Thursday, February 15, 2018

Oh what a tangled web we weave......Propping up the market.....stoking exuberance and animal spirits?

I read a wonderful daily newsletter called the Daily Pfennig written by Chuck Butler. Chuck is a currency and metals guy retired, but still with his eye on the markets and the economy,. (I recommend the newsletter a lot)

This issue mentioned another article titled: "Rumors Grow that the U.S. Fed is Propping Up the Stock Market" about the Federal Reserve and other world central banks working to "prop-up" stocks, and the US market in particular. I recommend that article also, thought I am not sure many will be surprised to read it.

I think the issue is that we are all getting "numb" to some of these manipulations, and the key we need to remember is that the economic system stays in "balance" because of all the natural fear / greed forces that work against each other. But if these systems are themselves manipulated so that the proper fear / greed signals are being blocked or somehow enhanced so that those involved don't get the proper feedback....well, like the person who takes pain killers after an operation, they very well might rip the stitches in their new incision because they have no sense of pain from a particular movement they might make.

IMHO: We currently have great pressure building up around huge personal and public debt....and we should be feeling the pain of higher interest rates telling us to slow down and reverse our course....but these are manipulated so that they don't exert the normal pain.....our punch is spiked, and we don't get the proper feedback.

But some day, we might get that feedback in the form of an open wound due to our ripped stitches.... but at that point, we might well have a "gusher" please play it all conservatively.

Wednesday, February 14, 2018

Warren Buffet thinks about the "last" crisis and the you think we do what he recommended?

Here is an old video from one year after the housing bust.....and you have to realize that things were still not firing on all cylinders just yet, so the comments are quite interesting.

But please skip forward to about 19:20 minutes into the video and note the discussion Buffet has about his fear of deficits and dept accumulation. Note his feeling that we would certainly need to get our deficits under make out outlays better match our tax revenues...but our situation never really came to that. In fact, out current plans are to further increase out debt......

So we might want to consider as Buffet says, where this might be leading us, and get prepared for it before we "get there".

DEBT......Here is the new boss, same as the old boss!

Record  #USHouseholdDebt, escalating federal debt, and a slow growing economy....and the confidence the .COM & housing mess. BTW: "This time it is NOT different".....fool me once, shame on you, fool me thrice, shame on me.

Wednesday, February 07, 2018

People think of "SHOCKS" to a system as the only thing to worry about

What if we had a problem that was a bit slower in manifesting itself as a BIG issue. What if it were "more" like the frog in boiling water problem.

What is our solution of increasing debt to fix a problem of debt was exactly the wrong prescription.....but we didn't know it because we seemed to go back through "normal" as we did it...and so we felt "good" about our prescription....but what if what we were really doing was just setting up a long and slow oscillation.

Look at the video below of the Tacoma Bridge disaster....there is no doubt that people recognized the situation was not only unusual.....but quite dangerous. But it wasn't a case of a "shock", so much as a wind that just happened to create forces that set a dangerous oscillation at the harmonic resonance of the bridge......

Could economic situations ever be similar?

Here is a more dramatic news show describing the event:

Hmmm....interesting comments by the regulator from China seem to be being "shut-down"....

I decided to watch this video of a round table event at the Davos economic summit, and it must be noted that this forum occurred many days before the latest market correction. (hopefully just a correction) 

But the only one on the panel that is a regulator is a guy from China, who seems to have a slightly different perspective from others...not that any of them are just blindly optimistic....not at all, they all speak wisely as folks who admit to have NOT seen prior crisis....but the regulator speaks as if it is almost a foregone conclusion that there will be a future issue.

Now, to be clear....IMHO, some of this discussion poorly differentiates a normal economic cycle from the sort of melt-down that was seen in the last crisis in 2007, or the .COM crisis in 2000....or even the depression of 1929....and no one talks about being "insulated" from either of those.....but if you look at the discussion that occurs at the 50 minute point of this video where the regulator tries to point out (on a graph) the dangers he sees with the level of the stock market will see what looks to me to be almost a concerted effort by a number of the others to "shut down" the discussion.

Also....the regulator seems to later indicate that it is the regulators "job" to make sure these PE levels are "tempered"...and this discussion is of course  "shut down"......I don't know if this is because this is a sort of "dirty secret" that markets are manipulated.....or just that this is NOT how we do it, and the danger may in fact be "real".....

Either way....very interesting meeting / discussion.....

Please go to minute 50 of this video and comment on what you think about the Chinese regulator and whether my thoughts of the conversation being "shut down" are on point or being overly sensitive.

