Friday , January 17 2020
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Gregor Samsa

Gregor Samsa

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Articles by Gregor Samsa

The Best MLK Weekend Of All-Time

5 hours ago

We are reposting this in honor of Dr. King, a truly great American.
Originally Posted on January 21, 2019
During my Lehman days as a bond strategist, the firm’s research group would do a January roadshow in many of America’s major cities to present our ideas to institutional investors.   One particular year, we were in Atlanta at the end of the week and scheduled for another “greatest show on earth” in Chicago the next Tuesday.
A Weekend In The Peachtree Hyatt
Rather than flying home to New York, I decided to stay over in Atlanta and migrate north on Monday evening.   It was MLK weekend and I wanted to attend services at the Ebenezer Baptist Church, where Martin Luther King, Jr. was baptized as a child and gave his first sermon. If my memory is correct, I believe his father also

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The Secular Decline in U.S. Manufacturing Employment

18 hours ago

The title of the post is a bit of a misnomer.
Though the number of manufacturing jobs in the United States is 40 plus percent higher than in 1939, their proportion of total private payrolls hit its lowest level in December at 9.91 percent.
That is there are almost 4m more manufacturing payroll jobs in December 2019 than in January 1939, which at the time — just four months before Germany invaded Poland to start WWII, BTW — made up 35 percent of American nonfarm payroll jobs.  It’s relative, however, as there are also 104m more private-sector payrolls.
Manufacturing peaked as a percentage of the private jobs in the U.S. at 16.6m or 45.30 percent in November 1943 at the height of World War II, when everyone and their mother not in uniform were building tanks and ships. Anybody hear

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How Is That Austrian Century Bond Doing?

2 days ago

I guess it depends on your entry price.   The Austrian 2117 bond chart now looks like a broken stock.
We did notice during summer feeding frenzy and August highs, our bond trading buddies in Europe were pounding the table the loudest that every bond yield in the world was going to zero and beyond.   It’s always loudest at tops.
The whole negative-yielding debt fiasco was generated by a ginormous momentum trade or a greater fool theory, coupled with momentum-driven algos with no context, a dearth of low-risk fixed income securities, and ambiguity of how a new round of QE would unfold in Europe.
We wonder out loud if the proliferation of negative-yielding debt — $16 trillion and counting — would be taking place if humans and not the bots and algos were still in control of the

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Stocks Get Vertical & Vertigo

2 days ago

This is some chart.  Even if you assume a structural shift in valuations began when the Fed started backstopping markets after the 1987 crash, that puts the average valuation of the Wilshire Market Cap to GDP at 92.58 percent.   That’s an extremely mean regression to the mean from current levels.
Upshot? 
We are all momentum algo traders now.   When it stops, nobody knows.
Patience, grasshopper.   We wait patiently on the beach for the fever to break.
Stock prices are likely to be among the prices that are relatively vulnerable to purely social movements because there is no accepted theory by which to understand the worth of stocks….investors have no model or at best a very incomplete model of behavior of prices, dividend, or earnings, of speculative assets.  – Robert Shiller,  GMM

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“Phase 1” Of Potemkin Trade Deal Signed, Sealed, And Yet To Deliver

2 days ago

We have been busy collecting bets on the outcome of the U.S.-China Trade Deal.
We never believed for one moment that China would cave on any of the big issues, such as restructuring its economy and any deal would be just some token political salad dressing for the 2020 election.  Most importantly, it moves the needle very little in bringing jobs back to the U.S. rust belt as promised.  The global manufacturing sector is in recession — though appears to be putting in a bottom —  as a result of the administration’s trade policy and the U.S. farm belt has been devastated and may never fully recover.
But. if you know the trip to Disneyland is coming to end, its always best to stay in Fantasyland as long as possible.
So, after all the American economic carnage caused by Trump’s trade

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U.S. Treasury Borrowing & QE Forever

