Monday, February 29, 2016

Finding the likely response of a likely prediction

Capital spectator list the methods used to generate predictions of the ADP employment report a few days.  But the ADP data is already impulse response corrected for seasons, so you want to go back to the raw data, then perform predictions incorporating the models own detection of seasonal patters.  Maybe these researchers do that, but they should put up boldface assumption, 'Using Raw Numbers' If they are not going to raw data, then they have a big problem with interference of the two filters

ARIMA: An autoregressive integrated moving average model that analyzes the historical record of ADP’s estimate of private payrolls in R via the “forecast”package.
ES: An exponential smoothing model that analyzes the historical record of ADP’s estimate of private payrolls in R via the “forecast” package.

Smart strategy

Business Insider: $19 billion investment fund ValueAct Capital, has been investing in companies where there's an opportunity to cut out the so-called middlemen.
Also known as intermediaries, middlemen help facilitate transactions between companies and customers. They can be agents, brokers, or wholesalers.
These go-betweens can in some cases be cut out of the equation, or disintermediated. Companies can save the money they otherwise would have paid out to those middlemen if they find a way to do business without them. This is a key trend that ValueAct has picked up on.
Here we have a hedge fund investing in new money technology.  They are not whining and complaining about our socialist nanny banker.

A gutsy call by Apple

On Tuesday, Apple's top lawyer, Bruce Sewell, will testify before the House Judiciary Committee, and he is expected to encourage Congress to pass laws that would make the FBI's request moot.
"The decisions should be made by you and your colleagues as representatives of the people, rather than through a warrant request based on a 220-year-old-statute," Sewell will say as part of his prepared remarks.
Before Sewell testifies, the committee will hear testimony from Apple's nemesis over the past three weeks, FBI director James Comey.

Yes, fight the illegal assumption of judicial power. It's time to fix the  Swamp, if not shut it down.

Texans do not vote Yawker

Here is the national polls, and clearly it is neck and neck.  

New York could vote Trump, that means Texas does not count all that much.  But I have news for the Texas Republicans, the rank and file down there will prefer  Trump over a racist Hillary of Yawk.  Trump has to be favored to win, I see no pattern that puts Hillary over the top.

OK, let's look at the KKK web page

KKK: Join The KKK. Our children, our race, and our Nation have no future unless we unite and organize White Christian Patriots. Join The  Ku Klux Klan

Later they point out that they prefer male rulers.   

Change the words to  Sunni Islam, and what you get is the religion of peace, which Obama thinks is fine and dandy..

So, when Hillary and Nancy stop their racial pandering then Trump can freely denounce racial pandering.  Unfortunately, when  we have the 200 year history of Democrat racism, it become normal, and the KKK is just part of the liberal plot to make race the issue.

I am with Trump, when the Dems denounce their own racism, then the KKK has no excuse.  Until then, refer all racist questions to Hillary and Nancy, leave Trump out of it.  And, I might add, Black Lives Matter should be in  Baltimore, stopping the black on  black murder rate.  

Glenn Reynolds, welfare bum, wants government nanny banking

Glenn Reynolds: Cash is the currency of freedom
Former Treasury secretary Larry Summers wants to get rid of the $100 bill. But I think he has it exactly backward. I think we need to restore the $500 and $1000 bills. And the reason is that people like Larry Summers have done a horrible job.

No Glenn,  banking freedom is the currency of freedom.  Boneheads like you who rely on socialist money are threatening our freedom.  You and the pack of welfare bums called the Tea Party.  What the economy is doing, with FinTech, is creating free banking, unlike you, Glenn, who just wants more government control.

Time to sell our houses

DEUTSCHE BANK: $328 billion has been moved out of China in secret
A lot more money is leaving China than it should be.
According to Deutsche Bank analysts led by Zhiwei Zhang, about $328 billion left China in secret between August 2015 and January this year.
This is a huge number – about 78% of total capital outflows.
Despite China running a trade surplus of about $60 billion a month, the country's FX reserves fell $420 billion in the last few months of 2015 as policymakers spent dollars to replace the missing yuan.

Chinese investors do  not want to invest in  communist economic plots, capital is too inefficient. 

California Dems appoint our affirmative action Senator

SAN JOSE – Attorney General Kamala Harris secured the California Democratic Party endorsement for U.S. Senate Saturday night over Orange County Congresswoman Loretta Sanchez. Both women are vying to replace retiring Senator Barbara Boxer.

Sunday, February 28, 2016

That's a mass layoff event

China expects to lay off 1.8 million workers in the coal and steel sectors as part of its efforts to reduce industrial overcapacity, an official at the human resources and social security ministry said on Monday.
Yin Weimin, minister of human resources and social security, said capacity cuts will lead to some layoffs in 2016, but added that he was confident of keeping employment stable this year despite downward pressure on the economy.
No timeframe was given for the 1.8 million figure cited.

Let's write a letter to dear leader

We are writing a letter to government,
 addressed to the magical place

 Simon and Robert are all writing to their leaders. I would write, but my G is a probabilistic network, under change, I probably won't reach the bozo in  charge with any given transaction.  We need bribery bot, one of the most important bets in the bot collective.  

