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  • 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
  • Wall Street Breakfast: Here Comes The GDP Revision [View article]
    Rate hikes are a bias for risk-off. 25 bps may not move the needle much, so it just may keep the S&P around 2000 and the 10 yr below 2.30, that is, if there is no countervailing factors such as tax or regulatory decreases to offset the risk-off. Most likely scenario is just a flattening of the yield curve with short-term rates ticking up and LT rates ticking down.

    The more rate hikes, the more risk-off. If there are enough rate hikes, it could induce just enough risk-off so as to invoke more QE. If so, the trick would be to sell equities now, move to bonds, wait for the retreat, sell the bonds just before QE, move back to equities, and wait for the Fed to reinflate.
    Nov 24, 2015. 12:16 PM | 2 Likes Like |Link to Comment
  • Friedrich Hayek And Milton Friedman Predicted This Economic Crisis [View article]
    Another important thing to keep in mind is that there is a difference between money and money mediums. You don't need money to survive as an individual or even as a group of individuals. Everyone could grow their own food and make their own shelter, but that would preclude the specialization of labor. Without the specialization of labor, the growth in the standard of living is extremely restricted.

    As such, to take advantage of the specialization of labor, people engage in trade. When people trade, both sides share an idea. The idea is that, "I will give up the product of my labor for the product of your labor". At that instantaneous moment, what you have is a dual claim on labor between both parties. Their personal balance sheets would both show a receivable and a payable. They would also both show income and an expense (cost of goods sold).

    Since they both show debt, what we are really saying is that money is a debt contract. Money is an idea. Its an equally shared idea of trade. The mediums of money developed to further streamline the transaction, so that all you had to do was present the medium and the person receiving the medium quickly understood the contract being presented.

    Thus, there is a difference between the contract and the medium that represented the contact. Throughout history the medium has been all sorts of things. From salt to metals to paper and now to crypto. All have had their pros and cons throughout history. One of the features that made the mediums desirable, was their ability to maintain value.

    Value is their ability to exercise a claim on labor and the assets that labor creates. Hence, the reason gov paper currencies deflate as seen via price inflation. Govs are price blind due to their monopoly of force. They destroy the value of money mediums for short term wealth transfer from the general populace to the gov and its advocates.

    One day, with enough enlightened people, this paradigm may change, but until then, one way to protect yourself is being in or near the ranks that to whom the wealth is transferred to. Financial markets are one such place. A central bank is a subsidy for financial markets. Sure, the CB may collapse asset prices from time, but in general, the CB will reinflate the financial markets. If you can learn to time these booms and busts (which can be done by studying the subsidy mix), you can maximize the wealth transfer your way.
    Nov 24, 2015. 09:49 AM | Likes Like |Link to Comment
  • Friedrich Hayek And Milton Friedman Predicted This Economic Crisis [View article]
    "Having money for the sake of having money makes no sense."

    This is the heart of the matter. When a person or group of people wash up on a deserted island after a plane crash or sunk ship, the first they do is to seek food and shelter. What they don't do is establish a central bank so they can stimulate their aggregate demand to get them to seek food and shelter.
    Nov 24, 2015. 09:09 AM | 2 Likes Like |Link to Comment
  • Why Not Just Print More Money? [View article]
    "The cartelism and monopolism of players like Standard Oil are often conflated with free-markets."

    Excellent point.

    The point of a monopoly is to decrease supply and increase price. Kerosene went up in supply and down in price during the late 1800s, not to mention that a substitute, electricity, was on the rise. The opposite of what was supposed to happen.

    Rockefeller definitely wanted to have a monopoly so he could decrease supply and increase price, but whenever he would obtain more than a 95% market share, he would attempt to raise price. The result of that would make it attractive for new entrants to enter the market with the latest and greatest refinery equipment. People were even building fake refineries just to get Rockefeller to buy them out.

    So, now, put yourself in Rockefeller's shoes. He just over paid for some asset, and it would only justify itself at a price level that he could charge if he actually could charge monopoly prices. It was like way overpaying for dividend stocks. The result is a lower yield. Since he couldn't control new entrants, he just wound up overpaying and overinvesting, and thus the resulting yield wasn't worth it.

    In fact the 1901 National Biscuit Company (NABISCO) noted in their letter to shareholders that they were giving up on this cartel scheme, and were just going to focus on beating their competition with better products rather than trying to buy them all out.

