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Shane Anthony Mele stumbled off the straight and narrow path many years ago. One bad decision here. Another there. And he was neck deep in the smelly stuff.

These missteps compounded over the years and also magnified his natural shortcomings. Namely, that he’s a thief and – to be polite – a moron. Recently the confluence of these two failings came together like a sewage spill to a river draining through the center of town.

Mele made a dishonest mistake. He failed to recognize that he’s not the only dishonest soul operating in a dishonest world. That is, he failed to comprehend the difference between face value and real value.

So it was, with dishonest intentions, that he burgled a rare coin collection with no clue what it was that he’d taken. To his soft and greedy mind all he saw was a hoard of coins with a face value of One Dollar. Thus, he redeemed them for cash. Zero Hedge offers the details:

“After stealing a rare coin collection from an elderly and disabled retiree, Shane Anthony Mele, dumped what their owner said was at least $33,000 worth of collectible coins down a Coin Star machine at a Florida supermarket and collected their face value, receiving about $30 – enough for a couple of 12 packs.”

A Downright Disgrace

Mele, no doubt, is a thief and a moron. He’s also a thief and a moron that got caught up in something he doesn’t understand. He may be dishonest. But the world he’s operating in is also dishonest.

Stealing someone else’s property and then reducing the spoils valued at $33,000 to a payout of about $30 is a remarkable achievement. Mele’s Coin Star transaction delivered a loss of over 99.9 percent. But he’s not alone…

…click on the above link to read the rest of the article…

The Big Government Show Must Go On

February 8, 2019

The Big Government Show Must Go On

Another week. Another week of distractions. On Tuesday, for instance, was the great State of the Union Address. To this, many opinions and observations have been offered. Here, we’ll contribute several of our own…

President Trump is a showman of stout ego. How he must have relished the run-up to Tuesday’s primetime address with impatient anticipation. What a disappointment it must have been to look out from the podium of the House of Representatives at the 116th Congress and see the greatest assemblage of political crooks, lowlifes, and losers in living memory staring back at him.

But the show must go on…disappointments and all. For life’s full of disappointments. The many botched opportunities. The countless hours wasted on bids for ridiculous jobs. Super Bowl Sunday. Duds, dissatisfactions, and disappointments come a dime a dozen.

Words are also the source of many disappointments. Words that shouldn’t have been said. Words that should have been said.

So, too, words, and the absence of words, can be distractions. And within a sequence of words there are sometimes obvious omissions.

For example, nowhere within the 82 minute State of the Union Address was there a single word of the country’s burgeoning $1 trillion budget deficit. Nowhere was there a word of the great $22 trillion national debt default that’s bearing down upon us like a savage hurricane along the Gulf Coast. Nowhere was there mention of the $122 trillion in unfunded liabilities, which includes the sacred cows of social security and Medicare.

What Gives?

No One Cares

The real State of the Union – the one President Trump omitted from his address – is a state of impending doom brought on by 50 years of relentless debt accumulation. Day after day, week after week, month after month, year after year, the federal government has spent more than it takes in. Now the debt has piled up past the point of no return; there’s no longer an expedient way to reverse course.

…click on the above link to read the rest of the article…

Washington’s Latest Match Made In Hell

January 12, 2019

Washington’s Latest Match Made In Hell

Almost Predictable

One of the more enticing things about financial markets is not that they’re predictable. Or that they’re not predictable. It’s that they’re almost predictable… or at least they seem they should be.

