ALIVE AND WELL

How much and what does it take to fully compensate one for taking on a specific risk?

Answering that is like getting a bunch of guys together to watch a Miss Universe pageant and getting everyone to agree which ladies are a 10. It ain't going to happen.

A similar situation exists today with the so-called new way of deciding which four teams should make up the playoff group to decide the national champion in college football. 

What was supposed to be objective is, if any thing, about as subjective as it gets. Strength of schedule, nonsense about how many top 25 ranked teams did a team play are just two examples.

Top 25 ranked teams is like a sliding scale of insulin, it changes over time. Was the team played on the road or was it played at home and margin of victory are some more?  

What's wrong with these so-called improved ways of selecting is the same thing wrong with those guys watching that beauty pageant--everyone has an opinion and everyone has a bias.

The pyrite of this system is the canard that a group of selectors--irrespective of their backgrounds or credentials-- just because they form a committee or commission suddenly grow a set of angelic wings and discard their humanness. It ain't going to happen.

And it's that same humanness that drives much of the market everyday. Like the market, big time college football is about big bucks. Like it or otherwise, wherever one finds big bucks one will also find big elements of humanness.

And that brings us back to how much is enough compensation for taking on a specific risk. Only you can decide. And for us we see some risk in the stock market with all the corporate buybacks providing much of the upside fuel for a market that is about as close to being overfed as overfed gets.

Perhaps nowhere is that more of a concern than in the credit market where corporate add backs roil the credit waters more than many investors may be aware. We will spare you the internals. Just know that optimistic projections, like those football polls and all those talking head commentaries every year, are one thing and reality another.

Rising credit costs usually accompany rising interest rates. And it's a known fact that in the corporate accounting world the term meretricious despite all the so-called regulations is alive and well.

We once knew a buccaneer with all the proper credentials and accoutrements who masqueraded as a surgeon.

HAD THEIR TURN AND FAILED

We recently wrote about California's Mendocino County voters who passed a referendum this month declaring self-determination.

In that post we mentioned Catalonia, a small section in northern Spain that wants its freedom from Madrid or the central government.

The Economist in its recent issue wrote:

SECESSION is a nasty business. A century and a half ago, America fought a civil war to prevent it. So it is not surprising that Spain, which has bad memories of its own civil war, should oppose independence for Catalonia. Spain’s refusal to allow a referendum on the issue is, however, matched by Catalonia’s determination to hold one—hence the vote the regional government held on November 9th, in which 80% of those who participated voted for independence (see article). The government in Madrid called the vote illegal, and a failure because turnout was only 37%; the Catalan one said that it demonstrated the case for Catalonia’s independence.

Neither is right. The case for holding a referendum is strong, but if there is one, Catalonia should vote to stay part of Spain.

Like another MSM news organization, Bloomberg which opposes the move in Mendocino County, these shills for the status quo never saw a secession they agreed with or liked,

Under a banner of Better Together, the Economist continues:

Catalan nationalists have drawn strength from the Scottish referendum earlier this year, but Catalonia is not Scotland. In relation to the rest of Spain, it is twice as big, with around 16% of the country’s population. It is also much richer, contributing almost a fifth of GDP and, unlike Scotland, transferring substantial sums to the rest of the country. Moreover, Spain has other restless regions: were Catalonia to go, so might the Basque Country and Galicia. Catalan independence would thus pose a serious risk to Spain’s very existence.

What the author or his editors or both don't seem to understand, or more likely don't want to understand, for Catalonians who are apparently fed up with their bigger Spanish centralized brothers, it's not their concern whether Spain's very existence is at risk.

In fact, at a much deeper level for those who are willing to take off their blinders, that's what Catalonians are rebelling for--their very existence and the right to preserve it.

Centralized governments when they get too big and too centralized threaten peoples' lives, their very ways and cultures of existence. It's a universal fact.

Contributing nearly 20% to GDP of a distant, feckless centralized government is reason enough for secession, but surely there are many others. The only constant in life is change. And if that applies to peoples' lives it certainly ought to apply to incompetent governments and countries.

The big concern here is once again money. Those who oppose Catalan independence are most concerned about an independent Catalan stiffing EU creditors in Brussels.

The people of Catalonia should decide their fate, not Madrid bureaucrats and politicians who like in many other regions on this planet have had their turn and failed

http://www.economist.com/news/leaders/21632478-madrid-government-should-let-catalans-have-voteand-then-defeat-separatists?

JOLTS AND JOBS, JOBS AND JOLTS

So goes the quit rate, so goes interest rates?

At least that what's some are saying. The quit rate--at a six year high--jumped to 2 percent in September with the number of job quits, according to the Bureau of Labor Statistics, at 2.8 million.

That could turn out to be a jolt from the JOLTS department for the Federal Reserve. 

Federal Reserve Chair Janet Yellen reportedly pays close attention to the JOLTS report. The reasoning being if one feels good enough to quit one's job it must be because he also believes jobs are now more plentiful and easier to get.
                                                      
Does this mean that the old two percent target rate for inflation is as passe as pegged pants or is this just another twist in the six year ongoing monetary circus we've all been watching and wondering about?

