Paradise in LA LA Land
More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.

Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]

For example, here in the land of fruits and nuts, things are whacky, things are zany. Last month, State Senator, Dick Pan, introduced Senate Bill (SB) 1424, which would require California based websites to utilize fact checkers to verify news stories prior to publishing them.
Who exactly these fact checkers would be – the moral servants that would save the world from the ills

Good Intentions
One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive.

It seemed a good idea at first… [PT]

Many thrilling stories of doom and gloom were published across the tops of the finest digital news sites.  The main object of our satisfaction, however, was buried further down the pages, well below the latest Trump tweets and relentless reports on the global war buildup.  Nonetheless, our focus is not without merit.
Today’s foil is played

Interesting Times Arrive
“Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.

Ancient Chinese curse alert… [PT]

“One moment markets are gorging on financial slop like fat pigs in mud.  The next they’re collectively vomiting on themselves. I’ll tell you one thing.  President Trump’s trade war with China won’t end well.  I mean, come on.  China’s outplayed the U.S. at this game for over a quarter century.  They have the upper hand.
“Besides, what’s the point?  If we no longer buy stuff from China, then how will China buy Uncle Sam’s debt?  And the timing for all this couldn’t be worse.  Deficits are spiraling out of control.

Son of the Imperial City
What are the chances of Federal Reserve Chairman Jerome Powell being wrong?  The chances he’ll be wrong on the economy’s growth prospects, the direction of the federal funds rate, and inflation itself?  Our guess is his chances of being wrong are quite high.

The new central planner-in-chief. Central banks are facing a special case of the socialist calculation problem pertaining to the financial system. Like the comrades in the former Eastern Bloc, who tried to adjust their plans based on prices they were able to observe in the capitalist West, their best bet is to simply follow market rates. Unfortunately market rates – especially at the short end of the yield curve – are subject to an observer-participant

One and the Same

“God gave me my money.”
– John D. Rockefeller

Today we step away from the economy and markets and endeavor down the path less traveled.  For fun and for free, we wade out into a smelly peat bog.  There we scratch away the surface muck in search of what lies below.

One should actually be careful about quotes like the one attributed to Rockefeller above, even if it of course sounds good and is very suitable for the topic at hand. In reality he probably said something like it, but it is almost certain he didn’t say it verbatim (contrary to Mr. Blankfein, who is indeed on record for stating that Goldman Sachs was “doing God’s work”). We mention this because we have long noticed that the best-known quotes attributed to all

Fake Responses 
One month ago we asked: What kind of stock market purge is this?  Over the last 30 days the stock market’s offered plenty of fake responses.  Yet we’re still waiting for a clear answer.

As the party continues, the dance moves of the revelers are becoming ever more ominous. Are they still right in the head? Perhaps a little trepanation is called for to relieve those brain tensions a bit?  [PT]

The stock market, like the President, knows the art of ballyhoo. Day after day, stocks behave in shocking and unpredictable ways.  They bluster and then recoil with the inconsistent elegance of a President Trump twitter tirade.
Wild multi-hundred-point swings on the Dow Jones Industrial Average (DJIA) have become the norm.  Up 300

Demanding More Debt
Consumer debt, corporate debt, and government debt are all going up.  But that’s not all.  Margin debt – debt that investors borrow against their portfolio to buy more stocks – has hit a record of $642.8 billion.  What in the world are people thinking?

A blow-off in margin debt mirroring the blow-off in stock prices. Since February of 2016 alone it has soared by ~$170 billion – this is an entirely new level insanity. The current total of 643 billion is more than double the level of margin debt at the tech mania peak and 15.4 times the amount of margin debt just before the crash of 1987. [PT]

Clearly, they’re not thinking.  Because thinking takes work.  Most people don’t like to work.  They like to pretend to work.

Ridiculous Minutia
Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job.  He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer.  He still doesn’t know what roach coach menu items induce a heinous gut bomb.
 

The perpetually slightly worried looking new Fed chairman Jerome Powell, here seen warily inspecting the Rose Garden at the White House. Everybody wants to know if he has a “better plan” – but there is no better plan, thus no-one has one. [PT]
Photo credit: A. Brandon / AP
 

Yet across the planet, folks high and low are already telling him exactly how he should do his job.  What’s more, they’re passing advance judgment on things that may or may not happen. For example, the South

Mnuchin Gets It
United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.
 
