All Tears Have Salt In Them

Fifty-one people were just butchered in Orlando.

Another 50 were injured and those are the one we know about. Even among the lucky non-injured, how much damage was done? Anyone think that was an act of rationality? Anyone think gay lives are less important than, say, lives of African-Americans or Hispanics? We don't don't know the statistics but odds are great that horrible list of victims includes Caucasians, Hispanics and African-Americans.

Let's be clear here. We are not gay. There are news stories the FBI was focusing on homeless people not just in Florida but other places. There's a reason for that, one MSM denies and refuses to focus on. From Connecticut to Colorado, the shooter was a mentally ill person, one known with mental illness. In the Colorado case he even told his psychiatrist, according to reports, he had urges to kill lots of people. Given what we know so far from Connecticut to Colorado to San Bernardino to Orlando or those Twin Towers how many were done by the homeless?

For those who despise the obvious, there are two terms for this--pattern and profile.

Is the psychiatrist libel? Did he or she inform the authorities? We have a so-called President who is either unable or unwilling to call this what it is. One of the reasons should be fairly obvious. If he does he won't be welcome in any mosques anytime soon. You have a whole horde of people from the Beltway to Hollywood who want to take the easy path--focus on the weapons not the reasoning behind the massacres. Some things are just too unpalatable to stomach.

A lot of gay people--as should be their right-- voted for Mr. Obama and they most likely will step peacefully into polling booths this November and vote for Hilary. Yet the same rights should be afforded to those who will vote for her opponent whoever it is.  Much of what we have today is a byproduct of PC. The chicken late or soon finds it's way home to roost.

How long will it be before one of the victims in these human slaughters will be a loved one of a Congressperson who gets the toe tag? Brutal. Crass. Insensitive?

Tell that to the friends and loved ones of the Orlando slaughter.

All tears have salt in them.

Linear Paradoxes

Linear thinking is a paradox. That is to say it's paradoxical like many things in life. Things are not always what the seem, as Gilbert and Sullivan wrote: "Skim milk masquerading as whip cream." Or more recently a certain person masquerading as a President.

A+B = C is a process of linear thinking. It most certainly can work when A and B and C are numbers. Just as the reverse would be true: C-B = A. Numbers play a huge role in investing. But behind those numbers are people and despite what one might think, when A+ B = C are not numbers but Alfonso and Betty and Carl, linear thinking is nearly worthless.

Only cellar-dwelling economists with their econometric models think people behave rationally all the time. It's understandable. And it's comforting, like an evening glass of decent wine after a long, tedious day. But it's saddled with the same flaws as the Random Walk theory, humans can't outperform the numbers or averages. As a matter of fact they can and do, often outperforming the averages going up and going down. It's just that all humans can't do it and none can do it all the time, the worst nightmare of the PC tribe. No outliers allowed.

Despite all the nonsense of psychiatry and psychology studies we've had for years, they've yet figure out human behavior. One reason is they keep looking for ways to prove and they continue to assume humans in the main behave rationally, whatever that is. It makes them feel good and important when they have outliers whom they can label mentally sick or deranged. One can almost hear their sighs of relief. It's labeled employment. The so-call in-crowd, therefore, remaining folks, must be rational. What they fail to get is something called circumstances.

Here's a chart with a link to the rest of the article. One of the most obvious human acts of irrationality was inventing a 2,500 pound metal and fiber glass object that can go from 0-100 miles an hour in 10 or 20 seconds, putting a steering wheel behind it and then putting a human being behind the steering wheel.

Forget your religious preferences, if you have any. That's a real leap of faith. We could go on with cell phones, texting and GPS devices and what have you.The idea that people would use such rationally is probably buried somewhere in one of those economists' econometric models about the flood of high paying jobs the Fed has created since 2008.










After hanging around the investment world for more years than we care to recall, we can suggest (note the word, suggest) one piece of advice whether you're talking insurance company annuities or mutual funds or stocks and so forth that the author of this article captures in truth: The first major flaw in the plan is the “compounding” of annual returns over time which never happens. The second, and most important, is the future expectation of returns for individuals over the next 10-20 years.

These are all classic examples of linear thinking. Get sucked in with your own A +B = C thinking. Just be prepared to own it when you do.

davidstockmanscontracorner.com/why-the-next-decade-will-foil-financial-plans

Overnight

For Japan it's the same old same, same old with concern about weak consumer demand and flagging exports as the yen has appreciated 12% against the dollar so far this year. Then, too, many are waiting to see what if any results kick in from negative zero interest rates. Patience in some quarters are growing thinner.

On the other side of the globe the U.S. central bank meets this week as Asian investors keep a sharp watch out for will they or won't they hike rates. As of now the consensus appears they won't. Asian shares traded lower overnight with concerns about the U.S. central bank and the Bank of Japan on tap this week and Brexit to follow a week later. It's fairly safe call volatility will remain an issue until after the UK votes in or our.

