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  • Fed Policy: Unsafe At Any Speed? [View article]
    "The rich don't spend; the rich save"

    Which is really a lower cost of capital as seen in higher bond prices and higher equity prices. In a market free of coercion that leads to greater investment in higher productivity. Higher productivity leads to higher standards of living. In a highly coercive market, such as a highly gov regulated market, that higher productivity is punished. Thus, there are no new, or very few new competitors to hire employees and bring down the price to consumers. The result then, is just higher and higher existing financial asset prices. The threat to those prices, is when fiscal policy via higher taxes on capital or the Fed dries up Fed notes.
    Nov 27, 2015. 04:43 PM | 1 Like Like |Link to Comment
  • Wall Street Breakfast: A Very Black Friday For Chinese Stocks [View article]
    The theory is the Fed basis its actions on its forecasts. Not where the numbers currently are. Also, remember, in all of its history the Fed has never forecasted a recession. Just to give you an idea of how good their forecasting abilities are.
    Nov 27, 2015. 03:41 PM | 2 Likes Like |Link to Comment
  • Fed Policy: Unsafe At Any Speed? [View article]
    "interest rates would be higher?....Monetizing that debt lowered rates "

    Most likely the yield curve would just be flatter. Again, its a myth that the Fed controls interest rates. I know we hear Fed officials and the Fed advocates claiming all the time that central banks control interest rates, but they don't. All they control is how much of a subsidy they provide for the financial markets by how much they expand credit (a money note is just another form of debt).

    "The continued interventions and purchases dropped rates"

    Actually the opposite is true. Before QE1 officially began, the 10 yr had dropped to about 2% in late 2008. After QE began in Dec of 08, the 10 yr yield started to rise. Again, the Fed claimed it was going to lower rates, but the opposite happened. Most likely the drop in the 10 yr yield before QE1, was just the conventional wisdom driving the market to think the Fed was going to lower rates. Thus, people rushed in to buy, which lowered the yield, but they were thinking it was going to go even lower. Of course, those that bought at 2% in late 08 were sitting with unrealized losses in Mar of 2010 when the 10 yr was again back at close to 4%.

    Again, remember, it was Greenspan and BB that raised the DR to over 6% by 2007. It was mid 2007 that the S&P started to fall apart along with RE prices. It was mid 2007 the the Case Shiller 20 City Composite Home Price Index also started to fall apart.

    This was, yet again, another recession caused by the Fed Res. Remember, we generally express everything in terms of pricing based on central bank notes and their proxies. So, when a CB is being accommodative, prices are up. When a CB is not accommodative, prices go down. Greenspan and BB basically pulled the rug out from underneath the markets by raising the DR. In other words, they were drying up Fed notes which were being used to bid up asset prices.

    As such, the asset prices fell, people started to panic, they began to flee risk (equities and RE) and move towards safety (bonds). So, equity prices fell and so too did bond yields. Now, granted, during this time the Fed started to lower the DR, but it too nearly a year and half to come down from the +6%. By then, defaults and foreclosures where baked in the cake.

    Of course, once the Fed became accommodative again, asset prices started to re-inflate, and interest rates went back up. Note that during each QE round, equities would surge and so would interest rates. That's the subsidy effect from the Fed.

    Then on top of the Fed collapsing asset prices (like it did in the Fall of 1929), fiscal policy clamped down on productivity via increased taxes and regulations (like what Hoover [Smoot Hawley gave us the bank runs] and FDR did). This includes the stimulus spending. All that did was to induce a consumption subsidy that creates risk-on just like QE. That diverts human activity away from innovation, which would increase productivity, to simply biasing towards current production methods. Thus, when the consumption binge is over, the risk-on it creates moves back to risk-off to reflect the capital we consumed rather than the capital we created, asset prices and yields fall (like when you debit equity for an expense and credit an asset that you consumed - your balance sheet recedes, hence recession).

    The reason we are stuck in a malaise, and will stay in a malaise, is the Fed is simply supplying the Fed notes that the US Treas and fiscal policy is soaking up via taxes and regulations. Thus, since the Fed is now resupplying the markets with notes that are being destroyed by fiscal policy, we have a risk-on scenario that is noted in the shape of an upward sloping yield curve. To get new, massive growth, we would have to cut back on Fed note collection by the US Treas, and action wasting rules from the regulatory bodies (not gonna happen - so expect more malaise).

