Archive for October, 2014
From Mike “Mish” Shedlock at Global Economic Trend Analysis:
Last Week the Huffington Post reported Ebola.com Sells For More Than $200,000 – Including 19,000 Shares Of Cannabis Sativa Stock.
Two Las Vegas entrepreneurs attempting to sell the rights to Ebola.com succeeded in selling to the highest bidder ? literally.
Chris Hood and Jon Schultz paid $13,500 for the rights to Ebola.com back in 2008 and have just sold it to a company called Weed Growth Fund.
The terms of sale call for Hood and Schultz to get $50,000 in cash and 19,192 shares of Cannabis Sativa, Inc., a company run by former New Mexico governor Gary Johnson that hopes to market legal cannabis products throughout the world.
The stock is currently trading under the CBDS ticker symbol at $8.55 share, which means the value of the shares sold to Hood and Schultz is $164,091.
Add it up and they received $214,091. That’s quite a profit, but the sellers made even more on LasVegasRealEstate.com and PayDayLoans.Com.
There is certainly a lot of attention on the disease. But what are the real risks?
The following chart of number of Ebola cases and the country of origin from The Guardian will add a much needed perspective.
Admittedly, the disease is very scary. About 70% of the people who contract the disease die from it. But according to Dr. Jeremy Farrar of Wellcome Trust and as reported by The Guardian, Ebola ‘May Have Reached Turning Point’
The Ebola epidemic in west Africa may have reached a turning point, according to the director of the Wellcome Trust, which is funding an unprecedented series of fast-tracked trials of vaccines and drugs against the disease.
Writing in the Guardian, Dr. Jeremy Farrar says that although there are several bleak months ahead, “it is finally becoming possible to see some light. In the past 10 days, the international community has belatedly begun to take the actions necessary to start turning Ebola’s tide.
“The progress made is preliminary and uncertain; even if ultimately successful it will not reduce mortality or stop transmission for some time. We are not close to seeing the beginning of the end of the epidemic but [several] developments offer hope that we may have reached the end of the beginning.”
Farrar’s comments come as the World Health Organisation confirmed that the number of Ebola cases in Liberia has started to decline, with fewer burials and some empty hospital beds. But the WHO warned against any assumption that the outbreak there was ending.
“I’m terrified that the information will be misinterpreted,” said Dr Bruce Aylward, assistant director-general in charge of the Ebola operational response. “This is like saying your pet tiger is under control. This is a very, very dangerous disease. Any transmission change could result in many, many more deaths.”
“The danger is that instead of a trend that takes us down to zero, we end up with an oscillating pattern,” he said. Getting to zero will involve grindingly hard work, identifying every Ebola case and tracing all the contacts. Without that effort, Ebola will remain at a lower but still dangerous level.
Balanced Risk Assessment
Dr. Jeremy Farrar does a good job of expressing cautious optimism, yet mentioning the risks without the customary fear mongering and hype we have seen in other articles.
QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In round terms, this official counterfeiting spree amounted to $3.5 trillion ? reflecting the difference between the Fed’s approximate $900 billion balance sheet when its “extraordinary policies” incepted at the time of the Lehman crisis and its $4.4 trillion of footings today. That’s a lot of something for nothing. It’s a grotesque amount of fraud.
The scam embedded in this monumental balance sheet expansion involved nothing so arcane as the circuitous manner by which new central bank reserves supplied to the banking system impact the private credit creation process. As is now evident, new credits issued by the Fed can result in the expansion of private credit to the extent that the money multiplier is operating or simply generate excess reserves which cycle back to the New York Fed if, as in the present instance, it is not.
But the fact that the new reserves generated during QE have cycled back to the Fed does not mitigate the fraud. The latter consists of the very act of buying these trillions of treasuries and GSE securities in the first place with fiat credits manufactured by the central bank. When the Fed does QE, its open market desk buys treasury notes and, in exchange, it simply deposits in dealer bank accounts new credits made out of thin air. As it happened, about $3.5 trillion of such fiat credits were conjured from nothing during the last 72 months.
All of these bonds had permitted Washington to command the use of real economic resources. That is, to consume goods and services it obtained directly in the form of payrolls, contractor services, military tanks and ammo etc; and, indirectly, in the form of the basket of goods and services typically acquired by recipients of government transfer payments. Stated differently, the goods and services purchased via monetizing $3.5 trillion of government debt embodied a prior act of production and supply. But the central bank exchanged them for an act of nothing.
Contrast this monetization process with honest funding of government debt in the private market. In the latter event, the public treasury taps savings from producers and income earners and re-allocates it to government purchases rather than private investments. This has the inherent effect of pushing up interest rates and, on the margin, squeezing out private investment. It is a zero sum game in which savings retained from existing production are reallocated.
To be sure, the economic effect is invariably lower investment, productivity and growth down the line, but the process is at least honest. When the public debt is financed from savings, government purchase of goods and services are funded with the fruits of prior production. There is no exchange of something for nothing; there is no financial fraud.
And it is the fraudulent finance of public deficits which is the real evil of QE because the ill effects go far beyond the standard saw that there is nothing wrong with central bank monetization of the public debt unless is causes visible inflation of consumer prices. In fact, however, it does cause enormous inflation, but of financial asset values, not the CPI.
Despite the spurious implication to the contrary, central banks have not repealed the law of supply and demand in the financial markets. Accordingly, their massive purchases of the public debt create an artificial bid and, therefore, false price. Moreover, government debt functions as the “risk free” benchmark for pricing all other fixed income assets such as home mortgages, corporate debt and junk bonds; and also numerous classes of real assets which are typically heavily leveraged such as commercial real estate and leased aircraft.
