We don't know if former New York Mayor Michael Bloomberg broke any laws by defying the FAA's ban on flights to Israel.
But if it turns out he did, in the name of king-sized sugary drink lovers everywhere, we want to be among the first to push for regulators and law enforcement officials to prosecute him.
If the law of this land supposedly applies to all equally, we want him prosecuted. Show the people whether that's the truth or just something officials in high places simply mouth to quell the rabble.
If you don't stay with your winners, you are not going to be able to pay for the losers.”
The above quote could easily apply to today's market as it continues to defy what many call "all reason." But the stock market, comprised as it is of millions of individuals, has little in our view to do with reason.
From the book, Market Wizards, the above reminder, like most things, is probably a double edged blade. And it will remain that way until it no longer does.
Too many today are looking for black swans. To be sure, they're out there lurking somewhere just below the surface. But this market, as the above quote implies, is not done sucking more innocents into the game. Nearly everyone talks about markets being perverse creatures, often making fools of the greatest number, but when the market gets as perverse as it's been so far in 2014, the grumbling starts.
Those who planned to short bonds, buy growth and ride the macro tide to huge prosperity this year so far remain frustrated and foiled. Things haven't gone as they were suppose to, not what they seem. To quote Gilbert and Sullivan, it's so far been a year of "skim milk masquerading as whip cream."
With volatility 25% below its historical average, complacency still reigns. Like the alluring Sirens of mythology wooing unwary sailors to their doom, complacency can prove quite disturbing to those minds use to functioning within the limits of logic and rationality.
To quote Carl Jung "A symbol always stands for something more than its obvious and immediate meaning."
Until future books about the history of the stock market get written, only then will we fully learn complacency's true place in market annals and what role, if any, the inhabitants of the Eccles Building at 20th Street and Constitution Avenue played.
t. man hatter
If you haven't heard of a bit license yet, stay tuned because you will.
It's about the new virtual currency, bitcoins. New York, it seems, has become the first state to propose the new fee. That's the kind term for new tax once it becomes law and most likely will follow in other states and jurisdictions all the way to the county and city levels. Federal, state, county and city, remember, each has its on taxing octopus.
The justifications for invoking the new rules never vary--to protect the public and prevent crime. Those two have replaced motherhood, apple pie and what use to be semi-revered God, the church and the American flag.
The proposed new rules applied only so far to those involved in trading and storing virtual currencies. Despite what naysayers will say, bitcoin is growing in acceptance as Michael Dell of Dell computer just announced they will accept the virtual currency. And there are many others like Dish Network, the cable provider. Around the globe there are now nearly 65,000 firms that accept the coin.
What remains to be solved, as some are already pointing out, is whether, contrary to what the New York State Department of Financial Services is proposing, separate regulations are warranted. Some feel the new currency should just be folded into the already existing financial system.
Oscar Wilde noted that a cynic is a person who know the price of everything and the value of nothing. Well, we don't know what the price of any licensing fee will be--bureaucrats seldom miss a juicy new taxing opportunity--but our gut feeling is whatever it is will supersede the value those subject to paying will receive.
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t. man hatter
Once upon a time there was a popular song with the line: "I wouldn't last a day without you." That was a story about a love affair the singer didn't want to end.
Well, that line could be turned around a bit given the market's recent reaction to the terrible tragedy in the Ukraine and all the bloodshed in Gaza.
Investors seemed to be bothered by horrible news about one day. And that for all intents and purposes appears to be the meme of this market so far this year. "We hear and feel ya, but our focus is just somewhere else for now."
And many, many people obviously don't want this market love affair to end either. So what's going to finally change investor focus? At the moment nothing. As we said in our post Taos Jones Averages, it is what it is until one day it isn't.
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Here are two charts from a recent report by 90-year-old Richard Russell, the father of market newsletters. Russell says gold can go to $10,000. But whatever it does, he ain't selling. And on any price weakness below $1,200 he might even be a buyer.
Gold miners versus gold bullion. We've discussed the gold mining stocks before. Look at the charts and draw your own conclusions. Our point here is more to inform than to recommend. It's like the difference in the English language many fail to distinguish between the terms imply and infer. We imply, you infer.
In more pragmatic terms, you're on your own. So get use to it.
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A South African gold mining firm signs deal with gas company to bring cheap energy for their mines.
Gold miner AngloGold Ashanti (NYSE:AU) has signed a $140 million
agreement with natural gas infrastructure business APA Group (ASX:APA)
for a natural gas pipeline to supply the remote Tropicana and Sunrise
Dam gold mines in Western Australia.
The 292 kilometer Eastern
Goldfields Pipeline will connect AngloGold's mines to APA’s existing
pipelines and is seen saving the South African miner millions of dollars
in energy costs.
“Gas power generation is expected to reduce cash operating costs at both sites by between A$25-$30 an ounce,” said Michael Erickson, AngloGold Ashanti’s senior vice president in Australia.
