Monday, June 23, 2014

Asset rich, income poor

Moral: Wherein we look at savings and savers, a little more (no reason to think that we are complete, at this point).

The WSJ (June 20, 2014) article, The Asset-Rich, Income-Poor Economy, was a welcomed change due to its reasonableness and to the obvious proper insight of the authors (for example, they note the problem of retirees straining to enjoy their golden years under the current regimen). Actually, I'm running into articles that remind me of 2006/2007 when I was first reading analysis about the state of the economy. Many analysts were seeing problems mounting up way  before the downturn occurred. And, I don't need to list those who kept up their headstrong rush all the way to their crash.

Must we have these silly crashes? No. Is Yellen helping? Not like she thinks. Is it good for her to continue to flay savers? We'll see, they are a hearty lot.

Back to the article which is worth a read. The authors provide a chain of relationships that support a sustainable economy. It is termed in the sense of "wealth" in the following way:
    A proper mix of labor, capital, and know now goes into productivity; productivity provides labor income; income goes, in part, to savings; savings becomes capital; capital supports investment, ... and so forth, recurrent-ly. (emphasis mine)
One can think of this as cyclic or even with a mechanical sense. But, if you want to get relative, that works, to boot. The thing is that we have never balanced these things in the manner to which they ought to be handled.


Notice, savings goes to capital (not the ca-pital-sino, per se) in a real sense. And, there are better ways to handle savings than with the chimera and its train. So, we will be describing further the chimeric aspect of the proverbial train (at the same time, debt's role needs to be considered - as in, pure debtors (that is, those with no capital) create an inner & inter generational drag on the economy).

Remarks:  Modified: 06/23/2014

06/23/2014 -- Yellen behind the curve

Friday, June 20, 2014

Sucker money

Moral: Wherein we consider how the Fed is setting up for losses by those who cannot afford such.

In other words, sucker money will (may) be flowing in. May? Perhaps, people are smarter this time around. The "sucker" post was from 2010. That was before Ben did some of his trickery.

In the meantime, savers were flayed to within an inch of their lives. Perhaps, they'll be like cats and have nine of these to give up.

You see, several things needs to be explained. We'll get to that. In the meantime, it will be interesting to watch how all of this unfolds. Except, the victims will be those who were pulled late due to all of the hype that has inflated as much as have the markets.

Those late buyers will buy from the early entrants (or even those who stayed in last time, getting what they expected Ben to do (and now Yellen), in hopes that the punch bowl would be kept full) who will have massive gains. Then, as things tumble, those late buyers are guaranteed losers (assuming they sell, if they do not sell, what type of trickery will be required for the next load of dope for the addicts?).

Minsky's notions, of course, will come into play as we look at this matter, again.


But, we can talk moral hazard, too. Lots to talk about there.

Then, we will look at how savers have been hurt, using numbers. Perhaps, it's time to re-evaluate the model that has consumer spending weighted so heavily. Near-zero's reality is lurking.

You see, our infrastructure is decaying all around us. The fat cats don't usually bother with such things (as we will show). Why? Their position (as in, they're the best, deserve everything they can obtain via exploitation, and a whole litany) leads them to believe in perpetual motion (we'll do a post on this - something from nothing, if you must ask - as we see with the chimera). Yes, idiotic, isn't it?

Remarks:  Modified: 06/20/2014

06/20/2014 -- Last fall, there was a flurry of activity, looking at Yellen's approach. Two examples: Folly of the Fed, P/E Multiples. That was last fall, who is looking now? Well, Smithers is still at it. Also, quote from the Economist (May 10, 2014) -- emphasis mine: Janet Yellen, the Fed’s head, rather bizarrely used the prospective price-earnings ratio, one of the weakest of all measures, to justify a statement that Wall Street was not overvalued. (This was doubly strange since her husband, George Akerlof, co-wrote a book with Robert Shiller, who has championed a much better measure, the cyclically adjusted price-earnings ratio.). ... From my analysis, we'll see something else: the earnings are less than expected just by definition (such that allows book cooking in order to reduce the influence of costs - see infrastructure allusion earlier). 

Thursday, June 12, 2014

Minsky, again

Moral: Wherein we say that Minsky still makes a lot of sense as he did before the bulls ran amok; but do we learn (or listen)?