For a long time people believed – and from what we read and hear, many still do – that economic cycles move in easily predictable, regular time periods. All you had to do was create a chart of the up and down waves of your favorite cycle model and extrapolate it into the future, and presto, your prediction was ready to be sold. But it turns out it is not that simple. The chart above was published by the “Inflation Survival Letter” in the late 1970s and purported to show the future trend of the so-called Kondratiev Wave, a cycle invented by Soviet economist Nikolai Kondratiev (who was eventually deported to the GULAG and killed by the Stalin regime, after a fellow American economics professor denounced him to the communists in Moscow as a “counter-revolutionary”). Interestingly, their forecast of the trend in wholesale prices turned out to be correct, but everything else they predicted in this context was incorrect. According to the K-Wave theory, the year 2000 was supposed to have been the trough of a major economic depression, with extremely high unemployment, a plunging stock market and all the other symptoms associated with a giant bust. In reality, the year 2000 was the peak of a major boom, with unemployment almost reaching a record low and stock prices soaring to unprecedented valuations. There was a time when the seeming elegance and simplicity of models like Kondratiev’s had our attention as well. There are ways of rationalizing such models.

…click on the above link to read the rest of the article…

The Recline and Flail of Western Civilization and Other 2019 Predictions

December 31, 2018

The Recline and Flail of Western Civilization and Other 2019 Predictions

Darts in a Blizzard

Today, as we prepare to close out the old, we offer a vast array of tidings. We bring words of doom and despair. We bring words of contemplation and reflection. And we also bring words of hope and sunshine.

Famous stock market investment adviser Field Marshal D. Trump [PT]

After all, the New Year’s nearly here. What better time than now to turn over a new leaf? New dreams, new directions, and new delusions, are all before us like a patch of ripe strawberries. Today’s the day to make a double-fisted grab for all of them – and more.

Rest assured, 2019 will be the year that everything happens precisely as it should. Some good. Some bad. Indeed, each day shall unfold before you in symbiotic disharmony. You can count on it.

But what else? What are the essential anticipations as we embark on a new voyage around the sun? What about stocks, the 10-Year Treasury note, gold, and everything else? Are we fated for complete societal breakdown? Will this be the year the Fed put finally bites the dust?

Today we attempt to answer these questions – and many others – with meekness and modesty. Predicting the future, like Fed monetary policy, is primarily guesswork. But unlike the Fed, we acknowledge we’re merely throwing darts in a blizzard.

By all accounts, our methodology is as unscientific as prophecy via tarotology. We shun common forecasting techniques for a conjectural approach. First, we engage all matters of fact, fiction, fakery, and fraud. Then, through induction, deduction, biased interpolation, gut check filtration, and metaphysical reduction, we arrive at precise, unequivocal answers.

…click on the above link to read the rest of the article…

How Faux Capitalism Works in America

December 15, 2018

How Faux Capitalism Works in America

Stars in the Night Sky

The U.S. stock market’s recent zigs and zags have provoked much squawking and screeching. Wall Street pros, private money managers, and Millennial index fund enthusiasts all find themselves on the wrong side of the market’s swift movements. Even the best and brightest can’t escape President Trump’s tweet precipitated short squeezes.

The Donald mercilessly hits the shorts with a well-timed tweet. But as it turns out, this market is in a really bad mood at the moment. [PT]

The short-term significance of the DJIA’s 8 percent decline since early-October is uncertain. For all we know, stocks could run up through the end of the year. Stranger things have happened.

What is also uncertain is the nature of this purge: Is this another soft decline like that of mid-2015 to early-2016, when the DJIA fell 12 percent before quickly resuming its uptrend? Or is this the start of a brutal bear market – the kind that wipes out portfolios and blows up investment funds?

The stars in the night sky tell us this is the latter. For example, when peering out into the night sky even the most untrained eye can identify the three ominous stars that are lining up with mechanical precision.

These stars include a stock market top, followed by a monster corporate debt buildup, and a fading economy. In short, the stock market’s latest break is presaging a corporate credit crisis and global recession.