In short, massive monetization of the public debt results in the systematic repression of the “cap rate” on which the entire financial system functions. And when the cap rate gets artificially pushed down to sub-economic levels the result is systematic over-valuation of all financial assets, and the excessive accumulation of debt to finance non-value added financial engineering schemes such as stock buybacks and the overwhelming share of M&A transactions.
Needless to say, the false prices which result from massive monetization do not stay within the canyons of Wall Street or even the corporate business sector. In effect, they ride the Amtrak to Washington where they also deceive politicians about the true cost of carrying the public debt. At the present time, the weighted average cost of the $13 trillion in publicly held federal debt is at least 200 basis points below a market clearing economic level ? meaning that debt service costs are understated by upwards of $300 billion annually.
At the end of the day, the fraud of massive monetization makes the rich richer because it drastically inflates the value of financial assets ? roughly 80% of which is held by the top 5% of households; and it makes the state more bloated and profligate because its enables the politicians to spend without imposing the pain of taxation or the crowding out effects which result from honest borrowing out of society’s savings pool.
In the more wholesome times before 1914, the Federal government didn’t borrow at all. During the half-century between the battle of Gettysburg and the eve of World War I, the public debt did not rise in nominal terms, and amounted to just $1.5 billion or 4% of GDP at the time of the Fed’s creation. Even then, the Fed was established as only a “bankers bank” which could not own a dime of public debt, but instead existed for the narrow mission of liquefying the banking market by means of discounting solid commercial paper on receivables and inventory for ready cash.
The modern form of monetization arose in the service of financing war bonds, not managing the business cycle, levitating the GDP or boosting the labor market toward the artifice of “full employment.” These latter purposes reflect a century of “mission creep” and the triumph of the statist assumption that governments can actually tame the business cycle and elevate the trend rate of economic growth.
But history refutes that conceit. In the early post-war period, central bank interventions mainly caused short term bouts of unsustainable credit growth and an inflationary spiral which eventually had to be cured by monetary stringency and recession. In the process of repetition over several decades culminating in the 2008 crisis, the household and business leverage ratios were steadily ratcheted upwards until the reached peak sustainable debt.
Now the credit channel of monetary policy transmission is broken and done. The Fed’s most recent massive monetization and “stimulus” has therefore simply inflated financial asset values ? meaning that the Fed has become a serial bubble machine.
There is a better way, and it contrasts sharply with the systematic fraud of QE. That alternative is called the free market, and at the heart of the latter is interest rates which are “discovered” by the market, not pegged and administered by the central bank. Stated differently, the free market requires that all debt and other forms of investment be funded out of society’s pool of honest savings ? that is, income that is retained out of production already made.
Under that regime there is no fraudulent bid for public debt and other existing assets based on something for nothing. Markets clear where they will, and interest rates are the mechanism by which the supply of honest savings and the demand for investment capital, including working capital, are balanced out.
Needless to say, free market interest rates are the bane of Wall Street speculators and Washington spenders alike. They can spike to sudden and dramatic heights when demand for funds to finance government deficits or financial speculation out-run the voluntary pool of savings generated by society. So doing, they bring financial bubbles and fiscal profligacy up short.
In stopping QE after a massive spree of monetization, the Fed is actually taking a tiny step toward liberating the interest rate and re-establishing honest finance. But don’t bother to inform our monetary politburo. As soon as the current massive financial bubble begins to burst, it will doubtless invent some new excuse to resume central bank balance sheet expansion and therefore fraudulent finance.
But this time may be different. Perhaps even the central banks have reached the limits of credibility ? that is, their own equivalent of peak debt.
“I think QE is quite effective,” Boston Fed President Eric Rosengren said in a recent interview with The Wall Street Journal, describing the approach as an option for dealing with an adverse shock to the economy.
From Eric Barker at Barking Up The Wrong Tree:
But what’s the best way to build rapport and create trust? Plain and simple, who can explain how to get people to like you?
Robin Dreeke can.
Robin was head of the FBI’s Behavioral Analysis Program and has studied interpersonal relations for over 27 years.
He is the author of the excellent book, It’s Not All About “Me”: The Top Ten Techniques for Building Quick Rapport with Anyone.
I gave Robin a call to get some answers. (Note that Robin is not speaking for the FBI here, these are his expert insights.)
You’re going to learn:
- The #1 secret to clicking with people.
- How to put strangers at ease.
- The thing you do that turns people off the most.
- How to use body language like a pro.
- Some great verbal jiu-jitsu to use on people who try to manipulate you.
And a lot more. Okay, let’s learn something.
1) The Most Important Thing To Do With Anyone You Meet
Robin’s #1 piece of advice: “Seek someone else’s thoughts and opinions without judging them.”
Ask questions. Listen. But don’t judge. Nobody — including you — likes to feel judged.
The number one strategy I constantly keep in the forefront of my mind with everyone I talk to is non-judgmental validation. Seek someone else’s thoughts and opinions without judging them. People do not want to be judged in any thought or opinion that they have or in any action that they take.
It doesn’t mean you agree with someone. Validation is taking the time to understand what their needs, wants, dreams and aspirations are.
So what should you do when people start spouting crazy talk? Here’s Robin:
What I prefer to try to do is, as soon as I hear something that I don’t necessarily agree with or understand, instead of judging it my first reaction is, “Oh, that’s really fascinating. I never heard it in quite that way. Help me understand. How did you come up with that?”
You’re not judging, you’re showing interest. And that lets people calmly continue talking about their favorite subject: themselves.
