Wednesday, December 18, 2013


This comes as no surprise to readers here...its developmental ontology recapitulating the phrenology of other actors who dare to challenge the authority of currency backed by "taxes and men with guns" (to paraphrase a popular economist) and instead offer something that can circumvent Government.

Bitcoin prices took a big hit on Wednesday after China’s regulators ordered the country’s payment processors to stop doing business with the country’s Bitcoin exchanges.
BTC-China, the world’s biggest Bitcoin exchange, said it would no longer take deposits in Yuan, effectively putting an end to the exchange’s pipeline of new Bitcoin buyers.
Bitcoin, the world’s most popular digital currency, which had been trading at about $700 on worldwide exchanges, dropped 35 percent to around $450 on the news. But then it did gain back some of that ground. At press time, bitcoins were trading at $575. That’s about half what a bitcoin was trading at two weeks ago.
China’s central bank met with payment processors on Monday, ordering them to “stop giving clearing services to bitcoin, litecoin, and other cryptocurrency exchanges,” the South China Morning Post reported on Wednesday, citing the financial news site Yicai. The payment processors were told to sever their relationships with Bitcoin exchanges by the end of January, the Post said.

Monday, October 21, 2013


Gets many things right in this article.  Like this observation:

China’s seemingly open-ended purchases of US government debt are at the heart of a web of codependency that binds the two economies. China does not buy Treasuries out of benevolence, or because it looks to America as a shining example of wealth and prosperity. It certainly is not attracted by the return and seemingly riskless security of US government paper – both of which are much in play in an era of zero interest rates and mounting concerns about default. Nor is sympathy at work; China does not buy Treasuries because it wants to temper the pain of America’s fiscal brinkmanship.
China buys Treasuries because they suit its currency policy and the export-led growth that it has relied on over the past 33 years. As a surplus saver, China has run large current-account surpluses since 1994, accumulating a massive portfolio of foreign-exchange reserves that now stands at almost $3.7 trillion.

But then borks up the conclusion:

With rebalancing will come a decline in China’s surplus saving, much slower accumulation of foreign-exchange reserves, and a concomitant reduction in its seemingly voracious demand for dollar-denominated assets. Curtailing purchases of US Treasuries is a perfectly logical outgrowth of this process. Long dependent on China to finesse its fiscal problems, America may now have to pay a much steeper price to secure external capital.

The U.S. does not need to "secure external capital" from anyone, and it certainly does not need China to "finesse" its fiscal problems.  Its all about the pricing, gentlemen, and given the U.S.'s strategy of market control via military dominance (like being the prime mover in Africa,  etc.), the U.S. has the initiative once again.

Creating Order...

One of the themes of this blog has been the inevitability of strong U.S. presence in Africa.  Since I have been writing about this subject, Arfricom, military bases, and vastly increased attention to the continent have followed.  While most of this has been accomplished in a clandestine fashion, it appears that the Pentagon nees a new budget for this project and is now letting all of us know its intent.

This is wonderful for Africa, and terrible for the U.S. in the long run.

Full article here.

FORT RILEY, Kan. — Here on the Kansas plains, thousands of soldiers once bound for Iraq or Afghanistan are now gearing up for missions in Africa as part of a new Pentagon strategy to train and advise indigenous forces to tackle emerging terrorist threats and other security risks so that American forces do not have to.
The first-of-its-kind program is drawing on troops from a 3,500-member brigade in the Army’s storied First Infantry Division, known as the Big Red One, to conduct more than 100 missions in Africa over the next year. The missions range from a two-man sniper team in Burundi to 350 soldiers conducting airborne and humanitarian exercises in South Africa.
The brigade has also sent a 150-member rapid-response force to Djibouti in the Horn of Africa to protect embassies in emergencies, a direct reply to the attack on the United States Mission in Benghazi, Libya, last year, which killed four Americans.
“Our goal is to help Africans solve African problems, without having a big American presence,” said Lt. Col. Robert E. Lee Magee, a West Point graduate and third-generation Army officer whose battalion has sent troops to Burundi, Niger and South Africa in the past several months, and whose unit will deploy to Djibouti in December.

Monday, October 14, 2013

Optical backstops...

...making the rounds across the world...the EU edition below.  I am sure this will take care of all of the structural problems in the EU...

"The effectiveness of this exercise will depend on the availability of
necessary arrangements for recapitalizing banks ... including through
the provision of a public backstop," Mario Draghi said on Friday.
"These arrangements must be in place before we conclude our
assessment," he said.

But the ministers' talks face an additional hindrance because
Germany's finance minister, Wolfgang Schaeuble, is not expected to
attend the two-day Luxembourg meeting. Germany, Europe's biggest
economy, in talks to form a new government.