BofA/Merrill Lynch US high yield Master II Index yield – this looks like a quite convincing breakout, impossible to tweet down. In other words, the corporate debt build-up is beginning to bite back – and rather bigly, if we may say so (ed note, in case you’re wondering: the little poems are from a Spectator competition in which people used phrases from actual tweets to put together Donald haikus and poems). [PT]

…click on the above link to read the rest of the article…

Paper Lanterns

December 8, 2018

Paper Lanterns

Mud Volcanoes

There are numerous explanations for just what in the heck is going on with the economy. Some are good. Many are bad. Today we’ll do our part to bring clarity to disorder…

Two data series it is worth paying attention to at the moment: the unemployment rate (U3) and initial claims. As the chart at the top shows, when the former makes a low it is time to worry about the economy. Low points in the U3 UE rate slightly lead the beginning of recessions. Claims on the other hand are near coincident indicators of the stock market, this is to say, lows in initial claims tend to happen within a time period of four to six weeks surrounding major stock market peaks (in most cases they lead slightly, but small lags have occasionally occurred as well). Note: neither indicator confirms an imminent turning point as of yet – initial claims would e.g. have to rise to around 300k in order to do so. The same is true of other major recession indicators, their most recent readings do not yet confirm that the business cycle is about to turn down. However, there is a lot of circumstantial evidence that indicates such a downturn may soon be confirmed, including recent market moves (i.e., deteriorating stock prices and rising credit spreads). [PT]

Several backward looking economic fundamentals show all is well. Third quarter gross domestic product increased at an annual rate of 3.5 percent. And the unemployment rate, if you exclude something called discouraged workers, is just 3.7 percent – a near 50 year low. By these metrics, the economy’s never been better.

…click on the above link to read the rest of the article…

The Intolerable Scourge of Fake Capitalism

November 17, 2018

The Intolerable Scourge of Fake Capitalism

Investment Grade Junk

All is now bustle and hubbub in the late months of the year. This goes for the stock market too. If you recall, on September 22nd the S&P 500 hit an all-time high of 2,940. This was nearly 100 points above the prior high of 2,847, which was notched on January 26th. For a brief moment, it appeared the stock market had resumed its near decade long upward trend.

We actually did not believe in the validity of the September breakout attempt: the extremely large divergence between the broad market and the narrow big cap leadership was one of many signs that an internal breakdown in the stock market was well underway. It is probably legitimate to refer to the January 2018 high as the “orthodox” stock market peak – the point at which most stocks topped out. [PT]

Chartists witnessed the take out of the January high and affirmed all was clear for the S&P 500 to continue its ascent. They called it a text book confirmation that the bull market was still intact. Now, just two months later, a great breakdown may be transpiring.

Obviously, this certain fate will be revealed in good time. Still, as we wait for confirmation, one very important fact is clear. The Federal Reserve is currently executing the rug yank phase of its monetary policy. As the Fed simultaneously raises the federal funds rate and reduces its balance sheet, credit markets are slipping and tripping all over themselves.

This week, for example, seven-year investment grade bonds issued by GE Capital International traded with a spread of 2.47 percent. For perspective, this is equivalent to the spread of BB rated junk bonds. In other words, the credit market doesn’t consider GE bonds to be investment grade, regardless of whether compromised credit rating agencies say they are.

…click on the above link to read the rest of the article…

When Fake Money Becomes Scarce

November 10, 2018

When Fake Money Becomes Scarce

Remaining Focused

A rousing display of diversions this week assured the American populace was looking every which way but right under its collective nose. Midterm elections. White House spats with purveyors of fake news. The forced resignation of Attorney General Sessions…

Old drug warrior (otherwise recused) on his way home to Alabama…

Sideshows like these, and many more, offered near limitless opportunities to focus on matters of insignificance. Why stop to really understand what’s behind a headline when hundreds of new headlines pop up by the minute? Why bother to try and figure things out when real thinking is such an inconvenience?

What’s more, the S&P 500 jumped nearly 3 percent between market open Monday and market close Thursday. Clearly, the October mini-panic is now a distant memory. At this rate, we’ll all be rich off stocks by the New Year.

