Category Archives: Manias

Inflation?

The increase in average hourly earnings (AHE) was taken as a sign of economic strength. Well, no. AHE is aggregate earnings divided by aggregate hours worked. So if hours worked is declining faster than earnings, AHE goes up. But is a sign of weakness. From ECRI.

In another case of up means down, the NOPE index is signalling trouble.

Res Ipsa Loquitur

Those Words Again

Fed Chairman Powell, speaking this morning at the Jackson Hole festival of central banker self-love, promised to do “whatever it takes” to prevent another financial crisis.

Unfortunately, Mr Powell, your predecessors have done everything that it takes to guarantee another crisis, a truly special one this time.

Lost Decade

The last time we were here immediately preceded the S&P500’s first negative decade. Which is exactly what John Hussman is predicting by other means. Then there’s this:

Squeeze?

There are two big speculative shorts out there, just begging for squeezes. One of course is the record short position in Treasuries. Interest rates going up? Must mean short the long end, amirite? Not if recent history is any guide. The other is in volatility, where hedge funds are shorter than they were before the February massacre.

Blockchain RIP?

The blockchain technology is a partial solution to the Byzantine generals problem. A full solution to the problem has been mathematically shown to be impossible. As a result, blockchain systems are vulnerable to attack by introducing enough fraudulent voting power to improperly modify the blockchain.

Apparently this is now happening to some of the smaller networks.

The potential prizes on the larger ones are rich enough that it is probably just a matter of time until one of them is compromised for serious money. Then we’ll see what happens.

The New Gilded Age

The Gilded Age, roughly 1870-1900, was a period where abject poverty and fabulous wealth coexisted.

Unlike today’s New Gilded Age, the original was a period of rapid economic growth. Today, wealth has been concentrated in the hands of a tiny elite by the actions of the Fed, which have inflated asset prices.

I offer as evidence:

24Karat gilded chicken wings. Serving no purpose whatsoever except ostentation. (The gold is tasteless and passes unchanged through the digestive system).

Wag The Dog

As I have said many times before, I believe the biggest mistake the CFTC has ever made is the securitization of VIX. This decision has allowed VIX futures, options and ETFs, trading in any and all of which provides staggering leverage on the overall market. Here’s a piece which shows both how easy it is to manipulate VIX, and the effect of VIX manipulation on the overall market.

I’m watching this as I write, as the manipulators crush price discovery. Of course the eventual consequences of this will be catastrophic – the “Volgasm” of early February was just the fat lady clearing her throat.

Perspective

“Just a flesh wound,” said the Black Knight.

The PhD Standard

James Grant (Grant’s Interest Rate Observer) in 2011:

“The 2007-2009 real estate debacle is the monetary equivalent of a chain reaction on a foggy California freeway. The trouble with our monetary mandarins is they [the Fed] believe impossible things. They have persuaded themselves that the central bank can pick the interest rate that will cause the GDP to grow, payrolls to expand, and prices to levitate by just two percent a year, as they measure it. It is impossible as experience and common sense attest. Yet, they hold it to be true.

… William F. Buckley famously and persuasively said that he would rather be governed by the first 400 names in the Boston phone directory than by the faculty of Harvard. Unaccountably, this Congress has entrusted the value of the dollar that we own, that we transact to an independent committee dominated by monetary scholars. In one short generation we have moved to the PhD standard from the gold standard.”

The insanity continues.