percent.
The yen fell more than 3 percent against the dollar and 4 percent against the euro, while the 10-year government bond yield hit a record low.

In an economy which is 1/3 the size of the US Economy, Kuroda’s fearless move will double the monetary base of Japan’s economy in hopes this will stoke lending and investment. And instead of focusing on interest rates, Kuroda has pledged to fine tune the Japanese economy by centering on the monetary base:

New Governor Haruhiko Kuroda committed the BOJ to open-ended asset buying and said the monetary base would nearly double to 270 trillion yen ($2.9 trillion) by the end of 2014, a dose of shock therapy officials hope will end two decades of stagnation.
The policy was viewed as a radical gamble to boost growth and lift inflation expectations and is unmatched in scope even by the U.S. Federal Reserve's own quantitative easing program.
 The Fed may buy more debt, but since Japan's economy is about one-third the size of the economy, Kuroda's plan looks even bolder.
"This is an unprecedented degree of monetary easing," a smiling Kuroda told a news conference after his first policy meeting at the helm of the central bank.
"We took all available steps we can think of. I'm confident that all necessary measures to achieve 2 percent inflation in two years were taken today," he said.
One of those steps was to abandon interest rates as a target and become the only major central bank to target primarily the monetary base - the amount of cash it pumps out to the economy. It adopted a similar policy in 2001-2006, but not on this scale.


Putting this $1.4 Trillion BOJ stimulus into perspective by comparing it to the US Federal Reserve’s stimulus:

Adjusting for gross domestic product, Japan's program will be twice as large as the Fed's asset purchases, said Stephen Jen, managing partner at SLJ Macro Partners in London. "Investors were justified in feeling shocked and awed," he said.

America’s bond king, Bill Gross, adds some color commentary on this big swing for the fences:

"It may not work but they will go down swinging," added Bill Gross, founder and chief investment officer at giant bond fund PIMCO, via his Twitter account.

Stealing some notes from the US Federal Reserve game plan of Ben Bernanke, and adding some wildcat plays of his own, Kuroda has pledged to buy government bonds while adding purchases of shares of ETFs and REITs in the Nikkei.

The BOJ will buy 7.5 trillion yen of long-term government bonds per month, roughly 70 percent of bonds sold in markets. It combined two bond-buying schemes, its asset-buying and lending program and the "rinban" market operation, to buy longer-dated government bonds, including those with duration of 40 years.
The central bank will also increase purchases of exchange-traded funds (ETFs) by 1 trillion yen per year and real-estate trust funds (REITs) by 30 billion yen per year.
"I can say that the BOJ came up with a perfect answer in response to market expectations," said Junko Nishioka, chief Japan economist at RBS Securities.
"Kuroda made good on his promise of boosting monetary easing in terms of both volume and types of assets that the bank purchases."
Kuroda said the BOJ wanted to push down bond yields enough so that investors will start buying riskier assets, such as property and stocks, and to prompt households and companies to spend now rather than later on expectations of rising prices.

Will this desperate move of Kuroda’s be too much for the bond markets to absorb without jacking up long term rates? Will this huge injection of stimulus finally ignite investor confidence for riskier investments in the Japanese Nikkei? Only time will tell.



03 April 2013

Musings of a Short Travel To Florida's Mainland . . . United Corporations of America Wasteland


Written in a hotel room
Somewhere on the Port St. Lucie/Stuart, Florida line
Monday - April 1, 2013


I've just had a family reunion with all my siblings in Fort Pierce/Port Saint Lucie. Although I was wiped out by the long drive (5 hours from the Keys - after having gotten off my job at 4:00 AM), I took a 3 hour nap and we all met for a kitchen table discussion starting at 8:30 at night which went on at a leisurely pace and finished up 3 hours later.


Most of our talk centered on our aging mother, the Macro-Economy, and what the four of us are doing in our lives for work, etc.