    However, for a lot of these so called robber barons, they realized that the only way to get the cartels they wanted was to turn to gov, the real source of concentrating capital and wealth in the hands of the few, aka John Law and JB Colbert. The Railroad Commission wasn't made up of consumers of oil and transportation in order to lower the price. It was made up of people in the railroad business so they could RAISE the price that kept going down. You can keep that kind of consumer protection.

    In a free market, someone can rise to the top and in theory have 100% market share, but they will only be able to do that so long as the supply they create is commensurate with the price the consumer's income will allow them to pay. One slip up, and it will be all over, hence, why it is so hard to do (are stocks on SA valued because they have a talent for losing market share?). History is littered with the wreckages of these slip ups. Which is ironic. We are supposed to be so afraid of the free market robber barons and the certainty that they will take over everything, yet these same fear mongers also tell us we need bailouts for these supposed juggernauts when they fail. So which is? Are they unstoppable, or are they so fragile we have to bail them out?
    Nov 23, 2015. 02:02 PM | 1 Like Like |Link to Comment
  • Why Not Just Print More Money? [View article]
    "With FRNs, you can only discharge a debt."

    Right, its more of just a reclass from one debt instrument to another. To be fair, the same would be true for gold that is used as money medium. Ultimately all debt would be satisfied by the creation of new assets to make those ownership claims worth something (ie something you can live in, wear, eat, etc). whether we used gold or paper or crypto.

    Debt, in and of itself, is not necessarily a bad thing. Its just ownership rights expressed on a piece of paper. What really worries us, is that we all know we can't eat or live in paper. So, its real assets that we all want. Thus, if note creation is consistent with asset creation, we all feel better. What makes us really feel good is confidence in our asset creation abilities.

    If we create notes that then result in food creation, the notes then represent claims on real assets. We eat the food, and then destroy the notes. Your balance sheet would be debit food and credit ownership rights, when you created the food (which is income), and then debit ownership rights and credit assets when you eat the food (which is expense).

    In a free market, notes would be created based on supply and demand. There would tend to be a natural equilibrium that constantly adjusts with market demands. So, your consolidated balance sheet for your economy would have a natural tendency for debt and ownership rights (note creation) to go up only as assets went up.

    With a central bank, all the banks are basically part of the gov. When the fountain is turned on, the whole system can expand. That was the whole point. They wanted inflation to be centrally controlled, instead of the localized inflation that could be created under the 1860 banking acts.

    Of course the point was to have access to gov guns so they could expand even if the market didn't warrant it. This is how we get booms and busts. By learning to view the economy as what I call a "subsidy mix" you can get a better feel of when the booms and busts will occur (this is why we had booms and busts even before CBs - we still had subsidies and Gov intervention). Fed accommodation is a major force, but other factors come into play as well, so you have to account for them.

    Take a look at how often an increase in the DR comes before a recession.

    But, not always. Take the 1960s for example. Kennedy embarked on lowering the top marginal tax rates. In other words, as the Fed was "drying" up FRNs with DR increases, the Treas was allowing those FRNs (checks, credit cards, etc are all just proxies for FRNs - all US banks are part of the Fed cartel) to stay in the system.

    By doing that, the ratio of notes stayed more or less consistent, and thus asset prices (the ratio expression of notes to assets) were able to maintain their support.

    1991 is another great example. We see a series of DR increases, and then we got a tax increase (remember Bush going back on his "read my lips" pledge?). The result was a "drying up" of FRNs from both the CB and the US Treas. The ratio of notes to assets fell, the result was a drop in asset prices, people feel less wealthy, they reign in spending, GDP is a measure of spending, and presto, recession.

    Contrast that with the mid 90s. We again had tax and regulatory relief (Clinton was compromising with Congress), even though the DR was increasing. Again, this allowed the ratio of notes to assets to remain more stable, and thus no massive drop in asset prices that led to a recession. All through the 90s, the S&P went up.

    From 1999 to 2000 the DR went from 4.5 to 6, and presto we got another recession. 1929, same thing - over 6% on the DR. Strong (NY Fed head honcho, and JP Morgan's man on the Fed - NY Fed ran things, not the guys in DC) died in 1928. Power shifted to DC, and Young took over. The Committee was worried about prices in the stock market, so they took the DR from 3% to over 6% in the late 1920s. Guess when? In Sept of 1929. The crash happened in Oct of 1929.

