The economic news has turned decidedly negative globally and a sense of ‘quiet before the storm’ permeates the financial headlines. Arcane subjects such as a Hindenburg Omen now make mainline news. The retail investor continues to flee the equity markets and in concert with the institutional players relentlessly pile into the perceived safety of yield instruments, though they are outrageously expensive by any proven measure. Like trying to buy a pump during a storm flood, people are apparently willing to pay any price. As a sailor, it feels like the ominous period where the crew is fastening down the hatches and preparing for the squall that is clearly on the horizon. Few crew mates are talgking as everyone is checking preparations for any eventuality. Are you prepared?
What if this is not a squall but a tropical storm, or even a hurricane? Unlike sailors, the financial markets do not have the forecasting technology for protection against such a possibility. Good sailors before today’s technology advancements avoided this possibility through the use of almanacs, shrewd observation of the climate and common sense. It appears to this old salt that all three are missing in today’s financial community.
Looking through the misty haze though, I can see the following clearly looming on the horizon.
Since President Nixon took the US off the Gold standard in 1971, the increase in global fiat currency has been nothing short of breath taking. It has grown unchecked and inevitably has become unhinged from world industrial production and the historical creators of real tangible wealth.
Do you believe trees grow to the sky?
Or, is it you believe you are smart enough to get out before this graph crashes?
Apparent synthetic wealth has artificially and temporarily been created through the production of paper. Whether Federal Reserve IOU notes (the dollar) or guaranteed certificates of confiscation (treasury notes & bonds), it needs to never be forgotten that these are paper. It is not wealth. It is someone else’s obligation to deliver that wealth to the holder of the paper based on what that paper is felt to be worth when the obligation is required to be surrendered. It must never be forgotten that fiat paper is only a counter party obligation to deliver. Will they?…
I met with Yves Smith of Naked Capitalism on the weekend, at a superb Japanese restaurant that only New York locals could find (and I’ll keep its location quiet for their benefit–too much publicity could spoil a spectacular thing). Yves was kind enough to post details of my latest academic paper at her site in a post she entitled “Steve Keen’s scary Minsky model“.
Yves found the model scary, not because it revealed anything about the economy that she didn’t already know, but because it so easily reproduced the Ponzi features of the economy she knows so well.
I have yet to attempt to fit the model to data–and given its nonlinearity, that won’t be easy–but its qualitative behavior is very close to what we’ve experienced. As in the real world, a series of booms and busts give the superficial appearance of an economy entering a “Great Moderation”–just before it collapses.
The motive force driving the crash is the ratio of debt to GDP–a key feature of the real world that the mainstream economists who dominate the world’s academic university departments, Central Banks and Treasuries ignore. In the model, as in the real world, this ratio rises in a boom as businesses take on debt to finance investment and speculation, and then falls in a slump when things don’t work out in line with the euphoric expectations that developed during the boom. Cash flows during the slump don’t allow borrowers to reduce the debt to GDP ratio to the pre-boom level, but the period of relative stability after the crisis leads to expectations–and debt–taking off once more.
Ultimately, such an extreme level of debt is accumulated that debt servicing exceeds available cash flows, and a permanent slump ensues–a Depression.
There are 4 behavioural functions in the model that mimic the behaviour of the major private actors in the economy–workers, capitalists and bankers. Workers wage rises are related to the level of employment and the rate of inflation; capitalists investment and debt repayment plans are related to the rate of profit; and the willingness of banks to lend is also a function of the rate of profit.…
Thousands of police officers have been laid off all across America since the current economic crisis began. Thousands more are getting ready to be laid off. So could we be on the verge of a new era of chaos and anarchy in America as crime runs wild and there are just far too few police to respond to it all? That is the message that one blood-smeared billboard in Stockton, California is trying to get across. Paid for by the Stockton, California police union, the message of the billboard is chillingly clear: "Welcome to the 2nd most dangerous city in California. Stop laying off cops." As state, city and local governments across the United States continue to be devastated by the ongoing economic crisis, budget cuts are becoming much deeper and police forces have suddenly become a very popular target.
