Category Archives: Economy and Meltdown

House Passes Sequester Replacement "Spending" Bill By 215-209 Vote, "Plan B" Vote Next – Live Webcast

Update: an unexpected setback for Boehner appears to have appeared with rumors that there may not be enough votes in support of Plan B. As a result the vote on Plan B is for now delayed, and the Republican leaders are said to plan a 7:45pm conference. Suddenly it is becoming a real nailbiter. Stay tuned and grab your popcorn.

The first key vote on the House’s docket – the Spending Cut Bill, i.e. the Sequester removal, has just passed as widely expected, by a vote of 215-209 with 21 Republicans voting now. Shortly thereafter, the House will vote on the “Plan B” Boehner tax proposal which too is expected to pass the House, and then be blocked by the Senate. At that point the Fiscal Cliff debate for 2012 is likely to be shelved and reopened in 2013 only after the consequences of the Fiscal Cliff have taken place. A final resolution may well stretch out into March, as we predicted previously, when the drop dead decision date is due – that coinciding with the debt ceiling increase, which by mid-March will no longer be extendable.  Watch the vote live below.

Visualizing The Changing Face Of Global Manufacturing

Manufacturing industries have helped drive economic growth and rising living standards for nearly three centuries, and for some developing economies (as McKinsey notes in a recent report) continues to do so. Things are changing, however, as manufacturing output (as measured by gross value added) grew by 2.7% annually in advanced economies and 7.4% in large developing economies (from 2000 up until 2007); the leaders are changing rapidly China, India and Russia rise and Germany, Japan, UK, and Canada are sliding. The following chart simplifies the evolution of global manufacturing economies over the last four decades.

 

 

Source: McKinsey

RIMMberrrr – Redux (-20% from AH Highs)

With every man, woman, and child now firmly aboard the ‘RIMM is back’ bandwagon, the squeeze in after-hours trading appears to have had a 30-minute half-life. It seems the Blackberry-maker just can’t get a break. Two words “iconic” and “Kodak” come to mind… RIMM is now -9% on the day, after being up 4% at the day-session close and up over 13% on earnings news… oops. Paging Eric Jackson? Or Jimbo?


 

$RIMM huge–you close enough plants and keep revs stead, you make a ton of money…

— Jim Cramer (@jimcramer) December 20, 2012

 

 

RIMM -20% from after-hours highs

 

Guest Post: Gun Grabbers Call For Re-Education Programs In Public Schools

Submitted by Brandon Smith of Alt-Market blog,

Was the shooting of 20 students in Newtown, Connecticut the Neo-Liberal version of 9/11?  The question merits considerable thought, but let me explain further what I mean.  In the aftermath of the 9/11 World Trade Center attacks, a sense of shock and awe sunk into the minds of the American populace like nothing seen in decades.   This overwhelming fear, this logic crippling terror, infected the public to more destructive ends than any deadly virus in existence.  Conservatives were especially vulnerable to the infectious symptoms of the event, abandoning all reason and even their small government values to support the fascist inklings of the Bush Administration; a Neo-Con (fake conservative) driven presidency with ambitions of constitutional reversal.  Whatever you may believe about the true causes and culprits behind 9/11, no one can deny that Bush and his ilk sought to exploit the tragedy to gain political capital to be used in the destruction of American civil liberties. 

More than a decade later, the Neo-Liberal (fake liberal) Obama Administration and its minions continue the Bush legacy by exploiting our latest tragedy at Sandy Hook Elementary as a means to an end; a political opportunity to assert federal authority as more valuable than constitutional freedom.

