Thursday, March 14, 2013

Just a PSA- Google Reader is Done

Come July 1, Google is dropping the axe on Reader. Time to look for a new reader.

We Have Found the God Particle

Kind of fitting considering the Catholic Church just elected their new Pope.

As AP News is reporting,

Physicists said Thursday they are now confident they have discovered a crucial subatomic particle known as a Higgs boson - a major discovery that will go a long ways toward helping them explain why the universe is the way it is.

They made the statement following study of the data gathered last year from the world's largest atom-smasher, which lies beneath the Swiss-French border outside Geneva. The European Organization for Nuclear Research, or CERN, said that what they found last year was, indeed, a version of what is popularly referred to as the "God particle."

Joe Incandela, who heads one of the two main teams at CERN that each involve several thousand scientists, said in a statement that "it is clear that we are dealing with a Higgs boson though we still have a long way to go to know what kind of Higgs boson it is."

The long-theorized subatomic particle would explain why matter has mass and has been considered a missing cornerstone of physics.

Last July, scientists with the world's largest atom-smasher announced finding a particle they described as Higgs-like.

This is a huge deal and will hopefully open up new avenues and understandings of the nature of the universe

High Volume High 3/13 Edition

Not a lot going on in the world of new high volume highs...

Volume Off the High 3/13 Edition

Just two energy related names in yesterday's trading.

Just Another Anti-Free Market Voice Among Many

A new Pope was voted in among cheers of many Catholics yesterday. Myself, albeit not anywhere near Catholic, still watched over interest in the process itself. Although I should not have expected any less, the Church elected what appears to be a ant-free market Cardinal to their top post. Why does this matter? In my mind it is just another voice- a voice who millions will now listen to- among what appears to be a growing dissent against the only human invention(s) that have the ability to elevate us all.... reason and the free markets.

This via and translated from Spanish

In a keynote address at the Alvear Palace Hotel Cardinal Jorge Mario Bergoglio, now leaves office, drew on "social debts". No doubt the good intentions of the Archbishop and his genuine interest in solving the distressing issue of poverty, which is shared by all people of good. Unfortunately, what he proposes and the lifts of their reasoning, far from mitigating the problem, aggravated in the extreme. In these areas and in many others, the purest intentions are irrelevant, what matters is results.

We think that the conclusions misguided in economic and social affairs are due to poor study the role and significance of private property and the free market in the coordination of information by its nature fractionated and dispersed as opposed to lives and schedules haciendas outside rights not only affect but, first, create poverty for the whole community but so very special for the needy and, second, concentrated ignorance thus impossible project evaluation, accounting and general economic calculation through the dismantling of prices as indicators in the allocation of scarce resources provided.

Proposals deficient, contradictory and disadvantages in social unaware of the process by which capitalization rates set wages and income of any society and to maximize this result becomes indispensable institutional respect the right as the right to use and likewise have not provided equal rights of others injured. This is, in essence, the reason for the difference between a prosperous country and a poor one. In the first case we understand that wealth is not a zero-sum process but about value creation and multiplication, while in the second it takes wealth as static and unchanging to be "redistributed".

Said Cardinal Bergoglio in said speech that "The economic and social crisis and the consequent increase in poverty has its causes in policies inspired by neoliberalism considering ways to profit and market laws as parameters, to the detriment of the dignity of individuals and peoples. In this context, we reiterate the conviction that the loss of the sense of justice and lack of respect for others have worsened and led us to a situation of inequity. " Later stressed the importance of "social justice", "equality of opportunity" damage "transfers of capital abroad," which should be required "distribution of wealth", said the damage of economic inequalities and the need to "prevent the use of financial resources is shaped by speculation," especially in the context of the "social debt"-which in his opinion is of eminently "moral" - is to reform "economic structures" in expressed the sense before.

"Neoliberalism" is an invention with which at present no intellectual weight is identified, is a label-entelechy using unsuspecting and detractors of the open society. In any case, it is the liberalism that means full respect for the lives of other projects, tradition of thought which is constantly boiling process and in no popes and therefore there are many different shades and approaches different but all point to seek more complete consideration for individual autonomy beings who are always unique and unrepeatable.