The
companies said engineering, design and procurement work has begun, with
construction expected to start in February 2015. Gas transportation
services are due to commence in January 2016.
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Investors can often accurtely anticipate an event. What they can't often accurately anticipate, it seems, is the consequences of that event.
At the beginning of the year many macro investors anticipated higher interest rates and falling bond prices owing to the massive ballooning of money sloshing around the world as central banks continued to print the stuff.
Moreover, the Fed contributed to this outlook with its announcements about future monetary policy, the start of its tapering program and its constant reassurances there would be enough time for everyone to get to the life boats if they were needed.
As has been noted, the Federal Reserve's balance sheet exploded from $950 billion in 2008 to its current $4.3 trillion, a number that for most is totally incomprehensible.
Take the case of big U.S. banks. One of the stories in the news today is how tighter lending standards, much of it most likely owing to the cumbersome effects of Dodd-Frank, have apparently helped these giants clean up their loan losses, seemingly a good thing.
Tighter lending standards may lead to, as one analyst put it, claiming "In the worst of times the best loans are made," better quality loans, but they also lead to less expansion or economic growth, supposedly what the Fed's easing has been all about.
Investors cite numerous reasons for the economy's slow recovery, a recovery most agree that has been below historical norms. Some of that may stem from the recession itself which was deeper than historical norms.
But that's not the complete answer. Despite what its proponents might say, the heavy-handed Dodd-Frank Act has played a bigger than accepted role.
You can't have it both ways, at least not for long. And that's exactly what the Fed has done.
Here's a quote for article today posted on MarketWatch from Jeremy Grantham, head of GMO investments.
“She will not use interest rates to head off or curtail any asset
bubbles encouraged by the extremely low rates that might appear. And
history is clear: very low rates absolutely will encourage extreme
speculation. But Yellen will, as Greenspan and Bernanke before her,
attempt to limit only the damage any breaking bubbles might cause.”
Grantham is critical of Yellen and her predecessors for essentially what we posted in two or our articles earlier, Complacency By Any Other Name and Fed Policy Dangers.
Now to be sure, the Fed has its apologists and defenders, that ought not to surprise you. One of the most outspoken is CNBC commentator Ron Insana who recently wrote a long piece claiming people who had not entirely drudged through recent voluminous pablum from the Fed didn't really understand what a good job the Fed had done and is doing.
With all due respect, we would suggest just the opposite.Those voluminous tombs are proof positive of analysis paralysis, a characteristic of this and the previous two Fed chairs. Furthermore, indirectly it's an indictment of what we the public deserve and get when we turn an institution over to bureaucrats and academics.
Here's the link. We'd like to know your view.
http://blogs.marketwatch.com/thetell/2014/07/21/yellen-encourages-fully-fledged-equity-bubble-says-jeremy-grantham/
t. man hatter
The last correction low in the Dow Jones Industrial
Average happened on 10/3/2011. Since then the famous index has gone 33
straight months without a 10% correction or pullback. The Dow is now up
59% since that last low occurred. Usually, in most bull markets, there
is at least one 10% pullback in the Dow every 12 months.
Small cap stocks after an earlier run-up have faded of
late, but by many metrics hardly appear cheap, trading at a forward p/e
on the Russell 2000 index around where they started 2014 at 21. That
compares with an average of slightly over 19 times earnings.
Another area worth watching is emerging and frontier debt
markets where international sovereign bonds sales soared to record
levels, hitting nearly $70 billion in the first half of 2014. Concerns
about the quality of these bonds are beginning to surface some
quarters.Ecuador, the tiny Latin American country that defaulted on its
debt six years ago and has been locked out of the international
financing market since, recently floated $2 billions in new debt.
Greece, Cyprus and Kenya are similar examples of recently
holding bond offerings that most were over-subscribed to by
yield-hungry investors. With the apparent end of Fed tapering on the
horizon, some worry what will happen when it ends.
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Besides
the bond market, the Fed recently expressed concerns about another
sector, biotech, and investors have apparently been listening as the
funds flowing this month into the sector receded, turning fund flows
negative so far for 2014. That's a marked change from a sector that not
too long ago captured Wall Street's love and admiration. Though
investors were pulling funds before the Fed put small caps, bonds and
biotech in their cross hairs, $440 billion left the sector since the
beginning of this month, bringing the total for the year so far to a
negative $77 billion.
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Macro
is out and event-driven investing appears for the time to be in among
successful hedge funds, according to recent blubs in Barron's and the Financial Times. At
the center of this strategy is merger and and acquisition activity now
at booming levels. One such aspect of these events is the so-called tax
inversion deals going on that the failed Pfizer-Astra seemingly kicked
off earlier. As the FT put it; "the economy may be miserable in the US, but takeovers are at boomtime levels."
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The
European Banking Authority supposedly put a cap on bonuses for high
bank earners.But as the saying goes, where there's a will there's
apparently a way as, according to recent research, 55% of banks in
Europe and 47% of non-Europe banks plan to use allowances to circumvent
the caps for bank high earners.
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