Monday, December 22, 2014

Fed Bubble #3 Will Hit Canada Harder Than Bubbles #1 and #2


22 December 2014
This post refers to a well-researched article published yesterday by Sober LookIf energy prices remain near current levels, Canada's economy is in trouble.



Collapsing energy prices will be the story of the year for Canada, due to our high costs of production in the oil sands sector. In the US, the primary impact of low oil prices will be on the over-leveraged, capital-intensive and high-turnover shale fracking sector. In Canada, the oil sands operations are much better-funded, but they're not economic at these prices, and we have fracking going on here, too. 



But the real Canadian story is that we have so far entirely missed the US real estate correction (due to riding the commodity boom), but the turndown in oil prices is going to hit Canada's real estate market very hard. 

While our energy sector is much less leveraged than in the US, our housing sector is clearly vulnerable. Our household debt load has doubled as a percentage of income since 1990. 



This is thus emerging as Canada's biggest economic setback in decades. 

By the way, one statistic really caught my eye. I have been commenting for as long as I can remember that we keep our local construction workers busy full-time without building any new houses. In fact, I have been on the mark. Canada has been involved in a renovation boom for years (see story and chart). Falling energy prices will impact that, too, and it's likely that real estate prices have already peaked, given how fast the rig count is dropping in the oil patch. 



Now... will this be the crisis that triggers a resurgence in gold? Well, Mr. al-Naimi just announced that the Saudis don't care if oil falls to $20/barrel. They are obviously wishing to preserve market share, and they are fighting a battle they can win. 

Note that the Asians have been playing years ahead of us in stockpiling gold, as a hedge against bad debt and economic volatility. This trend has not reversed since 2011, when the chart below was created. 



The gold price will be leveraged if there is a credit crunch, and that appears to be what is shaping up. Once again, the crazy Americans have started another boom/bubble with the only real economic and employment growth of the past 7 years having occurred in only 5 shale fracking states. And of course, everybody will pay for the Federal Reserve's latest experiment in bubble-blowing. 



What is the moral of this story? You can't print $4 trillion of funny money and not have consequences. The Fed brought on the so-called Great Recession in 2008 --- arguably a depression, which has so far been masked by moneyprinting and borrowing, but it has not gone away. 

The chart below shows that the Federal Reserve has recently accumulated $4 trillion in assets, purchased with printed money, that it cannot sell without creating irreparable market dislocations.



Booms are not the same thing as economic growth. Rather, they are temporary and unsustainable events caused by economic central planners who believe that moneyprinting stimulates the economy. However, moneyprinting always results in malinvestment, which results in transient booms that ALWAYS go bust with real capital loss. 

Only saving, combined with  capital investment for the long-term, produces growth, whereas stimulating borrowing and debt (the strategy used by economic central planners since 1987) always fails. 

In the chart below, we see how decades of Federal Reserve bubble-blowing have decimated US breadwinner jobs.



If you want to know more about how Fed bubble #3 is unfolding (with the usual dire consequences), David Stockman has summarized it here: The Fracturing Energy Bubble Is the New Housing Crash

Here, we see that Federal reserve intervention has added to jobs only in the least stable and lowest wage sectors.



And for a little more digging into risky energy finance, have a look at John Mauldin's recent review, here (though I disagree with his speculation that we've outgrown our need for jobs --- rather, Fed-induced malinvestment keeps killing them): Oil, Employment, and Growth

Combined with the above charts, it is evident that the latest boom has led to the creation of only low wage jobs (above) and speculatively-financed carbon energy sector jobs in only 5 states (below).



The article linked at the start of this post is brief, full of charts, easy to read, and sobering. If I'm right, the energy sector will remain weak until the vulnerable players get taken out of the game. It is bad debt that will eventually force interest rates higher, whether our central planners wish for rates to go that way or not. 

On the upside for Canada, which has more mining companies than all other countries in the world combined, the fallout in bad debt from the collapse in the carbon energy sector could be counterbalanced to some degree by a resurgence in the gold mining sector, which will certainly benefit the region where I live (Northwest Ontario). 



Keep watching, and look out! The oil price collapse seems quickly to be unmasking Fed bubble #3, as far as I can tell from here. 

When do the bubbles and booms stop? When the central planners stop intervening by printing money and "stimulating" borrowing and debt in the absence of viable targets for investment. 

Where should the investment be coming from? 

Savings, not borrowing. 

What should we be investing in, instead of booms and bubbles?

Let the market decide --- without intervention by central planners.
_

Wednesday, December 10, 2014

A Three Stage Gold Bull Market?

27 December 2005, 16 April & 9 May 2010; 10 December 2014

This is a legacy article from 2005 which I though might be interesting to update and republish. Here, for your interest, is the original text, followed by today's update at the end:

I was reading the most recent issue of Fortune Magazine last night, and what should be on the cover but bars of gold bullion? As you might imagine, Gold is now on Fortune’s top 25 list of recommended investments for 2006.

There is presently much discussion among precious metals analysts as to whether we have entered “stage two” of gold’s bull market, which is expected to be marked by increased mainstream interest in gold investment. I will attempt to show here, in accord with one of my mentors, Ed Bugos (http://www.goldenbar.com/
), that despite increasing public interest, we remain in “stage one” of the gold bull market, though I believe stage two is fast approaching.

Bull markets are generally presumed to evolve through three stages. In the first stage, astute individuals who are alert to emerging trends often experience considerable gains while their area of investment interest remains "under the radar."

In stage two, the general public and the professional investment community develop increasing interest in the emerging opportunities in a particular field of investment. In my understanding, stage two is typically characterized by increased risk, as a later stage pullback can erase the gains of new investors, and restore investment values to levels somewhere between the peak and the (typically lower) close of stage one. This is significant, as some early investors may sell out to new investors at or near the stage two peak, and new investors tend to become discouraged with the new bull market after a dramatic pullback has erased their gains.

Strikingly, just at the point where the general public and the broader investment community (including the majority of professional advisors) become most disillusioned with the now maturing bull market, stage three typically begins. Once again, the early investors, who have a clearly thought-through rationale for their investment preferences, are those most likely to benefit by the third, and most dramatic bull market stage, which is one of parabolic growth over a relatively short period of time.

I can think of two excellent illustrations of these three bull market stages. The first is the gold bull market of the 1970’s, which ended in a dramatic 1980 peak with gold values over $800 per ounce.




