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  • Stocks pop higher following the strong ISM print. S&P 500 +0.5%, Nasdaq +0.5%. The 10-year note climbs 3 bps to 1.93%.  [View news story]
    So this makes me think the nonfarms won't be all that ugly. Unless of course this has just been utilizing people more efficiently. Still, though nonfarms could come in at around 165k +/-.
    May 1 11:44 AM | Likes Like |Link to Comment
  • The Fed Will Come To The Rescue But Deliberately Late [View article]
    How are they appealing to inflation expectations if they aren't growing the balance sheet?

    I guess the induced risk would suggest more lending thus getting reserves into things that will affect the CPI, but then that would suggest their intent was to induce risk and they simply used the mechanics of messing with interest rate by messing with fundamentals. So the purpose then would be to induce risk without growing the balance sheet.

    So if you think inflation expectations fall, then wouldn't you think interest rates would fall?
    May 1 10:25 AM | 1 Like Like |Link to Comment
  • The Fed Will Come To The Rescue But Deliberately Late [View article]

    Are you saying that neither the Fed or ECB will do anything else after OT ends?

    I agree they can't improve the economy, but it appears they believe they can. In theory, if they could produce money mediums commensurate with what the economy required, then prices for production would reflect simply supply and demand as driven by technological change. However, this requires a pricing mechanism, and as a part of gov (regardless of the rhetoric to the contrary), CBs are part of gov, and as such they are blind to prices. Since they confuse any sort of consumption with justified consumption, they tend to create money money mediums at rates faster that what the economy would require (part of the aggregate demand fallacy). The result is subsidized consumption, which is basically people consuming irrespective of productivity. This then is the use of gov force to favor one party in a transaction, which is what causes the wealth transfer. You basically get to buy something where the price wasn't arrived at via voluntary discovery.

    The ultimate expression of this is a theft transaction. The thief creates the ultimate inflation scenario. Instead of getting the same thing for a higher price, you get nothing in return for all you have. This is possible via the application of a gun. This is why a CB can't grow an economy. At the end of the day, the root of its existence is gov force. Legislatures use their grant of force from the populace to create them. So guns cause CBs to come into being. Not voluntary price discovery. As such, a CB is blind to prices, which makes it blind to any tool that would grow an economy. In the form in which CBs exist, the most natural result for them is to transfer wealth.

    As such, the return on production isn't as great, thus the incentive to invest is diminished. Without greater production there is less to consume, and the result is austerity, not as a policy choice but because nature forces it.

    If a CB were senstive to prices and not confused by failed economic ideologies, the real threat would only then be fiscal policies that damaged the economy with subsidies because of fiscal price blindness (they have guns too). Either way, what we have now is a CB system that can only transfer wealth because of its price blindness, but they don't understand that. So they are like a lose cannon on a deck that rolls back and forth with the pitching of the deck (liquidity sloshing around). If you learn to watch how the deck pitches, you can learn which way the cannon is going to roll, and thereby get out of the way.

    So my objective is to observe what the Fed is going to do based on their price blindness and adherence to failed economic beliefs. So while I am concerned with what should happen, right now I am more concerned with what I think will happen.
    May 1 10:11 AM | Likes Like |Link to Comment
  • The Fed Will Come To The Rescue But Deliberately Late [View article]
    I've been thinking about 2 scenarios, and I base them on the purpose of OT. OT was about inducing risk without growing the balance sheet. BB was taking heat about commodity speculation driving up commodity prices. So we had riots where we exported food inflation, grumblings domestically about the price of oil, and gold headed towards $2k. So whether the Fed caused this or not, I think it had an impact on BB. So he thought he could kill two birds with one stone. Keep the balance sheet where it is, but take the wind out of the sales of commodity speculation and spur home purchases which would help unemployment (part of the mandate).

    So my first scenario is OT ends in June, but since nothing else has really changed with regards to economic opportunity, people will tend to continue to seek out what appears to be the best bet right now - equities. As such, the demand for LT bonds will diminish because of the unattractive yields, and with fewer buyers for these bonds rates will drift up. I could see 2.50 to 2.75 on the 10 yr by Sept, and with it mgt rates drifting up. When that happens, new weakness in housing appears, and then a threat of weakening employment. Then what makes sense is that BB rolls out OT2, but this time it will be called "Sterilization", and we slowly get back to where we are now by December. If such a course develops I would be looking to sell some bonds if the 10 yr hits 1.85 and then look to replace when the 10yr hits the 2.60 to 2.75 range, and then sit back and wait for it to come back down towards 2.00.

