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  • How To Prepare For Rising Interest Rates [View article]
    "In US interest rates have been falling for 33 years. Why would they start rising now? "

    Also, keep in mind that "high" rates are a sign of trouble. In a vibrant, free market, it would be a sign that the demand for capital outstrips the supply. In the past, that scenario attracts capital. The additional capital then pushes rates back down. The Dutch experienced this when they gained their freedom from Spain in the late 1500s, and their 14% interest rates dropped to 3% after they created the freest markets in Europe. In fact the low rates in the Netherlands was one of the reasons the British created the Bank of England in 1694 in an attempt to create their own low rates to create the prosperity the Dutch were experiencing.

    High interest rates are also the sign of credit risk, like Greece.

    Thus, high interest rates should generally only be temporary. A growing economy would attract capital and thus then experience lower rates. A credit risk basket case will eventually default, and then find no one else will lend to them, thus they can only borrow when they can bear the cost, and thus lower rates.

    For the US, we would expect higher rates if we expected the economy to take off in the near future. That would require major policy shifts like gutting the regulatory agencies and getting rid of the IRS. Neither of these are likely, thus, we should not expect a rapidly expanding economy wherein the demand for capital outstrips the supply. Next would be credit risk. For that to happen some other country would have to become the world's reserve currency by developing a larger consumer market than that of the US. That would mean Europe or China would have to switch to a market that is freer than the US. For that to happen, the ruling classes would need to be willing to risk their fortunes and power. That isn't likely to happen either.

    So what we are left with is that neither of the conditions are likely to be satisfied that would indicate rates are about to go up. As such, it is logical to think that rates will stay low for a very long time, at least until the macro policy changes I listed above are employed.

    Its like expecting Tesla to make a profit as long as they only know how to make $100k electric cars. Now, if they found a way to make the same car that sold for $10k, that would be a major policy shift that would require a calculus change.
    Aug 28, 2015. 09:38 AM | 2 Likes Like |Link to Comment
  • Comments On The Market Correction; Focus On Biotechs: Large Caps [View article]
    more QE

    Here's an interesting thought.

    http://bloom.bg/1K3Jrgv
    Aug 26, 2015. 03:49 PM | 1 Like Like |Link to Comment
  • The Lesson In China: Don't Go Bubble In The First Place [View article]
    "The Quantitative Easing Policy is still in place, it is has not ended. "

    Yes. Everyone knows that. That's why I said this from above.

    "The ECB is still engaged in QE"

    ECB QE was still going on when rates were going up as well. By your logic, they should have been steadily going down all through the program. However, they have gone up during ECB QE, and then down. So there's more going on here than just one thing. As I have noted before, its about the subsidy mix, and that's what we have to look at here.

    However to help you out even more I will explain further to help you have a better understanding of how this works.

    In addition to ECB QE, we also have the Fed maintaining its balance sheet at $4.5 trillion. To do that it has to buy bonds. QE is buying bonds, so in essence, the Fed is also still engaged in QE. However, it is just not a QE that GROWS the Fed's balance sheet.

    If you are interested in learning more about this, you can track the Fed balance sheet here.

    http://1.usa.gov/sQo6xW

    Overall, here is what is going on. The real economic data reveal a slightly receding malaise. In other words, the economy is just barely limping along. In such a scenario, the yield curve would tend to flatten out and stocks would show modest growth. What has helped boost asset prices has been the ongoing QE from the Fed to maintain its balance sheet and growth QE from the ECB.

    The efforts from these CBs have propped up asset prices and yields despite the weak economic conditions. This is what produced the increasing equities markets and rising interest rates you noted above (which also conflicted with your notion that QE always makes rates go lower).

    As such, the market is constantly trying to correct to lower levels to reflect the real economic conditions, which the data show as weak (aka China, Greece, Europe, etc). Thus, the looming threat to current asset prices are the proposed Fed DR increases and the PROJECTED end of ECB QE, supposedly in Sept of 2016.

