Staying Alive

You know it's alright, it's ok
I'll live to see another day
--Bee Gees

When the Virgina Tech shootings occurred in 2007, I remember thinking that one of the last thoughts that ran thru the minds of students who were in a room with the shooter was, "I wish I had a gun."

SCENARIO: you’re in a room with an armed crazy person...

Choose one:

— Cliff Maloney (@LibertyCliff) December 30, 2019

When facing an aggressor with a gun and no chance of being rescued by someone else, you'll likely throw any anti-gun political views out the window. When it is a matter of life or death, you'll yearn for a firearm that will help you stay alive.

Tech Tonic

Sandy Riggs: So, what is Microspan Corporation all about?
Mitch Leary: I just came to meet the president. I wouldn't presume to bore you with my business.
Sandy Riggs: I don't blame you. One thing I don't understand is high tech.
--In the Line of Fire

When's the last time the tech sector was valued at ~1.75x the S&P 500? October 2000.

Ratio of the Tech sector to S&P 500 is at its highest level since October 2000. pic.twitter.com/KxqcChaL5d

— Charlie Bilello (@charliebilello) December 30, 2019

Doesn't mean the ratio can't go higher. After all, we were on the way down from dot.com top when we last marked these levels.

What it does mean is that relative tech valuations are getting pretty rich on a historical basis.

Jesus, Socialism, and Covetousness

"Their prophet says 'submit.' Jesus says 'decide.'"
--Sybilla (Kingdom of Heaven)

These pages have previously discussed the absurd claim that Jesus was a socialist. My sense is that those who make the claim are ignorant of economics, the bible, or perhaps both.

Lawrence Reed thoroughly refutes the Jesus/socialist canard here. One of his references is Christ's admonishment of envy that sets up the Parable of the Rich Fool (Luke 12: 13-21) which comprised the gospel last summer on the 18th Sunday of Ordinary Time. Someone in a crowd says to Jesus, "Teacher, tell my brother to share the inheritance with me." Jesus replied, "Man, who appointed me as your judge and arbitrator?"

He then turned to the crowd and said, "Take care to guard against all greed." Emphasis is mine, as it is straightforward to construe that Jesus is reprimanding covetousness as a form of greed.

If Jesus was a socialist, then He would have rebuked the brother who purportedly was not 'sharing' his inheritance and, likely, campaigned for a program of forced redistribution in the name of fairness and equality.

Instead, Jesus reinforced what God has commanded: Thou shall not covet.

Not QE

Don't need money
Don't need fame
Don't need no credit card
To ride this train
--Huey Lewis & the News

Charlie Bilello notes that, at the current run rate, the Fed's balance sheet will exceed its peak 'QE' level by spring.

If the Fed's balance sheet continues to expand at the pace of the last 4 months (>$100 billion per month), it will hit a new all-time high by April 2020. pic.twitter.com/gYB5t6Ocb8

— Charlie Bilello (@charliebilello) December 27, 2019

But remember, this is not QE...

Working Orders

I got something now to think about
I'll work all day but not to pay it out
--Pete Townshend

Pension buyout funds were deposited into my rollover IRA yesterday. I look forward to allocating these resources primarily toward dividend paying stocks and precious metals/miners. However, with stock markets at all time highs and the metals complex in rally mode, it is difficult to do a lot right here as prices are stretched to the upside.

Instead, I plan to spread out my buys over time. By 'working' my buy orders, I accumulate shares at various prices which, given the extended nature of the tape, increases the likelihood that my cost basis will be lower than if I purchased an entire position all at once right around here.

In the 'olden days,' working orders in small increments was uncommon. When brokers served as investment agents for most investors, those agents rarely had the time or patience to piece out trades for clients. Moreover, the transaction fees associated with trading in small quantities made trading in small size cost prohibitive.

Now, however, individual investors have the operational resources trade on their own behalf. And with brokerage commissions largely a thing of the past, it makes little sense to make big trades in risky situations--such as our present overbought condition.

So I'll work my orders by buying small and scaling in.

Silver Strength

Silver and gold, silver and gold
Means so much more when I see
Silver and gold decorations
On every Christmas tree
--Burl Ives

Technical picture for precious metals continues to improve, particularly for silver. The metal itself has broken a multi-month downtrend.