Studies show people get more pleasure from talking about themselves than they do from food or money:
Talking about ourselves—whether in a personal conversation or through social media sites like Facebook and Twitter—triggers the same sensation of pleasure in the brain as food or money…
(To learn how FBI hostage negotiators build rapport and trust, click here.)
So you’ve stopped being Judgy Judgerson and you’re happily validating. Oh, if it were only that easy… What’s the problem here? Your ego.
2) Suspend Your Ego To Make People Love You
Most of us are just dying to point out how other people are wrong. (Comment sections on the internet are fueled by this, aren’t they?)
And it kills rapport. Want to correct someone? Want to one-up them with your clever little story? Don’t do it.
Ego suspension is putting your own needs, wants and opinions aside. Consciously ignore your desire to be correct and to correct someone else. It’s not allowing yourself to get emotionally hijacked by a situation where you might not agree with someone’s thoughts, opinions or actions.
When people hear things that contradict their beliefs, the logical part of their mind shuts down and their brain prepares to fight.
So what happened in people’s brains when they saw information that contradicted their worldview in a charged political environment? As soon as they recognized the video clips as being in conflict with their worldview, the parts of the brain that handle reason and logic went dormant. And the parts of the brain that handle hostile attacks — the fight-or-flight response — lit up.
(For more on keeping a conversation fun, click here.)
So you’ve stopped trying to be clever. But how do you get a reputation as a great listener?
3) How To Be A Good Listener
We’ve all heard that listening skills are vital but nobody explains the right way to do it. What’s the secret?
Stop thinking about what you’re going to say next and focus on what they’re saying right now.
Be curious and ask to hear more about what interests you.
Listening isn’t shutting up. Listening is having nothing to say. There’s a difference there. If you just shut up, it means you’re still thinking about what you wanted to say. You’re just not saying it. The second that I think about my response, I’m half listening to what you’re saying because I’m really waiting for the opportunity to tell you my story.
What you do is this: as soon as you have that story or thought that you want to share, toss it. Consciously tell yourself, “I am not going to say it.”
All you should be doing is asking yourself, “What idea or thought that they mentioned do I find fascinating and want to explore?”
Research shows just asking people to tell you more makes you more likable and gets them to want to help you.
The basics of active listening are pretty straightforward:
- Listen to what they say. Don’t interrupt, disagree or “evaluate.”
- Nod your head, and make brief acknowledging comments like “yes” and “uh-huh.”
- Without being awkward, repeat back the gist of what they just said, from their frame of reference.
- Inquire. Ask questions that show you’ve been paying attention and that move the discussion forward.
(To learn the listening techniques of FBI hostage negotiators, click here.)
I know, I know — some people are just boring. You’re not that interested in what they’re saying. So what questions do you ask then, smart guy?
4) The Best Question To Ask People
Life can be tough for everyone: rich or poor, old or young. Everyone.
We all face challenges and we like to talk about them. So that’s what to ask about.
A great question I love is challenges. “What kind of challenges did you have at work this week? What kind of challenges do you have living in this part of the country? What kinds of challenges do you have raising teenagers?” Everyone has got challenges. It gets people to share what their priorities in life are at that point in time.
Questions are incredibly powerful. What’s one of the most potent ways to influence someone? Merely asking for advice.
Via Adam Grant‘s excellent Give and Take: A Revolutionary Approach to Success:
Studies demonstrate that across the manufacturing, financial services, insurance, and pharmaceuticals industries, seeking advice is among the most effective ways to influence peers, superiors, and subordinates. Advice seeking tends to be significantly more persuasive than the taker’s preferred tactics of pressuring subordinates and ingratiating superiors. Advice seeking is also consistently more influential than the matcher’s default approach of trading favors.
Twisting your mustache thinking you can use this for nefarious purposes? Wrong, Snidely Whiplash. It only works when you’re sincere.
In her research on advice seeking, Liljenquist finds that success “depends on the target perceiving it as a sincere and authentic gesture.” When she directly encouraged people to seek advice as an influence strategy, it fell flat.
(For a list of the questions that can create a strong bond in minutes, click here.)
But what if you have to approach someone cold? How do you get people who might not want to talk to you to willingly give you their attention?
5) How To Make Strangers Feel At Ease
First thing: tell them you only have a minute because you’re headed out the door.
When people think you’re leaving soon, they relax. If you sit down next to someone at a bar and say, “Hey, can I buy you a drink?” their shields go way up. It’s “Who are you, what do you want, and when are you leaving?” That “when are you leaving” is what you’ve got to answer in the first couple of seconds.
Research shows just asking people if now is a good time makes them more likely to comply with requests:
The results showed that compliance rates were higher when the requester inquired about respondents’ availability and waited for a response than when he pursued his set speech without waiting and inquiring about respondents’ availability.
Nobody wants to feel trapped talking to some weirdo. People are more likely to help you than you think, but they need to feel safe and in control.
(For more on how to make friends easily, click here.)
Even if you get all of the above right you can still come off like a shady used car salesman. And that fear stops you from meeting new awesome people.
Robin says one of the key reasons people come off as untrustworthy is because their words and their body language are misaligned. Let’s fix that.
6) The Best Body Language For Building Rapport
You words should be positive, free of ego and judgment ? and your body language (“non-verbals”) needs to match.
Here are the things Robin recommends:
- “The number one thing is you’ve gotta smile. You absolutely have to smile. A smile is a great way to engender trust.”
- “Keep that chin angle down so it doesn’t appear like you’re looking down your nose at anyone. And if you can show a little bit of a head tilt, that’s always wonderful.”