Starting to unravel...

Of course they are angry about the current Congressional imbroglio.  Its a partial turning off of the only spigot that is holding the Peoples Republic of China together.

The keys to the Middle Kingdom are held in Washington D.C.

BEIJING—China's exports unexpectedly shrank in September, in a sign of
weakening global demand for its products and a potential headwind for
the world's No. 2 economy.

Exports fell 0.3% in September compared with the year-ago period, data
from the General Administration of Customs showed o  This
was sharply down from August's 7.2% growth and far below economists'
median forecast of a 5.5% expansion.

Imports rose 7.4% on year, slightly up from the 7% rise in August and
beating economists' median forecast of a 6.75% increase. China's trade
surplus narrowed in September to $15.2 billion from $28.52 billion in

Tuesday, September 24, 2013

Interesting bubble note...

The causes of property and financial bubbles are fairly well known...but it does appear to be an interesting confluence among places like London and NYC...

Full article here.

The trouble with nonresident property owners is that they’re fair-weather friends. There are three main groups in London at the moment: the super-rich buying holiday homes, investors looking for a quick buck, and overseas nationals looking for a safe haven. Normally you don’t get those groups all at once. When there’s massive overseas investment, you don’t expect many financial refugees, and vice versa. In the past the global super-rich were few in number—relying broadly on having an oil field in the sandpit or a fleet of tankers on the pond—and they spread their charms more evenly around the world. 

Wednesday, September 18, 2013

The Fed

Its always entertaining to read Fed minutes for their obfuscation and observations on recursivity.  The latest decision to hold off on "tapering" is a good case in point.  So much ado about simple asset swaps that provide no net benefit or detriment to the Economy.  The more insidious effects of QE for financial markets will be felt soon enough.  Removing quality collateral from dealer desks will have some effects with respect to short-term paper, and I fully expect the first convulsions for the next financial seizure to occur within money markets, commercial paper, or other short-term obligations.

Taking into account the extent of federal fiscal retrenchment, the Committee
sees the improvement in economic activity and labor market conditions since it
began its asset purchase program a year ago as consistent with growing
underlying strength in the broader economy. However, the Committee decided to
await more evidence that progress will be sustained before adjusting the pace
of its purchases.

Accordingly, the Committee decided to continue purchasing
additional agency mortgage-backed securities at a pace of $40 billion per month
and longer-term Treasury securities at a pace of $45 billion per month. The
Committee is maintaining its existing policy of reinvesting principal payments
from its holdings of agency debt and agency mortgage-backed securities in
agency mortgage-backed securities and of rolling over maturing Treasury
securities at auction.

Thursday, September 12, 2013


...Putin takes advantage of the situation and provides all sorts of cover for Russian operations in and within its former Soviet satellites.  Prolonging the Syrian question provides a win/win:  Obama capitulation or what will be perceived as a tyrannical bombardment against popular opinion.

One has to chuckle at the rhetoric, however.  Does anyone here really think a man like Putin adheres to constraints of a mere legal nature?  Is Georgia and its Pipeline now safe?

His article from the New York Times here.

From the outset, Russia has advocated peaceful dialogue enabling Syrians to develop a compromise plan for their own future. We are not protecting the Syrian government, but international law. We need to use the United Nations Security Council and believe that preserving law and order in today’s complex and turbulent world is one of the few ways to keep international relations from sliding into chaos. The law is still the law, and we must follow it whether we like it or not. Under current international law, force is permitted only in self-defense or by the decision of the Security Council. Anything else is unacceptable under the United Nations Charter and would constitute an act of aggression.

But I thought...

...the Paper Dragon was to grow indefinitely and create a rising tide for all its suppliers, ad infinitum.  The race is on folks.

Australia suffered a surprising drop in employment in August that pushed the jobless rate up to a four-year high of 5.8 percent, a disappointingly soft report that revived the chance of a cut in interest rates and knocked the local dollar lower.

The currency skidded by almost one U.S. cent as Thursday's data from the Australian Bureau of Statistics showed employers shed a net 10,800 workers in August, well below forecasts of a 10,000 increase and a second straight month of losses.

Wednesday, September 11, 2013

Shots across the bow...

...when pension funds for citizens are considered a strategic asset, anything is possible.  This is even more remarkable given the lack of legal process involved in what appears to be an asset coup from private (foreigners) to public funds.

WARSAW, Sept 4 (Reuters) - Poland said on Wednesday it will transfer to the state many of the assets held by private pension funds, slashing public debt but putting in doubt the future of the multi-billion-euro funds, many of them foreign-owned.
The changes went deeper than many in the market expected and could fuel investor concerns that the government is ditching some business-friendly policies to try to improve its flagging popularity with voters.

The Polish pension funds' organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.

