Sony pulling a Hollywood production:
If there should be anything inviolate in this country, it is the rights granted by the Constitution of this country. While I will forever seek to protect another person's rights against what I consider to be my own, the balance is the American Life. Its continued genesis is shared through time's lament of lost life, and the shared fortune naturally brought by a time like Christmas. Through these ideas, we find the combined fortitude that gives cause for the U.S.A, and a blessing never to be taken for granted. Sharing of blessing is known in this country, and expressed by well recognized holidays.
In my appreciation for reasons why people look to this nation for various purposes: I know, having learned from others, the steely spine of our U.S.A . At this point, so much can go unspoken, but certainly recognized and felt by the American public.
I recall a State of this grand United States that has a motto of Tread on me Not. I also recall an international law that says don't export extortion. I also recall a publicly broadcast press conference from the President of the United States. President Obama said the U.S. will respond, but at its own choosing.
From this, U.S.A. holds the hand, and certainly against further cowardly attacks.
Unlike many countries, we make an effort to leave no "man" behind. Please consider www.woundedwarriorproject.org/ Freedom is certainly not free.
Sunday, December 21, 2014
2014 showed signs of substantial yield seeking, now second step is an investement in technology and transportation
The global market was once disjointed when it entered 2014. Late in 2013, we saw oil service industry gluts and signs of pricing pressure for the underlying commodity. We also saw commodity currencies at highs, such as the Australian dollar, China attempting hawkish methods of monetary rebalancing despite commodities stock piled at its ports, and rising local government debt that leads national debt, not to mention China's corporate debt.
As the year moved forward, we saw Japan enhance their QE in magnificent proportions. But the Japanese economy stalled due to an April consumer tax increase, and never has deviated the decline in yen, or the yields on JGB values. Europe, in like mind has the European Central Bank (ECB) buying covered bonds. They are talking about buying other forms of debt, if not equities.
Between the Japan and Europe QE, and U.S. propositions of tightening, a serious decoupling is occurring between the considerations of enhanced QE and indications of cyclical rotation in the emerging markets, and commodity based advanced markets. All influence the other advanced markets, against the emerging markets' associated mutual currencies of trade.
To explain, advanced markets relied for a long time on the developing growth of emerging markets and on commodity based markets to feed the idea of global growth. Now, we have those same growth markets needing to develop a more complex cycle of production, versus a simple proposition of re-investment in continued growth. This opposes the once known thesis of supplying these markets with easy U.S. cash. Perhaps, in the future, academics will confirm the declining influence of QE over markets, even when different countries enhance QE.
At this time, U.S. equities grow as did the production capacity of these emerging and commodity based countries. This occurs while the U.S. has good corporate earnings, though revenues have been generally slower. Nonetheless, the U.S. is the best of countries, among countries, in terms of economic performance.
Let me say, when the U.S. dollar appreciates, with its assets, that appears to be a carry trade. Recently, a carry trade idea was to buy a dollar and invest in higher yielding assets. Essentially, a carry trade is gaining from a currency, while also buying assets that grow. To make this work, you need to buy advancing currencies (sell declining currencies), and use the money to buy higher yielding asset classes. In this proposition, one must not be greedy. Reason is that currency markets will hurt, and remember pigs to get fat, but hogs will be slaughtered. So, caution and understanding the trade is of the utmost need.
Basic example today of a carry trade was: sell the euro to buy the U.S. dollar. With the proceeds, buy U.S. equities.
The U.S. is still looking at a bull market of sector advantage. This concept is shifting the extraction and growth that once dramatically grew economies into the efficient utilization of economic production and ultimately delivery capacity. Creating synergies and ultimate production to utilization of capacity, mostly in natural resources, will be driven by technology. Logical reason is simply the need of emerging and commodity economies to transition their investment into the maturity of processing and delivery of production.
This need goes into the technology needed to meet inventory and delivery against production levels. The need continues into transportation and end use utilization needs. Logistics, ordering, and order confirmation..... and all associated technology is what I look forward to. Among various markets.
Consumption is needed to create this product shift, and associated demand to absorb capacity.
If the U.S. economy leads the world by virtue of its consumers: A few dollars more (Clint Eastwood movie), can make a difference, as with money in the American consumer's pocket to help the globe.