    This means that though the ECB and Fed are engaged in QE, it is not strong enough to offset the weak economic conditions caused by gov interventions in the economy. So, contrary to your comments in June that the market was going to keep going up along with interest rates (again contrary to the theoretical claims of QE) because the Fed had tapered, based on a strong economy via all the gov interventions, the market has continued to struggle to reach the tops I had mentioned earlier.

    The lesson to learn from CBs, is that they inflate, then cause deflation, and then re-inflate. The Fed and ECB have provided some asset price support in 2015, but there is the possibility they are going to take some of that away later this year or next year. Thus, if they do, that represents a possible buying opportunity to buy at CB induced deflated prices, in order to take advantage of the CBs re-inflated asset prices subsequent to their deflation.
    Aug 26, 2015. 03:23 PM | Likes Like |Link to Comment
  • Comments On The Market Correction; Focus On Biotechs: Large Caps [View article]
    "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). "

    These comments were made in June. On Jul 13 the 10 yr was at 2.43 and a few days after that the S&P hit 2128, but as I noted before this is mainly driven by the ECB QE and offset by all the unresolved gov intervention issues into the economy causing the weakness which drives the fear trade.


    The ECB is still engaged in QE, though what we are seeing is that its not strong enough to drive a big risk-on move. The Fed's balance sheet has shrunk by about $10 billion this year, but it is still being maintained close to $4.5 trillion. The ECB QE is scheduled to end in Sept of 2016. The Fed is still talking about increasing the DR (though doubt is rising).

    What this means is that the there is still some slight bias towards risk-on, so that means support for asset prices until the Fed raises the DR and the ECB ends QE. As such, the circumstances don't indicate a big drop in equities and interest rates before that. What seems likely is the 10 yr bouncing between 2 and 2.30 and the S&P bouncing around 1900 to 2100, that is until we actually get the Fed DR increase and the ECB ends QE.

    If that scenario does play out then we could start talking about 1.60 on the 10 yr and 1700 to 1800 for the S&P. What could drive equities and yields lower, would be a series of DR increases (say 75 bps instead of 25) and after the ECB ends QE, the ECB allows the balance sheet shrink they way it did when it ended LTRO in 2012.

    If events do occur that way, then what you look for are indications the CBs are going to move to reinflate (more QE or lowering DR). If you get wind of that, then that is the time to go all in and wait for the CBs to re-inflate, causing equities to rise and interest rates to go up, and thus re-inflating you along with the market.
    Aug 26, 2015. 03:11 PM | Likes Like |Link to Comment
  • The Lesson In China: Don't Go Bubble In The First Place [View article]
    "That is the exact opposite of what happened. The stock market is at an all time high and interest rates are now rising."

    Let's see, on 8/25 the S&P hit 1867, and on the 24th the 10 yr was closing in on 1.90. The predicted "permanently high plateau"-ish, Fisher like comment above, turned out to be just as wrong.

    Here is my comment from above.

    "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). "

    These comments were made in June. On Jul 13 the 10 yr was at 2.43 and a few days after that the S&P hit 2128, but as I noted above this is mainly driven by the ECB QE and offset by all the unresolved gov intervention issues into the economy causing the weakness which drives the fear trade.

    So, now that we can dismiss with DLA's incorrect analysis driven by propaganda and conventional wisdom, and we can move on to what is going to continue to happen.

    The ECB is still engaged in QE, though what we are seeing is that its not strong enough to drive a big risk-on move. The Fed's balance sheet has shrunk by about $10 billion this year, but it is still being maintained close to $4.5 trillion. The ECB QE is scheduled to end in Sept of 2016. The Fed is still talking about increasing the DR (though doubt is rising).

    What this means is that the there is still some slight bias towards risk-on, so that means support for asset prices. As such, the circumstances don't indicate a big drop in equities and interest rates. What seems likely is the 10 yr bouncing between 2 and 2.30 and the S&P bouncing around 1900 to 2100, that is until we actually get the DR increase and the ECB ends QE.