There are Four...

...truly Sovereign countries in the world.  They are the U.S., Russia, China, and the Anglo-Frank-German alliance known as the "EU".

These are the countries that have independent Militaries.  All other countries are purchasers who are by definition removed from the cutting edge of technology from their suppliers.

Please do remember this when someone offers you an investment in a product denominated in a "hard currency" that does not belong to the above list.

This holds doubly when one of the members of the list jumps into pole position by selling a large tranche of bonds.  Russia has certainly unnerved a number of its competitors by this maneuver, as all emerging markets are now wondering if they missed the window to issue their own bonds.

A very clever move, which I am certain has nothing to do with the financing requirements of the Verizon/Vodafone deal or Syria...

Saturday, August 31, 2013

Future historians of war...

...will find this current epoch a curious one with respect to declarations and the communication of intentions...

Two days after he made the Obama administration’s definitive case for attacking Syria, Secretary of State John Kerry will make the case for asking for congressional permission on the Sunday talk shows, a State Department aide said Saturday.

Tuesday, August 27, 2013

Syria, Russia, and the U.S.

Let us not forget that the Queen on the board for Russia is Georgia and the pipeline.  This Syrian conflict and resultant clash of weapons systems between Russia and the U.S. is a sideshow.

The E.U. is taking orders from Washington as well it seems.

A showdown with Gazprom risks inflaming relations with Russia just as Putin prepares to host a meeting of leaders from the Group of 20 nations next month in St. Petersburg. Russian Foreign Minister Sergei Lavrov warned this month that if the European Union imposes antitrust sanctions against Gazprom, “it will be difficult for the company to operate in markets where it faces open discrimination.”
The “case has the potential to seriously disturb EU-Russia relations,” said Thijs Van de Graaf, a researcher at the Ghent Institute for International Studies in Belgium. “Gazprom is not a normal company in Russia. It does not only give account to its shareholders but also serves political goals.”

Saturday, August 24, 2013


One of the beautiful things about propaganda is enacting policies that would, by use of its original appellation, be anathema.

One of the current examples of this is the usage of "macroprudential policies" that would ostensibly smooth out economic downturns and offer a general panacea to market distortions.  These policies would be carried out by responsible and learned technocrats who understand the massively complex system that is the Global Economy.

But of course these "macroprudential measures are simply re-worded polices for tried and true protectionism in the form of capital controls, currency management, control and Executive Power of Foreign Subsidiaries, and a myriad other policies that States have used since complex societies formed.  The word "macroprudential" itself elicits an atmosphere of control, wisdom, and patience.  Quite brilliant.

I have stated many times on this blog that the Economics profession has devolved into a sort of apologetic faction for the state.  The State declares its intentions, then receives arguments from members of its court.  It performs this role extremely well, and provides propaganda for the State that is well-reasoned and compelling.

And so This Paper making the rounds is having the desired effect.  And of course, would not be presented if it had not been selected to further the current Agenda:  That is, by centralizing more control of global GDP among the G8 states.

A quick question for my readers:  what % of G20 GDP is controlled directly or indirectly by their respective States?  Is the rate of change in that number increasing or decreasing?

Wednesday, July 31, 2013

The Paper Dragon

I have written extensively on this blog regarding global investment preferences and the risk/return matrix specifically between the U.S. and China.  Specifically here, here, here, and here.

So it will be no surprise to readers here that the preferred zone of asset placement is the U.S., and China is becoming more marginalized.  The totality of all the literature anointing China as the new world hyperpower can now be safely confined to the dustbin of history.

U.S. GDP will continue to stagnate unless additional deficit spending is injected into the system.  Where will all those export from China go?  What will the accounting treatment for the warehouses full of inventory and high-rises with no-one living in them be?  These are all things we have discussed here before.  And there is a very high and rising probability it will not end well.

But hey...they were useful, were they not?

The Shanghai Composite Index (SHCOMP), which doubled in 10 months through August 2009 as the government poured $652 billion of stimulus into building roads, railways and housing, has tumbled 43 percent from its high, destroying $748 billion in market value. Only Greece’s ASE Index (ASE) has fallen more in percentage terms. The Standard & Poor’s 500 Index, the benchmark gauge of American equity, erased all of the losses from the worst recession since the Great Depression and has gained 68 percent since the China peak, reaching a record this month.

Thursday, July 18, 2013

When pigs fly.

This "study" of opinion does what exactly?  It certainly has no effect on reality.  No mention of the member countries of this survey...or what six countries believed the U.S. would "remain on top".

I have no idea what this study is supposed to accomplish.

