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jhooper

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  • Summary Of My Post-CPI Thoughts [View article]
    "Greg Ip makes a strong case that slow productivity growth is a bigger hindrance to worker pay increases than income inequality in his Capital Account column in today’s WSJ. The productivity slowdown to 0.3% year-on-year likely reflects the reams of new regulatory requirements put on US companies since the financial crises. In banking, or instance, the Fed’s stress tests alone have added thousands of non-productive worker hours of labor each year. Now multiply that by each phone-book sized section of Dodd-Frank rules and then extrapolate across finance, healthcare and energy companies and it’s no wonder productivity has stalled. Productivity is a big concern at the Fed, too, because slow growth in productivity means a lower GDP growth speed limit. But the Fed has a particular blind spot when it comes to the link between regulation and productivity, so don’t look for anyone there to make the connection."

    "Interestingly, even after 5 years, only 238 of the 390 “rules” have been implemented."

    http://bit.ly/1IcKYth

    There is still plenty of risk-off to come. This suggests that the massive interest rate increases that the regulators expect any day now, will be put off for quite some time.
    Jul 23, 2015. 08:34 AM | Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "My "dogma" isn't blind"

    Apparently it is.

    "Government always intervenes, that's what its for."

    This is the typical statement you hear from those fresh from the uninformed Yahoo and Youtube threads. Its typical of those devoid of facts but flush with arrogance driven by ignorance. Its why people loose their wealth when they listen to such poorly informed positions.

    "prefer they not intervene to contract an economy that needs more expansion"

    Which is what was being done by and for Greece for decades ever since the Euro was created, and the result was not what was promised (apparently is not even the century old promises that get ignored - typical of the excuse makers). Instead of all this expansionary stimulus making Greece a mighty economy, it has resulted in people leaving (or at least not having enough babies) to leave an aging population gasping for air in an economy that doesn't know how to produce air.

    The bottom line is all the promises of the vaunted expansionist policies didn't work then and they won't work now. Apparently we are supposed to believe that the old promises didn't work, simply because they are old, and the new ones will work because they were new. Well, the old promises were at one time new, and if you guys couldn't deliver then, then there is no reason to think you will deliver now.
    Jul 23, 2015. 08:26 AM | Likes Like |Link to Comment
  • Hindenburg Omen - November 13, 2012 [View instapost]
    The Fed is threatening to increase the DR this year. Now 25 bps I not a lot, but if they raise it 50 bps, with 25 this year and 25 next year, and then the ECB ceases QE in Sept 2016 as scheduled, late 2016 would be the target date for a market retreat. How much of a retreat will depend if the CBs (Fed and ECB) balance sheets shrink significantly.
    Jul 22, 2015. 10:56 AM | 4 Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    The gov causes recessions. The way to correct this, is to reverse the policies that cause the downturn.

    "ilton Friedman and Anna Schwartz, in A Monetary History of the United States, consider mistakes in Federal Reserve policy as a key factor in the crisis. In response to post–World War I inflation the Federal Reserve Bank of New York began raising interest rates sharply. In December 1919 the rate was raised from 4.75% to 5%. A month later it was raised to 6% and in June 1920 it was raised to 7% (the highest interest rates of any period except the 1970s and early 1980s)."

    http://bit.ly/1VurKtj

    http://bit.ly/Xf6s83

    Basically it boils down to, "when the gov is choking people, then the way to get them to breath again is to stop choking them". Hopefully the "no harm" klowns will be able to understand the harm that choking does.
    Jul 22, 2015. 10:52 AM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "Our CB has been the best in the world, and their "do no harm" policy has meant that the harm done is due to the contractionary fiscal policy that took $50B out of the economy in a single month this June."

    Talk about a contradictory statement. If you view is that money needs to stay in the economy, then how can you claim the Fed does no harm, when it did many multiples of this from 2004 to 2007?

    You clearly need to do some serious research instead of getting all your talking points from Yahoo news and Youtube threads. If not, then you and anyone that listens to you, deserve to have their wealth transferred from them.
    Jul 22, 2015. 10:46 AM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "The deficit that badly needs to rise is still falling."

    Now, this is closer to the fact that these so called vaunted gov officials don't understand the forces they are dealing (which is another reason to not give them the power to meddle that they currently have).