Joe Biden who doesn't understand climate change

Hey, Joe, this is an ice core sample. Notice the ups and downs? Those are ice ages, really, its the glacial cycle. What missing at the end Joe? Climate change is missing, Joe, where is the new ice age?  It looks to have been missing for longer than normal.

Now, tell me Joe, you intend to fix something in this chart.  What you gonna fix, Joe, cause as near as I can tell you gotta get the temp down 4 degrees, you gotta cycle this  baby.  How you gonna do that, Joe.

This is getting weird

Members of the University of Oklahoma’s College Republicans are taking on the five-hour “diversity” course requirement that came about after the infamous Sigma Alpha Epsilon fraternity “racist chant” scandal.
Students have to fulfill the requirement by the end of their first year or “risk holds on future enrollment.”
College orientation should be a legal contract, and it seems easy to make diversity training part of that.  Interesting to see where this all leads as I cannot imagine smart people being able to tolerate the political correctness.

This chart fascinates

Take away housing and consumer prices have not changed since 2010, 6 years of flat consumer prices.  We spent 6 years waiting for house prices to catch up?  Now the homeowners are fat and happy again.   Even a clear string of huge auto sales years could not dent the CPI. 

Except for medical, the retail industry is seeing a 1% deflation, an extreme contraction of the American consumer.  It is no wonder that international trade is the pits, China cannot adapt to this sudden stop.  This is why we have an earnings recession.

Kocherlakota's heroic effort to save Magic Walrus

Kocher: To sum up: an aggressive demand stimulus plan can achieve its aggregate objectives if (but only if) the Fed does not tighten significantly in response to the program.

He has been concocting this plot whereby Congress and Janet do the careful waltz along a secret path, leaving eight years of baggage behind.  

Not so.  The Fed will be walking along the circular path of regulation costing for millions of tiny steps.  Each step it has to sort out who pays for what regulation costs, but the costs change faster than Janet can dance.  

The Fed is lost until helicopter time, then the Swamp marks to market, deletes debts and we spend ten years sorting out winners and losers.  That is how Nixon and Roosevelt did it, and three or four administrations previous in American history.  But, the technology improves each time we do this, and we get better at it.

I keep looking for this inflation

Consumer are paying higher prices, they say.  OK, this is the index, the actual price average, no seasonal adjustment. We are focused on the 2014 to 2016 time frame, the end of the chart.  

Start with the bottom green line, prices without shelter.  It has not changed in a year.  That is all prices for the urban consumer, minus the Asian home buyers.  Housing makes all inflation, that's called a bubble, shared with the medical inflation bubble!  

All the inflation for the last year came because of communist currency controls and Obamacare!  Otherwise, prices are stable, and we are near potential growth, according to Magic Walrus.  So, if the magicians do not like the answer, then they better get the Commies in China to fix their financial system, and Nancy to fix Obamacare.  

The Economist wants a different drunk for the helicopter

Time to fire Trump

An editorial from the Economist.  They have a different drunk in mind, Goldman Sachs, I think  Not a bad drunk, better than letting the Kanosians fly.

But, let's not kid ourselves, whoever wins, the helicopter will take a drunken flight before the 2024 recession.

Donald! learn your war jingo

Donald Trump Quotes Mussolini And Says “What Difference Does It Make”

We all knew it as kids.  Here it is:

Hitler was a jerk
Mussolini bit his weenie 
now it will not work.

California's golden goose is ill

The Second Tech Bubble Has Burst: Here Come The Mass Layoffs

This is a Zero Hedge report, a good one.  The venture capital system is very volatile, its going to have deep cycles.  It's tech, that means at some point the gang invents the systematic, open source protocol to get all the crap done.  When that happens,  a thousand start ups no longer have, the little proprietary edge  and layoffs at Silicon Valley jump way up.

For example, we had a variety of networking protocols, then suddenly we all jumped on Tcp/Ip, the web.  That was a disruption but then we get web companies.  Now we are adopting a verifiable web language with transaction closure rules. All the various Fintech start ups will adopt the common  model of transaction, likely ethereum. And so it goes. 

What happens next?
  • California housing will take a dip, or remain stable in price. 
  • 40% of our job growth goes away, and about 20 billion in state taxes.  
  • Retail slows a bit.  
  • The stock market drips a bit.  Local union fees jump, and so it goes; all the feedback effects..

Who is laying off  nationally

Retail, the oil patch, banking, manufacturing, and now tech.  The only thing holding us up are Asian asset buyers, and welcome to them.

Crime rates

Tijuana’s homicide rate has jumped from 28 per 100,000 residents in 2012 to 39 per 100,000 in 2015, which made it the 35th-most-violent city in the world that year, according to a Mexican think tank.
Should San Diego be worried? Try Baltimore:
With six weeks left in 2015, the homicide rate in Baltimore has set a new high for the city, surpassing the previous record set in 1993. The city saw its 300th killing of the year over the weekend; since then, gun violence has killed five more people. Those homicides raised "the city's per capita homicide rate — based on the recent population estimate of 622,793 residents — to 48.97 per 100,000 residents," The Baltimore Sunreports.
Philadelphia should  be worried.  

Let's do the numbers.

