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  • Summary Of My Post-CPI Thoughts [View article]
    "Conventional wisdom, at the Fed at least, is that wage pressures cause inflation. We know from experience, however, it can come from other sources."

    If it can be demonstrated that wages don't cause inflation, why is it conventional wisdom at the Fed?
    Jun 25, 2015. 02:34 PM | Likes Like |Link to Comment
  • True Or False: The Fed Causes Recessions [View article]
    "You appear to believe that interest rates can be set at a whim by the Federal Reserve Bank (FRB). "

    No, that's a straw man you have assigned to me, because that will be easier for you to argue against than what I actually have said.

    Again, if you want to keep believing unfounded dogma someone has told you and you want to keep losing money because of it, that's your choice. I on the other hand want to be mindful and thoughtful instead of reactionary.

    You keep trying to make arguments based on things you wished people had said or assumed they said.

    The Fed is part of the consumption subsidy mix. Basically all it can do is accelerate consumption but not production. The subsidized consumption leads to distorted prices which is what produces bubbles. Natural forces can pop the bubble, but it is typically the gov itself that does that by drawing in the subsidies either by raising the DR, raising regulations, or raising taxes.

    Learning to observe this interplay is how you can protect yourself from these bubbles and busts, and thereby prevent your wealth from being transferred away from you. Its very similar to the Cantillon Method.

    Of course, as I've said, if you are comfortable losing money, then by all means have at it. For the rest of us in the informed, professional circles, that simply won't do.
    Jun 24, 2015. 05:27 PM | 2 Likes Like |Link to Comment
  • This Ratio Signals Recessions And Inequality [View article]
    "contrary to what you and others have predicted, Treasury yields HAVE been firming up since the end of QE."

    If the data were so contrary to what I was proclaiming and had proclaimed in the past, I would run from the thread as well.

    The Fed may have ended QE, but it really hasn't decreased its balance sheet. However, QE ended in Oct of 2014, but the BOJ began its new round of QE in Nov of 2014 and then the ECB in the first part of 2015. It was only after the ECB really started to get some traction that the 10 yr yield started going up again. During the period when the Fed was only maintaining its balance sheet, and the ECB had not yet started QE, the 10 yr fell into the 1.60s. That's a far cry from the 4% to 5% SOME people predicted.

    If the Fed starts to raise the DR, rates won't go up, they will go down. The short end will trend up a bit, but as asset prices fall (ie equities) people will move to bonds and thus lower bond yields. It will all depend on how much the Fed raises the DR. 25bps may not trigger a recession or a big sell off, but any move in that direction will be risk-off to some extent.
    Jun 24, 2015. 05:19 PM | Likes Like |Link to Comment
  • This Ratio Signals Recessions And Inequality [View article]
    Remember this?

    "In turn, this implies 10Y US Treasury yields in the range of 4.5%-5.5% based on historic norms.

    There is every reason to believe that 10Y yields will reach or surpass this normal range for 10Y yields when the Fed ends QE."

    This was in Sept of 2013. Since then the 10 yr yield has gone as low as the 1.60s after the Fed ended QE.
    Jun 24, 2015. 03:30 PM | Likes Like |Link to Comment
  • True Or False: The Fed Causes Recessions [View article]
    "Central banks, indeed any bank, cannot create bubbles nor can they prevent them from forming."

    Sometimes I am really worried for you small retail guys that keep repeating this type of unfounded dogma, and then conflate it with unrelated analogies. Now, if you want to go ahead and keep losing wealth by having it transferred from you because you refuse to assess all the variables in the market because of dogmatic ideologies, that's up to you, its your money.

    However, I caution all of the other readers to open their eyes and not get taken in mouth foaming rhetoric.

    For instance the bubble and the real estate bubble where both creations of gov subsidy policy via the Fed and other subsidies such as the GSEs, FHLB, mgt int ded, gnma, etc.

    When you go back and look at the DR over time, you will note raising it typically precedes recessions.

    However, as I've noted above (straw men arguments to the contrary notwithstanding), a CB is not the only reason, but part of a confluence of subsidies in the market from gov.

    For instance, in the 60s and 90s the DR was steadily raised, but there was no recession. That's because other factors in the subsidy mix mitigated the subsidy retraction that a rise in the DR represents. The 60s say decreases in marginal rates for income taxes and the 90s saw tax relief and regulatory relief (which is a form of tax relief).