4 days ago

The U.S. Treasury recently released the December monthly statement, which put us to work crunching the data.  Note the Treasury is on an October-September fiscal year.  We are using calendar years in our analysis.
Federal Borrowing From The Public
The following chart illustrates the increasing pressure on the private markets given the spike in the U.S. budget deficit, which has almost doubled since 2016 to over $1 trillion in 2019.   It is much easier for the Treasury to float a trillion of debt during recessions or risk-off markets as haven flows are starved for riskless assets.  Supply is not an issue as demand is overwhelming.
We believe the big spike in borrowing in 2018 crowded out other markets, which put upward pressure on long-term interest rates in September causing the

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Inflation, Minimum Wages, Suicide, & Karl Marx

8 days ago

Is the rise of the global populism the result of a mismeasurement of inflation? 
Seeing lots of inflation as we enter the New Year — from milk and Subway sandwiches to big price spikes on restaurant menus.   It’s anecdotal and we have no doubt the government statisticians will find a way to massage the price hikes away.  They always do as they need to do.
Retailers Passing On Wage Costs
It now looks like retailers are passing on the relatively large increases in the minimum wage that went into effect on January 1st — between 8-15 percent in some California cities  — to consumers.
Maybe that’s partially why the stock market is going apeshit –margins are safe?

While the federal minimum wage hasn’t changed in more than a decade — it’s still $7.25 an hour — many cities and states have

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QOTD: War And Truth

10 days ago

QOTD – Quote of the Day

In war, truth is the first casualty. – Aeschylus

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U.S. Troop Levels In Iraq

10 days ago

Great graphic from Stratfor, who, BTW, is running a great subscription deal.  You’re gonna need some good geopolitical analysis in 2020.  That we can be certain.  See here.
It seems like Mr. Market is the only one who didn’t see the Iranian retaliation coming.
EMH* über alles!   NOT!
Godspeed to our soldiers!
* Efficient Market Hypothesis

DJIA futures down 310, S&P futures down 37 (or 1.1%)
WTI up $2 or 2.5%
Bond futures up 25 ticks
Gold up $20 to $1,595 (1.5%) https://t.co/7DPsMHqYFT
— Jim Bianco (@biancoresearch) January 7, 2020

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U.S. Trade Deficit Shrinking And It’s All China

10 days ago

JANUARY 7, 2020 — The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $43.1 billion in November, down $3.9 billion from $46.9 billion in October, revised
November exports were $208.6 billion, $1.4 billion more than October exports. November imports were $251.7 billion, $2.5 billion less than October imports.
The November decrease in the goods and services deficit reflected a decrease in the goods deficit of $3.9 billion to $63.9 billion and a decrease in the services surplus of less than $0.1 billion to $20.8 billion.
Year-to-date, the goods and services deficit decreased $3.9 billion, or 0.7 percent, from the same period in 2018. Exports decreased less than $0.1 billion or less than 0.1 percent. Imports decreased

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COTD: China’s Social Credit Score System

11 days ago

COTD:  Chart of the Day
Background:
The Social Credit System (Chinese: 社会信用体系; pinyin: shèhuì xìnyòng tǐxì) is a national reputation system being developed by the Chinese government. The program initiated regional trials in 2009, before launching a national pilot with eight credit scoring firms in 2014. In 2018, these efforts were centralized under the People’s Bank of China with participation from the eight firms. By 2020, it is intended to standardize the assessment of citizens’ and businesses’ economic and social reputation, or ‘Social Credit’.
The system will be one unified system and there will be a single system-wide social credit score for each citizen and business.The system is considered a form of mass surveillance which uses facial recognition system and big data

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Stock Market Returns And Presidents – Beware Of Averaging

12 days ago

We have warned about looking at averages (see here), especially with such skewed distributions and how a couple outliers can greatly distort this most common statistical metric.
Real Life Macro Economy Example: 
2019 Q1:  Average U.S. Household Wealth =  $803.3K                     Median U.S. Household Wealth =   $112.5 K    – GMM,  Sep 2019
Even the MSM is now questioning the macroeconomic data because of our two-speed economy — one for the well-off and one for the not so — as exemplified in this New York Times headline, which we will address in a week or two.

