Sunday, December 21, 2014

SUNDAY NIGHT SPECIAL
The Power of Believing 
That You Can Improve
OUTSIDE OUR BOX
Carol Dweck researches “growth mindset” — the idea that we can grow our brain's capacity to learn & to solve problems .. she describes two ways to think about a problem that’s slightly too hard for you to solve. Are you not smart enough to solve it … or have you just not solved it yet? .. 10 minutes
The Federal Reserve Plays 
Not-So-Secret Santa 
For Wall Street
Free marketeer Richard Ebeling explains why the stock market just jumped 800 points: "Janet Yellen, and the other Fed board members, basically said to Wall Street 'don’t worry, you don’t have to ever pay real money for borrowing funds for the foreseeable future'" - in other words, the Federal Reserve will keep interest rates artificially low .. "The Federal Reserve has basically abolished the pricing mechanism of financial markets. When you say that the price of borrowing is near zero that means that either people don’t want it, are not willing to pay anything, or that there is so much of it that there’s enough to go around for everybody regardless of how much they want….it’s treating savings and lending like a free commodity." .. 17 minutes audio interview of Ebeling on the Jerry Doyle Show.
LINK HERE to the postcast
Gary Shilling*:
Russia a Trigger Mechanism 
for U.S. Treasuries
Gary Shilling* discusses how the fall in the value of the ruble impacts the Federal Reserve & his call for global deleveraging .. maintains his call for the U.S. Treasury 10-Year bond yield to reach 1% by the end of 2015 - this means a rally in U.S. Treasury bonds ..  emphasizes the U.S. economy is more driven as a financial economy than a real economy, that is why falling oil prices present more danger to the U.S. economy than helping consumers with lower energy costs .. NNOO .. 3 minutes
The World Has Reached
The Keynesian Endgame
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Zero Hedge: "With all the 'talk' of diverging paths of monetary policy... one could be forgiven, if glancing at the chart above, for thinking the inevitable endgame of Keynesianism is very much at hand as first The BoJ, then The Fed, then Europe all enter ZIRP... and now NIRP."
link here to the reference
Suddenly Event Risk Matters
Gordon T Long* discusses risks that may affect the financial markets .. highlights how QE has destroyed whatever free market system has been in place .. slide-based podcast a few weeks old but still relevant .. 20 minutes
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Kyle Bass On Holding Gold
In a Bullion Bank Comex Warehouse
Jesse's Café Américain comments: "'It's actually an easy decision if you are a fiduciary.' .. Especially if you take the duties of a fiduciary for other people's assets seriously.. What about the fiduciary responsibilities of central banks? Hard to say, right? .. We'll get right on that-- in about seven years. Jawohl! And no need for an audit. We believe .. And as for private citizens, when and if the time comes when there is a 'run on the bullion banks', I would not be surprised to see forced cash settlements, and 'bail ins' with even allocated receipts being taken. Does this seem unlikely, improbable? MF Global."
link here to the reference