NOTE: All three charts originated by Mary Ann and Pamela Aden (http://www.adenforecast.com/). Readers are advised to visit their excellent website for fuller understanding.

In stage one, gold values began drifting up from $35 per ounce, where they had been fixed by international accord through 1968. In 1971, President Nixon removed the US dollar from the gold standard, thereby fully opening up the value of gold to market pricing, which saw gold’s advance to about $120 per ounce in 1973. Stage one closed when gold pulled back modestly to about $100 later that year.

Stage two of the gold bull market was associated with the return of private ownership of gold to US citizens in 1974. The gold price moved up rapidly, almost to $200 by 1975, drawing in increasing public interest. But, as is characteristic of bull markets in their second stage, gold’s price then pulled back to the $100 per ounce range, thereby erasing the gains of new investors, but preserving the gains of the early investors.

As is typically the case in bull markets, this second stage collapse actually set the stage for the stage three parabolic move upwards in gold’s value to over $800 per ounce.

By 1980, with gold nearing its peak values, market fundamentals changed, and the wisest of investors sold their holdings of gold in recognition of the changed fundamental situation. (The best known of these is Jim Sinclair: http://www.jsmineset.com/).


The particular development in 1980 was that Paul Volcker was appointed to chair the US Federal Reserve Board. Volcker steadily raised interest rates to wrestle inflation to the floor, ushering in a 21-year secular bear market in gold. Oblivious to these fundamental changes, many members of the public were by this point anticipating near-infinite gains in the value of gold, and steadily lost their gains (or their invested capital) due to holding their investments as the gold bull market at first precipitously, and then gradually, unwound in a 21-year downtrend, ending in 2001.

My second example of a three stage bull market is the recently concluded “technology bubble.” The three stages are well-illustrated in a study of the shares of Dell Computer. Dell’s stage one accumulative phase continued through the end of 1992, at which point the price (in contemporary post-split terms) had risen from mere pennies to 78 cents a share, creating dramatic gains for early holders. However, stage one concluded with a pullback to 22 cents per share in 1993.

This laid the foundation for the stage two rise to $1.54 per share in late 1995, essentially doubling the gains of early stage one investors, and increasing the holdings of early stage two investors sixfold.

However, Dell’s share value then collapsed dramatically by over 50% to 72 cents per share that same year, essentially erasing all of the share value gains from the 1992 peak through to 1995 – a discouraging three-year period of non-performance.

This wrenching late stage two pullback, once again, set the stage for a dramatic stage three bull market move for Dell. From its 1995 low of 72 cents, Dell never looked back until 2000, at which point it had attained a value of $59.69 per share, confirming the wisdom of the longer term investors who had correctly perceived (or luckily discovered) that Dell had entered its stage three bull market phase.

Note that the shares of Dell are now unwinding, as did the value of gold after 1980, and that, in my opinion, Dell’s shares have much more to lose before its “secular” bear market is done. Dell had collapsed to the $16 range shortly after its 2000 bull market peak. It since recovered to a $42.57 high in late 2004, but in my view will be facing a long downward slope for many years to come as the investment community gradually recognizes that computer hardware has become a “commodity” in an emerging globalized economy (that is, fundamental factors have again brought an end to a dramatic and exciting bull market).

Looking back to the 1970’s gold bull market, and its subsequent 1980-2001 bear market decline, it strikes me that bear markets may be characterized by three stages as well. The bear market pullback may appear less dramatic in terms of the currency value of shares, due to the persistent eroding background interference of monetary inflation, which, by matter of government policy, steadily undermines the purchasing power of all money.

In my view, the 1980-82 gold market decline would constitute stage one of the bear market, pulling the price back inside the long-term channel of gold’s appreciating value in terms of a steadily inflating currency; then 1982-93 constituted stage two, returning the price to the middle of the channel defining gold’s value in terms of an inflating currency; and 1993-2001 constitutes stage three of the bear market, bringing the price of gold to a 21 year channel bottom, and preparing the stage for the present gold bull market.

Given that the length of gold’s recent (1980-2001) bear market was almost twice as long as its 12-year 1968-1980 bull market, I now suspect that we may be seeing a much longer and more gradual, but ultimately more powerful gold bull market than in the 1970’s.

Chart analysis shows that we have not yet attained even gold’s long-term mid-channel values (presently in the $600 per ounce range), and there is still the move to the top of the channel to anticipate (stage two), as well as a possible parabolic move above the channel to culminate stage three of the present gold bull market.

The background to my speculation that the present gold bull market will be lengthier and more powerful than the 1970’s bull market is due in large part to the fact that the value of gold mining company shares steadily weakened against the value of gold from the date of the initial free market trading of gold (1968) through 1980.

In the present gold bull market, gold mining company shares have appreciated strongly relative to the value of gold, obviously due to the fact that their relative value remains, even now, in a 36-year downtrend.


I find it difficult to countenance that the value of gold shares relative to gold will not break out of their present 36-year downtrend channel during the present gold bull market

Any breakout in share values above this channel top (we are now very near this point) will almost certainly see an end-of-stage-one pullback to the upper line of the (gold share relative value) downtrend channel, possibly on a strong move in gold, though possibly also due to short-term renewed weakness in the gold mining shares due to a range of very real fundamental issues, including inflating production costs, political risk, and questions about demand for gold at higher prices (by the way, don't worry about this latter issue – if any currency were climbing in value, would people wish to own more or less of it?).


On the upside, resistance to gold shares’ continued upward movement will be set by their 1993, 1973 and 1969 highs, respectively.) The time to sell gold shares and diversify into other investments would be at the time that the 1969 ratio high is reattained, very likely a decade or two in the future, if not longer. By then, equities, bonds or some other class of investment (perhaps real estate) would likely have returned to attractive values.

As I am working with a conceptual model which indicates that the present bull market in gold and gold shares could last much longer than the 1970’s “flash in the pan” gold bull market, I suggest that we could anticipate 20 or even 30 more years of strength in gold mining shares relative to gold. Bear in mind that only 4 years have been logged so far. Of course, there will be many surges up and down along the way. But a 20 to 30-year buy and hold strategy in gold mining shares would seem to be a workable choice in this market, even allowing for the likelihood that there will be a substantial correction at the end of stage one (if it has not already concluded), and an even greater, perhaps 50% correction, at the close of stage two.


So if we are not yet in stage two in this bull market, where are we? I suggest that we probably are moving quite near to the end of stage one, which I expect to conclude with gold values in the $600 per ounce range.