49 murders per 100,000 per year, or 980 over 20 years. Spend your youth in Baltimore, and you have a 1% chance of getting murdered. 


From the founder of Stratfor: Italy is the fourth-largest economy in Europe and the eighth-largest economy in the world, and its banking system is collapsing. And Germany is desperate. It must maintain its standard of living. It can only do that with exports and Deutsche Bank is very exposed to Italian debt. But so is the rest of Europe.
So Europe, which is barely not in a depression or recession, is really going to be crushed by Italy. So constraint theory: Italy has 17% bad debt. Take it seriously, believe it. What happens if that 17% of the loans they made are unpayable?
One of the things you have to be able to do when you forecast is believe what you see, even if it’s different from what The New York Times said. How else could it end? Will the Germans save them? Ultimately they have to. Can they? 17% of the Italian banking system is a lot of money. 

Stratfor is a risk and prediction firm, mostly in international political policy.   Friedman, a founder, talks about constraint theory, defining boundaries that cannot be crossed.  Then combinatorics begins to limit the available options for any action that suppresses  a threat, and the prediction need only deal with a few.  This constraint theory is like a major refutation of Magic Walrus assumptions.
Here he scares the Germans:

It’s going to spill over into the Netherlands, it’s going to spill over into Germany. Germany is the new pig. Germany depends on exports and its markets are drying up. When the Germans start getting 10% unemployment, 15% unemployment, which is the real variable, how are they going to handle it?
Italy spills over to everything. Italy is a huge banking system. It has been the major banking system in Eastern Europe. It’s worked with Austria’s banking system. There’s all sorts of interplays there. So it's not the PIIGS one should worry about. Germany hasn’t even begun falling yet. And when Germany falls, and it will, that’s when the panic begins to set in. 

The problem he sees is asymmetric information, the New York times in not the decision maker, and considers the world as one with a smooth range of options.    But powerful nations have severely limited choices.

What is the Tyler bet?

Tyler Cowen: Central banks around the world could raise rates of price inflation, and boost aggregate demand, if they were allowed to buy corporate bonds and other higher-yielding assets.  Admittedly this could require changes in law and custom in many countries[.]
There is no economic theory which says central banks could not do this, as supposed liquidity traps would not apply.  These are not nearly equivalent assets with nearly equivalent yields.
The central bank is not stable in any connection between the SP500 and inflation.  Too many parties handle that chain, none of them member banks.  The result is a severe cycle.
Banker bot handles the issue

Banker bot simply runs the SP500 bets, and member banks are betters in the SP500.  Hence, banker bot can keep the queues of buyers and sellers from becoming unstable.  So, sure, a currency banker for the SP500, why not? Just do not think inflation has any role. 

Basically, the banker bot runs a futures desk, with a published amount of liquidity to float.  When  the liquidity of the market breeches the liquidity target (the queues of long and short become mutually unstable), then  the bot pays off according to the current price. A good idea? Sure, but its happening now, on Ethereum, and the central bank is not involved.

We need affirmative action for government censors

Buzzfeed brings us the story of the DOJ meeting with Silicon Valley execs, to manipulate free speech in support of the war. So, we now find that the speech police have to have a quota of Arabs!
“They wanted to figure out how to fight ISIS online, how to understand the psychology of those who support ISIS, and they invited almost no one who speaks for those of us in the Arab world, and from Arab communities, who have everything to lose from ISIS’s growing popularity,” said one Arab attendee, who estimated that less than 10% of the attendants were of Middle Eastern descent. “They don’t understand this community. That has been proven time and time again with their tone deaf messages. Why hold an event like this where there are ten white men outnumbering every Arab?”
Racism seems quite acceptable since Obama came to office.

Is it racist to invite more Asian home buyers?

"Declining corporate profits as measured by US equity EPS have been closely followed by, or coincided with, a recession 81% of the time since 1900," Lakos-Bujas at JP Morgan wrote in a note to clients this week.
And given where the profit cycle is, Lakos-Bujas said that history says only an outside economic shock has been able to keep the economy out of recession. 

External shock?  That would be a steady stream of Asian home buyers, courtesy of the Communist Party.   Am I racist  No, Asia is a geographic region known for selling the American consumer good things,  If you have been running a trade surplus with the American consumer, then by all means, come on over and bring your surplus.

Saturday, February 27, 2016

Trump has said very little about race

One of the ex presidents of Mexico:
"I think his logic of exalting white supremacy isn't even acting against immigration - Donald Trump is the descendant of migrants - it is acting and speaking against immigrants who have a different skin color than him, which is frankly racist and is a bit like the exploitation of raw nerves that Hitler did in his day," Calderon told reporters after a meeting of the National Action Party, or PAN, in Mexico City.

Vincente Fox brought up race too.

Slate's  Jeremy Stahl:

Here’s the first iteration of the comments, from when Trump announced his run for the presidency earlier this month:
When Trump was asked to explain those comments over the weekend by CNN’s Jake Tapper, he basically reiterated the stance.
The U.S. has become a dumping ground for everybody else’s problems. … When Mexico sends its people, they’re not sending their best. They’re not sending you. They’re not sending you. They’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people.

That was it?

