China outlook

I heard this on NPR:

“I think there’s a pretty major impact if you just look at the numbers,” says Victor Shih, a political economist at the University of California, San Diego, who studies the Chinese economy. China exports more goods to the U.S. than to any other country in the world, and those exports have dropped by more than 12% this year alone, he says.... [Read More]

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International Tax Competitiveness Index, 2019

Tax shakedownThe Tax Foundation (founded in 1937, they are the people who compute Tax Freedom Day every year) have just released the 2019 edition of their “International Tax Competitiveness Index” [PDF].  It evaluates the 36 countries of the Organisation for Economic Co-operation and Development (OECD) for their rates and policies for five kinds of taxation: corporate, individual, consumption (sales/VAT), property, and international tax rules, computing a ranking in each category and an overall rank merging category scores.

The top ten ranking countries for 2019 were:... [Read More]

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Repo Creepo

Something funny is going on in the very short-term money market.  That’s funny as in “uh-oh” rather than “ha ha”.  A “repurchase agreement” or Repo is a widely-used instrument for managing cash needs in banks, corporate treasuries, government agencies, financial institutions, and the Federal Reserve.  In a Repo, a party with an immediate need for cash sells a security, often a government or agency debt instrument such as a Treasury bill or note, to a counterparty, who pays in cash, providing liquidity to the seller.  Under the Repo contract, the seller agrees to buy back (repurchase, hence the name) the security after a short term (often overnight) for slightly more than the funds received from the sale, compensating the buyer for the use of their funds.  (This can be looked at as a kind of interest on a very short-term loan.)

This is a huge market: between US$ 2 and 3 trillion in Repos are outstanding most of the time and much of this turns over on a daily basis.  Normally, the equivalent rate of interest on Repos closely tracks that of short-term money market interest rates such as the federal funds rate.  If the Repo rate rises substantially, it is an indication of a “cash crunch”, where borrowers who have an immediate need for cash have to pay more to lay their hands on it.  Usually the Repo market is stable and predictable, but in the last few days it’s been behaving distinctly oddly.  It started in the overnight market between September 16 and 17, when a vertical spike in rates went from 2.25% to 4.75%, something rarely seen except in unusual circumstances such as the end of a quarter when corporations need to raise cash to pay taxes, dividends, and coupons on bonds.... [Read More]

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Depressed Growth

According to this guy, the US has been in a depression since 2007, using an idiosyncratic definition of depression. Putting aside the semantics, I was skeptical of, yet intrigued by, the claim that there was a significant, persistent change in economic growth since the 2008-9 recession. Using data from FRED, I plotted real GDP per capita. The plot is on a semi-log scale, where a constant percentage growth appears as a straight line. The quarterly FRED GDP data are plotted in red. Exponential fits to the 1947-2007 and 2009-2019 are plotted in green and blue, respectively. The fits have been extended to highlight the difference between the two annual growth rates (2.15% & 1.56%). The difference between the green and blue fits in the current year is more than $10k per capita: nothing to sneeze at.

... [Read More]

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Escape From New York

According to recent Census data, 277 people move away from the New York metropolitan area every day. That is over 100,000 people a year. After seeing this data my first thought was, “Why isn’t it more?”

Don’t get me wrong, New York City has a lot to offer. It also has high real estate costs, high city taxes, high state taxes, and all sorts of costly regulations.... [Read More]

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Book Review: The Creature from Jekyll Island

“The Creature from Jekyll Island” by G. Edward GriffinAlmost every time I review a book about or discuss the U.S. Federal Reserve System in a conversation or Internet post, somebody recommends this book. I’d never gotten around to reading it until recently, when a couple more mentions of it pushed me over the edge. And what an edge that turned out to be. I cannot recommend this book to anybody; there are far more coherent, focussed, and persuasive analyses of the Federal Reserve in print, for example Ron Paul’s excellent book End the Fed. The present book goes well beyond a discussion of the Federal Reserve and rambles over millennia of history in a chaotic manner prone to induce temporal vertigo in the reader, discussing the history of money, banking, political manipulation of currency, inflation, fractional reserve banking, fiat money, central banking, cartels, war profiteering, bailouts, monetary panics and bailouts, nonperforming loans to “developing” nations, the Rothschilds and Rockefellers, booms and busts, and more.