In some circumstances, there is endorsement unfairly liberalism situations where the Leviathan is thickened with more expenses that should be provided with increased resources detraídos of community members and indebtedness that compromise the heritage of future generations who have not even participated in the election of the ruler who incurred the debt, within a framework of alarming corruption, the most obvious ignorance of the separation of powers and devolution of state monopolies aberrant shameless private monopolies and captive markets encouraged by hunters privileges misnamed entrepreneurs.

In the open, competitive market, the results box, ie, gains and losses are a central compass a fundamental guide to know who are right and those who err in consumer preferences (the first and second gain profits incurred with grief), unlike the system that allows pseudoempresarios do business in government offices, in other words, friends of power that operate espaladas the interests of the people. In contrast, in the open market, the entrepreneur, to improve its financial position, is forced to serve their fellow man.

The so-called "social justice" can only have two meanings: either it is a gross redundancy because there is no sense of justice among the plants, minerals and animals either it is for you to get some belongings to give to others which contradicts the classical definition of Ulpian of "giving each his own".

Equal opportunity is a mutually exclusive concept of equality before the law. Not all have equal rights if applicable equal opportunity. If a person who plays tennis badly when he intended to give equal opportunities to the professional front, we must compel the latter to play with the arm that was not used for that sport will thus violated his right. Many times, the sponsors of equal opportunities to draw a parallel with the sport by claiming that all "should start the race through life without economic benefits and as the effort will be those positions achieved on the final goal" without realizing that the argument is self-defeating because if it is consistent with the premises will be leveled again in the next race loses meaning with what the have endeavored to get the top spot.

The "capital transfers abroad" are due to conditions in the country of origin are not attractive which is solved by changing institutional frameworks to become civilized. On several occasions this is hampered when agencies like the IMF finances devastating governments whose policies are responsible not only capital flight but the brain drain situation is neutralized with the above financing that encourage rulers to continue with measures statist as price controls and foreign exchange market, land reforms, foreign trade restrictions, minimum wage labor policies that expel the market to those who most need work and condemn the black market to survive, galloping inflation, stifling regulations and all kind of absurd that hinder the flourishing of creative energy.

The "distribution of wealth" through devices we call government force operating in the opposite direction to the allocation of resources that people have decided on the daily plebiscite equivalents supermarket and buy or abstain from doing thus consume capital and, consequently, reduced wages and incomes in real terms. Meanwhile, economic inequalities are the result of the same phenomenon establishes consumer preferences with their purchases. The leveling estate produces two results: those under the level line will not produce waiting to be distributed, a distribution that will never come, precisely because the second result is that those who are on the reference line will tend not to produce if they know that they were expropriated by the difference.

Finally the condemnation of "speculation" is not relevant since in every human action means there is speculation that the acting subject of conjecture spend less satisfactory situation estimated that gives a greater satisfaction given axiological structure. For example, Cardinal Bergolio to deliver the speech of yore is speculating that help to clarify certain points, similarly, writes that these lines are speculating that the reflections are those showing the disadvantages of the words of Cardinal. All acts, whether sublime or speculate ruines best results: you sleep (if not suicidal) speculates dawn with life, a journey that begins speculated reach destination, the study speculates that get the title respective and facing a business speculation profit. Speculation highlights the importance of personal interest. The importance of caring for one's own soul first. This is why St. Thomas Aquinas in the Summa Theologica slogan about love of neighbor that "what you see that man's love for himself is a model of love which has another. But the model is better than molded. Then the man of charity should love himself more than his neighbor "(2nd 2nd, q.xxvi, Art.III). On the other hand, who hates himself is incapable of loving another since love provides personal satisfaction.

For all this is that when outputting documents and speeches is of interest to recall the text of the International Theological Commission of the Holy See in its Declaration on the human and Christian salvation has entered the June 30, 1977 that " In itself, theology is unable to deduct from their specific principles specific rules of political action, the same way, the theologian is not entitled to their own lights resolve the fundamental social debates [...] Sociological theories are reduced conjecture made and not infrequently contain ideological elements, explicit or implicit, based on questionable philosophical assumptions on an erroneous conception or anthropological. Such is the case, for example, a remarkable part of the analysis and inspired by Marxism Leninism [...] If we apply this kind of analysis, they do not acquire any additional certainty by the fact that the insert theology the plot of his statements "