However, stage one is also likely to conclude with a greater correction in the price of gold than we have seen so far (that is, closer to a 20% - or greater - correction than to a 10% correction). The associated correction in gold shares may be more modest, and is more likely to follow the gold shares’ breakout from their 36-year downtrend than to precede that breakout move.

Psychologically, while Fortune Magazine’s cover certainly signals awakening public interest in the gold market, there remain several missing pieces to that puzzle as well. To begin, while gold itself has qualified as a recommended investment for 2006, no gold or precious metal mining companies have yet been named. Secondly, the analysis offered by Andy Serwer really neglects the primary driver of gold’s appreciation, which is ongoing inflation in the quantity of money in all of the world’s major currencies. I believe that a fundamental grasp of gold’s role as a hedge against deterioration in the value of money will need to be more clearly understood during stage two of the gold bull market.

I invite readers to share their thoughts and comments about gold’s three-stage bull market with me.

10 August 2008: Also - be sure to read my more recent posts on the topics of precious metals and secular trends, starting here: "Gold's 1980 High – Think $5000 - No $6000 - per Ounce."


16 April 2010: I thought this topic was important enough to revisit 5 years later. Though some details may be off to some degree (particularly my prediction that stage one would run no higher than $600 or so), the scenario I painted in 2005 has more or less come to pass. In my view, the 34% pullback in the gold price in October 2008 (from $1033.90 to $681.00) constituted the end of stage one in the present 3-stage gold bull market. The recovery in the gold price from this level since that time appears to constitute the early era of stage two, and that is where we are now.

Where then will stage two end? Pamela and Mary Anne Aden have recently proposed that the gold price is likely to see a level over $2000, perhaps as high as $3000, by February 2012 or so.

This prediction is based on a pattern of gold prices reaching peaks 11 years following major lows. The assumption is that a large pullback would follow that interim high - and then the fabled stage three would launch from the second primary pullback low.

Gold analysts generally expect stage three to be a "bubble" stage, during which the gold price will rise to unprecedented levels in an atmosphere of general panic. I have blogged earlier that the gold price can easily run to a level of $6000 or higher, depending on what happens with inflation, which of course now appears to be picking up steam.

As the chart above shows (comparing gold to previous well-established investment bubbles), there is no detectable "bubble" action in the price of gold at all so far, so it is not difficult to envision how the gold bull market could easily extend for an additional decade or so from here.

Speaking in broad brush terms, if stage two wraps up with a primary correction (that is, a major pullback) in say 2012 or 2013, then the stage three bubble high will occur some years after that. We are now of course speaking very speculatively. But if the Adens are correct in describing an 11-year pattern in gold price highs, then the bubble peak might possibly occur 11 years following the October 2008 low, that is, somewhere near the year 2019. This speculation thus projects that the present gold bull market will run approximately 18 years from 2001 through 2019 or so.

Interestingly, drawing on a separate source, Jim Rogers has recently reminded his followers that "previous commodity bull markets averaged about 17 to 18 years in length and experienced very large percentage increases." That is, the speculation that stage three of the present gold bull market might run approximately to the year 2019 is well-grounded in history.

If I have been wrong anywhere so far in my original 2005 speculations about the 3-stage gold bull market, it has been in my original assumption that gold stocks would begin to leverage the gold price early in the process.

In fact, gold stocks well outperformed gold from 2001-2003, and since that time (now almost 7 years), have dramatically underperformed gold itself, as can be seen in the chart above (and the HUI index is the best-performing of the alternative gold stock indices!).

If gold stock investors (I am one) can take any solace, then it is in the current positive trend in the price of gold stocks relative to gold since October 2008, as can be seen in the same chart. Should gold stocks continue their more recent pattern, then it is possible that we could see a new high in the HUI:Gold ratio by February 2012 or so. Given that gold exploration and mining companies (1) own gold in the ground at a substantial discount to the market price of gold itself, and (2) have established their ability to get it out of the ground efficiently, that would in fact be a rational outcome, though as all investors know, markets are under no requirement whatsoever to perform in a rational manner at any time!

(The photo above is of the new headframe at the Goldcorp Red Lake Gold Mine, in which my wife and I are investors.)

10 December 2014: I thought it might be worth commenting, this article has basically been proven correct, though the winding down of the stage two phase of the gold bull market has emerged as far more brutal and extended than I had imagined, even in my most recent previous post, in 2010. As it turns out, gold peaked at stage two in September 2011 at about $1930 per ounce, and there have since been four apparent bottoms, the most recent in the $1130 range in early November 2014. 



The recent bottom can be seen here (Stockcharts' daily closing gold prices are approximate):



Referring to the above article, a more extended and brutal downturn presages a stronger and longer rally back the other way (and higher) --- whenever it starts. (Timing is the most unknowable factor in the investing world, or "everybody" would win.) 

As has often been discussed here, gold mining stocks amplify the movements of gold in both directions, and the present downturn has been no exception. As you can see, gold mining stocks, as represented by the now "old hat" HUI Gold Bugs Index, have been slammed for over three years, and we're still searching for the bottom. I will just comment that this kind of (primary) correction cleans out ALL the nonbelievers, and even quite a few of the "faithful!" It has been horribly ugly and longlasting --- though, of course, that is what downturns are supposed to be, especially "primary corrections," as their function in the market is to clear out "weak hands," and thus to position holders for longer-term gains at very low entry prices. 



Even worse is the HUI:Gold ratio (the value of gold mining stocks relative to gold), as we have now revisited (and fallen slightly under) the absurdly low levels of the year 2000, prior to the beginning of the present 13-14 year gold bull market. It's as though the price of gold had not changed since the year 2000 (when it was in the $250/ounce range), though, more precisely, it's as though gold mining is no better a business at $1200 gold than it was at $250 gold 13 years ago, which is a little bit of a ludicrous concept (though mining costs have certainly sustained severe inflation during that period). 



Given how lengthy the stages of the current gold bull market have proven to be (the previous one in the 70s lasted only 8-11 years), I am now rethinking whether 2018-19 (that date is speculative guesswork, by the way) is likely to be "the top," or just another way station. For example, bonds have remained in a multi-decade bull market (which is now likely to end reasonably soon), and my present guess is that we're going to see something more like that in gold now... that is, continuing gains for decades to come, though of course, as in all markets, with surprises (both ways) and ample volatility to keep shaking out the uncommitted. 