The Nikkei dropped 2.6% as a stronger yen put stress on sharerices. Bond yiels in Korea dropped as Reuters reported: "The yield on South Korea's benchmark 10-year treasury bonds fell below the comparable U.S. yield on Thursday for the first time in nearly 10 years, reflecting their divergent monetary policy settings. South Korea's 10-year treasury bonds yielded as low as 2.463 percent, compared with 2.473 percent for the U.S. Treasury Bonds. It was the first time since October 2006."

The Kospi was off 1.6%, the Hang Seng index fell 2.41%, the Shanghai composite edged 0.71% lower and the Shenzhen composite gave up 0.88%, the ASX 200 down 0.92%. Oil traded struggled with the magical $50 a barrel level barely staying above it.

No Free Lunches

The truth is the U.S. and the EU are two examples of countries living beyond their means. And now China's being forced to confront that prospect.

Nothing has changed. What little austerity happened it was way too little and most probably way too late. So the same old beat goes on with nothing really corrected or changed. If anything it's not only more of the same but more of the same only worse. Here's just one side effect of these low and negative interest rates.



Bonds were once marketed as providing some downside protection from sinking equity prices owing to there dependable yields. Sure their prices go down with rising interest rates, but for some there was the possibility of higher yields and some upside when rates went back down again. It is called total return or rerun to maturity.

The psychological effects of holding negative yield sovereign debt that keeps dropping in value will be interesting to watch.

businessinsider.com/goldman-bonds-make-less-effective-hedges-2016-6

How About You?

How about you?

"All my rich friends are hoarding cash," Richard Fisher. Who is he? Here's who.

Fisher was president of the Federal Reserve Bank of Dallas and a voting member of the Federal Open Market Committee (FOMC) from 2005 to 2015. He was one of, perhaps the only, skeptic on the Fed board going into the great financial crisis, warning on numerous occasions about the upcoming crash only to be ignored by his wiser peers and certainly Alan Greenspan and Ben Bernanke. He was also ignored in the post-Lehman era by both Bernanke and Janet Yellen. 

Among his biggest concerns:

• Government Debt: he is worried about the $19 trillion US government debt (up $11 trillion since 2008) because the Fed has fired all its monetary bullets and can’t expand the balance sheet any further.
• China and social instability: he thinks communist leaders care about production but not efficiency. "They might produce more, but our products work," jokes Fisher. There are entire cities in China with nobody living in them, according to him. Fisher says the biggest problem in China is social stability. "I'm deeply worried about their ability to maintain social stability,” but... “It doesn’t affect us directly.” Another risk in China is that millions of people are pulling their money out of the country.
• Low interest rates don't work: "We had a long period of moderation and low interet rares, which did nothing to adjust." The online countries that adjusted were Poland and Mexico, according to Fisher.
• The failed Brazilian experiment: Fisher said Brazil is a symbol of what's wrong with emerging markets. They lived through the crisis but learned nothing from it.“Brazil has always been a country with potential, and it’s never been realized."
• Raising rates is long overdue: he made the point that raising interest rates won’t ruin the economy. "The debt rollover is what we should be worried about. Yet nobody is talking about it."
• It's all one big Ponzi scheme: “Our government has to borrow money just to pay interest.” Or as Minsky would say, this is the Ponzi finance stage, just before everything goes to hell. "We have a lot of unsound policy in place. It is agreeable, but in my view, it is unsound.”
• The death of the middle class: Fisher says the lowest income quartile has seen an increase in income. The highest quartile has also seen a massive increase in income. The two middle quartiles were flat over a period of many years. “This is why we have such support for people like Donald Trump and Bernie Sanders.”
• A ritalin monetary policy: “We have what I call a Ritalin based monetary policy.” Now Janet Yellen’s job is to wean it. “It has to do with taking the distortions out of the financial markets and letting the markets down easier.” “These are the lowest interest rates in 239 years of history.”

But as Sagami points out, Fisher’s most telling comment came during the Q&A session when he was asked how his personal portfolio was positioned. Fisher’s response: “In the fetal position.” Moreover, he also said that “all my very rich friends are hoarding cash.”  

As we've pointed out before there is a saying in surgery, "The solution to pollution is dilution."

Take the $13 trillion U.S. government debt as the pollution and the endless printing of money as the dilution and you have your end result.  Solution:You have inflated your way debt free.

zerohedge.com/news/2016-06-10/former-fed-president-all-my-very-rich-friends-are-hoarding-cash

With All Due Respect

With all due respect to Canada and it's data keepers, this is yet another example of government numbers being mostly of the Fly-by-the-seat-of-you-know-what kind. Hype and revision are government staples in the economic data collecting world. They usually require a big dose of Pepcid.

A cynic--if any are still welcome and we rather doubt it--might argue the upswing in workers over 55 and the decline in those 15 to 24 reflects something else. The millenials are too smart to take those burger-flipper jobs. businessinsider.com/canada-jobs-report-may-2016-6?