The "social debt" really means sponsoring measures to help our neighbor that has a decent standard of living to which requires an atmosphere of freedom and mutual respect that is systematically destroyed by socialism and fascism whose main enemy is always the liberal. Finally, in addition to the Commandments which stress the importance of private property ("do not steal" and "do not covet your neighbor's goods"), is of interest to review some biblical passages. In Deuteronomy (VIII-18) "Javeh remember that your God is he who gives you power to get you proveas of wealth." In 1 Timothy (v-8) "if anyone does not provide for those who are his, and especially for those who are members of his household, he has disowned the faith and is worse than a person without faith." In Matthew (v-3) "Blessed are the poor in spirit, for theirs is the kingdom of heaven" whipping that puts the material to the love of God (love of perfection), in other words that "not rich to the sight of God "(Luke xii-21), which clarifies the Encyclopedia of the Bible (with the technical direction of RP and RP Sebastián Alejandro Diaz Bartina male under the supervision of Archbishop of Barcelona):" forced to interpret the beatitudes of the poor in spirit, in the moral sense of resignation and detachment "and" the clear formula Mateo-blessed are the poor in spirit, suggests that rich or poor, what they have to do is take off the inside of all wealth "(Volume vi, p. 240/241). In Proverbs (11-18) "who trusts in his riches, this fall." In Psalms (62-11) "to riches, when increasing, apeguéis no heart." This is also the meaning of the parable of the rich young man (Mark x, 24-25) and that "no one can serve two masters" (Matt. vi-24), in other words, is not conducive to confuse self-perfection with means. No condemnation of wealth but to altered priorities in life that divert and distract from the goals that are blurred. Moreover, if you think that poverty is a virtue should condemn charity since then decreases poverty status of the recipient.

What we should aim then is that people prefer to do so out of poverty, which requires knowledge of the advantages that have always provided the countries further adopt the formulas of the open society as opposed to those who insist on corseted by the Leviathan. The moral crisis of our age is the abandonment of principles and values ​​that made the country prosperous and have accepted and again unenforceable populist promises that are producing large-scale social fissures. To solve a problem, the first thing that is required is a good diagnosis and, indeed, failed to address the darts wrong targets.

Wednesday, March 13, 2013

Causes and Consequences of the Value of Money

Excerpted from Theory of Money and Fiduciary Media edited by Jörg Guido Hülsmann

Mises found that the traditional literature on the purchasing power of money (PPM) had entirely focused on analyzing the impact of changes in the supply of and demand for money. But before even getting to this question it was necessary to explain the level of PPM in the first place. Only in a second step could one set out to explain the transition from one level to another. Mises provided this missing foundational analysis, highlighting the central role of the subjective value of money and formulating what he would later call the “regression theorem.” He argued that the PPM is directly determined by the subjective value of money—that is, the relative importance of money as compared to the non-monetary goods for which it is being exchanged, in the eyes of all the partners to these exchanges. Thus the subjective value of money explains the equilibrium level of the PPM.

Mises refuted the objections formulated by Wicksell and Helffering against the very possibility of this approach, stressing that they had analyzed the PPM from an overall point of view, whereas the pricing process could only be adequately understood by adopting the subjective point of view of the exchange partners. The subjectivist approach was not unproblematic. The central difficulty was the interdependence between the subjective value of money (SVM) and the PPM. Money was valuable because it had purchasing power, but the purchasing power resulted from the SVM. This seemed to be an instance of circular reasoning, not of causal analysis. But Mises could solve this problem by developing an explanation which he found in Wieser: SVM and PPM did not determine one another simultaneously—which would have precluded causal analysis—but diachronically. Today’s SVM determined today’s PPM, which in turn determines tomorrow’s SVM, which determines tomorrows PPM, etc.[7]
Mises then proceeded to analyze the consequences of changes in the demand for and supply of money. He first dealt with their impact on money prices, especially the price level, and then with their impact on the production and distribution wealth and income. He concluded this part of the book by discussing the policy implications of his findings. Let us highlight his chief contributions in turn.

Concerning the impact of changes in the demand for and supply of money on the price level, Mises made three contributions. First he delivered a subjectivist interpretation of the quantity theory of money, arguing that the money supply and the price level were positively correlated, but stressing at the same time that this relationship was not mechanical. There was no fixed quantitative relationship between an X% variation of the money supply and some Y% variation of the price level.