Bear in mind, the gold price rises when real interest rates are negative, and when the global macroeconomic picture is unfavourable, due to such issues as excessive debt, monetary inflation, poor government leadership, and so on. I honestly don't see how that problem gets fixed by 2018-19. It's probably going to take much, much longer than that... and gold should sustain its appreciating trend throughout that period!

So, what can I say, but "hold on for the ride!"



_

Saturday, October 18, 2014

HOW TO EXERCISE: Five (Necessary) Exercise Strategies

5 April & 18 October 2014

It can be harder than it might seem to know “how to exercise,” particularly as ongoing research keeps adding new facts to our accumulating knowledge. Clearly NOT exercising is bad... very bad, especially for those of us who have sitting jobs, because just sitting through the day shortens your life by several years (even if you exercise) There are TOO MANY facts about exercise, and it can get confusing. Here is the simplest summary I can come up with (and yes, you must do all 5 to get the full benefits of exercise):

1. Aerobics or "cardio." Run, swim, bike, walk, hike, climb, skate, ski, etc. This is endurance training. It's good for "type I" (slow twitch) muscle fibres, which require only 24 hours to recover. Aerobic fitness involves breaking down stored fuel 16 times more efficiently in the presence of oxygen, and it confers endurance and long life. You have to move enough to breathe hard and deeply, and keep at it for an extended period, for substantial portions of an hour, or more. It charges you up on endorphins as an added benefit, and prevents or heals a host of inflammatory illnesses (though not "all" of them). .


2. Strength training. This is good for type II (fast twitch) muscle fibres, which require 48 hours to recover (so take breaks in-between). Strength training enhances muscle bulk and length, and of course, strength. This is the form of exercise that produces the most myokines (protein signalling molecules secreted by contracting muscles) – 400 of them have been identified, and we're only starting to understand what they do. We know that substances secreted from contracting muscles repair tissue damage and injuries; prevent and reverse inflammatory and metabolic illnesses; melt off interstitial (visceral) and subcutaneous (pinchable) fat; grow new blood vessels, new (and stronger) bone cells, new muscle fibres and new brain cells; kill cancer cells, bacteria and viruses; and even reverse cellular aging by preserving the length of telomeres – the molecular shoelace tips at the ends of our DNA! And that’s just for a start!


3. Core/functional training. Here, we're talking about rotation around all of our joints, especially around the waist, off-balance movement and recovery (which improves balance), flexibility, functionality, fall and accident prevention, reaction time, stability, small-muscle strength, the ability to handle complex and unexpected movements, etc. While just pumping iron is fine for strength training (above), a totally different exercise strategy is needed for the twisting, bending, stretching and gyrations of (complex and integrated) core movement. The Pilates method emphasizes training the core of the body, and is a good starting point for exploring this type of training.


4. Lifestyle fitness. You can't just lock exercise into a scheduled time slot each day. You will STILL die years earlier than necessary. You have to incorporate exercise into your daily routines. There are 1-minute and 4-minute workouts you can do at almost any point throughout the day. You can park your car and walk, invent excuses to get out of your chair, take the stairs – not the elevator, walk for pleasure, change your position, get involved in physical recreational activities, etc. Fitness has to be part of your lifestyle, or you're not getting it!


5. Short-burst training. Also known as high intensity interval training, this is a new and hotly-researched area with some very convincing scientific evidence behind it. You go “all-out and whole-body” as much as possible in "bursting" movements (e.g., jumping, squatting, lunging, sprinting, throwing, kicking, punching and more) for intervals of only 20–60 seconds (depending on the intensity level and the equipment/apparatus used for training) before entering the recovery phase, using a series of high-intensity, short-duration exercises interspersed with brief periods of lower-intensity movement. (Self-injury is not necessary to achieve the “short-burst” effect -- never push hard enough to hurt yourself!)

The intent of short-burst training is to utilize the anaerobic energy system. The primary fuel used is carbohydrate (which gets exhausted quickly), with stored fat kicking in later (in fact, for up to the next 24-48 hours -- this strategy is perhaps the ultimate "fat burner"). The conversion of white-fat "storage" cells to beige-fat "energy burning" cells is believed to be triggered by signalling molecules that muscles release during contraction (one of them is called irisin or FNDC5 -- though the function of this particular molecule remains a topic of scientific controversy at present).

The process of burning more oxygen for many hours after intense exercise is called "EPOC" (excess post-exercise oxygen consumption). A minute is the maximum "magic number" for a human to go “all-out,” and 20 seconds is sufficient when you are exercising continuously and varying your rate of exercise to achieve high intensity interval training. Research has shown that exercise intensity has a 13.3 times greater effect on systolic blood pressure, a 2.8 times greater effect on diastolic blood pressure, and a 4.7 times greater effect on waist circumference in men when compared to exercise duration.


In brief, to benefit by exercise, you need to incorporate all five of the above strategies in your exercise plan.

Here is the good news: Strength, core and short-burst training are EASILY combined, so we can beneficially treat these three as one group (by planning our workouts thoughtfully). Bursts are also easily incorporated in aerobic and lifestyle activities, so short-burst fitness can be fit into many places throughout the day. And yes, the research confirms... as few as three 20-60 second bursts of higher-intensity exercise within a workout session of only 4 to 30 minutes in total can have measurable long-term benefits. Similarly, on the other side of the coin, 15 minutes a day is sufficient to win the endurance benefits of aerobic (cardiovascular) exercise. So you ARE NOT wasting your time to be trying out workouts even of just a few minutes in length.

My conclusion: There aren't many excuses left. Being fit is TOO EASY!

Enjoy.
_

Monday, September 08, 2014

How Long Can the Amazon.com Business Model Last?

8 September 2014

Jillian D'Onfro at Business Insider has just written a thoughtful analysis of the Amazon.com business model. If you follow e-commerce at all, then you know that Amazon plays to maximize market share, slash margins, and make customers happy.


I read this article and the reader comments carefully, because I am a core Amazon customer. I'm not into streaming media, etc., but I live in a small town in Canada where I would have to travel hundreds – or thousands – of miles to find even slightly specialized items. 30-40 years ago, I was ordering odds and ends at the local small-town Sears outlet (we still have one). But Amazon is for sure the new Sears if you live in a small town.

Now I honestly don't see how Amazon can stay a going concern based on its present policies, but everything they do is by all means customer friendly. I have the Amazon card, etc. (No need for Prime, however, which isn't so great in Canada, anyway).