Officer Steve Leonesio, the president of the Stockton Police Officers Association, has announced that the police union plans to spend approximately $20,000 on at least 20 more billboards.
Why is the union putting up all of these billboards?
Well, it turns out that Stockton has been considering a plan to lay off 53 police officers in an effort to eliminate a $23 million budget deficit.
But law enforcement in Stockton has already been cut to the bone. Recently, the Stockton Police Department dropped this bombshell….
"We absolutely do not have any narcotics officers, narcotics sergeants working any kind of investigative narcotics type cases at this point in time."
Do you think drug dealers will be flocking to Stockton after they hear that?
But the truth is that so many of these local governments around the nation are just flat broke at this point.
Even major cities are having to admit that they have accumulated such large debts that they cannot even afford to provide the most basic services any longer.
In Oakland, California the battle over police layoffs has made national headlines over the past couple of weeks. Oakland has laid off 80 police officers, and now the police chief says that there are some crimes that his department simply will not be able to…
This relatively boring hearing suddenly turned exciting when Congressman Kevin Brady asked Tim Geithner to step down. The economic team that President Obama put in place (primarily Geithner and Summers) has been largely responsible for the current predicament. This is not to imply that the Republicans and President Bush did not play an equal (or greater) role in the economic crisis, but it’s truly astonishing that the people who helped cause this crisis are the same ones who are attempting to steer us out of it:
A potential Head and Shoulders top has formed. It will be a valid formation but the objective will not be activated until and unless the neckline is broken.
Volumes remain light, with lots of technical gamesmanship that contributes to quite a bit of volatility in the short term, aka a ‘daytrader’s market.’
There is quite a bit of ‘tension’ in the market ahead of the GDP report tomorrow. The consensus is for growth of 1.5%. We are still a couple of weeks short of the timeframe we have projected for a top and the beginning of a leg down in markets, but some data or exogenous surprise could accelerate this.
There is a de facto partnership between the government and the banks with regard to the financial system and the economy which is spilling over to the equity markets. This is a similar arrangement that brought us the housing bubble and the credit crisis after the tech bubble and crash of 2001, which itself was a reaction to the Asian and Russian currency crisis of the late 1990′s.
The financial engineers will likely not abandon their efforts until they either succeed, or finally shake the real economy apart and destroy the US financial system and currency. How they define ‘success’ is likely to be stability at the price of freedom, a classic oligarchy with ‘enlightened despots.’ Their financial engineering will require ever greater control over policy and priorities to maintain its artificial equilibrium.
The banks must be restrained, the financial system reformed, and the economy brought back into balance before there can be a sustained recovery.
Every once in a while I write about topics that seemingly have nothing to do with investing, but for those that are able to connect the dots, they will actually find great value in these seemingly unrelated topics to wealth building and preservation strategies. As it is the weekend, I'm releasing an article that we originally posted on our website about the topic of meditation and investing on 19 August 2016. Again, to first read our articles when we release them, subscribe to our article fee...
The love affair was no surprise. Nor was the fact that the IMF had taken part in the immolation of Greece. No, the surprise was that the IMF would publicly disclose the extent of incompetence and massive rule breaking that had taken place.
The Ambrose Evans-Pritchard byline told me this would be a good story. Here’s his lead:
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleade...
This morning's Second Estimate of Q2 GDP at 1.1% was a ho-hum event in advance of Fed Chair Yellen speech at Jackson Hole. And indeed the intraday range volatility of today's session was at the 70th percentile of the 165 market days of 2016 and the widest in 37 sessions. The S&P 500 opened higher, rallied with the opening of her speech, and then sold off sharply during with Vice Chairman Stanley Fischer's suggestion that a couple of rate hikes this year were possible. The index bounced back later in the afternoon to its -0.16% Friday close. The index is down 0.68% for the week.
The yield on the 10-year note closed at at 1.62%, up four basis points from the previous close.
Here is a snapshot of past five sessions in the S&P 500.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer. One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."
Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.
Genetic components are the DNA sequences that are 'inherited.' Some of these genes are stronger than others in their expression (e.g., eye color). Yet, some genes turn on or off due to external factors (environmental), and it is und...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.