Developing larger groups of consumers by larger production delivery systems, technology, logistics can all create a higher demand for the production capacity once created. Down side risk is wage depression sustained by over capacity due to inability to move surplus capacity, resistant local regulatory regimes and regional banking regimes that fail to move productive capacity, and globally declined demand. Upside advantage is removal of regional commodity glut bottlenecks due to inability to move commodities to market while transitioning from extraction to marketing, efficiency of moving production to market with improved technology that helps to efficiently move various products regionally and globally, and diversified product movement that results in value added synergies for production. Also, upside is preventing regulatory risk, in an environment that, among emerging markets, wants to protect their shores.
Ultimately, these emerging countries must weigh their shores going forward against the heft of their allowance of in-flowing investment capital. Consequent of country investment inflow, partnerships have developed. As a practical matter to protect their foreign currency reserves and current account these countries must acknowledge their growth partners, simply as a partnership matter. To allow confidence in investment partners, and to allow investment on a deeper level, these countries must allow inventory and shipment technology. That is, second step methods to prevent capital outflow.
Together, all countries can acknowledge emerging market currency risk. And search primarily for all countries to recognize a level of investment risk in global growth, and then seek private market methods to mitigate such risks. Especially in this environment of substantial first stage investment, a natural recognition means accounting for the second step of securing foreign investment. That is preventing capital flight to sustain capital on any second step to maintain building partners.Where not all companies are poised for, or want to engage in second steps, there are certainly those that want to and can. And with a view to safety and security.
Sustaining value of capital investment for both investor and host country seems very mutually beneficial for both the host country and the investor. Prevention of capital flight, which creates currency disturbance, is the mutual injury to guard.
Matters certainly appear that where emerging market businesses might not have the common technology known in advanced economies, there is a new level of development to be had. It's a level of development known to those that can apply advanced technology on a cost effective basis firstly. Secondly is not selling the impossible or imprudent, rather selling the effective for business partner needs. There certainly will be room to grow mutual investment. Where a rule of law secures investment over time, a rule of law can still exist, and comes to exist by popular movement and expectation.
As the year moved forward, we saw Japan enhance their QE in magnificent proportions. But the Japanese economy stalled due to an April consumer tax increase, and never has deviated the decline in yen, or the yields on JGB values. Europe, in like mind has the European Central Bank (ECB) buying covered bonds. They are talking about buying other forms of debt, if not equities.
Between the Japan and Europe QE, and U.S. propositions of tightening, a serious decoupling is occurring between the considerations of enhanced QE and indications of cyclical rotation in the emerging markets, and commodity based advanced markets. All influence the other advanced markets, against the emerging markets' associated mutual currencies of trade.
To explain, advanced markets relied for a long time on the developing growth of emerging markets and on commodity based markets to feed the idea of global growth. Now, we have those same growth markets needing to develop a more complex cycle of production, versus a simple proposition of re-investment in continued growth. This opposes the once known thesis of supplying these markets with easy U.S. cash. Perhaps, in the future, academics will confirm the declining influence of QE over markets, even when different countries enhance QE.
At this time, U.S. equities grow as did the production capacity of these emerging and commodity based countries. This occurs while the U.S. has good corporate earnings, though revenues have been generally slower. Nonetheless, the U.S. is the best of countries, among countries, in terms of economic performance.
Let me say, when the U.S. dollar appreciates, with its assets, that appears to be a carry trade. Recently, a carry trade idea was to buy a dollar and invest in higher yielding assets. Essentially, a carry trade is gaining from a currency, while also buying assets that grow. To make this work, you need to buy advancing currencies (sell declining currencies), and use the money to buy higher yielding asset classes. In this proposition, one must not be greedy. Reason is that currency markets will hurt, and remember pigs to get fat, but hogs will be slaughtered. So, caution and understanding the trade is of the utmost need.
Basic example today of a carry trade was: sell the euro to buy the U.S. dollar. With the proceeds, buy U.S. equities.