- “You don’t want to give a full frontal, full body display. That could be very offensive to someone. Give a little bit of an angle.”
- “Keep your palms up as you’re talking, as opposed to palms down. That says, “I’m hearing what you’re saying. I’m open to what your ideas are.”
- “So I always want to make sure that I’m showing good, open, comfortable non-verbals. I just try to use high eyebrow elevations. Basically, anything going up and elevating is very open and comforting. Anything that is compressing: lip compression, eyebrow compression, where you’re squishing down, that’s conveying stress.”
Depending on whose smile you see, the researchers found that one smile can be as pleasurable and stimulating as up to 2,000 bars of chocolate! …it took up to 16,000 pounds sterling in cash to generate the same level of brain stimulation as one smile! This is equivalent to about $25,000 per smile…
(To learn how to decode body language and read people like a book, click here.)
So now you come off as the pleasant person you are, not as a scheming taker. But what do you do when the other person is a scheming taker?
7) How To Deal With Someone You Don’t Trust
The name of this blog is not “Helpful Tools For Sociopaths.” I’m not trying to teach you to manipulate others.
But what should do you do when you feel someone is using these methods to try and manipulate you?
Don’t be hostile but be direct: ask them what they want. What are their goals in this interaction?
The first thing I try to do is clarify goals. I’ll stop and say, “You’re throwing a lot of good words at me. Obviously you’re very skilled at what you’re doing. But what I’m really curious about… What’s your goal? What are you trying to achieve? I’m here with my goals, but obviously you have to achieve your goals. So if you can just tell me what your objectives are, we can start from there and see if we can mutually take care of them. If not, that’s fine too.”
I watch for validation. If someone is trying to validate me and my thoughts and opinions, I am alert to it. I love doing that as well. So now I’m looking for intent. Are you there for me or are you there for you? If you are there strictly for your own gain and you’re not talking in terms of my priorities ever, that’s when I’m seeing someone is there to manipulate me.
When you ask people what the most important character trait is, what do they say? Trustworthiness.
Participants in 3 studies considered various characteristics for ideal members of interdependent groups (e.g., work teams, athletic teams) and relationships (e.g., family members, employees). Across different measures of trait importance and different groups and relationships, trustworthiness was considered extremely important for all interdependent others…
(To learn how to detect lies, click here.)
That’s a lot more to digest than “Just be yourself” but far more effective. Let’s round it up and make it something you can start using today.
Here are Robin’s tips:
- The single most important thing is non-judgmental validation. Seek someone else’s thoughts and opinions without judging them.
- Suspend your ego. Focus on them.
- Really listen, don’t just wait to talk. Ask them questions; don’t try to come up with stories to impress.
- Ask people about what’s been challenging them.
- Establishing a time constraint early in the conversation can put strangers at ease.
- Smile, chin down, blade your body, palms up, open and upward non-verbals.
- If you think someone is trying to manipulate you, clarify goals. Don’t be hostile or aggressive, but ask them to be straight about what they want.
(For more insights from Robin’s book, click here.)
Robin’s a fascinating guy and we ended up speaking for over an hour, so the above is just part of what he had to say.
I’ll be sending out an extended interview in my next weekly email update.
Crux note: You can sing up for Eric’s fantastic, free weekly update, right here.
From Zero Hedge:
More and more people ? including such shocking statist luminaries as Alan Greenspan (the person more responsible for today’s global depression than anyone else) and the Treasury Borrowing Advisory Committee ? are realizing that the old “debt = growth, saving = bad, spending = prosperity, and inflation = utopia” economic paradigm, the one unleashed by John Maynard Keynes, is the primary reason for today’s worldwide economic devastation…
And then there is BusinessWeek, which quite to the contrary, is urging its readers in its cover story to ignore common sense and do more of the same that has led the world to the economic dead end it finds itself in currently…
And spend, spend, spend… preferably on credit.
Because, supposedly this time, the resulting crash from yet another debt-funded binge will be… different?
Then again, an article that has this line…
With fiscal policy missing in action, the world’s biggest central banks tried heroically to plug the gap.
… surely has to be premised on sarcasm.
Hardly anyone can be so clueless not to realize that it was the “heroic” central banks “getting to work” for the past six years that enabled fiscal policy to stay on the sidelines. It has led to the most dysfunctional Congress in history… to a Europe that in the past five years has implemented precisely zero reforms… and where nothing at all has changed…
Except debt has hit new record highs, the amount of reserves in circulation is un-chartable, the number of billionaires is hitting new records every week (even as the people living on food stamps and out of the labor force is unprecedented), and, of course, the S&P 500 is at an all-time high.
So we will operate on the assumption that indeed BusinessWeek‘s Peter Coy, in his cover story, is merely pulling a prank. Because the alternative is far scarier, if funnier, to contemplate…
There is a doctor in the house, and his prescriptions are more relevant than ever. True, he’s been dead since 1946. But even in the past tense, the British economist, investor, and civil servant John Maynard Keynes has more to teach us about how to save the global economy than an army of modern Ph.D.s equipped with models of dynamic stochastic general equilibrium. The symptoms of the Great Depression that he correctly diagnosed are back, though fortunately on a smaller scale: chronic unemployment, deflation, currency wars, and beggar-thy-neighbor economic policies.
Some of the other pearls…
This isn’t a stable status quo. The mid-October shock in global stock markets betrayed grave concerns about a relapse. While the U.S. economy is growing adequately for now despite the drag from fiscal policy, China’s pace is slowing, Japan is suffering from the self-inflicted wound of its consumption tax hike, and the 18-nation euro zone had zero growth in the second quarter. That simply isn’t good enough, Treasury Secretary Jacob Lew said in an October visit to Bloomberg. “You need all four wheels to be moving,” he said, “or it isn’t going to be a good ride.”
