Archive for Macro Economic Viewpoint

QE Infinity Will Not Pause B/C of Shutdown

This information should be of value to investors who are looking to hedge risk and avoid losses during the shutdown. It is interesting to know that the FED is not subject to ending the stock-market rigging scheme of buying bonds because the FED is not a public enterprise. In other words, because the FED is a private cartel it is exempt from shutting down… AKA there will be squeezes on the way down….?


The Government May Shut Down, But These 18 October POMOs Will Proceed Come Hell Or Selective Default

Submitted by Tyler Durden on 09/30/2013 – 15:15

As pointed out earlier, the Federal Reserve does not depend on Congressional appropriations, and will not see any cutbacks due to a shutdown which with every passing hour seems more inevitable. It also means that even if the entire US government were to be shutdown, the daily wealth effect injection into the stock market for the benefit of the 0.01% will continue and the confidence show must go on. Specifically, as was released moments ago by the NY Fed, Bernanke will inject another $45 billion in the capital markets courtesy of 18 distinct bond-monetizing POMO operations over the next 31 days. These will take place regardless of anything else that may happen to the government, which perhaps better than anything else, shows who is truly in control of this country and on whose behalf they operate

One Day Reversal, Nasdaq Leadership, Central Bank Talk-job, Wildfires

Sure, the Fed and the other big 6 central banks may have few bullets left to prop up equity markets with, but in the end “talking” the market up is a free policy tool that requires little actual effort or work but can have helpful short term effects.

I’m long (even though I’m bearish) so I do hope they can pump this paper to Dow $25,000 but the reality is likely that all of these Hindenburg Omens (there has been like thirty of them) will actually result in a market correction of 10% or more.

Certainly, those waiting for the correction have learned a lesson on patience and “sideline remorse” but no harm no foul. We think chasing the rally at this point is a bad investment decision, but we have made our share of those here as well…

Today, we saw a big one-day reversal in markets which is short term bullish. Nasdaq leadership is equally as nauseatingly bullish for the perma-bubble (but we all root for the home team!).

All in all, it pays to be cautiously optimistic and to be a risk taker — the real question is which is a better risk reward investment long term between stocks and cash. Personally, I would feel safer in cash but even cash is risky with all of the central banking kitchen sink malarky.

Too many wildfires here for me to care — the biggest risk in buying timber property IMO and I’m staring head on at one which is ten miles across a valley from me!

Good luck and God Bless to all of our readers! You keep me sane (well, sort of)

Dr. Sanjay Gupta’s Weed 180


Over the last year, I have been working on a new documentary called “Weed.” The title “Weed” may sound cavalier, but the content is not.

I traveled around the world to interview medical leaders, experts, growers and patients. I spoke candidly to them, asking tough questions. What I found was stunning.

Long before I began this project, I had steadily reviewed the scientific literature on medical marijuana from the United States and thought it was fairly unimpressive. Reading these papers five years ago, it was hard to make a case for medicinal marijuana. I even wrote about this in a TIME magazine article, back in 2009, titled “Why I would Vote No on Pot.”

Well, I am here to apologize..

Dr. Gupta, a neurosurgeon and CNN’s chief medical correspondent, explains how he mistakenly bought into certain government propaganda surrounding cannabis, but through continued research and his experiences filming his upcoming documentary “Weed” (which airs on CNN on Sunday at 8pm ET and PT) completely changed his mind on the plant and its efficacy.

I mistakenly believed the Drug Enforcement Agency listed marijuana as a schedule 1 substance because of sound scientific proof. Surely, they must have quality reasoning as to why marijuana is in the category of the most dangerous drugs that have “no accepted medicinal use and a high potential for abuse.”

They didn’t have the science to support that claim, and I now know that when it comes to marijuana neither of those things are true. It doesn’t have a high potential for abuse, and there are very legitimate medical applications. In fact, sometimes marijuana is the only thing that works.

NORML applauds Dr. Gupta for openly apologizing for his role in how Americans have been “terribly and systematically misled for nearly 70 years in the United States” on the issue of marijuana and his recent advocacy in favor of marijuana law reforms, something we can only hope will continue. Sanjay appeared on Piers Morgan Live last night to promote his new documentary, this segment alone demands some attention for his ability to explain the medical applications of cannabis and the hypocrisy of our current laws in an intelligent and articulate manner.

