Archives for March 2015

If It Ain’t Broken, Don’t Fix It: Religious Freedom Act Take II

Courtesy of Mish.

Religious Freedom Act Take II

I received a number of emails in response to Indiana Legalizes Discrimination on Grounds of "Religious Freedom".

The bill, signed by Indiana Governor Mike Pence openly encourages discrimination based on sexual preference although Pence incredulously denies that claim. Pence now recognizes the need to "clarify" the legislation.

One of the better email responses came from reader Mark who wrote …

The Constitution plainly states "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof."

The Constitutional guarantee of religious freedom is sacrosanct. The only restrictions placed on religious freedom are those religious practices that harm others.

And I would say “Yes” if you wanted to post a “No Catholics” or “No Jews” sign on the front door of your business. I would also warn, in the same breath, that you may find your business surrounded by protestors and boycotted the very next day. That is the market forces at work. Even though I am neither a Catholic nor a Jew, I would not do business with someone that had that sign on their front door. That is my choice, too.


If It Ain't Broken, Don't Fix It

I replied …

"Why was there a need then to pass any bill? Pence now says the bill needs to be 'clarified'. If the bill needs 'clarification' then something in it is wrong. At best, the law was political stupidity. At worst, the legislation provides explicit and open encouragement of discrimination."

By the way, the problem with allowing a sign "Blacks Not Welcome" or "Jews Not Welcome" would be the massive protests that would undoubtedly disrupt neighboring establishments, all of which whose business would suffer while the sign was up.

In fact, it is likely the entire neighborhood of an establishment posting such as sign would be torched, with considerable and perhaps permanent damage to the property owner. …

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In the News, 3-31-15

From Bloomberg

Singapore Home Prices Post Longest Losing Streak Since 2004Singapore's Property

Singapore’s home prices dropped for a sixth consecutive quarter, the longest losing streak in more than a decade, as tighter mortgage curbs cooled demand in Asia’s second-most expensive housing market.

An index tracking private residential prices fell 1.1 percent in the three months ended March 31, matching the longest stretch of declines since March 2004, according to preliminary data from the Urban Redevelopment Authority on Wednesday. The URA changed the method it uses to calculate the property index from last quarter to better reflect the property market, it said in the statement. (More)


China Enters Stock Frenzy as Rookie Traders Open Record AccountsChina's Stock Market

To get a sense of the frenzy in China’s world-beating equity market, consider this: In a two-week span last month, the rally lured 2.8 million rookie stock pickers, almost the equivalent of Chicago’s entire population. (Read here)

Indian Nifty Futures Drop After Worst Benchmark Month in 2 Years

Indian stock-index futures dropped after benchmark gauges capped their biggest monthly loss since February 2013.

SGX CNX Nifty Index futures for April delivery fell 0.2 percent to 8,525.5 at 9:52 a.m. in Singapore. The underlying CNX Nifty Index was little changed at 8,491 on Tuesday. The S&P BSE Sensex lost 0.1 percent to 27,957.49. The Bank of New York Mellon India ADR Index of U.S.-traded shares declined 0.4 percent. Markets in India are closed Thursday and Friday for the Mahavir Jayanti and Good Friday holidays. (Continue)


China’s Big Stock Market Rally Is Being Fueled by High-School DropoutsAsian Stocks Drop as China Rate Concern Lingers

There’s a story that Joseph Kennedy sold his stocks on the cusp of the Great Crash of 1929 after a shoe shine boy shared trading tips with him. If even the shoe polisher is buying stocks, he reasoned, the market must be riding for a fall.

New data from the China Household Finance Survey, a large-scale survey of household income and assets headed by Professor Li Gan of Southwestern University of Finance and Economics, provides fresh insights into who has been driving the recent rally in China’s markets. It is not reassuring. (More)

Dollar Falls Amid Economic Concerns After Biggest Gain in Decade

The dollar retreated, after a gauge of the currency completed its strongest three-quarter gain on record, amid speculation the Federal Reserve will raise rates slowly.

The U.S. currency surged at least 9 percent against all its major developed peers since the end of June as more than two dozen central banks, including those in Australia, Canada and Europe, eased policy this year. The dollar pared gains on Wednesday after a Chinese manufacturing gauge rebounded in March, damping demand for the U.S. currency as a haven. (More here)

Chinese Developer Country Garden Suspends Trading in Hong Kong

Country Garden Holdings Co., China’s third-largest developer by area sold, suspended trading in Hong Kong on Wednesday.

The company, based in Foshan in southern China, halted shares pending an announcement of “inside information,” it said in a filing to the Hong Kong stock exchange, without elaborating. The stock last traded at HK$3.13 on March 31 and has gained 1 percent this year. (Read more)


Chinese Manufacturing Gauge Rebounds in March After StimulusChinese Manufacturing

A Chinese manufacturing gauge rebounded in March, suggesting stimulus efforts have started to bolster factories in the world’s second-largest economy.

The government’s manufacturing Purchasing Managers’ Index was 50.1 last month, from 49.9 in February, according to the statistics bureau and the China Federation of Logistics and Purchasing in Beijing. Numbers above 50 signal expansion. (Continue)

Japan Big Manufacturers Are Unconvinced on Economic Recovery

Japan’s large manufacturers see business conditions weakening this quarter and the bulk of companies in the world’s third-largest economy plan to pare investment in the year ahead.

The Bank of Japan’s Tankan large manufacturer index came in below estimates in March, unchanged at 12 from the previous quarter, the central bank said. The index is forecast to drop to 10 in June. Companies plan to reduce capital expenditure by 1.2 percent in the fiscal year through March 2016. (Full Article)

Shale Producer Samson Says Bankruptcy May Be Best Option

Samson Resources Corp., an oil and natural gas producer controlled by private equity giant KKR & Co., warned investors that bankruptcy may be its best option as collapsing crude prices erode its ability to repay debt.

Filing for Chapter 11 protection “may provide the most expeditious manner in which to effect a capital structure solution,” the Tulsa, Oklahoma-based company said Tuesday in its annual report. (More here)

No Joke, U.S. Treasuries Tend to Rally in the Month of AprilU.S. Treasury Building

Treasuries tend to rally in the month of April.

U.S. government securities have advanced in the period every year from 2010 to 2014, according to data compiled by Bloomberg.

One theory for the gain is that Japanese investors are buying as they begin their fiscal year on April 1. Even though it’s April Fool’s Day, the five-year run is no gimmick. Kei Katayama at Daiwa SB Investments in Tokyo said it’s driven by higher yields than those available in Japan. (More)

Reckoning Arrives for Cash-Strapped Oil Firms Amid Bank Squeeze

Lenders are preparing to cut the credit lines to a group of junk-rated shale oil companies by as much as 30 percent in the coming days, dealing another blow as they struggle with a slump in crude prices, according to people familiar with the matter.  (Read more)

Iran Told to Make Deal by Dawn With Talks Set to Miss Deadline

World powers warned Iran that they’re ready to quit nuclear talks on Wednesday even if there’s no agreement, according to a participant, as the approach of a deadline led to brinkmanship on both sides.

While negotiators have agreed to continue past midnight, breaking with the official timetable, the talks won’t be extended beyond April 1, said a diplomat from one of the six countries negotiating with Iran, speaking on condition of not being identified in line with protocol. The European foreign ministers intend to leave the Swiss city of Lausanne on Wednesday morning regardless of the outcome, the diplomat said. (Here)

Catch of the Day: GOP Retreat on Obamacare<p>Repeal, replace and retreat.</p> Photographer: Alex Wong/Getty Images

A Catch to the Washington Post's Greg Sargent, who figured out what some Republicans are really saying: that popular provisions of  Obamacare “don’t really count as Obamacare!” 

He was analyzing the Facebook fiasco suffered by Representative Cathy McMorris Rodgers, a Washington Republican, who asked her constituents for horror stories about the Affordable Care Act on its fifth anniversary. (Read more)

Oil Extends Drop as Looming Iran Nuclear Deal Seen Swelling Glut

Oil extended losses from a third quarterly drop as negotiators signaled they’ve reached consensus on major points of a nuclear deal with Iran that may allow the OPEC producer to increase crude exports.

Futures fell as much as 1 percent in New York after closing at a one-week low Tuesday. The foreign ministers of Russia and Iran said a statement may be drafted Wednesday, a day after talks were scheduled to have ended with an outline agreement. U.S. crude stockpiles probably expanded from a record last week, a Bloomberg survey showed before a government report. (More here)

The Saudis Are Losing Their Lock on Asian Oil SalesSouth Korea's Oil Imports

Ships carrying oil from Mexico docked in South Korea this year for the first time in more than two decades as the global fight for market share intensifies.

Latin American producers are providing increasing amounts of heavy crude to bargain-hungry Asian refiners in a challenge to Saudi Arabia, the world’s largest exporter and the region’s dominant supplier. (More here)

Japan's Newest Export: Deflation<p>Land of the sinking yen.</p> Photographer: KAZUHIRO NOGI/AFP/Getty Images

In 2006, seven years before he became Bank of Japan governor, a testy Haruhiko Kuroda told me he thought China was raising its own living standards at the expense of its Asian neighbors.  "The relationship between exchange rates and poverty reduction is not so direct, but a more flexible Chinese exchange rate would benefit Asia," Kuroda, who at the time was head of the Asian Development Bank, told me in his office overlooking the Manila skyline. "It would make a difference." (Continue)


Chart o’ the Day: How Dispersion Stole the Alpha

Chart o’ the Day: How Dispersion Stole the Alpha

Courtesy of 

Why have stock-picking fund managers had it so tough over the last few years? A lot of people would say high correlation in the stock market, but that’s only part of the story. According to Goldman Sachs strategists, the real culprit is low dispersion.  We’ve talked about this topic here before, but to rehash: Dispersion is a measurement of how stocks act in relation to each other, not just to the overall market.

A high-dispersion environment is where a large number of stocks are zigging and zagging drastically. This means that returns and risk factors are all over the map, which, in theory, would allow skilled stock-pickers to greatly differentiate themselves. In a low-dispersion environment, which is what Goldman expects to continue throughout 2015, it’s harder to select stocks that will move meaningfully based on individual company micro-drivers (fundamental changes, news, etc).

