Posts Tagged ‘Keynes’

Which Way Wednesday – Japan’s GDP Plunges 6.8%

MORE FREE MONEY!!!  

That's all this chart says to traders this morning, who are taking the European Markets up over half a point this morning and are goosing our Futures by half a point as well as bad news is good news and TERRIBLE news is even better in this Central Bank-sponsored market.

Private Consumption in Japan fell 5% in April, May and June and wages dropped 1.8% while sales taxes rose 3% and – PRESTO – there's your 5% decline in Private Consumption.  

Obviously, giving the workers more money is out of the question in a Conservative Capitalist Economy like Japan and we're certainly not going to tax Corporations when we can raise sales taxes that disproportionately target the poor instead so the only solution is:  MORE FREE MONEY!!!

Japan has increased their monetary base by 50% since last year and this year they are on track to add another 25% to pump it up to 270,000,000,000,000 Yen.  In March of 2000, there were just 50Tn Yen in circulation so a 5x increase in the money supply and NONE of it ended up in the hands of the bottom 80% who, just like in America, saw their standard of living DECREASE over the past decade and a half.  

It's a great race to the bottom in annual GDP growth overall as essentially all of the economic gains in Japan and the US accrue to the top 10% (people and corporations) while the bottom 90% circle the drain on the "Road to Serfdom" that Hayek warned us about 70 years ago:

“It is one of the saddest spectacles of our time to see a great democratic movement support a policy which must lead to the destruction of democracy and which meanwhile can benefit only a minority of the masses who support it. Yet it is this support of the tendencies toward monopoly which make them so irresistible and the prospects of the future so dark.

"If we face a monopolist we are at his absolute mercy. And an authority directing the


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Wildlife Wednesday – The Portu-Goose!

 

"Portugal will not request financial aid for the simple reason that it's not necessary" – Socrates

Of course, that was Jose Socrates, Portugal's Prime Minister, not Σωκρτης the great Philospoher, who was more famous for saying "False words are not only evil in themselves, but they infect the soul with evil" as well as "True knowledge exists in knowing that you know nothing."  More apropos for this morning is the more famous Scocrates' more famous observation that "True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us." 

The investors jacking up the markets at 6am this morning understand very little about the relevance of Portugal's sale of $1.62Bn in bonds.  While the auction was a "success" with longer bonds going off at 6.7% that's WITH intervention by China and Japan on an auction amount that either one of them could have tipped the cab driver on the ride over from the airport and not missed it.  This is like going to your rich uncle for a used car loan because the bank wants 12% and your uncle says "sure I will help you out but you will owe me big time and I will make my brother's life miserable because I have to give his kid money and I'll never let him forget it" and then he hands you a contract to pay him back at 11.5%.  

Actually, Portugal didn't even get that much of a "family discount,"  The last bond auction of 2010 went off at 6.8% and the fear was that the rates would go over 7% but let's not do cartwheels over 6.7%.  Oh, sorry, too late, the markets are already doing cartwheels with a 0.5% gain in the futures and just look how excited the Hang Seng was after lunch, gaining 200 points in a virtual straight line and almost doubling the day's optimistic opening.  The Shanghai was just as exciting, falling from 2,828 down almost 1.5% to 2,788 but then flying back to 2,821 to book a 0.6% gain on the day and giving Mainland China's Main Market this exciting profile:

So it's no surprise Uncle China doesn't want Portugal falling apart but…
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Weekend Reading – Reviewing the Reviews

 I am still trying to get more bullish

I was thinking about writing something cute like I resolve to get more bullish but that would be wrong.  I try, in my own humble way, to "get" the market right.  That means I am not bullish or bearish but Truthish (to further botch Stephen Colbert's use of the word) and, as Buddah says: "There are only two mistakes one can make along the road to truth; not going all the way, and not starting."  Confucious reminds us that there are three methods by which we may learn wisdom:  "First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest."

In that spirit, we will spend the day in reflection so that we are better able to start on that long road to the truth so that we will be better able to imitate the things that will work in the year to come while trying to avoid making mistakes that will give us bitter experiences.  

This post is not about me – We had a fantastic year and I've already given some outlook for 2011 back on the 19th in that weekend's "It's Never too Early to Predict the Future" and our current position is short-term bearish in the Jan-April time-frame, looking for a pullback to at least 1,200 on the S&P and possibly back to 1,150.  

