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Mercenary Trader

 
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  • Let Them Eat iPads: Why Wage Suppression Is Key To The Market Puzzle [View article]
    Just now realizing Seeking Alpha made an edit to the original piece that doesn't make any sense.

    Some ham-fisted editor took this paragraph out:

    "In this week’s links, you will find an argument from Jim O’ Sullivan, chief economist at High Frequency Economics, that US wage growth is accelerating. You will also find a series of FRED charts, accumulated by Conor Sen, showing that slack in the labor market is falling. Even those with no high school diploma are seeing unemployment rates plummet."

    What the heck SA. Why would you make a change that removes an evidence reference from the logic chain. I guess because they took the links off the bottom too, which are available here:

    http://bit.ly/1oZN1hl
    Nov 18, 2014. 03:47 PM | 2 Likes Like |Link to Comment
  • Let Them Eat iPads: Why Wage Suppression Is Key To The Market Puzzle [View article]
    There is no necessary conflict between the presence of luck or randomness and the Darwinist paradigm.

    Two species could have the same hypothetical level of evolutionary fitness starting out, but one runs into a highly aggressive predator but the other does not, or one experiences debilitating habitat change and the other does not. A little serendipity early on can mean the difference between a thousand generations or dying out, just as "right place, right time" can be a decisive factor in business success.

    Mother Nature has no qualms with paying favorites.
    Nov 18, 2014. 02:40 PM | 1 Like Like |Link to Comment
  • Let Them Eat iPads: Why Wage Suppression Is Key To The Market Puzzle [View article]
    It's a bit more nuanced than that. The phenomenon you describe took place more at the long end of the curve than the short end.

    China and large volume oil exporters, and to a certain degree other emerging market exporters, contributed to the multi-year "global savings glut" via mercantilist trade policy of selling America "stuff" on credit while parking the USD proceeds in dollar-denominated assets.

    What the Federal Reserve did was a bit different. They acted as emergency liquidity providers in the 2008 financial crisis, and then maintained that provisional liquidity for years while holding interest rates at near zero levels at the short end of the curve.

    These relationships are very complex. There are a lot of moving parts and pieces. China is in serious trouble now, for one, with trillions of dollars in NPLs on their books, as a result of fueling economic growth with an extended ponzi scheme construction boom.

    It is ironic that China's UST pile may actually represent their best investment of the next few years when exchange rate differentials are taken into effect.

    Last but not least, the comparison of "high cost producers" and "low cost producers" is almost too generalist to be of use. Europe and China have no Google, Apple, Microsoft, Tesla, Exxon etcetera. On top of that, much of the low cost production work done in Asia is also low margin and deliberately stripped out by higher margin producers, e.g. Apple maintaining fat margin intellectual property ROI while sourcing the low margin grunt work of physical product assembly to FoxConn.
    Nov 18, 2014. 02:36 PM | 1 Like Like |Link to Comment
  • Let Them Eat iPads: Why Wage Suppression Is Key To The Market Puzzle [View article]
    Don't feed the trolls...
    Nov 18, 2014. 01:13 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    Keep an eye out for new articles... or consider checking out the SIR: http://bit.ly/1pUhfmR
    Nov 13, 2014. 05:06 AM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    Meh, not really. There are two kinds of short sellers, dumb and smart. The dumb short sellers have gone the way of the dodo, all but extinct.

    Smart short sellers are tactically nimble -- keeping their powder dry or otherwise keeping their exposure to sectors in serious decline, like energy, or overvalued equity plays now out of favor, like ANF and Z. (A few places we are short.)
    Nov 12, 2014. 02:22 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    I don't agree with the assertion that "the dollar is now a questionable source of trade." The dollar still facilitates more than 80% of all global financial transactions. That is hardly "questionable," it is massively dominant. And people have been complaining about the dollar and making ideologically driven dollar-demise forecasts for decades.
    Nov 11, 2014. 04:08 PM | 1 Like Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    Glad to hear it! We value the clarity that comes with sharing our thought processes. Thanks for the feedback.
    Nov 10, 2014. 06:13 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    One could argue a cold war with Russia is definitely on. The west has taken deliberate steps to undermine Russia's power. We ar fairly clearly at war with ISIS. Stuxnet, heartbleed, etc etc count as cyber warfare both state sponsored and freelance.