Let me share just one example of a surely non-sustainable business practice. I basically outfitted my home gym at Amazon (though I bought my weight sets years ago, in Winnipeg, about 150 miles away). So, I order a Ringside 100-pound heavy bag from Amazon.ca for maybe $139, and the shipping is listed at maybe $270, but it's eligible for free super saver shipping. I mean, the delivery guys had to haul it to my house and bring it up the stairs to my door (something I would have had to do if I'd made the purchase at a store). So for no shipping charge, I have this 100-pound bag waiting for me at my door.


Logic insists that this cannot last. But yes, I am trying to buy everything I could possibly ever need now, because I can't see Amazon still delivering hundred-pound packages for free, 5 or 10 years down the road! But for consumers, there has been nothing better.

And, to do a business analysis, Amazon clearly has one competitive advantage, which is the massive number of partners. (The local competitor is Indigo.com, which is a home-grown Canadian former bookstore chain turned e-tailer, but, “no competition.”)

In recent years, it has indeed gotten easier to search Amazon than Google, if the intention is to make a purchase. Given that AMZN has a massive market cap, and Sears is on death's door, it has crossed my mind that Amazon might want to buy up Sears just to get their distribution system, and the Kenmore brand name may or may not help --- not that important. But if I had to drive the one-mile trip to the Sears distribution centre to pick up my Amazon order (still with free shipping), I would not be complaining. 


This advantage really shows up in Canada, where, historically, no retailer has ever given any customer anything for free. Canadians are used to paying top dollar for services in most categories, and that included shipping, until Amazon.ca showed up. (Sears usually had the best delivery deal, before Amazon arrived on the scene – but they would not deliver a 100-pound item to your door for free --- you still had to go to the outlet yourself, and pick up the new washer and dryer, snowblower, or what have you, possibly with the van you had borrowed from your neighbour!)

So, I certainly wish Amazon well, but I'm buying all the heavy stuff now!
_

Monday, September 01, 2014

Patiently Awaiting Recession Number Three

1 September 2014

I have posted before that the US government, in my opinion, doesn't manage money very well. These charts are meant to serve as one illustration of that.


Basically, "reserve bank credit" is new money printed by the Federal Reserve Bank to keep the economy moving along when things slow down (most notably after 2000 and 2008, but it's actually been going on for a long time on a smaller scale).

One interesting factoid, the total US (broad) money supply as recently as the year 2000 was less (about $2.8 trillion) than just the Fed's balance sheet today (about $4.4 trillion).

Fed injections of "new money" (a euphemism for money-printing) have brought the current US money supply up to the $10 trillion range.


So, if you're not feeling 250% richer, that is probably because money-printing mainly just causes inflation.

The official statistics show inflation as "low," but as they say, it's easy to lie with statistics. If you have noticed necessities, in particular, getting more expensive, it might have a lot to do with the antics of the Federal Reserve.

Does money-printing solve anything? No, it actually makes things worse, by encouraging short-term thinking, and by giving more options to the ultra-rich (who are able to play games with money) than to anyone else.

As soon as all this stops, the economy will slow down --- again, and a lot.

That won't be fun, but it will cause people to start making longer-term and better decisions.

The Federal Reserve may not be permitted to do this a third time, as people may eventually figure out that economies improve through capital investment (based on having a real business plan and confidence in the future), rather than through running the (now-digital) printing presses.
_

Friday, August 29, 2014

THE BEST DECADE I HAVE SEEN

29 August 2014
Having lived in parts of three half-centuries and 8 decades, I believe I am qualified to comment on this topic. Of the decades through which I have lived (starting with the '40s), the best (by far) was the 1950s. No other decade compares.

Don't get me wrong, there was a lot wrong with the '50s. Basically, everybody smoked, drinking to excess was widely accepted - as was drinking and driving, food quality in supermarkets was actually at a low ebb during that decade. There was a fascination with science and technology, and canned and processed foods, many with virtually all nutritional components removed, were staples of the diet. Previously unknown metabolic diseases were on the increase. Above-ground atomic testing was still going on, poisoning the air and soil. Worse still, racism and xenophobia abounded, and no less than 10% of GDP, possibly much more, was "100% wasted" on "anti-communism" (a problem which the communists themselves corrected by creating social and political structures that imploded). Paranoia was pervasive, and social and political norms were incredibly narrow.
That said, essentially all the problems I just listed started getting better in the 1950s. It was the key decade, above all others, in which the middle class prospered. Increasingly liberal social policies worked, because the group of socially disadvantaged persons was small enough that a modest diversion of funds and efforts could genuinely help them. The poor gradually began to move into the burgeoning middle classes. Antibiotics and vaccines came to be widely used, creating a revolution in public health. And doctors still made house calls. There were no class action lawsuits, drug abuse existed only at the fringes of society, and people thought that new technologies and new products were "good." We even initiated the space race in the 50s, and Chuck Yeager had already broken the sound barrier (that was in 1947 --- I remember sonic booms throughout my childhood).
While many of the problems of the '50s have been corrected today, the great majority of its advantages have been lost, foremost among them, the dominance and prosperity of the middle class, and with it, the conviction that advances in society and science were going to keep making life better. While we no longer waste taxpayer dollars on military adventures against communism, our efforts to oppose Middle East dictators (and renewed Russian expansionism, of all things) are equally counterproductive and ill-advised. It's the Chinese who are going to "beat" us anyway, and they are presently doing more things "right" than we are, so I can't really say I'm against them... though my preference would certainly be for us to do better, as our society is freer and more tolerant than theirs.


I remain optimistic at heart. I am always thinking about how things can be better, and the range of our opportunities remains unimaginable. But we are presently mired in ideological straitjackets that no longer match our present reality, a very large proportion of our taxpayer dollars are invested in counterproductive ventures that are more likely to bring pain and further social disintegration than satisfaction, and we have new social problems that make those of the '50s look infinitesimal by comparison. We are quibbling over the small stuff, and failing to invest in and plan for "the big stuff."
Technologies that have the potential to resolve most of our present problems (robotics, nuclear fusion, space habitation, biotechnology and many more) await us on the horizon, but we aren't even going that direction. In an effort to please everybody, our elected leaders are investing in old ideas that don't work, accumulating debts that cannot be repaid, and laying the foundations for increased social and economic disorder in the future.
I guess I'm just arguing that it's time to think smarter and make the hard decisions. Why do I believe we can? Because that's exactly what we did in the '50s. Let's start by believing that new ideas (not just old ones) can actually make things better. That in itself should be enough to turn the tide.
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Friday, August 22, 2014

Russia's "Can't Lose" Financial Strategy

17 February 2014 - updated 22 August & 22 December 2014

Here's a strategy I've thought about for a while now. This is only possible because we have abandoned the gold standard (and with it, sound money - you can talk to Ben Bernanke and Janet Yellen about that). 