The onset of the illegal wars thrust upon the Middle East after 9/11 brought with it mass resistance from the “left” side of the political spectrum.  Protests abounded, dissenters were numerous, and Bush responded in kind with unprecedented domestic surveillance programs and attacks against free speech.  Democratic leaning citizens saw the criminality of it because they were unhindered by bias.  The archetypal manipulation of 9/11 and the fear mongering of the terrorist myth was less effective on them.  However, times have changed…

With a Democratic president in the White House, the left has grown addicted to their perceived (but illusory) social leverage.  The intoxicating symptoms of power overdose have clouded their vision, and that which they fought against in the Bush years now appears rather fair and acceptable to them today.  Obama has so far committed every war atrocity that Bush was ever guilty of in his tenure, while expanding on liberty nullifying pieces of legislation Bush set into motion.  Liberals cry out in horror at the deaths of 20 children in Connecticut while cheering a man like Obama, who orders predator drone strikes that result in the deaths of children everyday.  Of all the people in this country, self proclaimed “progressives” are the most hypocritical and the most disappointing as human beings.

Adding to that disappointment, Obama’s more aggressive socialist support base (useful idiots) along with the establishment controlled mainstream media are attempting to squeeze every last ounce of political advantage from the Newtown massacre to gain superiority in a battle over one of the last portions of the Constitution that people still seem willing to fight and die for:  The 2nd Amendment.

In the past few days I have seen an unprecedented tidal wave of media stories promoting anti-gun sentiments and prejudice against gun ownership.  Counterpoints to this philosophy are almost never given credence in print or on television, and when they are, gun rights advocates are interrupted with incessant Alinsky arguments attacking their characters or distracting away from the real issues.  What the MSM is attempting to do (blatantly and shamelessly I might add) is to create the illusion of consensus.  Through a deluge of constant propaganda, they hope to implant the false perception that a “majority” of Americans are in support of strict gun control or even confiscation.

What I have found though in my seven years as an analyst in the independent media is quite the opposite.  America’s appreciation of gun rights and gun ownership is increasing exponentially.  Not because of some newfound love affair for “hunting”; that’s just nonsense.  Instead, the public is embracing our gun culture because they are slowly realizing the need for self defense in these precarious times, and this need extends to defense against a highly corrupt government (hence the public’s right to military style weapons).  Gun ownership has even increased amongst Democrats after the election of Barack Obama, and gun sales have skyrocketed beyond all expectation.  Interestingly, some gun grabbers are willing to admit that 2nd Amendment principles are pervasive in the U.S., and have suggested that the Obama Administration target not only gun ownership, but our “gun culture” as well.

Numerous mainstream articles have been published attacking the gun culture as the root cause of all our nation’s ills, but I felt one Reuters piece in particular stood out as indicative of the truly despotic depths to which leftists (who claim to be champions of freedom) are willing to sink:

http://blogs.reuters.com/great-debate/2012/12/14/obama-should-treat-gun-control-like-lbj-did-civil-rights/

The piece begins by comparing the battle for gun control to the battle for civil rights of black Americans during the reign of Lyndon Johnson.  As painful and absurd as this sounds, the author appears to take the premise very seriously. 

The article attempts to promote the idea that desegregation was achieved due to the actions of the Johnson Administration, who supposedly used the threat of cancelled supplemental funds to state schools as a means to force them into enrolling black students. 

The goal here is to promote a worshipful attitude towards the Federal Government as the sole arbiter and savior of the people.  It’s funny, but I thought it was the dissenting protests of millions of civil rights activists that ended desegregation, NOT Lyndon Johnson, who by all accounts was a racist who only wanted to use the black community as a voting bloc to revitalize the Democratic Party. 

In this White House recording, Johnson complains that using the argument of discrimination to impose federal controls on taxation in Texas was not working because there were too many “n*ggers” voting there to make it seem plausible:

Johnson is also famous for this quote:

“I’ll have those n*ggers voting Democratic for the next 200 years.”
From Ronald Kessler’s “Inside The White House”

Clearly, Johnson saw the tragedy of the oppression of the black community as a tool he could exploit to further his goal of decapitating states rights.  Progressives and centralists often use the argument that if the states are left to their own devices they will implement freedom crushing legislation like segregation.  I would point out that anti-constitutional and anti-freedom actions by ANY government, whether state or federal, need to be stopped by the citizenry.  The federal government is supposed to keep the states in line constitutionally, but states are also supposed to keep the federal government in line constitutionally.  In the meantime, the people are supposed to keep BOTH of them in line constitutionally.  The Federal Government was never designed to be an unaccountable and unstoppable dictator in the affairs of the states or the populace.  They do not get the last word; the Constitution and the people do. 