    Once you understand the realities that gov price fixing has on asset prices, the booms and busts are no longer some mysterious force that no one can explain regardless of unrelated analogies about cancer cells.

    Thus, we realize the alternative to gov created boom and busts cycles is long, steady, stable growth periods punctuated by periods of plateaus as new technology is developed thus leading to the next period of steady, stable growth. As such, the gov created boom and bust cycle is not the only game town, unless of course you hold to tyrannical ideas, then it is, because the booms and busts are periods of wealth transfer, that transfer wealth from the general populace to a more and more concentrated ruling elite. Its JB Colbert and the Sun King all over again.

    It doesn't have to be that way, but if it is, then you need to find ways to protect yourself, and to do that, you can't hold to mouth foaming rhetoric that spews nonsense claiming CBs have no impact on the markets thus we need them in order to have impact on the markets. That's just plain crazy talk.
    Jun 24, 2015. 03:20 PM | 3 Likes Like |Link to Comment
  • True Or False: The Fed Causes Recessions [View article]
    "There were repeated severe panics and a major Depression in the 1870's."

    We can also point out all the gov interventions before the Depression as well. During the 1860s in the US, we had the 1860s banking acts. This was a typical ploy by govs to force legal tender laws whereby gov bills had to be accepted. This is also when we got the OCC. The result was another inflationary boom that typically accompanies gov war. Add to this railroad subsidies and their corruption (aka Credit Mobilier)

    Not to mention the two central banks the US had prior to the 1860s, steamboat subsidies, state run bank regulations complete with state funded deposit insurance (that all went broke by the way), and what you have, is not a story of free markets and capitalism but one of constant gov intervention and its concomitant boom and bust.

    "Irving Fisher was a 19th Century mind "

    Do you recall Fisher's famous quote in late 1929 that stocks had reached a permanently high plateau? If he had known the history of what gov intervention does, he would have known not to say such a stupid thing.
    Jun 24, 2015. 12:45 PM | 3 Likes Like |Link to Comment
  • True Or False: The Fed Causes Recessions [View article]
    "recessions were self-correcting (pre-1914 banking theory). No longer"

    Not necessarily. The depression of 1920-1921 timeframe is barely remembered because it was so short. Look at policy from that era. The top marginal income tax rate of 80% was cut down to 50%, and the DR was lowered. On top of that gov spending was reigned in, and the downturn turned into just a blip.

    It wasn't until Progressives/Intervent... like Hoover and FDR took over that the busts caused by gov policy were dragged out for years and years. That's the change. They are doing the exact opposite of what happened in 20-21, and the result is a growing trend to make excuses for the poor performance by saying, "its a new normal".
    Jun 24, 2015. 12:21 PM | 3 Likes Like |Link to Comment
  • True Or False: The Fed Causes Recessions [View article]
    "Indeed it is correct to say that the Fed caused all the recessions since the Great-Depression. "

    It should also include the stock market crash of 1929. Strong died in 28, and Young took over. The Fed then started writing about their worries of an asset bubble in the stock market, so they raised the DR to over 6% by Sept of 29, and presto, the Fed got the result they wanted, asset prices dropped in the stock markets (and boy howdy did they drop).

    This provided the requisite fear that the Progressive/Interventi... Hoover followed by FDR needed to rush in with their "fixes". These fixes on served to restrict production by trying to keep prices and wages up, and the result was massive unemployment for a very long time.

    Eventually equity markets recovered, and that is the lesson. Keep an eye on CBs. When they start raising their DR, start developing a plan to move to bonds or cash. When the drop happens, start developing a plan to get back in near the bottom, and then wait for the CB to reinflate equity prices.

    This is known as wealth transfer. The smart thing is to recognize it for what it is, and to start figuring out how to have a CB transfer wealth your way.
    Jun 24, 2015. 12:16 PM | 3 Likes Like |Link to Comment
  • True Or False: The Fed Causes Recessions [View article]
    "The Federal Reserve Bank (FRB) was only created in 1914 yet there were plenty of recessions, depressions, and panics before 1914[1]."

    This is more propaganda head fake. When people talk about central banks causing booms and busts, what that really means is that the principles on which central banks are based (i.e. gov coercion into price sensitive markets with price blind policies in order to protect existing interests from new competition).