We are in the face of a massive racist policy program by the Democratic party and this is the worst of Trump

I have news, Jerry Brown once proposed special schools for Hispanic kids, about as friggen racist as one could get.  California laws include the right of a majority race to throw a minority out of office, based on race!

Hillary claims that white people should bear a special burden on behalf of her favored races.  Nancy Pelosi thinks racial pandering is normal for Democrats.

I have news, for about 200 years the Democratic has never spent one single election cycle without some stupid racist policy, from  slavery to Jim Crow (which Brown still believes), to racial quotas and white man's burden sponsored by our liberal universities.

Eric Holder, the modern racist of our time was attorney general!  We have two Mexican Presidents  claiming some shit about race for which they have no facts.

OK, stupids in  the liberal racist camp, here is what a shrewd Trump is doing, keeping actual race out of it and allowing  every racist prick liberal  to come of the closet and look like a fool.

Koch kids attempt takeover of the Republican Communist Party

Insiders who were at a recent meeting between the Koch Bros. and Marco Rubio leaked intel on how exactly they’re going to try and steal the election from Donald Trump, GOP strategist Roger Stone revealed.
The Koch Bros. met with GOP millionaires and billionaires Thursday night to pool together over $75 million to stop Trump and are going to use Mitt Romney as ‘Plan B’ if Rubio fails to gain traction on Super Tuesday, according to moles who were inside the meeting.
Koch Bros, same old welfare bums they have always been. 

Mr. Lilly White, replaces himself with a diversity thing

'Star Wars' Director J.J. Abrams Says 'Studios Need to Step Up' to Fix Hollywood's Diversity Problem.  


Send them to Los Angeles

SAN FRANCISCO — An order by the San Francisco authorities to vacate a sidewalk tent camp in a commercial district has rekindled passions over the city’s longstanding homeless problem, which residents say has reached crisis levels.
Inhabitants of the encampment near a Costco and car dealerships defied the city’s order to disperse by Friday, forcing a dilemma for San Francisco’s municipal government, which has until now sought to use gentle persuasion in its dealing with the large homeless population. “I kind of want to stay put and fight it out,” said Elizabeth Stromer, 45, a former nurse who lives in a tent not far from a BMW dealership on the edge of the city’s Mission District. She described the standoff as a “personal battle” between the homeless and the administration of Mayor Edwin M. Lee.
Do not send them to Fresno, we just pass them on down south anyway.

Yellen hates flirts

It's always the same, Janet sits, steaming while Lagarde works the boys.  Janet is probably the only one who knows the days of central banking are numbered, most central bankers are delusional.

I suffer bureaucraphobia

New American: That is because a panel advising the Obama administration, in partnership with Big Psychiatry, wants to make doctors subject all American adults and children over age 12 to screening for alleged “mental health” disorders 
How many neuroses will the good doctors find? Should we include the legal illegal aliens?  Sure, but many of them are in  China working. Can we be shrinked online?  Can we just go to the Swamp Shrink page, fill out a form.  Just  mark me as  bureaucraphobic. 

Too many Kanosian gatekeepers

Krugman It’s completely crazy that public construction as a percentage of GDP has declined to record lows even as interest rates have done the same.

Well, Paul,. everywhere we look there is a Kanosian gatekeeper that wants a cut; the unnions, the environmentalists, the racial set asiders, state level politicians, and a whole host of Kanosian special interests,   That makes you a liar , Paul, because you know this, all your pals are part of the scam; from Nancy's racial pandering, to DeLong's need to stuff college pensions, to  inefficient transit spenders. Look no further than  the eight year high speed train boondogle. .  Kanosians are not to be believed on infrastructure spending.

Turn out the lights

CHICAGO (CBS) — With state funding cut off due to the ongoing budget impasse, Chicago State University has announced all 900 employees, including the university president, are receiving layoff notices. CSU President Thomas Calhoun Jr. said the university has reached a point where it can’t continue to function as it has since the school year began last fall, so layoff notices have been sent to all faculty, staff, and administrators. “We have the legal responsibility to communicate to our employees that, should our statehouse fail to fund us, and put us in a position where we have to be compromised, we would need to have the flexibility and the legal position such that a reduction in force could take place,” he said

Friday, February 26, 2016

Yes, a great American song

While on tour with the Bar-Kays in August 1967, Redding wrote the first verse of the song, under the abbreviated title "Dock of the Bay," on a houseboat at Waldo Point in Sausalito, California.[1] He had completed his famed performance at the Monterey Pop Festival just months earlier, in June 1967. While touring in support of the albums King & Queen (a collaboration with female vocalist Carla Thomas) and Live in Europe, he continued to scribble lines of the song on napkins and hotel paper. In November of that year, he joined producer and guitarist Steve Cropper at the Stax recording studio in Memphis, Tennessee, to record the song.

That is a bunch of guaranteed freedoms the 1789 Congress gave away

Cybersecurity expert John McAfee, who has vehementlyopposed the FBI's attempt to force Apple to create a back door into its iOS software, is taking his defense of the tech giant one step further.
McAfee claims the government is violating the 13th amendment, which abolished slavery and involuntary servitude, if it forces Apple to create the back door.