A new Pew Research Center survey of 38,000 people in 39 countries found the widespread belief that China is well on its way.
Overall, a majority or plurality of respondents in only six of the countries surveyed believe the U.S. will remain on top.
"Publics around the world believe the global balance of power is shifting," Pew wrote. "China's economic power is on the rise, and many think it will eventually supplant the United States as the world's dominant superpower."
In both the United States and China, an increasing number of respondents agree with this thesis.

Sunday, June 30, 2013

It is truly fitting...

...that the country most responsible for the Euro project (when it suited their interests) should now speak of the first country to secede (when it suites their interests) from this silly experiment.

Mrs Le Pen said her first order of business on setting foot in the Elysee Palace will be to announce a referendum on EU membership, "rendez vous" one year later. "I will negotiate over the points on which there can be no compromise. If the result is inadequate, I will call for withdrawal," she said.

Saturday, June 29, 2013

The real news...

...regarding the below snippet is not so much the financial fall-out.  The real news here is WHERE the bonds were issued and under what LAW they are governed.  Bonds issued in the U.S. and subject to U.S. jurisdiction are good substitutes for Aid packages (that are subject to various political tendrils).  Bonds issued in London and subject to U.K. law are also good substitutes for direct Aid packages given the similarities of U.K. and U.S. default, liquidation, and Bankruptcy law.

The point being that Western powers have wrestled a massive portion of control away from China and other waning interests in Sub-Saharan Africa...once again outmaneuvered by its more nimble, open, and adaptable opponents.

In purely financial terms, these Bonds are extremely risky...but the The West (primarily the U.S.) is the House, and The House always wins.

Full article here.  And its once again notable that Economists always see events like these in purely economic terms.

IN RECENT years, a growing number of African governments have issued eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment.
Taking the lead in October 2007, Ghana earned the distinction of being the first sub-Saharan country other than South Africa to issue bonds in 30 years. This sparked a sovereign borrowing spree in the region. Nine other countries followed suit. By February, these 10 African economies had collectively raised $8.1bn from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%. These countries’ existing foreign debt, by contrast, carried an average interest rate of 1.6% with an average maturity of 28.7 years.
Sovereign bonds carry higher borrowing costs than concessional debt does. So why are developing countries resorting to sovereign-bond issues? And why have lenders suddenly found these countries desirable? One explanation is that this is just another manifestation of investors’ search for yield. Moreover, recent analyses have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa’s infrastructure needs. Moreover, the conditionality and monitoring associated with the multilateral institutions make them less attractive sources of financing.

Friday, June 28, 2013

Achieving Europe...

..."What are you talking about".  Indeed.  Professor Galbraith gives a nice and relatively short (20 minutes) lecture about the challenges ahead.  Of course, all of this was discussed here years ago, but its nice to see people lay out the problem in clear words once again.

Lecture here.


I have written about this phenomena previously.  In all seriousness though...what do we expect the spread of outcomes to look like if these policies are followed?  One of those laugh or cry headlines here:

Ireland falls back into recession despite multibillion-euro austerity drive

Official data revision of final three months of 2012 means Ireland has
endured three successive quarters of recession

An anti-cuts protest in Dublin this weekAn anti-cuts protest in Dublin
this week. Photograph: Diego Puerta/Demotix/Corbis
Henry McDonald in Dublin

Ireland is back in recession for the first time since its 2010
bailout, official figures have confirmed.

Tuesday, June 25, 2013

Capital flows...

...continue to flow to the most productive and safe jurisdictions.  This particular data set is pretty noisy (currency and financial asset fluctuation account for the Lion's share of the second derivative here) but its still a fairly good indicator of where capital is flowing.

The U.S. net international investment position at the end of the first quarter of 2013 was -$4,277.1 billion (preliminary) as the value of foreign investments in the United States exceeded the value of U.S. investments abroad. At the end of the fourth quarter and year 2012, the U.S. net international investment position was -$3,863.9 billion (revised). The -$413.2 billion change in the net position reflected a $394.2 billion increase in the value of foreign-owned assets in the United States and a $19.0 billion decrease in the value of U.S.-owned assets abroad.

Monday, June 24, 2013

Interesting perspective...

...on the nature of international capital.  Fitch must also believe that a relatively seamless transition to another jurisdiction is can be achieved given some social instability in Bermuda.

I have been to Bermuda.  It is a lovely place for those with liquid capital...and a large boat...

 In addition, Bermuda-based insurers tend to hold very little if any Bermuda sovereign debt or Bermuda currency. In addition, they maintain relatively minor investments in Bermuda banks and other Bermuda-based companies. While most Bermuda insurers have some level of deposits held at Bermuda banks, these amounts are generally quite limited. In addition, investment custodians are typically located outside of Bermuda. As a result of this very limited linkage of Bermuda-based (re)insurers to the island's fiscal issues and local economy, Fitch believes stress experienced by Bermuda would have minimal impact on the credit quality of its (re)insurers.