The author is inordinately fond of conspiracy theories. As we pursue our random walk through history and around the world, we encounter:... [Read More]

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The Dog that Did Not Bark

Debt bombIn one of Heinlein’s stories (I forget which one, and the search engines haven’t helped on this odd query) a character awakes after having been in suspended animation for many years and catches up on what he’s missed by spending a few hours reading a history book, then remarks on how much time he would have wasted had he read a newspaper every day for all that time, reading about matters too ephemeral to make the history books.

If you do follow the news (I try to spend as little time as possible doing so), keep in mind that the most important thing may be what’s not in the daily news.  Many of the things that end up in the history books were complete surprises to those embedded in the “news cycle” and to the “experts” who feed it.  For example, check the newspapers for early October 1929, November 1941, October 1989, the latter half of 1990, or August 2001: you’ll find little or nothing about the imminent stock market crash, Pearl Harbor, fall of the Berlin Wall, collapse of the Soviet Union, or terrorist attacks in the U.S.  And yet, in retrospect, the circumstances which led to these “surprises” were in plain sight.  Thus, I’m always interested in the big story that none of the chattering classes are chattering about.  Which brings me to…... [Read More]

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Book Review: What Has Government Done to Our Money?

“What Has Government Done to Our Money” by Murray N. RothbardThis slim book (just 119 pages of main text in this edition) was originally published in 1963 when the almighty gold-backed United States dollar was beginning to crack up under the pressure of relentless deficit spending and money printing by the Federal Reserve. Two years later, as the crumbling of the edifice accelerated, amidst a miasma of bafflegab about fantasies such as a “silver shortage” by Keynesian economists and other charlatans, the Coinage Act of 1965 would eliminate sliver from most U.S. coins, replacing them with counterfeit slugs craftily designed to fool vending machines into accepting them. (The little-used half dollar had its silver content reduced from 90% to 40%, and would be silverless after 1970.) In 1968, the U.S. Treasury would default upon its obligation to redeem paper silver certificates in silver coin or bullion, breaking the link between the U.S. currency and precious metal entirely.

All of this was precisely foreseen in this clear-as-light exposition of monetary theory and forty centuries of government folly by libertarian thinker and Austrian School economist Murray Rothbard. He explains the origin of money as societies progress from barter to indirect exchange, why most (but not all) cultures have settled on precious metals such as gold and silver as a medium of intermediate exchange (they do not deteriorate over time, can be subdivided into arbitrarily small units, and are relatively easy to check for authenticity). He then describes the sorry progression by which those in authority seize control over this free money and use it to fleece their subjects. First, they establish a monopoly over the ability to coin money, banning private mints and the use of any money other than their own coins (usually adorned with a graven image of some tyrant or another). They give this coin and its subdivisions a name, such as “dollar”, “franc”, “mark” or some such, which is originally defined as a unit of mass of some precious metal (for example, the U.S. dollar, prior to its debasement, was defined as 23.2 grains [1.5033 grams, or about 1/20 troy ounce] of pure gold). (Rothbard, as an economist rather than a physicist, and one working in English customary units, confuses mass with weight throughout the book. They aren’t the same thing, and the quantity of gold in a coin doesn’t vary depending on whether you weigh it at the North Pole or the summit of Chimborazo.)... [Read More]

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Insight Is Where You Find It

I use a commercial gas station. It requires a card and is unattended. You even need the card for the rest rooms. I have the card because I am officially an employee of one of my oldest clients , the owner gives me health insurance on his plan and I am his CFO when he needs one.

... [Read More]

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Inverted Yield Curve

U.S. Treasury Bond, 1977, US$ 1 millionThis is a fairly geeky financial technical analysis post.  I usually post such material as Gnome-o-Grams on my own Web log, but as an experiment, I’m posting this one here to see if there’s any interest among the membership or wish to see further posts of this kind.  If you’d like to see more like this here, please indicate by liking this post or commenting, including topics you’d like to see discussed (after reviewing those already published, linked above).  As always when anything discussing finance or investing, I don’t make recommendations; you’re entirely responsible for your own decisions and would be crazy to interpret anything I say as a course of action you should pursue without coming to your own independent decision.