Interest in Minsky?
via the New Yorker
Minsky? Yes, he of the moment. As in, the moment that is around the corner of this inflated, conflated state that we find ourselves in, for many reasons.

Piketty is the rage now. Either, his thoughts explain things to people; or, he is trounced upon by those who are avid capitalists (as in, near-zero exploiters - we will get back to the ca-pital-sino, as almost an essential result from misusing Adam's thoughts).

Well, earlier, a mere six years ago, Minsky was the rage, though long passed on.We invoked Minsky several times: FEDareated, Truth Engineering, 7oops7. Others did so, as well, but, earlier: New Yorker Feb 2008.


December, 2008: We asked, is finance, by necessity, Ponzi-like (er, actually, Made-off was in there as an example, too, so we ought to say, by necessity, Made-off-ish).

We're at a similar place, via different paths. Back in 2009, no one envisioned that Ben would reach into his bag of tricks and do his QE stunt. Look at the chart in the post, Ben's put to see what looks to be highly correlated graphs (not talking causality, at the moment). In the times of that post (2013), many would not accept that Ben was pushing us toward some Minsky state. Too, though, all sorts of revelations were coming about in regard to the malfeasance (mortgage issues and more).

So, Minsky was forgotten, it seems. Or, his thoughts put on the back burner as less relevant.

The gist of it: Moms and pops ought not get pulled into the current game. Not, let's say, until Janet gets interest back to where we can graft some skin on the poor savers who have taken the worse of it (so that the fat cats could be coddled, sweet/baby-talked, and the like).

Too, we ought to have better access to the neutral truth, rather than to the marketing material pushed by different viewpoints (money-making schemes that abound and that are harped about daily by the talking, screaming, and spitting heads).

Remarks:  Modified: 06/14/2014

06/14/2014 -- Review of Piketty's book

Wednesday, June 11, 2014

That old chimera, the train

Moral: Wherein we consider the train, again.

Train? Yes, we said that there was none such. But, today, someone says that the train is on top of the 17K mountain (DOW flirts with 17k). And, you are not there unless you stayed in stock.

Otherwise, you're back in the muck in the valley.


So, let's, first, look at the use of the train, in this blog (and related).
  • November 6, 2009 -- Back then, the thought was that getting on a "train" and riding on other people's money was not what one needs for a sustainable economy (still true). Now, I will argue about those who like a free lunch; too, though, is the troublesome pursuit of finance after the perpetual motion event (their market). 
  • November 6, 2009 (Truth Engineering) -- Some might have gotten on something and, in doing so, had gains (ill-begotten, in more way than one) to brag about. But, the discussion, below, will look at why gloating is suspect.  
  • November 6, 2009 (7oops7) -- What was behind the gains (see above) then? Who would have thought that Ben would QE us as in screw savers even more than he had done to that date? Of course, a whole lot of system finagling has been done to keep the down-side in control, so can we ever get back to where the proper grounds can be known?   
  • November 7, 2009 -- The train that is at 17K has the fat cat cars, up front, in which most of the value has been sucked. It is at the top, when the other cars can be let loose to fall to perdition, below. 
  • ... and references, thereafter, in other posts
Then, we would have to discuss the fact that all cannot be on top of the mountain, in the train. In fact, the train is on very shaky tracks besides being loaded with cars that have been sucked dry of their value.

Too, as those on the top of the mountain being to sell, it'll start (train and all) to tumble (built on faith).


At some point, near-zero will have to get attention (too, the fact that Ben's largess was required to get to this "inflated" state).

Remarks:  Modified: 06/14/2014

06/14/2014 -- The future is chimeric; actually, our view of the past, given what we know of memory has the same problem. For some reason, if there are mathematics (mis-used, to be explained) and computers involved, then people's mind close up. Ah, yes, the wizards know. Hah! Given the issues, still unresolved, with computation, we ought to shake in our boots as we let technology run rampant. If only we knew. ... So, changed the profile from a "mirage" to a long road to unknowns as those crossing the continent saw in the early days (say, 1800s - and still do). What was ahead (the road was not there, by the way; again, representative of our thinking that we have paved some way)? Daily sight increasingly looming as those people toiled over the landscape - trudging, foot by foot); and, what lies ahead is not known until one gets there. Yet, those unknowns were tamed enough to establish and to cultivate (through long years of work and struggle by determined people - whereas,capitalists want returns from sitting on their expansive arses while others do the work and sweating - sheesh -- and without pay - [for each $200 that is paid for a smart device (supposed - of a certain type), those who do the work, collectively, get $10 - oh, didn't know - all of you smart-device users?]. Never conquered, though. That's one point (our over-estimation of ourselves in terms of handling the future - risk, in some senses).