Tuesday, February 06, 2018

Government Power.....rules for the road! this isn't strictly economic news or information, but it is key to understanding how money and economic money flows from those in power.....and why. (all useful)

So why do so many "clammer" for central leadership....not I, not I.

Monday, February 05, 2018

Sort of a Sector Rotation for the Highest Levels (Corporate Managers....maybe Corporations themselves?)

This video is a bit more all encompassing than my point here below....but this is touched on by Mr. Dalio.....though NOT in the way I am describing it. He is a smart guy, and me....not so much, but I am an Engineer who looks at complex system problems.....and this is certainly one of the most complex systems. (or machines as Mr. Dalio refers to the economy)

When we outsource everyone's job and make them compete against the other low-cost folks in the it s surprise we have crushed the middle class.....and since the higher-end managers basically do NOT get outsourced, then it is no surprise they they will do well because they are able to appreciate the use of the lower worker and the lower cost we might to doing a "rotation out" of the ruling class.....the companies will be taken over by those in the east, who we actually outsourced all our past productivity it goes, perhaps another sort of "sector rotation". (I see the destruction of companies like Digital Equipment Corporation of the past and current problem with GE to be of a similar nature to this....I think someone referred to it as a sort of "hollowing out" of the USA.)

Looked like a rough fall mid-day.....when the "buy the dip" crowd (or perhaps the PPT) came to work today....

Is this "save" of the market today just the result of a buy the dip mentality, or perhaps the work of the PPT?
Two related thoughts......Trump has so strongly hitched his wagon to the stock markets performance, there is a natural inclination for the powers under his control to "protect" that legacy and buoy the market......on the flip side, [conspiracy thought alert] he has also recently made some enemies (at least created bad blood) of some people not only in the other party, but his own and particularly the "three letter acronym" secret societies of the proof of anything, but one might also understand how a rough market would be a way to insert a sort of self-inflicted "thorn" in his side.
So there are cheerleaders in position of power on BOTH sides I suppose.

Sunday, February 04, 2018

I swear I didn't watch this before my trip to Walmart, or making my last post!

Alan Greenspan seems to see inflation in the are two interesting interviews where a now older Greenspan pulls out his crystal ball. (and a far better set of analytical tools than I have between my ears)

Oh, and another recent interview with the same outlook, though from a different set of questions. Also...anyone want to bet Social Security will be "touched" at some point? My dad told me when I started to work that I needed to be a saver because I should NOT rely on Social Security....he thought it would be bankrupt before I retired.

My dad might not be might come to an end after I retire....but it is really interesting how my dad's crystal ball was. He didn't just "guess" that we would have crashes and economic difficulties, but he highlighted Social Security as the camels back that would not hold.

Price Inflation Is Finally Coming......

Well, I am no economist, but as a saver all my life I do admit to thinking about money, inflation, appreciation and all the like. My interest is a practical one, and not so much trying to develop universal equations, but rather enough of an understanding so that my efforts to save and build a nest egg can be as efficient and effective as possible.

OK....I am just saying that I am no expert, but still I try to learn enough to play the game.

I will not get into the details of my investments, or even all the views I hold about the state of the world.....but let me just say that I feel the world is under economic tension right now, and that tension is manifesting itself in many things "not acting in what we used to think of as normal"......and there are plenty of things....starting with interest rates being this low for this long. IMHO, that is creating all sorts of distortions.....any savers out there say over 40 will probably appreciate the fact they in order to even stay where you are, we are all pushed to higher and higher risk assets.....and then there is the amazingly low level of volatility we have experience in the past year or more......not normal, and IMHO creating a "pressure" somewhere that will eventually come unhinged. (be careful, I am not saying CRASH.....just unhinged with might simply look like a slide into a direction that doesn't even seem to make sense) I have always thought that we in say the USA have been benefiting from what I call a deflationary input cost environment. That is, with labor and raw materials sourcing going to places like China, Mexico and Vietnam, we have benefited (overall) from the fact that input costs could go down, and our companies could do several things......either lower prices, or raise wages....and they did a combination of both. As input prices continued to fall as more and more of our production was moved.....we continued to benefit....and we have been trying to develop the political system to "re-distribute" that wealth that was coming in to those sitting at the arbitrage points where these delta's were most present. (I am not going to vilify anyone or any group, that is not the point...just think about it as trying to "FIX" the wealth gap that has been increasing.)

So what happens when the gravy train ends....that is, once input / labor costs can no longer go down further, and we don't have the capability (for cost and skill reasons) to take back that production and do it ourselves. Oh, and what happens when we continue to spend beyond our means and essentially borrow the money from the very folks we outsourced out production to....and even more recently, to do we unwind all of that.