The yield curve is a measure of the sentiment of investors, particularly conservative investors who own fixed-income securities (bonds and equivalents).  (Much of the financial press covers the equity [stock] markets and neglects the bond markets, but the bond markets dwarf the stock market in valuation.  Bonds aren’t [usually] exciting [and when they are things are generally unpleasant], so they don’t get much attention, but if you’re interested in the flow of funds [and you should be], that’s where you ought to be looking.)  The yield curve simply plots, for equivalent fixed-income (debt) securities (bonds), the relationship between the yield of the security and the time to its maturity (when the investor gets his or her money back).  For example, consider the most widely traded securities in the world: U.S. Treasury debt.  These instruments have various names: Treasury Bills, Treasury Notes, and Treasury Bonds, depending upon their time to maturity, but they all are obligations of the U.S. Treasury and bear the full faith and credit of the United States.  They are considered as close to risk-free as any paper investment in the world.... [Read More]

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Book Review: Billion Dollar Whale

“Billion Dollar Whale” by Tom Wright and Bradley HopeLow Taek Jho, who westernised his name to “Jho Low”, which I will use henceforth, was the son of a wealthy family in Penang, Malaysia. The family’s fortune had been founded by Low’s grandfather who had immigrated to the then British colony of Malaya from China and founded a garment manufacturing company which Low’s father had continued to build and recently sold for a sum of around US$ 15 million. The Low family were among the wealthiest in Malaysia and wanted the best for their son. For the last two years of his high school education, Jho was sent to the Harrow School, a prestigious private British boarding school whose alumni include seven British Prime Ministers including Winston Churchill and Robert Peel, and “foreign students” including Jawaharlal Nehru and King Hussein of Jordan. At Harrow, he would meet classmates whose families’ wealth was in the billions, and his ambition to join their ranks was fired.

After graduating from Harrow, Low decided the career he wished to pursue would be better served by a U.S. business education than the traditional Cambridge or Oxford path chosen by many Harrovians and enrolled in the University of Pennsylvania’s Wharton School undergraduate program. Previous Wharton graduates include Warren Buffett, Walter Annenberg, Elon Musk, and Donald Trump. Low majored in finance, but mostly saw Wharton as a way to make connections. Wharton was a school of choice for the sons of Gulf princes and billionaires, and Low leveraged his connections, while still an undergraduate, into meetings in the Gulf with figures such as Yousef Al Otaiba, foreign policy adviser to the sheikhs running the United Arab Emirates. Otaiba, in turn, introduced him to Khaldoon Khalifa Al Mubarak, who ran a fund called Mubadala Development, which was on the cutting edge of the sovereign wealth fund business.... [Read More]

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Shiite Shenanigans

Oil tankers were attacked in the Gulf of Oman. This is just over a month since the previous attacks in the Persian Gulf. Houthi rebels in Yemen, a client project of Iran, attacked oil wells and pipelines and an airport in Saudi Arabia.

The Mullahs of Iran are trying to raise the price of oil, to create a better market for their black market oil that they are trying to sell around President Trump’s sanctions. ... [Read More]

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Welcome Back My Friends To The Show That Never Ends….

We have reached a nexus, a tipping point, where one deflection may echo down the centuries.

As the remnants of national democracy align against elite totalitarian rule, USA, Japan, India , Brazil and Trump versus China and the Globalists…. ... [Read More]

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The Threat of China

China has been attacking the U.S.A. ever since the days of Richard Nixon, in many ways subtle and not subtle.   But their attacks have grown more devious, more corrupting, and are preparing them for assaults on America that will be devastating when they are unleashed.

Yes, they have been spying and stealing technical secrets, violating copyrights, trademarks and the plain language of contracts for decades.   But the current state of affairs calls for a confrontation, and I am glad to see President Trump bring a confrontation that is clever and likely to succeed.... [Read More]

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