After that, we are expecting a return to steady gains but without the irrational exuberance we're currently experiencing.  So no, I am not bearish – I simply think we've gotten ahead of ourselves.  Since we don't know where the rally train will stop, we have our "Breakout Defense – 5,000% in 5 Trades or Less" from Dec 11th, which were a set of very bullish, highly levered plays where a little bet can pay off a lot if we simply hold our long-established breakout levels.   

How much is "a lot"?  Well my GE trade idea, for example, was to sell the 2013 $12.50 puts for $1.10 (net $1.15 in ordinary margin according to TOS) and to use that money to buy the 2012 $17.50/20 bull call spread for .95, which was a net .15 credit on a $2.50 spread
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What is the Role of the State?

What is the Role of the State?

Courtesy of Mark Thoma at Economist’s View

When I teach the History of Economic Thought, one thing we focus on is how views on the role of the state have changed over time. It has a natural cycle to it, with eras such as the highly interventionist Mercantilist years followed by Physiocratic and Classical views stressing minimal government intervention. This is followed by a rebound in the other direction, and so it goes with a Keynes followed by a Friedman in the 50s, a rebound back to Keynes in the 60s, to classical ideas following the experience of the 70s, and so on, and so on. We are involved in the same debate, and a smaller version of the grand historical lurches in each direction, yet again today:

What is the role of the state?, by Martin Wolf: It is … a good time to ask … the biggest question in political economy: what is the role of the state? This question has concerned western thinkers at least since Plato (5th-4th century BCE). It has also concerned thinkers in other cultural traditions… The perspective here is that of the contemporary democratic west.

The core purpose of the state is protection. This view would be shared by everybody, except anarchists… Contemporary Somalia shows the horrors that can befall a stateless society. Yet horrors can also befall a society with an over-mighty state. …

Mancur Olson argued that the state was a “stationary bandit”. A stationary bandit is better than a “roving bandit”, because the latter has no interest in developing the economy, while the former does. But it may not be much better, because those who control the state will seek to extract the surplus over subsistence generated by those under their control.

In the contemporary west, there are three protections against undue exploitation by the stationary bandit: exit, voice … and restraint. By “exit”, I mean the possibility of escaping from the control of a given jurisdiction, by emigration, capital flight or some form of market exchange. By “voice”, I mean a degree of control over, the state, most obviously by voting. By “restraint”, I mean independent courts, division of powers, federalism and entrenched rights.

This, then, is a brief background to … the problem, which is defining what a democratic state … is entitled to


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A Keynesian Theory of Mind

This is an interesting article but yet I have to disagree with at least part of the premise--that impairment of the "theory of mind" is very specific/sensitive measure for Autism. I also have serious doubts about Asperger’s being on a continuum with Classical Autism — I think these two conditions are quite distinct.  I haven’t reviewed the literature in a long time, so please let me know if you know studies disproving my admittedly subjective opinion. – Ilene 

A Keynesian Theory of Mind

Courtesy of Tim at The Psy-Fi Blog

The Mental Cell of Autism

Autism is one the crueller tricks that nature plays on human beings, leaving sufferers isolated, incapable of making social connections and effectively trapped within their own heads. Although the causes aren’t fully understood some of the consequences are, and chief among these is the inability of sufferers to take on the perspective of others. This failure to develop a so-called theory of mind means they simply can’t understand the needs and motivations of other people.

According to John Maynard Keynes a proper theory of mind is just what an investor needs to keep one step ahead of the crowd, although others feel that Keynes’ approach to investing is tantamount to chasing returns all the way to poverty. It raises the question, though, as to how much a person’s genetic makeup determines the type of investor they are. Are effective value investors really just socially inept wallflowers or simply extremely focused individuals?

A Theory of Mind

It’s become clear that autism isn’t a straightforward condition. Although extreme autism is utterly disabling and sufferers can’t live a normal life or even look after themselves there is a spectrum along which we’re all spread out. Improved diagnosis methods have shown that many people have mild forms of the problem, usually referenced as Asperger’s syndrome. Such people prefer to be solitary and are generally fairly rubbish socially. [I would say "different," without hints of negativity. - Ilene]

To explain this the concept of “theory of mind” has been developed by Simon Baron-Cohen who describes it as:

“… being able to infer the full range of mental states (beliefs, desires, intentions, imaginations, emotions, etc) that cause action. In brief, having a theory of mind is to be able to reflect on the contents of one’s own and other’s minds”.