Yet while the mob stampeded from one distraction to the next, we remained focused on the real story: The outright pilfering of the nation’s time, talent, and treasure. This isn’t the story that’s readily presented by the headlines. But it is readily evident for those willing to open their eyes and look around at the world before them.

You see, the real story, the story that’s being largely ignored, is three fold. Rising borrowing costs, a debt crisis, and price inflation are converging with unbearable consequences. You can’t miss it.The “thank God it’s over” election celebration in the stock market. This rally is not likely to last. In fact, it could quite easily morph right back into a panic cycle. [PT]

Fake Money

The U.S. Treasury, if you didn’t know, will issue $1.3 trillion in new debt in 2018. This represents a 146 percent increase in new federal government debt issuance from 2017. By our rough estimation, this number will significantly increase in 2019 and again in 2020.

…click on the above link to read the rest of the article…

Pushing Past the Breaking Point

November 3, 2018

Pushing Past the Breaking Point

Schemes and Shams

Man’s willful determination to resist the natural order are in vain. Still, he pushes onward, always grasping for the big breakthrough. The allure of something for nothing is too enticing to pass up.

From the “displays of disbelief, revealing touching old-fashioned notions” file… [PT]

Systems of elaborate folly have been erected with the most impossible of promises. That prosperity can be attained without labor. That benefits can be paid without taxes. That cheap credit can make everyone rich.

Central to these promises are the central government and central planning authorities. They take your money and, in return, they make you a dependent. They promise you a secure retirement, and free drugs, while running a scheme that’s well beyond anything Charles Ponzi ever dreamed of.

According to the government’s statistics, the economy has never been better. By the official numbers, we’re living in a magical world of full employment, 2.3 percent price inflation, and the second-longest growth period in the post-World War II era. Agreeable reports like these are broadcast each month without question.

Still, we have some reservations. How come, with the nirvana of full employment, 62 percent of all U.S. jobs don’t pay enough to support a middle class life? An economy with full employment should be an employee’s market; one where employees can name their price.

Surely, workers would select a middle class life if they could. But they can’t… because full employment is a sham.

Left: Charles Ponzi back in his heyday. Right: the almost free lunch, a.k.a. the no free lunch theorem ATM [PT]

An $8 Trillion Purge

…click on the above link to read the rest of the article…

Why You Should Expect the Unexpected

October 20, 2018

Why You Should Expect the Unexpected

End of the Road

The confluence of factors that influence market prices are vast and variable. One moment patterns and relationships are so pronounced you can set a cornerstone by them. The next moment they vanish like smoke in the wind. One thing that makes trading stocks so confounding is that the buy and sell points appear so obvious in hindsight. When examining a stock’s price chart over a multi-year duration the wave movements appear to be almost predictable.

The fascinating obviousness of hindsight – it is now perfectly clear when one should have bought AMZN. Unfortunately it wasn’t quite as clear in real time. [PT]

Trend lines matching interim highs and lows, and bounded price movements within this range, display what, in retrospect, are the precise moments to buy and sell. In practice, the stock market dishes out hefty doses of humility with impartial judgment. What’s more, being right does not always translate to success. Sometimes it is more costly to be right at the wrong time than wrong at the right time.

One fallacy that has gained popularity over the last decade is the zealot belief that the Fed disappears risk from markets. That by expanding and moderating the money supply by just the right amount, and at just the right time, markets can grow within a pleasant setting of near nonexistent volatility. Some even trust that when there is a major stock market crash, the Fed, having the courage to act, will soften the landing and quickly put things back upon a path of righteous growth.

Believers in the all-powerful controls of the Fed have a 30 year track record they can point to with conviction. Over this period, the Fed has put a lamp unto the feet and a light unto the path of the stock and bond market.

…click on the above link to read the rest of the article…

Choking On the Salt of Debt

October 15, 2018

Choking On the Salt of Debt

Life After ZIRP

Roughly three years ago, after traversing between Los Angeles and San Francisco via the expansive San Joaquin Valley, we penned the article, Salting the Economy to Death. At the time, the monetary order was approach peak ZIRP.