Second, then, Mises delivered an in-depth critique of the most important variants of the traditional rigid quantity theory, refuting the conceptions of Hume, Mill, and Fisher. Most notably, he argued that, even if one fictitiously assumed that increases in the money stock had no impact on the distribution of wealth and income, such increases would still modify individual value scales and therefore entail a different price structure than the one that had existed before. While the marginal value of money would diminish for each individual, it would not diminish in exactly the same proportion. [8]Again, the mechanical quantity theory does not apply. In the 1924 edition (C168, B126f.), Mises added an additional paragraph to clarify this argument:
If we compare two static economic systems, which differ in no way from one another except that in one there is twice as much money as in the other, it appears that the purchasing power of the monetary unit in the one system must be equal to half that of the monetary unit in the other. Nevertheless, we may not conclude from this that a doubling of the quantity of money must lead to a halving of the purchasing power of the monetary unit; for every variation in the quantity of money introduces a dynamic factor into the static economic system. The new position of static equilibrium that is established when the effects of the fluctuations thus set in motion are completed cannot be the same as that which existed before the introduction of the additional quantity of money. Consequently in the new state of equilibrium the conditions of demand for money, given a certain exchange value of the monetary unit, will also be different. If the purchasing power of each unit of the doubled quantity of money were halved, the unit would not have the same significance for each individual under the new conditions as it had in the static system before the increase in the quantity of money. All those who ascribe to variations in the quantity of money an inverse proportionate effect on the value of the monetary unit are applying to dynamic conditions a method of analysis that is only suitable for static conditions.
Third, he discussed various complications, considering most notably the impact of changes in the demand for money on the PPM (neglected in the traditional theory), as well as inter-local price differences (he denied that they could exist in equilibrium) and the theory of exchange rates (he resuscitated Ricardo’s purchasing-power-parity theorem).

Mises here also briefly touches upon the impact of changes in the demand for and the supply of money on interest rates, but does not yet present his views on the matter, which would have led him to discuss his business cycle theory already in this second part of the book (where it in fact belonged from a systematic point of view). He merely points out that, traditionally, the problem of the purchasing power of money had been completely neglected in inter-temporal exchanges, both by theoreticians and by investors and other practitioners.[9]
Mises proceeded to study the impact of changes in the demand for and supply of money on the production and distribution of wealth and income. Here he emphasizes right from the outset, and then repeatedly throughout the remainder of the book, that there is no relationship between the money supply and aggregate output. Increases of the money supply do not spur, and decreases of the money supply do not hamper the production of wealth. The first time he brings up this point is in the context of his discussion of the general differences between money and all other goods. Here he states:
Both changes in the available quantity of production goods or consumption goods and changes in the available quantity of money involve changes in values; but whereas the changes in the value of the production goods and consumption goods do not mitigate the loss or reduce the gain of satisfaction resulting from the changes in their quantity, the changes in the value of money are accommodated in such a way to the demand for it that, despite increases or decreases in its quantity, the economic position of mankind remains the same. An increase in the quantity of money can no more increase the welfare of the members of a community, than a diminution of it can decrease their welfare.[10]
Thus right from the outset he makes three fundamental points. One, the real money supply (the aggregate purchasing power of all cash balances) tends to adjust to the real demand for cash balances. Two, as a consequence, the nominal money supply is irrelevant for the services provided by money. Three, as a further consequence, changes in the nominal money supply are equally irrelevant for those services. Only under exceptional circumstances could an increase of the nominal money supply, directly or indirectly, bring about advantages from the overall point of view. Increases of the money supply usually did not tend to increase the supply of consumers’ goods (see A227, A335). They had just an impact on the distribution of those goods. Mises reiterated this point again and again as the starting point for all reflection on the social effects of money.[11]
However, Mises stressed almost in the same breath that any change in monetary conditions (demand for and supply of money) affects the distribution of income and wealth. In other words, although there is no causal relationship between the money supply level on the one hand and aggregate production on the other hand, any change in that level, and any change in the demand for money, entails a redistribution of real incomes and therefore also a redistribution of wealth. The reason is that any such change does not affect all prices at the same time and to the same extent. For example, the first users of newly produced money units tend to gain real revenue at the expense of later users, because they can spend these new units right away, while their purchasing power is still relatively high; whereas the later users have to spend them when their purchasing power has already somewhat decreased. These causal relations also play out in the international sphere and affect trade patterns and capital flows.