    Note how LM Shaw (and his predecessor Lyman Gage) used the US Treas in a proto central bank fashion. Shaw left the Treas in March of 1907, and the Panic of 1907 occurred in Oct of 1907. Indeed, there was no central bank, but Gage and Shaw used the US Treas in the subsidy fashion that a central bank operates on.

    So, whenever someone uses the tired old bromide that booms and busts happened before the Fed (even though there were other central banks in the world - which is also conveniently ignored), you can just chalk that up to all the other straw man arguments that are used by uniformed people to support policies that they have simply been told are good.

    Whether its the Bank of Amsterdam causing the tulip bubble with free coinage subsidies or whether it is a war that causes an inflationary boom then followed by a bust, it all comes down to gov using its gun to try and force prices to go in a direction that nature will not allow.

    SA is a website for investing and protecting your wealth. To do that you have to be pragmatic. To do that, you can't be drawn in by all the wild and unfounded ideologies that you will hear in the news or on the internet. CBs, gov price fixing, real productivity, the weather, are all factors that affect asset prices. If you choose to ignore any of these realities simply because of an ideology that you think will make you sound smart, then you deserve to loose your shirt.
    Jun 24, 2015. 12:08 PM | 5 Likes Like |Link to Comment
  • Whither Bonds? Arnott Answers [View article]
    "will add the increased private sector demand for loan-funds to the insatiable and unsustainable demands of federal, state, & local gov'ts"

    That's a good point. It's an evidence that the productive capacity of the populace can't pay for both. As such, something's gotta give in order for growth to continue. That means structural reforms to growth killing gov programs. However, given the state of the populace, I don't see how such reforms can be achieved. I guess in the mean time we have to find ways to profit from an uniformed populace that is so willing to believe the false advertising of gov.
    Jun 24, 2015. 09:15 AM | 3 Likes Like |Link to Comment
  • The Lesson In China: Don't Go Bubble In The First Place [View article]
    "You will note that in Oct of 2014, when QE ended, equities dropped off."

    More to this point. It was Fed jawboning about keeping QE going that propped the markets back up until the other CBs could ramp up their QE once the Fed handed the ball off to them.

    Remember this?

    "At the height of last week’s market turmoil, St. Louis Fed President James
    Bullard suggested the Fed could continue buying bonds"
    Jun 23, 2015. 11:11 AM | Likes Like |Link to Comment
  • That's Not How Any Of This Works [View article]
    "CEDARS a form of this as well. "

    Though, the regulators put this somewhere between Rateboard and straight brokered.
    Jun 23, 2015. 11:05 AM | 1 Like Like |Link to Comment
  • The Lesson In China: Don't Go Bubble In The First Place [View article]
    You haven't been following the data.

    Let me help you out.

    Here is a chart for the 10 yr.{"range":"5y","allowC...

    By the end of 2013, the 10 yr was at 3%. QE3 ended in Oct of 2014. You can do a Google search to find that out. Taper prior to that during 2014, and ended in Oct of 2014. By early 2015, the 10 yr had dropped to the 1.60s. If you need some instruction on this, 1.67$ is lower than 3% and 2.26% is also lower than 3%.

    Now, here is a chart for the S&P.{"range":"5y","allowC...

    You will note that in Oct of 2014, when QE ended, equities dropped off.

    Now for the rest of my comment...

    "and it wasn't until the other CBs engaged in more consumption subsidies via QE that we got a rebound"

    In Nov of 2014, the BOJ announced more QE, and was followed by the ECB in Jan of 2015 (though hinting at it in 2014). Don't forget the Fed officials at the end of 2014 also jawboning more QE.

    Still, it wasn't enough to keep rates up as the Greece fear trade developed. We saw a similar thing during OT and LTRO. Capital flight pushed equities up while rates stayed down.

    Now, I have been predicting that with ECB QE we will probably see 2.50 on the 10 yr (or a bit higher depending on how far they push it), and we've gotten pretty close to that. However, this is a far cry from the conventional wisdom that said we would see 3% to 4% on the 10 yr when Fed QE ended (since all the experts know rates go up when QE ends).

    "to a recent report from Goldman Sachs, they see yields increasing this year due to rising inflation. With the 10yr note currently around 2.48%, they are forecasting it will reach 3.0% by year end"


    Again, by studying the Subsidy Mix (of which the consumption subsidies from CBs are a huge part), the direction of the markets become very clear.