The two charts below show how the stock-pickers struggle when dispersion is low and alpha grows scarce:

Screen Shot 2015-03-31 at 8.48.33 AM

You’ve also likely noticed that funds have trouble outperforming during bull markets generally, but we’ve been over that too (see: Why Active Management Fell Off a Cliff).

Strategist David Kostin & Co ran an analysis that measured the S&P 500 stocks for dispersion potential and the tendency to move independently.

They find that the stocks with the potential for high dispersion are most likely to fall into either the information technology or consumer discretionary sectors. This makes intuitive sense – consumer disc companies see radical changes in stock price as a result of the capricious preferences of shoppers while in technology, individual-company innovation is the big driver. Energy, materials and staples – with largely commoditized products to sell – tend to see the lowest amount of dispersion among their stocks.

GS emphasizes that picking stocks with high-dispersion tendencies will be the key to outperformance this year, long or short. The best hunting grounds are in the retailers, techs, biotechs and luxury brands.


Picking stocks in a low return dispersion market 
Goldman Sachs – March 30th 2015

Downside Data Surprises in Canada; Bad Weather Up North? How About Recession?

Courtesy of Mish.

The string of bad data reports not only applies to the US, economists up North appear to be no better at predicting the weather than US economists.

Variant Perception reports Downside Data Surprises Continue in Canada.

For the past 6 months, we have been alerting clients to the persistent decline in our Canada leading indicator. This is now showing up in numerous Canadian coincident data releases, with retail sales being the latest to miss expectations last Friday.  The economic surprise index is now declining sharply and there is little sign of immediate improvement ahead.

PMIs continue to fall whilst building permits and housing starts (some of the best leading indicators to watch), remain negative yoy (top chart). However one of our main themes this year has been that of cognitive dissonance, whereby growth disappoints, but higher excess liquidity supports asset prices.

Canada December Retail Sales

On February 20, the Huffington Post reported Canadian Retail Sales Post Biggest Drop Since April, 2010.

Retail sales in Canada in December posted their largest one-month drop since April 2010, as the cost to fill your gas tank plunged and holiday shoppers spent less.

Statistics Canada said Friday retail sales fell 2.0 per cent compared with November to $42.1 billion in December. That compared with a drop of 0.4 per cent that economists had expected, according to Thomson Reuters.

The drop in sales came as sales at gasoline stations fell 7.4 per cent in December due to lower gas prices, while sales at motor vehicle and parts dealers fell one per cent. Excluding motor vehicle and parts dealers, sales were down 2.3 per cent.

Despite the larger than-expected drop in sales, Bank of Montreal senior economist Benjamin Reitzes cautioned not to jump to conclusions based on the retail sales report. Reitzes noted the rise in popularity of Black Friday sales in Canada has pulled some holiday shopping into November.

Sales were down in nine of 11 subsectors, representing 71 per cent of retail trade.

Canada January Retail Sales

On March 20, the Statistics Canada Retail Trade, January 2015 report showed sales down for a second month.

Retail sales decreased for the second consecutive month in January, declining 1.7% to $41.4 billion. Sales were lower in 7 of 11 subsectors, representing 83% of retail trade.

Lower sales at gasoline stations represented the majority of the decline. Excluding sales at gasoline stations, retail sales were down 0.8%….

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Apple CEO: Pro-discrimination ‘religious freedom ‘ laws are dangerous


Apple CEO: Pro-discrimination ‘religious freedom ’ laws are dangerous 

By TIM COOKThe Washington Post, via Business Insider

There's something very dangerous happening in states across the country.

A wave of legislation, introduced in more than two dozen states, would allow people to discriminate against their neighbors. Some, such as the bill enacted in Indiana last week that drew a national outcry and one passed in Arkansas, say individuals can cite their personal religious beliefs to refuse service to a customer or resist a state nondiscrimination law.

Others are more transparent in their effort to discriminate. Legislation being considered in Texas would strip the salaries and pensions of clerks who issue marriage licenses to same-sex couples — even if the Supreme Court strikes down Texas' marriage ban later this year. In total, there are nearly 100 bills designed to enshrine discrimination in state law.

These bills rationalize injustice by pretending to defend something many of us hold dear. They go against the very principles our nation was founded on, and they have the potential to undo decades of progress toward greater equality.

America's business community recognized a long time ago that discrimination, in all its forms, is bad for business. At Apple, we are in business to empower and enrich our customers' lives. We strive to do business in a way that is just and fair. 

That's why, on behalf of Apple, I'm standing up to oppose this new wave of legislation — wherever it emerges. I'm writing in the hopes that many more will join this movement. From North Carolina to Nevada, these bills under consideration truly will hurt jobs, growth and the economic vibrancy of parts of the country where a 21st-century economy was once welcomed with open arms.

Keep reading Apple CEO: Pro-discrimination ‘religious freedom ’ laws are dangerous – Business Insider.

This article originally appeared at The Washington Post. Copyright 2015.


Economists Fail to Predict Weather Once Again: Chicago PMI Disappoints

Courtesy of Mish.

Chicago PMI Disappoints

Economists expected a rebound in the Chicago PMI index this month following its collapse last month. Alas, once again the weather was much worse in Chicago than economists thought.

The Bloomberg Consensus was for a rebound from last month’s dismal print of 45.8 back into positive territory of 50.2

“Companies sampled in the Chicago PMI report continue to report a lull in activity, at a sub-50 March index of 46.3 following 45.8 in February. On a quarterly basis, the index averaged only 50.5 in the first quarter, down steeply from 61.3 in the fourth quarter for the weakest reading since the third quarter of 2009. Respondents are citing bad weather and fallout from the West Coast port slowdown as temporary negatives, and they see orders picking up during the second quarter.

Failure to Predict Weather

That the Chicago PMI index remained in contraction for the second month at 46.3 while economists expected a rebound into positive territory proves once again how difficult it is for economists to predict the weather in Chicago for February, even though it’s now March.

Don’t worry, economists tell us this unfortunate string of bad weather is “temporary” and will improve in the second quarter.

On the dark side, I fail to see how economists can predict the weather in advance when they cannot do so in arrears.

Mike “Mish” Shedlock

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Why The Mania Is Getting Scary – Central Bankers Are Running A Doomsday Machine

Courtesy of David Stockman at Contra Corner

If you need evidence that we are in the midst of a lunatic financial mania, just consider this summary from a Marketwatch commentator as to why markets are ripping higher this morning [March 30]:

“The dovish comments from both Fed Chairwoman Janet Yellen and People’s Bank of China Governor Zhou Xiaochuan are giving markets a big lift, and in the absence of negative data or news, I imagine this will continue to buoy the markets throughout the session,” Erlam said in emailed comments.

Yellen said gradual hikes are likely this year, but that the central bank will move cautiously……. the PBOC governor said he saw “more room” for China to ease policy if the economy stays soft and inflation continues to weaken.

Its just that frightfully simple. If any of the major central banks anywhere on the planet ease or even hint they might, the robo machines and day traders unleash an avalanche of buy orders and the stock averages jerk higher.

Indeed, Zero Hedge captured the motion succinctly this AM. In keeping with Bernanke’s inaugural blog revelation that 98% of monetary policy consists of “open mouth” operations, the markets leapt upwards on cue. That is, if central banker jaws are flapping, then buy!

What this means is that this third immense financial bubble of the current century will keep inflating until central bankers stop banging the “stimulus” lever or the bubble finally crashes under its own weight. The latter will surely happen, eventually—- and the potential carnage can be readily approximated.

Last time, global equity market inflated to a peak of $60 trillion in aggregate value before they plunged to barely $25 trillion during the post-Lehman meltdown. Now they have been pumped back to the $80 trillion mark by the sheer recklessness of the world’s central bankers, but this time the underlying economic advance has been even more artificial and unsustainable; it amounts to little more than a temporary outgrowth of the explosion in public and private credit since late 2008. At the same time, the bubble has been spread to virtually the entirety of the world’s $200 trillion credit market owing to the nearly universal embrace of massive central bank bond-buying under QE.

Yet do the central bankers have even the foggiest clue that they are sitting on a potential $50-$100 trillion financial market implosion? That the mother of all meltdowns lurks around the corner?

Not these boneheads. They have ripped all the stabilization circuitry out of financial markets, thereby completely disabling honest price discovery. That means they have destroyed the shorts, extinguished fear, obsoleted fundamental analysis, drastically cheapened the cost of hedging and offered speculators unlimited opportunities to shoot fish in a barrel by front-running their announced bond buying and currency manipulation campaigns. In short, they have showered speculators with stupendous windfalls, displacing self-correcting two-way financial markets with rigged gambling casinos in the process.

The immense damage visited upon the machinery of financial markets is sitting there in plain sight. The endless six-year buy-the-dips run of the S&P 500 since March 2009, for example, would be impossible in an honest free market. So why do they ignore the dangers, and stubbornly plow forward clutching to ZIRP, N-ZIRP, QE, forward guidance and all the other tools of central bank stimulus?

The utterances of the duo who kicked off today’s rip make absolutely clear why the central bankers will never stop stimulating. They have embraced a spurious “inflation deficiency” doctrine, and have thereby, in effect, lashed themselves to the wheel of a doomsday machine.

To wit, massive central bank financial repression is the actual cause of deflation. In the boom phase of the expansion it leads to unsustainable public and private borrowing which finances artificial spending by households and governments and excess investment in private mining, processing, manufacturing, transportation and distribution capacity, as well as public infrastructure. Then eventually comes the crack-up phase when the borrowing ends or diminishes, causing cascading reductions in output, prices, profits and incomes throughout the economic chain.

Thus, Governor Zhou Xiaochuan’s threat to unleash more stimulus owing to the specter of “deflation” in China borders on the comical. The very deflation about which he frets was caused by the runaway money printing campaigns of the PBOC over the last several decades—-campaigns which produced monumental price and credit inflation in China, and which were then transmitted and amplified throughout the world economy, and especially China’s supply base in the EM

In the process, the latter caused massive overinvestment and malinvestment in private industry and public infrastructure alike. The “deflation” that Zhou professes to fear is thus the result of price cutting by companies battered by too much debt and too little business, and the inexorable cooling of artificial demand for the materials and services needed to build empty apartments, malls and cities and hideously redundant highways, airports, subways and bridges.

Indeed, the PBOC is threatening to chase its own tail. If China’s traditional high level of consumer inflation is abating, its because of the drastic cooling of the oil-energy complex and the iron ore-metals complex—–trends which, in turn, originate in the sharp and unavoidable slowing of China’s construction and investment mania.