    If one interprets war as a power law phenomenon, it makes sense to view a continuum in which lots of little micro-wars are breaking out at any given time, but truly large and all-encompassing wars are much more rare. They are like earthquakes in this way -- many tremors, few full-scale disasters, with the earthquake itself not knowing how large it will be.

    btw here is our Ubiquity write-up: http://bit.ly/1yrHZtM
    Nov 10, 2014. 06:07 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    For a great read we would recommend "Ubiquity" by Mark Buchanan. The book gives insight into power law phenomena, which applies to war as well as other things.

    It's a scary time when right wing parties are rising to power in Europe -- under the same austerity driven conditions that produced the Nazis in the 30s -- and a majority of Chinese expect to wind up in a hot war with Japan. Then too you have Russia on the verge of collapse which can lead to all sorts of unpleasant hail mary efforts.

    As a general rule one can think of war as an extreme fat tail. Given the complexity of global trade and interacting nations, a fat tail simply comes along every once in a while. As such we give credence to cycle theories for their general explanatory power, without necessarily placing weight on a specific time frame expectation.
    Nov 10, 2014. 06:03 PM | 1 Like Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    We more or less agree... which is why passive indexing is a popular form of insanity in our view... too much risk of being brutally clobbered at the worst time, for years on end with no reprieve.
    Nov 10, 2014. 05:54 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    What other style of capitalism is there? Europe's model? Japan's? China's?

    Trust in a vague opinionated sense is not really a factor here. Capitalists more or less run the world, or at least the investment world... one dollar, one vote... and their basis perceptions have not changed. The drivers are more hard-nosed and cash flow oriented than that.

    Remember that, as a general rule, most of the people vocally critical of "the system" have no meaningful capital to speak of. They are moral observers rather than profit-oriented participants. Those who do have capital are too busy making management decisions, for the most part, to spend a lot of time critiquing "the system" itself.
    Nov 10, 2014. 05:52 PM | 1 Like Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    Buyers of XLU and XLP, driving both to unprecedented historically overvalued levels in search of domestic yield, would agree with you... from our view a frighteningly crowded trade.

    Though yes, it's certainly possible that safe haven equity attractions could last a while. That's one reason we anticipate our equity bear raid campaign not really beginning in earnest until sometime in 2015 (though timing is obviously flexible).
    Nov 9, 2014. 06:07 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    No worries, though we would encourage you to seriously rethink the implications of a 30% equity drop vis a vis armageddon labels.

    In the big scheme of things, and in terms of regular business cycles and market cycles, a thirty percent drop in US equity valuations should hardly even qualify as a big deal, let alone flat-out catastrophe.

    The experience of college-aged European youth, on the other hand -- where literally tens of millions of twenty-somethings have seen their jobs and earnings prospects destroyed, possibly for their entire lives, given the damage a non-functional career start can do -- really does deserve a moniker of armageddon-like.
    Nov 9, 2014. 06:03 PM | Likes Like |Link to Comment
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next [View article]
    "Getting off the petrodollar next year" is hand-waving zero percent probability.

    As to 5 year highs, that is a novel argument for anticipating weakness. The USD index has surged through a downtrend dating back to 2008 and taken out multi-year high resistance levels established in July 2012 and July 2013.

    Re, Chinese yuan, if you dig deeper into the situational dynamics of what is going on inside China, you would see why the statement "everyone wants it" is rather laughable in respect to logical extrapolation.

    With all due respect, we would consider your quality of analysis shockingly poor. Perhaps we are myopic as you say.
    Nov 9, 2014. 05:59 PM | 1 Like Like |Link to Comment
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