    As I have been noting for a long time. The Fed is supporting its balance sheet size (that's risk-on), the BOJ is growing its balance sheet (that's risk-on), and the ECB is growing its balance sheet (that's risk-on). However, we have Greece and other geopolitical conflicts that add to the fear trade, so since late 2014 I was saying we would get to 2100 on the 10 yr and eventually 2.50 on the 10 yr (but that 2.50 would be hard going because of the fear trade).

    This is exactly what is happening. What we didn't get that everyone was predicting were rates shooting up for the 10 yr to the 3% and 4% range because the Fed was no longer growing its balance sheet. Rates fell, and only rebounded when the other major CBs began QEing.

    You can track their balance sheets here.

    Remember, CBs are an important factor on asset prices. You have to pay close attention to them. You small retail guys need to be careful not to get sucked into all the media conventional wisdom that you hear. Remember those people are just journalists. They don't know anything. You need to be able to do your own research and look up the data for yourself.
    Jun 19, 2015. 04:57 PM | 1 Like Like |Link to Comment
  • The Lesson In China: Don't Go Bubble In The First Place [View article]
    "and increased every month until February of 2007 "

    This is also like saying, "since I stabbed you once and you didn't die, then if I keep stabbing you, then you will never die".

    Its not a single rate increase, or a single tax increase, or a single regulation increase that brings on asset deflation, its a confluence of gov coercive factors that affect asset prices above and beyond what a stable free market made possible by capitalism would establish.

    Its this constant "tinkering" by people who simply ASSUME they know better that causes the booms and busts or rather the asset inflation and deflation. Once you understand how this works by being honest and accepting the real world you can then start to understand why the markets take the directions they do.

    Then you will no longer be like the posters who are constantly shocked and surprised by market movements who must perpetually make excuses why their predictions and proposed solutions were wrong.

    Think about it, we actually have people proclaiming the Fed can never blamed. In other words, a central bank can never do anything wrong. REALLY?!!. Suddenly we have perfect human beings, and we are supposed to accept this claim as serious and thus the advice of those making these claims as serious.

    Once you understand what is really going on instead of what we are told is going on you can make predictions like this. Here is a comment of mine from 2013.

    "When QE stops, equities will fall and so will interest rates. "

    This indeed happened, and it wasn't until the other CBs engaged in more consumption subsidies via QE that we got a rebound.

    Remember what is going on here is gov coercion causing asset prices to fluctuate around what would be a stable growth rate via consumption subsidies. By studying the direction of the subsidies, you too can then understand the direction of markets.
    Jun 19, 2015. 03:22 PM | 1 Like Like |Link to Comment
  • The Lesson In China: Don't Go Bubble In The First Place [View article]
    "and increased every month until February of 2007 "

    This is one of those propagandist clichés like, "bubbles happened before central banks, thus you can never blame central banks".

    What these simplistic and uniformed comments miss is that it is the policy of subsidized consumption that causes booms and busts. A central bank is just an example of a gov consumption subsidy. The other things these propagandist comments ignore is the question of volume in light of all the other factors going on in the economy, especially the other venues of gov consumption subsidies that are happening at the same time.

    As such, a single raise in the DR of 25 bps won't necessarily collapse real estate prices, but a series of raises of 500 bps is more likely to collapse them. Thus, we never know where that breaking point is, so all we can do is say a CB engaged in consumption subsidies (ie a DR of 25 bps) will be revealed in prices somewhere in the economy, typically capital assets, like real estate. When the CB starts to reign in those subsidies (ie raising the DR drastically via a series of increases, say from 1% to 6.25%), then asset prices are at risk.

    The Fed has done this many times throughout history. Thus its best to avoid ideological propaganda like, "Bubbles are simply an natural part of the capitalism that occur, on their own, without any assistance from central banks.", or, "It is not possible to have capitalism and not have bubbles." Especially since all the empirical evidence and reasoned logic show otherwise. Thus, you can ignore advice from people making such comments, and learn to take advantage of the wealth transfer that CBs provide by understanding how they operate in the Subsidy Mix.

    Then you too can begin to predict the direction of equities markets and interest rates, and not have your wealth transferred away from you because you fell victim to people shoveling ideological propaganda.
    Jun 19, 2015. 02:53 PM | 1 Like Like |Link to Comment