Sunday, August 28, 2016

Mr Rogers History Lesson

Strange voices are saying
What did they say?
Things I can't understand
It's too close for comfort
This heat has got
Right out of hand

Hadn't heard from Jim Rogers in a while. Here he explains what he's doing to position himself ahead of the next market catastrophe. Rogers has been an outspoken commodities bull but barely mentions them here outside of gold. Instead he discusses 'special situation' country markets such as Russia and Nigeria. And currencies.

He thinks China will come under more pressure the next time down due to its increased debt load. He also thinks that US markets are a short as they have yet to come down like other markets have.

Great quote on history: "The main lesson of history is that nobody knows the lessons of history."

position in SPX

Saturday, August 27, 2016

Recession Probability

So hold on
Here we go
Hold on
To nothing we know
--The Motels

JP Morgan estimates the probability of a recession within the next 12 months to be 37%--the highest odds since the beginning of the present 'expansion' in early 2009.

Eyeballing suggests that the last recession spawned by credit collapse commenced right around this level of estimated probability.

Friday, August 26, 2016

Favor for Sale

Say that you'll never, never, never need it
One headline, why believe it?
Everybody wants to rule the world
--Tears for Fears

Evidence continues to mount that Hillary Clinton and her hubby have been huge sellers of political favor over the past decade or so. While the multi $100 million size is eye opening, that they have been sellers shouldn't be a surprise. Whenever government is capable of redistributing resources from some for the benefit of others, then markets for political favor will thrive.

As noted here, the solution is not to try to restrain the buyers of political favor. Whatever the rules might be limiting campaign contributions et al., those seeking to gain political favor will find a way to purchase it.

Instead, the solution is to prohibit government from forcibly taking property from some for the benefit of others. Then and only then would politicians have nothing to sell. The market for political favor would at that point be shut down.

Thursday, August 25, 2016

Pension Put Selling

They gave you life
And in return you gave them hell
As cold as ice
I hope we live to tell the tale
--Tears for Fears

A predictable consequence of eras of financial repression is that investors will seek out riskier sources of yield. Pension funds, for example, unable to earn large enough coupons from traditional fixed income vehicles, are now resorting to put selling to earn income. 

As long as prices stay elevated, then the 'free money' comes tumbling in. However, when prices fall, then risk becomes reality and losses mount as those who are short puts must cover at higher prices.

At some point, stretching too far for income in this environment will sever people from their capital.

Wednesday, August 24, 2016

Welcome Robots

C-3PO: Is there anything I can do?
Luke Skywalker: Not unless you can alter time, speed up the harvest, or teleport me off this rock.
--Star Wars

Another nice contribution that counters the robot fallacy. One particularly noteworthy quote: "Simply put, jobs that robots can replace are not good jobs in the first place."

The author also observes that capital seeks to destroy low productivity work in favor of work that produces more output/hr. That more wealth per unit of human exertion, not less.

He also notes that in 1962, JFK worried about "how to maintain full employment at a time when replacing men."

Technology always creates more jobs than it destroys. Since JFK's question, US employment has nearly tripled.

Automation increases focus on the strengths of human capital: intelligence and flexibility.

Tuesday, August 23, 2016

Ball and Chain

"These walls are funny. First you hate'em. Then you get used to 'em. Enough time passes, you get so you depend on them. That's institutionalized."
--Ellis "Red" Redding (The Shawshank Redemption)

Welfare chains people to poverty.

More people snapping on the leg irons by the day.

Monday, August 22, 2016

Swimmer Lies Matter

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

Right on cue after yesterday's post.

Only swimmer lies matter, it seems.

Sunday, August 21, 2016

Lying Down

We're so sorry, but we haven't heard a thing all day
We're so sorry, Uncle Albert
But if anything should happen
We'll be sure to give a ring
--Paul McCartney

Was thinking during my morning workout about the media's double standard regarding lying. Gallons of ink are spilled over the lying of an olympic athlete but the 'short circuiting' of the truth by a presidential candidate is virtually ignored.

Then saw this am tweet from Johnny Bench:
Right on, JB.

Saturday, August 20, 2016

Mechanical Slaves

Kyle Reese: There was a nuclear war. A few years from now, all this, this whole place, everything. It's gone. Just gone. There were survivors. Here, there. Nobody even knew who started it. It was the machines, Sarah.
Sarah Connor: I don't understand.
Kyle Reese: Defense network computers. New, powerful, hooked into everything. Trusted to run it all. They say it got smart, a new order of intelligence. Then it saw all people as a threat, not just the ones on the other side. Decide our fate in a nanosecond: extermination.
--The Terminator

Fears escalate about the "robot fallacy"--i.e., that robots will take over the world of work. Some good rejoinders here. Robert Samuelson reviews the history of the misplaced fears of technological unemployment and notes that robots are merely the most recent chapter in the drama.

Prof Boudreaux adds that not only do robots not threaten long term unemployment, but they improve productivity and prosperity.

Prof McCloskey might state it best, "The repeated alarms against robots are silly, since robots are merely mechanical slaves for our benefit."

Friday, August 19, 2016

Productivity and Monetary Policy

Get back
Get back
Get back to where you once belonged
--The Beatles

Productivity in the US is declining. Peter Schiff explains why (Bill Gross also gets it). Central bank policies have been driving depletion of savings. Without savings, there can be no capital. Without capital, there can be no investments that improve output per worker hour.

Output per worker hour is the way productivity is commonly defined.

How to rebuild the capital stock thru savings? Raise interest rates, which provides a signal that capital is in demand.

Rates do not have to be risen artificially. Central bankers merely need to step away from the interest rate lever and let the markets determine where rates should naturally be.

We can be certain, however, that markets would raise them...substantially.