In light of this information on Johnson, I find it interesting that the author of the Reuters article above uses Johnson’s methodology as an argument for Obama’s gun control.  Whether he realizes it or not, he has made a very astute comparison.  Obama does not care about Sandy Hook, the children who were killed, or similar tragedies in general.  Like Johnson, though, Obama does care about how he can use the event to further federal power and chew away at our constitutional rights.   

The LBJ / Obama connection aside, the article gets much worse…

The author goes on to propose that Obama use Johnson’s strategy of flaunting federal money as a carrot to get states to submit to centralized gun control.  This plays into the overall meme that the mainstream media is pushing post-Newtown; the idea that Obama must bypass Congress and take action against gun rights unilaterally.  You know…like an emperor…

And still, it gets even darker…

What is the author’s ultimate methodology?  What edict does he hope the Obama Administration will implement?  Use the threat of lost federal funding to force schools across the country to institute government approved “gun safety and violence prevention” programs. 

But what does he mean by “violence prevention”?  The author dances around the specifics of the issue while throwing out a couple small placations to states rights advocates, but slips up by admitting he wants the gun control ideology taught to schoolchildren while blaming the American “gun culture” as equally responsible for the attack at Newtown:

“…Public debate and discussion about the role of guns and gun culture in American society must be a key component of that process. The question that many Americans will be asking is: Why did the shooting occur and how can we prevent another shooting in the future? It is not just that guns are available, it’s also the culture that surrounds them. It’s about the people and the tools, not one or the other. A comprehensive attempt at gun control would better inform Americans about gun safety and the hazards of guns. But how best to do that? I offer one possible solution: the power of federal government intervention through schools.”

 

“…the Obama administration would begin to chip away at a culture of violence that is clearly deeply rooted across the country…If we can link federal funds to mandatory standardized testing then we can certainly do the same for gun-control education. This will not only be a practical step to ensure that an event like the Newtown shooting does not happen again. It’s also a moral one to combat a culture that’s buying an increasing number of guns—guns that can easily have dire effects in the future.”

And there you have it.  The answer, according to gun grabbers, is to force schools to reeducate your children to fear and disdain the very idea of gun ownership.  This is almost the equivalent of a “Prima Nocta” policy against the gun rights movement.  Essentially the Reuters author’s philosophy is to “breed us out”, taking away our ability to pass on our 2nd Amendment principles to our children through propaganda conditioning, instead of trying to fight us head on.    

Is this really the point we have come to in America?  Where hack journalists feel no qualms about openly calling for the execution of political propaganda in public schools to manipulate little kids into believing what the establishment wants them to believe?  I realize that this is sadly already happening in many ways, but it has always been a subversive and secretive process because, well…because it is abhorrent and they know it!  Now, they openly petition for it as if it should be commonly accepted?!

Here is the bottom line:  If you can’t convince people through rational debate that your position is the correct one, and, if you have to threaten them, lie to them, or brainwash them before they will adopt your ideas, then there is something wrong with your ideas.  The truth wins out eventually under its own power.  Only disinformation needs to be forcefully injected into the public consciousness.  Obviously, there are a great many truths behind the concepts of individual self defense and gun ownership if gun grabbers find it impossible to prevail without subverting our youth.