Timmy says first and fifth.  I say fourth and ex post facto.  Now we have a 13th.  If the local cops want access, we can include the 14th, and due process.  I say that Congress never had the right to writ any individual from the beginning, they have subpoena powers only as a burden on individuals. 

But unfortunately, the Supremes have a more potent force, Sotomayor and  Kagan.  The rights they guarantee are the ones that meet their politics.

Yet another bank shrinks

Bank of America is preparing for significant job cuts across its global banking and markets business, according to people with knowledge of the matter.
Senior executives in the division were tasked with identifying potential job cuts a few weeks ago, and this week were asked to increase their size, according to people familiar with the situation.
The cuts are likely to be over 5% of staff, the people said. Some business lines will face deeper cuts than others, and the details haven't been finalized.

Mergers should be forthcoming. 

A Joisy and a Yawker walk into a bar

From California they look like a couple of drunken helicopter pilots.

A better idea for Trump, understand exactly what Texans want, pay close attention, listen. Do that, and you are Mayor of Swamp.

A tidbit

NYT: The gap between the richest and poorest American communities has widened since the Great Recession ended, and distressed areas are faring worse just as the recovery is gaining traction across much of the country.

These findings, outlined in a study to be released on Thursday by theEconomic Innovation Group, a new nonprofit research and advocacy organization, may help explain why the country’s economic and political situation has become so polarized in recent years. The results, broken down into areas as small as individual ZIP codes, provide one of the most detailed looks at the nation’s growing inequality.
HT Marginal Revolution

An agglomeration effect, due to Swamp rule over the economy.  This effect was coincident with the Fed doing QE, and a number of studies have shown QE to cause regional disparities.  When the Fed is releasing hot potatoes, Nick Rowe calls them, then  regions with the reserves can ride the wave, stressed regions lose out.  The cure? Distribute power away from the Swamp.  Less hot potato and more accurate pricing.  Then we can all price the cost of bonehead government, as it happens.

Obamacare, unsustainable

Portland Tribune: Health Republic Insurance Company of Oregon, a Lake Oswego-based insurer that is phasing down its operations, on Wednesday filed a $5 billion class action lawsuit on behalf of insurers it says were shorted by the federal government under an Obamacare program.
The lawsuit, filed in the United States Court of Federal Claims, focuses on a program that was intended to offset insurer losses in the early years of the implementation of the Patient Protection and Affordable Care Act.
Instead, payments to insurers under the "risk corridor" program amounted to 12.6 percent of the amount expected for 2014, and are expected to be similarly low for 2015.
Federal law and regulations "are unequivocal about the payments the Government must make," according to the lawsuit. "The law is clear: the Government must abide by its statutory obligations."
The federal government has said it hopes to make insurers whole by using funds from subsequent years to make up payments still owed from earlier years. "In the event of a shortfall for the 2016 program year, HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments," according to a federal Centers for Medicare & Medicaid Services website.

Congress did not budget the reserves needed to cover insurance losses during the phase in . This is contract law, Nancy Pelosi promised the do-re-mi and the courts will make her pay.

Citi wants a taxpayer bailout

ZeroHedge: “Keeping the previous language would be very disappointing and would be viewed as either complacent or reflecting policy paralysis. [They need to] man up and tell member countries that monetary policy should be accompanied by fiscal expansion.”

Banks are tied to the socialist debt machine and the economy cannot operate unless taxpayers are willing to take on  more debt.   Banker bot has no such problem, it has no preference for government debt.  Let's replace Citi with a javascript program, what say?

Can they write 'Purple lives matter'

"There have been several recent instances of people crossing out "black lives matter" and writing "all lives matter" on the walls at MPK," Zuckerberg said in the post. "This has been a deeply hurtful and tiresome experience for the black community and really the entire Facebook community."
What color matters the most? Well, there are very few purple people, so one might think rarity adds value. 

Thursday, February 25, 2016

The political correcters deny our right to fluffy pig hats

Here we have a European being detain ed for fluffy pig hatness.  
College kids in America have to learn the new PC rules, I hear.  Make this rule number one, no fluffy pig hats!

Senator Graham, how many senators can we kill?

Graham: If you killed Cruz on the floor of the Senate, and the trial was in the Senate, no one would convict you

You bring up a good point since Texas is about four senators short of a fair deal in the Senate.  So the Swampers have already killed off four of Cruz's colleagues.  You and your pals have also killed off the six senators California is short.   Once the secession  starts, there will be plenty of killing to go around. some of the dead might even be South Carolina senators.

Mr. Fox don't like Yawker

"It is not to defend our race, it is not to defend our creed, but to defend the same nation that is hosting you. This nation is going to fail if it goes into the hands of a crazy guy."
And that is ex pres of Mexico, Vincente Fox talking about Trump.  The problem, Mr. Fox, is that Yawker ain't one of us.  Same applies to the other Yawker.  I am not a racist, I just don't like Yawkers telling me what to do.  It's not a hispanic thing, it's just that Yawker is just too weird for me.

The red line is hogging the Y axis

Excess reserves and match treasuries held.  This is the loan and deposit numbers that matter.  The ratio of the two barely changes, and holds nearly at 1, and the variation is all in the blue line.  Even though the red is stuck, the blue does price discovery, to the tune of about 1% of GDP, so there id not much price variation allowed, we are liquidity short.