Enter Lord Keynes. Cutting interest rates is fine for raising growth in ordinary times, he said, because lower rates induce consumers to spend rather than save while stimulating businesses to invest. But where rates sink to the “lower bound” of zero, he showed, central banks become nearly powerless, while fiscal policy (taxes and spending) becomes highly effective as a fix for inadequate demand. Governments can raise spending to stimulate demand without having to worry about crowding out private investment ? because there’s plenty of unused capacity, and their spending won’t lift interest rates.
It’s the closest thing economists have found to a free lunch. Keynes, ever the provocateur, argued that in a deep recession anything the government did to induce economic activity was better than nothing ? even burying bottles stuffed with bank notes in coal mines for people to dig up.
Of course, it’s far better if the money is spent well. Considering the crying need for better roads, bridges, tunnels, schools, and the like, it’s a no-brainer for governments to build them now, when there are willing hands and cheap loans. Harvard economist Lawrence Summers, a former Treasury secretary, and Brad DeLong of the University of California at Berkeley argued in 2012 that infrastructure investment might even pay for itself, in part by keeping people employed so their skills don’t atrophy.
Love him or hate him, there’s no one like Keynes on the world stage today. He was a statesman, a philosopher, a bohemian lover of ballet, and a member along with Virginia Woolf in the artsy, intellectual Bloomsbury Group. He made and lost fortunes as an investor and died rich.
In 1919, in a prescient book called The Economic Consequences of the Peace, he condemned harsh reparations imposed on Germany after World War I, which were so punitive that they helped create the conditions for Adolf Hitler’s Third Reich. In 1936, he essentially invented the field of macroeconomics in his masterwork, The General Theory. From 1944 until close to his death at age 62 two years later, he led Britain’s delegation in negotiations that resulted in the founding of the International Monetary Fund and the World Bank.
The world was lucky in the 1970s and early 1980s, when finally Keynes lunacy quickly unraveled, when as even Coy admits, “his theories couldn’t readily account for stagflation the coexistence of high unemployment and high inflation.”
Academic economists were drawn to the new theory of “rational expectations,” which said that government couldn’t possibly stimulate the economy through deficit spending because foresighted consumers would rationally expect that the stimulus would have to be paid for eventually and so would save for future tax hikes, offsetting the initiative.
Supply-side economists said Keynes missed how low taxes could stimulate long-term growth by inducing work and investment. “Unsuccessful policies and confused debates have left Keynesian economics in disarray,” the Swedish economist Axel Leijonhufvud wrote in 1983 for a conference celebrating Keynes’s centennial.
A successor theory that evolved in the 1980s and 1990s, New Keynesianism, attempted to inject rational expectations theory into Keynes’s worldview while preserving his observation that prices and wages are “sticky”? i.e., they don’t fall enough in a slump to equalize supply and demand. New Keynesians range from conservatives such as John Taylor of the Hoover Institution to liberals like Berkeley’s DeLong.
Of course, what ended up happening is that one bad theory was replaced by an even worse one, when in the 1980s Alan Greenspan unleashed the “Great Moderation” genie and the Fed’s bubble factory was put on “max.” But that is a topic too complex for the BW author. Instead, he quotes Joe Lavorgna:
On Wall Street, Keynesianism never really died, because its theories did a good job of explaining the short-term fluctuations bank economists are paid to predict. “We approach forecasting more from a Keynesian perspective whether we like him or not,” says Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities.
Actually, Joe, speak for yourself. And then there is the inevitable outcome of the entire world following Keynesian policies. War.
If Keynes were alive today, he might be warning of a repeat of 1937, when policy mistakes turned a promising recovery into history’s worst double dip. This time, Europe is the danger zone; then it was the U.S.
What’s called the Great Depression was really two steep downturns in the U.S. The first ended in 1933. It was followed by four years of output growth averaging more than 9 percent a year, one of the strongest recoveries ever.
What aborted the comeback is still debated. Some economists blame President Franklin Roosevelt for signing tax hikes and cuts in New Deal jobs programs. Others blame the Federal Reserve. Dartmouth College economist Douglas Irwin argues that the Roosevelt administration triggered the relapse by buying up gold, removing it from the U.S. monetary base. The move to prevent inflation succeeded all too well, causing deflation.
Whatever the cause, Britain and other trading partners were dragged down, and U.S. output plunged and didn’t fully recover until America’s entry into World War II. “We are really at a kind of 1937 moment now,” says MIT’s Temin. “It’s a cautionary history for us.”
In short, let’s accelerate the world’s collapse into yet another global war and listen to Keynes once again. Judging by the number of all out conflicts around the globe, and how much the latest “war on terror” boosted U.S. third quarter gross domestic product, we are already half way there.
Not enough humor? The rest can be found here.
Then again, maybe the joke’s on us, and the only thing that one can hope is “stimulated” are magazine sales.
From Dr. David Eifrig, MD, MBA, editor, Retirement Millionaire:
Add some spice to your food to help your brain… A new study from the Institute of Neuroscience and Medicine in Germany found a compound in turmeric – a spice used in curry – can help the brain heal itself. Researchers injected the compound, called aromatic-tumerone, into the brains of rats. Brain scans showed that the parts of the brain involved with nerve-cell growth became more active. This leads to the thought that new cells might grow to repair a damaged brain.
While this hasn’t been tested on humans, it could mean better treatment for people with brain damage from conditions like dementia or from strokes. And longtime Retirement Millionaire subscribers already know about the health benefits of turmeric.
