"The best way to destroy the capitalist system is to debauch the currency." ~ John Maynard Keynes
"Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted." ~ Albert Einstein
“War does not determine who is right – only who is left.” ~ Bertrand Russell
Research:
Duration measures the sensitivity of the price of an asset to changes in interest rates.
The Fed is said to be lowering duration, or sensitivity to interest rates. This may be true in the short term; however, if they are successful in manipulating people into taking on more debt, then once this debt is assumed, they become highly sensitive to changes in interest rates, not less.
For example, take Japan, whose high debt load means they will be bankrupt with just a 2% move in interest rates.
It exemplifies the Fed’s short-sighted thinking.
*FED’S EVANS SEES JOBLESS RATE SUB 7% `MUCH SOONER’ FROM QE3 //
When it doesn’t, it will suggest to him more printing is needed
Recent comments suggest lower unemployment rates alone will not be enough enough for Dudley and Evans ~ Beyond BRICS
Lately, the talk is concern about an exit strategy. Exit strategy? I’m not sure what they are talking about. The Fed’s “exit strategy” is to hold the securities to maturity. They should be talking about QE ∞
nexus: a connection or series of connections linking two or more things
Benjamin Franklin’s rule for decision making ~ Farnam
- write down positives and negatives in two columns, weight, then cancel similar weights out.
Reading 10 pages then writing a 1 page summary boosts retention by 50% over passive reading, says study ~ Farnam
Techniques of Persuasion ~ Farnam
- Most people want to feel that issues are simple rather than complex
- They want to have their prejudices confirmed,
- They want to feel that they ‘belong’ with the implication that others do not, and
- They need to pinpoint an enemy to blame for their frustrations.
Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment (Bernanke, Reinhart, Sack) ~ SSRN
Time for a reread
Friends describe Elon Musk as Steve Jobs, John D. Rockefeller, and Howard Hughes rolled into one. ~ @TheBrowser
Grants interest rate observer archives ~ grantspub (PDF)
Also a must read
Why We Die ~ Scientific American
Much of this country is eating itself to death, using other people’s money
Stress: Portrait of a Killer (with Stanford Biologist Robert Sapolsky) ~ Open Culture
A Mind is a Terrible Thing to Change: Confirmation Bias in Financial Markets (Pouget,Villeneuv) ~ ideas.repec
- optimal trading strategies to take advantage of confirmation bias include i) riding bubbles ii) though contrarian trading can be optimal sometimes
U.S.
Kashkari, Ross, Stern on Economy, Fiscal Cliff ~Bloomberg
- Pimco sees U.S avoiding recession from Fiscal Cliff – $250 billion actual result, $450 billion deferred, but uncertainty could pose a problem
- From 2002-2007, thanks to low interest rates and Fed induced credit pumped into consumers veins, households assumed $2.2 trillion of debt
- Corporate balance sheets healthy, but total debt, mostly of household and consumer debt is $38 trillion ~ Wilbur Ross
- In 1983, the bottom 95% of population had $0.40 cents of debt in income in, now it’s $1.40. ~ Wilbur Ross
Yet, the Federal reserve wants them to take on more debt
Bioprinting to allow scientists to print living human tissue – blood vessels, cartilage, skin, and muscle. Organs later. About 5 years away. ~ WSJ
Billionaire Peter Thiel donates to 3D meat bioprinting lab – Wired
Odd
Skilled Work, Without the Worker ~ NYT – discusses robotics in manufacturing
- Robot demand growth expected to be +9% Y/Y, but not immune from global economy
Fanuc Bets Future on ‘Cranes With Brains,’ Inaba Says ~ @BloombergNews
Roger McNamee likes content producers and those providing the tools to enjoy content better, not the middlemen, like those in search
Premium and discounts to 50 year average ~ @AJInsight
A Decade of Volatility: Demographics, Debt, and Deflation ~ Harry Dent still in the deflation camp ~ Twitter - 
I don’t know, maybe boomers do not retire as early as assumed; plus, if you look at the left hand side, negative growth preceded a boom
Obesity rate has risen from 17% in 1997 to 28% in 2011
A Nation of Dependents ~ the numbers by Veronique de Rugy ~ National Review Online
Gender gap not so wide ~ St Louis Fed – believe I read that in NYC, women earn more
62% of Americans see China as an adversary; 25% an ally ~ NBC/WSJ
World:
John Mauldin on Australia 30% public debt ratio: Spain and Ireland also had low debt burdens before banking crises ~ Investor Insight
"Australia is a classic case of the Dutch Disease"
Spain facing banking run that ECB can’t stop; Spain’s BOP deficit 30%; Germany to lose a lot of money ~ Felix Zulauf
Unresolved: France, Spain, and Italy are not ready to give up fiscal sovereignty, Germany wants union before debt sharing ~ Bridgewater
Ray Dalio: European issues not finished ~ Ray Dalio Blog
Obama now has a 68% chance to be re-elected according to InTrade
Putin watches war games, tells soldiers more conflicts around the world means "keep your powder dry" ~ Reuters
Turkey: running a monetary maze ~ beyondbrics
OJ TO CONSIDER ADDITIONAL EASING, NIKKEI @MichaelSedacca: how predictable. they’ve bought REITS in the past inflation
Food Prices + Hunger Index = Riots, Civil Wars and Revolutions ~ Financial Sense
Europe Banks Fail to Cut Bloated Assets as Draghi Loans Defer Deleverage ~ @BW moralhazard
Turkish Central Bank Cuts Rate ~ WSJ – $TUR – the race to the bottom – I believe Turkey is in trouble
Asia:
‘The “Patriotic Education Campaign” of Jiang Zemin in the 1990s appealed to anti-Japanese divert attention from party corruption’
Japan’s spending on its “Self-Defence Force” had shrunk by 4pc in 10 years ~ U.K. Telegraph
"Japan as a whole is essentially long China and Short oil" ~ Sebastian Galy, Socgen
The birth rate of the Islamic world has begun to decline dramatically ~ WSJ – people want freedom, could follow decline in Christianity
Beijing hints at bond attack on Japan as anti-Japanese protests spread to 85 cities across China ~ @Telegraph
China-Japan Dispute Over Islands Risks $340 Billion Trade ~ Bloomberg
Japanese bonds have compounded gains at an extraordinary rate over the past couple decades – it would be a savvy move to sell now, regardless of the political situation. Japan’s time is nearly up
China’s non-ferrous industry might be too reliant on short-term debt ~ @theanalyst_hk
China Needs to Build More Subways, Highways, NDRC– one existing train stop is in the middle of a corn field
Chinese banks are “the nexus for… all of this credit-driven investment." ~ Jim Chanos
- "They all seem to have negative cash-flow, non-collectible receivables…they all seem to not earn their cost of capital.” ~ Chanos
Profits at China’s state-owned enterprises (SOEs) have fallen 12.8% y/y ~ Xinhua
China’s money outflow continued in August ~ theanalyst_hk
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