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  • The Wages-Fuel-Demand Fallacy [View article]
    Excellent article,
    If a time traveler from the summer of 1914 were to land on Wall St. today, here are the major net changes he'd see to the world's economic scene:
    1.The world population grown from 1.8 Billion to 7.24 Billion people.

    2.Russia, having conducted a 72 year failed experiment in Marxism, still expanding it's border in the name of protecting Russians on it's border.

    3.Two world wars fought and the stage being set for a third.

    4.US Financial Services expanded from 5% of GDP in 1980 to 20% today with nothing but cash dispensing machines and credit cards to show for it.

    5.Aggregate world debt, including derivatives, in excess of $100 Trillion and rising faster than world GDP

    6.Ivory tower economists arguing that what the world needs now is more printed money and debt.
    Keynesian economics it's called.
    Aug 30, 2014. 01:09 PM | 4 Likes Like |Link to Comment
  • What Happened To All The Profits? [View article]
    Excellent article.

    Keynesian economics is now doubly damaging: First, it's spending more and more for less and less, and second, the focus and ongoing debate on it's efficacy is diverting attention from other issues which are also gutting the middle class such as:

    The Chinese continue to lead the Asian currency exchange rate race to the bottom. They've held the Yuan appreciation to only 2.25% annually for the past fifteen years, from roughly 8 to today's 6.1 to the dollar, and not nearly enough to stem the flow of jobs, and American living standards, to Asia.

    The Fed's hijacking of interest rates to zero has accelerated the automation of our remaining manufacturing jobs. It's easier to compete with inexpensive Asian labor with a robot than a full burdened American worker, especially when the cost of automation capital is being driven to peanuts by the Fed.

    The US tax code remains, to quote Jimmy Carter, (and one of the few things I agreed with him on), "A disgrace to the human race." It was around 11,000 pages when he said that in 1976. Today it's over 70,000 pages and beyond the pale.

    We need to be working on real problems with real solutions. The ivory tower academics are killing us.

    Aug 29, 2014. 11:19 AM | 4 Likes Like |Link to Comment
  • IBM: A Huge Debt Load [View article]
    The next corporate debt crisis won't come from the IBMs of the world. IBM's size and product line diversity will enable it to ride thru what's coming.

    The growing problem is the large number of much smaller firms loading up as if they too had similar staying power. When things go wrong, many of them won't.

    Everyone's watching interest rates, but a strengthening dollar, alone, can devastate consolidated FCF for a smaller firm carrying too much debt. I saw it happen first hand in the wake of Volker's war on inflation.

    The debate on whether we had too much debt raged internally until we were summoned to the board room one morning and the walls were lined with strange suits. End of debate; we were in chapter 11. The 40% of total cash flow which had come from international operations had evaporated in less than a year.

    Current loan quality data suggest that more than a third of new debt would be considered iffy in times of normal interest rates. Those smaller firms loading up now are running huge risks. It will take years for the tide to run out this time and reveal how many are swimming in cheap debt, to paraphrase Warren Buffet.
    Aug 28, 2014. 02:36 PM | 2 Likes Like |Link to Comment
  • Why "S&P 2000″ Is A Fed Manufactured Mirage: The "Buy The Dips" Chart That Says It All [View article]
    Excellent observation, RS055!
    And have you noticed that nowhere on the entire thread is there even a single mention of the shadow banking monster created by our friendly financial services sector which grew from five to twenty percent of GDP since Volker and has produced, yes, ATM machines!!!
    If you'll recall, $85 Billion of Paulson's 2008 "God save us all" raid on the Treasury was to back AIG who, in turn, had pretended to back all those NINJA loans.

    Not to worry, the Financial Stability Board and others variously estimate shadow banking to now be no more than $100 Trillion or so. So much for the antiquated notion of reining them in and putting banking back in the banks.

    Then there's the small matter of our investor guardian FASB, who missed the entire fiasco, quietly suspending FASB 157 which required quarterly public valuation of all balance sheet assets on March 19, 2009. It's still suspended. The current "market rally" began almost to the day.

    Their collective message to us all:

    Pay no attention to those expert bankers behind the curtain, just continue to fight each other and enjoy the free money.

    I trust them all.
    Aug 26, 2014. 10:51 PM | 1 Like Like |Link to Comment
  • Why Global Bond Yields Are Tumbling [View article]
    And at the core of the crisis lies an uninformed electorate, largely oblivious to the fact that throughout history, over indebtedness in all it's forms has eventually proved disastrous, no matter the political spin applied nor the increasingly tortuous arguments made in it's defense.
    For instance:
    Allowing the Chinese, Koreans, Japan, etc. transfer of our manufacturing base to Asia via undervalued currencies, a form of loaning us higher living standards than we can afford, goes largely unnoticed and seldom discussed.

