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When Certainty Frays, Capital Gets Skittish

When Certainty Frays, Capital Gets Skittish

The net result is capital is impaired in eras of uncertainty.

As we look ahead to 2019, what can we be certain of? Maybe your list is long, but mine has only one item: certainty is fraying.

Confidence in financial policies intended to eliminate recessions is fraying, confidence in political processes that are supposed to actually solve problems rather than make them worse is fraying, confidence in the objectivity of the corporate media is fraying, and confidence in society’s ability to maintain any sort of level playing field is fraying.

When certainty frays, capital gets skittish. Predicting increased volatility is an easy call in this context, as capital will not want to stick around to see how the movie ends if things start unraveling. The move out of stocks into government bonds is indicative of how capital responds to uncertainty.

The coordinated efforts of global central banks to backstop and boost markets also backstopped confidence in the banks’ monetary policies. Regardless of the long-term impact of the policies of quantitative easing and repression of interest rates, capital could count on the policies remaining in force and act accordingly.

With the Federal Reserve apparently ending the Fed Put and normalizing interest rates after a decade of near-zero rates, certainty about global central bank policies and the impacts of those policies has dissipated.

With valuations at historic highs and real estate rolling over, confidence that gains are essentially permanent is also fading. Buying at the top and holding onto the asset as it loses value is a predictable way to destroy capital, and so capital’s willingness to exit is rising, as is its preference for deep, liquid markets such as U.S. Treasury bonds, markets where big chunks of capital can be safely parked until clarity and confidence return.

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

Why buy gold now? Because I don’t know

Why buy gold now? Because I don’t know

From 2000 through 2012, the price of gold increased every year, rising from around $280 an ounce to nearly $1,700. It was an unprecedented run.

Then, in 2013, gold took a nose dive, losing over 27% of its value.

It was widely reported that the Swiss National Bank, the former bastion of monetary conservatism, lost $10 billion that year just on its gold holdings.

As you probably know, central banks hold a portion of their reserves in gold. The practice goes back to when central banks actually had to have gold on hand to trade in and out of paper money (or even trade for goods and services).

And central banks still hold reserves in gold today, even though they don’t need it to transact like they used to.

So that begs the question, did the Swiss National Bank actually lose $10 billion? It still had every ounce of gold in its vaults. And gold, after all, ismoney.

Plus, the SNB wasn’t holding gold to speculate…

Today, central banks hold gold as a hedge against fiat money. These are the guys with their fingers on the printing press… so they know exactly the effect they have on money.

And right now, banks are buying up gold hand over fist. Central banks currently hold 20% of all the gold ever mined—33,000 metric tons.

And JPMorgan Chase says they’ll buy another 650 tons this year and next.

Why?

Gold is for the I don’t knows.

And right now, there are a LOT of I don’t knows.

Markets have been going crazy over the past few months.

After a record bull run for stocks, we are now seeing massive volatility with the Dow regularly jumping 500+ points in a single day. Just yesterday, the Dow fell a whopping 800 points.

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

We are Living with Maximum Uncertainty – Catherine Austin Fitts

We are Living with Maximum Uncertainty – Catherine Austin Fitts


Financial expert Catherine Austin Fitts has said for years that the economy was not going to crash, but be on a “slow burn.” How long can they make this heavily indebted game last? Fitts says, “Our problem as investors is we don’t know. If you look at all the information we need to make an intelligent assessment, we don’t have access to that information. I have said many times this is a military question. Who has the biggest weapons and who has the ability to deliver force and control? So, we are living with maximum uncertainty. . . . Clearly, we are headed into a new currency world that’s part of a new control system, but the answer is we don’t know when. My fear with many, many commentators is they are underestimating the power and endurance of the system. I am always getting yelled at because people think I am pro-empire. I am not saying I am pro-empire or I am for the things they are doing to keep it going.”

Fits adds that things are so uncertain that “the old system could go five years or five months.”

On introducing a new dollar, Fitts says, “Even if they do introduce a dollar backed by gold, it’s going to start off with a small market share. They are very unlikely to do a big bang thing. These guys are prototypers.”