Our boy ZIRP has passed away. Mr. 2.2% effective has taken his place in the meantime. [PT]

We found the absurdity of zero bound interest rates to have parallels to the absurdity of hundreds upon hundreds of miles of blooming crop fields within the setting of an arid desert wasteland.

Given today’s changing financial conditions, namely the prospect of a sustained period of rising interest rates, we have taken the opportunity to refine our analysis. What follows is an attempt to bring clarity to disorder.

The natural starting point for the topic at hand is from a place of delusion. That is, the popular delusion that central planners can stimulate robust economic growth by setting interest rates artificially low. The general theory is that cheap credit compels individuals and businesses to borrow loads of cash – and consume.

Over a sample size of five to ten years, say the growth half of the business cycle, central bankers can falsely take credit for engineering a productive economy. Profits increase. Jobs are created. Wages rise. A cycle of expansion takes root. These are the theoretical benefits to an economy that central bankers claim they impart with just a little extra liquidity. In practice, however, this policy antidote is a disaster.

Without question, cheap credit can have a stimulative influence on an economy with moderate debt levels. But once an economy has reached total debt saturation, where new debt fails to produce new growth, the cheap credit trick no longer works to stimulate the economy. In fact, the additional credit, and its flip-side debt, distorts prices and strangles future growth.

…click on the above link to read the rest of the article…

Fed President Kashkari Hears Voices – Are They Lying?

October 6, 2018

Fed President Kashkari Hears Voices – Are They Lying?

Orchestrated Larceny

The government continues its approach towards full meltdown. The stock market does too. But when it comes down to it, these are mere distractions from the bigger breakdown that is bearing down upon us.

Prosperity imbalance illustrated. The hoi-polloi may be getting restless. [PT]

Average working stiffs have little time or inclination to contemplate gibberish from the Fed. They are too worn out from running in place all day to make much of it. This fact accounts for the limited inkling the populace has for why there is a great prosperity imbalance between wage earners and the creams.

If there was a better understanding of the scope and scale of the orchestrated larceny being conducted, practitioners of mass money debasement would be tarred, feathered and paraded down Main Street.

This seems a small penalty for turning markets into casinos and debasing the rewards of an honest day’s work. Instead, they preserve their misplaced stature through the backwards process of taking the absurdly simple and twisting it up into the inordinately complex.

Several months ago, roughly in mid-May, the yield on the 10-Year Treasury note briefly eclipsed 3 percent. This prompted numerous articles – including one of our own – on the possible end of the great Treasury bond bubble. But then, just as quickly as a pickpocket disappears into a crowded street, the yield on the 10-Year Treasury note slipped back below 3 percent.

Now, as the days grow shorter, the yield on the 10-Year Treasury note is again pushing above 3 percent, at roughly 3.22 percent. The yield on the 30-Year Treasury note – the long bond – is about 16 basis points higher.

10-year yields are trying to get above the 3% level again – and this time it looks like they may actually mean it. [PT]

…click on the above link to read the rest of the article…

Oil Mania Redux

September 30, 2018

Oil Mania Redux

Positive Energy

By now, late September of 2018, it has become increasingly evident that something big is about to happen. What exactly that may be is anyone’s guess. But, whatever it is, we suggest you prepare for it now… before it is too late.

Art auction energizer: Norman Rockwell’s portrait of John Wayne. You can’t go wrong shelling out top dollar for me, pilgrim, can you? [PT]

Several weeks ago, if you haven’t heard, an undisclosed rich guy enthusiastically bid up and then bought Norman Rockwell’s portrait of John Wayne for a cool $1.49 million at the 12th Annual Jackson Hole Art Auction. According to auction coordinator Madison Webb, “There was a really positive energy in the room.”