As I mentioned in my article ‘Teachers:  It Is Time To Arm Yourselves Regardless Of The Law’, the Liberty Movement has already offered a solution to potential gun violence that can and does work far better than gun restriction or confiscation; let teachers carry their own firearms, training to defend themselves and their students.  We should demand that this solution be given the consideration it deserves instead of being outright ignored in the public arena.  If we allow gun grabbers to “shame” us into silence, or, god forbid, reeducate our offspring, the outlandish Orwellian concepts peddled by the mainstream today will seem like child’s play compared to the tyranny of tomorrow.

Comment Of The Day: On The Self-Destructiveness Of Fed Policy

From Popo, as commented earlier

If all public companies were both efficient and trustworthy, Ben’s plan might actually work.   But Bernanke has never worked for a public company and nor is he an experienced trader.  Therefore his effort to put wealth towards productive purposes will simply add to the massive bonfire of malinvestment, fraud, mismanagement, corporate graft and executive fleecing.  What Bernanke fails to understand about his master plan is that corporations are not able to invest any better than people in environments where profits are irrational and unearned.  These policies create corporate asset bubbles in acquisitions, material, personnel, technology, inventory and in every conceivable expenditure.  Bernanke is creating an unprecedented era of corporate inefficiency. 

 

What creates real efficiency and competition are not eras of wealth and largesse, but eras of scarcity and change.  A good analogy is that war creates better armies and better weapons, not prolonged periods of peace.   Bernanke of course has zero understanding of what happens to large companies when financial reality is made irrelevant, and capital is made plentiful.  (Growth and efficiency are by no means a logical result). This is what happens when academics who are deeply inexperienced in business run monetary policy designed to stimulate business.   The market is going to bend him over the table and humiliate him eventually.  And then all that capital that he injected into the market is going to evaporate, and a generation of Americans will be financially obliterated.

* * *

This is a delightfully concise evaluation of the practical implications of ZIRP/NIRP from an economic standpoint, and why it is self-destructive. For the market implications of the gross misunderstanding of market psychology by central planners, here are our prior thoughts:

Presenting The Fundamental Flaw In The Fed’s Thinking

This one simple chart below shows what is possibly the biggest and most fundamental flaw in Bernanke’s approach to spurring the economy, which to him, of course, means rising prices of risky assets, aka the stock market.

The chart above shows the return of two simple things: the return of 4.25% 30 Year Bond issued November 2010… and the S&P.

As is vividly shown on the chart, the return of the long-bond is nearly three times greater than that of the broader equity market in 18 short months!

And therein, ladies and gentlemen, lies the rub.

Recall that Bernanke said something substantively as follows:

“When our policy response lowers interest rates on govt bonds, it induces market participants to take more risk.  Someone selling their govt bond to us may go out and buy a corp bond, thereby lowering spreads. A bank selling their govt bond to us may go out and make a loan…” 

There is one problem with this logic: it is dead wrong. Because instead of forcing investors to rush out of the bond market, which potentially has much more upside embedded (the 30 Year is yielding 2.7% right now: this means the actual price of the 30 Year can continue going up and up and up), investors, even those “sophisticated” ones at banks, hedge funds, and prop desks who can trade CDS, IR Swaps, variance swaps, swaptions, and things the retail investor has never heard of, are doing something else, and something much simpler, entirely.

They are simply front-running the Fed!

The Fed’s entire policy of boosting the economy is a failure for many reasons, but the primary purpose embedded therein – to lift stock markets, will forever be subordinated (to use the parlance of our times) to just frontrunning the Fed, which simply means buy whatever the Fed is buy, and sell whatever (if anything) it is selling.

In simpler format:

  1. Frontrun what the Fed has publicly telegraphed to be doing
  2. Profit

And as long as the Fed continues on the course of LSAP, either unsterilized or sterilized ala Twist, this will continue, and the Fed will continue failing upward.

Sadly, this also means that at the end the Fed has only one option: to go Japanese and start buying not only REITs and ETFs, but ultimately individual stocks.

At that point the best purchase, however will not be the stock market, but wheelbarrows.