Posts Tagged ‘Public Policy’

Japan’s Demographic Time Bomb Is Imploding

Mark suggests that Japan’s poor demographics are the cause of its "death spiral," whereas Ambrose Evens-Pritchard argues that too much government spending resulting in too much debt is at the heart of the problem. Could it be combination rather than an either-or? – Ilene

Japan’s Demographic Time Bomb Is Imploding

Hinamatsuri (Doll festival)

Courtesy of Mark Sunshine of the Sunshine Report

According to Ambrose Evans-Pritchard Japan is quickly turning into developed world’s sickest economy and could soon tip into an uncontrolled downward spiral. Evans-Pritchard reported last week in the Telegraph that Japan is reaching the point of no return where it won’t be able to meet its obligations and could enter a debt death spiral.

While Evans-Pritchard is one of my favorite writers, at the end of the article he comes to the wrong conclusion about what the West should learn from Japan. Evans-Pritchard suggests that too much government spending resulting in too much debt is the root cause of Japan’s problems and that the West needs to take notice and get government spending under control. While Evans-Pritchard is correct that Japan’s debt habit is unsustainable, the country’s debt problems are the result of its population imploding and the fuse finally burning out on its demographic time bomb. The Land of the Rising Sun is in trouble because it suffers from an insular society that discourages immigration and implicitly encourages low birth rates. For the last 50 Japan has been slowly committing demographic seppuku and now the inevitable is taking place, i.e., Japan’s population is crossed the tipping point so that its work force is both relatively old and shrinking and as a nation Japan can’t sustain its standard of living.

It shouldn’t be a surprise to anyone that Japan is facing deflation, falling domestic demand, stagnant to shrinking GDP and, as of recently, a low national savings rate. They are all the result of Japan’s bad demographics.

Virtually all economics students learn that when the work force of a nation shrinks it is difficult if not impossible to sustain economic growth and a vibrant economy. Also, retirees tend to consume less than families that are raising children and as each generation ages towards retirement it tends to consume less and less causing domestic demand to shrink. Aging populations also have low savings rates because most retirees continue…
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Another Big Win For Energy Economics 101

Another Big Win For Energy Economics 101: Demand Destruction Isn’t Good For New Investment

Courtesy of Mark Sunshine of The Sunshine Report

Oil Refinery Workers Walk Out In Protest Over Foreign Workers

On Monday the Wall Street Journal ran an article that described the end of the golden era for oil refiners. It is a great article that, unfortunately, was published many years too late to be considered news. Just as gravity is a force that brings all objects to earth, public policy that destroys the demand for gasoline will hurt the refinery business. Not surprisingly, President Obama’s public policy initiatives that increase car and truck fuel efficiency have the side effect of hurting oil refinery and distribution businesses.

Just to be clear, I am not against the Administration’s effort to increase fuel efficiency in the vehicle fleet. Quite the contrary, it is a matter of national and economic security that we burn less imported fuel.  Increasing transportation fuel efficiency is a “must” for the United States. However, I don’t think that it is realistic to believe that the energy industry is act like an old trusted dog that knows when it it time to walk into the woods and die. And, it isn’t fair to the refinery and distribution businesses to ask them to effectively subsidize the rest of the economy’s shift to more fuel efficient vehicles and alternate energy without compensation.

The Wall Street Journal reported that over the next few years there is going to be global overcapacity among oil refiners. Not only is demand being reduced for refined products (particularly in the U.S.), but there is a lot of new and efficient capacity that is coming on line in Asia and the Middle East. That isn’t a prescription for a lot of new investment in refinery capacity or for good returns for existing refiners.

I have a couple of news flashes about the future of oil refinery and distribution that I am pretty sure are big news scoops (at least for most major media outlets).

  1. As gasoline demand drops refineries won’t be the only businesses whose investments are underperforming. There is going to be a lot of excess distribution and retailing capacity. So far the Wall Street Journal has only reported on excess refinery capacity. Distribution and retailing are the next segments of the industry that will experience overcapacity and the end of its


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How Much Longer Can This Bear Market Rally Last?

How Much Longer Can This Bear Market Rally Last?

bear marketCourtesy of Kevin Depew at Minyanville

How long, O Lord, how long? It’s always good to remember that the stock market is not the economy. Every day I come into the office to find literally dozens of emails complaining that the market is ignoring the relentlessly bearish news flow. But that doesn’t bother me. What will bother me is when we start getting good news. Markets tend to reach exhaustion on good news, not bad. And these days it’s hard to discern between what’s merely bad and what’s actually disastrous. So, let’s take a look at what the difference between the two really is, and what it means going forward.

A recently released Societe Generale report outlined a "Worst-Case Debt Scenario," one which they believe is a very low probability. Their central scenario assumes a slow global recovery, with private debt being transferred to governments. Fair enough. We’re well on our way there.