    Since 2001, China has grudgingly allowed the Yuan to strengthen an average of 2.2% annually in the face of empty US threats and complaints, from 8 to 6.1 to the dollar. This is not nearly enough to stem the tide of our job losses. Abenomics is an even more recent and blatant devaluation of the Yen

    Uncontrolled immigration is still another borrowing underway: Cheap labor sustains businesses and garners growing votes and political power. There is no natural domestic constituency to oppose it in artificially sustaining our living standards and postponing the day of reckoning.
    Aug 26, 2014. 02:47 PM | 4 Likes Like |Link to Comment
  • Why "S&P 2000″ Is A Fed Manufactured Mirage: The "Buy The Dips" Chart That Says It All [View article]
    I explain them mostly as repeating 19th century equivalents of our dot com bust. Theirs was in railroads, which leveraged Watt's steam engine versus ours which leverages the transistor.

    They built the country, and when they over-built and went bust because they couldn't service their debt, the owners took the hit and went on. Also, they accomplished this unprecedented economic miracle during mostly DEFLATIONARY times, which gives the lie to Keynesian bunk insisting on continuous inflationary devaluation of our currency.

    We, however, have devolved to an alternative model whereby the debt mountain is now deemed "TBTF" and is being repeatedly socialized and rolled forward by our new entity...the Fed. It's a politician's delight: They don't even have to vote on it.
    Aug 26, 2014. 12:07 PM | 5 Likes Like |Link to Comment
  • Why "S&P 2000″ Is A Fed Manufactured Mirage: The "Buy The Dips" Chart That Says It All [View article]
    My concern is that Bernanke and his successors' approach to bear control has been to feed them...$4,000,000,000,000 over five years, and counting. They're getting bigger and coming more often. The notion that the Fed's gun will always be big enough is a myth awaiting exposure. It would have been nice to see leadership instead of Keynesian pabulum trotted out yet again as a systemic solution to massive over-indebtedness. And, yes, it started with Nixon unhooking politicians everywhere from any tether to actual value in the currency in 1971 when he closed the gold window and allowed his treasury secretary, John Connally, to tell the world "It's our currency, but your problem."

    We're still abusing our reserve currency status and running up bills we're less and less able or willing to pay.
    Aug 25, 2014. 06:47 PM | 3 Likes Like |Link to Comment
  • Why "S&P 2000″ Is A Fed Manufactured Mirage: The "Buy The Dips" Chart That Says It All [View article]
    Exactly. Virtually none of the New Dealers want to talk about the roaring twenties blunders setting the stage for 1929. And Irving Fischer, the first economist rock star, also missed the bubble entirely, declaring the market to be on a new, "permanently high plateau" just before it bellied up.

    Truth is: Hitler and Tojo saved the Roosevelt myth in the nick of time and at a human cost of 50 million dead.

    Anyone looking at the graph below who can't see something profoundly changed since Greenspan's first put purchase in the mid-1990s followed now by Bernanke's, should stay away from data: it'll just bore you.;range=my;compare=;ind...
    Aug 25, 2014. 05:46 PM | 2 Likes Like |Link to Comment
  • John Hussman: Broken Links: Fed Policy And The Growing Gap Between Wall Street And Main Street [View article]
    Excellent article.
    The Fed continues to struggle alone without congressional help, and to use obsolete tools on the wrong problems.
    I defy anyone with actual manufacturing experience to tell me how to employ US pair-of-hands labor to compete in world markets with Asian labor costs, even at ZIRP cost of capital. It can't be done. With today's near real time market data flow, price increases on increasingly commoditized products will result in immediate market share erosion and force cost reductions, 80% of which is typically people.

    The Fed's congressionally mandated 2% inflation floor forced onto an economy operating in this new trade world is, therefore, obsolete. It will not work, ditto the "full employment" mandate. The full employment has gone to Asia.

    Since 9/11, China has grudgingly allowed the Yuan to climb from 8 to 6.1 to the dollar under ongoing, empty threats of US retaliatory actions. That's about 2.2% per year, and not nearly enough to address the continued massive flow of our manufacturing jobs to China. QE1,2,3...n and the Fed's permanent purchase of every long bond and mortgage issued in this country will not address this problem.
    QE is merely more booze in Wall Street's punchbowl, compliments of saver's confiscated interest earnings.