Iron Ore Spot Price (Any Origin) Chart

Iron Ore Spot Price (Any Origin) data by YCharts

So there you have it. The People’s Printing Press of China has been running red hot for more than two decades, and has fueled the most fantastic credit bubble in human history. Total credit market debt outstanding in China at the turn of the century was $2 trillion; now its 14X higher at $28 trillion.

Even more fantastically, China’s nominal GDP has barely doubled—-from $5 trillion to $10 trillion since the 2007. Yet its credit market debt—-public and private combined—-has increased by $21 trillion, or by 4X the gain in money GDP.

This is downright monetary insanity, but in response to modest cooling of its construction frenzy, its chief central banker could think of only one thing: moar ease!  Apparently, a 7X increase in PBOC’s balance sheet since the turn of the century is not enough—–even when it only adds fuel to the deflationary fires.

Historical Data Chart

Needless to say, during the past year the signs that China’s house of cards is tottering have become omnipresent. So this is where the doomsday machine comes front and center. China’s credit addicted financial system has just channeled the central bank’s liquidity injections to the stock market in response to Beijing’s attempts to administratively rein-in shadow banking system excesses, and particularly, the so-called “trust loans” to developers and commodity speculators.

Accordingly, the Shanghai A Shares index is up 81 % in the last nine months fueled by margin loans and an explosion of retail stock market speculation. Never has there been a more pathetic march of the lemmings toward their doom.

^SSEA Chart

^SSEA data by YCharts

Janet Yellen’s pronouncements last Friday were no more sensible. Rhetorically waving her arms at the bogeyman of too little inflation, she proclaimed the following:

That said, we must be reasonably confident at the time of the first rate increase that inflation will move up over time to our 2 percent objective, and that such an action will not impede continued solid growth in employment and output.

That is sheer gibberish and rationalization. There is not an iota of evidence that 2% inflation will cause any more growth in output and employment than will 1.6% inflation—–the actual rate of PCE deflator less food and energy increases since 2007. Worse still, there is absolutely no chance that “open mouth” policy at the Eccles Building will have any impact on what amount to downright trivial short-term wiggles in the measured CPI.

Indeed, the very idea that the US economy is suffering from insufficient inflation is a Keynesian canard that defies empirical reality and common sense. As we demonstrated last week, the rate of real GDP growth has slowed to 1.7% since the turn of the century and 1.1% since the pre-crisis peak. That is, to less than one-third of its historic growth rate. And that’s despite a 9X increase in the Fed’s balance sheet—-from $500 billion to $4.5 trillion during the last 15 years—-and far more inflation than main street households could reasonably tolerate, given the tepid rate of wage growth during that period.

And it doesn’t matter how you measure it. Inflation has been high on a cumulative basis, and the median household income has been going in the wrong direction.

CPI and PCE Ex Food and Energy Since 1987- Click to enlarge



CPI and PCE Ex Food and Energy Since 1987

In short, the US economy has not suffered from an “inflation deficiency”. As shown above, the price level has actually doubled  since the era of monetary central planning incepted under Greenspan in 1987.

Likewise, there is no shortage of “aggregate demand” that can be remedied by continued “monetary accommodation”. The welcome, modest abatement of consumer price inflation in recent months reflects the epochal deflation now underway around the planet——the inexorable correction of the monetary boom that has been fueled by central banks since the 1990s.

By insisting that monetary accommodation can fill-up an imaginary bathtub called the US economy until it reaches the brim of full employment and precisely 2.000% change in the PCE deflator over some arbitrary time frame that remains forever undefined, the Fed is engaging in an act of monumental folly. And one which is now being replicated even more egregiously by the rest of the world’s convoy of money printing central banks.

That’s the equivalent of a doomsday machine. The central banks will ease and talk of easing until the third great bubble of this century reaches brobdingnagian extremes. Then the carnage will commence. Again.

Why Is the Fed’s Stanley Fischer Tilting at Windmills?

Courtesy of Pam Martens.

Stanley Fischer, Vice Chairman of the Federal Reserve

Stanley Fischer, Vice Chairman of the Federal Reserve

Last Friday and again yesterday, the Vice Chairman of the Federal Reserve, Stanley Fischer, delivered speeches that attempted to refocus his audience away from the systemic global risk posed by behemoth Wall Street banks and redirect their gaze to dangers lurking in the nonbank sector: things like mutual funds and hedge funds.

Reading the speeches, we had an epiphany here at Wall Street On Parade: if something does blow up in the nonbank sector it is highly likely to be caused by an interaction with a Wall Street bank. The insurance company, AIG, would not have failed during the last financial crisis had it not agreed to engage in Credit Default Swaps (CDS) with Wall Street mega banks. Fannie Mae and Freddie Mac would not have failed had they not been seduced into buying dodgy mortgages,  mortgage-backed securities, and derivatives from Wall Street banks. The Reserve Primary Fund, a money market fund that infamously broke the buck (its shares fell below the sacrosanct $1 per share) in September 2008, did so because of its holdings of Lehman Brothers’ debt – a large Wall Street investment bank which failed in September 2008 while owning two FDIC-insured banks — Lehman Brothers Bank, FSB and Lehman Brothers Commercial Bank.

Fischer’s efforts to redirect the debate away from the largest Wall Street banks comes on the heels of a February report from the Office of Financial Research, a unit of the U.S. Treasury, showing systemic problems bubbling again at the mega banks.

The study was authored by Meraj Allahrakha, Paul Glasserman, and H. Peyton Young, and found that five U.S. banks had high contagion risk values — Citigroup, JPMorgan, Morgan Stanley, Bank of America, and Goldman Sachs.

The authors write:

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How The Fed Has Failed The Nation (In One Chart)

Courtesy of Charles Hugh-Smith of OfTwoMinds

The Federal Reserve has failed not just the nation and the U.S. economy, but more importantly, the American people that it supposedly serves. It has also failed the world, by showing other central banks that they can reward private banks and top .01% with absolute impunity.

The supposed goal of the Fed's zero-interest rate policy (ZIRP) and quantitative easing (QE) was to make borrowing easier for both corporations and consumers, the idea being companies would borrow to invest in new productive capacity and consumers would buy the new goods and services being produced with cheap credit.
The secondary publicly stated goal was to spark a rally in stocks, bonds and real estate that would spark a wealth effect: as households saw their net worth rise, they would feel wealthier and thus more likely to buy goods and services they didn't need on credit.
The real reason for ZIRP and QE was to rebuild the balance sheets and profits of banks on the backs of savers who have earned near-zero thanks to the Fed's manipulation of markets. But setting aside the obvious success of the Fed's real goals–enriching the banks and the super-wealthy who have access to near-zero interest credit–let's see what corporations did with the Fed's nearly-free money.
Did they invest in new productive capacity? No, they bought back their own stocks–trillions of dollars worth, to boost stock prices and managerial bonuses. Note what happened when the last stock buyback binge faded: stocks crashed.
The Fed's free money for financiers enriched the top layer of corporate management and the top 1% who own most of the nation's equities. You can read the details here: Factset Buyback Quarterly.
The other group of financiers with access to the Fed's free money for financiers has been private equity. So did the private equity multi-millionaires borrow the Fed's largesse to build new plant and hire new employees? Did they invest the borrowed billions in productive startups?
No–they used the money to buy existing companies and bleed them dry. The Glory Days of Private Equity Are Over (Via Mark G.):
Private equity has been holding back the economy. When you buy out a drugstore chain or car-rental company and load it with debt, you aren’t investing in the productivity of the economy. More often, by cutting back on new products and services, you are removing productivity from the economy. While generating wealth for endowments and pension funds, private equity can destroy wealth in the economy—my guess is 0.5%-1% lower gross domestic product in an already subpar recovery.
There you have it: the Fed has lowered productivity and GDP and stripmined savers, widows and orphans to further enrich the obscenely wealthy. Recall this from my entry last week, Will Cash Always Be Trash, Or Will It One Day Be King?
Between 2009 and 2012, the first years of the economic recovery, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%.

There is only one way to end the financial tyranny of the Federal Reserve–abolish it, and put an end to the predatory pathologies of its policies

Former Fed Governor Admits Market Controlling The Fed Is A “Very Dangerous Development”

Courtesy of ZeroHedge. View original post here.

The constant changes to Fed policy targets and enslavement to the ticker must change, according to former Fed Governor Kevin Warsh. 

"The markets think they have Yellen's number," that she will never allow markets to go down, Warsh warns "that is a very dangerous development."

We must stop QE, Warsh chides, as the inflation goals are close enough to a comfort zone and arguing for QE because of lowflation is poor thinking "because our gauges are not even that good."

Dollar strength is The Fed's doing, he adds, since they have been telling everyone to do what we have been doing… and adds "The Fed talking about the dollar tells me they are more concerned about the dollar's impact on earnings."

What worries Warsh the most, however, is "The Fed's policies changing based on what happens on the ticker… The Fed should be thinking 3 to 4 years ahead."

Finally, he crushes the memes of all the malinvestment deniers… "people in the real economy who dont have big balance sheets have been suffering from wage pressures and stagnation…"

"We tried negative real rates in the mid 70s and the early 2000s and both ended badly."

As Jim Grant opined so eloquently… "The Fed can make things look better but can't make things better," and Kevin Warsh blasts buybacks and financial engineering as evidence of this.

"This is an experiment we should be taking with great care without some obvious conviction that there is no financial stability risks."

Investors "think good times can last forever," he warns… they can't…

Amid all the turmoil in global geopoltics, "you still don't see any of those risks in financial markets.. and I cant help but think aggressive central banks are responsible for that."

The Full Warsh…

* * *

Someone is not getting invited back on CNBC…

Recovery, Geopolitics and Detergents

Courtesy of The Automatic Earth.

Gottscho-Schleisner Fulton Market pier, view to Manhattan over East River, NY 1934

Increasingly over the past year or so, when people ask me what I do, and that happens a lot on a trip like the one I’m currently on in the world of down under, I find myself not just stating the usual ‘I write about finance and energy’, but adding: ‘it seems to become more and more about geopolitics too’. And it’s by no means just me: a large part of the ‘alternative finance blogosphere’, or whatever you wish to call it, is shifting towards that same orientation.