    The other thing that might happen, is OT ends, but capital flight from Europe ramps up and keeps the 10yr from getting above 2.50. There appears to be some heavy EU maturities in Oct, so between June and Oct the 10yr creeps up to 2.50, but then EU turmoil causes more flights to quality and pushes the 10yr back down. As a result of EU bank runs during the flight to safety, the ECB doubles it balance sheet through more LTRO.

    So the Fed may not have to do anything if the ECB does it for them. Either way, I anticipate a period when rates creep up a little more this summer but then get pulled back down. All the while, I could see a pull back in equities but with a rally once a CB delivers, and I could see it being the ECB rather than the Fed.
    May 1 08:34 AM | 2 Likes Like |Link to Comment
  • There's no middle ground in a debate between Ron Paul and Paul Krugman. Paul: "I don't want the government or Federal Reserve fixing the rate of interest... Governments aren't supposed to run the economy. The people are." Krugman: "I want the market economy to be left as free as it can be, but there are limits. You do need the government to step in to stabilize." (video)  [View news story]
    Gov can regulate with regards to force and fraud via its grant of force. It cannot regulate with regards to price because it's grant of force makes it price blind. Free markets are free when they are free of force and fraud, not when they are free to do what ever they want. That occurs when gov is not limited. Then it's force becomes the agent of theft.
    Apr 30 10:30 PM | 2 Likes Like |Link to Comment
  • The Fed Will Come To The Rescue But Deliberately Late [View article]
    What do you think happens when ot ends?
    Apr 30 10:06 PM | Likes Like |Link to Comment
  • The Fed Will Come To The Rescue But Deliberately Late [View article]
    When you say a few billion, do you mean a few hundred billion?
    Apr 30 08:14 PM | 3 Likes Like |Link to Comment
  • Still No Recession On The Horizon [View article]
    "monetary system you're operating under, it always gets things just right."

    It recognizes the reality that gov has guns, and since it has guns, it has no incentive to learn. What it will have is an incentive to transfer wealth based on political biases. Wealth transfer is a disincentive to produce, and productivity is what justifies consumption. Money and money mediums are just products. When they are subject to production based on learning, they will be produced at a rate that is commensurate with what people have collectively learned about their production.

    Does this mean that everyone gets everything they've every wanted at no cost? No, that's the fraud that is used to justify gov monopolization of money. What it means is that the economy functions at peak capacity based on what people have learned about production. Gov with its guns can do nothing about increasing learning. Gov's grant of force is only useful as a deterent against illegitimate force. The only way gov could improve production is if it had some secret store of knowledge granted to it by the populace that it could inject into the economy in order to increase its growth. If people in gov had secret stores of knowledge, then they wouldn't work for go. It wouldn't pay enough, and of course if the public already had the knowledge, why would they need to grant it to the gov?

    When gov interferes in price sensitive issues (like how many money mediums should be in produced) with its price blindness created by its grant of force from the populace, the only logical outcome is wealth transfer (this is why a thief uses a gun). The result when people don't understand this is constant aruging about the reasons why a CB can't seem to get money medium creation right (like the EU and the ECB).

    The issue isn't about a system of perfect money medium creation vs a system that will totally fail, but rather who in the economy is best to address price sensitive issues? Your choice is between people without guns that must learn about production (money and money mediums are a product), and people in gov that have guns and thus do not need to worry about production.

    No, surely if you try hard enough, you can figure it out.
    Apr 30 06:22 PM | 1 Like Like |Link to Comment
  • Spain's provisional GDP data comes in at -0.3% Q/Q and -0.4% Y/Y, better (surprisingly) than the expected -0.4% Q/Q and -0.6% Y/Y.  [View news story]
    Exactly my point. Who got them into that system? Who designed it? Again, it was supposed to be designed by the experts. The PHDs and top gov officials whose price blindness will somehow make their market knowledge superior to people who must live and die by prices. If they designed a faulty system before, they will do it again. They have no reason to design that makes them responsible for their mistakes because the people designing the system have access to guns. They won't pay for their mistakes. The average citizen will pay for it, with a reduced standard of living.