What is the problem?

Th3e red line are loans outstanding to the member banks, and all the borrowing is done by one member bank, the Swamp.  The Swamp has no liquidity, so the red line barely adjusts with the blue, almost never.  Oh, you say, that red is some magic by the Fed.  No, the Fed and Treasury co-plot, they act as one.  Our federal government is very unresponsive, held in a severe debt bind and operating via insider trading from the Senate. The federales cannot do price discovery, the volatility of price adjustment wrecks havoc with the budgeting process.  No discretionary spending lewft.

States rights always drags out the socialist bums

(ANTIMEDIA) In a peremptory case of government acting as oil industry legislator, Texas Governor Greg Abbott signed into law a prohibition on fracking bans — completely undermining one town’s hard-won ordinance to protect its citizens’ health and safety. Effective immediately, no city or town in the entire state will be able to “ban, limit, or otherwise regulate” any“commercially reasonable” industry practice — with “reasonable” being determined by government and the industry, itself.
Greg Abbott is the usual socialist pig.  How is this socialist any different than Jerry Brown who lets unions control local democracy in San Diego?    We are stuck, democracy is losing out.  Always push to dis-aggregate, move power to more local control.

We need a bigger inflation bulge to have a good crash

This chart is familiar, the real inflation after all the revisions.  The story in the economy is simple, over lending, the lenders takes losses during the crash. That is when the curve inverts.  The financial industry consolidates, at each recession, and long term liquidity removed.   So, as time goes on, since the Nixon shock, the increasingly consolidated financial sector mostly deals with funneling the interest payments and suppressing lending.

Our last inflation bulge, since 2009, has been well contained, and our recession likely to be mild and short.   But our growth will be lower, we have used up our lending infrastructure.  Banks are closing retail branches and fixed rate traders being let go. 


Separate the currency banker from its primary role as an agent of Swamp financing.  We cannot aggregate all the bailouts in the Swamp, price discovery stops.  We have a name for this process, a non optimum governing zone, the Swamp.

AEI is pushing pushing demographics research

AEI: “Changing demographics across the 50 states will have a huge impact on the results of the 2016 election and beyond,” said William H. Frey, senior fellow at Brookings Institution and a coauthor of the report. “Unlike in the primaries, both parties will need to come to grips with a more racially diverse nation in order to capture the White House in the general election. These projections will give Republicans and Democrats a valuable tool for assessing the future.”

I have not read the report.  But it is not race or age, it is western migration, especially to Texas that dominates demographics.   After the 2020 census, almost a third of the electoral votes will be held by Florida, Texas and California, and Washington state will take another bite..  The South West is a different nation, we do not share the same culture.

President Trump

A new Quinnipiac University survey discovered some potentially alarming results for Democrats — and particularly for former Secretary of State Hillary Clinton.
Quinnipiac released a poll Wednesday that showed various hypothetical general-election matchups in Ohio
Clinton lost every one. 
And this:
Daily Caller: A political science professor who claims his statistical model has correctly predicted the results of every election in the last 104 years has forecast that the odds of Donald Trump becoming America’s next president currently range from 97 percent to 99 percent.
That leaves the Texas primary as the only barrier for Trump.

Screw you John Kerry

“The U.S. government has warned some top U.S. banks not to bid on a potentially lucrative but politically risky Russian bond deal, saying it would undermine international sanctions on Moscow,” WSJ reports, adding that “the rules don’t explicitly prohibit banks from pursuing the business, but U.S. State Department officials hold the view that helping finance Russia would run counter to American foreign policy.”
courtesy ZeroHedge

Well, I am not much of a patriot, sorry.

Unemployment claims

Courtesy Calculated Risk.

We do not spend much time at the bottom, then we get the sudden surge up.  This time is not different.   What we want is one of those skinny blue bars, like in 1991 and 2001.  

Wednesday, February 24, 2016

Trump beat Cruz in Texas

Texas has 155 delegates up for grabs in its Republican primary next week, but for Sen. Ted Cruz, the stakes in his home state are immeasurable.
A victory by front-runner Donald Trump in Tuesday’s contest would knock the wind out of Cruz’s bid for the nomination.
Three polls released this week show Cruz leading in Texas by margins of between one and 15 percentage points. But Trump’s commanding win in the Nevada caucuses, his third victory in a row, means Cruz is going to have to fight that much harder on his home turf, starting with Thursday’s debate in Houston.
“Trump is succeeding everywhere right now, and Texas is not immune to that,” said Matt Mackowiak, a GOP political consultant in Austin who isn’t aligned with any presidential candidate. “If Trump were to defeat Cruz in Texas, it would be an earthquake, an absolute earthquake.”

I want to hear from my fellow SouthWest nation.  Your economy centers around oil exports and Mexico/California trade.   Together the three of us are as big as Germany.  So what would a Yawker real estate developer know about Texas  and he Great SouthWest?

The US Congress does not keep liquid reserves

Reuters has an article about Freddy and Fanny, the two large mortgage insurers (they aggregate mortgages to establish safety in the market) owned by Congress. Congress has been taking the liquid reserves from these two firms and spending, it says the federal housing agency head.