Emerging Markets Meltdown Ahead
"There is no place safer right now going into 2015 than the USA. Our high-flying banks will blow-up as always, but not until after the 3rd quarter of 2015 .. We are likely to see the first knee-jerk reaction be the traditional run into U.S. bonds as the rest of the world starts to implode. The higher this pushes the dollar, the more defaults we will see in sovereign debt and foreign banks .. The dollar rally will push stocks up, and help create the bubble in the bond market .. We will see not just Russia in economic chaos, but all emerging markets must now brace for their ordeal by fire .. The emerging markets have issued debt in dollars which is a currency they cannot print and do not control. This hard-currency debt has tripled in the last decade and is split between $3.1 trillion in bank loans and $2.6 trillion in bonds .. A large portion of this emerging market debt was taken out at real interest rates of 1% on the implicit assumption that the Fed would continue to flood the world with liquidity for years to come. This has made the emerging markets vast borrowers of dollars .. so in a trading position they are 'short dollars'. This is the greatest short-position on a currency on the boards and when the dollar RISES, they will face the margin call from Hell itself. This will set off another banking crisis .. The coming meltdown in Emerging Market debt can be seen in Pimco’s Emerging Market Corporate Bond Fund, which suffered a loss of $237m in November, and the pain is unlikely to stop as clients discover that 24% of its portfolio is in Russia."
- Martin Armstrong
link here to the reference
link here to the other reference
Victor Adair, John Mauldin & Ross Clark
Ross Clark - Equity Trading .. Victor Adair - Equity Markets .. John Mauldin - Lower Crude & Natural Gas Prices .. NNOO .. 56 minutes
Jim Rickards* Recommends Patience
Jim Rickards* on where to put $100,000 in 2015:
"Number one, it’s really, really important to be diversified." - that does not mean owning 50 stocks because stocks are just one asset class.. "The biggest challenge facing investors today is that we have inflation and deflation fighting each other at the same time and you don’t know which way it’s going to tip, and you need to be prepared for both." .. recommends inflation hedges/investments & deflation hedges/investments:
- $30,000 in cash.
- $20,000 in gold.
- $20,000 in ETFs that are inverse to the junk bond market. “So basically, if the junk bond market goes down, you’ll make money on these particular ETFs.”
- $10,000 in 10-year treasury notes. Rickards notes that although nominal interest rates are close to all-time lows, “real rates are nowhere near all-time lows, and if deflation persists, you could see a huge rally in treasury notes.”
- $20,000 in alternative investments, says Rickards, including global macro hedge funds, venture capital & fine art.
OVERALL: "You can’t get whipped around by the day-to-day, so I recommend patience."
link here to the article
Identifying Weaknesses 
in the Eurozone
INETeconomics video on European Investment Bank economist Massimo Cingolani .. suggests Europe needs to integrate fiscally at the federal level .. NNOO .. 13 minutes
Canadian Oil Stocks 
Not At Bottom Yet?
NNOO .. courtesy of Danielle Park
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Could Russia Unleash Black Swans
& Topple Our House of Cards?
"Suppose the Russian government says, ‘Well, since the attack on the ruble is political and you guys are attacking the ruble and causing us so much trouble, we are just not going to pay off the next tranch of our debt that comes due early in 2015.' .. Well, the European banking system would collapse because those banks are terribly undercapitalized. Some of them have loans to Russia that almost absorb the entire capital base. So the Russians don’t even have to default. They can just say, ‘We’re not going to pay this year. We will do it later. We’ll do it when the ruble stabilizes.’ .. The biggest black swan of all, if the Russians get thoroughly angry, all they have to do is call up the European governments and say, ‘We no longer sell natural gas or any other form of energy to members of NATO.' The consequence would be the utter and total collapse of NATO. Not even a puppet state like Germany is going to let the people freeze to death, let the factories be closed down, and let the unemployment rate hit 40%. It’s just not going to happen — it would be the end of NATO .. That would set off so many black swans. Every banking system would probably collapse because if the German banks are faced with German industry closing down, what the hell is going to happen to the banks? So all the cards are in Putin’s hands. None of them are in Washington’s hands. Putin is going to reorient Russia to the East. Then you are going to see Russia, India, and China, take over the leadership of the world. That will start in 2015." NNOO(but possible)
- Dr. Paul Craig Roberts
LINK HERE to the article
LINK HERE to the podcast

Can Money Printing 
Cause Deflation?
Dr. Marc Faber*..
..has observed that in countries with high money printing, real wages & incomes have tended to decline .. goes into the reasons why the money supply has not picked up in the U.S., even with lots of money printing .. one reason is that those people who want to borrow money have no access to additional credit, those can can borrow are already loaded with cash & don't need additional funds .. the latter group are also not investing in the real economy, they are investing in financial assets & real estate assets .. "My point is that all the liquidity that central banks have created isn’t flowing into the real economy but remains in asset markets (mostly financial markets) buying and selling currencies, bonds, stocks, real estate, art, entire companies, etc .. Going back to my original question of whether, under certain conditions, the expansion of central banks’ balance sheets and policies of zero interest rates could actually have a deflationary impact, I believe that as long as savings and newly created fiat money flow into booming and speculative asset markets, real economic activity will remain depressed."
LINK HERE to the essay
Oil Price Crash Short Term 
Means Price Rises Long Term?
Wall St for Main St interviews energy law & finance professor at SMU & energy fund manager Joseph Dancy .. Dancy doesn't think a supply glut or huge drops in demand really had much reason for why the oil price dropped so much so quickly .. says according to the IEA demand from the developing world is still growing & that's causing global demand to still grow despite potential demand reductions in the U.S., EU, Japan, etc. .. discussion on the immense capex cut coming in the global oil industry & what that means for oil prices & oil supply long term .. expects that this short term oil price crash guarantees even more volatility & that in the next few years oil prices will spike much higher because companies are drastically cutting back on production, investments in finding more future supply, etc in the face of still rising demand globally for oil .. 1 hour
Morgan Stanley
on Financial Repression
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From last year but mostly still relevant, provides insight into what financil repression is & what the investment implications are .. looks at financial repression as:
• Explicit or indirect caps / ceilings on interest rates
– Government regulation in the U.S.
– Ceilings on bank lending rates
– Central Bank interest rate targets
• Creation and maintenance of a captive, domestic investor base
– Capital account restrictions and exchange controls to force a ‘home bias’
– High reserve requirements
– Regulatory measures that require financial institutions to hold government debt in their portfolios
– Transaction taxes on equities; prohibitions on gold transactions
• Direct ownership of, or extensive management over, banks and other financial institutions
– Restriction of entry into financial markets
– Directing credit towards certain industries
LINK HERE to get the PDF