There is no doubt wealthy people around the world are buying gold. Why? Fitts says, “The reality is . . . in the worst case scenario, gold is a store of value because it is respected globally as a currency or money without the backing of a sovereign government. What is the global currency that has backing without a sovereign government, and gold and silver are one of the few.

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

Do Not Waste One More Second

Do Not Waste One More Second

Do not waste one more second of your time on this earth, for the insects are all dying, and the ice caps are vanishing, and the oceans are filling with plastic.

This could all be gone very soon, so don’t waste it. Don’t take any part of the crackling miraculousness of this cacophony for granted, because there are missiles being targeted, and there are vast battle plans being drawn. You could look outside your window tomorrow morning and see a mushroom cloud on the horizon, and you will regret letting life’s preciousness slip through your fingers.

We do not like to think about death. We say, “I will think about death some other day. Today I must busy myself with mental chatter about nonsense and the avoidance of feeling my feelings. I would love to stare into the white skull of the human condition, but my schedule is chock full of escapism.” We push death aside, and push death aside, and push death aside. And then, one day, death pushes us aside.

One way or another, the end is coming. But if you truly, deeply engage here, you can live more life in a week than most people live in an entire lifetime. By that I do not mean that you can have more experiences, I just mean that you can experience far more moments with far more depth and clarity than someone who’s just drifting through life on autopilot. One week fully and consciously appreciated contains more lived life than an entire stay in this world from cradle to grave when it is taken for granted.

And of course you will also have far more amazing experiences than someone who isn’t directly interfacing with the moment.

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

Uncertainty is the Mother of Volatility

QUESTION: Well you called this year the political year from hell. You got that one right again. Between trying to figure out the politics in the US, we have Britain in turmoil and Italy trying to figure out if they should stay or go. Hungary becoming more defiant and Sweden swinging to the right. You are the best at forecasting this sort of crazy stuff. You got BREXIT right and Trump’s victory. I can see your model looks at the economics and predicts a response that becomes political change. So what does this all mean?

KD

ANSWER: Regardless of your political persuasion be it for or against any of these political issues, the importance is really the impact upon CONFIDENCE. If you are for or against Trump, we still have one thing in common. We just want stability and some sense of the future to bank on. For example, if Trump were to go down, the impact upon the world market could be very dramatic and how we then stage ourselves to survive this type of financial chaos is critical. It is the same situation in Europe. If Italy pulls the cord to get out, the Euro cannot survive. What I hear from Behind the Curtain is that the ECB may be forced to cut its bond purchases by 50% and there are even those demanding Quantitative Easing MUST end by the end of the year. Draghi has DESTROYED the bond markets in Europe. Stopping QE will result in interest rates going up dramatically.

As I have said, Trump is the Counter-Trend or FALSE move. I fear what comes afterward be it now or in 2020.

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

Axiom of Uncertainty

Axiom of Uncertainty

It’s simple. Given that there might well be an absolute nature/structure of the universe and our perhaps fundamentally limited cognitive position/abilities within it can we be certain that we can be sure about the true nature of anything? Can there be fundamental forces, matter, and material relationships of which we will never know?

While unanswerable in principle, the mere possibility of such an epistemological situation has many consequences.

Firstly, it considerably lets out the air out of our current secular hubris.

Science and technology have given us what is perhaps a false impression of our own cognitive and technical omnipotence. While we rightly marvel at what we have achieved during the last five centuries, it does not necessarily give us the right to think that we can, even theoretically, master and understand all that there is.

Would it be so far fetched to think that the human mind, both as it is now and will be in the future, will always be limited in what it can know?

Although we cannot even judge the actual probability of such a proposition it should nevertheless give us pause while constructing brash anthropocentric scenarios which inflate our own importance within the universe.

If we stop to consider the possible theoretical implications of this axiom of uncertainty we will quickly realize that we may never know more than a part, even just a small part of existence past, present, and future.

Of course that does not mean we should stop trying to know all we can.

On the other hand, it does mean that we should be far more circumspect when offering explanations about everything whether scientific, political, or religious.

In each of these domains, we may, it might turn out, be far off the mark.

Yet, the deeper point is that according to the above axiom we can never know for sure.