Concerns by Fannie Mae and Freddie Mac's regulator about the U.S. mortgage finance agencies' lack of capital has opened the door for federal actions that may eventually end government control over them, Bank of America Merrill Lynch said on Wednesday.
In 2008, the agencies went into conservatorships following the housing bust in order to get taxpayer help to deal with heavy losses.
Profits from their mortgage business and investments have been going to Uncle Sam even after they repaid the government for their $187 billion bailout. Because of this, they have been unable to rebuild their cushion against losses - a concern raised by Mel Watt, director of the Federal Housing Finance Agency, last week.
"In an unusual speech, the FHFA director flagged lack of capital as the most serious risk for Fannie and Freddie," Ralph Axel, rates strategist for Bank of America Merrill Lynch, wrote in a research note on Wednesday.
"We think this opens the door to FHFA pursuing a recapitalization plan, eventually leading to the end of the conservatorships," he said.
FHFA also oversees the Federal Home Loan Bank System, another mortgage government-sponsored enterprise.
Watts warned in a speech at the Bipartisan Policy Center in Washington last Thursday that Fannie and Freddie would have no capital buffer starting Jan. 1, 2018 against possible losses.
Since their 2008 bailout, Fannie would have sent a total of $148 billion to the U.S. Treasury by next month, and Freddie a sum of $98 billion, data from the agencies show.

This is capital reserves, as opposed to 'cash' on hand to cover default risk in their mortgage business.  Don't ask me to explain, I am not sure.

Congress keeps no capital reserves, nor do any of the socialist enterprises they own.  Congress will just go borrow whatever bailout funds it needs.   So what? If Congress sells of the two insurers, they will get a weaker price, and it will likely be a fire sale.  

Why worry when you can vote

FreeBeacon: China warned the United States on Wednesday not to adopt punitive currency policies that could disrupt U.S.-China relations after Donald Trump’s win in the Nevada caucus.
Foreign Ministry spokeswoman Hua Chunying told reporters in Beijing that “we are following with interest the U.S. presidential election.”

According to our Attorney General Lynch, no citizenship is required to vote, just fly on in to California and vote.  Buy a house while you are here and get your Legal Illegal Alienship  Card. Besides, most of  our foreign immigrants come from China and vote for Trump. So the communists can take part of the blame.

I thought we had already written off Detroit

Bloomberg: "This month the amount of state aid that’s siphoned off to service debt will jump to roughly what is spent on salaries and benefits, pressuring the district’s ability to pay its bills," Bloomberg writes, and that means "the district may have to stop paying workers if lawmakers fail to reach an agreement."

Detroit's school system is sitting on more than a half a billion in debt to the state loan authority and will be insolvent in less than 60 days. Last month, some schools were forced to close because teachers called in sick to protest poor conditions.

 There are still students in the town.  It would be cheaper to ship the remaining families out to Los Angeles, let the Brown administration sort it out.

All this debt!

We get an investment note from Hoisington Investment Management’, specialists in the long bond. 
Barrons: Much of their continuing dour outlook on U.S. and global growth revolves around the explosion of combined private and public debt as a percentage of economic output. According to Hoisington, in the U.S., that has jumped from 200% in 1987 to about 370%. In the euro zone, it has gone from about 300% of GDP in 1999 to more than 460%. Japan’s debt stands at a monstrous 650% of GDP, while China’s total debt has quadrupled since 2008, to 300% of GDP. And that’s probably a conservative measure, considering that China consistently juices its GDP growth numbers.
According to Hunt, the growing debt load, especially in the past decade, acts as a blanket of snow and ice, freezing growth. Money is wasted by financing temporary boosts in consumption, rather than being used for sensible capital spending and infrastructure projects that would yield much future growth. As China has shown, capital investment is unproductive if it just builds highways to nowhere, redundant industrial capacity, and empty housing complexes.
Debt growth is sustainable only if the projects it underwrites produce a stream of income sufficient to repay the interest and principal. This, according to Hunt, is becoming problematic in many areas of the globe, including the U.S., where the energy and mining sectors are in a world of hurt.
According to Hunt, overindebted economies have certain telltale characteristics. Jumps in economic growth, inflation, and high-grade bond yields prove short-lived because debt constrains economic activity. Difficulties in making debt payments, in turn, push economies into frequent downturns and hurt productivity. Monetary policy loses effectiveness as the debt overhang stunts expansion of the money supply, slows monetary velocity, and quenches the animal spirits of producers and confidence of consumers.

I boldfaced the part about covering interest and principal.  There is no Kanosian trick, and the Swamp never pays off interest and simply rolls over principal, and that means low capital efficiency in the Swamp, bad multipliers.  The double entry accounting system does notice this, and business activity drops as the flow of interest payments increase.   HT Mish.