The Average Stock Market Return of All Presidential Administrations
The same applies to average stock market returns, especially during presidential administrations, which are distorted, distributed and touted during

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If War Comes, It Won’t Be Your Father’s War

14 days ago

Just a heads up and reminder, folks.   Do some homework.
SAN JOSE, Calif. (AP) — Security researcher Brian Wallace was on the trail of hackers who had snatched a California university’s housing files when he stumbled into a larger nightmare: Cyberattackers had opened a pathway into the networks running the United States power grid.
Digital clues pointed to Iranian hackers. And Wallace found that they had already taken passwords, as well as engineering drawings of dozens of power plants, at least one with the title “Mission Critical.” The drawings were so detailed that experts say skilled attackers could have used them, along with other tools and malicious code, to knock out electricity flowing to millions of homes. – Times of Israel,  Dec 2015
You can start by reading Ted Koppel’s

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U.S. Manufacturing ISM At 10-year Low

14 days ago

December PMI registered 47.2 percent, a decrease of 0.9 percentage point from the November reading of 48.1 percent, the lowest reading since June 2009’s 46.3 percent. New Orders Index came in at 46.8 percent, a decrease of 0.4 percentage points from the November reading of 47.2 percent. The Production Index was 43.2 percent, down 5.9 percentage points compared to November. The Backlog of Orders Index posted 43.3 percent, up 0.3 percentage points. The Employment Index registered 45.1 percent, a 1.5-percentage point decrease from the November reading of 46.6 percent. The Supplier Deliveries Index was 54.6 percent, up 2.6-percentage points. The Inventories Index was 46.5 percent,  up 1 percentage point.
The Prices Index registered 51.7 percent, a 5-percentage point increase from the

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The August 1914 Question…

15 days ago

Growing complicated entanglement (even in Venezuela) and an increasingly isolated America.  Geopolitical toxic cocktail.  We are upping our concern slightly for the country’s power grid as Tehran may, though unlikely, now have the ability to turn out the lights in a major U.S. city.

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Creative Destruction 3.0 Meets Roaring ’20s 2.0

15 days ago

Creative destruction refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. It was coined by Joseph Schumpeter (1942), who considered it ‘the essential fact about capitalism’.
The process of Schumpeterian creative destruction (restructuring) permeates major aspects of macroeconomic performance, not only long-run growth but also economic fluctuations, structural adjustment and the functioning of factor markets. 
At the microeconomic level, restructuring is characterized by countless decisions to create and destroy production arrangements. These decisions are often complex, involving multiple parties as well as strategic and technological considerations. The efficiency of those decisions not only depends on managerial

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GMM’s Global Reach

16 days ago

A special thanks to all our readers who tuned into the Global Macro Monitor in 2019.  We are stunned just how small the world has become with the advent of the internet in the past two decads.  Everybody now has the ability to communicate with anybody at anyplace during anytime. 
We had readers from almost every country and territory in the world with about 60 percent domiciled in the United States.   
Stay tuned as 2020 is sure to an exciting and watershed year for the markets and global economy. 

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Global Risk Monitor – Year-End

16 days ago

We are resurrecting our Global Risk Monitor, which tracks several, what we believe to be, the key global stock markets, interest rates, currencies, and commodities.  The tables will be updated on a weekly basis and provided to our subscribers. 

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Happy New Year! And That Song?

17 days ago

Happy New Year, folks!
After this year’s market returns, go out and enjoy one of these parties.  See ya’ next year.
[embedded content]
 
Repost
Posted on December 31, 2018
In 2019 I will try and learn something new every day.   Already have a head start:  Auld Lang Syne was the Korean national anthem until 1948 and made popular in the U.S. by Guy Lombardo.  Watch…

The US associates “Auld Lang Syne” with the New Year, but not everyone does.
Join the Vox Video Lab! https://www.vox.com/join

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COTD: Top Five Skills For Tomorrow’s Jobs

19 days ago

COTD = Chart of the Day

A quantum of change is coming. As the age of automation takes hold, both young people entering the workforce and those already established in their careers are fretting about the rise of the machines.  But while machines will be increasingly powerful, humans will actually be more essential.  –  WEF

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Why Is Everyone Busting Buffett’s Balls?