Master of the Mint and economy wizard Steven Mnuchin and his wife at the annual ritual greenback burning festival. [PT]
 

In fact, Mnuchin’s wife, Louise Linton, says she admires him because “he understands the economy.”  And Mnuchin, no doubt, admires Linton, a Scottish actress 18 years younger, because “she loves SoulCycle Snapchat filters that make people look like puppies and

Actions and Reactions
Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We’d rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.
 
Memorable moments from the annals of dentistry [PT]
 

For example, the days following a market correction are full of restoration and redemption.  Like the prayer of Saint Francis of Assisi, Tuesday’s 567 point DJIA bounce brought hope where there was despair, light where there was darkness, and joy where there was sadness.  President Trump

When to Sell?
The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to cash.
 
The DJIA over the past two years – the recent blow-off move has catapulted the average way above its 200 day moving average. As we recently pointed out, the DJIA has posted unprecedented overbought readings in longer-term time frames and we suspect that the distance from the 200 dma it recently reached was quite a rare

Something for Nothing
The world is full of bad ideas.  Just look around.  One can hardly blink without a multitude of bad ideas coming into view.  What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor.  It’s nearly as destructive as prescription pain killers.  Yet people chug it down with reckless abandon.
 
Looking at the expression of this Mickey’s Malt Liquor tester one might initially get the impression that he is disappointed. We assure you that is not the case – this is actually his happy face, he is probably just about to enter Nirvana. Countless taste tests prove it, see this comparison of the “entire bottom shelf” of malt liquors, or these cost-conscious routiniers. Not to forget, it comes either in cans or in shatterproof plastic

Trade Deficit with China Widens on Trump’s Watch 
Most things come easier said than done.  Take President Trump’s posture on trade with China. Trump doesn’t want a bigger trade deficit with China.  He wants a smaller trade deficit with China.  In fact, reducing the trade deficit with China is one of Trump’s promises to Make America Great Again.
 
We are often willing to give Donald Trump the benefit of the doubt, despite the fact that his delivery needs a lot of work. Considering his enemies and most vociferous detractors, we reckon he must be doing something right; but we vehemently disagree with his views on trade, some of which are unfortunately becoming policy now. As Murray Rothbard once noted: “[P]rotectionist arguments, many plausible at first glance, are really a tissue of

Controlled Inflation
American consumers are not only feeling good.  They are feeling great. They are borrowing money – and spending it – like tomorrow will never come.
 

After an extended period of indulging in excessive moderation (left), the US consumer makes his innermost wishes known (right). [PT]
 

On Monday the Federal Reserve released its latest report of consumer credit outstanding.  According to the Fed’s bean counters, U.S. consumers racked up $28 billion in new credit card debt and in new student, auto, and other non-mortgage loans in November. This amounted to an 8.8 percent increase in consumer borrowing.  It also ran total outstanding consumer debt up to $3.83 trillion.
 
US non-mortgage consumer debt – this exercise in admirable restraint seems to have served as a

Onward Toward Default
People are hard to please these days.  Clients, customers, and cohorts – the whole lot.  They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions.
 
The age-old art of assigning blame – in this case complemented by firm knowledge of the proper way to prosperity (see lower right corner). Jack Lew not only sees the future with perfect clarity these days, he also seems to have spent his time as treasury secretary garnering plenty of “not guilty of anything/ had absolutely nothing to do with it/ innocent as the snow is white/ just a job title, doesn’t mean a thing” points. All the bad stuff related to public debt and deficits clearly happened before and/or after him, or in other words, he dindu nuffin’ . Similar to the

A New Year of Symbiotic Disharmony
The New Year is nearly here. The slate’s been wiped clean. New hopes, new dreams, and new fantasies, are all within reach. Today is the day to make a double-fisted grab for them. Without question, 2018 will be the year in which everything happens exactly as it should. Some things you will be able to control, others will be well beyond your control.
 
How new years generally work… [PT]
 

Certainly, your ability to stop your neighbor’s cat from relieving itself in your side yard is limited, barring extreme measures. What we mean is each day shall unfold before you – both good and bad – in symbiotic disharmony. You can count on it.
But what are the specifics and particulars for the year ahead? What about stocks, the 10-Year Treasury note, gold, bitcoin,

Remarkable and Extraordinary Growth
Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?
 
