Dollar Strength Is Hiding In Plain Sight

By Heisenberg

And One Strategist Says It’s Here To Stay

Overnight, the yen rose against all its G10 peers because Donald Trump has lost his mind completely and is now firing everyone in sight.

On Thursday evening, the Washington Post reported that a “very stable genius” called “Dennison” is now planning on ridding himself of national security adviser H.R. McMaster who, according to some accounts, once called Trump an “idiot” with “the intelligence of a kindergartner” at a dinner with Oracle CEO Safra Catz.

This kind of thing usually gets reflected in risk appetite one way or another and right now USDJPY is even more of a natural expression than it would be anyway thanks to a variety of factors not the least of which is that the ongoing land scandal has everyone on edge about Aso and ultimately Abe, which in turn raises questions about the future of Abenomics. Here’s USDJPY overnight:


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Super-Duper-Irrational Exuberance, Report

By Keith Weiner

Think back to the halcyon days of the dot com boom. This was a time after Greenspan declared “irrational exuberance”. Long Term Capital Management collapsed in 1998, and Greenspan decided to risk propelling exuberance to a level beyond irrational. Super-duper-irrational exuberance?

Anyway, Greenspan cut interest rates a few times in late 1998. Technology companies were able to raise $5 million or more with just a sketch on a napkin (“serviette” for those outside the US). Companies at a “later stage”, though without revenues, could raise $30 million. A company called “Webvan” was able to raise nearly a billion dollars without ever becoming profitable.

These companies should not have been able to raise so much capital. At any given point in the development of a company, there are only so many things that need spending. Not to mention can be justified to investors.

It is obvious in retrospect that those particular companies wasted investor money (if not the broader principles), after investors booked the losses, but it was anything but clear at the time. Keith recalls debating the so called hypothesis of efficient markets with some people who believed that all market prices are correct. That all changes in price are random, unpredictable.

We have written a lot about how falling interest rates cause capital consumption. It drives speculation, which is a process of conversion of one speculator’s wealth into another’s income. No one wants to spend his wealth, but people are happy to spend their income.

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Gold is a Giant Ouija Board

By Keith Weiner

We have been promising to get back to the topic of capital destruction, which we put on hiatus for the last several weeks to make our case that the interest rate remains in a falling trend. Today, we have a different way of looking at capital destruction.

Socialism is the system of seeking out and destroying capital. Redistribution means taking someone’s capital and handing it over as income to someone else. The rightful owner would steward and compound it, not consume it. But the recipient of unearned free goodies happily and uncaringly eats it up. Socialism is not sustainable. It inherits seed corn from a prior, happier system, and it lasts only as long as the seed corn.

Totalitarian Socialism

There are different flavors of socialism. The 20th century witnessed an aggressive totalitarian form. Both communism and Naziism feature military occupation of domestic territory and conquest of foreign lands. Few people willingly feed whatever they have into the sausage grinder of State sacrificial collectivism. And so totalitarian socialism has armed thugs all over the streets, both open military and secret police. There are frequent killings, of those suspected of disloyalty or holding back small scraps. In their constant fear of uprising, they use disappearances, interrogations, and torture to root out the names of traitors to their bloody revolution.

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