Let's just say a government decided to print money out of thin air and use it to buy gold. You start with something that is an entirely artificial construct (any national currency in today's world meets this criterion) and use it to buy something that is real, scarce and irreplaceable (gold still meets THOSE criteria!). Voila, you have a "can't-lose" strategy for getting leaps and bounds ahead of everyone else. 

And... I think one country may actually be doing this (I originally commented on this a couple of years ago). Check out these two Russian charts.... 

(1) They are buying-up gold hand over fist; and 

(2) They are printing funny money like crazy (it's virtually without cost for any nation to increase their "money supply" like this today, for as long as the current insanity lasts). 

Vladimir Putin is NOT a nice guy. We all know that. But is he a smart guy? Yeah. And a wise guy, too. Perhaps a few of the rest of us should clue in... and catch up. 

Russia's gold reserves are up 150% in 7 years:



Russia's money supply is up 33% in 2 years:



I have said earlier that the Federal Reserve should have just put $10,000 in the mailbox of every US citizen (yes, they HAVE spent that much "new" money to "rescue" the still-staggering economy). This would have done MUCH more for the economy than bailing out BOTH political parties, GM, Countrywide Financial and Bank of America. 


But a better scheme even that that would have been to take the $3 trillion printed dollars (yes, they did print $3 trillion to bail out the government and the banks) and to quietly, discreetly, buy gold with it. 

Well, have no fear. Ben Bernanke gave all his money to Citibank, Fannie Mae, General Motors, and the US Congress. It's gone. 

But Vlad Putin bought gold with his "printed money." In my world, Mr. Putin is BY FAR the wiser man.
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22 August 2014: While some reports show slow periods and even temporary reversals in Russia's accumulation of gold, the most recent figures from the World Gold Council show that Russia has (again) reported an increase in its official reserves since February 2014, moving its place in global national gold rankings up two additional slots. What can I say? Print money, buy gold. It's legal. Just what I don't really get is why only the Russians are doing it.... (Believe me, some day, this will no longer be allowed!)

Russia (#5 globally):
Official gold holdings:
1,094.7 tonnes

Percent of foreign reserves in gold:
9.7%

Russia has increased its gold holding since February 2014 and has eclipsed both Switzerland and China. In August 2014, Russia's central bank decided to buy up even more gold and diversify away from the dollar and the euro as a result of economic sanctions imposed by the West.

Russia's central bank gold holdings crossed the 1,000-tonne mark for the first time in Q3 2013.

Source: World Gold Council

22 December 2014: While I disagree with Mr. Putin on many points, in particular, the suppression of diversity at home and my belief that Ukraine should shape its own future, the Russians continue to be cleverer than we in many respects. Despite rumours that they have been selling gold, in fact, it is US dollars that they are unloading, while (wisely) buying ever more gold.




For more information, click here.
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Saturday, January 18, 2014

A Best-Case Scenario for the Financial Apocalypse

18 January, 18 February, 2 April 2014

Let's try the "best-case" scenario for where the US economy can go in the next several years. 



In our current "Fed-centric" economic environment, our first assumption must be that the Federal Reserve ("the Fed") will be able to keep tapering its purchases of US bonds and mortgage assets with never-before-existing money, and that nothing crashes. 

Fed total asset holdings rose from $3 to $4 trillion in 2013. These assets consist of mixed US bonds and mortgage "securities." With tapering, the Fed is now buying $75 billion in new assets per month, down from $85 billion per month last year. So by the end of this year, their holdings will still be close to $5 trillion. In fact, lets say that they decide they can taper another $10-20 billion per month (we're being optimistic here), so maybe in 2015, they're buying $50 billion a month. Even with a good rate of tapering, they're still going to end up holding something in the $7 trillion range in 3-5 years. 


So now, think about how that would impact the budget line if the government and mortgage agencies started paying the Fed back (that is, the US government would need to dig into its own or somebody else's pockets to find another $7 trillion, plus accrued interest, in addition to its current expenditures). Note that China holds $1.3 T, Japan $1.2 T, and all foreign nations $5.7 T in US government bonds.) OK. Let's NOT pay the Fed back, then. We can keep rolling that over. The Fed (truly) doesn't care, since they are legally permitted to print Monopoly money whenever they wish to.


Current US GDP is $16 trillion. US total (Federal only) debt is $17.3 T ($54,000 per citizen). The present blended rate of interest is 2.4%, requiring $415 B per year to pay interest on the current debt (and the Fed already returns its portion of interest due). The foreign holders ($5.7 T) obviously want to collect their payments more than does the Fed. Same for the domestic holders. However, the average rate of interest over the past 20 years was 5.7 %, and 30-year treasuries are presently at 3.76% (up from 2.4% in 2012). Remember that operation TWIST transferred as many long-dated assets as possible into the Fed's hands (figure that one out - OK, I'll help you: Fed purchases of 30-year treasuries keep rates lower through artificially-induced "demand" for this expensive-to-repay product). 

The US annual deficit is now back to a "low" $680 B (down from $1.1-1.4 T in the preceding 4 years). Increased tax receipts accounted for 79% of the reduction from the previous year's $1.1 T. Though this is "better," this is only temporarily the case (see below). And, no matter how good it gets, the US national debt will still exceed $20 T in a small number of years. 

Now, let's apply historically normal 5.7% interest rates to $20 T in debt. Yes, you calculated correctly. The annual debt service reaches $1.14 T. How much does the IRS collect in taxes? The last year for which we have figures is 2012. In that year, tax receipts were $1.1 T. I think you can see where we're going. In a "normal" interest rate scenario, tax receipts will cover interest payments on the national debt and nothing else. 

Bear in mind that in our best-case scenario, the annual deficit may continue to fall, though perhaps only for a short time. The Congressional Budget Office projects that the annual deficit will decline into 2015, to under $500 B, but then will start rising again, due to mushrooming entitlement spending - note that no one anywhere denies this. Remember that so long as the government keeps running deficits, the national debt will continue to increase, thereby placing additional pressure on interest payments. 