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

Oil Prices Tear Higher On Middle East Tensions

Oil Prices Tear Higher On Middle East Tensions

Marcellus gas rig

Oil prices rose on Tuesday ahead of the API data report, fueled by Middle East tensions and dwindling crude output in Venezuela.

(Click to enlarge)

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– U.S crude oil exports averaged 1.1 million barrels per day (mb/d) in 2017, twice as high as 2016. It was the second full-year since the prohibition on crude exports had been lifted.

– Canada remained the largest buyer at 29 percent of total U.S. exports. But a notable development was the emergence of China as a major buyer of U.S. crude, representing 20 percent of the total.

– Breaking it down by product type, crude oil only accounts for 18 percent of total petroleum product exports, with hydrocarbon gas liquids (HGL) and distillates each accounting for 22 percent.

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

Worst Case Scenario: What is It?

This article provides insight as to the way the Fed and all central banks think.

A worst-case scenario is a concept in risk management wherein the planner, in planning for potential disasters, considers the most severe possible outcome that can reasonably be projected to occur in a given situation.

The book Worst Case Scenario Extreme Edition provides hands-on strategies for surviving an elephant stampede, a 16-car pile-up, a mine collapse, and a nuclear attack. Discover how to take a bullet, control a runaway hot air balloon, break a gorilla’s grip, endure a Turkish prison, free a limb from a beartrap, chased by a pack of wolves, or buried alive.

Alas, the book does not cover worst case Fed scenarios brought about by Fed policies.

Insight into Central Bank Thought Processes

The following video explains the way the Fed thought in 2006 and thinks again today regarding “worst case scenarios”

Please play the video. It’s a real hoot.

The alleged “stress tests” in Europe and the US are bogus.

Currently, the ECB believes Italy will never leave the eurozone and the EU cannot break up.

The Fed does not believe they have blown another bubble.

The interesting thing is the Fed is the very purveyor of bubbles. They do not see it and never will.

The result is bubbles of increasing amplitude over time.

Fed Uncertainty Principle

Let’s do another flashback,. This time to April 3, 2008 to my article Fed Uncertainty Principle.

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

“What Happens When The Market Can No Longer Pretend”: Charting Today’s Minsky Moments Dynamics

“What Happens When The Market Can No Longer Pretend”: Charting Today’s Minsky Moments Dynamics

Back in July, Deutsche Bank’s derivative strategist Aleksandar Kocic believed he had found the moment the market broke, which he defined as a terminal dislocation between market and economic policy uncertainty: as he wrote 4 months ago, it was some time in 2012 that markets “lost their capacity to deal with uncertainty.”

It was also some time in 2012 that traders and market participants realized central banks have not only taken over the market, but have no intention of ever leaving as the alternative is a crash that wipes out 8 years of artificial “wealth effect” creation and puts the very concept of fractional reserve and central banking in jeopardy.

This intention was confirmed last week when as Kocic again wrote overnight, it became clear – once again – that Central Banks’ main agenda “is management of the risk of policy unwind” which has two different aspects, especially for those who still believe there is such as a thing as a “market.” Kocic explains:

  • On one hand, it is reassuring that Central Banks are cognizant of severity of the risk and are showing appropriate flexibility in adjusting their reaction functions to incorporate these realities.
  • On the other hand, this is less good because it does not allow the market to reposition and, thus, normalize. By soliciting feedback from the markets, Central Banks are further encouraging bad behavior making things potentially worse by postponing the resolution further into the future.

This is also the “nightmare scenario” envisioned by Eric Peters: a world in which central banks inject more and more liquidity and “stimulus”, and yet inflation does not rise, resulting in greater and greater financial inflation, i.e., asset bubbles, and a Fed chair who is confused about the “mystery” of inflation.