Last year, I told readers that turmeric acts as an anti-inflammatory, which can relieve joint pain, improve digestion, and protect against memory loss. In the S&A Health Report in 2007, I explained how another antioxidant compound in turmeric – curcumin – works to fight inflammation and ward off Alzheimer’s disease.
If you don’t like curry, do what I do… use turmeric as a spice on salads, in soups, and on rice. And if you use it with black pepper, you’ll get even more of the benefits, as pepper helps your body absorb more of the nutrients from the spice.
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The reasons oil prices started sliding in June were hiding in plain sight: growth in U.S. production, sputtering demand from Europe and China, Mideast violence that threatened to disrupt supplies and never did.
After three-and-a-half months of slow decline, the tipping point for a steeper drop came on Oct. 1, said Ray Carbone, president of broker Paramount Options Inc. That’s when Saudi Arabia cut prices for its biggest customers. The move signaled that the world’s largest exporter would rather defend its market share than prop up prices.
“That, for me, was the giveaway,” Carbone said in an Oct. 28 phone interview from his New York office. “Once it started going, it was relentless.”
The 29 percent drop since June of the international price caught traders and forecasters by surprise. After a steady buildup of supply and weakening demand, the outbreak of an OPEC price war is casting doubt on investments in new oil resources while helping the global economy, keeping inflation in check and giving motorists a break at the pump.
Brent crude, the global benchmark, declined to $82.60 a barrel on Oct. 16, the lowest in almost four years, from $115.71 on June 19. In the U.S., West Texas Intermediate touched $79.44 on Oct. 27, the lowest since June 2012. U.S. regular unleaded gasoline is averaging close to a four-year low of $3.01 a gallon nationwide, according to AAA.
The bear market exceeded the decline anticipated in exchange-traded futures, used by producers to hedge price swings. As recently as a month ago, Brent for delivery in November traded at $97.20 a barrel, 12 percent above the current price.
OPEC Secretary-General Abdalla el-Badri denied the existence of a price war. “Our countries are following the market,” he said yesterday at the Oil & Money conference in London. “People are selling according to the market price.”
Officials from the Saudi oil ministry could not be reached for comment after hours.
Prices stayed higher earlier this year as traders focused on the risk that armed conflicts in Libya, Iraq and Ukraine could interfere with oil production, according to Jeff Grossman, president of New York-based BRG Brokerage. The disruptions never materialized.
“This one caught a few people off guard because they were still worried about some of these geopolitical things that were happening all over the world that never came to fruition,” said Grossman, a New York Mercantile Exchange floor trader. “We probably never should have been over $100.”
Libya’s production tripled since June to about 900,000 barrels a day, still 40 percent lower than two years ago, according to an official with direct knowledge of the matter. War hasn’t stopped production in Iraq, which is pumping 3.1 million barrels a day, within 10 percent of February’s 13-year high. The Organization of Petroleum Exporting Countries boosted September production to an 11-month high of 30.9 million barrels a day.
London-based Barclays Plc cut its oil-price forecasts on Oct. 28 for the second time this month, citing a global surplus. Brent will average $93 a barrel in 2015, while WTI averages $85, down from previous estimates of $96 and $89, respectively, the bank said.
The revision follows Goldman Sachs Group Inc. cutting its 2015 forecasts a day earlier, to $85 a barrel from $100 for Brent, and to $75 a barrel from $90 for WTI. Brent will average $99.65 a barrel in 2015, down from a September prediction of $105.50, according to the average of 46 analyst estimates compiled by Bloomberg.
OPEC faces increasing competition from the U.S., where technological breakthroughs — hydraulic fracturing and horizontal drilling — have enabled domestic production to replace imports at a historic pace. Output surged 14 percent in the past year to 8.97 million barrels a day, the highest since the U.S. Energy Information Administration’s weekly estimates began in 1982.
Yet U.S. production has been booming for years now without setting off a bear market, said Katherine Spector, an analyst at CIBC World Markets Corp. What changed this summer was macroeconomic data indicating weak demand in Europe and Asia, she said in an Oct. 16 report.
The International Monetary fund this month cut its forecasts for global growth in 2015 to 3.8 percent from 4 percent. The Paris-based International Energy Agency predicted world oil consumption would expand at the slowest pace since 2009 after cutting its forecast in October for the fourth time in a row, to half what it predicted in June.
On Oct. 1, Saudi Arabia lowered prices on its crude exports to Asia to the lowest in more than five years. Iraq and Iran followed. Frankfurt-based Commerzbank AG called it a price war.
Brent crude for December settlement fell 72 cents to $86.40 a barrel on the ICE Futures Europe exchange as of 10:47 a.m. in London. West Texas Intermediate lost 71 cents to $81.49.
“That’s where the perception of their action changed overnight,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “They must have been aware how the market would interpret that when they’d been such a guarantor of stable prices for so long.”
The plunge does not accurately reflect the balance between oil supply and demand, OPEC’s El-Badri said at the London conference yesterday.
“We see that demand is still growing, that supply is also growing, but the magnitude in the increase in supply does not really reflect this 25 percent change in the market,” he said. “Unfortunately, everybody is panicking.”
As Saudi Arabia tolerates lower prices to protect its market share, the kingdom is also testing the level at which higher-cost U.S. production remains profitable, according to the IEA. As much as 50 percent of shale oil is uneconomic at current prices, El-Badri said. New York-based Sanford C. Bernstein & Co. estimates about a third of U.S. production from shale loses money at $80 a barrel.