Comparing US and Japan, albeit from SocGen’s more sanguine standpoint, there’s some reason to believe the US could feasibly accommodate a Japan-esque 200% of GDP debt burden, which would essentially double 2010′s projected 100% of GDP debt burden. The reason this might not collapse the dollar is because there are no attractive alternatives. Government debt is a global problem, and when you look at the US government debt on a comparative basis, the figures, while high, aren’t extraordinary — at least within that context. More on this momentarily.

As a brief digression, I don’t believe that all government debt is bad by definition. Some are dogmatic on that point. While I do find a framework for understanding economics through the Austrian school, the reality is that no one is going to be able to squeeze pure, free-market toothpaste back into the tube. In fact, Ron Paul’s quixotic quest to end the Federal Reserve could actually succeed… only I can promise you it would soon be replaced by a similar central bank mechanism with a different name, slightly altered agenda, and new cast members. In other words, more of the same; let’s be realistic.

Also, remember that governments worldwide have a long history of supporting failed industries only to turn around and re-privatize them at a later date. It’s the government version of the private-equity game (buy ‘em, repackage ‘em, sell…
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Banks Don’t Intentionally Overcharge Credit Card Customers…Or Do They?

This is not sun-shiny news, but a few words of caution about your bank statement from Mr. Sunshine. - Ilene

Banks Don’t Intentionally Overcharge Credit Card Customers…Or Do They?

sunshineCourtesy of Mark Sunshine of The Sunshine Report

Have you ever tried to recalculate the finance charges on your credit card bill? I am betting that few American’s know if their bank is overcharging them or not. 

I have to confess, for the last 28 years I was one of the people who trusted my bank and didn’t bother to check the interest calculation. After all, in 1966 when I opened my first bank account my mother told me that I could trust my bank and that they would never try to rip me off. 

But, this month my wife (she is a lot more attentive to details than me) appeared at the door of my home office (where I was busy watching a football game) and demanded that I recalculate the interest on one of our credit card bills.  Of course I didn’t want to do it. However, after a lot of spousal pushing (and during half time) I did what I was told. And, guess what? My wife was onto something. When I looked at the bill I was able to quickly confirm that we had been overcharged. The amount wasn’t much, $4.57, but then again, since we had a $0.00 balance subject to finance charges, $4.57 seemed like a lot. 

On Monday my wife called our bank and they immediately admitted their error and reversed the charge. But, the overcharge on one credit card bill made me wonder; could we be getting overcharged on all our credit cards and how would we know? 

So, I got the other credit card bills from my wife (she takes care of all of the finances in our family and pretty much everything else that is important). I discovered that despite paying the entire balance each month on our other cards we still were incurring finance charges. So, I read the rules on the back of the credit card bill. While I am a trained attorney, I haven’t practiced law in a while and am rusty in the arcane art of interpreting legal hieroglyphics. It took me a little while to decipher the credit card agreement and after working on it for about an hour I still wasn’t sure what it meant. My wife was much quicker (after all, she
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W, V, U, L or Z: What Direction Is The Economy Going?

Mark Sunshine discusses the possible shape of the eventual economic recovery – pick a letter, any letter.  Welcome Mark!

W, V, U, L or Z: What Direction Is The Economy Going?

Economic Nostradamus, predictions on economyCourtesy of Mark Sunshine at The Sunshine Report

Almost every day I am asked about the economic recovery and whether or not it is sustainable.

People ask because there is a constant barrage of economic predictions by economists that pretend that they know what will happen in the future even thought they still can’t figure out what happened in the past. Listening to economists and TV talking heads it’s clear that while everyone has an opinion, no one really knows if the recovery will take the form of a “W”, “V”, “U”, “V” or “Z” (I am not really sure what a “Z” recovery is but some really confusing economists are predicting it).

This time around almost all of the TV pundits are going be able to claim that they are the economic Nostradamus of our time because sooner or later graphs of economic growth are going to have the profile of most, if not all, of the letters of the alphabet. For the foreseeable future, economic growth is going to be volatile and somewhat random and almost every prediction will be right.

Rorschach test There is going to be a level of randomness to the growth trajectory of the economy as it inevitably grows, then grows at a slower pace, then grows at a faster pace, then shrinks a little, and then grows again. Unfortunately, given the seriousness of the economy’s problems, I think it will be a while before the U.S. is back on a sustainable high growth trajectory that is sustainable (thereby making the L crowd right as well).

So, like a Rorschach Test, for the next few years there will be something for everyone in the economic statistics.

The U.S. economy is starting to bounce back because of the positive cumulative effects of (i) an inventory rebuilding cycle (i.e., production of new inventory is rising because inventory stocks in many industries are depleted and need to be replenished), (ii) a lot of fiscal and monetary stimuli and (iii) productivity growth (one tiny, positive side effect of layoffs). The bounce from inventory restocking will be temporary and, as a result, if all other things remain constant, growth will taper off to a much slower pace late in the 4th quarter
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Zero Hedge

"There's No Way Out": Johnson Slams "Undemocratic" Irish Backstop In Letter To European Council

Courtesy of ZeroHedge View original post here.