Indeed, it takes a lot of really positive energy – and a healthy bank account – to shell out that sum of money for a painting of “The Duke.” Still, positive energy, like good weather, can quickly turn negative. Soon enough, we suppose, the purchaser’s excitement will transform into a serious case of buyer’s remorse.

Of course, we could be wrong. The buyer could have a special liking for old John Wayne movies. Perhaps he’s a collector of Norman Rockwell paintings. Or maybe he won the lottery and is compelled to burn through his winnings in odd and outlandish ways.

What this has to do with anything is a bit of a stretch. But art, if this qualifies as such, offers a rough barometer of social mood (see: The Bubble in Modern Art). Moreover, when the price for a painting of a 20^th century actor pretending to be a 19^th century character of American nostalgia sells at nearly a million and a half bucks, we suspect something more is at work.

…click on the above link to read the rest of the article…

Honest Work for Dishonest Pay

September 16, 2018

Honest Work for Dishonest Pay

Misadventures and Mishaps

Over the past decade, in the wake of the 2008-09 debt crisis, the impossible has happened. The sickness of too much debt has been seemingly cured with massive dosages of even more debt. This, no doubt, is evidence that there are wonders and miracles above and beyond 24-hour home deliveries of Taco Bell via Door Dash.

The global debtberg: at the end of 2017, it had grown to USD 237 trillion. Obviously this is by now a slightly dated figure, as debt issuance has continued with gay abandon this year. [PT]

But how can dosages of more debt be the cure for too much debt? Can more Cutty Sark be the cure for a dipsomaniac? Certainly, in both instances, and after some interim relief, the cure always proves to be much worse than the disease.

Without question, a moment of clarity is approaching that will bisect the world of today from the world of tomorrow, like the Patriot Act bisects the present world from its prior state of bliss. Thus, what follows is a rudimentary preview of what’s in store. But first, some context is in order…

The fake money system – a system centered on debt based legal tender and centrally fabricated interest rates – produces booms and busts of greater extremes with each progression of the business cycle. This century alone we’ve experienced two iterations of these boom and bust scenarios. First the dotcom bubble and bust. Then the housing boom and crash.

The “well-contained” end of the housing boom… [PT]

Make no mistake, these booms and busts were anything but garden variety gyrations of the business cycle. In fact, the Federal Reserve’s finger prints are all over them. The booms originated from Fed monetary policy misadventures. The busts were triggered by Fed monetary policy mishaps.

…click on the above link to read the rest of the article…

Thirteen Reckonings Hanging in the Balance

September 8, 2018

Thirteen Reckonings Hanging in the Balance

A Fake Money World

The NASDAQ slipped below 8,000 this week. But you can table your reservations. The record bull market in U.S. stocks is still on. With a little imagination, and the assistance of crude chart projections, DOW 40,000 could be eclipsed by the end of the decade. Remember, anything and everything’s possible with enough fake money.

Driven by a handful of big cap tech companies, the Nasdaq Composite has made new highs – but the broad market (here shown in the form of the NYSE Index) has not even made it back to the January blow-off peak. It is a good bet the return of the average investor’s portfolio mirrors that of the latter. Such divergences are typically a sign of steadily weakening market internals which are seen near major trend changes. When such a glaring divergence in performance persistently fails to be invalidated and keeps dragging on for many months, it tends to be particularly concerning for the longer term outlook, Note that even more glaring divergences exist now between US stocks vs. European and EM stocks. Despite the fact that US economic indicators remain strong and no obvious recession warnings are evident, we have yet to see such large divergences resolve without a hiccup. Usually the hiccup turns out to be quite a doozy. [PT]

Still, we consider DOW 40,000 to be about as probable as having a dinosaur step on our car as we drive to work today. More than likely, a return to DOW 10,000 will first grace the front page of the Wall Street Journal.

In the interim, while still in the delight of this “permanently high plateau,” we’ll turn our attention to another equally suspect record that’s presently unfolding with imperfect precision.

…click on the above link to read the rest of the article…

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