Based on these elements, Mises concludes the second part of his Theorie des Geldes und der Umlaufsmittel with an in-depth discussion of the nature and scope of monetary policy. He starts off by distinguishing between traditional and modern monetary policy (A246, B200). Traditional interventionism, which involved most notably the depreciation of silver and gold coins, had a purely fiscal motivation. By contrast, modern monetary policy does not necessarily have such a motivation. Rather, its characteristic feature is the hypothesis that changes in the “inner objective exchange value of money” (IOEVM)—especially a decreasing IOEVM—are beneficial. The explanation why they are beneficial varies from one author to another, but the common conviction is that such benefits exist.[12] Thus modern monetary policy is from the outset at crossroads with classical economics à la Ricardo, which rejected the notion that the value of money had anything to do with the wealth of nations. Modern monetary policy seeks to pursue its objectives by modifying the money supply. This presupposes that the modification of the money supply is technically feasible in the first place. It follows, therefore, that the most important tool of modern monetary policy is the choice of the kind of money to be used within the country. In Mises’s words:
The principal instrument of monetary policy at the disposal of the state is the exploitation of its influence on the choice of the kind of money. It has been shown above that the position of the state as controller of the mint and as issuer of money substitutes has allowed it in modern times to exert a decisive influence over individuals in their choice of the common medium of exchange. If the state uses this power systematically in order to force the community to accept a particular sort of money whose employment it desires for reasons of monetary policy, then it is actually carrying through a measure of monetary policy. . . . If a country has a metallic standard, then the only measure of currency policy that it can carry out by itself is to go over to another kind of money. It is otherwise with credit money and fiat money.[13]

The Top 10 Smartest People in the World

Source: Super Scholar. Reading through these I had to pause at Rosner. changing your name to stay in high school into your 20's? Does that make you extraordinarily smart or creepy?

smartest people in the world

High Volume High for 3/12

Still plenty of investment hitting highs with volume....

Volume Off the High for 3/12

Just a handful of names coming off of near-term highs with volume....

Tuesday, March 12, 2013

The Moral- Don't 'Like' Anything

Debt, In the Long Run, is Not Meaningful- Grantham

Although Grantham does give some interesting insights, in other ways I think he is missing the broader picture. Debt is not just an accounting entry, it is a contractual claim on your or some group's future productive capacity that also represents the pull forward of future demand. Grantham's thesis of a low growth world is predicted on debt and its consequences, at least in my opinion. Additionally, he claims that government intervention, via spending, is a preferred economic stimulus over monetary or other methods. This completely disregards the fact that the money spent by the government has to be acquired from somewhere, i.e. taxes or money printing, both of which reduce the capabilities or private individuals and businesses produce and expand. This says nothing to the fact that in a fractional reserve banking system system with fiat money that debt and money become synonymous. 

Still, I may have to put my foot in my mouth when the broader interviewed is aired.

Via Bloomberg.....

Youtube Video Vs. the Universe

The alternative title could have been Don't Bother Trying to Understand the Size of the Universe.

High Volume High 3/11 Edition

I will soon be looking at past volume movers to derive more investable candidates, be it on the long or short side. in the mean time, here is the latest high volume high list of names.....

Volume Off the High 3/11 Edition

I will soon be looking at past volume movers to derive more investable candidates, be it on the long or short side. in the mean time, here is the latest volume off the high list of names.....

Monday, March 11, 2013

Addicted to Asset Bubble

This was originally penned by  Joseph Salerno and posted on

Ben Bernanke confided on January 14 that he is unaware of any new method of stimulating economic growth. Bernanke said: “As far as I’m aware, there’s no completely new method that we haven’t [already tapped].” So Helicopter Ben has run out of innovative and unconventional ways to create new money. Lest you be tempted to breathe a bit easier, however, rest assured that the now conventional method of quantitative easing, involving the Fed’s monthly purchase of $85 billion worth of mortgage-backed and U.S. government securities, seems to be working just fine according to Bernanke and he foresees its continuation. Noting the stubbornly high unemployment rate combined with the low inflation rate in the U.S. economy, Bernanke stated, “That is the case for being aggressive, which we are trying to do.” Although he is “cautiously optimistic,” he does promise to closely monitor the risks, efficacy, costs, and benefits of this inflationary policy.

I guess the rapid asset price run-up in stock and commodities markets, which are nearly back to financial bubble levels, and booming farmland prices do not count in Bernanke’s benefit-cost calculus. More likely, Bernanke accounts them as a benefit, which, via the “wealth effect,” will induce another debt-driven consumption spree on the part of the American public that will stimulate economic growth, i.e., create another bubble economy.