While interest rates may stay artificially low for a while longer, I think the chart below illustrates reasonably well why a return to the 5% range is likely. There are those who think that 2008-2012 was a "double bottom" in these charts. Economists pay A LOT of attention to interest rate trends, as they exert a multifaceted influence on behaviour, including borrowing, spending, investment and, of course, the flow of credit. In particular, when consumers pay higher interest rates on debt, they make fewer purchases. 



Note that 10 and 30-year interest rates are set by the market, NOT by the central planners (foremost among them, the Fed), and that the central planners are presently proposing to intervene somewhat less in "the market." Also consider that real inflation rates are substantially higher than the central planners are telling us (here, take your soma, you'll feel fine). Finally, note that entitlement spending has been "on the rise" for 45 years.


The "conservative" CBO sees future expenses looking like this (they always lowball everything, don't they?):


Note that non-entitlement spending actually has to fall to make the above chart possible. 

So at present, we are apparently in what I can only call a transitional period, during which some old ways of picturing our situation (collect taxes, pay bills, run up a tab, keep rates low) will have to give way to some new ways of thinking (OMG, we can't afford this!). 

Tipping points are hard to predict in advance. But how can one argue that a tipping point does not lie ahead? 

While the bills can obviously be paid with inflated dollars, can this be done without the costs of everything else (including entitlements) also rising? 

So, it seems to me a question of "when" vs "if." Have I argued wrongly anywhere?


Remember, I have just described the "best" case for how things can play out. 

Because the economy is a complex system, it is difficult to visualize all of its moving parts at one time. It may help to think of it this way. The fundamental problem is very simple: We are spending money we do not have. However, that "game" can play out in many different ways. When we did the same thing in the 1920s, the result was the Great Depression of the 1930s, as the financial dislocations were allowed to work their way through the system, and most of the fundamental problems were eventually corrected by the market itself. That is, the most viable businesses survived, and the economy became more productive and efficient through the process that Joseph Schumpeter called "creative destruction."



Our present generation has been playing more by the rule of "you can have it all." Well, here is how that works. In 2008, a partial withdrawal of financial stimulus by the central planners led to the inability of vulnerable borrowers to make payments on low-quality loans. The infection then spread to middle and upper middle class borrowers as well, and asset values (primarily home prices) collapsed, causing recent home buyers to go "underwater" on their mortgage loans, despite the fact that the loans were originated at very low interest rates. A similar, though more restricted process had occurred in 2000, with the bursting of "the tech bubble" (which was also caused by monetary inflation promulgated by the Fed, but that is not today's topic!).

The Fed responded to the bursting of the housing bubble in late 2007, which led in turn to the financial "crisis" of 2008-2009, with historically-unprecedented measures, including lowering interest rates to well-below the level of inflation, and the initiation of massive purchases of US government bonds and mortgage securities with newly-created money, thereby greatly expanding the total supply of US dollars in circulation, and buoying the faltering (and overbuilt) housing market. The government, for its part, took an ownership stake in badly-run businesses, such as General Motors and Bank of America, preventing them from failing (Lehman Brothers was the canary in the coalmine, and didn't get rescued).



I think what the above discussion illustrates is that it has proven possible to "solve" one problem temporarily by creating another. As a result of spending literally trillions of dollars to bail out mismanaged companies, to restore owners of mispriced homes to solvency, and to keep the economy ticking, the US government chose to take on historically-unprecedented levels of debt, which it has so far been able to manage through its partnership with the Fed, which has kept interest rates extraordinarily low. As a consequence of continued artificially-low interest rates, government debt payments have remained "manageable," despite the explosion of the absolute amount of the national debt. About $8 trillion was added to the national debt in little more than 5 years, between 2008 and 2013, in order to "solve" the problem of the collapse of the housing market together with the consumer economy.

Today, the US stock market is at new highs, and there is universal optimism that the economy is "in recovery," while not so far beneath the surface, the US national government has run up a level of debt never before seen in history, which it has absolutely no means to repay. Concurrently, the US government faces increased entitlement and other expenditures which are expected to "explode" into the far future, beginning in about 2015. A national debt amount of $5.7 trillion on September 30, 2000 has literally tripled to a figure of $17,270,240,354,364.86 today (official figure as of January 16, 2014).

That is, the US presently owes about one-third of all the government debt in the world (total global government debt presently equals $52.5 trillion dollars). As American citizens represent only 4.5% of world population, the average American citizen bears a (government) debt load equivalent to ten times that of remaining global citizens ($53,600 average government debt per US citizen, versus $5,220 average government debt for all other global citizens).

So, in brief, our current "you can have it all" generation has persisted in "solving problems by creating new ones." Rather than face the current financial collapse as we did in the 1930s, by allowing it to run its course, Americans have opted instead to take on unsustainable levels of government debt in order to keep the economy "humming." Of course, the rising debt amounts must either be repaid or inflated away. Neither course is particularly attractive, and both options entail future economic weakness in return for the illusion of economic wellbeing today.

Beneath the surface, the real problem with the current "rescue strategy" of the central planners is that "patchwork" solutions of the type I have described promote what the Austrian economists refer to as "malinvestment." Malinvestment is an almost invisible, but pervasive problem that is only exacerbated by "quick-fix" strategies.

That is, when the economy is merely limping along, wholly dependent on injections of "stimulus" (a euphemism which simply and always means "increased debt"), and with no fundamental factors to justify expectations of real improvement over the long term, business investors simply lack the confidence required to commit their available monies to long-term projects of good quality. They instead divert their investment funds to often-insubstantial, quick-return schemes - for example, the "subprime loan business" of the early 2000s, and the expense reductions, middle-management layoffs and Wall Street game-playing seen everywhere today.

So yes, we can solve one problem by creating another. That is how systems work. But doing this further impairs the functioning of the total system each time that "problem displacement" occurs. So let us now return to our fundamental and very simple problem: spending money we do not have.

How does one actually go about fixing a problem of this kind? The "real fix" for our present predicament is to make the tough decisions about what we must have and what we can do without. My personal belief is that, due to advances in technology and other factors, we truly have the means for all of us to live reasonably well today (though not like kings and queens) if we make some tough decisions.

First among these "tough decisions" is for the people themselves to wake up to the fundamental problem, which is that we can have a good life - caring well for each other, including for the weakest and most vulnerable members of society - but we cannot "have it all."

