Monday , July 15 2019
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Gregor Samsa

Gregor Samsa

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Articles by Gregor Samsa

President Trump Is Not Your Father’s Conservative

3 days ago

Nobody cares about debt and deficits anymore.  Until they will.
Excuse our little diversion as we set the mood music and narrative for our analysis of the current U.S. budget situation.
Sovereign Borrowers Have Found A New Revenue Source?
The total stock of negative-yielding debt now tops $12.5 trillion dollars, including benchmark sovereign bonds in Germany and France.  If this pace continues, some of these government borrowers — can’t even rule out the U.S. G — are going to be convinced they have found a new revenue source to finance profligacy.  Generate more revenue by running bigger budget deficits to accelerate the expansion of negative-yielding debt.
The new zoom loop. It’s a no-brainer, right?
Reading More Kafka
That’s why we read more Kafka these days, folks.  His writings

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Need Inspiration After Dropping Fiddy Large To The ‘Bots?

4 days ago

Next time you need to pick your ass up off the matt after dropping a tenth of a yard (or a fraction thereof ) to the market you can always come back these videos for motivation.
Please disregard if you have never had a losing trade.
What a story about the Jimmy V Award recipient, Rob Mendez, at the ESPYS last night.  Awesome, stuff!  Take the 10 minutes for both vids.
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Fading A China Trade Deal

5 days ago

Trump is going to have to cave on some major issues as it appears China is gearing up to play hardball and is ready to rumble in the next round of negotiations.  The Ministry of Commerce announced this morning the “talks will be held in the spirit of equality and mutual respect, and that China’s core issues must be resolved.”
But even the doves in the Trump administration seem to be growing increasingly pessimistic and lowering expectations.

Kudlow: U.S. may never reach trade deal with China
“When you get down to the last 10 percent, seven-yard line, it’s tough,” he added, referring to the negotiations. – Larry Kudlow, Politico
China is sensing that patience is running thin in America over Trump’s trade war.
While rural Americans were some of Trump’s biggest supporters, they are

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Maybe 25 bps

5 days ago

This should be baked in, and even a bit disappointing, but, like my Australian Shepherd, markets like to run.  Though hard to predict for how long.
Since our May meeting, however, these crosscurrents have reemerged, creating greater uncertainty. Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture report heightened concerns over trade developments. Growth indicators from around the world have disappointed on net, raising concerns that weakness in the global economy will continue to affect the U.S. economy. These concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data.
In our June meeting statement, we indicated that, in light of increased

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Ross Perot And Me

6 days ago

R.I.P, Ross Perot.
The Butterfly Effect Again
If not for Ross Perot’s decision to run for president as a third-party candidate in 1992, there would be no President Bill Clinton, no candidate Hillary, and probably no President Trump.
Politics is a process. There would be no LBJ without FDR. There wouldn’t be a Reagan revolution without Barry Goldwater. And it’s possible there wouldn’t be a Trump presidency without Perot. – Boston Globe

Perot won almost 20 percent of the popular vote in the 1992 presidential election, which the Bush family and many analysts believe much of his votes were siphoned from the incumbent, President George H.W. Bush.   Bill Clinton won 43 percent of the popular vote, the second-lowest in modern presidential politics; second only to the Woodrow Wilson in

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Dollar Impact On U.S. Manufacturing Employment

7 days ago

We have been busy on a piece evaluating the U.S. economy under the first 29 months of the Trump administration.  As I used to bark out selling programs as a young kid at Dodger Stadium, “You can’t tell the players without a program!” Similarly, you can’t measure the economy without the data.  Tweet and hype just don’t do it for us.
Does the economy data live up to the hype as the “greatest economy ever?”  Stay tuned to find out.  The post should be up by mid-week.
Here’s Another Appetizer
Nevertheless, we came across a very interesting find tonight when looking at the monthly year-on-year change in the value of the trade-weighted dollar index relative to the 3-month change in manufacturing payrolls since 2014.   We found that when the change in the value of the dollar is lagged

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Happy July 4th

12 days ago

Have a great Independence Day, folks!   Enjoy the beach, BBQ, and fireworks but let us never, ever forget what we celebrate.
E pluribus unum over and out!