“We think there’s a lot of economic oil at $75, economic meaning we earn 15 percent, 16 percent, 17 percent returns,” Stephen Chazen, chief executive officer of Houston-based Occidental Petroleum Corp., said during a conference call with analysts Oct. 23.
Other U.S. drillers have already altered plans due to lower prices.
Dallas-based Exco Resources Inc. will defer some drilling in North Louisiana because of lower prices, President Harold Hickey said on a conference call yesterday.
“We’ve used $100 Brent as the basis for our plans even as Brent has averaged nearly $110 for the last three years,” John Hess, New York-based Hess Corp.’s billionaire CEO, said on a conference call yesterday. “However, with Brent now at approximately $87 per barrel, we are reviewing our plans and actions that we might take in a lower price environment.”
Al Walker, chairman and CEO of The Woodlands, Texas-based Anadarko Petroleum Corp., said on a conference call yesterday that the company will “watch this for a few more months and when we announce our capital plans in March, we’ll have a much better idea of what we expect.”
Consumers, on the other hand, have cause to celebrate. A 20 percent drop from the average oil price of the past three years amounts to a $1.1 trillion annual stimulus to the world economy, Citigroup Inc. estimates. In the U.S., gasoline continuing at the current level would add 0.4 percent to annual economic growth, according to Joseph LaVorgna, New York-based chief U.S. economist at Deutsche Bank Securities Inc.
“Historically, when price changes kick in, they are usually more violent than the forecasts,” said Torbjoern Kjus, senior oil market analyst at DNB ASA in Oslo. “It’s difficult for analysts to see such a massive drop, as you will look like a conspiracy theorist.”
Some analysts do, however, see a price rebound. Brent will climb to as much as $100 a barrel next year, according to London-based Standard Chartered Plc, Sanford C. Bernstein, and Barclays.
From Amber Lee Mason, editor, DailyWealth Trader:
“If you don’t take advantage of this idea,” I told the crowd, “you can’t call yourself an investor… ”
I was recently in Nashville, Tennessee for the latest Stansberry Conference Series event. It was a great show. We heard from master resource investor Rick Rule, Agora founder Bill Bonner, and former Congressman Ron Paul.
And for the first time, I got up and told the crowd about my best idea… I said it was the day’s top moneymaking strategy. And if folks only took one thing away from the conference, it should be this idea.
This idea has nothing to do with trading. It’s the kind of thing you should buy now and forget you own… for decades, if you can.
Let me show you what I shared with the audience…
Take a look at the below chart. It compares the average annual return of individual investors from 1993 to 2012 with the returns of a bunch of other asset classes during that period.
As you can see, several asset classes averaged annual returns between 6% and 8%. But because he was buying and selling at the wrong times, the Average Joe investor did terribly… below even inflation, which means he was essentially losing money year after year.
Imagine looking back 10, 20, 30 years from now and realizing that, after all your effort, that’s all you achieved?
On the other end of the spectrum, here’s what some of the world’s greatest investors did.
Bruce Berkowitz was named “fund manager of the decade” for 2000-2009. His Fairholme Fund made investors 13.2% over that time frame.
Leon Cooperman founded Omega Advisors after retiring as CEO of Goldman Sachs Asset Management. His average annual return since 1992, after subtracting management fees, was 14.3%.
Warren Buffett is probably the biggest name in investing… and for good reason. His average annual returns over 50 years of investing are just under 20%.
The promise I made to the folks in Nashville was that my idea could take them from one end of the chart – where the Average Joe is losing money – to the other end of the chart, where the all-time greats are building enormous wealth.
And there IS a way for part-time, amateur investors to get there… You can do it by compounding.
Compounding is “making money off the money you make,” as my friend and mentor “Doc” Eifrig puts it. In short, if you own an asset that pays income, you use that income to buy more of the asset. And since you then own more of the asset, you earn even more income. Then, you use that income to buy more of the asset… and so on.
It’s a snowball effect. Reinvesting your income increases your returns exponentially. Over the long term, it can turn even a small investment into a fortune. And there’s a group of stocks that you should use to start compounding your wealth right away.
They’re called the Dividend Aristocrats. A company gets into the Aristocrats if it has been raising its dividend for at least 25 years in a row.
In other words, these companies had to maintain their competitive advantages and generate plenty of cash year after year after year. They didn’t get derailed by a bad economy, bad management, or a bad market. Only the world’s best companies do that.
And the world’s best companies will treat you way better than the average stock. Here’s how the Dividend Aristocrats Index has done, with dividends reinvested, compared with the benchmark S&P 500 over the last 24 years.
As you can see, the Aristocrats just about doubled the S&P 500′s return.
And here’s another way to look at it. Below, you’ll find the average annual share price growth and dividend growth of the S&P 500 and the Aristocrats. And it’s the dividend growth that makes the difference… An increasing income stream supercharges the effects of compounding.
You can see the effect in the next chart. If you take these average annual returns and project them forward by 30 years, you’ll see that $10,000 invested in the Dividend Aristocrats would turn into $670,000. $10,000 invested in the S&P 500 would turn into just $320,000.
Now, I can’t guarantee the Aristocrats will turn every $10,000 into $670,000 between now and 2044… But it’s very likely they’ll far outperform the S&P. That’s the effect of compounding with growing income. It’s mechanical.
And depending how long you allow your wealth to compound with the Aristocrats, you could very well find yourself in league with the world’s best investors… Take a look.
Right now, there are 54 stocks in the Aristocrats index… that’s a lot of stocks to buy and keep track of. But there’s an easy, one-click way to own all of them:
The ProShares S&P 500 Dividend Aristocrats Fund (NOBL) owns all 54 stocks. It has low, 0.35% annual fees. And if you buy it and ask your broker to reinvest your dividends, you’ll start compounding your wealth immediately.