    If that scenario does play out then we could start talking about 1.60 on the 10 yr and 1700 to 1800 for the S&P.

    Just remember, you can forget all the propaganda about free markets causing the booms and busts. All of history and all of the empirical evidence shows it is the gov intervention via subsidies, CBs, tax policies, war, etc that leads to the booms and busts. Learn to study the subsidy mix in order to protect yourself.
    Aug 26, 2015. 02:59 PM | Likes Like |Link to Comment
  • Little Trouble In Big China [View article]
    "Bloomberg is right; although 2% is small in absolute terms, it is a multiple of what China has ever done at one time in the past."

    Yeah, but if I have never eaten sugar, and then one day I have one cube, sure my usage has skyrocketed relative to what I have done in the past, but it doesn't mean I will gain 500 lbs by tomorrow.

    What matters is the impact. If the first cube was the first in a series of steps that results in one cube every 5 years, the impact is still meaningless. However, it is the first step into 100 lbs of cubes everyday, then that is something to watch out for, but that also assumes I could afford 100 lbs everyday.

    There actually are costs to printing money, and nature stops it at some point. China may also not be ready to bear the costs of taking any more steps.
    Aug 19, 2015. 02:22 PM | Likes Like |Link to Comment
  • The Future Of Greece, The Euro And The Impact On Global Markets [View article]
    "Once the money is controlled and debt replaces the wealth of savings, "

    Indeed, think about a note. A note is just a claim on assets. Assets are produced by labor, so a note is really a claim on labor.

    A basic balance sheet is

    Assets = Capital. Capital is represented by notes we call stock. Printing stock is dilutive to ownership because it spreads the claim on the assets.

    A central bank note is really a claim on the labor of the society that backs it up. In this sense, there really is no such thing as a fiat currency. All notes have to have a claim on some valuable asset to have worth, thus all notes must be a store of value. In other words, they have value because they can be used for transactions that exchange assets (contrary to John Law I might add). The more assets a note can be exchanged for, the more valuable it becomes.

    Thus, a central bank that can print an infinite amount of notes (which is why we are told we should cherish it) is really a central bank that can print an infinite claim on labor. An infinite claim on labor is total slavery.
    Aug 19, 2015. 02:16 PM | Likes Like |Link to Comment
  • The Future Of Greece, The Euro And The Impact On Global Markets [View article]
    "who not accidentally, shrinks the population."

    We see this borne out in all slaver states. England makes it harder and harder to get health care as you get older. I believe it was Kim Jong Il who said that his main problem was a population that got "too" big. The National Socialists of Germany were also great examples, although they were pikers compared to Mao and Stalin.

    Contrast that to the US in the late 1800s that was an yawning chasm, desperate for labor. Part of the reason the Titanic had so many deaths, is that it was full of people fleeing the highly taxed and regulated markets of Europe, which, of course, had central banks and a class system. The revolt of the American colonies was over taxes and regulations (violence checking violence).

    When gov doesn't protect person and property, you get Napoleon going into to Russia with 600k men and coming back with less than 100k, because Russia was violating the trade sanctions that the French had struck with the Russians against the British.
    Aug 19, 2015. 02:10 PM | 1 Like Like |Link to Comment
  • The Future Of Greece, The Euro And The Impact On Global Markets [View article]
    "Slavery usually results in revolt as starvation sets in."

    A market is a law of nature. Nature will always correct market mistakes. The correction for a coerced market is bloodshed. That's the point of striving for a free market, which is to say, a market free of violence. Capitalism is simply a system of property rights based on the observations of nature that show us the capital cycle. Thus, the manifestation of capitalism is a free market. A free market promotes maximum productive growth. It creates a cycle of getting richer and richer for everyone. That's nature's reward.

    When force is interjected into a market, the incentive for people become to live off of each other. Everyone becomes everyone else's slave. That leads to a downward spiral where there may be some getting richer while everyone gets poorer, but the over all economic situation is one of declining life styles. At some point, the market will correct, and that correction to offset the threats of violence from the gov is private violence.