Here we go...

DJ Dudley: Fed Has Fallen Short On Job, Inflation Goals

Thursday, June 20, 2013


...the volatility has arrived before I had anticipated.  Although bonds have weakened, I still consider them to be in play given the simple fact that if rates are allowed to drift upwards, the nascent housing "recovery" will stall and severely effect employment, GDP, aggregate demand, etc.

As I have said previously, it is the wrong time to speak of "austerity" throughout the G20 and it was definitely a mistake to implement it.

The Fed overplayed its hand with respect to its "tapering" marketing campaign.

Monday, June 17, 2013

Shalom Ben...

...have fun back at Princeton...

 June 17 (Bloomberg) -- President Barack Obama said Federal
  Reserve Chairman Ben S. Bernanke has stayed in his post “longer
  than he wanted,” one of the clearest signals the central bank
  chief will leave when his current term expires next year.

     “Ben Bernanke’s done an outstanding job,” Obama said in
  an interview with Charlie Rose that airs tonight, when asked
  about nominating him for another term subject to Senate
  approval. “He’s already stayed a lot longer than he wanted or
  he was supposed to.”


Yet more "news" that readers here will find amusing...if only because this was discussed years ago on this blog.

Fitch says China credit bubble unprecedented in modern world history
China's shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned.

The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead.

"The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the agency's senior director in Beijing.

"There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling," she told The Daily Telegraph.

While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. "It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property," she said.

Thursday, June 13, 2013


Ok... I guess we will take your work for it...


Wednesday, June 12, 2013

Since when...

...did internal Executive Branch "process" become a proxy and substitute for 5th amendment rights.

That's all I am going to say on that topic.

The problem with "human rights"...

...and "humanitarians" is simple.  They simply assume that the same processes that drive human nature in Tyrants and Dictators do not apply to those who would be the leaders of whatever "international consensus" which would enforce "international law".

Just about every Tyrant in history started out as some sort of Revolutionary bent on returning rights back to the people...and even if this was not the case, how can you predict human behavior ex ante?  Given the enormous power that would hypothetically be ceded to some congress of "international law", how would this power be effectively checked?  Can you imagine the potential abuses if a person or group of people had "legal" jurisdiction over the entire Planet?

Plato was just as naive.  Holding that a class of people is immune to the sway of Power is silly and not borne out by the most casual observation of reality.  Empower the perfectly logical and pragmatic Philosopher King at your peril.

Or, as the Metal Musician/Poet Dave Mustaine wrote:

"You take a mortal man
and put him in control
watch him become a God
watch people's heads a roll"

And so I read the below statement by a respected human rights advocate and shudder to think what the world would be like if they were somehow given what they wanted.

"I have seen what national sovereignty can do in terms of damaging the resident population”, Laura Boldrini continued  “I refer to dictatorships, ethnic cleansing, mass extermination and civil wars. Like many, I have been indignant at the indifference of the world. I believe that when faced with the mortification of human dignity there is a right and duty to interfere in internal affairs. However, on two conditions. Firstly that one acts by scrupulously applying international law and not in a unilateral way or with improvised coalitions. Secondly, interference does not necessarily mean armed intervention. Here it is necessary to make  distinctions: the military do their job, humanitarian workers do another. The two may come into contact, but the agendas are separate".

We agree with you..., precisely, do they accomplish this terrible and totally illegal system of surveillance?  We are just curious...

Ah, like the great Lily Tomlin said: "No matter how cynical you get, its impossible to keep up"

Russia would consider granting asylum to NSA whistleblower Edward Snowden, Vladimir Putin's spokesman Dmitry Peskov said Tuesday.
Snowden fled the United States after leaking information about the NSA's secret surveillance of phone records and information collected by Internet providers. Afterrevealing his identity to the public, he said that he had sought refuge in Hong Kong, and was hoping "to seek asylum in a country with shared values."
Snowden has not made any requests for asylum yet, but Peskov told Russian newspaper Kommersant, "If such an appeal is given, it will be considered."
"We'll act according to facts," he said. The Guardian reported Tuesday that the statement prompted other Russian officials to declare their support for Snowden. As the newspaper noted, the country has a poor record for human rights and free speech, but has been known to support critics of the United States.

How not to inspire confidence in a Central Bank.

This statement would be an excellent exhibit for historians of the future.  Of course, if time = money...


Tuesday, June 11, 2013


It seems the collateral (and liquidity) questions are being partially answered today.  Again, its not time for a major reprisal.  Bonds will be fine once the equity rotation begins to wane.

The Widowmaker...

...strikes again.  Tough to see that one coming.

Shhh... hear that? (Silence).  That is the sound of nobody caring.