    Just because the US has a fiscal and monetary union, where one state can subsidize another and not really know it, didn't mean that we didn't have a huge real estate bubble that was popped by the Fed and resulted in the loss of 8 million jobs. If the gov regulators had been worth their salt, none of that would have ever happened, and the reduction in the standard of living for these people would not have occured either.

    Inflation is not a no cost option. It means years of suffering for the average person via a lower standard of living or a frozen standard of living via lost economic opportunities.

    This will definitely make the rich richer and the poor poorer. This is what tyrannical economies always do.
    Apr 30 02:33 PM | 1 Like Like |Link to Comment
  • Spain's provisional GDP data comes in at -0.3% Q/Q and -0.4% Y/Y, better (surprisingly) than the expected -0.4% Q/Q and -0.6% Y/Y.  [View news story]
    Its the issue of why unions succeed or don't succeed. A monetary union and/or fiscal union will only continue as long as the individual interests perceive that union is in there best interests. If the union is created based on a false assumption of what the union can actually do (i.e. have a price blind system manage prices), that union will fail and its goal will not be accomplished. In fact the exact opposite of the goal will occur (EU folks were tired of trade wars turning into the real thing).

    The EU monetary union was based on the false assumption that a price blind central bank could monitor the creation of money mediums whose value depends on price sensitivity. So we were told by the experts that believed in this, that a union would promote growth and harmony via such a union (Ohio doesn't declare war on Georgia - except once they did). Instead all we have now is austerity and fighting and finger pointing. This is nothing new for Europe. It has always been tyranny based economics over there (and becoming so in the US as well).

    The double dip in Spain is occuring because they have no clue as to what would be necessary to create the kind of wealth necessary to solve their problems. The point is a fundamental analysis of Spain's strategy on how they will address their growing austerity (a reduction in their wealth/standard of living), and thus their impact on financial markets.

    For several years to come, Spain (and Europe in general) is going to offer many opportunities for wealth transfer via the capital flights they are going to create, because they have no clue as to how to generate the wealth they need to solve their issues. The fundamental issues at the heart of the Civil War and the US union are the same as those that are affecting the European Union and all unions for that matter. They are also the same issues when people form a union, such as a corporate union like Apple. You always ask the question, "OK, how are these people going to create wealth?".
    Apr 30 01:56 PM | 1 Like Like |Link to Comment
  • Spain's provisional GDP data comes in at -0.3% Q/Q and -0.4% Y/Y, better (surprisingly) than the expected -0.4% Q/Q and -0.6% Y/Y.  [View news story]
    But it goes back to your original assumption, that having no central gov leads to a civil war, which is clearly illogical. The issue is not central gov, but what central gov people want. The broader the issues that a central gov serves, the more likely the people are to want it. When a central gov tries to impose preferences of one group onto another, people just don't roll over and say, "Oh well, its what the central gov wants, thus I'll just take it." In these instances it is the central gov that causes the tension because it is attempting to force preferences. It is the reason empires become hated, and the reason people want to leave (Palestinians want to secede from Israel).

    The best test for gov policy is what issues can everyone agree on. The only issues that qualify are "stealing" or "no stealing". No stealing is the only issue you can get a unanimous vote on. Thus the only sustainable gov model is one that only uses its grant of force to repel illegitimate force. A union based on this fundamental concept would last a thousand years or more. The problem is gov force makes stealing cheap. Soon the gov becomes the agent of theft (the way the slave states govs sanctioned the theft of labor of one man by another - a free market could never support slavery because people don't volunteer to have their labor benefit someone else for the rest of their lives - people aren't collectivist by nature).

    Once the gov becomes the agent of theft (taking what one person has produced to give to another for a transfer of benefit), you will get strife. This is why collectivists unions don't last (aka Soviet UNION) because everyone starts resenting everyone else, so much so that they decide to leave and only violence will keep them together (like an abused wife).

