Saturday, September 6, 2014

Billionaire to Clueless CEOs: Stop Your Greedy Economic Policies

Jim Hightower
I’ve noticed several CEOs, political pundits and so-called economic experts saying they’re confused as to why Americans are so down. Consumers should be out buying stuff, they say, for the economy is humming again. Just look at the key indicators: GDP is growing, corporate profits are high, the stock market is soaring, jobs are being created, the unemployment rate is steadily dropping, and people’s disposable income is up.
Yet, as the CEO of the Container Store recently grumped, consumers are in a “retail funk.”
That’s so cluelessly wrong, sir. Consumers (unlike you platinum-card members of the CEO Club) are in an income funk, meaning we have very little of the green stuff coming in. The bottom line is that Americans are down, because … well, because most of us are down. Yearly income for the typical household is $3,300 lower today than in 2007, when Wall Street barons crashed our economy. Or look at what’s happened to the typical American family’s net worth. It was nearly $88,000 10 years ago, but today it’s down to $56,000 — that’s more than a one-third drop, even though we’re told that America is enjoying “a strong recovery.”
And the picture is not getting any brighter, because a new normal has been imposed on America’s workforce. Señor CEO has been gleefully slashing both jobs and pay, reducing the future of work to a low-wage, no-benefits, part-time, grind. One more number for you: 48. That’s the percentage of adults who now hold full-time jobs — leaving more than half of us trying to make ends meet on part-time work.
The lesson for the Powers That Be is that there is no species called “consumers.” Rather, that creature is just a worker with a decent-paying job. Eliminate the job or shrivel the pay and — poof! — consumerism goes away.
Read more

Fracking Industry Resorts to Crude Caricatures and Economic Nationalism

Ryan McMaken
The hydraulic fracturing (fracking)  industry is fighting regulations or outright bans against fracking in a variety of states and localities. There are many reasons to oppose government restrictions on fracking, of course. If a fracking operation can arrange to frack on private land and pay market rates (not subsidized rates) for water, then there is no reason why a private company should not be free to do so. If fracking results in polluting a neighbor’s land or water, the fracking organization in question should be liable in the fashion outlined by Rothbard for dealing with polluters.
One reason to not support fracking, though, is because it is good for “energy independence” or economic nationalism. Both concepts have long been dreams of militarists and economic interventionists who believe that investors, consumers, and private citizens should be dictated to by government as to what they can buy, where they should invest, and whom they should be able to work for. Every now and then, one sees a new article coming from nationalists such as Pat Buchanan who claim that it is a matter of “national security” that the United State attempt autarky in food production, energy production, and, of course, production of the machinery of war.  Since capital and labor move constantly to better accommodate consumers and do not respect national borders, such autarky can only be achieved through government regulation, prohibition, and force.
Thus, you can understand my disappointment when I noticed this video from a pro-fracking industry group called Friends for Safe Energy that argues for freedom in fracking, not because freedom or respect for private property are good things, but because fracking is (allegedly) bad for the Russians. In other words, faced with the option of appealing to basic human rights (such as private property) or appealing to rank and crude nationalism, the fracking group decided to go with the latter:

Why bother with a pro-freedom argument when you can employ nationalistic fear-mongering and ethnic stereotypes instead?
As an argument, this is barely a step up from the “If you Ride Alone You Ride With Hitler”propaganda campaign which lectured Americans about not contributing enough to “energy independence.” They didn’t use that term back then, but that’s what they meant. Yes, it’s true that the stated goal (at least on the surface) of “Friends of Safe Energy” is more freedom for frackers and their clients, but is it necessary to make their case by employing inherently statist canards? It’s also true that there’s nothing wrong with encouraging people to carpool, but we all know that to encourage economic nationalism, whether it’s anti-Hitler or anti-Russian, is to posture against free trade, free association, and consumer freedom.
Not that we should be surprised. Numerous major industries, including the oil industry have long had a very bad record on free trade and free markets. From the sugar industry, to steel, all the way back to Jefferson’s trade embargo, many domestic industries have been more than happy to encourage xenophobia and nationalism to help the bottom line.
Friends for Safe Energy is apparently carrying on this tradition, and if they’re the best we can hope for in making the case for free markets, we are in deep trouble indeed.
This piece was reprinted by RINF Alternative News with permission or license. 