19 days ago

Amazing how the FinTwits, not all, are busting Warren’s jewels for holding $100 plus billion in cash and underperforming in this latest blowoff.
Assuming the info in the following Tweet is true, and it does  pass the smell test but all info and videos should be questioned as we move into, what we believe will be the decade of deep fakes, it explains why Buffett is one of the five wealthiest people in the world.

Warren Buffett in July, 1999: “If I had to pick the most probable return over the next 20 years, it would probably be 6%”
Gallup poll in 1999: “Investors expect stocks to return 13-22% annually”
S&P avg. return from 1999-2019: +6.117% https://t.co/7C9fYHL2sO
— Vetle Forsland (@vetleforsland) December 28, 2019

We are with Warren.

Be Fearful When Others Are Greedy and

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Daily Tracking Poll Now At +16 For Trump’s Removal

20 days ago

This MSN daily tracking poll is often cited by the Drudge Report.  On Christmas Day, Drudge ran this:
CHRISTMAS SHOCK POLL: 55% SUPPORT REMOVAL OF TRUMP
Is anyone watching?
Is it a fake poll?
Are the Republican Senators watching and starting to feel some heat back home?
Mr. Market certainly is not or is highly discounting the veracity of the data or its eventual impact on at least 20 Republican Senators.
December 28 Polling Data
The daily movement could just be all noise but keep it on your radar, folks, as that looks like some kind of break on December 18th, the day President Trump was impeached.
Even taking into account the best-case scenario, where the margin of errors on both support and remove favor Trump,  removal is still +10.  The worst-case for the President on both the

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Stock Jocks All Lathered Up Over This?

22 days ago

Baby it’s cold frothy outside!

Even with the "phase one" deal in effect, Trump will have increased the average US tariff on imports from China to 19.3% from 3% in January 2018, before the trade war started. pic.twitter.com/GhcCorhVRy
— Peterson Institute (@PIIE) December 20, 2019

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It’s The Genes, Stupid!

22 days ago

To paraphrase James Carville, strategist for then presidential candidate Bill Clinton in 1992 to explain, what we think is the epidemic currently spreading through America’s body politic.  Very disturbing.
Recall we redefined the current political spectrum – fact based versus conspiracy based.

Watch. This. Video.
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Buying Tops And Trump’s Race For Stock Market History

26 days ago

We want to add to our last post because we believe the topic is of immense importance to the younger generations starting to save and plan for their retirements.   Note, we had a slight error in the post,  Keeping Stock Market Returns In Perspective, on the annualized return for President Obama’s S&P due to the wrong start date.  We have made and noted the correction.
We doubt many caught it but glad we did before say, Fox News, as they may accuse us of searching and cooking up fake market conspiracies to hurt President Trump politically.  God forbid that ever happens in this great country.
Beware Of Buying Tops 
Let of preface our post by saying that we do not, nor does anyone else know the future or can say if stocks are topping or have high valuation levels with absolute

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Keeping Stock Market Returns In Perspective

28 days ago

We just want to pass on some data to keep this year’s stock rally in perspective.  We are seeing a lot super giddy behavior out there as the S&P500 makes a new all-time high but…wait for it…at record high valuations by almost any measure.
Once again, seeing the analysts retrofit their fundamental based on the market’s current price action —  bullish if it is going up, bearish if it is going down.
That is not new us.  We used to trade, and trade a lot, but learned its almost impossible to beat the ‘bots.   We are back to the “old school” of buying low and selling high, or selling high and buying low though we do put on an occasional trade.  Buying high and trying to sell higher, aka the “greater fool theory” is too risky in an algo driven market.
Facts
The data show that the S&P500

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