by ilene - March 7th, 2014 11:46 pm
Courtesy of Joshua M Brown, The Reformed Broker
Who says QE is ineffective? If you’re an owner of real estate or financial assets, it’s pretty darn f*cking effective.
From the Wall Street Journal:
The net worth of U.S. households and nonprofit organizations rose 14% last year, or almost $10 trillion, to $80.7 trillion, the highest on record, according to a Federal Reserve report released Thursday. Even adjusted for inflation using the Fed’s preferred gauge of prices, U.S. household net worth—the value of homes, stocks and other assets minus debts and other liabilities—hit a fresh record.
So why is no one happy about it? Oh right, because this gain mostly accrued to those who needed it least. Well, Capitalism is the worst economic system possible, except for all the others.
by ilene - March 7th, 2014 11:38 pm
The U.S. government and the Russian government have both been forced into positions where neither one of them can afford to back down. If Barack Obama backs down, he will be greatly criticized for being "weak" and for having been beaten by Vladimir Putin once again. If Putin backs down, he will be greatly criticized for being "weak" and for abandoning the Russians that live in Crimea. In essence, Obama and Putin find themselves trapped in a macho game of "chicken" and critics on both sides stand ready to pounce on the one who backs down. But this is not just an innocent game of "chicken" from a fifties movie. This is the real deal, and if nobody backs down the entire world will pay the price.
Leaving aside who is to blame for a moment, it is really frightening to think that we may be approaching the tensest moment in U.S.-Russian relations since the Cuban missile crisis.
There has been much talk about Obama's "red lines", but the truth is that Crimea (and in particular the naval base at Sevastopol) is a "red line" for Russia.
There is nothing that Obama could ever do that could force the Russians out of Sevastopol. They will never, ever willingly give up that naval base.
So what in the world does Obama expect to accomplish by imposing sanctions on Russia? By treaty, Russia is allowed to have 25,000 troops in Crimea and Russia has not sent troops into the rest of Ukraine.
Economic sanctions are not going to cause Putin to back down. Instead, they will just cause the Russians to retaliate.
In a letter that he sent to Congress this week, Obama claimed that the Ukrainian crisis is an "unusual and extraordinary threat to the national security and foreign policy of the United States."
Language like that is going to make it even more difficult for Obama to back down.
On Thursday, Obama announced "visa restrictions" on "those Russians and Ukrainians responsible for the Russian move into Ukraine's Crimean Peninsula", and a House panel passed a "symbolic resolution" that
by ilene - March 7th, 2014 11:23 pm
Because by Friday, Ukraine was Old News
By the end of the week, the Russian fatigue factor had set in. Most Americans didn't care to hear any more bs about how events in the Ukraine would torpedo their U.S. portfolios. The DJIA closed higher by about 0.8%. The SPY was up 1.0% and the NASDAQ up 0.7%.
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by ilene - March 7th, 2014 4:57 pm
Courtesy of Mish.
To help put the Russia-Ukraine battle over Crimea in proper perspective, here’s a long historical look at European borders.
Link if video does not play: European Border Changes over Last 1000 Years
Mike “Mish” Shedlock
by ilene - March 7th, 2014 4:44 pm
Courtesy of Lance Roberts of STA Wealth Management
There was so many good things to read this past week that it was hard to narrow it down to a topic group. After a brief respite early this year, the markets are hitting new highs confirming the current bullish trend. As a money manager, this requires me to increase equity exposure back to full target weightings. After such an extended run in the markets, this seems somewhat counter-intuitive. It is, but as Bill Clinton once famously stated; "What is….is." [I think Clinton said, "It depends on what the meaning of the word 'is' is." The intitial part of the sentence being important and further distinguishing the meaning from the all too commonly spoken "It is what it is." ~ Ilene]
However, while the current market "IS" within a bullish trend currently, it doesn't mean that this will always be the case. This is why, as investors, we must modify Clinton's line to: "What is…is…until it isn't." That thought is the foundation of this weekend's "Things To Ponder." In order to recognize when market dynamics have changed for the worse, we must be aware of the risks that are currently mounting.