UK Prime Minister Boris Johnson as barely been in office a month, and he's already convinced some Britons that he's ready to take the UK out of the EU, with or without an interim trade deal to soften the blow.

On the other side of the Atlantic, President Trump has pledged to cobble together a trade deal to help bolster Johnson's popularity should he need to call for an early general election to try and bolster his party's mandate (the Tories and their coalition control the Commons by one measly vote).  This past week, Johnson has generated headlin...



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Phil's Favorites

Aramco Asks Banks To Submit Proposals For Role In Mega IPO (Again)

Courtesy of Julianne Geiger, OilPrice.com

The Aramco IPO is one step closer to reality, with Saudi Arabia’s state-run oil company seeking proposals from banks who wish to fulfill various roles in the much-anticipated IPO, Reuters sources said on Monday.

The requests for proposals were sent a few days ago, the sources said. Saudi Aramco declined to comment on the development.

Aramco’s official request that banks submit proposals is a positive development for the IPO, although even with banks handwringing with anticipation, the mega IPO has an uphill battle ahead.

Aramco’s Senior VP of Finance, Khalid al-Dabbagh, said last week that it w...



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Lee's Free Thinking

Watch Out Bears! Fed POMO Is Back!

Courtesy of Lee Adler

That’s right. The Fed is doing POMO again.  POMO means Permanent Open Market Operations. It’s a fancy way of saying that the Fed is buying Treasuries, pumping money into the financial markets.

Over the past 6 days, the Fed has bought $8.6 billion in T-bills and coupons. These are the first regular Fed POMO Treasury operations since the Fed ended outright QE in 2014.

Who is the Fed buying those Treasuries from?

The Primary Dealers. Who are the Primary Dealers?  I’ll let the New York Fed tell you:

Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a ...



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Kimble Charting Solutions

Steel About To Breakdown And Send Bearish Economic Message?

Courtesy of Chris Kimble

Is the Steel Industry suggesting that a recession is nearing? In my humble opinion, the jury is still out on this one.

This chart from Marketsmith.com takes a look at the patterns of Steel ETF (SLX).

SLX has spent the majority of the past 3-years inside of trading range (1). The persistent decline over the past year has it testing the bottom of this trading range at (2).

The weakness over the past year has it below long-term moving averages as its relative strength r...



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The Technical Traders

Fed Too Late To Prevent A Housing Market Crash?

Courtesy of Technical Traders

Real Estate is one of the biggest purchases anyone will make in their lifetime.  It can account for 30x to 300x one’s annual income and take over 30 years to pay off.  After you’re done paying for your property, now you have to keep paying to maintain it and to support the property taxes to keep it.  What has happened to the US Real Estate market since the 2008-09 global credit market collapse and is the US Fed behind the curve?

Case-Shiller Home Price Index

One of the most common indicators used to measure national housing affordability and price trend is the Case-Shiller Home Price Index.  In this chart, we are displaying the Case-Shiller National Home ...



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Insider Scoop

Economic Data Scheduled For Tuesday

Courtesy of Benzinga

  • The Johnson Redbook Retail Sales Index for the latest week is schedule for release at 8:55 a.m. ET.
  • San Francisco Federal Reserve Bank President Mary Daly is set to speak at 4:30 p.m. ET.
  • Federal Reserve Board of Governors Vice Chairman for Supervision Randal Quarles will speak in Salt Lake City, Utah at 6:00 p.m. ET.

Posted-In: Economic DataNews Economics ...



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Chart School

Bitcoin 2019 fractal with Gold 2013

Courtesy of Read the Ticker

Funny how price action patterns repeat, double tops, head and shoulders. These are simply market fractals of supply and demand.

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Ref: US Crypto Holders Only Have a Few Days to Reply to the IRS 6173 Letter

Today's news from the US IRS has been blamed for the recent price slump, yet the bitcoin fractal like the gold fractal suggest the market players have set bitcoin up for a slump to $9000 USD long before the IRS news hit the wire.

Get the impression some market players missed out on the b...

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Digital Currencies

New Zealand Becomes 1st Country To Legalize Payment Of Salaries In Crypto

Courtesy of ZeroHedge View original post here.

Bitcoin and other cryptocurrencies have been on a persistent upswing this year, but they're still pretty volatile. But during a time when even some of the most developed economies in the word are watching their currencies bounce around like the Argentine peso (just take a look at a six-month chart for GBPUSD), New Zealand has decided to take the plunge and become the first country to legalize payment in bitcoin, the FT reports.

The ruling by New Zealand’s tax authority allows salaries and wages to b...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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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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