I have always thought we would eventually be "forced" by those we owe the money to (and think of yourself on Social Security, and how you would feel about getting what you think you deserve there) to pay back what we I thought our first step was balancing a budget, and then we could just create a modest amount of inflation and essentially pay people back with "slightly less valuable" dollars.....but we have NO plans to balance a budget.....but even if we did, inflation is the key.

Well, it seems to be rearing it's head now......yes, there have been other indications in the past, stock and bond prices.....housing prices......but now I see clear evidence in retail when I look at prices at low-cost suppliers like Walmart and Market Basket....and I think you see it there first because their margins are so low that find it hard to absorb any increases.....they generally will pass them on.

Well, first off I see sardines.....they have risen from $1 per can to between $1.18 and $1.25. Then, those "fake" stacking potato chips in a can that used to sell for $1 per can have slowly moved up to between $1.15 and $1.50. (some of the other things are harder to see because they have experienced size decreases rather than price I am sure there are plenty of other examples, just more difficult to the "clearance" prices for shirts/pants and shows going steadily up over the last 9 months....from say $7.00 per item to $9 or $11)

But the reason I came to even write this was because earlier in the week bought three Ni-Mh replacement batteries for my wireless home phones from a company with Chinese batteries....and my EBay cost was $4.99. Within three days I received an email telling me there was a quality problem and they wanted to cancel my order.....which I allowed because I didn't want a quality problem battery....but I expected that ALL their batteries would have been removed from EBay, else they would have just told me there would be a delay...but when I went right back I found the price from the same vendor was not $6.99 for the same three batteries! They probably cancelled my order because of currency valuation shifts that resulted in them suddenly losing money on that auction.....and they of course are not in business to do that....

Anyways.....I am not sure how much of our price inflation will be coming from the recent currency devaluation of the USD....and I am pretty sure the food prices I describe above were NOT the result of I wonder if what I am finally seeing is perhaps the front edge of a wave of increases coming out large or long the wave, I have no might affect companies internally places like budgets, where they cut back on coffee and fringe benefits....or it might come right out into product prices. We shall see.....fasten your seat belts! (I hate to make predictions.....our economy has so many ways to tolerate and adjust)

Saturday, February 03, 2018

I got lucky....sort of....I only wish I could invest in a Crystal Ball

Well, let me get past the "lucky" part first......I sold ALL my USA stock positions (in the 30% money I control) on Thursday, January 25th. The market topped on January 26th, and has slid a bit since then. (most days down, maybe one or two up)

I did make one possible SLIP two days ago when I bought a position at $10.92 in Ford Motor Company, when I was pulled in by what I thought was low price and their 5.6% dividend yield. (let's hope that wasn't too stupid, since it is currently sunk to $10.62) But that was not a lot of money relative to the chunk I took to cash.

Yes, I did feel the market was way overvalued.....but I have felt this way for about two years! I had thought to pull out twice before, but I talked myself out of it.....why didn't I listen this time? (I actually didn't even try to talk myself out...) In fact, my last thoughts were: 
"Bulls make money, bears make money, but pigs get slaughtered."
So I was lucky enough to pull the trigger......

Having said that....I still have money managed by someone, and they have money in stock and bond funds.....and I have NOT looked at their value since the slide began. I trust their judgement, and this might sound "stupid", but part of the reason I have my money management split-up (now between myself and a manager) is for diversification of thought. Yes, I try to have diversification of assets, but I also think there is value in diversification of thought.

Yes, if things "hit the fan", I will certainly "call an audible" and tell them to get my investments OUT OF DODGE (and Ford I suppose).....but that moment has not come just yet.

Also, another part of the money I manage is in foreign stocks and currencies (a Russian Ruble Bond, Chinese Yuan and a touch of gold)....and quite frankly, the currency stuff is paying off well lately. Should I tell me?!?

Is this sort of diversification a good strategy, I think might not....I don't think there is a single way to get results, and sometimes you need to place more than one bet on the roll of the wheel.

Let's hope that old acronym for Ford (FOUND ON ROAD DEAD) is wrong, and the second one (FIRST ON RACE DAY) turns out to be right after all!

The Economist takes the place of Mathematicians of olden days!


Indeed....I am not sure when this transformation occured.....but I think you might remember the old joke.

Interesting Podcast Looking At Crypto Currencies

I listen to this Podcast regularly, and find their Macro Economic insights to be very valuable....but this particular episode titled: "Bits, Blocks & Forks: The Story of Bitcoin & The Blockchain" is particularly good.

It brings in some Crypto Currency Traders to discuss how they got into it, and where they think things will go...and you will be surprised at the range of thoughts.