Wednesday, February 21, 2018

This or That?

So I guess the fortune teller's right
I should have seen just what was there
And not some holy light
--Natalie Imbruglia

Elongate the time horizon on the gold chart and what do you see? Some might see what looks like a monster head and shoulders pattern nearing completion. This is bearish.

Others might see a declining pennant pattern in the midst of a long term uptrend. This is bullish.

The great debate long raging inside my head may be nearing resolution.

Tuesday, February 20, 2018

Environments of Aggression

Daniel LaRusso: You really think I can beat that guy?
Miyagi: No matter. Wacko teacher attitude rest in fist. Stupid but fact of life. Win, matter. You make good fight...earn respect...then nobody bother.
--The Karate Kid

Central to principled self-defense is to be ready. To anticipate danger. Part of this involves knowing factors that foster environments of aggression.

Two conditions attract aggressors like flies: weakness and surprise. Aggressors prefer to attack people who are incapable of defending themselves when attacked. And they like to attack unannounced. Weakness and surprise increase the likelihood that aggressors will be successful.

Here is a one question quiz that tests your understanding of environments that invite aggression:

Schools have always been target rich environments for bad guys. Lots of kids who are relatively weak and unprepared. Adding a promise of no guns on the premises essentially transforms schools into defense free crime zones.

Although the concept seems counter intuitive to some, schools that voluntarily arm themselves reduce conditions of threat in their environments.

Monday, February 19, 2018

Left in Psychosis

"You want to know something? I don't think Mozart's going to help at all."
--Midge Wood (Vertigo)

Cognitive dissonance-->Trump derangement syndrome-->psychosis.

Hard not to wonder whether Left ever pull out of it...

Sunday, February 18, 2018

South Side Skyway

Well the South Side of Chicago
Is the baddest part of town
--Jim Croce

When driving to Chicago, one of my favorite parts of the journey is the leg from Gary, Indiana to Chicago's South Side. Lots of old factory buildings including a panoramic view of the US Steel Gary Works. Periodic glimpses of Lake Michigan shoreline add to the treat.

The leg also features the Chicago Skyway, a toll road that includes a giant bridge spanning the Calumet River just over the Illinois state line. When the City of Chicago leased control of the Skyway in 2005, it marked the first privatization of an existing toll road in the US. In my travels, upkeep of the Skyway has been far superior under private ownership.

Above is a pre-Skyway pic of the Calumet Harbor taken in 1929. Today, the Skyway crosses the Calumet at the High Bridge after the river bends to the left. The commanding view afforded from the High Bridge suggest things have changed little in nearly eighty years. Perhaps a few less smoke stacks, but still lots of old steel-laden infrastructure from a golden age of production.

Insight into yesterday worth today's toll bridge price.

Saturday, February 17, 2018

God's Gift of Politics

When they kept on questioning, he straightened up and said to them, "Let anyone among you who is without sin be the first to throw a stone at her."
--John 8:7

I sometimes wonder whether God gifted us with politics primarily to teach us about hypocrisy in the human condition. Yes, Christ provided a seminal lesson captured in John 8:7. It seems, however, that He desires to regularly reinforce that lesson with examples conveyed by routine political practice.

Hypocrisy is the act of engaging in behavior that one claims to be morally reprehensible in others. It tends to be difficult to see in ourselves but easy to identify in others. Because they tempt individuals to engage in duplicitous behavior on a daily basis, political environments are breeding grounds for hypocrisy.

By regularly observing the pretense and insincerity of politicians, we are reminded once again to take a good look at ourselves before casting stones at others.

Friday, February 16, 2018

Read the Paper

Ah you're breathing faster
Silence the only sound
There's no need to be nice on the way up
'Cause you're not coming down

It's been a long time since I've heard this much chatter about rising inflation. With supporting evidence too.

Take, for example, my old sector. Pulp and paper has been suffering from overcapacity and declining demand for so long that durable price increases were a pipe dream. Now look:

As noted before, once inflation--both perception and reality--gets going, it's hard to stop.

Thursday, February 15, 2018

Get the Picture

I've been living so long with my pictures of you
That I almost believe that the pictures
Are all I can feel
--The Cure

Connected to our earlier post, here's a picture of how the deficit and corresponding debt balloon with the new spending bill.

Source here.

A Million A Minute

So turn on the TV one more time
And see that everything is fine
--Flesh for Lulu

Judge Nap reprises Rand Paul's recent calculation. The budget deficit since 2016 has the federal government borrowing at the rate of $1 million/minute. With the recently passed spending bill, the deficit is forecast to widen at least $5 trillion over the next three years. This will push the borrowing rate up close to another million a minute.

As such, Judge Nap suggests that the greatest threat to liberty in this country is not some external entity such as Russia or ISIS. It's debt.

Rand Paul adds that, once voters wrap their heads around the enormity of the problem the the GOP-led spending bill has exacerbated, incumbent Republicans should not be surprised if they are tossed out on their ears in upcoming elections.

Wednesday, February 14, 2018

Inflation Heat

The shadow's high
On the darker side
Behind the doors
It's a wilder ride
--Glenn Frey

Stock futes flipped over this morning after CPI numbers printed higher than expected. Not exactly 'hot' though, as the core CPI came at at 2.1 vs 1.9 exp.

In the scheme of things, measured CPI still looks tame. However, market participants may be waking up to the reality that the Fed Funds Rate has been below the core CPI for about 10 years--by far the longest period in history.

Central banks who, by their easy monetary policies and negative real rates, have been trying to stoke inflation should be careful for what they wish. Once released, the inflation genie is difficult to get back in the bottle.

Tuesday, February 13, 2018

Negative Real Rates

"You know, the funny thing is, tomorrow if all this goes tits up, they're gonna crucify us for being too reckless. But if we're wrong and everything gets back on track? Well, then, the same people are gonna laugh till they piss in their pants because we're gonna look like the biggest pussies God ever let through the door."
--Will Emerson (Margin Call)

The difference between the nominal interest rate and the inflation rate is known as the real interest rate. If a fixed income instrument yields 5% annually but the purchasing power of the yielding currency is declining at 6% rate, then the 'real' yield is -1%.

A few years back, central banks embarked on policies known affectionately known as NIRP (negative interest rate policy). The idea was to make central bank yields so low that, when coupled with inflation, they discouraged saving in favor of spending. Presumably, this policy would be reversed as economies subsequently firmed.
The 'official' numbers tell us that, here in 2018, we stand in the ninth years of a global economic expansion. Yet, as indicated above, every developed country central bank in the world is maintaining negative real central bank lending rates.

Maintaining such easy money policy in the face of strong economic data signals one of two things. Either the 'official' numbers are wrong, or this is the greatest example of incompetence in the history of central banking.