Submitted by Tyler Durden on 02/16/2013 – 20:14
Paul Krugman is all for currency wars, but not trade wars: “…First of all, what people think they know about past currency wars isn’t actually true… And in reality the stuff that’s now being called “currency wars” is almost surely a net plus for the world economy…” There is a serious intellectual error here, typical of much of the recent discussion of this issue. A currency war is by definition a low-level form of a trade war because currencies are internationally traded commodities. The intent (and there ismuch circumstantial evidence to suggest that Japan at least is acting with mercantilist intent, but that is another story for another day) is not relevant — currency depreciation is currency depreciation and still has the same effects on creditors and trade partners, whatever the claimed intent. The risks of disorder and disruption are still very real today.
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Submitted by Tyler Durden on 02/16/2013 – 19:11
Look around the investing world and biases are pervasive, from clustering estimates around company guidance (anchoring) to avoiding a stock that has already outperformed (mental accounts). And these biases make a difference. To provide an example, buying Stoxx 600 companies on low P/E multiples (and selling high) would have generated ~25% annual alpha over the last decade using 12-month forward actual reported earnings, but would have lost ~3% per annum using consensus estimates. Interestingly, you would lose less money applying historical earnings (-2% alpha p.a.) than by using consensus estimates! Simply put, biases make consensus estimates worthless.
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Submitted by Tyler Durden on 02/16/2013 – 17:52
James Howard Kunstler is concerned. But beyond our decaying fundamentals, he’s distressed by society’s unwillingness to be honest with itself about the issue’s it’s facing. Instead, we are embracing a narrative based in “magical thinking” (e.g., prosperity through the printing press, energy independence through domestic shale) that assures us everything is fine. “It’s characteristic of the time that we’re living in that there simply is no sense of consequence. And that’s exactly what you get when you have a Federal Reserve that’s out of control and a public that is filled with technological narcissistic visions of Santa Claus delivering rescue remedies on demand. And so there’s no general sense that when you do things, bad things can happen.”
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Submitted by Tyler Durden on 02/16/2013 – 15:04
This recent release of the manufacturing and industrial production data added further support to our view that the much touted economic recovery has yet to manifest itself. The latest data showed that manufacturing in January fell back but after strong gains in December and November. However, it is important to remember that the gains at the end of 2012 were driven by the effects of Hurricane Sandy and the “Fiscal Cliff.” That ramp up in November and December is likely to leave a void in demand in the coming months – so January’s weakness is likely a return to a more normalized trend. What is clear, however, is that the economic data is not markedly improving. While monthly data points will remain volatile it is the trend of the data that is most telling about macroeconomic future. Currently, that outlook remains one of a“struggle through” environment at best. The belief, currently, is that the economy in the U.S. can decouple from the rest of the globe and act as an island of economic prosperity. With 40% of corporate profits tied to international exposure it is unlikely that the U.S. can remain decoupled from the rest of the global community for long.
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Submitted by Tyler Durden on 02/16/2013 – 14:15
This week we were told that, by the magic of a non-deficit-increasing wave of our President’s hand, the minimum wage should be increased to $9 (a 24% rise from the current $7.25 federal minimum wage) and anchored to inflation going forward. The rabbit-holes of whether this is a good or bad thing run deep and in very different directions. However, in three short minutes, Milton Friedman provides some critically clarifying truthiness on the unholy coalitions between ‘do-gooders’, ‘special interests’, ‘trade unions’, and the vicious circle that this non-market-based decision will create. “Do-Gooders believe passing a law saying nobody shall get less than [a minimum wage] is helping poor people (who need the money). You’re doing nothing of the kind. What you’re doing is to ensure that people whose skills do not justify that wage will be unemployed.” It is no accident that youth unemployment is almost double the overall unemployment rate. We never learn… and as Friedman concludes, “it is the exact people who the do-gooders are trying to help that are hurt the most – the poorest!”
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Submitted by Tyler Durden on 02/16/2013 – 11:13
Throughout history, citizen disarmament generally leads to one of two inevitable outcomes: Government tyranny and genocide, or, revolution and civil war. Anti-gun statists would, of course, argue that countries like the UK and Australia have not suffered such a result. My response would be – just give them time. You may believe that gun control efforts are part and parcel of a totalitarian agenda (as they usually are), or, you may believe that gun registration and confiscation are a natural extension of the government’s concern for our “safety and well-being”. Either way, the temptation of power that comes after a populace is made defenseless is almost always too great for any political entity to dismiss. One way or another, for one reason or another, they WILL take advantage of the fact that the people have no leverage to determine their own cultural future beyond a twisted system of law and governance which is, in the end, easily corrupted. The unawake and the unaware among us will also argue that revolution or extreme dissent against the establishment is not practical or necessary, because the government “is made of regular people like us, who can be elected or removed at any time”. This is the way a Republic is supposed to function, yes. However, the system we have today has strayed far from the methods of a Free Republic and towards the machinations of a single party system. Our government does NOT represent the common American anymore. It has become a centralized and Sovietized monstrosity. A seething hydra with two poisonous heads; one Democrat in name, one Republican in name. Both heads feed the same bottomless stomach; the predatory and cannibalistic pit of socialized oligarchy.
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Submitted by Tyler Durden on 02/16/2013 – 10:40When the news broke of the SEC’s action against the HNZ call option insider traders, andwe posted the full SEC charge against the perpetrators whose actions Zero Hedgereported on first, we asked this regarding one of the entities named: “the trade occurred through an “omnibus account located in Zurich, Switzerland in the name of GS Bank IC Buy Open List Options GS & Co c/o Zurich Office (the “GS Account”).” Does GS stand for Goldman Sachs one wonders?” This followed our prior post, rhetorically titled “Guess Who Was Buying HNZ Stock From Its Clients“, with the answer of course being Goldman Sachs, which had had HNZ stock at a Sell rating for months, and which just days before reiterated its negative sentiment. But for the most part the post was written in jest. Turns out the joke was on everyone else, because just as we feared, or rather knew, Goldman was indeed implicated all along.
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Submitted by Tyler Durden on 02/15/2013 – 22:35
Greenspan states the odds of sequester occurring are very high – in fact, the playdough-faced ex-Chair-head notes, “I find it very difficult to find a scenario in which [the sequester] doesn’t happen.” But when asked how this will affect the real economy, awkward Alan is unusually clearly spoken – “the issue is how does it affect the stock market.” While not so many of our leaders have taken the path to direct truthiness, Greenspan somewhat shocks a Botox’d and babbling Bartiromo when he admits “the stock market is the key player in the game of economic growth.” And before you retire to the bar to sip Cognac with your Latvian model girlfriend, consider Alan’s crucial insights – all you need to know – “data shows that not only are stock markets a leading indicator of economic activity, they are a major cause of it,” except of course in 1987, 2000, and 2008 right?