    Now, think about this. If we know that the Fed provides a subsidy to asset prices by being accommodative (ie low DR - risk on, equities up and upward sloping yield curve), and that it can hurt asset prices by taking away that accommodation (ie higher DR - risk off, equities down and flattening yield curve), what is a logical conclusion now that the Fed is talking about raising the DR again?
    Nov 27, 2015. 03:38 PM | 5 Likes Like |Link to Comment
  • Fed Policy: Unsafe At Any Speed? [View article]
    "We forced our low wage earners into the street."

    Surpluses are a typical sign of gov price fixing. With the growth of gov regulation over the decades, the result is artificially high fixed costs that technology advances cannot compensate for. As such, the marginal worker cannot be afforded by the consumer, and the result is unemployment.

    All gov regulations are effectively wage regulations. If a gov price regulation results in the sales of a product being cut in half, the result is a wage reduction for those that were producing that product. If the US were to wall itself off to trade as China did under Mao, the result is effectively a massive minimum wage for domestic producers. If the domestic consumers do not have the income to purchase the domestically produced goods to support the state imposed minimum wage of the protected industries, those consumers simply don't purchase. So, instead of protecting domestic jobs, the result is those domestic jobs simply don't exist, ie massive unemployment.

    This is why millions and millions of Chinese starved under Mao. It was a highly regulated economy, which means, it had a high minimum wage, which produced a surplus of labor and a shortage of goods. Those poor folks were pushed into mass graves in ditches and covered over.
    Nov 27, 2015. 12:51 PM | 2 Likes Like |Link to Comment
  • Fed Policy: Unsafe At Any Speed? [View article]
    "Ms. Yellen concedes the fact that at least some savers have suffered hardship at the expense of the Fed's monetary policy "

    The lesson these people need to learn is that a central bank is a subsidy for financial markets. Its not a tool to regulate the economy, create equality, look out for consumers, or any of the other propaganda talking points used to sell it to the suckers. The job of a central bank is to stealth tax the general populace and transfer that wealth to the financial markets, period.

    As such, once people can be honest about this, they can then use this knowledge to protect themselves. A subsidy inflates the price of whatever is being subsidized. For example, gov subsidizes education, and the result is the cost of education perpetually inflates, or it subsidizes healthcare, and next people are shocked at how expensive healthcare becomes. Thus, when a central bank subsidizes financial markets, the price of financial instruments inflates (risk-on).

    So, what these "some savers" should learn is how to play this "subsidy-on" subsidy-off" cycle that a central bank engages in that causes these booms and busts in financial asset prices.

    What happens is that even the central bankers are not honest about what they are doing. They believe a lie as well. They believe their superior intellect is needed to manage the economy. These are the so called "disinterest experts", which is a laugh and the type of thing only suckers believe. As such, these so called experts are constantly fiddling with the cold and hot valves, thus increasing or decreasing the subsidy causing the up and down motion we see in overall, wide groups of asset classes.

    Learning to watch Fed policy is an important piece of the puzzle, though not the only one. Fiscal policy can act on asset prices in a very similar way. Putting the whole puzzle together reveals the subsidy mix. Watching how the Fed interacts in this, is a powerful indicator in the direction of asset prices, which reveals when the subsidy is turned on. When it is, the wealth transfer is in effect, and if you have positioned yourself to be where the wealth is going to be transferred to (financial markets - especially equities), then you can avoid the "hardships" that can happen to you if you don't really understand what a central bank is.
    Nov 27, 2015. 11:57 AM | 3 Likes Like |Link to Comment
  • Big Reversals Coming In 2016? [View article]
    "Its built on clicks and web page views thats what pays the bills. "

    Just doing my part.
    Nov 26, 2015. 10:40 PM | Likes Like |Link to Comment
  • Big Reversals Coming In 2016? [View article]
    Well that's encouraging.

    I have learned more from the fights I have had on SA, than any of the times when I was in agreement with someone.

    Its also a podcast you can download in iTunes.
    Nov 25, 2015. 10:29 PM | Likes Like |Link to Comment
  • Big Reversals Coming In 2016? [View article]
    "Look at the title? "

    Translation, that's as far as I am going, hence...