Recreating the Asset Bubble: The Fed’s Plan for Economic Recovery

Circle Bastiat, February 11, 2013 While Keynesians continue to sing that lame old song about insufficient aggregate demand stimulus and the horrors of austerity and “market” monetarists prattle on about deficient growth in nominal GDP, the signs of an incipient asset bubble become more evident every day. In fact, it would not be overstating the case to say that the Fed is deliberately aiming at recreating an asset bubble as a means of rekindling the historically unprecedented consumption booms of the latter half of the 1990s and the first part of the last decade. These consumption manias were driven by the “wealth” or “net worth” effect, pithily described in the metaphor “using one’s home as an ATM machine.” As the following graphs show, Fed monetary policy is succeeding in pumping up total net worth, which consists mainly of financial assets plus real estate owned by households (and nonprofit organizations) minus household debt.

total net worth

What the above graph shows is that total net worth peaked at $67.3 trillion in Q3 2007 and fell precipitously to $51.1 trillion in Q1 2009. This $16.1 trillion decline in U.S. household wealth exceeded the combined annual GDP of Great Britain, Germany, and Japan. The Fed has since succeeded in pumping up net worth, to $64.8 trillion by Q3 2012, which is only $2.5 trillion below its level at the peak of the bubble. Although the value of household real estate remained $5.5 trillion below its bubble peak for Q3 2012 and has been slowly increasing, the Fed has been wildly successful in pushing up the value of U.S. financial assets. This is revealed in the the Wilshire 5000 Total Market Index. This index tracks the total dollar value of all U.S.-headquartered equity securities with readily available price data and includes more than 6,000 firms.

Wilshire 5000 TMI

Note in the graph above that the index reached its peak of 15,244 in December 2007, then went crashing to its trough of 6,800 by March 2009. By January 2013 the Fed’s inflationary policies drove it past its previous peak, reflating the index by 2,000 points in 2012 alone. But perhaps the most telling graph is the ratio of household net worth to GDP.

This graph shows that for over 40 years, from 1952 until the dot-com boom began in the mid-1990s, the household net worth to GDP ratio fluctuated in a band between 300 percent and 350 percent. After falling back toward this range after the recession of 2001, the Fed’s monetary expansion interrupted the correction and sharply drove the ratio up by 100 percentage points in a matter of three years. The financial crisis set another needed asset price readjustment in train, but it was once again reversed by the Fed, which was desperate to re-inflate asset prices in order to first prevent a financial collapse and then to start another consumption boom. The ratio now sits at 400 percent—a level it first reached midway through the dot-com bubble—and is headed inexorably upward. Once housing markets in general begin to follow the lead of New York City’s and Washington, D.C.’s overheated residential real estate markets, we will be well on our way to another unsustainable asset bubble.

The Fed is Blowing More Bubbles

Circle Bastiat, February 15, 2013 As if any more evidence were needed that the Fed has succeeded, either through ignorance or design, in igniting new asset bubbles throughout the economy, the Federal Reserve Bank of Kansas City just released a survey of bankers that confirms a continuing rise in U.S. farmland prices. The following chart shows the stratospheric year-over-year rise in non-irrigated cropland prices for 3Q 2012.

U.S. farmland prices
As reported by TheBlaze, one analyst noted, “If this trend continues . . . these agricultural areas may very well become ‘New Manhattans’ (as far as wealth is concerned).” The chart below from the report by the Kansas City Fed puts this stunning trend in temporal perspective and reveals that it extends across all farmland, including irrigated cropland and ranchland.
all farmland prices