Monday, June 9, 2014

Dalio, again

Moral: Wherein we consider other views of the Fed.

Forgetting the particulars of Janet, we can discuss Ray Dalio's take. In an earlier view (Feb 2014), we looked at his model of the economy. And, we suggested that people watch his video with which he presented his mechanistic model (see image).

Aside: For Ray's view, "mechanistic" is used purposefully to align the conversation toward science. We all know that the dismal-ness of economics can be, in part (small part), lessened with better science. However, as we know, too, the mechanical view is a rough order-of-magnitude approximate to the relativistic look (which, by the way, is not complete - to be filled in, eventually, through consideration of things left out, for now, due to the troublesome-ness).

Now, Dalio has accommodated us with  more of the same in a talk with James Freeman: Soul of a Hedge Fund 'Machine' (WSJ Sat, 6/7/14). In fact, Dalio admits that he runs his people as if they were machines which is something that we will get back to.

For now, we will say that people lining up to be driven by machines, if they are remunerated properly for doing so (and are doing so voluntarily), is just another example (perhaps) of human nature (consider, though, Smart and its money, we have barely touched upon that).

On the other hand, what has ensured with out-housing and computational overlays is the onslaught of the privileged, can-do-it-cause-they-can upon the hapless. Yes, anyone who sits at a computer and drives human affairs ought to give themselves some time to pause and reflect.

Actually, I would propose this: such driving types, please go down and work those same processes, for more than a few minutes, and see how you can bear up.

You see, the whole framework of the economy is an endless supply of hapless people who can work, be exploited, and produce for their time (until they are spit out like an empty bottle). And, technology allows this since exploiters can bop from continent to continent finding new suckers (and local, corrupted lords who allow their people to be thusly mis-used).

Aside: It is nice that the uppers of the military (for the most part - 90-day wonders as an exception) came through the ranks (however, the academy experience is not sufficient - the O-series ought to spend some time (to be defined) in the enlisted ranks (walking in their shoes).

Dalio (talking to Freeman) says that the Fed's game is incomplete. There is another thing that they ought to be able to do (oh yes, consider the savers, please), besides the interest (knob and lever) and printing (say, QE?). What would that be? Dalio does provide us some relief due to his timely intrusions.

But, we're being brief for now and will return to Dalio's comments.

Remarks:  Modified: 01/02/2016

01/02/2016 -- Dalio used in Quora

Friday, June 6, 2014

Janet's moral make-up

Moral: How long will (can) Janet keep the punch bowl spiked?

By looking at posts on this blog, one can see that we said "unwind" a long time ago. Then, Ben was talking coo-coo to the investors (what a misnomer! gamblers is more apropos) as he witnessed taper tantrums. Now, Janet has said and says: oh no, jobs.

So, we see, today, that jobs are looking up (in ways where there are problems here, the FED's little gaming is not the issue). Too, the DOW is touching upward to 17K.

For why? Whence this? Inflationary pressures (Ben's stoking all of these years) on those markets that do not amount to anything real for the people on the street (as in, most of the populace).

Yet, at the same time, Janet and her ilk continue to flay (de-skin, first, then starting on de-flesh) the savers. Yes, we, the savers, feel like those cattle cruelly collected who are confronting catastrophic endings.

To whom will the flesh be sold? Please tell us, Janet or any of your partners.


The Economist had a special issue on Shadow Banking. Seems that people want to get away from those types whom Janet (and, before her, Ben) so dearly loves to support.


Why moral? Let's talk "moral hazard" as it applies to the billowing markets (aerated to the maximum point). That is, the safety net (Janet's put) urges those who have the predilection onward toward risky behavior.

Remarks:  Modified: 02/11/2015

06/07/2014 -- The ECB beat Janet to the punch (not to the bowl).

06/23/2014 -- Yellen behind the curve?

09/17/2014 -- The coo-coo, goo-goo goes on. The landscape is strewn with the lifeless bodies of the savers. Thanks, Janet.

02/11/2015 -- Wikipedia: Zero interest rate policy.