The U.S. is still looking at a bull market of sector advantage. This concept is shifting the extraction and growth that once dramatically grew economies into the efficient utilization of economic production and ultimately delivery capacity. Creating synergies and ultimate production to utilization of capacity, mostly in natural resources, will be driven by technology. Logical reason is simply the need of emerging and commodity economies to transition their investment into the maturity of processing and delivery of production.
This need goes into the technology needed to meet inventory and delivery against production levels. The need continues into transportation and end use utilization needs. Logistics, ordering, and order confirmation..... and all associated technology is what I look forward to. Among various markets.
Consumption is needed to create this product shift, and associated demand to absorb capacity.
If the U.S. economy leads the world by virtue of its consumers: A few dollars more (Clint Eastwood movie), can make a difference, as with money in the American consumer's pocket to help the globe.
Developing larger groups of consumers by larger production delivery systems, technology, logistics can all create a higher demand for the production capacity once created. Down side risk is wage depression sustained by over capacity due to inability to move surplus capacity, resistant local regulatory regimes and regional banking regimes that fail to move productive capacity, and globally declined demand. Upside advantage is removal of regional commodity glut bottlenecks due to inability to move commodities to market while transitioning from extraction to marketing, efficiency of moving production to market with improved technology that helps to efficiently move various products regionally and globally, and diversified product movement that results in value added synergies for production. Also, upside is preventing regulatory risk, in an environment that, among emerging markets, wants to protect their shores.
Ultimately, these emerging countries must weigh their shores going forward against the heft of their allowance of in-flowing investment capital. Consequent of country investment inflow, partnerships have developed. As a practical matter to protect their foreign currency reserves and current account these countries must acknowledge their growth partners, simply as a partnership matter. To allow confidence in investment partners, and to allow investment on a deeper level, these countries must allow inventory and shipment technology. That is, second step methods to prevent capital outflow.
Together, all countries can acknowledge emerging market currency risk. And search primarily for all countries to recognize a level of investment risk in global growth, and then seek private market methods to mitigate such risks. Especially in this environment of substantial first stage investment, a natural recognition means accounting for the second step of securing foreign investment. That is preventing capital flight to sustain capital on any second step to maintain building partners.Where not all companies are poised for, or want to engage in second steps, there are certainly those that want to and can. And with a view to safety and security.
Sustaining value of capital investment for both investor and host country seems very mutually beneficial for both the host country and the investor. Prevention of capital flight, which creates currency disturbance, is the mutual injury to guard.
Matters certainly appear that where emerging market businesses might not have the common technology known in advanced economies, there is a new level of development to be had. It's a level of development known to those that can apply advanced technology on a cost effective basis firstly. Secondly is not selling the impossible or imprudent, rather selling the effective for business partner needs. There certainly will be room to grow mutual investment. Where a rule of law secures investment over time, a rule of law can still exist, and comes to exist by popular movement and expectation.
Friday, June 20, 2014
Bank Penalties For BNP Causing Discord, Safty Resides In The Common Interest Of Banking Sustainability
Banks committed sins leading to 2008, and they do continue to sin. But most bank transgressions really come from the past with mortgage backed securities. JPM was fined over $20B and BAC looks to be similar. As a taxpayer, I can find justification in too large to manage institutions paying homage to regulatory authorities in largess, in some fashion.....Certainly given 2008 consolidations and associated sins of failing banks that were consolidated into bigger banks. Consequence was the too big to fail idea. Now we see the too big to manage idea.
There is also the Whale Trade with J.P. Morgan, and the serious LIBOR fixing issue with BNP Parabas, a French bank. Still, U.S. is looking for about $10B in penalties from BNP. European authorities have requested consideration from U.S. authorities, but encountered denials.
Now, because of the BNP issue the EU Legislature is proposing as law a single bench mark to gauge price. Perhaps suggested in such a move is fixing European law to prevent major penalties from U.S. regulators. But using only one bench mark is objected to by the European Central Bank (ECB) as not a realistic indicator of true value. Where the ECB"s objection is factual, the EU's position marks a reasonable political line.
By virtue of the U.S. not bi-laterally discussing proposed U.S. penalties on European banks, the appearance conveyed by U.S. representatives is perhaps not only unfriendly, but also arrogant. Truth be told, we live in the same world. Further, Europe is our strongest ally geopolitically.