Bernanke the Comedian

Circle Bastiat, February 27, 2013 Dr. Brendan Brown is an eminent financial economist in the City of London and the author of The Global Curse of the Federal Reserve, initially published in 2011 and just released in its second revised edition. In his book, Brown is critical of Milton Friedman and the monetarists for ignoring the effects of monetary expansion on interest rates and asset prices and for assuming that a stable price level indicates an absence of inflation. Brown adopts Rothbard’s view that the 1920s were an inflationary decade, because, despite the rough price-level stability that obtained, asset and commodities markets were “overheated.” Brown also rejects the monetarist argument that price-level stabilization is the sine qua non of economic stability. He argues that price stabilization policy is one of the “dangerous features of Friedmanite monetarism” which “Austrian critics have long highlighted” and “which in hindsight may have played a role in the growth in Bernanke-ism.” Finally, and most insightfully, Brown also maintains that deflation is effective—and indeed, necessary—to extricate an economy from the depths of a recession or depression.
Needless to say, Dr. Brown is no fan of Chairman Bernanke. In fact, in a memo today, Brown perceptively identifies the comedic aspect of Bernanke’s testimony on the first day of his semiannual monetary policy report to Congress. Writes Brown:
Comedy according to the theorists of drama is based on inflexibility of character. The lead role cannot in any way bend his stereotyped behaviour even when this would avoid an accident or disaster which is looming. And so “Don Juan” of Molière is a comedy. Even when the ghostly statue of his slain victim threatens to take Don Juan on a fiery descent into hell, the lead character cannot show remorse and desist from his life of debauchery. Chekhov listed his “Cherry Orchard” as a comedy because the lead characters could not shake themselves out of their nonchalance and avoid bankruptcy by selling the cherry orchard of their villa to a property developer on which he would build bungalows.
And so we come to the monetary comedy which played out in Washington yesterday. Professor Bernanke, adamant as always that the road to economic prosperity and stability takes the form of a rigorous targeting of inflation and supremely confident in a good outcome to his massive monetary experimentation tells his Congressional questioners that he sees no signs of asset price inflation which would justify changing his present policies. This is the same professor who largely repudiates any concept of asset price inflation and believes totally that any such dangers can be avoided well ahead of time by skilful action on the part of an army of regulators following the recently expanded book of rules. And this is the same professor who denies that monetary disequilibrium played any role in the giant asset and credit market inflations of the last two decades.
There is another element in the monetary comedy under the title of “Fed chair’s semi-annual testimony to Congress.” This is the failure of congressional questioners to hold the professor to account. When he declared that there is no asset price inflation, there was no follow on question such as “but professor you still say there was no asset price inflation in the last great bubble and bust and deny that the Fed of which you were a leading policy maker was in any way responsible: why should we believe you now?” That there should be no such question is part of the comedy, in its literal sense.

The Object of a Currency War is to Kill Yourself

A panel debate amongst Peter Schiff, John Mauldin, Rick Rule, and Grant Williams at the Feb 13th, 2013 Cambridge House California Resource Investment Conference. A good debate between the Austrian and Keynesian points of view.....

High Volume High 3/8 Eiditon

Quite a a few high volume highs.... noticing that the office furniture guys have been hitting new high volume highs in recent trading sessions.

Volume Off the High 3/8 Edition

With the market continuing in rally mode, there are only a few names that are falling off of highs (or near highs) on volume.

Sunday, March 10, 2013

VIX-Trading Portfolio Update for Week Ending 3/8

Still exposed to the S&P 500 on a one-for-one basis, the VIX-Trading Portfolio gained 2.1% on the week. This is roughly inline with the 2.2% gain on the S&P 500 index. The latest gain on the week leaves the portfolio up by 6.8% on the year, for about a 2 percentage loss relative to the market, and up 4.9% since inception, the later representing a detriment of 5.2 percentage points relative to the S&P 500. All of this is reflected in the chart below.

Despite the mechanical model turning positive on equities early last week, I am remain cautious on the index. My trepidation stems from a combination of technical indicators and what I see as weak fundamental underpinnings. Technically, a number of indicators are flashing caution signals, which can be seen below.

What stands out to me is the divergences in the MACD, RSI, and money flow indicators relative to the price. This suggests to me that the upside momentum is waning and that investor demand is tepid. What also stands out is the weakening volume dynamics. Since the S&P 500 broke out last week, volumes have been weak. This can also seen in the Price/Volume Diffusion Index, albeit still positive, which has turned down in recent trading sessions.

Fundamentally and without getting into all the details here, the number of companies cutting dividends, the anemic year-on-year growth in GDP, and the weakening acceleration/deceleration in employment all point to higher recessionary risks.

Despite these concerns, I still think the trajectory for equities prices is up in the short-term. The Price/Volume Diffusion Index remains positively positioned. Additionally, the standardized VIX data suggests higher equity prices. The current standardized VIX is -1.4 while the weighted average standardized VIX (a less volatile measure than the daily calculation) is just a tad greater than -2. The move over -2 in the latest week is what triggered the quantitative buy signal in the model. One final note on the standardized data, the skew, while still negative, is creeping closer to positive results. On a shorter-term basis, there is a positive discrimination between negatively and positively skewed data, meaning negatively skewed VIX data is typically followed by better equity price performance versus positively skewed data. The trend can change, but skew has been sliding towards the 0 demarcation for a few weeks now.

