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jhooper

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  • Wall Street Breakfast: Greece Votes 'No' - Now What? [View article]
    Let me add one more thing. Keynes was supposedly to have refuted Say's Law. So, yet again, the Greeks have this wonderful opportunity to prove Keynes right. All they have to do is leave the EU and the Euro, fire up their own fiat currency, and demonstrate that supply does not create its own demand or in other words that people CAN consume what they don't produce.

    The time for the Greeks to teach the world a lesson is at hand.
    Jul 7, 2015. 08:18 AM | Likes Like |Link to Comment
  • Wall Street Breakfast: Greece Votes 'No' - Now What? [View article]
    "Greeks work like anyone else in this world."

    I guess in some ways that is true.

    http://on.wsj.com/1HKspRz
    Jul 7, 2015. 08:12 AM | 1 Like Like |Link to Comment
  • Wall Street Breakfast: Greece Votes 'No' - Now What? [View article]
    "Do you seriously believe this attitude will change as if by magic? "

    Keynes used to make the point that ignoring the truth in order to get his ideals implemented would often be necessary. As such, in keeping with that tradition, I will point out that increased spending on infrastructure will never be corrupted, regardless of all the examples to the contrary.

    As such, I would love to see Greece implement the plan above. It can't possibly fail. All the people that would be in charge would be incorruptible. There is nothing to worry about.
    Jul 6, 2015. 02:51 PM | 3 Likes Like |Link to Comment
  • Wall Street Breakfast: Greece Votes 'No' - Now What? [View article]
    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 6, 2015. 12:02 PM | 7 Likes Like |Link to Comment
  • This Ratio Signals Recessions And Inequality [View article]
    "Stocks are titles to capital goods. "

    Another way of saying this, is that stock notes are claims to real assets. Also realize that all notes are ultimately claims to real assets. We see this in a simple balance sheet.

    Assets = Liabilities + OE

    If you consolidated all balance sheets in the world, cash would wind up on the right side of the balance sheet (since it is really just a claim on assets). Cash, in this day and age, is comprised of central bank notes, but even if it were gold, it would still be true.

    There really is no such thing as fiat currency. All currency is really backed up by the assets that can be procured with those notes. Thus, what makes a note valuable is the claim on assets it represents.

    Stock notes of private companies are price sensitive notes. That is management must engage in activities that increase the asset claim those notes represent by continually creating more and better assets. In other words, stock notes are intended to increase in value.

    Central banks are outspoken in their commitment to depreciate their notes, such as the Feds dedicating to a loss of value in their notes of around 2%.

    Thus, it is natural for people to abandon their central bank notes that are managed to depreciate for stock notes for stock notes that are managed to appreciate. This increased demand for stock notes drives up their price, and the result is a roaring stock market.

    So, when a CB is being accommodative (assuming no other changes in the subsidy mix from gov regulations or taxes) that means the CB is heading more in the direction of depreciating their notes and thus increasing the tendency for people to head towards better managed notes (like stocks). Then when a CB reverses policy (which they tend to do since they are run by poorly educated PHDs), the trend reverses or is mitigated, the better managed notes loose their subsidy, and they fall in price, and presto the boom and bust cycles that are so familiar with in economies that are polluted with gov intervention.

    If you learn to recognize these patterns then you can better protect yourself, and not make predictions that you should sell all LT bonds because yields are going to skyrocket to 5% because the Fed is about to end QE, and then watch rates fall even further (which also meant loosing the gain you could have had by waiting for the right time to sell).
    Jul 1, 2015. 10:03 AM | 2 Likes Like |Link to Comment
  • 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?

    http://bit.ly/1Nft7pO
    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.

    http://bit.ly/1jsAe3m

    http://bit.ly/1EdeiQU

    http://1.usa.gov/sQo6xW

    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.

    http://bit.ly/1LosHim
    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 dot.com 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.

    http://bit.ly/1sZE5UT

    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)

    http://bit.ly/1LnQ63B

    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 | 2 Likes Like |Link to Comment
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