    This is why Marx was constantly proved wrong. He predicted the workers would rise up in Capitalist system (his problem was he didn't know what Capitalism was), and create a communist one (which is really a slaver economy). Well, the opposite happened. The revolts occurred in the slaver states, with the slaves trying to flee to the Capitalist (ones striving for violence free - nonslaver state) economies.
    Aug 19, 2015. 02:02 PM | 1 Like Like |Link to Comment
  • The Future Of Greece, The Euro And The Impact On Global Markets [View article]
    "Force yes but not necessarily of a standing army."

    It can also be a police force, a treasury dept, or any armed gov "official" that has the power to threaten your body. Ironically, the people that support gov regulation are also the same people that claim to be against the death penalty, but if you think about it, all gov laws are ultimately enforced with a death penalty. If there was no threat to your body, then no one would comply. Consider a fine. If the gov levied a fine, but could never send armed "officials" to collect, then what would be the point of setting a fine. No one would ever pay.

    The human body is everyone's "first" capital. From that "first" capital flows all of the other capital a person would create. Thus, the only way to take a person's home (which is the capital their body created), is to threaten the body. A person that claims to be a pacifists, but believes in gov regulation is an oxymoron.

    This is why all legitimate law is based on supporting the non-aggression principle, and not the non-violence principle. Protecting a person's body and by extension, the property they create with their body, is fulfilling the laws of nature. Whenever nature is obeyed, then nature provides a reward. In this case, protecting person and property results in capital creation. Capital makes labor more efficient, which leads to more capital creation, and the cycle continues. Everyone will get richer and richer. Some may get richer faster than others, but you will not have what you have in a gov regulated system (like slavery) which is one group that gets richer while another group gets poorer (used up).
    Aug 19, 2015. 01:55 PM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    The Swedes are already working along a similar thought path.

    http://bit.ly/REqlPq

    And so is Hawaii.

    http://huff.to/1IQsU9y

    Of course, immigration would be a desirable thing if there were no gov intervention. Texas or any state for that matter, would be wise to have a single welfare program. That program would be to have lobbyists in CA, MN, and NY that lobby for all minimum wage increases, double state worker salaries and benefits, bans on petroleum products, bans on sugar, bans on salt, 90% state income tax rates on all incomes above $75k, bans on all private education, and welfare benefits that equate to $75k a year. The next part of the program would be a relocation service for any state resident or illegal alien to each of these states to CA, MN, or NY. The residents of CA, MN, or NY certainly couldn't argue, because based on their own arguments, this should make them the wealthiest states on the face of the planet.
    Aug 14, 2015. 08:07 AM | Likes Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "I want to balance up"

    Then you want to cut spending and taxes. That is balancing the gov down, which will result in balancing up for the productive side of the economy (off which the gov lives). What you are missing is the inverse side to what you are proposing, which is why your approaches create bubbles. Your approach benefits some at the expense of others. Gov spending erodes capital, and without capital, labor can't be made more efficient. Without more efficient labor, people can't work less and have more. In other words, its the gov spending that creates the austerity, the real austerity that we should be concerned with, where we have to work more for less.

    The money will be spent (you haven't read Bastiat). The question is are we going to let price blind gov spend it on roads that go to the wrong places, take way too long to build, cost three times what it should cost, and be built in a dangerous manner where people get killed, or are we going to let price sensitive organizations like Apple spend on making phones better and cheaper or food producers making food safer and cheaper.

    Its the same thing as a private company ending nonproductive activities to focus on productive activities. Its funny on a website that is dedicated to finding the companies that do that best, that somehow that analysis evaporates when it comes to the dogmatic defense of gov.

    If what you were proposing worked so well, Greece could leave the Euro, and do what you proscribe all by themselves and become wealthy beyond their wildest dreams. They fact that they don't, shows that it doesn't work. What has been demonstrated to work is gov that does what it is supposed to do and nothing more, which is protecting person and property, and then the natural laws of productivity via price discovery kick in, wealth is generated and everyone gets richer. Some faster than others, but everyone's standard of living goes up.