    Once you understand the subsidy mix, the interplay of tax, regulatory, and monetary policy that affects the ratio of notes to assets (known as price), the booms and busts are much more predictable.
    Nov 23, 2015. 01:38 PM | Likes Like |Link to Comment
  • Why Not Just Print More Money? [View article]
    " This asset swap changes the composition of the private sector's balance sheet,"

    This is another example of conflating the aggregate with the individual. You can't talk about a consolidated private sector, which is really the entire economy (remember the gov is just a sub of the populace), and then talk about notes as if they are only considered at the individual level.

    On a consolidated basis the notes that are called financial assets are on the liability side (rights side) of the accounting equation. The gov through its central bank (and spare me that its just some private corporation - look who sets the board and who gets the dividends - owners get dividend) does back door printing of money, which is the zero interest note they wanted to print to begin with, so the following is absolutely correct.

    However you are wrong to say that "...[T]here is no real "money printing" involved in any of this."

    The point of trying to call notes assets is to trick the public into thinking the gov is actually adding REAL wealth to the populace's consolidated balance sheet. The only real wealth are assets that humans have converted from resources that improve their standard of living.

    Buffet likes to attack gold because you can't eat it or live in it, but the same is true for Fed Res notes, US Treas, and stock certificates.

    Think about what happens when a gov FIRST issues notes. They are essentially doing this for an exchange for real assets. After the transaction the gov balance sheet looks like this.

    Building = Notes + Net Assets


    Real Asset = Claims of the Public on the Asset

    so the public's balance sheet went from this

    Real Asset = Claim on the Public Asset

    to this

    Note from Gov = Claim on Public Asset

    As you can see, for the individual, its an asset and for the gov, its a liability. when you consolidate the two (since the public owns the gov), they eliminate.

    Now it comes time to payoff the note. In a real transaction, the gov would give back the asset dissolve. Of course, govs just don't go away. They issue more notes. This time, since they have guns, they pay back the note with a new split note that they declare as a replacement for all other money in the public. If you don't take their notes, then you will go to jail (of course Cullen wants to claim there are no guns involved).

    So now, the public has to take notes that are claims on that original building which has depreciated. So the notes reflect that depreciation by virtue of the fact that they have less purchasing power. With regards to what you are buying, the price seems to have inflated, hence inflation.

    So what has happened is that your purchasing power has been reduced via the new notes that paid off the old note. Think about what happens when the IRS takes your Fed notes. That reduces your purchasing power. When your Fed notes depreciate at 2% a year, you are also losing your purchasing power. Either way you have been taxed.

    The goal of a central bank is for the gov to tax the populace without them knowing about. Its a way for the gov to print the 0 interest notes it would prefer to print instead of interest bearing notes, hence the so called "asset swap" that removes treas bills from banks that pay interest from the PDs to the central bank that then remits that interest back to the Treas from whence it came. Presto, the gov finally printed the money without having to bear the criticisms that come from having the Treas do this.

    They do this to subsidize the financial markets, who provide large campaign contributions. In other words its a back door method to steal wealth from the general populace and transfer it to financial markets. So, since we now know that a CB is just a subsidy for financial markets, that is, its going to transfer wealth to the financial markets, we now know where to be when the wealth transfer happens.

    You typically want to get rid of your Fed notes for some other note. The Fed has promised to depreciate those notes. The tricky part is timing which note class to be in, equities or bonds. A good signal for that is if the Fed plans to be accommodative or not. When it is in accommodation mode, its risk on. Equities up and bond yields up. This is because the subsidy is turned on. When it is un-accommodative, its risk off, equities down and yields down.

    So contrary to all the conventional wisdom that Fed buying bonds means yields will go down, the exact opposite is true. Look at QE. The Fed told us it was doing this to lower yields (see BB's testimony and all the articles on SA). However yields and equities went up during QE. That's because the subsidy was turned on. When QE was turned off, equities and yields fell.

    Understanding that a CB is a subsidy and not a mechanism to grown the economy is the first step to protecting yourself.
    Nov 21, 2015. 09:48 AM | 1 Like Like |Link to Comment