In my view, there is a lot that we can do without, and I have blogged about this before. I'm confident that we can dispense with our current fixations on the use of police powers and prisons to solve social problems, on military power to solve international problems, on hyper-regulation to limit the "unpredictability" of free markets, and on zero-sum game-playing in many spheres, for example, our current fixation with lawsuits and litigation of all kinds (vs. cooperative problem-solving).

Secondly, all of us, in my opinion, need to engage in much more long-term thinking. We must make some tough collective decisions about the carrying capacity of our planet's natural systems, which are overloaded and failing. We will benefit by making much bigger (not smaller) investments in technologies which promise a better life far into the future, including, in my view, such projects as basic and applied science, education, physical and social infrastructure (including health care and health promotion), fusion energy, robotics, space exploration, etc.

Finally, our political leaders need to have the courage to stand up for long-term versus short-term thinking, and to take the risk of engaging in politically unpopular decisions that hold promise for a truly better future, rather than just muddling through, following rather than leading us, on a day-to-day basis.

Do I have any advice to offer? 

A little bit, yes. I'm reasonably confident in stating that over 50% of current government expenditures in most global jurisdictions (not only in the United States) can be classed as "waste." I have blogged about this previously - and I'm not talking about any expenditures that directly help people or which preserve or expand infrastructure or the practice and application of science and "appropriate" technology. We could also spend more profitably in selected areas, first among these, on science education and on basic and applied scientific research (as discussed above). 

Finally, for investors, history teaches us that in times such as our own - until we "get our act together" and begin to address the fundamental problems we face - gold remains an asset that will preserve value when monetary inflation (a consequence of solving our immediate economic problems by expanding debt) eats away at the market value of virtually everything else. So, yes, keeping your savings in gold or gold-linked assets is still a very, very good idea, in my opinion. I have blogged about this dozens of times, and you may read as little or as much about this as you wish.

If perhaps it seems paradoxical that I am here advocating massively greater societal investments in science and technology, yet advising individuals to invest their personal funds conservatively in gold and gold-linked assets, I can offer an explanation. 

As we have been discussing, the present investment climate is not only unsustainable, but precarious. In fact, my real argument in this post has been that we are at present woefully underinvested in such necessary areas as education, social development, and science and technology precisely because we are making very bad social and economic decisions at the systemic level. In such an environment, investments in even the "best" scientific and technological ideas are at risk of failing, due to the absence of a viable and resilient systemic framework to support and sustain them. 

That is, we have got to reform our social, political and economic systems so as to make possible an environment in which scientific and technological investments can play out successfully over a longer term. I look forward to the day when I can proclaim that it is finally "safe" to invest in "good ideas." Believe me, this is my ultimate objective. 

Precious metal investments are literally a "crisis strategy" for dangerous times, and nothing more than that. Paradoxically, the greater part of the present danger has been created by well-intentioned, academically-sanctioned planners who believe that they can effectively "manage" our problems by centralizing control of the economy, and by riding through every rough patch by taking on more debt.  

I hope that what I have shown today is that this type of central planning, with its reflexive reliance upon the accumulation of debt and the suppression of long-term entrepreneurial initiative, rather than being a cure for what ails us, is actually the primary cause of our predicament. 

I eagerly await the day when the central planners and debt-advocates will take leave from their posts (in all likelihood, due to the catastrophic failure of their policies - though I emphasize that a voluntary change in direction, or failing that, resignation, would be preferable). At such a time as this, it will then be entirely timely for the rest of us to take action to create - and invest in - a better future for all in a once-again market-driven economy, which, if we choose, can be socially-sensitive as well. 

(While I believe that market-driven economies can also be socially-sensitive ones, that, too, is a topic for another day. Centrally-planned economies - including our own at this time, despite their socially-focused ideologies, are typically the least socially-sensitive of all. That is, they are riddled with paradox and counterproductivity because they discount the irreplaceable value of unimpeded choice as exercised by free citizens. If you doubt me on this, please consult the records of Josef Stalin, Robert Mugabe, Hugo Chavez, Osama bin Laden and other well-known central planners. But that is another topic!)

(Artwork by Brenda Brolly.)

18 February 2014: Some thoughts of the day.... Let's try arguing for inflationary policy for a minute. In truth, the $3 trillion (so far) won't have to be paid back. Also, only the Eurozone (including Iceland) is refraining from all-out inflationary policy. That is, everybody else is doing it, too - the Chinese, Japanese, Latin Americans and Africans in spades, for example - even the historically conservative Swiss! Asian manufacturers are keeping costs of goods relatively low, which helps to tame the inflation numbers, though service costs are rising, often dramatically, and the costs to produce anything are going through the roof (mining costs have gone crazy). Analytically, the real problem with inflationary policy (when everybody is doing it) is "malinvestment." That is, the money gets spent differently than when investment is based on savings, and there is no incentive to tame the bureaucracy and the military-industrial and prison-police complexes. So we can "afford" to keep doing all the things we really shouldn't be, including "throwing" money around, over-regulating almost everything, surveilling our citizens and locking a lot of people up for bad reasons. Thus, the problems with inflationary policy aren't obvious, and it looks good on the surface, but it's kind of "rotten" underneath... and that creates low quality new jobs, etc. When you reward savers, you have to stop doing inefficient and counterproductive activities, but the money is spent on long-term projects that are attractive to investors (who are real and usually prudent people), vs get-rich-quick schemes (just look at Wall Street these days, the proliferation of casinos, etc.). Obviously, I have trouble sticking with the pro-inflation side for long, for these reasons!

2 April 2014: Current thinking is that financial tapering can now happen faster, as things still look "OK." My take is that things are not actually OK, when we look beneath the surface. But, let's say tapering happens faster, anyway. The main implication is that the slowdown in money supply expansion then also happens faster. That is, we're slamming harder on the brakes (though bear in mind, we're still "speeding" by a considerable margin). If you look at recent history, the Fed has tried that a few times before, and always with undesired results. And following each intentional slowdown, even more "gas" has been required to get the motor revving again. I'm open to all possibilities, but when I look under the hood, I don't see how you can slow the rate of stimulus and still play the pretend "growth" game. So, let's wait and watch, and see how the fundamentals play out. My guess is that something will happen along the way that will shock the Fed back into "super-easy" policies, as that has been all the speculation-driven markets will accept, really, since 1987....
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