    Here is an example of one of these klowns demonstrating his ignorance of these matters.

    http://bit.ly/1DpIyuN

    However, its not the deficit per se, but why the deficit is being created. For instance, in the case of Greece, the debt was accumulated in a fashion to promote less productivity. The US is engaged in similar policies. This same analysis occurs on SA. The basic analysis is, "are companies engaging in policies that lead to greater asset creation in relation to the notes (stocks) they have outstanding?"

    What really needs to happen, is that the vaunted gov officials in both the fiscal and monetary realm need to acknowledge their fatal conceits, and reverse course. Let the deficit go up because the tax code was revamped to be 1% of AGI and no corporate tax, but noo, we can't have that. We need the deficit to go up because we want to follow Greece's policy, and send the money to green energy cronies who run off with billions and have nothing to show for it. Also, get these klowns to get their hands off voluntary associations, and let price sensitive actors react to price sensitive situations.

    Then productivity will return as people return to the laws of physics and prosperity will follow. Of course, this all depends on people dropping their fundamentalist dogma and accepting reality for what it is.
    Jul 22, 2015. 10:43 AM | Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "Do you think Greeks can run a surplus while Germany does? Is this Lake Wobegon economics?"

    Well, then, why are the Greeks so afraid to use Keynesian economics, and show the rest of the world what can be done.

    This is a great opportunity for Greece. This is their chance to leave the Euro and embark on a great Keynesian movement. Once they are out of the Euro, they will be able to establish their own central bank and print all the money they need. Remember, money doesn't have to be a store of value, it just needs to exist in order to facilitate transactions. To this end, the Greeks can embark on a grand infrastructure project. They can rebuild all of their roads and bridges, expand the Greek canal, rebuild the Parthenon and all the vacant and crumbling Olympic facilities. Then they can set about doubling the size of their gov workforce, and doubling its pensions. Then they can institute a guaranteed wage for all Greeks of at least 100k drachma/year, and a minimum wage for employed Greeks of 90k drachma/yr. Next, all education will be free, and so will all health care. Then the Greeks can nationalize all the banks, and pass a law that says all unions must get whatever they ask for. This will all be fantastic for aggregate demand.

    Next, only solar and wind will be allowed as an energy source. There is plenty of that in Greece, so there will be no need for oil, coal, or nuclear. Then, to promote local job growth and no off shoring of jobs, the borders will be completely closed off to trade. The Greeks will subscribe to that noble ideal of producing for use instead of for profit. This will force all items to made locally. Imagine the type of smart phone they will create for themselves, or the kind of motorcycle that Varoufakis can ride.

    Also, all income over 90k drachma will be taxed at 90%, and all corporate income will be taxed at 90%. Any corporations attempting to leave Greece will be subject to an exit tax of 100%. However, anyone wanting to immigrate to Greece may do so, and receive citizenship (with all the benefits thereof) and voting rights on day one.

    This will lead to such prosperity in Greece that they will be able to pay back all of their debts, two fold, not that they should, but as an example of how well their Keynesian program worked.

    So, they only question now is, what are they waiting for?
    Jul 22, 2015. 10:21 AM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "Greek GDP is down from transfers out of Greece."

    The point of those years of stimulus is that it would turn Greece into an economic powerhouse. Instead, it appears they will need perpetual "stimulus" as far as the eye can see. Again, this is far from the promises the gov meddlers made, and its more of a reason to not be a blind, fanatical gov or CB worshipper. Instead, its more evidence that you have to leave behind blind dogmatic rhetoric and step into the world of grown ups. Terms like "jump start" imply a quick return to what the economy was originally producing. Now, it appears "jump start" and "stimulus" mean decades and decades of "new normals" wherein all the utopian expectations based on utopian promises must be scaled back to a level that extremely reduces the expectations of politicians who a few short months ago promised the moon.
    Jul 22, 2015. 10:18 AM | Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "Since then our views about the Fed capability have become more realistic"

    Which is another admission that these gov regulatory agencies can never do what they are predicted to do. So, if we can't rely on the promises of what these agencies were originally supposed to do, how can we believe the promises and claims of what they are doing now or will do in the future.

    The only thing you can count on from gov intervention is excuses from its advocates who hold to blind dogma about what they WISH it could do.
    Jul 22, 2015. 10:10 AM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    More to this point.