If your into jolts from the BLS department of JOLTS report, here you go:

This news release presents statistics from the Job Openings and Labor Turnover Survey (JOLTS). The Bureau of Labor Statistics (BLS) collects and compiles JOLTS data monthly from a sample of nonfarm establishments. A more detailed discussion of JOLTS concepts and methodology is available online at www.bls.gov/opub/hom/pdf/homch18.pdf.

Meanwhile, if you want to view an interesting chart about the matter from Business Insider click on the link below.

By the way, try saying three times as fast as you can: Jolts and jobs, jobs and jolts.You might like it.

http://e.businessinsider.com/public/3338502

AN AMERICAN FIRST

Since our politics page today seems to have its own idea about self-determination we'll post this here.

The recent national election results were really much more remarkable from an historical point than most, especially the Democrats, would like to admit. This is fact, not an intended political or partisan jab.

These are the numbers from the election in the U.S. They are truly historic; to find a parallel in terms of partisan shift from the Democrats to the Republicans, you have to go back to the Wilson Administration elections of 1918 and Davis' crushing defeat in 1920 and Hoover's coronation as Coolidge's successor in 1928. Even Truman's successive losses in mid-term elections was not a comparable defeat because the Democrats remained solidly in the majority in state legislatures and governorships. Measured by all elective offices throughout the country, this is the first time in American history that Republicans have been the majority party for more than a single election.

This is not our research but from one of the many sites we visit daily. See link below.


Republicans now hold 31 (possibly 32) of the 50 governorships and 29 (possibly 30) of the state legislatures, a total that matches the Republicans' all-time greatest success in 1928. In the count of all state legislative bodies (99 total, thanks to Nebraska's unicameral legislature) the Republicans control 69; that is 5 more than their greatest previous success of 64 in 1920.
 
The President's record is truly extraordinary as the leader of an American political party. Since his election in 2008 the Democrats have lost 14 Senate seats (60 to 46), 72 House seats (257 to 185), and 10 governorships (28 to 18).

http://www.dailyspeculations.com/wordpress/?p=9792

MENDOCINO COUNTY: ALL THINGS START SMALL

Mendocino County is nestled in Northern California along the distinctive Pacific coastline on one boundary and the big Redwoods on the other.

The population is small, around 88,000 by the last census in 2010. Besides its beauty, some local wines, growing medicinal pot and a popular song recorded by country music legend Willie Nelson, it's hardly a place on the national radar.

That is, it wasn't and might still not be unless the results of its recent election change all that. Mendocino County voters recently trucked to the polls to vote on an important proposition, that of self-government and self-independence.

The results were encouraging, especially for those sick and weary from big government and big government intervention, a growing global phenomenon if one views places like the European Union, China, Catalonia and the recent events in Hong Kong, to name a few.

Sixty-seven percent of the voters clicked the yea button as in we've had enough of government intrusions in our lives making Mendocino the second such jurisdiction in the country to declare for self-determination.

Some will laugh, some just shrug, others will recognize. California for all its perceived nuttiness is a trendsetter in many areas of life for the rest of the nation. With perhaps the fifth or sixth largest economy in the world and a huge population it's no economic or social joke.

Its richness in resources from agriculture to energy to people to technology is no joke either. Make no mistake there's a burgeoning grass roots global movement in the air unencumbered by geographical boundaries or language and cultural differences.

Pick up a newspaper or click on the Internet and see all the stories about corporate or political corruption and the ever tightening, hardly subtle garrote being squeezed around the neck of individual liberties by governments.

Though we never had a horse in that race and many still fail to perceive it, the gay movement was really one about individual liberties and self-determination.  And so too is the right of interracial marriages and things like self-employment and just whom one hires.

All things start small.

STILL IN THE SHADOWS

 Pimco, the big Newport Beach money management firm still laboring in the exit shadow of its long-time leader Bill Gross, posted online yesterday it cut its short-term holdings of financial instruments last month.

The cuts came in the firm's popular Total Return Fund once run by Gross, according to the WSJ. Many interpreted the move as a forerunner to the Federal Reserve's coming interest rate hike sometime next year.

Per the WSJ, the fund's managers said they have reduced holdings of short-dated bonds whose yields are the most sensitive to changes in Fed policy. Pimco expects the Fed to start hiking rates mid-2015, the  report noted.

The report continued saying the fund has and will continue an 'underweight' holding of long-dated bonds because yields appear too "rich relative to our expectations for the future path of interest rates."

Last month the fund posted an 0.8% total return still behind the 0.98% on its benchmark, Barclays U.S. Aggregate Bond Index, Morningstar reported.

THE NEXT TIME YOU HEAR

For anyone who bothers to spend a little time with stock market history the following quotes are well-known.

         John Maynard Keynes in 1927: “We will not have any more crashes in our time.”