Not that no-one ever wrote about geopolitics before, but it used to be far less prevalent. Much of that, I think, has to do with a growing feeling of discontent with the manner in which a number of topics are handled by the major media and the political world. Moreover, as would seem obvious, certain topics lay bare in very transparent ways how finance and geopolitics are intertwined.

In the past year, we’ve seen the crash of the oil price, which will have – financial and political – effects in the future that dwarf what we’ve seen thus far. We’ve seen Europe and its banks stepping up their efforts to wrestle Greece into – financial and political – submission. And then there’s the nigh unparalleled propaganda machine that envelops the Ukraine-Crimea-Russia issue, which has bankrupted the economy of the first and imposed heavy economic sanctions on the latter, for political reasons.

And while there are plenty people out there all across the west who may feel convinced that Greece had it coming, that waging wars in far away lands is the only way to keep the west safe, and that Putin is the biggest and meanest bogeyman this side of Stalin, if not worse, many also have come to question the official version(s) of events. Something that, if you ask me, is always good, even if it doesn’t mean the conclusions arrived at are always top notch.

For that matter, even Société Générale does geopolitical commentary, as evidenced in a note published by Tyler Durden:

Western sanctions have exerted a broad-based negative impact on Russian businesses. The cost of borrowing has climbed considerably not just for sanctioned institutions, but also for other Russian entities. Risk management departments across global enterprises are likely to continue erring on the side of caution, continually assessing the risk of sanctions materializing for counterparties in Russia. Normalization of business practices may only reemerge long after the removal of sanctions. Although this does not mean completely avoiding interactions with Russian entities, businesses and investors are increasingly cautious and selective in their participation…

Western sanctions against Russia may persist indefinitely. Some locals believe in the likelihood of de-escalation later this year, pointing to the lack of political cohesion and unanimity among Europe’s political leaders, and increasing calls for easing of sanctions. Russian businesses believe that escalation of sanctions may be hard to implement, given that they will also hurt European counterparties.

Some local asset managers are optimistic on the performance of Russian assets later this year, based on a perceived high likelihood of improvement in geopolitics. Although locals differ in their assessment of the timeline when sanctions may be lifted, they appear united in their support and admiration of President Putin. Few care to speculate on President Putin’s ultimate game plan, or whether one exists, citing the opacity of the situation. With that said, locals broadly concur that Russia would never (again) relinquish Crimea. In this light, Western sanctions against Russia based on its annexation of Crimea may persist indefinitely…

While in my opinion the conclusions in the note leave to be desired, which may be an indication that the boys are somewhat new to the topic, the very fact that SocGen issues notes about geopolitics, and uses the term itself, is interesting and – to an extent – solidifies the link about finance and geopolitics I noted before.

Still, I’, inclined to think that when it comes to Greece, the bank’s analysts are capable of leaving their narrow finance perch behind for a broader vista that allows for a view that makes Greece a political instead of a financial issue. Because that’s what is has become, whether the parties involved wish to acknowledge it or not.

Greece, like Ukraine, is about power politics, executed at about the same level of intelligence and sophistication that you and I had when we are still playing in a sandbox. And finance, economics, is one of the very favorite weapons to try and get the side perceived as weaker to say Uncle.

And that in and of itself is still far from the worst thing. The worst is that what reaches the general public about these power games – which are far from innocent, they kill, maim, hurt real people – is a distorted and simplified precooked storyline, so hardly anyone can make up their own mind about what happens. That is why the ‘alternative finance blogosphere’ feels increasingly compelled to cover that part of the story as well.

This is also a major problem in the more domestic issue of economic recovery. Unless we would agree, which we really shouldn’t, that making a small group of the population richer while the much larger rest is made poorer, is how we define ‘recovery’, we have no recovery. But it is still accepted and proclaimed like a gospel: our economies are in recovery.

If you take a step back and watch things from a distance, it’s truly too silly to be true, but endless repetition of the same lines, be they true or not, has them accepted as being cast in stone. It’s like selling detergent. It’s exactly like that: say something often enough and people start to believe it, connect to it. Of course it doesn’t hurt that people very much want to believe a recovery is here. Just as they want to believe product X will turn them into shiny happy people dressed in ultra white shirts.

And of the best pieces I’ve seen in a while on the illusionary recovery topic comes from Scott Minerd at Guggenheim Partners, writing in the FT:

QE Will Lower Living Standards Long Term

New monetary orthodoxy is likely to permanently impair living standards for generations to come, while creating a false perception of reviving prosperity. As economic growth returns again to Europe and Japan, the prospect of a synchronous global expansion is taking hold. Or, then again, maybe not. In a recent research piece published by Bank of America Merrill Lynch, global economic growth, as measured in nominal US dollars, is projected to decline in 2015 for the first time since 2009, the height of the financial crisis.

In fact, the prospect of improvement in economic growth is largely a monetary illusion. No one needs to explain how policy makers have made painfully little progress on the structural reforms necessary to increase global productive capacity and stimulate employment and demand. Lacking the political will necessary to address the issues, central bankers have been left to paper over the global malaise with reams of fiat currency. [..]

What I decidedly do not like about Minerd’s piece is the suggestion that if only policy makers had made more progress on ‘structural reforms necessary to increase global productive capacity’, things would have been fine, or better at least. Like if someone came up with a better way towards growth, that would solve our problems.

In my view, this is not about failing to find the right way towards more growth, it’s that more growth itself is not the right way to solve the issues. When he says policy makers and central bankers are ‘lacking the political will necessary to address the issues’, I can only hope he means the will needed to restructure the entire financial system, force bankrupt banks into bankruptcy and break up what’s left into pieces too small to ever again threaten an economy, let alone the entire financial system. But I don’t see him say it, so I’m left doubting that’s what he means.

Essentially, monetary authorities around the globe are levying a tax on investors and providing a subsidy to borrowers. Taxation and subsidies, as well as other wealth transfer payment schemes, have historically fallen within the realm of fiscal policy under the control of the electorate. Under the new monetary orthodoxy, the responsibility for critical aspects of fiscal policy has been surrendered into the hands of appointed officials who have been left to salvage their economies, often under the guise of pursuing monetary order.

The consequences of the new monetary orthodoxy are yet to be fully understood. For the time being, the latest rounds of QE should support continued U.S. dollar strength and limit increases in interest rates. Additionally, risk assets such as high-yield debt and global equities should continue to perform strongly.

Despite ultra-loose monetary policies over the past several years, incomes adjusted for inflation have fallen for the median U.S. family. With the benefits of monetary expansion going to a small share of the population and wage growth stagnating, incomes have been essentially flat over the past 20 years.

That last bit is the same as saying there is no recovery. Which is a tad curious, because Minerd started out saying, in his first paragraph: ‘As economic growth returns again to Europe and Japan’. Pick one, I’d say.

In the long run, however, classical economics would tell us that the pricing distortions created by the current global regimes of QE will lead to a suboptimal allocation of capital and investment, which will result in lower output and lower standards of living over time.

In fact, although U.S. equity prices are setting record highs, real median household incomes are 9% lower than 1999 highs. The report from BoA Merrill Lynch plainly supports the conclusion that QE and the associated currency depreciation is not leading to higher global output. The cost of QE is greater than the income lost to savers and investors. The long-term consequence of the new monetary orthodoxy is likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity.

It’s by no means the first time I bring this up, but I’ll do it again until there’s no more need. The stories we are bombarded with 24/7 under the quite hilarious misnomer ‘News’ have been prepared, pre-cooked and pre-chewed for our smooth and painless digestion, and as such they contain only tiny little flakes of reality. They are designed to make us feel good, not understand the world around us.

It’s up to sites like the Automatic Earth – and there’s quite a few others – to expose these storylines and narratives for what they really are: tools to sell detergents. Their purpose is not to inform people, but to manipulate them into forming opinions about their world that serve the intentions of one or more groups of people hungry enough for power to occupy themselves with this sort of scheming.

Somewhere on the not so sharp edge between money and power, there are lots of people who devote their entire lives towards devising ways to make up your mind for you. And if you’re like most people, you like that, because it absolves you from having to think for yourself. But the price to pay doesn’t come with the commercials: if you let others think for you, you or your children may be called into war at any time of somebody else’s choosing.

And, as Scott Minerd says, the economic future for your entire families will look utterly bleak. Because that recovery they talk about? It’s not for you.

Historical Perspective on CPI Deflations: How Damaging are They?

Courtesy of Mish.

Yet another central bank has announced a warning about the perils of deflation. Please consider China Central Bank Calls for Vigilance on Deflation.

China's central bank governor Zhou Xiaochuan warned on Sunday that the country needs to be vigilant for signs of deflation and said policymakers were closely watching slowing global economic growth and declining commodity prices.

Zhou's comments are likely to add to concerns that China is in danger of slipping into deflation and underline increasing nervousness among policymakers as the economy continues to lose momentum despite a raft of stimulus measures.

"Inflation in China is also declining. We need to have vigilance if this can go further to reach some sort of deflation or not," Zhou said at a high-level forum in Boao, on the southern Chinese island of Hainan.

Zhou added that the speed with which inflation was slowing was a "little too quick", though this was part of China's ongoing market readjustment and reforms.

Historical Perspective On CPI Deflations

In its March report, the BIS took a look at the Costs of Deflations: A Historical Perspective. Here are the key findings.

Concerns about deflation – falling prices of goods and services – are rooted in the view that it is very costly. We test the historical link bet ween output growth and deflation in a sample covering 140 years for up to 38 economies. The evidence suggests that this link is weak and derives largely from the Great Depression. But we find a stronger link between output growth and asset price deflations, particularly during postwar property price deflations. We fail to uncover evidence that high debt has so far raised the cost of goods and services price deflations, in so-called debt deflations. The most damaging interaction appears to be between property price deflations and private debt

Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive.

Once we control for persistent asset price deflations and country-specific average changes in growth rates over the sample periods, persistent goods and services (CPI ) deflations do not appear to be linked in a statistically significant way with slower growth even in the interwar period. They are uniformly statistically insignificant except for the first post-peak year during the postwar era – where, however, deflation appears to usher in stronger output growth. By contrast, the link of both property and equity price deflations with output growth is always the expected one, and is consistently statistically significant.