Chris Christie's Bridge Scandal -Officer: Boss told me to 'shut up' about bridge

TRENTON, N.J. (AP) — Police officers on the George Washington Bridge last September during lane closures apparently ordered by Republican Gov. Chris Christie's aides as political payback said they warned superiors about the hazardous conditions created and were told not to talk about it on their radios, according to a summary provided by their lawyer to a legislative panel investigating the scandal.
Attorney Dan Bibb, who works for the union representing the Port Authority of New York and New Jersey officers, relayed information from 11 officers, including at least three who said they were told about the traffic change by a lieutenant who ordered them not to move the traffic cones blocking the lanes. Bibb's comments were included in a synopsis obtained by The Associated Press on Wednesday.
Bibb told the legislative panel's investigators that one of the officers, Steve Pisciotta, used his police radio to report hazardous conditions being caused by the severe traffic and was told to "shut up" by Deputy Inspector Darcy Licorish. Bibb said Pisciotta told him that Lt. Thomas Michaels and a sergeant visited him "to tell him that his radio communication had been inappropriate."
Michaels said in an earlier interview with the investigators that the Port Authority executive who ordered the closures, David Wildstein, called him the week before and asked him what would happen if three lanes were reduced to one. But the investigators said he told them that he didn't have any direct knowledge about why the lanes were changed and that he found out about the plan to change them the night before.

Friday, September 5, 2014

Marc Faber: Only Asset Class That is Relatively and Absolutely Depressed is Gold & Silver Shares


This week we are kicking off the relaunch of Palisade Radio to mark our one year anniversary and over 100,000 views to date. We have put together an all star line up of industry experts that include Jim Rogers, Doug Casey, Eric Sprott, Rick Rule, Frank Holmes, James Turk, and today on the show with us is renowned investor Marc Faber.
When speaking about an imminent stock market correction, Marc Faber argues that since the market hasn’t had more than a 10% correction since 2011, it is likely that we will se a 30-40% decline in the not to distant future.
Marc has witnessed many bull markets and crashes in his career. Marc says that bull markets frequently go on for longer than expected, but the current bull market is already very old, and has been going up steeply since 2009 – in other words, more than 5 years old. “The one thing I can say, is that we are in a aging bull market, and the recovery has lasted longer than the typical recovery phase over the past 100 years.”
We ask Marc if the Fed’s current slowdown in tapering will be reversed in a stock market correction? Marc points out that whenever there is a problem with liquidity in the markets (1988, 2000, 2007), the Fed has stimulated the economy by injecting liquidity, so it’s not unlikely that the Fed will again try to support assets markets. The problem is when this goes on long enough, numerous assets aren’t affordable for the majority of people. The impact of this may be negative for the economy, because some asset prices may rise disproportionally in comparison to other prices.

 
On the multi year low in mining equities, Marc says that general assets are very high right now. And the only asset class that in Marc’s view are beaten down now are the gold and silver mining shares. When looking at the Dow Jones Index in comparison to the GDXJ(junior gold mining stocks index), the underperformance from the GDXJ has been colossal. As a contrarian or as a value investor, Marc sees reasonable value in the gold mining stocks right now. Government bonds and other assets are essentially inflated, but the gold mining stocks are deflated.
Speaking on the influx on gold into Asia… Marc thinks it’s an interesting situation, because in the west we have rumors of central bank’s manipulation of the gold market to keep the price depressed. Marc believes that these rumors are insensible – the West should want to sell their gold at a high price, not at a low price point.
Finally, in the last 20 years, there has been a huge increase of wealth in Asia. The increase in gold purchases in Asia, comes from a growing population, and a population which is increasingly affluent. Marc says that in terms of the Asian stock markets, they are relatively depressed in comparison to the US stock markets, and there is better value there.
Dr Faber publishes a widely read monthly investment newsletter “The Gloom Boom & Doom Report” report which highlights unusual investment opportunities, and is the author of several books including “ TOMORROW’S GOLD – Asia’s Age of Discovery” which was first published in 2002 and highlights future investment opportunities around the world. “ TOMORROW’S GOLD ” was for several weeks on Amazon’s best seller list and is being translated into Japanese, Chinese, Korean, Thai and German. Dr. Faber is also a regular contributor to several leading financial publications around the world.

Here’s Why the Market Could Crash–Not in Two Years, But Now

Markets crash not from “bad news” but from the exhaustion of temporary stability.
Yesterday I made the case for a Financial Singularity that will never allow stocks to crash. We can summarize this view as: the market and the economy are not systems, they are carefully controlled monocultures. There are no inputs that can’t be controlled, and as a result the stock market is completely controllable.
Today I make the case for a crushing stock market crash that isn’t just possible or likely–it’s absolutely inevitable. The conceptual foundation of this view is: regardless of how much money central banks print and distribute and how much they intervene in the markets, these remain complex systems that necessarily exhibit the semi-random instability that characterizes all complex systems.
This is a key distinction, because it relates not to the power of central banks but to the intrinsic nature of systems.