    "What’s interesting about yesterday is that the short-end rallied just as strongly, perhaps under the rationale that the stumbling in earnings may force the Fed to stand down on a September rate hike. We’re not so sure about that line of thinking and still have September penciled in for the initial rate hike and for a flattening yield curve to prevail with a lifting on the short-end and a range bound long-end."

    http://bit.ly/1HRvuf7
    Jul 22, 2015. 10:07 AM | Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "Germany is also a socialist countries, all northern countries are socialists"

    Well, to be fair, the really is no such thing as a socialist country. Mises illustrated this long ago. If a country were truly socialists, then they would all be dead in a few short months. What we really have is a spectrum for economies. The most extreme end is totally coerced economy and the other end a completely free economy. Those that tilt toward the freer end are the more prosperous and those that tilt toward the coerced end are poorer.

    What is really going on is that Germany and the northern nations tilt more towards the free end as opposed to the southern countries which tilt more towards the coerced end. For instance on the Economic Freedom of the world index, Germany is ranked in the 20s, while Greece and Italy are ranked in the 80s. The US is in the teens, and Switzerland is ranked around 4th, and Finland around 8th. Any rate, you get the idea.

    The older population is a symptom of their more coerced population, not a cause. The more despotic a gov becomes via its control of the economy, the more cost prohibitive families become. As such, people don't have children, and young people use their youth to find greener pastures elsewhere. Sweden has a "Jobs Journey" program to move their youth out of the country.

    Greece is/was suffering from Dutch Disease.

    http://bit.ly/1KSSZZT

    They found an exploitable resource in the rest of Europe's wealth. Now, according to the Keynesians, this should have made Greece the wealthiest nation in Europe. Instead, as you pointed out, they have low productivity relative to the standard of living they would like. The result is they are now a beggar nation, that needs constant bailouts because they don't have enough productivity to create enough assets for trade. This is not a failure of so called "austerity" but of the Keynesian model itself.

    The Keynesian failure is part of the reason rates will stay low for a long time, regardless of what Yellen does. If she did start raising the DR significantly right now, all she would accomplish is an inversion of the yield curve (as typically happens with dramatic Fed increases in the DR). That would damage asset prices, that would induce the fear trade, and then equities would fall and then so too would interest rates.
    Jul 22, 2015. 10:02 AM | Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    In keeping with this consider Yellen's comments.

    “If we wait longer, it certainly could mean that…we might have to [tighten] more rapidly,” Ms. Yellen told lawmakers Wednesday. “An advantage to beginning a little bit earlier is we might have a more gradual path of rate increases,” which she described as the “prudent approach.”

    http://bit.ly/1IcKYth

    Again, remember this is not about whether Yellen is smart or well meaning or decent or trying to avoid harm, the bottom line is she is in charge of a price blind organization. She can't manage the economy or interest rates. She will never have the data or the incentives to perform such a task. All she can do is be expansionary or contractionary with the banking system. Remember the banking system is just one big cartel. The whole thing represents a ratio of notes to assets. More notes than assets, mean notes are diluted, which we see in higher prices, particularly equities. Less notes, is just the opposite. So, expansionary = risk-on, contractionary = risk-off. An increase in the DR is inherently risk-off.
    Jul 21, 2015. 04:22 PM | 3 Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "It's wrong, the primary and most important factor is fiscal."

    No, monetary is the most important factor. Fiscal has a role, and it certainly needs to be factored into the subsidy mix analysis, but the CB moves faster and broader than fiscal, and it was certainly designed that way. As you look over the past the biggest downturns in asset prices were preceded by Fed tightening. The Fed is designed to move faster than the legislative process. That was part of the whole mindset of that era in which the Fed was created. Wilson echoed this in his extremist statement about the "disinterested expert".

    So, while I will grant you the importance of including the fiscal side in the analysis, suggesting that the Fed or any central bank has far less impact than fiscal is extremist, especially given the fact that the mindset in creating the Fed was one to give it the freedom (aka independence) to move faster than a legislative body beholden to the voice of the people.

    Three other examples would include John Law and his gov granted monopoly on the issuance of bank notes creating the Mississippi Bubble, the Bank of Amsterdam and its free coinage subsidies that produced the tulip bubble, and LM Shaw using the US Treasury as a proto central bank (and a very early version of QE) that led to the Panic of 1907 (which occurred in Oct after Shaw left the Treas in March).