Most Average Joe investors will never understand this idea or put it to work… and most Average Joe investors will achieve terrible lifetime results.
If you’re looking to move from Average Joe returns to extraordinary returns, buy companies that relentlessly grow their dividends. The easiest way to do that is with NOBL.
P.S. My colleague Dan Ferris has spent more time than anyone I know researching the highest-quality income stocks you can buy. In Dan’s new book, he teaches readers how to identify these stocks – which he calls “World Dominating Dividend Growers” – and more importantly, when you should buy them.
If you want to earn safe, steady, and growing income with “the beachfront real estate of the stock market,” Dan’s book is a must-read. I have a copy on my desk. If you want one, too, click here.
Three Ways to Start Considering Gold Investment
Along with coins and bars, a well-established way to invest in gold is to invest in the shares of a company that mines gold. As long as the price of gold increases, gold-mining firms are likely to show higher profits, which will increase their share …
Crash-Proof Your Portfolio: Invest in Gold Now
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ETFs — like the world's largest gold ETF, the SPDR Gold Share Trust (NYSE: GLD) — track the price of gold but alleviate many of the problems of investing directly in physical gold. But ETFs have a crucial disadvantage compared to the gold miners …
Precious-Metals Equities: A Pocket of Cheapness in a Fairly Valued Market?Morningstar.com
EGO Crosses Critical Technical IndicatorNasdaq
The commodity equities are selling off as The Fed halts QE3. Commodities, metals and the junior miners are hitting multi year lows and falling below 2008 credit crisis levels. This is not a time to panic but continue to accumulate as the bear market may be reaching the final capitulation stage. This decline may be a sign that the quantitative easing may have lifted stock market indices, but it did little to improve demand and growth in the economy reflected by demand for energy and metals.
I just returned from the New Orleans Conference which was headlined by Alan Greenspan the former Federal Reserve Chairman from 1987 to 2006. It is interesting to note that Greenspan has become bullish on gold. He believes that quantitative easing did not accomplish what it was designed to do. It helped lift the stock market and stabilize the real estate market, however it fell short as the US economy is not really recovering like it should have. Gold is the best hedge against this uncertainty.
I happen to agree with him. Real estate values have jumped and stock market indices are hitting new highs. Only a small fraction of the US has gotten wealthier as the real economy continues to struggle. Greenspan is continuing to warn about the Fed’s exit from quantitative easing, which I am quite concerned about as well. Look at the recent volatility in the US dollar and treasuries. When the US dollar is moving parabolically higher like a dot com stock I exercise caution as this could have drastic effects on foreign exchange markets and international trade. The way to hedge against this volatility caused by government interventions and manipulations is precious metals and commodities. Accumulate during a bear market when it is on sale. A turnaround could be right around the corner.
Contrarian value investors should be looking at emerging junior uranium producers and explorers that are still trading for pennies on the dollar. The uranium spot price has made a dramatic move higher as Japan begins turning back on nuclear reactors and large producers such as Cameco announce production declines. There is a lot of buying in the spot market and it should be soon reflected in the performance of the junior uranium miners (URA). Look for a breakout past $37 on the U3O8 spot price.
A town in southwest Japan approved the restart of a nuclear power station. This is a sign that if Japan who suffered greatly from the Fukushima disaster can turn back on reactors then the rest of the world should continue to build newer and safer next generation nuclear reactors. Japan turned off the nuclear reactors following Fukushima in March of 2011. However, nuclear reactors may start coming back online in 2015. Japan’s economy can no longer handle importing expensive oil and gas. Nuclear is vital to Japan’s economy and used to supply close to one-third of their overall energy needs.
Don’t forget that he US is the largest consumer of nuclear power yet produces less than 10% of what it demands every year. For decades, America relied on Russia to supply cheap uranium in the megatons to megawatts program. This deal concluded at the end of 2013 and Russia could continue tightening its control on uranium as a bargaining chip against economic sanctions from the West.
Smart money is buying small emerging junior uranium producers in the US where demand far outpaces supply. Anfield Resources Inc. (TSX.V: ARY)(OTCQB: ANLDF) released news that they are acquiring the Shootaring Canyon Uranium Mill from Russian nuclear giant Uranium One. They just announced approval from the Utah Division of Radiation Control to transfer the license.
Anfield acquired a portfolio of uranium assets around the mine with historical estimates of 6.8 million pounds of uranium. For only $5 million in cash and shares paid out over 4 years Anfield has jumped to become a major contender in the U.S. uranium industry.
Anfield now owns one of three licensed uranium mills in the United States with one of the largest uranium land packages of more the 65k acres. Owning the mill is crucial as it allows the company to have control all the way from mining to production of yellowcake. Anfield could be a major supplier of uranium to help with the current supply deficit in the United States.
As Anfield Resources CEO Corey Dias said, “We are extraordinarily excited about the acquisition at it is transformational for the Company. With the acquisition of one of only three licensed and permitted uranium mills in the United States, we have significantly accelerated our timeline with regard to becoming a uranium producer. The mill is currently in good condition as it has been on continuous care and maintenance since it ceased operations.” With a market cap of only $10 million Anfield may be a cheaper and a more undervalued situation than some of its peers.
See my recent interview with Anfield (ARY.V or ANLDF) CEO Corey Dias by clicking here…
For more info on Anfield Resources Contact:
Anfield Resources Inc.
Disclosure: I own Anfield Resources and the company is a website sponsor.
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