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Things Have Changed…
THINGS HAVE CHANGED…
Today’s post is sure to anger a bunch of you. My libertarian friends (you know who you are) will probably be the most outraged, but I suspect many will misinterpret my observations about society’s most likely path as my belief regarding the proper course. So let me try to be clear. I have no interest in asserting I know what should be done, but rather I am focused on what will be done. If you want to debate the theoretical, then there are a myriad of websites for you to choose from. Whether you are conservative or liberal, hard-money or gasp Keynesian, there is a place for you to feel safe and share your views about society’s optimal direction. But let me tell you right now – this isn’t it.
So put aside your political views and try to deal with only probabilities as opposed to your desires regarding economic policy.
Although the Republicans are supposedly the party of fiscal conservatism, we all know that sort of talk is only for when they are not in power.
Again – please do not email me with your political rant. I have no dog in this hunt. When it comes to the markets, I am politically agnostic and the only religion I worship is that of the Market Gods.
There should be little surprise that under Republican stewardship, the greatest fiscal stimulus in the past decade has been instituted. Not saying if it is good or bad because my opinion is completely irrelevant.
But I would like you to step back and think about the recent bout of U.S. economic outperformance. It’s probably fair to say that relative to the rest of the developed world, American fiscal policy has been easier while monetary policy tighter.
…click on the above link to read the rest of the article…
High Debt Levels Rant
HIGH DEBT LEVELS RANT
I am going to break from regular market commentary to step back and think about the big picture as it relates to debt and inflation. Let’s call it philosophical Friday. But don’t worry, there will be no bearded left-wing rants. This will definitely be a market-based exploration of the bigger forces that affect our economy.
One of the greatest debates within the financial community centres around debt and its effect on inflation and economic prosperity. The common narrative is that government deficits (and the ensuing debt) are bad. It steals from future generations and merely brings forward future consumption. In the long run, it creates distortions, and the quicker we return to balancing our books, the better off we will all be.
I will not bother arguing about this logic. Chances are you have your own views about how important it is to balance the books, and no matter my argument, you won’t change your opinion. I will say this though. I am no disciple of the Krugman “any stimulus is good stimulus” logic.
The broken window fallacy is real and digging ditches to fill them back in is a net drain on the economy. Full stop. You won’t hear any complaints from me there.
Yet, the obsession with balancing the government’s budget is equally damaging. In a balance sheet challenged economy the government is often the last resort for creating demand. Trying to balance a government deficit in this environment (like the Troika imposed on Greece during the recent Euro-crisis) is a disaster waiting to happen.
Have a look at these charts from the NY Times outlining the similarity of the Greece depression to the American Great Depression of the 1930s.
…click on the above link to read the rest of the article…
Its Different This Time
IT’S DIFFERENT THIS TIME
Remember all those bullish studies market pundits were passing around in early January? Do you recall the parroting about “how goes January, the rest of the year follows?” It’s easy to forget, but many market strategists were falling all over themselves bullish just a couple of weeks ago (see Parabolic Moves Don’t End by Going Sideways).
Now, some 300 handles lower in the S&P 500, many of these same forecasters are talking about the extensive technical damage and advocating caution.
I am not here to pick on any pundits – I subscribe to the Yogi Berra school of forecasting – it’s tough to make predictions, especially about the future. But I take issue with one major aspect of the current investing environment. Most market players are using the playbook from the last few decades in their forecasts. They are mistakenly thinking the rules of the game haven’t changed.
Their predictions from last month are still ringing in my ears; low volatility January rises have been followed with stock market strength, so there’s no way anyone could predict that stocks would swoon 10% in a week and a half for no real reason at all. Yet that’s exactly what they did.
What’s different today?
I find myself hesitant to type out these next few lines. As I struggle to find the words to communicate my thoughts, I worry they will be misconstrued. Yet I don’t know how else to say it – except to blurt it out. So at the risk of being labeled a fool, here it goes – it’s different this time.
Yup. I said it. I committed the cardinal sin of investing. I uttered the most expensive four words in the history of markets.
Before you call me a Luddite and hit delete on your email or click the home button on your browser, hear me out.
…click on the above link to read the rest of the article…
Just Because the Hedge Fund Wise Guys Have Forgotten
JUST BECAUSE THE HEDGE FUND WISE GUYS HAVE FORGOTTEN
Today’s post will be about Japanese yen vol, but I am sure to bore some readers with that topic, so I am starting with something a little more interesting. As many of you know, I am a little bit of a bitcoin skeptic. At the end of the day, I have trouble investing in the ledger in the sky.
Call me old-fashioned, call me a troglodyte, call me a bitter gold bug, call me whatever you want, I just can’t bring myself to get long bits in the cloud. And before you send me messages how I don’t understand it, don’t forget I was mining bitcoin before most of Wall Street had ever heard of it. So I am much more than just some trade-a-saurus that refuses to get with the times, I am the knob who passed on bitcoin at $5.
Yet I have the privilege of counting Tony Greer from TG Macro as one of my pals, and his enthusiasm about using crypto currencies for micro-payments has piqued my interest. From Tony’s great letter the other day:
For selfish reasons, this is the article that gets me most excited about bitcoin and the blockchain. The streamlining of media distribution is going to kick the door open for individuals to compete with publishing powerhouses and main stream periodicals.
Publishing content on Amazon, iTunes, even YouTube is extremely costly for the author/artist. Youtubers can’t earn money until they get 10,000 views. Apple and Amazon take between 30% and 75% for the right to their distribution networks. Since media consumption has gone digital, it’s been difficult to charge on a PER ARTICLE basis because of high transaction costs making it prohibitively expensive. All that’s about to change.
…click on the above link to read the rest of the article…