The evidence from our long historical data set sheds new light on the costs of deflations. It raises questions about the prevailing view that goods and services price deflations, even if persistent, are always pernicious. It suggests that asset price deflations, and particularly house price deflations in the postwar era, have been more damaging. And it cautions against presuming that the interaction between debt and goods and services price deflation , as opposed to debt’s interaction with property price deflations, has played a significant role in past episodes of economic weakness.

The exception to the general rule was the Great Depression but, that was also an asset bubble deflation coupled with consumer price deflation.

Meanwhile central banks on every continent are worried about something they should welcome….

Continue here > 



In the News, 3-30-15

From Bloomberg:

Latest Products At The Wearable Device Technology Expo

FDA 'Taking a Very Light Touch' on Regulating the Apple Watch

With Apple Inc. and fellow Silicon Valley companies edging further into health care, the U.S. agency in charge of oversight says it will give the technology industry leeway to develop new products without aggressive regulation.

Bakul Patel, who oversees the new wave of consumer-focused health products at the Food and Drug Administration, said most wearable gadgets such as the soon-to-be-released Apple Watch and health-focused applications for smartphones have a way to go before warranting close scrutiny from the agency. (Read here)

<p>A lagging indicator.</p> Photographer: Scott Olson/Getty Images

Wages Will Dominate Big Week for U.S. Data

This week’s heavy load of economic data releases from the U.S. (and, to a lesser extent, China and the euro area) comes at a particularly opportune moment. Views about the prospects for the U.S. economy are all over the map. There also is significant divergence in the assessments of the effects of a probable increase in interest rates this year by the Federal Reserve. And there is an even greater diversity of opinion about whether the U.S. will help pull the rest of the world out of the doldrums or, instead, be dragged down. (More)

Big Oil Pressured Scientists Over Fracking Wastewater's Link to Quakes

In November 2013, Austin Holland, Oklahoma’s state seismologist, got a request that made him nervous. It was from David Boren, president of the University of Oklahoma, which houses the Oklahoma Geological Survey where Holland works. Boren, a former U.S. senator, asked Holland to his office for coffee with Harold Hamm, the billionaire founder of Continental Resources, one of Oklahoma’s largest oil and gas operators. Boren sits on the board of Continental, and Hamm is a big donor to the university, giving $20 million in 2011 for a new diabetes center. Says Holland: “It was just a little bit intimidating.” (More)

You May Want to Pay Extra Close Attention to the Economic Data This Week

The beginning of the month always has a lot of economic data. From the Non-Farm Payrolls report to ISM to Factory Orders, there's a ton for people to sift through. Typically the Jobs Report, which is scheduled to be released on Friday, sucks up the vast majority of attention. (Continue)

Frigid February Saps Spending as U.S. Consumers Stay Home

Consumer spending barely rose in February as frigid temperatures kept households away from malls and automobile dealerships, adding to signs the U.S. economy slowed at the start of 2015.  (More)

Economic Confidence Shows Euro-Area Recovery Defies Greek Risks

Euro-area economic sentiment rose to the highest level in more than 3 1/2 years, adding to signs that the fragile recovery is stabilizing despite Greece’s struggle to secure funding.

An index of executive and consumer confidence jumped to 103.9 in March from a revised 102.3 a month earlier, the European Commission said Monday. The reading is the strongest since June 2011 and exceeds the median of 30 estimates in a Bloomberg News survey, which was for an increase to 103. (Read more)

London Restaurant Will Be U.K.'s First Where Diners Buy Tickets

A restaurant in London's Shoreditch is to become the first in the U.K. to introduce a system in which diners must purchase tickets in advance—as for a sporting event or the theater—rather than booking a table in the conventional way.

Clove Club Chef Isaac McHale said customers regularly fail to show up or else arrive in fewer numbers than specified on the reservation. In the future, guests will pay for meals when they book, and it will be their loss if they don't come along to eat. (Continue)

U.K. Banks Face China Slump, Deflation in Second Stress Test

The Bank of England will assess the resilience of Britain’s seven biggest banks against a slump in the Chinese economy, a further drop in oil prices and a prolonged period of deflation in its second set of stress tests.

Banks such as HSBC Holdings Plc and Barclays Plc will also be examined on their ability to weather shocks including “severe” market stress leading to reduced liquidity, the BOE said in a statement on Monday. Lenders must maintain a core tier one capital buffer of 4.5 percent of risk-weighted assets to pass, as well as a new 3 percent leverage ratio requirement. (Read more)

The Real Greek Bank Stress and Why It Doesn't Matter—Yet

 It is no secret that Greek banks have been losing deposits in recent months. Data released by the Greek central bank show deposits have plunged to their lowest level in 10 years.    


Banks Face Global Push to Prepare for Interest Rate Rise

Banks face a push from international regulators for stiffer rules on the capital needed to handle an increase in interest rates.

The Basel Committee on Banking Supervision is weighing updating its standards for capturing interest-rate risk on assets banks plan to hold to maturity, Stefan Ingves, the regulator’s chairman, said in an interview.

“We are working on interest-rate risk in the banking book,” Ingves said on March 27 in Frankfurt. “We are looking into that presently and we hope to put out something in this field fairly soon.” (Full article)

This Magic Number Can Make or Break You in China’s Stock Market

It’s the magic number in China, a figure that conjures up public companies and private fortunes.

The number is 23 — and it’s one of the most powerful forces in China’s $6.4 trillion equity market today.

As the Shanghai benchmark index posts the world’s biggest rally, 23 has become a ceiling for firms trying to tap into it. Even though market valuations have climbed, virtually no companies have gone public at prices of more than 23 times their earnings per share. (More)

                                    The Invisible Hand of Government

Free Speech Inc.

The most illuminating free-speech case of 2015 has nothing to do with political speech, or civil-rights protests, or hate speech, or any other issues we used to associate with the First Amendment. It has to do with an obscure provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that directs the Securities and Exchange Commission to require companies to inform the public if their products use conflict minerals. (Read more)

China Loosens Home-Buying Rules to Counter Economic Slowdown

China announced steps today to make buying and selling a home cheaper, intervening to revive a slumping property market that’s weighed on economic growth and cut demand for commodities from copper to steel.

<p>In the eye of the beholder.</p> Photographer: BRENDAN SMIALOWSKI/AFP/Getty Images

Global Economy Is Now a Rorschach Test

After more than half a decade of inactivity on interest rates, theU.S. Federal Reserve believes economic conditions have improved enough that it can raise borrowing costs. The only question is when, rather than if, to move. 

Central bankers in the U.K, by contrast, are suggesting they could raise, or lower, or leave their key rate unchanged from the 0.5 percent level that's also prevailed for the past five years. Their lack of certainty should make the Fed less gung-ho in its rush to escape the so-called zero bound. (Continue)

<p>The costs of cost-cutting.</p> Photographer: Adam Berry/Getty Images

Low-Cost Airlines Are High Stress For Pilots

Andreas Lubitz, the co-pilot who last week steered a Germanwings flight into a mountainside, had a history of depression so debilitating that he left his pilot training program for six months in the late 2000s, according to Germany’s Bild newspaper. When he was ready to return, he had to pass a battery of psychological tests required for pilot certification, as well as another series of tests that were a prerequisite for his job at Lufthansa, which owns Germanwings. But in all likelihood, that was the last time Lubitz’s employer or government subjected him to a formal psychological evaluation.

Ritholtz's Reads: Tim Cook Leads Different

Welcome to the weekend. Pour yourself a mug of Guatemalan Antigua Valley coffee, and settle in for our long form Saturday morning reads:

  • At Kodak, Clinging to a Future Beyond Film (NYT)
  • Stanford’s Most Popular Class Isn’t Computer Science — It’s Something Much More Important. It’s Called “Designing Your Life,” A Course That’s Part Throwback, Part Foreshadowing Of Higher Education’s Future. (Fast Company)
  • The Deadly Global War for Sand (Wired)
  • How Chicago has used Financial Engineering to Paper over its Massive Budget Gap (Medium)
  • The Brain’s Empathy Gap: Can mapping neural pathways help us make friends with our enemies? (NYT Magazine)
  • Apple’s Tim Cook leads different (Fortune)



Inside Brookfield Place, the Swanky Mall Opening Near the World Trade Center

In the shadow of One World Trade Center, the colossal skyscraper in Lower Manhattan, lies a newly renovated luxury mall that hopes to be a mecca for swanky shopping.

Brookfield Place will open the doors to its glitzy new fashion stores and food marketplace on Thursday. Located in the building complex formerly called the World Financial Center, the project is four years and $300 million in the making, an ongoing saga that’s drawn much media attention for its ambitiousness. But though it's connected to one of the most expensive transit hubs ever built, the mall is actually aimed at locals. (More)

We Just Got Some Ugly Numbers out of Texas

There's been a lot of debate about how well the Texas economy will hold up in light of collapsing oil prices.

While it's just one datapoint, the latest Dallas Fed Manufacturing Index shows some trouble in the Lone Star State.

The general business activity index declined from -11.2 to -17.4 in March, vs expectations for a rise to -9.0. The February report also missed expectations, coming in at -11.2 from the previous reading of -4.4. (Read here.)

Natural Gas Advances in New York on Outlook for Cooler Weather

Natural gas futures rose in New York on speculation that cooler weather will boost demand, limiting gains in stockpiles of the power-plant fuel.

The East Coast and Midwest may see cooler-than-normal weather April 4 through April 6, according to MDA Weather Services of Gaithersburg, Maryland.

“We could see some upcoming injections disappoint,” said John Kilduff, partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “These temperatures are going to be below normal in April, which could drive demand.” (Continue)

Yuan Fell in Global Payment Ranking in February, Swift Says

China’s yuan fell two levels to a seventh place among the most-used currencies in the global payment system in February, according to the Society for Worldwide Financial Telecommunications.

The currency’s market share declined to 1.81 percent, a 20 percent decline from January, according to Swift, the financial-messaging service. The drop was likely due to fewer transactions during the one-week Chinese New Year holiday, the La Hulpe, Belgium-based organization said. (More)


Indiana Legalizes Discrimination on Grounds of “Religious Freedom”

Courtesy of Mish.

Can you refuse service to gays and lesbians? You can in Indiana thanks to the "Religious Freedom" Bill.

Indiana Governor Mike Pence has signed a bill that would allow businesses to refuse service to gay and lesbian patrons on the grounds of “religious freedom”, even as some of the state’s largest business interests oppose the measure.