In short, it’s the ability to…
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Thrilling Thursday – Can We Be Saved?

Let’s review first, how we got into this mess

Not only is a bust cycle the inevitable result of a Capitalistic boom but the way we keep shoveling crises under the rug (to avoid pain and the ensuing political fallout) only exacerbates the problem once the rug becomes too small to mask the problem.  Then things begin unraveling at the fringes and then – horror of horrors – someone actually lifts up the rug and says: "OH MY GOD – IT’S TERRIBLE!"   Well DUH!  Of course it’s terrible.  Hayek (Freidrich, not Selma) told us this would happen 60 years ago and it’s happened dozens of times already and it will happen dozens of times again because it’s the nature of a system where there can be winners and losers – sometimes you win and sometimes you lose

It is no surprise then, that the Europeans are choosing to follow Hayek’s path to austerity, while the Americans cling to the Keynesian delusion that we, if we just buy a bigger rug, we can fit a lot more problems under it and maybe no one will notice until we move out.  David Leonhardt has a great article in The Times presenting the Keynsian side of the eqation.  Paul Krugman points out that the "bond vigilantes" are behind this massive attack on the markets as they work very hard to drive current rates down and keep them there BECAUSE THAT INCREASES THE VALUE OF THE BONDS THEY OWN. 

Come on people, grow up!  First Pimpco and company drove rates sky high telling you the World was going to default and there was a "ring of fire" in Europe and that sent swap rates and note rates flying so these evill jackasses were able to buy tens of Billions in sovereign debt at sky-high interest rates.  Now those same crooks push for a bailout, using other people’s money to insure their high-yield bonds and then they begin a PR campaign to crack the whip on austerity to make sure that making the bondholders whole is every country’s top priority, no matter what the cost to the population. 

How much is at stake here?  Pimpco alone has over $1Tn in bonds that get much, much more valuable if they can engineer a low-rate Japan-style deflationary environment.  I pointed out that this was happening on June 15th, when Mohamed El-Erian teamed up with
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Testy Tuesday – Gentle Ben vs. Reality

Behold the power of prayer! 

We had a wild ride in the futures in the last 16 hours as they were up 1% and now are barely holding flat at 7:30.  Our catalyst was Dr. Ben Bernanke who, as we expected, attempted to boost the markets in a scheduled speech where the Fed chairman said he is hopeful the economy will gain traction and not fall back into a "double dip" recession.  "My best guess is we will have a continued recovery, but it won't feel terrific," Bernanke said.

Bernanke didn't offer new clues about when the Fed would reverse course and start to tighten credit. However, he did say the Fed won't be able to wait until the jobs market is fully healed before it pushed rates up.  Observing the economy, Bernanke said the news so far is "pretty good." Both consumers and companies are spending sufficiently to keep the recovery moving forward. The private sector, he said, is "picking up the baton" as government stimulus, which mainly powered the recovery in its earliest stage, starts to fade.  n relations between the United States and China, Bernanke said there is a real desire between the two superpowers to work together to ease trade and economic tensions. Both countries sort of understand there is a "co-dependency relationship," Bernanke said. The United States snaps up Chinese goods and the Chinese is a major buyer of the U.S. government's debt.

Wow, really Ben?  I guess that's some "good" kind of codependency and not the actual definition of codependency, which is: "A tendency to behave in overly passive or excessively caretaking ways that negatively impact one's relationships and quality of life…  Codependency may also be characterized by denial, low self-esteem, excessive compliance, and/or control patterns."  According to Mental Health America: "Codependency is an emotional and behavioral condition that affects an individual’s ability to have a healthy, mutually satisfying relationship. It is also known as “relationship addiction” because people with codependency often form or maintain relationships that are one-sided, emotionally destructive and/or abusive."  Gee, he's right – we DO have a codependent relationship with China! 

Even more interesting is the way the MHA links codependency to Dysfunctional Family Structures, saying

A dysfunctional family is one in which members suffer from fear, anger, pain, or shame that


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Creator of “Fear the Boom and Bust” at the ASC

Creator of “Fear the Boom and Bust” at the ASC

By Mises.org

H/tip to Tom Burger ("It is entertaining and I can even understand the lyrics. A fascinating and rare example of economic theory meeting up with pop culture. Well … okay … it’s probably the ONLY example…")

The Mises Institute is pleased to welcome John Papola to the Austrian Scholars Conference, March 11-13, 2010, Auburn, Alabama. John is the co-producer along with Russell Roberts of “Fear the Boom and Bust,” the youtube smash hit that pits Hayek against Keynes in a rap song about the business cycle.