I was very interested in the differences between the Port St. Lucie/Fort Pierce area vs. the Florida Keys. One of the “draws” (if you will) of this area is the adequate supply of  inventory of homes for sale, all at what seems like rock bottom prices to us Keys’ residents: I saw homes, vacant and occupied, for sale up here for 1/5th to 1/10th of what they would listed for in Key West proper.


Despite this huge advantage in home prices, there are many compromising factors which would give most Keys’ residents pause in selling their homes or quitting their jobs and moving up here: chief of the quality of life issues would be the big tradeoff of massive Congestion/Traffic.


At 6:00 AM, I turned on the hotel room TV and flipped through the channels.  All three major networks hosted by hometown "happy news teams" pretty much reported the same thing: the lead criminal stories from overnight, the one or two puff pieces about the local crafts fair or collector car auction, and every 10 minutes: traffic reports.


At the very moment the Morning Zoo teams were signing on radio and TV,  there were already traffic backups on major arteries feeding I-95 and the Florida Turnpike. Looking at the "skycams" from hovering copters, one can see miles of headlights snaking in one direction while in the opposite direction you see miles of ruby red tail lights, some moving at snail pace, some stopped dead in the off ramp/on ramp lanes. At 6 AM in Key West or the Keys, only the charter boat captains, shrimpers, waste removal teams and bar cleaners are up and about.


All morning, the three major networks continued to pump travelers' advisories: Between this road and that road, the travel time is 24 minutes. Between this avenue and that avenue, the travel time is 39 minutes.

You look out the hotel window and see traffic backed up at the traffic light heading into Stuart, Florida. Where are these people going so early in the morning, foot tapping brakes, gas, brakes, gas, while radio jocks using sound effects and forced laughter are background noise to assuage the stress and loneliness of a long distance commute?

I looked at this madness and wondered how anyone could be lulled into believing that "this is living".

You've got these roomy, inexpensive, houses in quite subdivisions, but there is no meeting place for neighbors to greet neighbors.  There is no corner store like you have in Key West run by some local you've known for years and where locals you’ve known for years sit and chat politics, sports or local news.

The morning routine up here for commuters seems to be this: you have to get into your car, drive through the maze of your housing development, and find the main road taking you down to, say, a nearby convenience store or all night drugstore 1 1/2 miles away on the corner as your one stop shop for salty snacks, beer, sodas and other processed foods by giant corporations which have packaged these short term palliatives in packaging which belie the empty nutrition inside. The closest open business to my brother’s home at this hour of 6 AM when he’s just hitting the road for his drive to work two counties away is a CVS drugstore. The clerks all know him by name. But his local CVS has no chairs, no benches, no place to sit - inside our out -  so one can slowly warm up and  prepare for the day or to wind down from a long night at work.  That plus CVS isn’t in the business of serving fresh coffee, bagels, croissants or pastries.

Places which allow socializing are not in abundance at this time of hour as they are in Key West. Here , you’d be forced to visit a nearby Dunkin’ Donuts which only has indoor plastic seating, all matched to the corporate logo’s colors. The homogenized feel of a Dunkin’s Donuts interior does not exude a warmth which attracts a knot of locals who want to sit and shoot the breeze for 30 minutes or more. The feel of the place is “eat and run”, and when I say “eat” it usually means, eating quickly in large bites so that you can hurry up and get on the road with that monster size cup of coffee which you will end up walking into your place of employment.

Or, maybe you feel the extended drive to a place which has faster service is what you desire: you can motor down a few more miles to the nearest McDondalds and eat your Happy Meal inside their newly remodeled store, or order your food through the bustling drive-through and eat while you drive - which is what most commuters do in Port St. Lucie/Fort Pierce at this time of day.