    Historically, the Fed has FOLLOWED rising loan demand, symptomatic of increased business activity and capital needs, with interest rate increasing actions of it's own to keep a lid on inflation. There is no US capital demanded for Asian manufacturing, just continued low interest rates enabling the US consumer's continued purchasing of the goods as our middle class continues to be hollowed out.
    Aug 25, 2014. 01:47 PM | 2 Likes Like |Link to Comment
  • Why The Fed's Outrageous Gift To Foreign Banks--- Risk Free Aribitrage On IOER--Is Just The Tip Of The Iceberg [View article]
    Thank you, Mr. Stockman.
    Excellent summarization. It's simply amazing and disgusting that Mr. and Mrs.working American saver, the ones funding this disgraceful exhibition, don't know and/or care enough to stop it.

    This article can't hurt.
    Aug 24, 2014. 04:02 PM | 12 Likes Like |Link to Comment
  • The Japanification Of Europe [View article]
    The Japanese government does not exist in a vacuum. Trashing of the Yen will damage the profitability of Japan-based companies operating overseas, which is most of them, and spur defensive responses by her businesses, citizens and trading partners.
    Japan is resource and energy poor. Historically, Japan's economic strength lay in the productivity and competitiveness of her conversion processes. Abenomics will ultimately make those processes more expensive and less competitive.

    The resulting inflation will accelerate both jobs and capital flight and lower Japanese living standards.
    Perhaps the only thing good to come of Abenonomics will be the final discrediting of the notion that a large developed nation can act unilaterally in devaluing it's currency and thereby export it's domestic economic difficulties to it's trading partners.
    Aug 24, 2014. 12:05 PM | 1 Like Like |Link to Comment
  • What If The Fed Has Created A Bubble? [View article]
    Admire you trolling this one past him, but I wouldn't spend any time waiting for an answer.
    Imagine El-Erian on the Titanic's bridge observing that the ship appears to be moving at 21 knots in foggy, iceberg-laden waters in the dark.

    No one would be asking how long it can last. Nobody knows until it ends.

    We do know, in the Titanic's case, that other ships in the area had stopped for the night, judging the risks too great.
    Since Central banks today are agreed, optimists might feel safe. Others, like me, not so much.
    Aug 22, 2014. 04:21 PM | 4 Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    This article is wrong on so many levels and oblivious on even more. It totally ignores the root causes of this, our third political policy/Fed-induced bubble in fifteen years. Data is mined and a story spun to support the Keynesian approach of treating the trailing symptoms of predictable, repeating financial crises, and not in addressing their root causes.

    The $868 Billion output gap was mostly excess capacity built over time in health care and home construction.
    Tax subsidies in employer health care plans, making a valuable good appear "free" to the consumer, accounts for the unbridled growth in health care. The construction and sale of $500,000 houses to $30,000 secretaries funded by NINJA loans, explains the construction bust.

    No business was ever taxed anything. Business customers get the bill. Our corporate tax policy forces gaming onto management. They are not idiots. And they also know that the Fed hijacking of interest rates is artificial and won't last so they're at a loss as to how, when and what to plan.

    Aug 19, 2014. 10:57 AM | 5 Likes Like |Link to Comment
  • Rocky Days Ahead [View article]
    Mr. Calhoun,
    I much appreciate your efforts in this very interesting time. I believe there are many millions more like me who are watching in awe and disbelief at the Fed's third Keynesian bubble blowing experiment in the past fifteen years.

    Perhaps there was no other way to finally discredit the Keynesian insanity: It's been the equivalent of a chilly camper's Pouring a huge bucket of gasoline on an ebbing campfire three times running now...just doesn't work for temperature control. Third time's the charm, I hope.

    With the coming debacle, we'll certainly stand accused of doing the same thing over and over, expecting a different result. Ditto, Europe and Japan. Hang in.
    Aug 18, 2014. 11:41 AM | 4 Likes Like |Link to Comment
  • U.S. Oil Production Keeps Surging, So Why Haven't Oil And Gasoline Prices Fallen? [View article]
    Yes, but global debt now stands at $100 Trillion dollars and climbing. The 24% GDP growth has been purchased on credit. Like the man said, things that can't go on forever won't, but with Central banks' support, it can certainly go on long enough to kill any and all shorts.
    In 2001, the Saudi oil minister declared that the"fair" price for oil would be around $25. Inflation adjusted, that would be $34 today. Much of the difference is explained by the Chinese demand, and yes, it takes a lot of oil and coal to supply Americans buying trinkets and gadgets on credit.
    Aug 13, 2014. 06:49 PM | 1 Like Like |Link to Comment