What would Winston Churchill say under these circumstances....Probably he'd let the finance ministers and bankers figure this out. But today, one really can't let the fox into the hen house. Unless, of course, we understand common ownership of the hen house.
On top of the U.S. Department of Justice, or other regulators seeking penalties, regulatory regimes are hard on banks. Obvious consequences are reduced bank lending, increased reserves and provisions for banks paying regulators. Also a consequence is reduced capacity to increase revenue to fill capital and retained earnings in order to meet regulatory requirements.
Bottom line of overall government action in terms of banking is reduced lending. Today, banks have to protect themselves, certainly if they have shareholders. Bank's are essentially guarding fractional reserve banking to their benefit, even if lending is a minor motivational force. Still, should banks not protect reserves in this environment, they will become an absorbed casualty among an all together glutted banking M&A forced market. Of course it wouldn't hurt if banks just played right.
True need is to find a way to keep banking out of its own hen house, and government not to compete for that same hen house through either regulation or its own lending. Therein resides the market. To accomplish a true market isn't by creating new derivatives of old assets whether they be failing or good. Rather, transparency and published market pricing is what's needed. That was proposed after the Great Depression, was instilled, and brought markets as they now exist, but now markets are in further need of transparency and access.
Changes needing to be made are updates to transparency and price discovery. There are so many new products on the market today, and so many are hidden behind a curtain whether by price, fundamentals or correlation . Eliminate that curtain, and global investors will be able to consider price in comparative terms.
There is also the Whale Trade with J.P. Morgan, and the serious LIBOR fixing issue with BNP Parabas, a French bank. Still, U.S. is looking for about $10B in penalties from BNP. European authorities have requested consideration from U.S. authorities, but encountered denials.
Now, because of the BNP issue the EU Legislature is proposing as law a single bench mark to gauge price. Perhaps suggested in such a move is fixing European law to prevent major penalties from U.S. regulators. But using only one bench mark is objected to by the European Central Bank (ECB) as not a realistic indicator of true value. Where the ECB"s objection is factual, the EU's position marks a reasonable political line.
By virtue of the U.S. not bi-laterally discussing proposed U.S. penalties on European banks, the appearance conveyed by U.S. representatives is perhaps not only unfriendly, but also arrogant. Truth be told, we live in the same world. Further, Europe is our strongest ally geopolitically.
What would Winston Churchill say under these circumstances....Probably he'd let the finance ministers and bankers figure this out. But today, one really can't let the fox into the hen house. Unless, of course, we understand common ownership of the hen house.
On top of the U.S. Department of Justice, or other regulators seeking penalties, regulatory regimes are hard on banks. Obvious consequences are reduced bank lending, increased reserves and provisions for banks paying regulators. Also a consequence is reduced capacity to increase revenue to fill capital and retained earnings in order to meet regulatory requirements.
Bottom line of overall government action in terms of banking is reduced lending. Today, banks have to protect themselves, certainly if they have shareholders. Bank's are essentially guarding fractional reserve banking to their benefit, even if lending is a minor motivational force. Still, should banks not protect reserves in this environment, they will become an absorbed casualty among an all together glutted banking M&A forced market. Of course it wouldn't hurt if banks just played right.
True need is to find a way to keep banking out of its own hen house, and government not to compete for that same hen house through either regulation or its own lending. Therein resides the market. To accomplish a true market isn't by creating new derivatives of old assets whether they be failing or good. Rather, transparency and published market pricing is what's needed. That was proposed after the Great Depression, was instilled, and brought markets as they now exist, but now markets are in further need of transparency and access.
Changes needing to be made are updates to transparency and price discovery. There are so many new products on the market today, and so many are hidden behind a curtain whether by price, fundamentals or correlation . Eliminate that curtain, and global investors will be able to consider price in comparative terms.
Wednesday, June 4, 2014
ECB's Current Move: Inflating Deflation by Deflating Rates. When is the Next Move?
In the morning we can expect the ECB to
put some meat on the bones of its talk. Generally anticipated is the
ECB will make a move. What appears rather mellow is the expected move
to be made. Economists expect the ECB to start lite with a cut in the
main refinancing rate to .15% to .10%. The ECB is also expected to
ease the interest rate on deposits from banks at their facility.