 Miners are getting their groove on as well. Pan American Silver (PAAS) has broken thru multi-year resistance at 19ish and is now making tracks higher. Technically, there is little in the way between here and previous highs more than 10 pts higher.

What's going on? The obvious answer is central banks' renewed affinity for easy credit and monetization. Markets are doing the math and they've calculated that currency destruction is a comin.'

position in gold, silver, PAAS

Emmanuel

The people who walked in darkness have seen a great light, upon those who dwelt in the land of gloom a light has shone.

You have brought them abundant joy and great rejoicing; they rejoice before you as with joy at the harvest, as people exult when dividing spoils.

For the yoke that burdened them, and the bar across their shoulders, the rod of their oppressor, you have broken as on the day of Midian.

For every boot that tramped in battle, every cloak rolled in blood, shall be burned as fuel for the fire.

For a child has been born for us, a son given to us; upon his shoulders dominion rests. They name him Wonderful Counselor, Mighty God, Everlasting Father, Prince of Peace.

His dominion is vast and forever peaceful for the throne of David and his kingdom. He will establish and uphold it with justice and with righteousness from this time onward and forevermore. The zeal of the Lord of hosts will do this.

Isaiah 9: 1-7

Opposite Eves

"Heaven help me. I love psychotic!"
--Margo Channing (All About Eve)

A year ago Christmas Eve found markets plumbing the depths of a 20% decline from previous highs. Panic was palpable.

We find the opposite this Eve. Indexes are marking record highs by the day. Optimism abounds.

Nothing, it seems, can go wrong.

Policy Uncertainty and Inflation Expectations

"Remember, sometimes when you're blind, and times seem darkest, you can often see more clearly."
--David Sloan (Kickboxer 2)

Article suggests a negative relationship between policy uncertainty and inflation expectations. The greater the policy uncertainty, the lower the expectations of inflation.

This is not necessarily intuitive. I suppose the argument goes like this. When people have trouble predicting what will happen in the institutional/regulatory environment, they will hoard cash and pull back on purchases (kind of like the 'wait and see' approach to investment advanced by researchers). Expectations of price increases therefore decline.

But we've seen the opposite as well, haven't we? In unstable policy environments, people can get nervous about holding onto cash because it might degrade in the future. Dumping cash on the market causes expectations of prices to explode higher. A reinforcing cycle commences where Big Inflation motivates even bigger inflation expectations.

The relationship between policy uncertainty and inflation expectations is moderated, it seems. What are those moderating variables?

OK Boomer

Darby Shaw: Don't laugh. It was ludicrous of me to think I could solve it. Hubris of the young, huh?
Thomas Callihan: Don't knock the hubris that I love.
--The Pelican Brief

'OK Boomer' has become a popular catchphrase among younger generations used to taunt or mock behavior or attitudes of older generations--particularly the Baby Boomer cohort. Some claim that this is yet more evidence of disrespect and apathy running rampant among youngsters these days.

These claims tend to emanate from the oldsters, of course.

This back and forth is nothing new. Friction between young and old has been at work since the beginning of sociological time. The young have what seems to be limitless time ahead of them. They see themselves as growing stronger and gaining more control over their environments by the day. Some degree of arrogance naturally results from this process, as does proclivity for rebellion against establishment.

Youthful attitudes also foster covetousness and envy toward the old. After all, the old possess relatively large stocks of economic resources that facilitate prosperous life. It is only natural for the young to want some.

'OK Boomer' is just another expression of youthful energy and hubris. OK [fill in blank with words like whatever, pop, old man]. We've heard it before.

While the young see time as infinite, the old are learning the opposite. Family and friends are passing at increasing rates, and mortality looms. The reality is that life time is limited, and older generations are becoming aware that they are closer to the end than to the beginning. It is easy, therefore, for the old to envy the young, because the young have time on their side.

Because of their tendencies for rebellion and covetousness, the young are also seen as a threat. Youngsters want to tear down what oldsters have built. Oldsters see their institutions and legacies at risk.

Thus, the old push back with memes of their own to describe the young. Brats, scallawags, whippersnappers, slackers.

Same as it ever was.