The U.S.’s AA+ credit rating outlook was increased to stable from negative by Standard & Poor’s, based on receding fiscal risks, less than two years after the company stripped the world’s largest economy of its top ranking.
The U.S. has a less than one-in-three likelihood of a downgrade in the “near term” with the revision, S&P said today in a statement. The New York-based company said it sees “tentative improvements,” such as the deal politicians reached to resolve what became known as the fiscal cliff and through spending cuts in the Budget Control Act of 2011.

Thursday, June 06, 2013

Risk on...

...Risk off.

The Karate Kid is a somewhat heartwarming (if still bad) rendition of a revenge story***.  Young spindly kid gets beat up by bully.  Kid takes Karate lessons from Okinawan Master.  Kid defeats bully in a tournament.  Bully graciously accepts defeat for some reason.   At this time in American culture (1984) Karate and Japanese martial arts held massive sway over young impressionable males such as yours truly.

This was largely due to the work of the great Sho Kosugi, whose myriad ridiculous "Ninja" movies (Enter the Ninja, Revenge of the Ninja, Pray for Death, etc.) convinced us all that Japanese martial arts, as opposed to, say, Boxing, was the way to go.  This marketing effort gave "The Karate Kid" credibility...just train for a couple of months and you too could defeat a physically superior opponent.  Forget studying other styles of combat and engaging in intense physical training for several years...just start washing fences and floors and voila!, you had the basics down and were instantly proficient in a street-level physical confrontation.

Of course, the entire genre was instantly destroyed by the abomination known as "Gymkata".  When adolescent men see a movie where the protagonist is defeating a mob armed with spears by performing pommel horse maneuvers, well, to put that into the modern vernacular, the Shark was truly jumped.

The point being marketing and media in the financial markets tend to overly simplify something incredibly complex.  There are no rules like "risk on, risk off" that work in the real world.

It would seem that every time bonds or stocks move 1%, pundits begin talking about "risk on" and "risk off" positions that would leave naive observers to believe these defensive positions somehow block losses.

Who can possibly find it profitable to trade every time markets move 1%, and getting suckered into a bad position at least 50% of the time.  You add the Vig of commissions and other "market frictions" (read: costs) and I have no idea who does this.  Its just another version of a bad marketing ploy...only this time instead of the quick fix of Karate, we have the quick fix of following some ephemeral market trend like "risk on, risk off".

***the film "Conan the Barbarian" abrogates the need to ever make another revenge movie.  What is the point.


Life imitating art...just about every response by official channels reads like MiniTru releases (sans Newspeak) with respect to what I thought "everyone" knew:  that all phone conversations in the U.S. have been recorded for at least 5 years.

Such power...I am certain it will not be misused...


I think the MOF and BOJ exercise their facility for cruelty.  Just as Bond shorts were clinking the champagne glasses, the following non-expansionary policy guidance appears:


Again, the "Widowmaker" trade's reputation is not undeserved...

Map of the day...

...U.S. Carrier Group locations...

Wednesday, June 05, 2013

Chart of the day...

...emphasizing the point of the previous post...these things have a tendency for reversion...

To laugh or cry...

...Austerity does what again?

The International Monetary Fund is to admit that it has made serious mistakes in the handling of the sovereign debt crisis in Greece, according to internal reports due to be published later on Wednesday.
Documents presented to the Fund's board last Friday will reveal that the Washington-based organisation underestimated the damage austeritywould cause to the eurozone country, which has required two bailouts in the past three years.
The Wall Street Journal reported that the papers would say that financial support from the Fund, the European Central Bank and the European Commission had bought time for Greece but had only been made possible because the IMF had bent its own rules to make the country's debt look more sustainable than it was. According to the WSJ report, Greece failed to meet three of the Fund's four tests to qualify for help.

Closer... the end of the "Great Rate Compression".  The last countries to attempt similar monetary easing as the developed nations will (of course) be the most damaged by the eventual global interest rate expansion (some would say "normalization")

Its not here yet.  But as the great Mark Cuban said "in business and in life, there are three I's:  Innovators, Imitators, and Idiots, and it helps to know which of those categories you fall into".

I will refrain form labeling entire countries under these guidelines, but as always, the maximum benefit accrues to those with initiative.

India’s bond yield held at the lowest level in a week as easing inflation and slowing economic growth spurred speculation the central bank will add to three interest-rate cuts this year.
Gross domestic product climbed a decade-low 5 percent in the 12 months ended March, below the 10-year average of about 8 percent, official data showed last week. Reserve Bank of India Governor Duvvuri Subbarao said May 14 that inflation at a 41-month low of 4.89 percent in April would be taken into consideration at the next monetary policy review.
“Sovereign bond yields have eased sharply in anticipation of easier monetary policy and lower inflation,” said Gaurav Kapur, a senior economist at Royal Bank of Scotland Group Plc in Mumbai. “While the RBI may not reduce rates on the 17th of June in its mid-quarter review of monetary policy, it is likely to guide that the room for policy rate cuts can increase.”