Short-Trading Portfolio Update for Week Ending 3/8

Wouldn't you know, the good times could not last indefinitely. Especially for a short-focused portfolio in a rising market environment. In the latest week, the Short-Trading Portfolio gave up some gains and lost 1.7 percentage points in the latest week for a relative loss of 390 basis points. The lion's share of thew weekly loss was due to the 16.5% gain in the shares of EHTH. This weekly gain, in my opinion, is just a dead cat bounce following the implosion in the shares. Additionally it occurs after the share price hit the swing points of June 2012. Nothing is ever a straight line move.

The following chart shows the performance of the portfolio versus other major indexes.

Following this week's performance, the portfolio has gained 170 basis points on the year for a relative loss of 710 basis points. Since inception, the portfolio is down 390 basis relative to the market but has gained 470 basis points. 

The Intelligence of the Lowly Slime Mold

New research is showing that the lowly slime mold appears to have some sort of 'intelligence'. This is despite the organism lacking any brain or central nervous system of any kind.

As Scientific America reports......

Inside laboratories slime molds have effectively re-created Tokyo's railway network in miniature as well as the highways of Canada, the U.K. and Spain. When researchers placed oat flakes or other bits of food in the same positions as big cities and urban areas, slime molds first engulfed the entirety of the edible maps. Within a matter of days, however, the protists thinned themselves away, leaving behind interconnected branches of slime that linked the pieces of food in almost exactly the same way that man-made roads and rail lines connect major hubs in Tokyo, Europe and Canada.

In other words, the single-celled brainless amoebae did not grow living branches between pieces of food in a random manner; rather, they behaved like a team of human engineers, growing the most efficient networks possible. Just as engineers design railways to get people from one city to another as quickly as possible, given the terrain—only laying down the building materials that are needed—the slime molds hit upon the most economical routes from one morsel to another, conserving energy. Andrew Adamatzky of the University of the West of England Bristol and other researchers were so impressed with the protists' behaviors that they have proposed using slime molds to help plan future roadway construction, either with a living protist or a computer program that adopts its decision-making process. Researchers have also simulated real-world geographic constraints like volcanoes and bodies of water by confronting the slime mold with deterrents that it must circumvent, such as bits of salt or beams of light.

Some may use this research to call into question the nature of human intelligence all together- which is hinted at in the video above. I have a totally different take. It just shows that organisms- and likely non-living interactions the universe over- have simple rules placed them and in the greater context of energy conservation some appearance of intelligence and order arise out of the seeming randomness.

Long-Trading Portfolio Update for Week Ending 3/8

The Long-Trading Portfolio remains in the negative column year-to-date. The portfolio, being concentrated, is volatile and is subject to frequent swings in performance. The latest week was no exception. The portfolio took back the previous week's losses and just a little more, gaining more than 400 basis points on the week or about 200 basis points relative to the market. The portfolio performance was predicated on the outperformance in the coal stocks with a drag coming from the flat performance in the latest addition, the Gold Miners ETF Trust (ticker GDX). The latest performance chart of the portfolio is shown below.

Year-to-date, the portfolio has lost 11.5 percentage points versus an 8.8 gain on the S&P 500. Since inception, the portfolio has gained 20 basis points for a relative loss of 740 basis points.

Long-Term Value Portfolio Update for Week Ending 3/8

The Long-Term Value Portfolio made up the ground lost week, and then some, in the latest trading week. The portfolio ended the latest five trading days by gaining 3.8 percentage points. This compares to the nearly 2.2 percentage point gain on the S&P 500 or a relative gain of 1.6% on the week. The latest weekly gain leaves the portfolio having gained 7.4% year-to-date, or a loss of 1.4 percentage points relative to the market, and up 14.9% since inception. Since inception, the portfolio has now run ahead of the market's performance by about 100 basis points. This is all reflected in the the performance chart below.

The gain on the week was most attributable to relative gains in the discretionary, staples, and telecom sectors with NTL, KKD, and DMND all gaining more than 10% on the week. These and other gains were more than enough to offset some minor losses in stocks like KEG and CLF.