Canada's latest jobs report crushed it.

The Canadian labor market added 13,800 jobs in May, above expectations of 1,800.

The report noted that full-time employment surged by 61,000 last month, but this increase was offset by a decline of 47,000 in part-time work.

Employment increased for those aged 55 and older, but it dropped for people aged 15 to 24.

As for the unemployment rate, it unexpectedly fell to 6.9% - the lowest rate since July 2015.

Economists were expecting the unemployment rate to tick up to 7.2%.

The Canadian dollar strengthened by 0.4% at 1.2668 a US dollar right after the report.

Party Poopers

We all pay a price for what we are. And in the world of investing for perma-bears things are no different.

Albert Edwards, the in-house perma-bear at the big French bank Societe Generale, is well-known for his views in his weekly commentaries. His latest is no exception, according to Business Insider.

"The key to the Ice Age thesis is to sound CONDITION RED ALERT as each recession approaches, because the equity outcome then always proves much worse than anyone expects due to the additional phase of secular de-rating," the strategist wrote in a note to clients Friday.
Based on Edwards' reading of the latest data out of the US, it appears that it is time to sound the alarm. Here's Edwards (emphasis added):

In the aftermath of the latest, weaker than expected, nonfarm payroll data, economists are certainly more worried. The excellent folks at Advisor Perspectives highlight the Fed’s Labour Market Conditions Index as suggesting a recession is imminent (the cumulative peak is an average of 9 months ahead of the start of recession and we are now four months beyond a peak. For investors who think copper still has some predictive power, its recent move is disturbing.



As we said: We all pay a price for what we are. Here's Edwards' own words.

"We remain at the bearish extreme of the market," he wrote.
"It is not a pleasant place. It is cold, dark, and damp. People either don'’t speak to you or send you abusive emails. Members of your own family pretend not to know you. Actually, I made that last bit up."

Here's a link to the rest of the article. It's hard to be humble when you're perfect in every way go the words of an old song almost too long ago to remember.  And it's even harder to be a party-pooper even when one is needed.

businessinsider.com/condition-red-alert-recession-is-imminent-2016-6.

Russian Rate Cut

The Russian Central bank cut its benchmark one-week repo rate today, lowering it for the first time in in nearly a year to 10.5% from 11%.

The move, according to one report, was based on future inflation expectations as future cuts are anticipated. Russia's ruble is up against the  dollar nearly 15% so far this year and was up 0.4% in trading earlier today, trading at USD/RUB 64.5956.












businessinsider.com/russia-central-bank-cuts-rates-2016-6? 

When

We will simply relate this to a piece, Decision Time, we wrote earlier with a link for those who want to read the rest of this article. Things can go on for a long time, but not forever. And the difficult part is when. It never changes.

We might be at the very end of this economic cycle, and the remarks by legendary investors Carl Icahn and George Soros signal it, said Jeff Rosenberg, BlackRock's chief investment strategist for fixed income.
"I think the message there is that this is a very late part of current cycle. Nobody knows how far that cycle will go, but it's clear that you're seeing many signals," Rosenberg said Thursday, on CNBC's "Squawk on the Street." "You're seeing them in the fixed income markets, you're seeing it in the credit markets, you see it in profits, in the equity markets — that this is the later part in the economic cycle."

Soros, according to The Wall Street Journal, came out of trading retirement with a series of very bearish bets, selling equities in favor of gold and gold miners' stocks. Icahn, meanwhile, said Soros' strategy made sense as equities had been falsely propped up.

http://adf.ly/3554628/banner/http://www.cnbc.com/2016/06/09/blackrock-what-you-should-take-away-from-icahn-soros-bearishness.

Your Choice

We read it, we pass it along. Here's an excerpt with link for those who choose to read the whole thing.

June 8, 2016

In much of what was once called “the free world,” governments and economies are in the throes of self-destruction. Before long, we shall witness revolution in several of these countries.

The revolutions may prove to be violent, or they may prove to be “soft” revolutions – major changes in the political structure. They may vary anywhere from mere changes in the rhetoric of political hopefuls, to changes in the actual structure of governments. 

 

One incorrect assumption about revolution is that it took place because the entire population had become dissatisfied. Not so. Most every revolution occurs as a result of a fraction of the population (sometimes a tenth, sometimes a third or more) taking action significant enough to bring about the desired changes. 

 

This is an important point, as it serves as a reminder that revolution frequently comes about as the result of a minority dissatisfaction. The revolution may then succeed if the minority can pull off a coup. And revolutions are not necessarily morally right or wrong, they’re just successful bids for change. In many such cases, all that changes is the faces, not the fundamentals of governance. 

 

But, assuming that the objectives are clearly-stated objectives (as opposed to vague proclamations such as, “We’re not gonna take it anymore,” we can examine, whether, in hindsight, the stated objectives of the revolution have been realised. 

 

https://www.sprottmoney.com/blog/predicting-the-efficacy-of-a-coming-revolution-jeff-thomas.