1) Fisher Warns Fed's Bond Buying Could Be Distorting Markets via Reuters
While this article falls in the "no s***" category, Dallas Fed President Richard Fisher points out areas that we should be paying closer attention to for signs of change.
"There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive," he said of the asset purchases, which are sometimes called QE.
"I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis."
Here are his main points:
1) QE was wasted over the last 5 years with the Government failing to use "easy money" to restructure debt, reform entitlements and regulations.
2) QE has driven investors to take risks that could destabilize financial markets.
3) Soaring margin debt is a problem.
by ilene - March 7th, 2014 4:05 pm
"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power. Nothing from the rising to the setting of the sun is enough for them.
Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they create a desolate wasteland, they call it peace."
Tacitus, Calgacus' Speech from Agricola
Remembering this may help one to understand some of the things that happen that otherwise may seem to make no sense. In the pursuit of profit, their hypocrisy and disregard for justice and human life knows no bounds.
I will let you in on a little secret. Not always, but the worst of them have a 'tell.' You have to look at the long record of a person's action and mode of acting to assess this. Are they plain and straightforward, or highly political and evasive in their motives. Do they often say one thing, and yet do another. If so, then this is their 'tell.'
The most cynical player will accuse and denounce their adversaries of the exact things that they have in mind, their precise motives, but first, and aggressively so with high indignation. But their own actions will appear to be without principled cohesion, that is, principles but selectively applied. Look for the inconsistencies, and if they are there, you know the type of hypocrite with whom you are dealing.
I think they do this because it defeats the ability of their opponent to accuse them of the very things that they themselves are doing. I have seen this in company politics to geo-political squabbles, over and over. Bald faced misdirection is almost standard fare these days of spin and propaganda in domestic politics.
Telling the truth is considered to be naive, embarrassingly clumsy, an automatic disqualification from power. It is almost as bad as bending your knee to the power of God rather than the will to power, when
by ilene - March 7th, 2014 3:51 pm
Courtesy of Jesse's Cafe Americain
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
In case you had not seen this, it is on the news wire from United Press International.
It seems that if this legislation is real, and is enacted, and that is a big IF, then all a government bureaucrat will have to do is to refuse to permit disclosure on topics that it considers to be too important for even the media to know. And they will be able to exercise a rather effective censorship over a compliant press.
But I think we can be confident that the government of any political party, or any future President, can be trusted to never abuse this power to gag the Press to cover up their mistakes, scandals, or extra-constitutional activities.
We will have to trust them. Because we won't know if they are abusing that power because the information that they are will be .. classified.
Perhaps a secret independent court can be set up to review their decisions. All of its decisions will be, of course, classified.
I wonder if the students at Georgetown understood the implications of what their privileged ears were hearing, or if they even cared.
I wonder how many other bloggers, who are so often preoccupied with freedom, will understand this and pick it up, or if they are just afraid, or even care.
No wonder. Audacious oligarchy, indeed.
Journalists and press freedom have taken a hit from the government since Edward Snowden leaked NSA documents to the Guardian, Washington Post, and New York Times.
WASHINGTON, March 5 (UPI) — National Security Agency chief Gen. Keith Alexander was speaking at Georgetown University when he hinted that government officials were working on
by ilene - March 7th, 2014 3:40 pm
Courtesy of Lee Adler of the Wall Street Examiner
Yesterday the media got all bulled up over the Fed’s new data on household wealth showing that it hit a record in the fourth quarter of 2013. As usual with Wall Street’s chattering media class, this wasn’t quite the whole story, at least not the “real” story.
The total net worth of households and non profits did reach a record in nominal terms. But that’s not the same thing as the wealth of individual households hitting a record in real, inflation-adjusted terms. In addition, the calculation of the numbers is based on absurd assumptions which everyone takes for granted as being realistic. And if the net worth of the top 1% was lopped off, the picture would be far bleaker.
But we need not even go there. By now it’s been well established that those in the upper income strata have gotten virtually all of the gains in wealth in recent years while the majority falls deeper into the economic mire.