Deposit wars.

Its Money Market Funds vs. Money Center Banks in a winner take all contest.

My money is on the big boys.

So expect further pressure for regulatory apparatchiks to force assets to the Money Center Banks...because they are such excellent stewards of capital...

Tuesday, June 04, 2013

The Game... this:  Will the global rise in equities and corresponding wealth effect force the current broken Monetary Channel back into something resembling a healthy banking system?

This is happening quickly in the U.S., less so in the other major economies and Europe as usual being the laggards.  So I fully expect the U.S. to benefit from this global rotation and continue to lead.

We are still in the land of negative real yields.  The Fed's main concern is getting out of this predicament and returning to "normal" monetary policy and creation.

Monday, June 03, 2013

A little late... the party, but certainly a shot across the bow for China, who regards the Continent as its own Saudi Arabia.  I have told readers here that Africa is THE chessboard for the world now, and proxy kinetic conflicts and more prosaic financial battles will determine the winner.

In Japan's case, they cannot afford to appear weak given China's position and will happily open another theater of competition to distract from the Sengoku issue.

Full article here.

Japanese Prime Minister Shinzo Abe pledged 3.2 trillion yen ($32 billion) to Africa as his government seeks to catch up with China in pursuing resources, markets and influence on the continent.
Abe announced the five-year commitment of public and private support in a speech today at theTokyo International Conference on African Development. Officials from about 50 nations are attending the meeting, held every five years, which is the biggest African development event outside the continent since it began in 1993.

Thursday, May 30, 2013

Austerity me?...

Austerity YOU!.

Migration as economy-sinking mobile mercenary army...these tactics are becoming an exercise in hilarity.

Berlin/Rome (DPA) -- Germany's biggest selling newspaper voiced
outrage Thursday that Italy gave cash grants to hundreds of
African migrants, reportedly with the advice to travel north to
   Bild described the individual grants of 500 euros (650
dollars) per head as a "reward to leave."
   It said 300 of them were in the northern port city of Hamburg
and homeless, whereas the German Interior Ministry had on
Wednesday quoted a lower figure of around 150.
   In Italy, the Interior Ministry confirmed that cash payments
were given to migrants leaving temporary refuge centres that were
set up in 2011 to host people fleeing Arab Spring uprisings, and
which were closed on December 31.
   "It is not true that the money was given with the advice to go
to Germany. This is a slanderous and unpleasant interpretation
given by the German press," Italy's ambassador to Berlin, Elio
Menzione, told the ANSA news agency.
   In Rome, the Interior Ministry explained that the money was
given to migrants to help them integrate in Italy, but added that
those with regular residence permits had the right, under
European Union rules, to travel within the Schengen area for up
to three months.

Predictions are tough...

...especially when they are about the future. - Yogi Berra.

My daily in-box of readings typically include commentary from this or that asset manager.  The following sentence (name changed) sort of raised my eyebrow for some reason:

"At Acme Asset Management, we do not attempt to predict the future. Our focus continues to be seeking to identify quality businesses priced at what we believe to be a discount to their intrinsic values"

If you believe that an intrinsic value that has not manifested itself at the present, but will do so at a future date, how are you NOT engaged in prediction?

Wednesday, May 29, 2013

Just in time for the March Against Monsanto...

...I noticed the below story.  I know nothing of the relevant issues (well, at least much less than anyone who despises Monsanto, who seem to know everything the company has ever done and can read the minds of its top officers and Board members and have found nothing but malice and evil), but as readers know I am a big fan of pseudo-events and the tendency for Media to be manipulated by various competing groups.  This appears to be an instant classic in terms of a pre-rally molotov-style article.  Its so interesting in its brevity and multiple negative implications with respect to its target.

WASHINGTON (Reuters) - A strain of genetically engineered wheat that was never approved for or consumption was found sprouting on a farm in Oregon, the U.S. Agriculture Department said on Wednesday.
The wheat was developed years ago by biotechnology company Monsanto Co but never put into use in the face of worldwide opposition to genetically engineered wheat.


Name the country that is the subject of the following news snippet (adorned with appropriate substitutes for said country).  For readers here, a simple task.

Why state such impossible prescriptions?  It is akin to stating "The U.S. must shrink its Defense Budget by half and reinvigorate the private sector without effecting employment".  It sounds nice, but impossible to implement given current political inertia.