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

Systemic Uncertainty, Meet Fragility

Systemic Uncertainty, Meet Fragility

That’s the problem with fragility: everything looks fine on the surface until a crisis applies pressure. Then the whole rickety contraption collapses in a heap..
Life is inherently uncertain, but systems that were once considered certainties have increasingly become uncertain. Social Security is one example; recent polls reflect widespread doubts among Millennials and Gen-Xers that there will be any Social Security benefits left for them by the time they reach retirement age.
This doubt is fact-based; as the number of retirees swells, as Medicare costs soar ever higher and the number of full-time jobs paying into Social Security/ Medicare stagnates, these pay-as-you-go programs break down; Social Security is already paying out billions more than it collects from employers and employees.
Uncertainty is one thing, fragility is another. The socio-economic systems we rely on are also becoming increasingly fragile and prone to failure, for an entirely different set of reasons than those driving uncertainty.
Changing fundamentals drive uncertainty. The nation’s demographics and stagnant wages for the bottom 95% are extremely unfavorable for pay-as-you-go programs like Social Security and Medicare; their future is uncertain because the inputs and outputs are changing.
Fragility is a function of systems being thinned by cronyism, self-serving insiders, fraud, lack of transparency, lack of competition, monopolies, profiteering and a decline of quality. Systems that become too costly due to the above dynamics are hollowed out as everyone seeks some way to reduce the costs. Redundancies are stripped out, staff is slashed to the bone, senior managers with the most experience are pushed out to lower payroll costs, quality control is whacked, and inferior inputs are presented as equal to the higher quality inputs that they replace.
When these weakened systems are under pressure or face a crisis, they crumble. Shoddy materials fail, inexperienced managers make hasty, ill-informed decisions, the barebones staff is overwhelmed, equipment that wasn’t properly maintained to save money breaks down, and so on.

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

Uncertainty and the Humility of Forecasting an Unknowable Future

Uncertainty and the Humility of Forecasting an Unknowable Future

While we’re being reassured that all these grandiose promises are resting on trends that are as reliably predictable as the tides, the next easily predictable crisis will very likely reveal the trends are speculative bubbles that will predictably burst in a devastating reversion.

Certainty and uncertainty come in a variety of flavors. “Certainty” seems rather definite, but lurking beneath certainty is the more scientifically verifiable notion of probability: the probability of outcomes can be high enough to qualify as certain and low enough to qualify as unlikely.

We can’t know with perfect certainty that our neighbor hasn’t invented a death-ray and may decide to test it on us due to that simmering feud over his dog Fluffy’s antics on our yard.

But we can make an assessment of the probability of this occurring, and conclude the probability is low with a high degree of certainty.

This assessment should change, of course, if we hear strange noises in his shop and notice shrubs in his back yard are now charred in peculiarly symmetric circles–and we learn he previously worked at a national lab on high-energy weapons but was dismissed for pursuing crazy ideas about developing handheld death-ray devices, i.e. phasers. (Star Trek fans, please raise a cheer.)

This brings us to a critical distinction between low-probability events, i.e. known unknowns a.k.a. highly unlikely “long-tail” events, and unknown unknowns, a.k.a. “black swans” made famous by author Nassim Taleb.

What is a known unknown? Death qualifies as a known unknown: we know with a high degree of certainty that the vast majority of living things eventually die (even cancer cells die once their host dies)–but the timing of their individual natural death is inherently uncertain, due to the great number of inputs, variables and causal factors intrinsic to life.

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

What Markets Are Telling Us

What Markets Are Telling Us

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Last week US stock markets tumbled yet again, leaving the Dow Jones index down almost 1500 points for the year. In fact, most major world markets are in negative territory this year. There are many Wall Street cheerleaders who are trying to say that this is just a technical correction, that the bottom is near, and that everything will be getting better soon. They are ignoring the real message the markets are trying to send: you cannot print your way to prosperity.

People throughout history have always sought to acquire wealth. Most of them understand that it takes hard work, sacrifice, savings, and investment. But many are always looking for that “get rich quick” scheme. Monetary cranks throughout history have thought that just printing more money would result in greater wealth and prosperity. Every time this was tried it resulted in failure. Huge economic booms would be followed by even larger busts. But no matter how many times the cranks were debunked both in theory and practice, the same failed ideas kept coming back.

The intellectual descendants of those monetary cranks are now leading the world’s central banks, which is why the last decade has seen an explosion of money creation. And what do the central bankers have to show for it? Lackluster employment numbers that have not kept up with population growth, increasing economic inequality, a rising cost of living, and constant fear and uncertainty about what the future holds.