Here’s what really happened: the government’s minions confiscated everything Santa had on him when he crossed the border and then added it to GDP. You know how it is… if something feels too good to be true… [PT]
 

We can’t think of one off hand. And if we could, we wouldn’t let it detract from the present merriment. Like bellowing out the verses of Joy to the World at a Christmas Eve candlelight service, it sure feels magnificent – don’t it?
The cocktail of record stock prices, robust GDP growth, and reforms to the tax code has

Bogus Jobs Pay Big Bucks
The political differences of today’s two leading parties are not over ultimate questions of principle.  Rather, they are over opposing answers to the question of how a goal can be achieved with the least sacrifice.  For lawmakers, the goal is to promise the populace something for nothing, while pretending to make good on it.
 
The short and sweet definition of democratic elections by eminent American wordsmith and political philosopher H.L. Mencken [PT]
 

Take the latest tax bill, for instance.  The GOP wants to tax less and spend more.  The Democrat party wants to tax more and spend even more.  We don’t recall seeing any proposals to tax less, spend less, and shrink the size of the state.  And why would we?
 
When the government cuts back…  [PT]
 
Today’s

When Bakers Go Fishing
Government intervention into a nation’s economy is as foolish as attempting to control the sun’s rise and fall by law or force.  But that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions.  The United States government is no exception.
 
From the “When the government helps the economy” collection: Breaking a few eggs while baking the bridge to nowhere omelet. [PT]
 

Over the years, layers and layers of interference by various federal, state, and local agencies have built up like grime on a kitchen window.  The grease shines and smells of something fierce.  The layers of government grime also drip and ooze into every crack and crevice of the economy.
These days, for example, it is impossible to carry out a simple

Style Over Substance
There are many things that could be said about the GOP tax bill.  But one thing is certain.  It has been a great show.
Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago.  Instead of addressing the Country’s mounting insolvency, lawmakers chose expediency without exception.  They kicked the can from yesterday to today.
 
The empty chairs meeting – this is slightly reminiscent of the Clint Eastwood skit in which he addressed an empty chair that was supposed to represent Barack Obama. No-one can accuse the current tax reform plan of making a lot of sense, but the problem is that any comprehensive sensible reform package would never make it past the lobbies interested in maintaining the status quo.

Standing In Your Way
Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens.  This is what our experiences and observations have shown.  What gives?
For one, politicians have an aversion to freedom and liberty.  They want to control your behavior, choices, and decisions.  What’s more, they want to use your money to do so.
 
As this by now famous cartoon implies, the State is essentially a gang of criminals waving a flag. We realize that most people have a far more romantic and naïve view of the nature of the State. Some have even swallowed the propaganda slogan asserting that ”we” are the State (hint: no, “we” are not). The misguided belief that it can be reformed if only the right people come to power (you just have to elect

Economic Nirvana
“Inflation is always and everywhere a monetary phenomenon,” economist and Nobel Prize recipient Milton Friedman once remarked.  He likely meant that inflation is the more rapid increase in the supply of money relative to the output of goods and services which money is traded for.
 
Famous Monetarist School representative Milton Friedman thought the US should adopt a constitutional amendment limiting monetary inflation to 3% – 5% per year, putting inflation so to speak on autopilot. But why should there be any central bank-directed inflation at all? To his credit, in 1968 Friedman wrote the following in the American Economic Review: “[M]onetary action takes a longer time to affect the price level than to affect the monetary totals and both the time lag and the magnitude

A Date with Dracula
The gray hue of dawn quickly slipped to a bright clear sky as we set out last Saturday morning.  The season’s autumn tinge abounded around us as the distant mountain peaks, and their mighty rifts, grew closer.  The nighttime chill stubbornly lingered in the crisp air.
 
“Who lives in yonder castle?” Harker asked. “Pardon, Sire?” Up front in the driver’s seat it was evidently hard to understand what was said over the racket made by the team of horses that drew their carriage over the Transylvanian collection of pot holes the natives quite audaciously referred to as a “road”. In fact, the thunderous clackety-clack of their hooves was slightly unnerving, not to mention the unsafe speed at which they were moving. “I said, who lives in yonder castle?”, Harker repeated,

A Flawless Flock of Scoundrels
One of the fringe benefits of living in a country that’s in dire need of a political, financial, and cultural reset, is the twisted amusement that comes with bearing witness to its unraveling.  Day by day we’re greeted with escalating madness.  Indeed, the great fiasco must be taken lightly, so as not to be demoralized by its enormity.
 