“Less efficient and more highly leveraged borrowers have been kept afloat, tying up credit that could be used to generate more growth,” said David Loevinger, former senior coordinator for Paper Dragons affairs at the U.S. Treasury Department. “To boost growth, Flaccid Drake needs to channel more financing to its private enterprises, which are both more profitable and less leveraged than their state-owned counterparts.”
State enterprises have seen their return on equity fall by half in six years, according to CLSA Asia-Pacific Markets in Hong Kong. The biggest concern from Obtuse Wyrm's credit surge is the money going to companies and state-run enterprises whose performance is deteriorating, Francis Cheung, head of China-Hong Kong strategy, wrote in a May 9 report.


Well, that experiment did not last long, now did it?

The European Commission has said it will allow some EU member states to slow their pace of austerity cuts, amid concerns over growth.
France, Spain, Poland, Portugal, the Netherlands and Slovenia are all being given more time to complete their austerity plans.
France will get two more years to bring its budget deficit below 3% of GDP.
Commission president Jose Manuel Barroso said the extra time must be "used wisely" to lift competitiveness.

Tuesday, May 28, 2013

In my view...

...this practice of Chinese government authorities incentivizing all kinds of mendacious behavior is endemic, and taking a literal "statistics on the table" view of their official figures would be madness.

Full article here, but suffice to say another example of illusory growth.

"With 50 million yuan worth of products, a firm could create the illusion of several billion yuan worth of trades," a source familiar with the practice said. "Then it could borrow several billion yuan from overseas banks, and move the funds freely through trades under the current account."
Some overseas loans have been channeled to domestic banks' wealth management plans, which offer yields higher than the borrowing cost. With the right bet on the offshore yuan Non-deliverable Forward, a futures contract, the borrowing company also stands to benefit from yuan appreciation.
Reining in trade-based currency arbitrage could be difficult, the Shenzhen government official said. Take rough gold processing for example. Customs is in no position to stop the business because simple processing is a legal business in bonded areas, he said.
But SAFE's tougher forex requirements may have begun to bite. One trader in Shenzhen's Futian bonded area said his company stopped faking imports and exports. Banks have halted financing to re-export businesses, a banker familiar with the situation said.


...a continuing saga.  If you are going to compete with the most recognized brand in the world (the U.S. Dollar), you had better have more backing than a few developers and a quirky DIY community.

This news snippet does not bode well for the future of Bitcoin.

Federal prosecutors have accused Liberty Reserve, a digital currency company, and its founder of running a $6 billion money laundering operation that became a "bank of choice for the criminal underworld."

The case, described by federal prosecutors in Manhattan as one of the biggest money-laundering schemes ever uncovered, comes just months after regulators warned that digital currency exchanges should follow traditional antimoney laundering rules.

Monday, May 27, 2013

Activity... the Subcontinent...

 May 27 (Bloomberg) -- Senior members of India’s ruling
  Congress party were among at least 27 people killed as their
  convoy was ambushed by 300 communist insurgents, in one of the
  most deadly attacks on politicians of a four decade offensive.

      Guerrillas blasted landmines to stop vehicles carrying
  Congress leaders from a May 25 party rally in central
  Chhattisgarh province before singling out their targets and
  opening fire, the Press Trust of India reported.

     The Congress party’s state chief Nand Kumar Patel and
  Mahendra Karma, the architect of a villager force called the
  Salwa Judum that was used by the state to counter the so-called
  Naxalites, were both killed, the state’s police chief Ramniwas
  said in a phone interview yesterday. A former federal minister,
  V.C. Shukla, was one of 32 people injured and airlifted to a
  hospital near New Delhi.

      The rebel group, formally known as the Communist Party of
  India (Maoist), trace their origins back to the ideology of Mao
  Zedong and are active in about a dozen of the country’s 28
  states, many of them rich in iron ore, coal, bauxite, manganese
  and other minerals. Prime Minister Manmohan Singh has called the
  insurgents the greatest threat to India’s internal security.

Wednesday, May 22, 2013


...Once again, its not called "the widowmaker" for nothing.

May 22 (Bloomberg) -- The Bank of Japan pledged to adjust its unprecedented stimulus program as needed after a jump in bond yields that highlighted risks linked to policy makers’ campaign to revive the world’s third-largest economy.
BOJ Governor Haruhiko Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner, and that the recent volatility in government securities isn’t yet affecting the economy. He spoke after the BOJ board affirmed its plan to double the monetary base in two years as it seeks to end 15 years of entrenched deflation.
The biggest surge in government debt yields in five years threatens to undermine the BOJ’s stimulus, with companies including steelmaker JFE Holdings Inc. pulling bond sales amid the tumult. The prospects of a growth rebound and the emergence of inflation has contributed to sending the rate on 10-year bonds up more than a quarter percentage point in two weeks.