    Its only in protectionist economies, where gov spending is used to protect cronies, where the rich get richer and the poor get poorer. This is the example we have seen for hundreds of years, the epitome of which was JB Colbert. What you are proscribing is just a rebranded version of that sort of protectionism.

    However, this is what we have, so the lesson to be learned is that the financial markets, particularly equities, is where the measure of that paradigm manifest itself. Gov regulations, taxes, and central banks are all protectionist measures that make the rich, richer, and the poor, poorer. If JB Colbert had an index, it would be the S&P. So, as a French peasant oppressed by Colbert, if you took what little you had left and invested in the Colbert S&P, you could get some back of what was taken from you. Thus, as Colbert and his cronies got richer, the index would go up, and you along with them.

    So, another strategy, if you don't have the time and patience for market timing, is just to get into an equity index. What will happen is that both fiscal and monetary policy will deflate equity prices from time to time via their incompetence (remember the Fed and the 16th amendment both happening about the same time - the dunderheads), but they will always reinflate. So long as gov regulations don't totally kill the economy like they have in Greece, Cuba, or N Korea, their will be productivity that will allow the equity prices to be reinflated.

    What you have to do is, understand what is going on, and just sit in equities and ride out the down turns, secure in the faith, that the protectionists and cronyists, will go to the mattresses for the financial markets. Then as they transfer wealth from the general populace to prop the markets back up, you will propped up along with them.

    Hundreds of years of history and empirical data show us how this works. Its only the dogmatic that won't learn from their mistakes. You can open your eyes as well, and learn from what I have to teach you.
    Aug 12, 2015. 10:11 AM | Likes Like |Link to Comment
  • The Future Of Greece, The Euro And The Impact On Global Markets [View article]
    "think free people in free markets tend toward a consumer economy because the worker/consumer gets ahead"

    Yes, its the nature of free markets (aka - markets free of coercion). Slaves must be coerced to be slaves. There were all sorts of gov slave codes in order to keep the slaves, slaves (ie the 1854 Fugitive Slave Act).

    If you think about, a slave economy is really just another manifestation of socialism, communism, etc. It boils down to a ruling minority/majority, with a monopoly of force, that uses that force to make the unarmed minority/majority work for their benefit.

    On a slave plantation, there would have been a guaranteed job, guaranteed housing, guaranteed food, guaranteed family planning, and guaranteed healthcare. They would have all been working for the collective, which is of course run by a ruling elite that happen to be more equal than some.

    The result is a lack of incentive by the slaves to be productive. In other words, you only do enough to stay out of trouble. As soon, as someone isn't looking, you slack off. Here we see the evidence of the Randian principle, that people will not work for the benefit of another. They will work for their own benefit, and it is from their surplus that we get trade, and from that is how we get the butcher and the candle stick maker working for their benefit but only by benefitting others.

    From that paradigm we get the division of labor and the efficiencies that creates. As labor becomes more efficient, people can work less and consume more, and presto the standard of living goes up.

    The reason Greece and Europe (and even the US) are having so much trouble, is because they are all drifting more and more into "slaver" economies. As they do so, they take on more of the characteristics of a slaver economy, which means, like the South, they get poorer and poorer, while a shrinking minority gets richer and richer.
    Aug 12, 2015. 09:10 AM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "by raising taxes and cutting spending "

    Let me help out the uninformed by explaining how this works.

    The US gov has monopolized bank notes in the US (like John Law above). As such, the US has basically nationalized all banks in the US. All banks are now just branches of the Fed Res. The reason govs do this via central banks is so they can get their hands on the money. This allows them to tax people with out actually having to go out and physically take their gold, which can be so unpopular that gov leaders can loose their heads over it.

