On Economy

     

 

 

Under the Influence

 

“This feels very sustainable.” 

– Federal Reserve Chairman Jerome Powell, October 8, 2019

 

Understandable confusion… [PT]

 

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21st Century Hooverville

There are places in Los Angeles where, although the sun always shines, they haven’t seen a ray of light in over 100-years.  There’s a half square mile of urban decay centered on the Union Rescue Mission at 545 South San Pedro Street, where depravity, chaos, addiction, insanity and archaic diseases multiply and ricochet about like metastatic cancer.

 

One of LA’s modern-day Hoovervilles in San Pedro Street…  In 2015 it was reported that Union Rescue Mission CEO Reverend Andy Bales had caught three different bacterial infections from merely walking around in the area. One of the infections rendered him unable to ever walk again (doctors eventually had to amputate his foot, which had fallen prey to flesh-eating bacteria). In short, this is not exactly the most hygienic and healthy environment. [PT]

Photo credit: Mike Blake / REUTERS

 

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Groping in the Dark

This week central planners pursued their primary mission with steadfast conviction. They planned. They prodded. They prearranged tomorrow to save us from ourselves. Some also grubbed a little graft for their trouble. Other central planners took to debasing the dollar to price fix the federal funds rate within a narrow band of tolerance.  What in the world do they think they are doing?

 

Central planning committee in the analysis and forecasting phase… [PT]

 

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An Odd Combination of Serenity and Panic

The United States, with untroubled ease, continued its approach toward catastrophe this week.  The Federal Reserve cut the federal funds rate 25 basis points, thus furthering its program of mass money debasement.  Yet, on the surface, all still remained in the superlative.

 

S&P 500 Index, weekly: serenely perched near all time highs, in permanently high plateau nirvana. [PT]

 

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Listless Nikkei

On 24 July 2020 the Olympic Summer Games will begin in Tokyo, the capital of Japan. Olympic Games and Soccer World Cups are among the largest sporting events in the world.  Do you perhaps also think that these events may affect the performance of local stock markets?

 

Olympic Summer Games 2020 – official logo (left), and a fan-made logo (right) by designer Daren Newman [PT]

 

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Freedom Rock

Hong Kong ranks among the freest societies in the world. Not only economically, but socially it is a very liberal place. It was marinated in British ways until 1997, much longer than Singapore and other colonies. Then China took it over as a special administered region, which according to the agreement with the UK meant that it was only nominally to be under Chinese control for the next 50 years. It was possibly the only colony in which a vast majority of citizens did not want the British to go.

 

Hong Kong skyline at night [PT]

Photo credit: Timon Studler

 

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Fiat Money Woes

Monday was Labor Day holiday in the US. The facts are that the euro lost another 1.4%, the pound another 1.1%, and the yuan another 0.9% last week.

 

Assorted foreign fiat confetti against the US dollar – we have added the Argentine peso as well, as it demonstrates what can happen when things really get out of hand. [PT]

 

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Brainwashed by Academe

Not a day goes by that doesn’t supply a new specimen of inane disclarity.  Muddy ideas are dredged up from tainted minds like lumps of odorous pond muck.  We do our part to clean up the mess, whether we want to or not.

 

No longer in demand: famous Enlightenment philosopher John Locke (1632–1704), who is widely considered the “Father of Liberalism” (classical liberalism, that is). [PT]

 

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The Pointlessness of Negative Yields

If there are any virtues of debt instruments with negative yields we have yet to realize them. Certainly, we understand that as bond yields fall, bond prices rise, and bond investors are rewarded with capital appreciation. But when capital is appreciating as a consequence of negative yields, we suspect there is something fundamentally wrong with the capital itself.

 

Not only is the stock of negative-yielding debt at a new record high of almost $17 trillion, lately there has been a big surge in corporate debt sporting negative yields-to-maturity. [PT]

 

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Incrementum Advisory Board Meeting of 31 July 2019

At the end of July the Advisory Board of the Incrementum Fund held its quarterly meeting (a full transcript is available for download at the end of this post). The board was joined by special guest Simon Mikhailovich, a financial market veteran who inter alia co-founded the Toqueville Bullion Reserve. The title of the transcript and this post was inspired by his remarks.

 

Special guest Simon Mikhailovich

 

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Not Adding Up

One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is.  In short, things don’t add up.  What’s more, the propaganda is so far off the mark, it is downright insulting.

 

Coming down from the mountain with the latest data tablet… [PT]

 

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Things To Keep An Eye On

Below is an overview of important US interest rates and yield curve spreads. In view of the sharp increase in stock market volatility, yields on government debt have continued to decline in a hurry. However, the flat to inverted yield curve has not yet begun to steep – which usually happens shortly before recessions and the associated bear markets begin.

 

2-year note yield, 3-month t-bill yield, 10-year note yield, 10-year/2-year yield spread, 10-year/3-month yield spread. As indicated in the chart annotation, the signal that normally indicates that a boom has definitely ended is a reversal in these spreads from inversion to rapid steepening. This has yet to happen.

 

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      21st Century Hooverville There are places in Los Angeles where, although the sun always shines, they haven’t seen a ray of light in over 100-years.  There’s a half square mile of urban decay centered on the Union Rescue Mission at 545 South San Pedro Street, where depravity, chaos, addiction, insanity and archaic diseases multiply and ricochet about like metastatic cancer.   One of LA's modern-day Hoovervilles in San Pedro Street...  In 2015 it was reported that Union...
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