Mr Pence, a potential 2016 presidential contender, said he signed the bill because “many people of faith feel their religious liberty is under attack by government action”.

Proving that he cannot think, Pence quipped "If I thought it legalised discrimination in any way in Indiana, I would have vetoed it."

And what about religious freedom for atheists, Muslims, ISIS? Can they do whatever they want too, or is this just religious freedom for Christians and Jews?

Where does one draw the line? Can I post a sign Catholics not welcome? Jews go home?

Greg Ballard, the Republican mayor of Indianapolis, has said that the Indiana law sends the “wrong signal”. “Indianapolis strives to be a welcoming place that attracts businesses, conventions, visitors and residents,” he said in a statement Wednesday.

In recent days, three major conventions have threatened to pull out of the state because of the bill. The organisers of Gen Con, the city’s largest convention, said the law “will have a direct negative impact on the state’s economy, and will factor into our decision-making on hosting the convention in the state of Indiana in future years”.

History Lesson for Pence

The opening of the United States Declaration of Independence states as follows:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed;


"Many people of faith feel their religious liberty is under attack by government action," said Pence. Actually, people of all races, creeds, and religions are under attack by this ludicrous bill.

To Pence, you are equal unless your religion says otherwise. He is exactly the kind of fake-conservative jackass the Republican party needs to get rid of.

Mike "Mish" Shedlock


Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It

Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It

Courtesy of Mish.

Ben Bernanke just started his own blog at the Brookings Institute. His first post, from today, Inaugurating a New Blog is the announcement.

Let's dive into Bernanke's second post of the day: Why are Interest Rates So Low?

Bernanke: Low interest rates are not a short-term aberration, but part of a long-term trend. As the figure below shows, ten-year government bond yields in the United States were relatively low in the 1960s, rose to a peak above 15 percent in 1981, and have been declining ever since. That pattern is partly explained by the rise and fall of inflation, also shown in the figure.

Mish: Inflation is only low if one ignores asset bubbles. The CPI does not factor in bubbles induced by monetary policy. The Bernanake and Greenspan Fed ignored the biggest bubble ever in housing for which the Fed has never apologized nor admitted any wrong doing. The effects of inflation are visible everywhere, except of course where the Fed looks.

Bernanke: If you asked the person in the street, “Why are interest rates so low?”, he or she would likely answer that the Fed is keeping them low. That’s true only in a very narrow sense. But what matters most for the economy is the real, or inflation-adjusted, interest rate (the market, or nominal, interest rate minus the inflation rate). The real interest rate is most relevant for capital investment decisions, for example. The Fed’s ability to affect real rates of return, especially longer-term real rates, is transitory and limited. Except in the short run, real interest rates are determined by a wide range of economic factors, including prospects for economic growth—not by the Fed.

Mish: It is difficult to say precisely where interest rates would be in the absence of the Fed, but the answer is likely, surprisingly low. The reason is the Fed (central banks in general) coupled with government deficit spending and fractional reserve lending are the very source of inflation. Amusingly, the Fed bills itself as an "inflation fighting force" but it is a key determinant of inflation. Worse yet, and since the Fed is totally clueless about asset bubbles, it fails to see inflation in front of its nose.

Bernanke: To understand why [the Fed’s ability to affect real rates is transitory and limited], it helps to introduce the concept of the equilibrium real interest rate (sometimes called the Wicksellian interest rate, after the late-nineteenth- and early twentieth-century Swedish economist Knut Wicksell). The equilibrium interest rate is the real interest rate consistent with full employment of labor and capital resources, perhaps after some period of adjustment. Many factors affect the equilibrium rate, which can and does change over time. If the Fed wants to see full employment of capital and labor resources (which, of course, it does), then its task amounts to using its influence over market interest rates to push those rates toward levels consistent with the equilibrium rate, or—more realistically—its best estimate of the equilibrium rate, which is not directly observable.

Mish: With that, the Fed admitted it is clueless about the alleged "equilibrium rate". Indeed it is not observable, nor is the concept of full employment known or observable. Government interference in the free markets, especially minimum wage laws grossly distort the level of full employment. Factor in changing consumer preferences and demographics, and it's a fool's mission to believe the Fed (any central bank), can come up with a realistic estimate to something Bernanke correctly admits is not directly observable.

Bernanke: When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings. I was concerned about those seniors as well. But if the goal was for retirees to enjoy sustainably higher real returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do.

Mish: It's not the interest rate policy directly that threw seniors under the bus. Rather, it's the Fed's inflation policy while ignoring the consequences of asset bubbles that threw everyone but those with first access to money under the bus. The Fed ignored an enormous housing bubble (Bernanke did not see it at all), then when housing crashed, the Fed lowered rates to save the banks. The overall action was as "necessary" as it was to  have a Fed sponsored housing bubble in the first place.

Bernanke: A similarly confused criticism often heard is that the Fed is somehow distorting financial markets and investment decisions by keeping interest rates “artificially low.” Contrary to what sometimes seems to be alleged, the Fed cannot somehow withdraw and leave interest rates to be determined by “the markets.” The Fed’s actions determine the money supply and thus short-term interest rates; it has no choice but to set the short-term interest rate somewhere.

Continue here

Wishful Thinking: “Strong Growth” to Propel Housing

Courtesy of Mish.

CoreLogic chief economist Dr. Frank Nothaft says Strong Economic Growth To Propel US Housing Market in 2015.

The U.S. economy is poised to grow by close to 3 percent in 2015, generating a 3- to 3.5-million-person gain in employment. This job growth, coupled with very low mortgage interest rates and some easing in credit access, is expected to propel both owner-occupant and rental housing activity this year. This heightened level of housing demand should translate to the best home sales market in eight years, a projected rise of about 5-6 percent in the national CoreLogic Home Price Index (HPI) and mortgage originations that will likely rise in 2015 compared to last year.

Economic growth near 3 percent

U.S. economic growth will be buoyed by three forces in 2015. One is the halving of energy prices since last summer, with prices unlikely to jump back up this year. This price drop has the similar beneficial effect on aggregate economic performance that a tax cut would have: Both consumers and business owners have more cash left each month to spend on other goods or invest in new equipment and financial assets. Lower energy prices could boost growth by as much as 0.5 percent, even though regions of the U.S. with jobs tied to energy production will face a slowdown.

A second force at work is the rise in consumer and business manager confidence in the economic recovery. This rise has been pronounced over the past year, coinciding with the pickup in economic growth (better than 4 percent annualized growth over the last three quarters of 2014) and the drop in energy costs. The Conference Board Consumer Confidence Index and the National Federation of Independent Business’ Small Business Optimism Index have both risen to the highest levels since before the Great Recession. Consumers who feel more financially secure are more likely to form new households and more likely to transition from rental to ownership; and businesses that are more optimistic that demand will be there for their products are more likely to hire staff.

The third factor at work is a significant improvement in the budget outlook for state and local governments. With tax receipts stronger than expected, state and local governments will likely spend more, providing further stimulus to aggregate demand. With these three forces working in concert, 2015 economic growth could hit 3 percent, making this year only the second calendar year over the past decade with growth of 3 percent or better.

Head in the Sand

Nothaft has his head in the sand. He ignores a massive string of bad economic reports, while focusing on the lagging influence of jobs.

Having followed confidence numbers for years, the numbers are volatile and pretty much useless.

Where are confidence numbers going from here?

I actually suggest down because I expect a recession based on firmer data.

Manufacturing Business Confidence

Continue here.


Risk Has Begun To Rein

Risk Has Begun To Rein

By Dana Lyons, Tumblr 


The following piece was originally posted in J. Lyons Fund Management Inc.’s February Newsletter at

Investment in the riskiest assets has been on a relative decline, a development which has preceded previous major tops.

"For the moment all discipline seems painful rather than pleasant, but later it yields the peaceful fruit of righteousness to those who have been trained by it.” – Hebrews 12:11

About 4000 years ago, the world experienced its most significant “risk-off” event of all time. Angered by the peoples’ wicked behavior, God flooded the earth, wiping out the entire human race, save for Noah and his family. One might consider Noah the original risk manager. Rather than dismiss the risk of rain — an event that supposedly had never occurred up to that point — he built an ark that would provide protection in the event of a flood.

It certainly helped having an advisor with inside information like God who not only warned Noah of the flood, but was also in charge of its implementation. Even so, it must have taken some serious faith and fortitude on Noah’s part to continue executing his risk strategy considering how lengthy the effort was before it finally revealed any benefit. From start to finish, it took Noah 100 years to build the ark. Can you imagine the taunting he must have endured (e.g., the “perma-bear” accusations in the social media circles)? To his credit, none of that interfered with the implementation of his risk management process. And in the end, the man lived for another 300 years while everyone else ended up under water, literally.

We have been implementing our risk management process to manage investments for over 40 years. Over the course of that time, we have seen all kinds of markets. However, never have we seen anything like the recent environment. While storm clouds in the market have been accumulating for the past few years, there has hardly been any rain, save for an occasional drizzle (June 2013, October 2014). So while we have not been shy in pointing out the growing potential risk in the market (we are active risk managers after all), this risk has not yet mattered. In fact, it has been just the opposite: a nearly unprecedented 2-year increase in asset prices with hardly any drawdown along the way. For a risk manager, these 2 years may have felt like those 100 that Noah spent building his ark.


Why Intel Wants Altera

Why Intel Wants Altera

By Brian Nelson, Tumblr

In its biggest potential acquisition in history, newsletter portfolio holding Intel is reportedly in talks to acquire Altera, though deal terms have yet to be disclosed. We think Intel could pay up to ~$40 per share for the company on the basis of the high end of our fair value estimate range for Altera and still generate value for shareholders, though we wouldn’t expect Altera’s $2 billion revenue stream to be much of a needle-mover against Intel’s $50+ billion revenue base, at least initially. However, there are a few reasons why this would be a strategic win for Intel.

Altera is one of the top standard cell ASIC (application-specific integrated circuit) suppliers in terms of revenue. Due to the rising cost of transistors, however, the ASIC and ASPP (application-specific standard product) models have come under pressure as of late. Altera’s response has been to position itself as one of the two largest manufacturers of field-programmable gate arrays, FPGAs, a sub-segment of programmable logic devices (PLDs) that have much better economics than either ASICs or ASPPs and are poised to displace legacy technologies, almost across the board (ASSP, ASIC, DSP, MCU, CPU, and GPU).