    "or is confronted by new information that conflicts with existing beliefs"

    You couldn't even get to the new information.
    Nov 25, 2015. 05:09 PM | Likes Like |Link to Comment
  • Big Reversals Coming In 2016? [View article]
    "Pretty biased website."

    Ahhh. Cognitive dissonance. Its like a warm blanket.

    "or is confronted by new information that conflicts with existing beliefs"
    Nov 25, 2015. 04:52 PM | Likes Like |Link to Comment
  • Big Reversals Coming In 2016? [View article]
    "It's too bad the economy has always done better under Dem presidents. "

    Interesting commentary on that here. Seems this is a bit of a contrived statement latched onto by low information voters.
    Nov 25, 2015. 03:46 PM | Likes Like |Link to Comment
  • Wall Street Breakfast: Here Comes The GDP Revision [View article]
    "You're suggesting Russia is on some kind of religious crusade to wipe out muslims and find the holy grail? "

    I wonder to whom this comment is aimed? Anyway, on to something meaningful.

    All we have here is a battle of thugs. Looters not only loot producers, but looters also loot other looters. This all translates into factors for fear and uncertainty, thus that means there are factors to keep rates down on safe haven assets. If a full blown war broke out, that would translate into a consumption subsidy, like an infrastructure project, and that would then translate into risk-on, equities up and rates up. Then, when the consumption binge is over, risk-off will return. For now, the fear factor will be the focus.{"range":"3mo","allow...
    Nov 25, 2015. 11:54 AM | Likes Like |Link to Comment
  • Wall Street Breakfast: Here Comes The GDP Revision [View article]
    You can check in, but you can't check out.
    Nov 25, 2015. 08:58 AM | Likes Like |Link to Comment
  • Wall Street Breakfast: Here Comes The GDP Revision [View article]
    The egg war is heating up.

    "Protesters have hurled eggs and stones at the Turkish embassy in Moscow."
    Nov 25, 2015. 08:53 AM | Likes Like |Link to Comment
  • Wall Street Breakfast: Here Comes The GDP Revision [View article]
    "Even supposing this were true, how is it in any way relevant? "

    Some more tidbits about Turkey.

    Erdogan's rise to power

    1970s-1980s - Active in Islamist circles, member of Necmettin Erbakan's Welfare Party

    1994-1998 - Mayor of Istanbul, until military officers made power grab

    1998 - Welfare Party banned, Erdogan jailed for four months for inciting religious hatred

    Aug 2001 - Founds Islamist-rooted AKP with ally Abdullah Gul

    2002-2003 - AKP wins solid majority in parliamentary election, Erdogan appointed prime minister

    Aug 2014 - Becomes president after first-ever direct elections for head of state
    Nov 25, 2015. 07:19 AM | Likes Like |Link to Comment
  • Wall Street Breakfast: Here Comes The GDP Revision [View article]
    Some interesting tidbits about Turkey.

    the birthplace of numerous Christian Apostles and Saints, such as Paul of Tarsus, Timothy, Nicholas of Myra, Polycarp of Smyrna and many others.

    The percentage of Christians in Turkey fell from 19 percent in 1914 to 2.5 percent in 1927

    Antioch was also the place where the followers of Jesus were called "Christians" for the first time in history, as well as being the site of one of the earliest and oldest surviving churches, established by Saint Peter himself. For a thousand years, the Hagia Sophia was the largest church in the world.

    Today, however, Turkey has a smaller Christian percentage of its population than any of its neighbours, including Syria, Iraq and even Iran, due to the Assyrian Genocide, Armenian Genocide and Greek Genocide during and after WWI, and the subsequent large scale population transfers of Turkey's Christian population, most notably Greece, and the forced exodus of indigenous Armenians, Assyrians, Greeks and Georgians upon the breakup of the Ottoman Empire. This was followed by the continued emigration of most of the remaining indigenous Christians over the next century.

    During the tumultuous period of the first world war and founding of the Turkish republic, up to 3 million indigenous Christians are alleged to have been killed. Prior to this time, the Christian population stood at around 20% of the total.

    I guess they had to make room for the President's palace.
    Nov 24, 2015. 09:07 PM | 3 Likes Like |Link to Comment