IN CONGRESS, JULY 4, 1776

The unanimous Declaration of the thirteen United States of America

hen in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable

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Payroll Prep

12 days ago

Here’s a heads up for Friday’s employment number before we hit the beach:  1) Nonfarm payroll expectations;  2) today’s ADP release, and 3) commentary by Mark Zandi.

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QOTD: Erma On The 4th Of July

12 days ago

QOTD: Quote of the day
Call me a traditionalist, a conservative, or what you will but I’m with Erma on this one.

“You have to love a nation that celebrates its independence every July 4, not with a parade of guns, tanks, and soldiers who file by the White House in a show of strength and muscle, but with family picnics …”
— Erma Bombeck pic.twitter.com/8vZ3NgdIaQ
— David Priess (@DavidPriess) July 3, 2019

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How Pepsi Once Became The World’s 6th Largest Military

13 days ago

The days of the barter economy.
We had to do a double take with this tweet.  Even fact checked it.
I had a twitter debate last month with someone comparing current day China with the Soviet Union before the collapse in the late 1980s.  Are you frickin’ serious?
I will believe that when China starts swapping their new lunar technology, which just probed the Dark Side of The Moon, for buckets of KFC.

In the late 1980s, Russia’s initial agreement to serve Pepsi in their country was about to expire, but this time, their vodka wasn’t going to be enough to cover the cost.
So, the Russians did what any country would do in desperate times: They traded Pepsi a fleet of subs and boats for a whole lot of soda. The new agreement included 17 submarines, a cruiser, a frigate, and a destroyer.

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The Clash Of Generations Is Here

15 days ago

Don’t know if you caught the Democratic debate the other night, which featured Bernie and Joe, who could be the grandfathers of some of the younger candidates that were on stage, but it also confirmed the arrival of what we have been writing about for years, the Clash of Generations. 

Congressman Eric Swalwell was one the young Democrats on stage with Bernie and Uncle Joe last week.
If you missed this Atlantic piece, it is definitely a must-read,

Money Quotes: 
In a variety of different areas, the Baby Boom generation created, advanced, or preserved policies that made American institutions less dynamic. In a recent report for the American Enterprise Institute, I looked at issues including housing, work rules, higher education, law enforcement, and public budgeting, and found a

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SBNN: BMW

15 days ago

SBNN = Song Before Night Night
Must admit this is the only BMW I have ever owned.   As in (B)ob (M)arley & the (W)halers.
When I lived on the UYupper West Side (are there still Yuppies?) in a different era, my neighbors said their BMW was an acronym for (B)reak (M)y (W)indow.
Get Up, Stand Up, folks.
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   Hat Tip:  KD
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Huawei’s American Suppliers Set To Rock The Casbah, Or Not?

15 days ago

Here are some of the top American suppliers to Huawei that should Rock the Casbah in Monday trading after Trump’s rethink the Chinese company is a national security risk.
It’s still not clear what the Trump-Xi Osaka handshake and agreement mean, however.  And it appears the walk back is already beginning as the administration is taking on pipe from both the left and the right for its apparent cave to get the Chinese back to the table.
White House economic adviser Larry Kudlow says U.S. President Donald Trump won’t back off national security concerns after agreeing to allow U.S. companies to sell some components to Chinese telecommunications giant Huawei.
Kudlow told Fox News Sunday and CBS’ Face the Nation that Huawei will remain on an American blacklist as a potential security

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Charts That Validate Stocks Are In The Process Of Topping

15 days ago

The S&P 200-day rolling return is an interesting chart but not much in the way of signals with the exception to illustrate the S&P500 does not fall out of the sky and enter bear markets after a strong 200-day run.
Bear Markets
Bear markets usually begin with a topping process, after all, markets are cold-blooded beasts and adapt and rationalize their bullish biases to negative news and deteriorating conditions.   Until they don’t.
Inertia is innate in the stock market, in part due to Wall Street’s myopic focus on the year-end bonus, but if equities can’t break out after making several local tops (see the second chart),  caveat emptor and be warned something is rotten in the state of Denmark.  
We remain medium-term bearish on U.S. stocks based mainly on macro valuations as the

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On This Day: One Wrong Turn & History’s Biggest “Butterfly Effect”

18 days ago

This post seems more relevant than ever as many believe the initial conditions of today are very similar to those of the Spring and Summer of  1914.
One wrong turn, one small change in initial conditions can change the course of history enormously.
Originally Posted on June 27, 2017
The butterfly effect is the concept that small causes can have large effects. Initially, it was used with weather prediction but later the term became a metaphor used in and out of science.
In chaos theory, the butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state. The name, coined by Edward Lorenz for the effect which had been known long before, is derived from the

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Are Stocks In A Bear Market?