    One other thing. Friedman would have been a baby when the Fed was being created, so he wouldn't have been issuing any statements as to what the Fed would do at the time it was being created. However, Owen, McAdoo, Glynn, and Gage were, and they clearly indicated the Fed would end economic downturns, even Hoover referred to this in later speeches. It was the general sentiment of the time. It is interesting to note how people who naively believe in CB propoganda have retreated from this to trying to remask it as "do no harm". Heck just sitting around doing nothing could accomplish that.


    The reality is the Fed causes more harm that it does by "avoiding harm" (whatever that means anyways as it is a noncommittal statement). A prudent investor factors all variables into the analysis, not just the ones that fit the talking points of the current version of the failed ideology.


    Greece is a great example. Greece should be the richest nation on Earth by now. They've had years of stimulus and wealth transfer from the rest of Europe, and instead of that leading to massive amounts of new productivity and technology driven by so called aggregate demand, all they did was drive up wages in sectors with falling productivity leading to a massive lack of competitiveness. Now they are beholden to handouts. If the ECB really delivered on the principles on which it was based, all those years of stimulus should have made Greece Germany. Instead Greece is now dependent on the rest of the world for its very survival via handouts. Far from avoiding harm, the ECB has left Greece devasted.
    Jul 21, 2015. 01:59 PM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    More from the daily emails.

    "James Bullard yesterday said the odds of a September rate hike are better than 50-50. The fact that he talked odds rather than his preference suggests he is handicapping the entire FOMC rather than offering an opinion. Of course, if he is, he is doing it in light of his forecast for the next couple of months data, which is bound to be bullish knowing Bullard. "

    "Bloomberg News makes the case that December is not a good time for liftoff because Treasury market liquidity (fixed-income liquidity period) has been extremely thin at year end in recent years. It’s a good point. If they can go in September, it would give the market time to digest higher rates before December. And it would give the Fed a chance to see the effect of tightening in a healthy market environment."

    Again, remember, the point is not necessarily when the Fed raises the DR (though its nice to know for timing purposes), but what will happen when they do, and it won't be what the Fed worshippers promise.

    Barring any other major changes in the environment, like tax cuts or reductions in regulations or increased QE via the ECB, a DR increase is a bias towards risk-off. 25 bps isn't a huge move, but what we might see is the 10 yr stays range bound in the 2.30s and the S&P right around 2100. A second rate increase might be enough to put the 10 yr into the 2.20s and the S&P in the 2000 range. Again, its a bit too soon to tell, but again, the main point is that an increase in the DR is a signal for a bias towards risk-off. (and a signal for Fed worshippers to start warming up their excuses for the Fed and their amnesia about the prior promises of what the Fed would do).
    Jul 21, 2015. 12:20 PM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "and its actions are therefore limited to harm reduction."

    Ha! That's a joke. The Fed causes the asset deflations that lead to the recessions and depressions. The two great examples are Young in the late 1920s after Strong died (aka the market crash of 1929), and then Greenspan and BB from 2004 to 2007 (aka the market bottom in March of 2009). There have been smaller episodes, but the two mentioned are the most glaring.

    Now, fiscal policy can do the same. Fiscal policy does the same as a DR increase via taxes (including regulations which are just disguised taxes), because when the IRS taxes Fed notes out of the system via increased collections by the IRS, its the same thing as the Fed contracting which basically provides less Fed notes in the system.

    Both hurt asset prices, and by hurting assets prices both create harm. So this omnipotent claim that the Fed can engage in harm reduction is also a myth.

    However, I will agree with you that Obama has been lousy on fiscal policy. Here are some of today's releases.

    "The Fed just released revised industrial production data and there are huge downward revisions. In 2015, production is now negative every month instead of 4 of 6. 2014 was revised from 4.1% to 3.7%. 2013 was revised from 2.9% to 1.9% and 2012 was revised from 3.8% to 2.8%. "

    Fiscal policy should be more accommodative, and it hasn't been. So just like Hoover and FDR, we have had very "unaccommodative" fiscal policy and thus a malaise (as you seem to recognize). The burden on productivity needs to be reduced via lower taxes and lower regulations, just like the Fed has been attempting to do, after causing harm from 2004 to 2007. Fiscal policy needs a similar reversal if we want to see NFP at 500k each month (in Sept of 83 NFP was over 1 million in just that month alone) and GDP in the 5% range with wages growing.

    Until we see that, expect rates to stay low for a very long time, maybe 10 to 20 years.
    Jul 21, 2015. 12:15 PM | 1 Like Like |Link to Comment
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