I asked my brothers about his neighbors. Here, you don't know your next door neighbors, you know of them.  You might say hi when the kid's soccer ball goes over the fence. You don't have neighborhood parties. The old people frown on children playing in the streets. And from what I see, not many kids live in these quiet sub-divisions. The lack of laughter is quite noticeable. Dogs must be leashed. The houses, all bunched up together with manicured lawns and cars in the drive, speak of Suburbia in a hush. The kids are entombed in their rooms with the latest video game or texting one another on their shiny smartphones. The only way the working parent might see them is on their way out the door, digging into a bowl of Frosted Flakes, Cap’n Crunch or Lucky Charms, or maybe on their arrival home when Dad don's the "World's Greatest Chef" apron to cook some processed meat tubes on the gas grill outside, or on a Sunday as he sinks into a couch and cheers on the Dolphins.

The suburbs up here - and their further out extensions of the exburbs - have no soul, no funk, no real feel like my beloved, but fast disappearing, Key West. I'm not talking about the Key West of North Roosevelt, Blvd with its two miles of strip malls. I'm talking the little shops and stores and bars and businesses established by locals who depend on us all to keep their - and our - uniqueness alive.

Up here on the South Florida mainland, usually a successful "local" owned store is basically a "franchise". 

You buy into the corporate dream of it has to be done "this way" and you’ll make a six figure income. The tradeoff of a franchise with attendant garish signage (usually backlit plastic which makes stargazing impossible for miles around) is this: the more stores open, the more removed the founder of a chain is from giving part of his connectivity to the community. The personal touch diminishes with every store opened under the brand. Like looking through an old time navigator's three sleeved telescope through the wide end lens and slowly moving the eyepiece away from your body, the owner’s imprinted image gets smaller and smaller the more stores he/she opens. The more stores opened, the "colder" the business becomes, the harder and more black/white the “systems” employed become. You as a franchisee might “own” one of these so called mainland “locally owned businesses”, but in the end, the franchisee has no say in how to operate his business with a more personal feel. When you buy into a franchise, you know who owns you and tells you what uniforms must be worn and at what temperature the coffee must be brewed, using the corporate bean, all poured into a styrofoam cup with the corporate logo on the outside.

The more removed from the “personal” touch one becomes by owning or relying on businesses which are franchised or owned outright by a megalithic entity such as CVS, Walmart, Dunkin’ Donuts, Walgreens, McDonald’s, etc., the more one feels like a number, like just another brick in the wall.

Up here, the United Corporations of America are on grand display. For miles, the eyes are visually assaulted and fatigued by endless logos of giant brand stores which have removed the "neighborly" feel of mom and pop operations. At yet, looking at the traffic patterns of mainland Florida, one realizes these giant corporate chains which have strode across our country and put the local mom and pops out of business will be the next “going out of business” victims during the coming crisis of a world with Peak Energy.

Peak energy means peak growth is coming. All of this growth at any means - predicated on cheap and easy to find energy sources (coal and oil) is coming to a slow, inexorable end. Perpetual growth cannot be. The planet is not going to hear it. Pollution is taking its toll. Mother Earth is telling us the raping and pillaging of her and her fauna and flora has upset the balance of the natural world and now karma is coming to kick us all in the ass with a size 14 steel toed Doc Martin boot.

The days of Cheap Oil are gone.  And so are the days of Happy Motoring.

Just look at the traffic up here: where are all the happy motorists one used to see in the 50s and 60s Esso ads, dad with pipe hanging out of his mouth, wearing a fedora? Mom in the front seat of the sedan, sporty hat on, a strand of pearls at the neckline, two well scrubbed faces of the kids bunched up a the backseat windows marveling at the countryside passing by? When the interestates were built, no one wore seatbelts. No one had a GPS monitor stuck to the front windshield. No one had TVs embedded in the dash or flip down sunshades or the backs of seats to sedate the kids who are now belted in with seatbelts and harness straps as though they are riding inside a cargo plane into a war zone. But then again, today, there's not much countryside to see in a one or two hour commute to work.
 
As a nation, we don't stop and think when filling up the tank that the stored sunlight energy represented by a gallon of gasoline is a very slow chemical reaction which took hundreds of millions of years for Mother Earth to prepare for humankinds' unbridled use as the basis, the very fuel, for the Modern Economy of the past 150 years.