Image Source: Altera

Full article: Brian Nelson's Tumblr — Why Intel Wants Altera.

Is This The ‘Best’ Blood Type?

This caught my eye this morning. While the author confirms that the diet book, the Blood Type Diet (telling people what to eat based on their blood types), was junk science, she also explains that blood type is likely correlated to certain diseases and causes of death — the major ones. Essentially, type O blood doesn't clot as well as blood with the A and/or B antigens, making it better for heart disease, strokes (presumably not the bleeding variety), certain infections and certain cancers.

If lower clottability is indeed the mechanism for protection against heart disease, strokes and some cancers, that would support the practice of taking low dose aspirin on a daily basis.

Is This The ‘Best’ Blood Type?

Is This The ‘Best’ Blood Type?

By Cassie Shortsleeve at Yahoo Health

A trendy diet left blood type with a hard-to-shake reputation, but respectable research suggests that being A, B, AB, or O may matter — far beyond what you’re eating. (Photo: Getty Images/Kevin Curtis)

A few years back, the Blood Type Diet — a controversial nutritional plan that suggests eating a certain way based on blood type — was all the buzz. The gist, according to the book that popularized the idea, was that doing so could maximize your performance, boost health, protect from disease, build stronger emotions, and even help you live longer. Problem is, last year, the diet was debunked by a study in the journal PLoS ONE, leaving blood type with a bad rep and most people thinking it didn’t matter much beyond the need for a transfusion or donation some day. 

But emerging research suggests that while your diet needn’t be so closely linked with your blood, your overall health may be. In fact, one blood type continues to emerge above the rest: blood type O.

Research suggests that people with type O blood are at alower risk for cardiovascular health issues like stroke and heart attack. A new study from the Karolinska Institute shows that people with type O blood are less likely to die from malaria. Science suggests that people with AB blood are at an increased risk of memory issues down the line compared to people with O blood. And other research pins people with O blood as less likely to experience certain kinds of cancer, like pancreatic and gastric cancers. 

This all begs the question: Is type O blood protective?

To answer that, we first have to understand the ABO blood group system: There are four types: A, B, AB, and O (or ABO). Your type is determined by either the presence or absence of antigens on red blood cells, which can trigger an immune response in your body, Kristine Alexander, PhD, a postdoctoral fellow in medicine at the University of Vermont, tells Yahoo Health. 

Keep reading Is This The ‘Best’ Blood Type?.

How Many Slots Are Open In The Upper Middle Class? Not As Many As You Might Think

Courtesy of Charles Hugh-Smith via OfTwoMinds

If America is the Land of Opportunity, why are so many parents worried that their princeling/princess might not get into the "right" pre-school, i.e. the first rung on the ladder to the Ivy League-issued "ticket to the upper middle class"? The obsessive focus on getting your kids into the "right" pre-school, kindergarten and prep school to grease the path to the Ivy League suggests there aren't as many slots open as we're led to believe.
Let's set aside the endless debate over what qualifies a household to be "middle class." Most people define themselves as middle class, with little regard for their income. Let's cut to the chase and ask: how many young people aspire to joining this ill-defined middle class? Does this mean a rising standard of living and security? Not any more.
If you want those things, you must aspire to join the upper middle class.
So the more fruitful question is: what qualifies as upper-middle class? Here's a handy line in the sand: Stanford University covers the tuition for all incoming undergraduates whose household income is less than $125,000.
According to the U.S. Census Bureau data (here displayed on Wikipedia), $125,000 is right about the 85% line–only the top 15% households make $125,000 and up annually:Household income in the United States.
For context, median household income in the U.S. is around $52,000 annually.
A few years ago, I calculated What Does It Take To Be Middle Class? (December 5, 2013) and came up with an absolute minimum of $111,000 for two self-employed wage earners, as this includes the cost of healthcare insurance and the employer's share of Social Security and Medicare taxes. This was bare-bones.
Since employees of the government or Corporate America receive healthcare and retirement benefits (matching contributions to employee 401K plans, etc.), these can be subtracted from the $111,000. But this didn't allow for vacations or any of the finer things in life, so if we are talking about a truly comfortable household income, around $105,000 for state/corporate employed people sounds right and $125,000 for self-employed people is more or less the minimum required.
(Obviously, money goes further in the Midwest and not very far on the Left and Right coasts.)
Stanford's cutoff of $125,000 isn't as outlandish as it might seem at first glance.See where your household income fits in the spectrum with this online tool: What Is Your U.S. Income Percentile Ranking? (This confirms that an income of $125,000 puts the household in the top 15%.)
Meanwhile, wages for every category of worker, from the highly educated to the high school graduate, have been declining:
How many slots are there in this upper middle class? A household income of $190,000 is in the top 5% nationally. According to the Social Security Administration data for 2013 (the latest data available), Wage Statistics for 2013, individuals who earn $125,000 or more are in the top 5% of all earners. Two such workers would earn $250,00 together. The 2.8 million households with incomes of $250,000 or more are in the top 2.5%. If we define the top few percent as upper middle class, then who qualifies as wealthy? Only the top 1%?
I think it is reasonable to define the 10% of households earning between $125,000 (top 15%) and $190,000 (top 5%) as upper middle class. This is around 12 million households, out of a total of 121 million households.
Most of those jobs are already held by people with years of experience and abundant social and human capital. Yes, there are plenty of wastrels living off trust funds and free-riders doing as little as possible in their guaranteed government jobs, but by and large the people earning these incomes are working hard and will do whatever it takes to maintain their current incomes for the sake of their kids and their own security.
This explains the frantic drive to be one of the 2,100 students accepted by Stanford out of 42,000 applicants. These low admission numbers reflect the admission realities in the upper crust of Ivy league universities, both public and private.
The assumption is the few open slots in the upper middle class (or dare we hope, the 1%) will disproportionately go to those who have the credentials that signal they have the social breeding and brains to fit the corporate culture and they're willing to work hard and make their bosses lots of money.
Meanwhile, the top 5% of households in San Francisco earn a whopping $423,000 annually. (
This is enough to put those households in the top 1% of California residents, roughly $433,000 annually: 10 States Where You Need The Most Money to Be In the 1 Percent
If you're curious what jobs those living in top 1% households have, check out this chart: Explore the occupations and industries of the nation's wealthiest households (NY Times).
4,575 writers (out of 92,000 nationally) are in top 1% households. Where do I sign up? Another 10,134 writers in "other industries" (out of 465,000 people claiming this employment category) are also in top 1% households. 15,000 retail clerks also live in top 1% households.
Perhaps the trick is not to make a lot of money writing or selling accessories, but to marry a top-level attorney, doctor, business owner, dot-com millionaire, lobbyist or trust funder?
(You can look up what qualifies as a 1% household income in this link, which has a chart of all 50 states and Washington D.C.)
Not only are there not that many slots in the upper middle class, the number of open slots is considerably lower. No wonder so many parents are desperate for an insider's pathway for their offspring.

Picture via Pixabay.

Paranoia Reigns in Congress Over an International Financial Cabal

Courtesy of Pam Martens.

The Plenary: Governing Body of the Financial Stability Board

The Plenary: Governing Body of the Financial Stability Board

It’s tough to keep up with the conspiracy theories that run rampant from day to day in the hallowed halls of Congress. But one that is gaining traction is that the U.S. Treasury Department’s Financial Stability Oversight Council (whose acronym is pronounced F-SOC) is the handmaiden of an international finance cabal and is obediently marching to its beat instead of the mandates of Congress.

These suspicions were on display at the Senate Banking Committee hearing last Wednesday and the House Financial Services Committee hearing the week before where U.S. Treasury Secretary Jack Lew, who Chairs F-SOC, was pummeled with thinly veiled, and not so thinly veiled, accusations.

F-SOC was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. It is charged with the early identification of emerging risks to the financial system. Every major regulator of Wall Street banks has a seat.

The conspiracy theory that foreign hot shots are really controlling decisions at F-SOC is not without roots. The international equivalent of F-SOC is the Financial Stability Board, which is run by a Plenary of central bankers and finance ministers from around the globe, along with organizations like the International Monetary Fund (IMF), World Bank and Basel Committee on Banking Supervision. The United States has three members on the Plenary: Nathan Sheets, the Undersecretary for International Affairs at the U.S. Treasury; Daniel Tarullo, a member of the Board of Governors of the Federal Reserve; and Mary Jo White, Chair of the SEC. Mark Carney, the Governor of the Bank of England is the current Chair of the Financial Stability Board.

The simmering conspiracy took wings on February 5 of this year when Mark Carney issued what appeared to be marching orders from the Financial Stability Board to G20 members, which includes the United States. One portion of the document reads as follows:…

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UBS on the Driver for Gold: What is Gold About to Tell Us?

Courtesy of Mish.

An interesting article came my way from UBS analyst Julien Garran on the driver for gold. I do not have a link to share so excerpts will have to do.

Garran's article is one of the better one's I have seen. Unlike others, Garran does not cite jewelry, mining capacity, central bank purchases or sales or other similar (and wrong) notions that unfortunately are widespread among most analysts.

Commodities & Mining Q&A (by Julien Garran)

Q1. What drives gold?
A1. In the past, we’ve argued that international US$ liquidity is fundamental to calling first gold and then the industrial miners. In this note, we go a step deeper, arguing that gold is a call on excess returns in the US economy, the policy response and finally the impact on that policy on international US$ liquidity.

Q2. What is gold about to tell us?
A2. The key issues facing gold; excess returns in the US are under pressure as the strong US$ and falling energy squeezes cashflow. As wages pressures rise, weak productivity means that cashflows could be squeezed further. Both undermine credit conditions and threaten the longevity of the cycle. We believe the prospect of deteriorating liquidity magnifies the threat. That in turn is limiting the Fed’s ability to tighten policy and may induce it to ease in the future. We think the Fed has started to recognise that pressure with its dovish backtracking at the March meeting last week.

A1&2. In commodity strategy, we believe that a forthcoming rally in gold may warn us that declining returns could ultimately force the Fed into a new round of international reflation. We think the first step was likely the Fed’s dovish backtracking at the March meeting.