For this analysis I look at the data as a whole and do the simple exercises of dividing the total net worth of households and non-profits of $80.66 trillion by the census bureau’s estimate of the total year end population of the US of 317.44 million. Then I converted that to real terms by dividing the result by the Consumer Price Index. That’s conservative enough. It probably understates inflation by underweighting housing and doesn’t take into account asset inflation at all. But it’s a widely accepted means of converting nominal measures into real, inflation adjusted numbers. The same operation is then performed for every quarter going back in time as far as the data goes. The results are then plotted on this graph. It shows how the wealth of households has trended in real terms per capita.
I’ve also plotted alongside that line a graph of the Fed’s holdings in its System Open Market Account, which is all of the Fed’s paper holdings that it acquires in trades with Primary Dealers. Prior to 2007, the Fed had steadily grown its holdings at…
by ilene - March 7th, 2014 2:54 pm
Courtesy of Daniel J. Graeber of OilPrice.com,
Geopolitical crises in Eastern Europe have been met with calls in the United States to use energy as a foreign policy tool. With U.S. Energy Secretary Ernest Moniz asking the industry to make a stronger case, however, it's domestic policies that may inhibit energy hegemony.
"The industry could do a lot better job talking about the drivers for, and what the implications would be, of exports," Moniz told an audience at the IHS CERAWeek energy conference in Houston.
The Energy Information Administration said in its weekly report that gross exports of petroleum products from the Unites States reached 4.3 million barrels per day in December, the first time such exports topped the 4 million bpd mark in a single month.
EIA said the United States is a net exporter of most petroleum products, but crude oil exports are restricted by legislation enacted in response to the Arab oil embargo in the 1970s.
In January, Kyle Isakower, vice president of economic policy at the American Petroleum Institute, said reversing the ban would help stimulate the U.S. economy and lead to an increase in domestic oil production by as much as 500,000 bpd. Current export polices, he said, are "obsolete."
This week in Houston, Sen. Lisa Murkowski, R-Alaska, ranking member of the Senate Energy Committee, said oil could help reposition the United States as the premier superpower.
"Lifting the oil export ban will send a powerful message that America has the resources and the resolve to be the preeminent power in the world," she said.
President Obama can show "true American grit" if he acts quickly and according to precedent. If the ban is reversed, it will be for the benefit of the international community, she said.
Moniz, who said in December the export ban deserves some "examination," said he wasn't yet convinced the case had been made to open the U.S. spigot, however.
For natural gas, House Energy and Commerce Committee Fred Upton, R-Mich., said expanding U.S. liquefied natural gas exports could be used to contain Russia, which dominates much of the Eastern European gas market.
by ilene - March 7th, 2014 1:51 pm
Courtesy of Larry Doyle.
Why do I anticipate reading and reviewing this report so much? Because we are a nation of laws and not of men. At least I think we are . . . although sometimes I wonder. As the WJP highlights,
“Effective rule of law helps reduce corruption, alleviate poverty, improve public health and education, and protect people from injustices and dangers large and small,” said William H. Neukom, WJP Founder and CEO. “Wherever we come from, the rule of law can always be strengthened.”
The Index is the most comprehensive index of its kind and the only to rely solely on primary data.
The more serious students in the audience may care to review the entire report. For those who might care for an abbreviated version of how the United States is doing, I welcome informing you of the following:
Our overall rank across all factors measured: 19th out of 99 nations. But let’s dig a little deeper and be a little more rigorous in our review. On a regional basis the USA is little better than average and relative to those nations with similar income levels, we consistently rank near the lower third if not worse than that by most measures.
A great nation? True leaders and statesmen know that a nation needs to uphold and embrace the rule of law, protect property rights, and expose corruption wherever it thrives in order to be a nation worthy of being called ‘great.’
We have a lot of work to do.
Additionally, the following line jumps out of the report on page 46:
“The United States saw a significant decline during the past year in people’s trust in the system of checks and balances and the protection of the right to privacy.”
Trust is the cornerstone of our markets, our economy, and ultimately our nation.