Economists expect this rate to go to .1%, and economists consider
this to be a negative interest rate.
One can only consider this to be a
negative interest rate when considering divergent inflation/deflation
rates in the euro area. For instance, euro area HICP (harmonized
index of consumer prices) was at .2% month over month for April of 2014 and .7% year
over year. For May, this same data dropped to .5% year over year. A negative trend in inflation is occurring and certainly far from the ECB's goal of just under 2.0% inflation.
Such inflation, actually deflationary, numbers make an ECB deposit rate of .1% essentially a
negative .1% in the short term and only .4% year over year. That is, to find the real interest rate, or
yield, one subtracts the rate of inflation from the stated rate. Or, in deflation, one adds the rate of deflation to the stated rate to find the real interest rate.
Keep in mind, Germany demonstrated actual deflation in April with a Consumer Price Index (CPI) of -.2% and a year over year inflation rate of 1.3%. France was flat on its CPI at 0.0% with a year over year inflation rate of .7%. European Producer Price Index numbers are even worse. European Union flash GDP numbers generally disappointed with import number exceeding export numbers, certainly for Germany.
Add to deflationary pressure in Europe the slowing economies of China and Japan (let alone geopolitical risk in Eastern Europe), and one can see the reason for toughening exports out of Europe aside from a high euro.
Simply generating negative interest rates in Europe doesn't kick start economies like Europe. But
it might help restart Europe's shadow banking system by giving
confidence to other financial intermediaries. ECB's potential action
can help mitigate yesterday's term structure risk and essentially
move maturity transformation to safer ground for past market
transactions.....If only these past transaction had a present day liquid market. I'm referencing, of course, markets to move otherwise illiquid bank loans.
Such wishful projections assume a market,
outside of sovereign debt, through which participants can diversify otherwise illiquid assets
based on price and maturity. Future looking market participants, however, might
see chasing deflation, by deflating the currency, by reducing rates in the present economic/market climate, as growth potential. It's possible.
Sunday, May 4, 2014
Treasury Yield Declines and Stock Market Highs
Friday's Employment Situation report bodes badly for general economic strength. On April 9th when the FOMC minutes were released, the Fed made a prescient remark by noting that a 6.5% unemployment rate is an outdated concept for measuring employment. They also said rates won't be increased in the first half of 2015.
Now, Friday's report shows an unemployment rate of 6.3% when consensus estimates expected 6.6%. Initially, this data looks good, save for 806,000 people leaving the labor market. Overall, 92M people are employable, but can't find jobs.
Some data does look good such as Apple's beat on earnings, Facebook and Netflix are similar. Just last month, however, growth stocks sold off significantly. On April 4th, for example, Facebook fell 4.6% and Netflix fell 4.9% with Nasdaq declining 2.6%.
Other data also looked good in April such as Industrial Production stated on on April 16th, showing a March increase of .7% when consensus estimates were a rise of .4%. Retail Sales stated in April also exceeded estimates as did Durable Goods Orders and the ISM Manufacturing Index.
Yet, if Friday's Employment Situation
report reveals causation, perhaps more than weather explains a Q1 GDP
of only .1% growth against an expected growth rate of 1.1%. Pending
home sales have been in decline for nine months prior to March. New
home sales declined14.5% in March and year over year, decline is
13.3%. Existing home sales are down 7.5% on the year.
Reality for U.S. equities are how they are loitering about their ceiling and trade within a range in terms of S&P 500 and the Dow. Nasdaq simply looks challenged to gain momentum to approach previous highs. Breadth indicators show a rather balanced market, probably revealing ultimate indecision. Therein resides the negative divergence among equities versus treasuries.
Decisive movement can, however, be
found in long term treasuries, confirming equities' negative
divergence. Where equities hover around highs, treasury yields have
been in considerable decline with the 20 year falling 60 basis points
since December 31, 2013 and the 30 year 59 basis points. While
shorting bonds in 2013 was convention, covering short positions
appears to be an inadequate explanation given other dynamics that
drive people to safe havens.
U.S. economic prospects aren't immune
from implications arising from Europe, Japan and China. Telling of
this proposition is the moderating yield curve with long term
treasury yields having been in rather stark decline.
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