In the past, we’ve argued that gold behaves as a probability indicator of whether international US$ liquidity will be improving or deteriorating in six months’ time. Industrial commodities are a call on whether international US$ liquidity is rising now.

So to call gold, and then the industrial miners, we have analysed the key drivers of those flows;

  • The Fed
  • The US current account deficit
  • Bank’s asset buying/accumulation

In this note we go a step deeper – arguing that gold is a call on excess returns in the US economy, the policy response and then finally the impact of that response on international US$ liquidity. We contend that the state of economy wide excess returns ultimately determine the longevity of the cycle, and so it is the progress of excess returns, above the intermediate targets on inflation & unemployment, that ultimately drive monetary policy.

Right now, excess returns are under pressure from four main areas; The rest of the world is exporting deflation to the US.

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In the News, 3-29-15 (p.m.)

From around the web:

Oil Companies Reap Large Gains After Cashing In Hedging Bets (The Wall Street Journal)

Rocked by months of plunging crude prices, oil producers are harvesting financial bets to raise, for some, much-needed cash. (Read More)

Woe Betide the Value Investor (Research Affiliates)

Research Affiliates is a value shop in the tradition of Ben Graham’s investment philosophy. As investors, we sell the popular securities that have become overpriced and we bargain-hunt for assets that have fallen out of favor. Today, however, we must acknowledge an inconvenient truth. The excess return earned by the average value mutual fund investor has been meaningfully negative.

Why We Feel So Poor (In Two Charts) (John Rubino at Dollar Collapse Blog)

Among the many things that mystify economists these days, the biggest might be the lingering perception, despite six years of ostensible recovery, that the average person is getting poorer rather than richer. Lots of culprits come in for blame, including the growing gap between the 1% and everyone else, negative interest rates (which starve savers and retirees of income) and the crappy nature of the new jobs being created in this recovery.

But one that doesn’t get much mention is the changing nature of the bills we’re paying. It seems that Americans are spending a lot more on health care, which leaves less for everything else. Here’s an excerpt from a MarketWatch report of a couple of weeks back, with two charts that tell the tale:

Share of consumer spending on health hits another record

The percentage of money U.S. consumers spend on health care rose in 2014 for the third straight year to another record high, according to one government measure.

Some 20.6% of total consumer spending in 2014 was devoted to health care, including prescription and over-the-counter drugs, annual figures from the Commerce Department report on personal expenditures show. That’s up from 20.4% in 2013.

Health-care expenses has been rising for decades regardless of government efforts to control costs. The percentage of consumer spending on health care rose from 15% in 1990, topping 20% for the first time in 2009. (Full article)

Consumer spending healthcare

A 4-inch iPhone 6 would be welcomed by many users (but will Apple deliver?) (Venture Beat)

Some people say the smaller phones are more manageable in the hand, while the larger iPhiPhone 6 Yanki01 Flickrone 6 is easier to drop. And the iPhone 6, without a case, is easy to drop (as the small dents in mine prove), because of the smooth metal surface of the device. Had Apple put stripes of rougher metal down the sides of the phone this wouldn’t have been a problem. (Continue here)

The Rise of the Tech Model May Soon Make You Obsolete (Institutional Investor)

Machine learning, artificial intellegence and other technological advances are transforming how pensions, endowments, sovereign funds and institution manage their assets.

[Image Credit: Jimmy Turrell]

North Dakota’s Jobless Rate Is the Lowest No Longer (The Wall Street Journal)

For the first time since the depths of the U.S. financial crisis, North Dakota no longer boasts the nation’s lowest jobless rate, a potential hint of trouble for energy-rich states bolstered by an oil boom that has since gone bust.

The shale-rich state was replaced by Nebraska, whose unemployment rate fell to 2.7%. North Dakota’s rate rose to 2.9% from 2.8% in what the Bureau of Labor Statistics called “the only significant over-the-month rate increase” for any state. The last time the state did not have the lowest rate in the nation was October 2008, the Labor Department said. (Read more)

These Are The Cities Where Workers Are Getting Priced Out Of The Housing Market (Business Insider)

Home prices have grown 13 times faster than wages in the housing recovery. That's according to a RealtyTrac study that compared government data on average weekly wages to median home prices between 2012 and 2014.

"Those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up," Daren Blomquist, vice president at RealtyTrac, said in the report. (More)

The General Motors Buyback: Beyond The Hysteria! (Value Walk)

Here is a script for a movie about the evils of stock buybacks, with the following players. The victim is an well-managed company in a business with significant growth opportunities and profit potential. The company has delivered products that its customers love, while paying its workers top-notch wages & benefits and invested heavily and prudently in its future. The villain is an activist investor, and for added color, let’s make him greedy, short term and a speculator. In the story, he forces the  company to redirect money it would have spent on more great investments to buy back stock. (Full article)

"Electric Cars Are Doing More Harm Than Good" Professor Warns  (Zero Hedge)

"Electric Cars Are Doing More Harm Than Good" Professor Warns "An electric car does not make you green… You’re better off filling up at the pump," if you live in Canada. According to a new study by professor Chris Kennedy, even if every driver in Canada made the switch – from gas to electric – the total emissions might not actually go down… since in Alberta, Saskatchewan and Nova Scotia, electric cars generate more carbon pollution over their lifetimes than gas-powered cars. Paging Al Gore… (Read more)


Screen Shot 2015-03-27 at 2.56.54 PM

Video Killed The Television Star: Why Total Fragmentation Is The New Norm  (Darmano Typepad)

Moment in time—the world seems obsessed with the renaissance of app led live video streaming and the rivalry between MeerKat and Twitter backed Periscope.

Debating who will win is a moot point. 

The real winner is digital video in all its forms—especially if it involves a popular app like Snapchat or a mobile optimized popular platform such as Netflix. The demise of traditional television happened somewhere around the time that YouTube began gaining popularity alongside with DVRs that empowered us to skip ads. Since then, things have only gotten worse for traditional, tied to the box television viewing. A recent poll found that millennials find YouTube entertainment and the stars who create it, more relatable and entertaining than TV. (More)

How Successful People Spend Their Weekend (Forbes)

As co-founder of and CEO of Zillow for the last seven years, 39-year-old Spencer Rascoff fits most people’s definition of success. As a father of three young children, Spencer is a busy guy at home and at work.

What’s the one thing that Spencer refuses to do on the weekend? Work—at least, in the traditional sense.

Jacquelyn Smith shared some interesting insights from Spencer in her article on how successful people spend their weekends:

“I never go into the office on weekends,” Spencer says, “but I do check e-mail at night. My weekends are an important time to unplug from the day-to-day and get a chance to think more deeply about my company and my industry. Weekends are a great chance to reflect and be more introspective about bigger issues.” (Continue)

Economic Growth, Corporate Profits Slowed as 2014 Ended (The Wall Street Journal)

WASHINGTON—Profits at U.S. corporations in late 2014 posted their largest drop in four years, a reflection of an economy weighed down by a strong dollar and weak global demand.

The Commerce Department’s third estimate of fourth-quarter gross domestic product also showed that the economy slowed in the final months of 2014, putting the growth trajectory on a lower path ahead of an apparent slowdown early this year. (More..)

The Bubble Machine Is Complete: Soaring Stocks Push Investors Into Bonds Whose Issuers Buy More Stocks  (Tyler Durden, Zero Hedge)

It’s no secret that central bank asset purchases and investors’ desperate hunt for yield have driven yields to record lows on everything from government bonds, to SSAs, to IG, to HY. This has regrettably had the effect of ensuring that spreads signal virtually nothing to investors about the riskiness of any particular issue as the market has become so distorted that it can no longer facilitate price discovery. This is great if you’re a company looking to leverage your balance sheet because it means you can borrow for next to nothing, and the beauty of the whole thing is that what looks like next to nothing to you looks great to investors who have seen yields on their risk free assets fall to zero or below, so finding buyers for new issues is easy (unless you’re a Australian iron ore producer that is). Corporates can then funnel the proceeds from new bond offerings back into their own stocks via buy backs, driving prices higher and artificially boosting the bottom line. Here’s what this looks like:

Intel's Rumored Acquisition Of Altera Could Protect Its Massive Monopoly In Servers (Forbes)

The Wall Street Journal reported on Friday that chipmaking giant Intel is in talks to buy Altera. If this deal goes through, it’ll be one of the largest deals Intel has ever made – Altera’s market cap stood at $13.36 billion when markets closed on Friday.


Sarkozy, Le Pen Triumph Over Socialists in Second Round of Local Elections

Courtesy of Mish.

The Socialists were routed in the second round of French elections this weekend. The centre-right UMP party led by Nicholas Sarkozy was the clear winner but Marone Le Pen’s National Front had it best performance ever at the local level although it did not win any départements.

The Financial Times reports Nicolas Sarkozy the winner as French local polls deal blow to Socialists.

The UMP, led by the former president Nicolas Sarkozy and in an election coalition with the centrist UDI party, won between 66 and 70 départements compared with 41 previously, according to projections from polling companies.

By contrast, the Socialist party looked to have held on to between only 27 and 31 — barely half the 61 départements it controlled before.

The far-right National Front (FN), meanwhile, appeared to have made considerable ground in Sunday’s second-round vote — though it was unclear if it had done enough to win full control of any départements.

Even so, the anti-immigration, anti-euro party led by Marine Le Pen is likely to have done much to boost its national presence as it looks ahead to the 2017 presidential election. The FN has made important gains in recent years, wooing voters from both left and right, disillusioned by the lack of economic growth and high unemployment.

Following on the back of last year’s success in European elections over France’s two mainstream parties, Ms Le Pen called Sunday’s result “the foundation of tomorrow’s big victories”.

Sarkozy and Le Pen Triumph in French Local Elections

The Guardian reports Hollande Left Bruised as Sarkozy and Le Pen Triumph in French Local Elections

Front National’s strong gains mark turning point for far right in expanding grassroots presence, while win for Sarkozy prefigures likely presidential run.

 The French right has made large gains in the country’s local elections, handing President François Hollande’s ruling Socialist party its third electoral drubbing in a year and raising fears for the future of the left.

Nicolas Sarkozy’s rightwing UMP party, in coalition with centrist allies, took the largest share of seats, wresting control of many traditional leftwing bastions from the Socialists.

But key to the changing political landscape in France was the strong showing for the far-right Front National, which marked a major turning-point as the party established a new grassroots presence across the country.

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