Markets Start Pricing in End of Super-Bubble

Of course we are in the midst of a technology bubble — heck, there’s a Democrat in office! The scandals surrounding the NSA leaker and Snowdengate continue to perk my interest though as a civil liberties advocate I kinda lost my “trust” in the administration once I discovered just how similar Obama’s economic team (ex-Wall Street) looked when compared to Bush’s economic leadership.

Most of the money is still heading toward banker bailouts (QE infinity) and to the military industrial complex, but I digress. Technology stocks represent the merger of the banker bailout and the defense bubble — the “cloud” revolution is sort of the “big data” spying tool that iron-fisted technocratic dictators love!

That being said, the internet is the current tool used for disrupting status-quo business models and it fascinates me personally to no end, which is why I blog here in part. The other reasons have to do with being charitable and spreading the truth — markets have looked vulnerable for some time because of all of the centralized pumping but like any “promotion” the game only lasts until the players run out of suckers to push paper onto. In other words, once Wall Street has unloaded their “maket mnaking” shares of these bubble stocks, expect a repeat of the 2001-2002 “revaluation.”

All in all, what is happening now in my view (not that anyone should care, really) is that markets have finally started to price in the end of the Octo-Bernank perma-bubble. Although it seemed teflon before last week, the truth of the matter is that markets are far out of equilibrium and probably need a 25% haircut and some new leadership to get the ship righted — most of the talking heads and Economists that are “respected” don’t deserve their respective hype. I do like Robert Shiller and also Nial Ferguson quite a bit and think what they are saying about “risk” is dead on — this crisis is not exactly the same as the 1930′s crisis and needs tailored medication, not a money printing banker bailout cure-all.

Hopefully, Americans can rally together and make some progress. It is good to see that oppression is being met head on by patriotic individuals on the inside — we need to stop the waste, fraud, and abuse right away and heads should roll.

Broadcasting Live From the Middle of Nowhere

Super excited to be up and running from the ranch here in the wilderness. Really excited to be fully connected with the help of Verizon‘s Jetpack and a Wilson signal booster. Kinda interesting considering I couldn’t even get cell service here a few months ago… Soon, I may even move up the ladder of human evolutional development and gain the power of electricity — certainly one of the bigger developments of the past few centuries.

I am more interested in wood gasefication and using wood coal to produce electricity and actual auto fuel. The wood economy is where it’s at in a depressionary “recovery” like the one we have now. The key is to become totally self-sufficient and I’m working on it though I am not a gun owner at present and don’t think I’ll go that route … In any event, it’s nice to be back in the saddle!

Sorry, NARM just couldn’t resist…

As for the “economy” it’s funny to see the Summers Vs. Yellin debate going on considering both of them were in power during and before the “whoops, bad business decision” fraud pit that was the 2008 financial crisis — neither of them were pushing for a tougher SEC or more financial regulations — in fact, both are tools of Wall Street, as we have all come to expect.

Let’s hope that the Occupy, Libertarian, Tea Party, and Anti-Fraud movements converge and America wakes up to all of the fraud, looting, and robbery that went on by public company managements back in 2007-2008…

The SEC has been downsized so bad that I was told by an inside source the number of investigators looking at public companies is less than a hundred!

Considering there are 8,000 public stocks trading, that seems pretty sketch to us.

Hedgephone Apologizes for Any (Real or Perceived) Player “Hating”


Look, we somtimes end up hating on technology we don’t understand here at Hedgephone and our readers deserve an apology — even Ben Bernanke I’m sure is a nice guy and has a big heart. We throw around accusations at this site mainly out of anger regarding all of the corruption guiding the mood of Mr. Market. Obviously, I made some bad investments along the way that I should have avoided. Some positions I could have avoided in questionably fraudulent businesses, but that is water under the bridge and I’m thankful for my blessings! I’m an incredibly lucky guy.