The past decade has been a lot like the 1920s, when prices wanted to drop but the Federal Reserve kept the price level steady through injections of easy money into the economy. The result in the 1920s was the Great Depression. But in the 1920s prices were dropping because of increased production.

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

Stretching Your Resources In Uncertain Times

Stretching Your Resources In Uncertain Times

money public domainWith the cost of everything going up and the future uncertain, stretching your resources and re-purposing items becomes more of a necessity. I am always looking for new ways to get the “max for the minimum.”

Some recent posts here reminded me of some of these things.  My grandparents and parents were a young family when the great depression hit. What kinds of things did they do to make ends meet when things were expensive or scarce?

Unfortunately, many of them who went through this period in time are no longer with us. However, I remember a few things they did or heard of them doing, that now, looking back, were obviously brought about by the times they lived in. Even after times improved somewhat, some still stuck to certain ways of doing things. Old habits are hard to break.

Hunting and gardening were basically a given back then. Most everyone outside the city limits did one or both of this along with bartering services for goods. A little carpentry or plumbing work for a couple of chickens.

I remember my grandfather mixing his old used motor oil with a little bit of kerosene and spraying the underside and inner fender wells of his pick up truck just before winter. He claimed it helped protect the truck from incurring rust damage over the winter months. Getting more serviceable years out of the truck.

I am sure environmentalists would have a cow over this nowadays, but it was a way of taking something that didn’t appear to have any usefulness left ,and yet, finding one more use for it. The county used to spray old used oil to keep the dust down on dirt roads during the spring and summer months. Don’t see that happening anymore.

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

Honey, I Broke the Markets

Honey, I Broke the Markets

“Donald Trump looks like the villain in a movie where the hero is a dog.”

– The internet.

Which four letter word still has an amazing capacity to cause offence, anxiety and aggravation ? In the world of investment, that word would have to be
R-I-S-K.

Do we even have a workable definition of what it means ?

Author Guy Fraser-Sampson, in ‘The Pillars of Finance’, points out that before the Second World War, financial thinkers had a somewhat humbler perspective on the subject:

“..while before the War there was eager discussion as to what risk might be, and whether it was the same thing as uncertainty, there was total agreement that whatever it was it was probably too complex an animal ever to be fully understood and, in particular, that it was incapable of mathematical calculation.” [Emphasis ours.]

The American academic Frank Knight published ‘Risk, Uncertainty and Profit’ in 1921. As he wrote, some forms of uncertainty are measurable. There is, for example, empirical observation with regard to the occurrence of a number of discrete outcomes, such as the rolling of dice.

Then there is ‘true uncertainty’, such as the chances of a house in a particular area catching fire in any given year. The probability of dice throws is capable of mathematical calculation – albeit the outcome is still not guaranteed – whereas the chance of a house burning down is not. In relation to fire insurance, we can only use statistical inferences drawn from prior observation.

“The import of this distinction.. is that the first.. type of probability is practically never met with in business, while the second is extremely common. It is difficult to think of a business ‘hazard’ with regard to which it is any degree possible to calculate in advance the proportion of distribution among the different possible outcomes. This must be dealt with, if at all, by tabulating the results of experience. The ‘if at all’ is an important reservation.”

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

Imagine If Exxon Had Told the Truth on Climate Change

Imagine If Exxon Had Told the Truth on Climate Change

Like all proper scandals, the #Exxonknew revelations have begun to spin off new dramas and lines of inquiry. Presidential candidates have begun to call for Department of Justice investigations, and company spokesmen have begun to dig themselves deeper into the inevitable holes as they try to excuse the inexcusable.

(Worst idea: attack Pulitzer prize-winning reporters as “anti-oil and gas activists”)

As the latest expose installment from those hopeless radicals at the Los Angeles Times clearly shows, Exxon made a conscious decision to adopt what a company public affairs officer called “the Exxon position.” It was simple: “Emphasize the uncertainty.” Even though they knew there was none.


Sowed Doubt about for Decades: http://insideclimatenews.org/news/22102015/Exxon-Sowed-Doubt-about-Climate-Science-for-Decades-by-Stressing-Uncertainty 

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