19 days ago

Technically, no.
Spiritually?  Nor sure, but definitely, there’s is something happening here. What is ain’t exactly clear.
S&P Flat For Past 17 Months
Even with all the Strum und Drang since the massive volatility shock of January 2018 — which includes a technical bear market > 20 percent sell-off from September 21st to December 26th and a ripping Fed-led 26 percent rally from December 26th to May 1st  — the S&P is up only 1.52 percent.  Stunning and exhausting.
It feels as if we have traveled Around the World in 80  354 Trading Days and yet have gone absolutely nowhere.
Bull Market Tops
We do feel stocks are topping and are in, or about to enter a major bear market.  For long-term investors, rarely does it pay to try and time a bear market but given the rising geopolitical and

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The Snowflake Economy & Market

20 days ago

Don’t talk to me about snowflakes.  I have one daughter in college and one about to enter and we have had some very interesting and, let’s just say loud, discussions about free speech,  triggers, snowflakes, and safe spaces.   On one occasion, they became very upset that I took the position that the political shock-jock, Ann Coulter, who, by the way,  is antithetical to my own political views and I find repulsive, should be able to speak on the UC Berkeley campus.  In fact, I was ready to drive down to the campus and protest for her right to speak.
I tried to explain to my daughters if only popular ideas were protected, there would be no need for the First Amendment.  If you do not defend the free speech rights of the unpopular, even if their views are repulsive to you,  our liberty

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How Tariffs Affect Nontradeables

20 days ago

25 Jun – 11:28:47 AM [RTRS] (LEN.N) – LENNAR CORP SAYS U.S. TARIFFS ON CHINESE GOODS HAS BEEN A HEADWIND; ON AVERAGE, THE IMPACT FOR LENNAR IS ABOUT $500 PER HOME – CONF CALL
— Alastair Williamson (@StockBoardAsset) June 25, 2019

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If Mexico doesn’t stem migrant flow? – BBC News

23 days ago

Our main market mover focus used to be capital flows.
Now, migrant flows?  Come on, man!
The US has proposed a “safe third country” agreement with Mexico, if migrant arrivals to the US border are not reduced by mid-July. What would it mean for asylum seekers? The BBC’s Barbara Plett Usher explains.
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Class Act

24 days ago

I have always been a bit ambivalent about baseball great, Albert Pujols (AP), who now plays for the Los Angeles Angels of Anaheim and returned to St. Louis tonight for the first time after playing for Cardinals from 2001-2011.   But not after seeing this tweet last night.
Treating others with the dignity they deserve ranks much higher in my Hall of Fame than how many home runs a player hits.
You are one class act, AP.  Be sure to click on the video.

AP’s return to St. Louie tonight. 

Go here to see where AP ranks all-time in baseball stats.   His 645 home runs rank 6th all-time, only 15 behind the great Willie Mays.
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The Innate Angst Of Inequality

26 days ago

Just a short but  very interesting follow-up video to our last post,  When 50 Percent Of U.S. Households Were Insolvent, which illustrated the stunning and parabolic growth of wealth inequality in the United States.

We feel this post is necessary and very relevant as many dismiss and have no worries about the growing inequality throughout the country.  In fact, we had a conversation with a “not a problem” journalist today.  We couldn’t disagree more.
Much of the growing angst in our society is caused by widening income and wealth gaps.
Even in the investment world, there is ample evidence of conservative investors taking foolish risks with their capital because they see friends and neighbors getting rich — albeit temporary – during asset bubbles.  They feel stupid being left out

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When 50 Percent Of U.S. Households Were Insolvent

27 days ago

Not that long ago, by the way.
My good friend, David Jones, sent over some new data this past weekend.  We have been busy.
Our First Take
Not a lot of prose tonight as we will let the data and charts speak with only some short comments.   We take a quick look at two issues in this post: 1) the growing wealth inequality in the U.S., and 2) the massive hit the American middle class took during the Great Financial Crisis (GFC).
Stay tuned for more analysis in future posts.
Stunning Growth In Wealth Inequality
Though we were cognizant of the growing inequality of wealth in the United States, we had not really internalized it and were shocked — no, floored — by the following data.

