They Warned Us

By Jeffrey Snider

We can add this to the list of all the things going wrong in October. If it felt like a wave of renewed deflation built up and swept over markets and the global economy, it’s because that’s just what had happened. I don’t think it random coincidence the WTI curve went contango and oil prices globally crashed when they did. Golden Weeks in China are always interesting, especially on the reopen.

There are two facts as they pertain to China in 2018. The first is the nation’s clear monetary trouble. The second is why it has (re)emerged.

The statistics for the first part were pretty grim last month, accounting for much of why October was such a major global mess. The People’s Bank of China has been forced into cutting back on monetary growth in base measures all year. This all changed in January, the same time the global economy began to come crashing back down from its low-level reflation in 2017.

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Here’s Hoping the BCSC Goes After TSX Companies as Well, Not Just the CSE

By Otto Rock

Because there’s plenty of grist for that particular mill, too.

I’ve been sent the link and/or the PDF of the BCSC announcement about the so-called “BridgeMark Group” around two dozen times since it came out yesterday. And a good thing too, thanks to all who cared enough to think of this humble corner of cyberspace, it’s greatly appreciated. There’s been plenty of real reporting on the development done by real reporters, you hardly needed a pissant blogger throwing in his dos centavitos yesterday, but there are a couple of interesting angles to the allegations brought by the BCSC Executive Director.

1) All the companies are CSE-listed. Now that’s fine, if all the named issuers have been doing naughty things they should be called out but there’s no way on God’s green earth you can tell me these nefarious peddlers of scams are confined to that exchange. Sleight of hand as outlined in the report has been going on forever on the TSX and especially the TSXV, therefore we wait to see whether BCSC has actually grown a real pair. Is it after the bad guys, or is it just trying to shut down the TSX competition which has grown from insignificant to a thorn in the side of the main exchange these last couple of years?

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Fed Shifts to a Less-Predictable (?) Approach to Policy Making

By Anthony B. Sanders

Nick Timiraos from the Wall Street Journal has an interesting article entitled  “Fed Shifts to a Less-Predictable Approach to Policy Making.”

Federal Reserve officials are moving into a more unpredictable phase of policy-making after two years of removing economic stimulus in regular, quarterly intervals.

They will be deciding whether and when to raise interest rates more on the basis of the latest signs of economic vigor—such as in inflation, unemployment and growth—and less on forecasts of how the economy is expected to perform in the months and years to come, they’ve indicated in interviews and public comments.

Less predictable???? One possible rule is the Taylor Rule. But The Fed kept their target rate at 25 basis points from late December 2007 to December 2015, far below the TR rate.

trrudesbuch

Here is the Fed Funds Target rate.

Continue reading Fed Shifts to a Less-Predictable (?) Approach to Policy Making

Revisiting the Gold-Backed Yuan Fantasy

By Steve Saville

This is an excerpt from a commentary posted at TSI about three weeks ago]

In an article titled “China’s monetary policy must change” Alasdair Macleod discusses a path that China’s government could take to make the Yuan gold-backed and thus bring about greater economic stability in China. Keith Weiner pointed out some flaws in the Macleod article, including the fact that the sort of Gold Standard that involves pegging a national currency to gold is just another government price-fixing scheme and therefore doomed to fail. We will single out an error in the article that Keith didn’t address and then briefly explain why a gold-backed Yuan is a pipe dream.

This excerpt from the article contains the error we want to focus on:

China’s manufacturing economy will be particularly hard hit by the rise in interest rates that normally triggers a credit crisis. Higher interest rates turn previous capital investments in the production of goods into malinvestments, because the profit calculations based on lower interest rates and lower input prices become invalid.

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A History of First Cuts

By Kevin Muir

The market is definitely torn about whether last week the Federal Reserve signaled a pause in their rate-tightening campaign. You know where I stand (they did), so there is little to be gained by my shouting into the wind trying to convince anyone.

Yet one of my more astute readers sent a note to be careful what I wish for. Now, he knows we are a long way from the Fed actually cutting rates. In fact, I suspect we both think the Federal Reserve will raise rates this December. But let’s imagine that I am correct and the next meeting brings about a one-and-done rate rise. What if the Fed’s next move after December is a rate cut? I know that seems preposterous right now, yet there are many signs the American economy is slowing faster than the Federal Reserve forecasts.

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A Golden Renaissance, Report

By Keith Weiner

A major theme of Keith’s work—and raison d’etre of Monetary Metals—is fighting to prevent collapse. Civilization is under assault on all fronts.

The Battles for Civilization

There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travellers to provide the password to their phones so the government can go through all your data, presumably including your gmail, Onedrive, Evernote, and WhatsApp. China is now developing a “social credit” system, to centrally plan the economy and control citizen behavior. Canada has made it a crime to call someone by the wrong gender pronoun. Even in the US, whose First Amendment has (mostly) stood as a bulwark against censorship now has a president who threatens antitrust action against Amazon, because its CEO Jeff Bezos owns the Washington Post, which prints things he does not like. On college campuses, professors are harassed if they say one thing that the professional sensitives are sensitive to. If a controversial speaker is invited, he risks an angry mob coming to disrupt his talk (or worse).

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Deconstructing the Crypto Genius

By Tim Knight

James Altucher, the self-described “crypto genius”, is someone about whom I’ve written in the past, but as I gaze upon the smoldering landscape that used to be the thriving cryptocurrency industry, I feel compelled to write on this topic again, since I think Altucher’s marketing efforts a year ago speak so much about the nature of the crypto craze at that time.

To be clear, I have no axe to grind. I’ve never lost money with the guy. Never had any kind of personal or professional relationship. Never met him. But, like virtually all of you reading this post, I’ve seen his face countless times on ads (especially late in 2017 and early in 2018) touting the surefire investment power of crypto. He became, in the words of the press, the “face of Bitcoin” (I guess all the other faces were taken).

Altucher is definitely a man who could be described in totally opposite ways, all while being completely honest. You could, for example, talk about him as a successful entrepreneur, popular author, widely-followed podcast host, and multimillionaire venture capitalist. Every one of those things would be true. You could, with just as much honesty, describe him as a man with multiple failed marriages and relationships, a person who by his own admission blew tens of millions of dollars and was at the brink of suicide, and a man who has created businesses that have drawn the wrath of customers and the Better Business Bureau alike. All true. It depends on how you want to spin things.

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US Crude Oil Plunges 34% Since October 3rd

By Anthony B. Sanders

Phillips 66 Plunges 25% (Venezuela’s Crude Basket Down 23%)

US Crude Oil (West Texas Intermediate Cushing  OK) spot price has fallen 34% just since October 3, 2018. And using US oil company Phillips 66 out of Bartlesville Oklahoma as an example, Phillips 66 plunged 25% since October 3rd as well.

phillips66

At the south side of El Caribe, Venezuela has seen a plunge in their crude oil basket of 23% since early October.

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In a Booming Economy, You Buy and Build Houses

By Jeffrey Snider

We can add realtors to the list of those who are angry with Jay Powell. The housing market continued its perplexing slump in October, according to a broad section of data encompassing everything from construction to sales of existing homes. We have been told since Economics 101 that the central bank is, well, central, therefore it is easy to infer causation from mere correlation.

The Fed is “raising rates” but unlike what’s taught in schools the FOMC doesn’t control all that much. Very little in the modern diagram. But because monetary officials claim to be tightening and now the housing market is clearly within a slump we shouldn’t ignore that correlation does not mean causation.

After all, we begin this study under false (mainstream) pretenses.

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