Autos still OK

The SAAR for total sales is projected to reach 17.7 million units in February 2016, up 1.4 million units from 16.4 million a year ago when much of the country was snowbound and the highest rate since 2000 when it briefly reached 18.9 million units.
“The year-over-year sales growth projection for February is strong, but we need to keep in mind that it is aided by the fact that sales in the upper East Coast, Midwest and Texas were hampered by weather last February,” John Humphrey, senior vice president of the global automotive practice at J.D. Power cautioned.
(VW teases new “trendy, affordable” new SUV concept. For more, Click Here.)
“To further put the February sales projection into context, while the retail SAAR of 13.9 million is unquestionably a high level of vehicle demand, it is the lowest monthly level since last June and well below the 15.3 million pace last September.”
 SWatch your seasona; adjuster.  It's the purple line, the blue is the actual sales.  Now we saw earlier that the sub prime auto default index is up, up to near;y recession ;levels.  So the rates on car loans is going up, quite a bit to cover default risk.

But, still, even if the auto sales is a lagging indicators, these numbers still look good.  We may still have a fairly  mild down turn,  The sudden stop, the negative feedback, comes from New York and California governments.

Insurance vs price prediction

The St Louis Fed performed a neat statistical trick.  They look at inflation protected bonds and get the forward looking rate of inflation.  Then using the elasticity of oi with respect to consumer spending, they find oil prices are predicted to be zero!, the red line.  The blue line is the future price of oil as estimated in the future market.

So, if I am a human portfolio balancer, why would I have two contradictory futures in my head?  Because I don't, I am using the inflation protection bond as an insurance policy.  I am protecting against the worst case,  not predicting the mean result.  Some economists know this, including Yellen.  It's like an fire insurance deductable.  The trader can cover the first 20k of a house fire, bur if the whole house goes up, he wants insurance.

When the tide goes out

The we see the butts of all the traders fooled by fraud. 
MarketWatch: There’s a big difference between companies’ advertised performance in 2015 and how they actually did.
How big? With most calendar-year results now in, FactSet estimates companies in the S&P 500 earned 0.4% more per share in 2015 than the year before. That marks the weakest growth since 2009. But this is based on so-called pro forma figures, results provided by companies that exclude certain items such as restructuring charges or stock-based compensation.
Look to results reported under generally accepted accounting principles and S&PSPX, +0.44%   earnings per share fell by 12.7%, according to S&P Dow Jones Indices. That is the sharpest decline since the financial crisis year of 2008. Plus, the reported earnings were 25% lower than the pro forma figures—the widest difference since 2008 when companies took a record amount of charges.

Hillary and Donald

Buzzfeed: If Hillary Clinton manages to beat Bernie Sanders, the early primaries have already revealed that there’s only one strategy for the general election against a Republican, be it Donald Trump, Marco Rubio, or Ted Cruz: Scorch the earth.
There was a scenario, which looks more like a fantasy, in which Clinton was a movement. Women in their twenties, thirties, and forties would rally to her the way black Americans rallied to Obama; she would run on her own mantle of change.
In reality, nobody is that excited about Hillary Clinton, and young voters, women and men — the foot soldiers of any Democratic Party movement — aren’t coming around. She lost a resounding 82% of voters under 30 in Nevada. Her campaign now rests on the hope that voters of color like her well enough, if nowhere near as much as they like Obama. And that means that when she faces a Republican, she will have to destroy him — something the people who will be doing the destroying acknowledged when I asked them earlier this month.

The polls have Hillary and Donald neck and neck.  The economy in the doldrums, if not outright recession.  Trump will storm through, not Hillary.  Obama missed the sea change, he still lives in the Doonsebury version of political correctness.   The antiestablishment hatred is strong,  The millennials know they have to choose the method of their recession in 2024.   They also have to watch the monetary regime change carefully, keep the Swampers from sending out the drunken helicopter pilot.  Voters will choose the blunt, candid candidate, Trump.

Boomers cashing in their pension pile

EdWeek: Teacher-retirement systems are supposed to provide a measure of security in exchange for years of service. But for new teachers in Illinois, that's looking increasingly unlikely.
Nearly a quarter of newly hired teachers will never vest in the state's Teacher Retirement System, a new analysis says. What's more, three quarters won't even make back what they pay into the system.
Those statistics are the result of changes made by lawmakers in 2011 to scale back costs, according to the analysis, by Bellwether Education Partners, a Washington-based consulting firm.

Familiar problem.  If you are a boomer take what you can get now, let the millennials sort the mess later,

Boomers cashed in on their homes

MarketWatch: A new report from the New York Federal Reserve shows older Americans have been ramping up their debt while younger Americans have not.
In real terms, debt in the hands of Americans between 50 and 80 years of age has increased by 59% since 2003. At the same time, the aggregate debt of those age 39 has dropped by 12%, the report released Friday shows.
The New York Fed report examines why. Mostly it’s a function of the housing boom and bust.
Home-secured debt, per capita, has surged 47% for those age 65, for an increase of $11,191, while it’s dropped 28% to $8,195 for those aged 30.
That makes sense as older Americans with a home, facing declining prices after the housing market collapsed but also declining interest rates, refinanced. At the same time, younger Americans were less able to get on the housing ladder, either because they didn’t want to since their job prospects were diminished and they were struggling with student debt, or they couldn’t because banks had made lending more difficult.

We will also find that the new home sales were dominated by boomers taking retirement, taking advantage of the Chinese home buyers. But the  millennials cannot afford rent, especially here in California.  The middle class exit from California is a mix, retirees going to cheaper environments, and middle class millennials doing the same.  Does the legislature ut here get the problem? No, they are busy comparing breast size.