Symphony grotesque in Washington [PT]
 

Of particular note is the present cast of characters.  Could Bill Shakespeare himself have come up with a more flawless flock of scoundrels to take the plotless narrative from comedy to tragedy?
There’s President Trump, Hillary Clinton, Paul Ryan, Mitch McConnell, Maxine Waters, Chuck Schumer, Nancy Pelosi, Robert Mueller, the Podesta Brothers, all of Congress; the list of political

Simple Classifications
Let’s begin with facts.  Cold hard unadorned facts. Water boils at 212 degrees Fahrenheit at standard atmospheric pressure.  Squaring the circle using a compass and straightedge is impossible.  The sun is a star.
 
The sun is not just a star, it is a benevolent star. Look, it is smiling…  sort of. [PT]
 

Facts, of course, must not be confused with opinions, which are based upon observations.  Barack Obama throws like a girl.  The Federal Register is for idiots.  Two slices of chocolate cake are one too many.  Are these opinions right or wrong?
The answer depends on who you ask.  What’s certain about opinions, however, is that like bellybuttons, everybody has one.  Moreover, unlike free drugs from the government, everyone is in fact entitled to their own opinion.

Pro-Growth Occurrences
An endearing quality of a late stage bull market is that it expands the universe of what’s possible.  Somehow, rising stock prices make the impossible, possible.  They also push the limits of the normal into the paranormal.
 
This happens almost every time Bigfoot is in front of a camera. [PT]
Cartoon by Gary Larson
 

Last week, for instance, there was a Bigfoot sighting near Avocado Lake in Fresno County, California.  But it wasn’t just one Bigfoot.  According to a local farmer, there was a family of five or six Bigfoot running across his ranch in the middle of the night.  Paranormal expert Jeffery Gonzalez offered the following Bigfoot sighting anecdote:
 
“One of them, which was extremely tall, had a pig over its shoulder.  And the five scattered and the one

Divine Powers
The Dow’s march onward and upward toward 30,000 continues without a pause.  New all-time highs are notched practically every day.  Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date.  What a remarkable time to be alive.
 
The DJIA keeps surging… but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During his campaign he professed to worry about the “giant bubble”. We happen to think that it is probably best for a president not to talk about the stock market at all, but the Donald evidently couldn’t resist. One thing that continues to be quite satisfying is this quote by Paul Krugman on election night, when stock market futures

The True Believer
How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.
 
Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT]
Photo credit: Linda Davidson / The Washington Post
 

Minneapolis Federal Reserve President Neel Kashkari is a man with strong convictions.  He is what the late Eric Hoffer would have classified as “the true believer.”  According to Hoffer:
 
“It is the true believer’s ability to ‘shut his eyes and stop his ears’ to facts that do not deserve

Bleeding the Patient to Health
There’s something alluring about cure-alls and quick fixes. Who doesn’t want a magic panacea to make every illness or discomfort disappear? Such a yearning once compelled the best and the brightest minds to believe the impossible for over two thousand years.
 
Instantaneous relief! No matter what your affliction is, snake oil cures them all. [PT]
 

For example, from antiquity until the late-19th century, bloodletting was used to treat nearly every disease. Reputable medical references recommended bloodletting as a cure for acne, asthma, cancer, epilepsy, gout, indigestion, insanity, leprosy, pneumonia, scurvy, tuberculosis, and everything in between. Bloodletting was even used to treat hemorrhaging.
The practice was simple enough. A surgeon, often a

Past the Point of No Return
Adventures in depravity are nearly always confronted with the unpleasant reality that stopping the degeneracy is much more difficult than starting it.  This realization, and the unsettling feeling that comes with it, usually surfaces just after passing the point of no return.  That’s when the cucumber has pickled over and the prospect of turning back is no longer an option.
 
Depravity and bedlam through the ages. The blue barge of perdition in the lower middle ferries the depraved and degenerate to their final destination, a small slice of which can be glimpsed above… [PT]
 

In late November 2008, Federal Reserve Chairman Ben Bernanke put in place a fait accompli.  But he didn’t recognize it at the time.  For he was blinded by his myopic prejudices.