The video (now with 785,000 views) has brought more attention to the Austrian theory of the business cycle, and with surprising theoretical accuracy, than any medium in history, and driven sales of Hayek’s book on the business cycle…

Read more here.>>

There is also "The Making of … " here.


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Phil's Favorites

The COVID Comeback

 

The COVID Comeback

Courtesy of Wade Slome, Investing Caffeine

Rocky Balboa (“The Italian Stallion”) the underdog boxer from the movie, Rocky, was down and out until he was given the opportunity to fight World Heavyweight Champion, Apollo Creed. Like the stock market during early 2020, Rocky was up against the ropes and got knocked down, but eventually he picked himself up and rebounded to victory in his rematch with Creed.

The stock market comeback also persisted last month as th...



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Biotech/COVID-19

Antibody injections could fight COVID-19 infections - an infectious disease expert explains the prospects

 

Antibody injections could fight COVID-19 infections – an infectious disease expert explains the prospects

Antibodies (pink) attacking a virus particle (blue). STEVEN MCDOWELL/SCIENCE PHOTO LIBRARY

Courtesy of Dimiter Stanchev Dimitrov, University of Pittsburgh

Antibodies are part of us – literally.

We have billions of them in our bodies with a combined weight of about 100 grams, or about the weight of a bar of soap. If there are so many antibodies inside our b...



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Zero Hedge

Chicago May Delay Reopening Because Of Riots: Virus Updates

Courtesy of ZeroHedge View original post here.

Summary:

  • Chicago may delay reopening
  • Florida reports jump of just 0,.4%
  • India now home to world's 7th biggest outbreak
  • Brazil passes 500k cases
  • Russia reports highest jump in new cases in weeks as easing begins
  • UK begins unwinding lockdown as daily deaths slow
  • Japan mulls plan to let some tourists back in

* * *

Update (1215E...



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ValueWalk

How Can We Address the Cybersecurity Skills Gap?

By Dale Strickland. Originally published at ValueWalk.

A 2019 report from Burning Glass noted a 94% growth in the number of cybersecurity job postings since 2013. Unfortunately, the available pool workers with the cybersecurity skills needed to fulfill these roles has risen in proportion, creating a significant gap. What can be done to increase the available pool of candidates?

Q1 2020 hedg...



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Chart School

Silver volume says something is near boiling point

Courtesy of Read the Ticker

Fundamentals are important, but they must show up in the chart. And when they do and if they may matter, it is a good sign if price and volume waves show a change of character.

The Point and Figure chart below is readtheticker.com version of PnF chart format, it is designed to highlight price and volume waves clearly (notice the Volume Hills chart).

Silver ETF volume is screaming at us! The price volatility along with volume tells us those who have not cared, are starting to, those who are wrong are adjusting, and those who are correct are loading up. Soon the kettle will blow and the price of silver will be over $20. 

Normally silver suffers in a recession, maybe this time with trillions of paper money being creat...

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Kimble Charting Solutions

Tech Indicator Suggesting A Historic Top Could Be Forming?

Courtesy of Chris Kimble

Tech stocks have been the clear leader of the stock market recovery rally, this year and since the lows back in 2007!

But within the ranks of leadership, and an important ratio may be sending a caution message to investors.

In today’s chart, we look at the ratio of large-cap tech stocks (the Nasdaq 100 Index) to the broader tech market (the Nasdaq Composite) on a “monthly” basis.

The large-cap concentrated Nasdaq 100 (only 100 stocks) has been the clear leader for several years versus the ...



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The Technical Traders

M2 Velocity Collapses - Could A Bottom In Capital Velocity Be Setting Up?

Courtesy of Technical Traders

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market colla...



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Lee's Free Thinking

US Southern States COVID19 Cases - Let's Give Credit Where Due

 

US Southern States COVID19 Cases – Let’s Give Credit Where Due

Courtesy of  

The number of new COVID 19 cases has been falling in the Northeast, but the South is not having the same experience. The number of new cases per day in each Southern state has been rangebound for the past month.

And that’s assuming that the numbers haven’t been manipulated. We know that in Georgia’s case at least, they have been. And there are suspicions about Florida as well, as the State now engages in a smear campaign against the fired employee who built its much praised COVID19 database and dashboar...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.