The older I get, the more I realize just how lucky I am to be alive and in good health (because health is wealth!) here in America, the land of the free and home of the brave. I’m lucky to have what I have and to be loved by a kind and caring family. So many tragedies lately that its hard to care much about economics. We try to make the world a better place, but I know sometimes it comes off as whiney drivel. Keep in mind that many of these posts are created in less than five minutes!

All I ask is for forgiveness. Any success or wealth in this world belongs to the Lord anyways, so why should I care about deception in financial markets? Hopefully, I am writing this blog for the right reasons and am not simply putting down trends I do not fully understand.

However, I was alive and lost good money during the first internet bubble. I hope the outcome is different this time, but cash flow still matters just as much today as it did in 2001 and basing an economic recovery on the back of another bubble is bad policy.

Most people think that a little fraud is OK so long as most of the work done by government goes toward the greater good. Personally, I view fraud as I would a cockroach infection — if you see one instance of fraud, then its safe to assume fraud is rampant. The same is true when you see one roach in your kitchen…

In the future, I aim to share less of my personal opinion about corruption and more research on fundamental equity valuations. Thanks to our readers who make this site possible!

I will work on sticking to the facts from here on out. While I do think gaming the financial markets to create a trickle down boom is sinister and immoral, I know complaining about fraud is not the best way to prevent or stop abuse — education is the only way we can build a world where truth and equality reigns and not tall tales of future financial riches. Just remember, “Pro Forma” really is Spanish for BullSHI%

I’m not a hater, I just vent a lot!

John Hussman: Deflationary Boom?

Deflationary Boom?

John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy

The defining feature of the present market and economic environment is incompatibility, juxtaposing weakness in emerging markets, materials, and inflation-protected securities with strength in equities and the U.S. dollar, a spike in interest rates, and an unusually steep yield curve in Treasury securities. The underlying thesis here couples a theme of deflation with a theme of robust economic strength. Taken together, the financial markets have priced a wide range of assets on the assumption that the U.S. is on the verge of a deflationary boom. Most likely, part of this scenario is wrong.

On Friday, bonds fell, stocks rallied and the U.S. dollar surged on strength in the June non-farm payroll report. While employment is widely understood to be a lagging, not leading indicator of the economy, the report would be worthy of enthusiasm if it was also coupled with strength in leading economic measures and coincident/lagging measures. We observe little evidence of that at present. Indeed, while both the establishment and household surveys showed job growth in June, the composition detail in the household survey was hardly an indication of a robust economy, with a loss of 240,000 full-time jobs offset by a 360,000 gain in employees reporting that they usually work part-time. Fully 352,000 of this increase fell into the category of “part time for economic reasons (slack work or business conditions).”

We can make sense of the “deflationary boom” thesis only if we consider various pieces in isolation, rather than as a cohesive whole. With Europe still in a recession, and an acute relapse of credit concerns in Portugal in recent days, Mario Draghi at the European Central Bank reached for the only tool still at his infinite disposal – words – to promise that interest rates would be held at zero for a significant length of time. In China, debt servicing problems are emerging in corporate and local government debt following years of unproductive overinvestment in still-vacant buildings, and attempts to slow the rapid, low-quality credit growth has quickly been met by strains on liquidity and economic growth. Coupled with the better-than-expected employment numbers, at least on the surface, Wall Street has chosen China and Europe to make the deflation case, and the perception of U.S. economic growth as the basis for a “cleanest dirty shirt” argument for the U.S. dollar and U.S. equities. In effect, Wall Street is singing “We are the world… so the rest of the world can sink into the sea.”


Heat Wave Intensifies — 115 Degrees in Redding CA


Warning: Your next methane filled fart could be your last — only you can prevent forest fires!

Seriously, it’s just too darned hot out right now in much of the west. Temperatures of 115 degrees are unheard of for Redding California in June. Even during the peak hot days of late August, temps usually only get to 105 or so — this is a major shift in climate for most of the west coast. Hopefully we start embracing natural gas and hydrogen fuel cell cars and trucks, and SOON… The companies making the cheap conversion kits need government stimulus and not the businesses like TSLA selling cars that nobody can afford.