One of the primary motivators of my work is the idea that systems analysis can tell us a great deal about the dysfunctions and future pathways of the market and economy. Systems analysis enables us to discern certain pathways of instability that repeat over and over in all complex systems–for example, the S-Curve of rapid growth, maturation and diminishing returns/decline.
One ontological feature of complex systems is that they are not entirely predictable. An agricultural monoculture is a good example: we can control all the visible inputs–fertilizer, seeds, water, pesticides, etc.–and conclude that we can completely control the output, but evolution throws a monkey wrench into our carefully controlled system at semi-random times: an insect pest develops immunity to pesticides or the GMO seeds, a drought disrupts the irrigation system, etc.
The irony of assuming that controlling all the visible inputs gives us ultimate control over all outputs is the more we centralize control of each input, the more vulnerability we introduce to the system.
Those arguing that central banks (and their proxies) can control the stock market have the past six years as evidence. Those of us who see this heavy-handed control as increasing the risk of unpredictable instability have no systems-analysis model that can pinpoint the dissolution of central bank controlled stability. As a result, we seem to be waiting for something that may never happen.
Despite its inability to predict a date for the collapse of stability, I still see systems analysis as providing the most accurate and comprehensive model of how complex systems function in the real world. If the economy and the market are indeed systems, then we can predict that any level of control will fail no matter how extreme, and it will fail in an unpredictable fashion that is unrelated to the power of the control mechanism.
Indeed, we can posit that the apparent perfection of central-bank engineered stability (i.e. a low VIX and an ever-rising market) sets up a crash that surprises everyone who is confident that central-bank monocultures never crash. In the real world, manipulated stability is so vulnerable to cascading collapses that crashes are probabilistically inevitable.
That raises the question; why not crash now? After all, all the good news is known and priced in, and all the bad news has been fully discounted. Why shouldn’t global stock markets crash big and crash hard, not in two years but right now?
Markets crash not from “bad news” but from the exhaustion of temporary stability. The longer that temporary stability is maintained by manipulation, the greater the severity of the resulting crash.
As I noted in The Coming Crash Is Simply the Normalization of a Mispriced Market, this line from songwriter Jackson Browne captures the ontological falsity of permanent market stability: Don’t think it won’t happen just because it hasn’t happened yet.

Read more at http://investmentwatchblog.com/heres-why-the-market-could-crash-not-in-two-years-but-now/#tBsHYEo84BRubjoF.99

Labor Participation Rate Drops To Lowest Since 1978; People Not In Labor Force Rise To Record 92.3 Million

It is almost as if the Fed warned us this would happen. In a note released yesterday, a Fed working paper titled "Labor Force Participation: Recent Developments and Future Prospects", looked at the US labor force and concluded that "while we see some of the current low level of the participation rate as indicative of labor market slack, we do not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve." But don't blame it on the greatest recession/depression since 1929: "our overall assessment is that much - but not all - of the decline in the labor force participation rate since 2007 is structural in nature."
Well that's very odd, because it was only two months ago that the Census wrote the following: "Many older workers managed to stay employed during the recession; in fact, the population in age groups 65 and over were the only ones not to see a decline in the employment share from 2005 to 2010 (Figure 3-25)... Remaining employed and delaying retirement was one way of lessening the impact of the stock market decline and subsequent loss in retirement savings."

So yeah... sounds like most of the decline in the participation rate is not structural in nature and is merely a response to what everyone but the 1% sees as the biggest - and ongoing - economic devastation perhaps in history, papered over conveniently for the 1% with trillions in liquidity injections.
In any event, no matter how you spin it, today's data was bad: because not only did the headline data disappoint, the labor force participation rate dropped once again to 62.8% from 62.9%, matching the lowest since 1978, as a result of the people not in labor force rising once again, and hitting a new all time high record of 92,269,000, up 268,000 from the prior month. In fact, in August the number of people not in the labor force increased by nearly double the number of people who found jobs, which as we reported previously, was only 142K.


Putting it another way, since the start of the depression in December 2007, the number of people not in the labor force has increased by 13.0 million. The number of jobs added: 768,000.

Market reaction to the ECB announcement

The ECB rolled out the big guns today but stopped short of an all-out quantitative easing. In addition to the TLTRO, there will be ABS and mortgage bond purchases. However these markets are relatively small in Europe – particularly the higher rated paper that would qualify for the ECB purchases.
The deposit rate on bank excess reserves was set to -20bp. With Germany continuing to resist full QE, Draghi’s best two options are to try stimulating consumer and business credit (via ABS purchases and TLTRO) as well as to push down the euro (via negative deposit rates). So we got a “bazooka lite”.
The euro took the biggest single-day hit in over two years in response to the decrease in deposit rate.
And the French 2-year government bond yield went negative for the first time.
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But without the full QE in place, longer dated bond yields actually increased, as yield curves steepened. This carried over to the US where long-term yields rose as well.
And by the way here is one reason Germany remains uneasy with an all-out QE program –
Source: ECB