    So, the point of cartelizing the banks under the gov control, is so the gov can spend without having to tax via expropriation. Inflation becomes the tax. A tax is anything a gov does that reduces your purchasing power. The IRS takes your Fed notes, which means you can't buy anything with those notes, and when the Fed devalues your money by 2% every year (in 25 years half of your retirement savings would be gone if it were all in Fed notes), that means 2% of the stuff you would like to consume, you can't. Both methods are taxation.

    Now, to show what idiots we have that run gov, when the Fed was created, which created the conditions for not needing income taxes, these morons actually amended the Constitution so they could implement the very thing a central bank is created to avoid. I hate idiocy. Only radical, extremists could think they shouldn't hate such things.

    So, when a CB is created, what happens, is not that you have a fiat currency because its not backed by gold, what you get is a currency that is backed by the productive capacity of the populace upon which that currency was imposed. ALL CURRENCIES ARE BACKED BY THE ASSETS PEOPLE CREATE. This is why all currencies must be a store of value. They have to be able to buy things that people can consume.

    In short, a CB incorporates the whole country, and bank notes take on the effects of stock certificates. The notes represent claims on the assets the people can create. Thus, just as stock certificates can appreciate or depreciate relative to the productivity of say, Apple, so too do monopolized bank notes appreciate or depreciate. Apple can print an infinite amount of stock, but it can't print productivity. Thus, as Apple issues more shares, those additional shares create dilution. In other words, Apple assets become more expensive as notes are diluted because you need more notes to have the same claim on Apple's income that you had before.

    So, with this understanding, we can now understand why fiscal and monetary policy are really the same thing. When the IRS takes your Fed notes and delivers them to the Treas, this is akin to Apple buying back Treas stock. The Fed notes and the Apple stock, simply disappear. The notes vanish. That means the ratio of notes to assets changes. The dilutive affect is diminished. The Fed could debit a "Receivable from Populace" and credit a DDA for every person in America. That would be the same thing as a temporary payroll tax reduction.

    The result is asset prices fall (in other words, they become less expensive). When asset prices fall, people panic, they stop spending, GDP is a measure of spending, and presto a recession.

    So, when the Fed raises the DR, its the same thing as the US Treas collecting more taxes. Asset prices fall, and if enough Fed notes are destroyed, you get a recession. In reality, we could get rid of the IRS, and inflation would become our only tax. However, if the resulting increase in productivity outstripped the increase in notes (both Treas and Fed Res), the ratio of assets to notes would improve, and the resulting taxation would be small. QE was basically a tax break for banks, because the banks basically got the money, instead of the average person getting a refund from the US Treas.

    Gov spending does the same thing. It puts more notes in the system, but those notes are created for subsidized consumption, which diverts from productivity increases. The result is an inflationary boom. That boom will be paid for by a bust, as future consumption must adjust to meet the new, lower productivity levels (its like eating your seed corn in the winter and then having nothing to plant in the spring - you WILL do without).

    Thus, the way to play all this, is when you see gov inducing "expansion" you will know this to be an inflationary consumption binge. Equities and interest rates will rise. Then when gov reverses the "expansionary" policies, a bust will come (gov "expansionary" booms can also be stopped by other price increases - such as a massive increase in commodity or energy if that's where the new money ends up. Typically, though, its the gov itself that reverses its policies and causes the bust - aka DR increases- so much for no harm policies). Equities will fall and so will interest rates. If you can spend enough time studying these factors, you can time the market. I made millions over the last few years doing this. QEs alone have made me $3 to $4 million.
    Aug 12, 2015. 08:57 AM | 1 Like Like |Link to Comment
  • Summary Of My Post-CPI Thoughts [View article]
    "during adverse economic conditions "

    Which have been caused by the bubble bursting from previous gov induced consumption binges.

    Notice how increases in the DR precede recessions.

    http://bit.ly/1To614i

    It is the gov bringing on the "adverse economic conditions". I hate this, but that's only because I care about people, whereas care more about their egos.
    Aug 12, 2015. 08:22 AM | 1 Like Like |Link to Comment
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