In any event, here are the raw numbers…

From Huffington Post

LAS VEGAS — Temperatures in Death Valley – the legendary hottest place on Earth – at least tied a record Sunday as a heat wave brought triple-digit highs across the West.

The National Weather Service’s thermometer recorded a peak temperature of 128 degrees in Death Valley National Park, which ties the record for the hottest June day anywhere in the country.

However, the Los Angeles Times reports that the National Park Service thermometer – 200 yards away – recorded a temperature of 129.9, which shatters the record for June.

Triple-digit heat struck again elsewhere in Southern California, while metropolitan Phoenix saw just a slight drop in temperatures after experiencing record-breaking heat Saturday.

Tragedy struck north of Phoenix as crews battled a fast-moving wildfire in the high heat. Authorities said 19 firefighters died after they were caught by the fast-moving flames near the town of Yarnell.

Forestry spokesman Art Morrison said the firefighters were forced to deploy their fire shelters, tent-like structures meant to shield firefighters from flames and heat.

In Las Vegas, the mercury shot up to 117 degrees on Sunday to tie the city’s record high and to cause more discomfort for residents and tourists in the sprawling desert city.

Since record-keeping began in Las Vegas in 1937, the only other times the temperature reached 117 degrees were on July 19, 2005, and July 24, 1942, according to the National Weather Service.

Death Valley’s the record high of 134 degrees set nearly a century ago on July 10, 1913, stands as the planet’s highest recorded temperature.

Six half-marathon runners in Southern California were hospitalized Sunday for heat-related illnesses. A day earlier, paramedics responding to a Nevada home without air conditioning found an elderly man dead.

Full Story Here:

Tech Bubble 2.0 — San Francisco Office Bubble and Eyeball Valuations


I have been warning about the technology 2.0 bubble for some time. Of course, I am either “wrong” or just early. That being said, I do foresee a return to sanity on valuation in the near term. Linkedin, Yelp, Salesforce, Angie’s List, etc.. etc… looked to be priced waaaay beyond perfection and there is a growing fear among traders that this time it’s not going to be any different. Just look at this opinion piece about San Fran office rents and the technology bubble 2.0 — from someone who just spent three months living in the “Slick Con Valley” I can tell you that the real estate values in the bay area are way out of control and are due for a serious haircut. Like a Miley Cyrus Justin Bieber type haircut. Check out what this real estate professional based in Riceroni land has to say about it:

OPINION We all remember the first dot-com bubble, right? Web technology start-ups flocked to San Francisco in the late 1990s. Thousands of would-be entrepreneurs and techies filled up the city. Gentrification of Central City neighborhoods accelerated sharply. Apartment rents jumped, followed by the condo boom. Demand for commercial office space, especially South of Market, quickly grew red-hot. Rents zoomed, and office developers rushed dozens of proposed new projects forward.

The leaders of Mayor Willie Brown’s gutless Planning Department rubber-stamped all they could, and decried the annual limit imposed on their approvals by the 1986 community-activist-sponsored Proposition M ballot measure.

The activists and the mayor put two competing measures on the November 2000 ballot in response. Both lost, but the progressive slate for the Board of Supervisors swept that election, defeating most of the mayor’s candidates.

And then Tech Bubble 1.0 popped. The peak year was 2000. The big dot-com bust, 9/11, and finally the Great Recession all followed.

The city’s office market crashed. Some new office buildings were foreclosed by their lenders. Many approved office developments went unbuilt. Overall office market vacancies approached 20 percent by 2010.

Ah, but here we go again — Tech Bubble 2.0! A new wave of recent technology industry start-ups — like Twitter and Yelp — are joining the growing survivors of Bubble Number 1 — like Salesforce. And San Francisco has become a premiere national media venue for the tech industry.

Thousands of would-be entrepreneurs and techies are again filling up the city. Apartment rents are going through the roof. Gentrification of Central City neighborhoods is accelerating even faster. Demand for commercial office space, still in SoMa, is red-hot again.