We have squandered that precious fuel by building a gluttounous America with no soul. We have turned our backs on mass transit (during the last Century, GM and Big Oil would go into small towns and buy up the short transit systems, rip up the track or pave over them so as to sell more cars, more oil) and we have a country built on the idea that Cheap Oil is an inherent right, and that growth - and cheap energy - are perpetual. When we went to war in Iraq, our Vice President, Dick Cheney - once the head of Halliburton,Inc. which was also one of biggest recipients of the Military Industrical Complex contracts in that country - said, "The American way of life is non-negotiable." Talk about playing to the base wants of the American consumer!

President Eisenhower tried to warn us about what would become of the “American Way of Life” as he left office. In his farewell address he told raised the alarm about corporate policy dictating our foreign policy. He gave us the phrase "the Military Industrial Complex" in his farewell speech of 1961 in the Rose Garden. The irony is Eisenhower built the nation's infrastructure of super-highways. But it was only when it was time for Ike to walk off the Big Show stage that he understood - and admitted - he was part a machine which depends on a constant and cheap energy source. Ike knew future wars would be fought for oil and that these wars would enrich sociopathic men whose children would not fight in those wars.

If Ike were alive today, he'd be shocked at how small town America has been shellacked by Growth At Any Cost mega-corporations who buy in bulk and undersell the mom and pop businesses by selling junk (be it food or products) at the lowest costs. He'd be dismayed at how Main Street has been co-opted by Wall Street and Madison Avenue, how the corporatocracy depends on us all being "Good Little Consumers" who buy into the meme of the moment, "There's never been a better time to buy a home", "More Taste - Less Filling," "A diamond is forever," "Breakfast of Champions", "Good to the last drop," and so on and so forth."

It's no accident that when President Bush stood on a mound of 9/11 rubble and urged our country to unite at the task at hand, he told Americans the best thing they could do is to go shopping to show them terrorists you can not stop America.

I submit that most of America does not critically think, that its people - once citizens - are now sedated, mindless consumers.

When I looked out my hotel window this past Monday morning I saw a lifestyle which is foreign to me. What I saw is what Throeau meant when he said, “Most people live lives of quiet desperation.” I could not imagine anyone winning a lottery in Fort Pierce and wanting to live is such a Wasteland of subdivisions, endless franchises in stripmall fashion, and traffic which boggles the mind (and which is still not as bad as Miami/Dade traffic).

This Monday morning, I missed the Florida  Keys badly. When I saw the traffic at 6 AM (we were planning on leaving the hotel between 7 and 9AM) I shook the little woman awake and said, “We’re not going anywhere in this traffic. Stay in bed. Well sleep through this day. I’ll get you up between 8PM and 12 midnight, and then we’ll drive home.”

Which is what we did. And the traffic at 9PM leaving Fort Pierce/Port St. Lucy was about 1/50th of what it was during “peak hours”. And the traffic on the turnpike going South was so sparse, there were moments where we’d see no headlights in our rear view mirror. Lesson learned: always travel South Florida between 8 PM and 5 AM to escape the madness most dayshift South Floridians put up with every day of their working lives.

We were  only up there on the mainland for 30 hours, but being in the vortex of everybody going somewhere at the fastest pace in a mindless rat race sucked the life spirit out of me. It reminded me of the opening lines of one of my favorite Jackson Browne songs of all time, "Bright Baby Blues":

I'm sitting down by the highway
Down by that highway side
Everybody's going somewhere
Riding just as fast as they can ride
I guess they've got a lot to do
Before they can rest assured
Their lives are justified
Pray to God for me baby
He can let me slide

I’m an Atheist and don’t pray to any gods, but I concur with the lyrics Jackson Browne put down years ago.

I don’t intend on joining the rat race in my waning years, unless it is to commute from a family farm in the middle of nowhere to go work in a burb or city with no soul. I don’t want to come home to a place which has no “there” there.





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