The table of data speaks volumes and explains much of the dynamic currently taking place in the U.S.

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Doubtful ECB Can Prevent Recession – O. Blanchard

27 days ago

Take a few and listen to O., well worth your time. 
Olivier Blanchard, the former IMF chief economist and part of our elite “One Smart Dude Club (OSDC)”, speaks on the ECB’s monetary policy and the tools it has available to fight an economic downturn.   He essentially concludes Germany, which is reluctant to venture into fiscal stimulus but will be hurt the most by the trade wars,  will have to do some backsliding on its frugal ways.
Traders and ‘bots way offsides today, including us (but not short) as we were gone fishing, took a one-two body blow from the Draghi dove and Trump tweet.
It’s all about the Tape  Tweet, folks.
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S&P500 Key Levels

28 days ago

Snoozefest until the FOMC on Wednesday.  Lots of Doji candles reflecting traders don’t wanna do jack all.  Volume running at about 90 percent of the 10-day moving average.
Market expecting no rate cut, though a 20 percent probability is not exactly zero.  It feels to us the market could be set up for some disappointment.  Expectations of three rate cuts by year-end seem excessive with 3.6 percent unemployment and 2 percent off all-time stock market highs.
The market needs a reality check here with respect to expected rate cuts and will be very sensitive to and looking for clues in the FOMC statement.
Key Levels
The S&P is having trouble at the key Fibo, 2900.95.  If that goes, the recent high of 2910.61 then off to new highs at 2954 plus.
On the downside, 2874 is a big number,  the

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Are Italian Mini-Bots Coming For You?

28 days ago

Are the ‘bots about to start trading Italian mini-BOTs?
Talk of a parallel currency in Rome is spooking some in the analyst community.
A proposal is being kicked around to issue small-denomination bonds — so-called mini-BOTs (short-term treasury bills) —  used by recipients to pay taxes or to buy goods or services from state-owned companies.  If the plan is realized, it could set Rome on the path to a parallel currency and an eventual “Black Wednesday.” where Italy leaves the euro.
Supporters, include Lega, one of Italy’s ruling parties.
Opponents argue it would lead to higher public debt and chaos.
“If Italy goes down that rout, it will in my opinion be a disaster for the country. You are going to have a loss of general confidence in the Italian debt in the markets,” Jacob

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S&P500 Key Levels

June 12, 2019

After rallying 6.66 percent from the bear trap low last Monday to yesterday’s high of 2910.16,  the S&P is now consolidating that big move.  The ‘bots have mastered the art of the bear trap.   F**k wads!
The 50-day moving average held today, which is positive.   The 2900 level seems to be a big number and a key Fibo retracement of this recent 7.63 percent sell-off.  A close above 2900 greatly increases the odds the 2954.13 all-time high will be taken out.
Note, our target for the S&P was 3025 before the Big Dipper sell-off hits but began to doubt that especially after the threat of Mexican tariffs came onto the radar.  The market is conditioned to salivate when the Fed rings the bell of mo monetary stimulus and, as you can see in the table and matrix below, the market prices a

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What To Expect When America Starts Electing

June 11, 2019

It’s 511 days to the 2020 Presidential election and we sense a total disconnect between the movement in the polling data and market expectations of the outcome.  It reminds us of our conversation with a hedge fund manager one month before the midterm who was certain the Republicans would remain in control of the House.
We laid our “Lavender Wave” scenario of at least a 35 seat pick-up by the Democrats– they eventually gained 40 House seats.  He wasn’t having any of it, however,

“I better check with my pollster.”

We do try and keep our partisan bias out of our political analysis and focus solely on the movement of the polling data in a disciplined analytical framework.  We have won a lot of bets from those who cannot and are out of touch with the data.
In fact, we know of nobody

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