But by 2011 so much vacant space was on the market, and so many approved buildings were waiting for anchor tenants to start construction, that there has been room for them all so far. Several new buildings got underway. Mayor Ed Lee strategically took advantage of this market boom to target economic expansion to the Central Market District, the last disinvested zone of San Francisco’s Downtown.

Even today though, city office vacancies still exceed 5 percent. And according to the most recent Planning Department report, more than a dozen already-approved new buildings, totaling more than 4.5 million square feet, are waiting to start construction in the Transbay Transit District, South of Market, and Mission Bay. Another 5 million feet of office space is proposed for more than a dozen more pipeline projects for those areas. Plus another 2.5 million feet is planned for projects on Port property — including the San Francisco Giant’s huge project — that are not even on the Planning Department’s list yet!

How does this total of 12 million square feet of pending new San Francisco office buildings compare to historic demand? Going back to 1986, the amount of new office space actually built — true long-term market demand through the boom/bust business cycles — averages out to about only 750,000 square feet a year. The city’s old-school corporate headquarters dramatically downsized or even moved out of San Francisco — like Chevron and Bank of America — and that’s still ongoing. The new tech industry is mostly replacing them. So these 30+ identifiable current projects would provide a 16-year supply of office space at historic rates.

But even in the face of this evident market glut of future office buildings, the usual civic development hypsters are once again muttering about gutting Proposition M, and radically upzoning Soma for even greater office expansion. Is that who City Hall will listen to this time too?

Bubble? What Bubble? [Pop!]

John Elberling is executive director of the Tenants and Owners Development Corporation.


Stocks Rise, but Mind the Gap


By N$L

Gaps get filled, and today the market gapped up around 1% higher in morning trade. That should signal to the trading community that in the next two weeks we will revisit the $1605 level or so on the S&P. Now, as you know, I am long so I will take what I can get. Yes, I do have a few short positions via options, but mainly I am using these as a slight hedge (maybe 5% of holdings) against my “perma-long” lemming-like buy and hope/hold equity allocation (yipppeeee). I am bullish on Amuuuurrrikka and on stocks over the very very very long term, but right now in the short run I am slightly bearish. Today is likely the window dressing day because tomorrow is the last day of trading for the month and Hedge Fund managers don’t want to get busted marking up their stock portfolio on the last day of the month. So, today we found out that the biggest hedge funds are indeed long and are marking the tape higher today to some degree.

Managers aren’t dumb enough to try and mark the tape on the exact last day of the month, because they know regulators (if they were looking) could easily spot end of the month “fake” buying of equities.

Most people think stocks act randomly and don’t understand that big money can actually “MOVE” stocks up or down by placing buy and sell orders in a given name. The supply and demand aspects of stocks work just like they do in any market and stocks today are up because of “demand” more than anything else, aside from the FED’s pump priming.

Look, the FED is doing a good job of getting what they want. The question is, as a society, do we want what we are getting — vertically rising stocks are creating two Americas — the rich who own stocks are getting richer while everyone else is getting poorer. I have long argued that forcing equity prices higher and “making” them stay at overvalued, elevated levels is a strategy that will gut the middle class eventually but I am also part of the problem because I own equities.

In the end, QE is not exactly fair to the poorest Americans. It creates two societies — stock (corporate) owners and wage slaves who are merely used as inputs into the corporate stock market system. It’s certainly NOT free market capitalism — it’s more like socialism for rich people.

That being said, I am personally happy when stocks go up and nervous when they drop — it’s sort of sick and sad really but it is what it is.

Lastly, gaps get filled so don’t rush out and buy stocks here expecting to make any money. This may well be the top for equities as the pendulum swings back to Labor from Capital. Gaps get filled so if you are going to execute a short term stock strategy, sell the rip (or short the rip) and be careful buying dips because the market is already quite extended.

The virtuos circle argument is not the same as it once was — today, technology is making human labor redundant but the owners of robots are benefitting at the expense of the poor factory line worker. It’s a bizarre dichotomy that may eventually create social unrest.

Technology is the greatest tool in the world for economic advancement, but like anything powerful it can be used for good or evil. Which will it be America? Inevitably we all live in a stock-centric society. 100 years ago, we lived in a farm-centric society. Technology is the wild card in the room.