H.H. Simmons, president of the New York Stock Exchange, Jan. 12, 1928: “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
Irving Fisher, leading U.S. economist, The New York Times, Sept. 5, 1929: “There may be a recession in stock prices, but not anything in the nature of a crash.” And on 17, 1929: “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

W. McNeel, market analyst, as quoted in the New York Herald Tribune, Oct. 30, 1929: “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”

Harvard Economic Society, Nov. 10, 1929: “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”

We have lifted them from an excellent piece http://www.zerohedge.com/news/2014-11-12/economic-end-game-explained because they are so relevant to what's going on today.

One must remember that when another person's economic territory is jeopardized or in any way threatened, the manipulation intensifies. It's the same everywhere, politics, economics, the stock market notwithstanding.

Main stream media is one of the main manipulators, usually via what Lenin called useful idiots. These are often well-known, even well-meaning people the media provides with public exposure. They come from a variety of areas, academia, corporate suites, Hollywood and so forth.

They are not necessarily evil people or conspirators. They're believers for the most part. Zealots at the extreme, Myrmidons at the center and the edges. Many are infatuated with the sound of their own rhetoric. People like New York Times economist Paul Krugman should come to mind.

Krugman's probably a decent sort and most likely when he was a kid even his mother loved him. In the military one quickly learns that it isn't only the enemy who can snuff you. Who are the ones in your own squad, well-meaning or otherwise, that can get you done in?

Danger is often much closer than most of us realize. Weapons are suppose to be kept up and down range. And MSM is suppose to reveal the truth and so they do. But it's their truth. And most likely not yours or mine.

This is hardly new. The history of news is rife with manipulations and falsehoods. It's different this time is one of their biggest falsehoods. See Alan Greenspan and just in time inventories around the 2000-2002 period. These are people who thrive in the world of half truths and selective data picking. Many of them masquerading as revisionists.

A good example appeared in yesterday's WSJ in a book review by Princeton economic professor Burton G .Malkiel, best known for his efficient-market hypothesis as expressed in his 1973 book, A Random Walk Down Wall Street. If you're like many us you've had a copy on your bookshelves for years.

And you know that if you mention a guy named Malkiel, you just mentioned another guy named Bogle and a huge mutual fund organization many know by the name of Vanguard.


Malkiel was reviewing James Grant's newest book, The Forgotten Depression, a review of the economic downturn in 1920-21, just after the great war to end all wars. Grant's the publisher of Grant's Interest Rate Observer and a known gold enthusiasts. He is also often cited for his bearish views.

Malkiel begins his review by quibbling with Grant's use of the term "Depression" in the title, saying "recent research suggests that the decline in the early 1920s wasn't as severe as that term usually signifies...." 

The point of Grant's book is the 1920-21 downturn happened and recovered without any government intervention, a point Malkiel concedes.

No fiscal stimulus was administered in 1920-21, and a powerful, job-filled recovery followed. Today our 'overmedicated' economy is in its fifth year of a 'lackluster recovery.' In the current environment, he (Grant) believes, we should take a more laissez-faire position.

There's an old saying that if your neighbor gets laid off it's a recession, but if you lose your job it's a depression. But who gets to define depression, the statistics crunchers, government officials and academics or those going through it, those who were there?

 Grant's point is it was a serious downturn for those who endured it that was turned around without any government interference.

Perhaps so, but there are important differences between then and now, and there is more to the story, Malkiel writes, rolling out one of the shills for government intervention's favorite arguments.

Malkiel then notes "...monetary policy did not cause the recession of 2008. The crisis was precipitated by the unraveling of a housing bubble and excessive leverage by individuals as well as financial institutions, creating a crisis whose remedies are different from 1920-21.

Malkiel conveniently skips the question of why it was necessary to unravel anything in the first place--that is, who helped not only create but stimulate the housing bubble--politicians with there push at the time every American should be able to afford a home and the Federal Reserve. 

Teaser lower interest rates tied to short-term Treasuries that will soon need refinancing coupled with low or no down payment incentives pushed by so-called well-meaning politicians and government bureaucrats are mighty tempting.

The financial institutions and individuals were just walk-ons to the program. It's there we'll give it a go. How many politicians who penned pitiful legislation at the time are being called out, let alone fined or prosecuted. 

Malkiel concludes his review with the old academic trick of damning with faint praise.

One can disagree with Mr. Grant's analysis and still admire his ability to produce a readable and carefully researched history.  People who believe in the inadequacy of the current macroeconomic orthodoxy will find him to be an articulate spokesman. 

In residency training, medical residents are judged by their fund of medical knowledge. It's the pure basics of medicine, the stuff they were suppose to learned and mastered before they showed up in residency.

If they fail early on to measure up, the department chief frequently asks them to move on and conveniently writes them a letter of damning faint praise. In essence, kicking the can onto the next fool and ultimately to the public at large.


It might be a stretch for you, but think of that pubic at large as the taxpayers the next time you hear it's different this time and government wants to help.