    The UNITED States and the European UNION are now experiencing this strife, and if this continues the unions will come apart. Unless there is violence, that is.
    Apr 30 01:22 PM | 1 Like Like |Link to Comment
  • Initial Jobless Claims: 388K vs . 375K consensus (prior week revised to 389K from 386K). Continuing claims +3K to 3.31M.  [View news story]
    If they were, they would be all over the world with economies twice the size of the US. If you are waiting on a Messiah to solve your material desires, you will be waiting the rest of your life.

    Sorry my friend, your material life is up to you. It is up to all of us.
    Apr 30 12:53 PM | 1 Like Like |Link to Comment
  • Spain's provisional GDP data comes in at -0.3% Q/Q and -0.4% Y/Y, better (surprisingly) than the expected -0.4% Q/Q and -0.6% Y/Y.  [View news story]
    You make it sound as if their first devotion was to central gov. Well if they were all for central gov at any cost, then they should have just stayed in the Union. What they really wanted was a central gov as long as it protected their interests (as tyrannical as they were), but once the time came that they determined that that wasn't going to happen (in their minds), they decided to leave (as the Northern states once considered doing in response to the Louisana purchase). Once they decided to leave, they were denied that right.

    Overall, the issue is one of voluntary associations, and govs that decide to force associations will have to result to violence. Lincoln didn't have to fight the Civil War. Once the South decided to leave (regardless of their motivations) he could have just let them leave. Clearly the South wasn't attempting to save central gov at any cost, they were more concerned with looking out for their own interests (as socialist as they were).

    The same is true for Europe. The EU wasn't just for the sake of a union, the same way collectivism is not about the group. It is and always will be about individual interests. If it was about the group then the sick and the weak should self terminate for the benefit of the group, the same way the South should have stayed in the Union regardless of what they might think they would have to give up.

    If people were really collectivists, then Germans would be willing to cut their standard of living in half so that the Greeks and the Spainairds wouldn't have to adjust their standard of living. Of course if the Greeks and the Spainairds were really collectivists, then they wouldn't ask the Germans to sacrifice either. The nonproductive would simply cull themselves.

    Make no mistake. Europe doesn't have the logic to solve the problems they have, just as your comments above didn't have the logic it needed to make the case the South believed in central gov at any cost.

    The best way to play this is to recognize reality for what it is, and the name of the game now is wealth transfer to equity markets from the general populace. This is not about growth from real increases in productive knowledge (though some of that will always be in around). The play will probably be equities (but you will have to get more and more selective) with retreats that provide buying opportunities bonds at higher yields for short periods. Then sell the bonds at gains, move to cash, and get ready to move back into equities before the latest round of CB action ramps them back up.

    If you live in illogical fantasy land, you will continue to lose money.
    Apr 30 12:50 PM | 1 Like Like |Link to Comment
  • Growth Pact And Infrastructure: Hollande Co-Opting The Inevitable [View article]
    If such a thing occured, you would need to figure out how to play the investment bubble. You would really want to be one of the politically favored construction companies that would get most of the contracts, and have the wealth transferre your way. This would also boost equities during the period of spending and make earnings look much better, but since the infrastructure will be built in the wrong places and cost way more than they should, the would soon prove to be a drain on other productivity and then hurt earnings. The trick with this would be to time the bubble. Have the wealth transferred your way via this timing, and then get out before the bubble bursts.
    Apr 30 12:32 PM | Likes Like |Link to Comment
  • Spain's provisional GDP data comes in at -0.3% Q/Q and -0.4% Y/Y, better (surprisingly) than the expected -0.4% Q/Q and -0.6% Y/Y.  [View news story]
    "st time we tried that experiment it led to the Civil War."

    No that was the desire to have a central gov have more power. The North could have just let the South go. Eventually slavery (100% income taxes and 100% regulations) would have made them so poor compared to the North (massive emmigration just like Mexico but with a similar language and cultural elements), the South and slavery would have collapsed, and then they would be begging to be let back in.

    The Union would have been saved (and Lincoln's life) and other countless lives. Ironically, the test of slavery is if you are free to leave. When the South wanted to leave to preserve their ability to prevent their slaves from leaving, the North would not let the South leave. The North did to the South exactly what the South was doing to the slaves.
    Apr 30 12:08 PM | 2 Likes Like |Link to Comment