Posted May 2, 2011 at 11:27 am
from Jeff Macke
“America can project its strength all over the globe to wreak furious vengeance upon our enemies.
The markets, just like all but the most obtuse of entities, knew, assumed and priced America’s superiority into any and all trading vehicles. Bin Laden’s death, while cause for celebration, does not offer a clear trade. Any and all sides of a position can be taken with equal clarity of thought.
Oil should move higher because of increased unrest due to vengeance terror attacks. Oil should move lower because of a demonstration of the U.S.’s ability to control events in the Middle East. Either reaction makes sense, as is the case with defense contractors, precious metals and so on. When a trade has no edge, it’s imprudent to trade the reaction at all.
An unbridled rally is not the “patriotic” reaction — it’s a reason to take some profits. U.S. stocks are up more than 8% year-to-date. The market owes us nothing more. If I take any actions this morning, it will be to take some profits in the blue chips dominating my portfolio.
When I take those profits, I’ll pocket some of the gains. Then I’ll go out, buy a nice bottle of something and toast the death of the most loathed human being on the planet. That seems the most logical, most American, reaction.”
For more of Macke’s thoughts, watch this video:
Filed Under: Market Bytes
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Posted April 28, 2011 at 12:00 pm
by Mike Young
The Texas House just passed an Internet Sales Tax Bill (HB 2403) aimed squarely at Amazon and other Internet retailers. Instead of cutting spending, these leftists are raising taxes. That’s not pro-growth. It’s wealth redistribution, stealing from entrepreneurs to fund government programs that should be cut or eliminated.
This Texas Internet sales tax bill isn’t as “bad” as ones passed in more liberal states. However, there is nothing “Main Street” or “fair” about taxing online businesses.
Once an Internet sales tax is in place, you can be sure that the rates will increase and more online businesses will have to pay it because the government is filled with a bunch of politicians who want to rob entrepreneurs to pay for their favorite goodies.
I’ve included a copy of the bill below.
Filed Under: Market Bytes
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Posted April 26, 2011 at 9:49 pm
by Gary Gibson
Sometimes Ron Paul seems too good to be true. For decades he has championed the cause of liberty and sound monetary and geopolitical policy. He has done this in the very heart of the Leviathan state even as the federal government has accelerated its expansion in the postwar years. Further Dr. Paul has repeatedly presented his case in print in clear language.
Liberty Defined is the latest timely addition to those efforts.
The format is one we’ve seen before in books like Libertarianism A to Z. In Liberty Defined, the introduction lays out the overarching principles of liberty and anti-authoritarianism. The book itself then devotes each chapter to an individual issue, starting with abortion, then moving through things like Austrian economics, capital punishment, evolution and creation, global warming, hate crimes, Keynesianism, taxes, unions and much more.
The chapters are fairly short at just a few pages each, written in clear language that seeks to discuss and educate. Each chapter is a delight to read, particularly for lovers of liberty, but even when you don’t fully agree with Dr. Paul, you’ll find his position compelling and his honesty and consistency incredibly refreshing.
“The phrase ‘Austrian School’ or ‘Austrian economics’” Dr. Paul writes, “is not something I ever expected would enter into the vocabulary of politics or media in culture. But since 2008, it has. Reporters use it with some degree of understanding, and with an expectation that readers and viewers will understand it too. This just thrilling to me, for I am a long-time student of the Austrian tradition of thought.”
And no doubt many readers will share Dr. Paul’s joy. They will also note that it is Dr. Paul himself who has been tirelessly campaigning for the free market principles of the Austrian School for the past several years.
Filed Under: Market Bytes
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Posted April 26, 2011 at 11:44 am
by Ezra Fieser
After the tiny Caribbean island of Grenada severed diplomatic ties with Taiwan in 2005, it received a token of appreciation from the mainland Chinese government: a $55 million cricket stadium.
It was part of $132 million China doled out to Caribbean countries in aid and soft loans in the years leading up to the 2007 Cricket World Cup. At the time, the investment was seen as a not-so-subtle reward to countries that had broken off formal relations with Taipei in favor of Beijing.
Ever since, China has made that sum look like pittance.
The Beijing government and private Chinese corporations are spending billions in the Caribbean, building major tourism projects, financing roads and ports and buying companies — all of which are helping open new markets for Chinese products.
The onslaught has cash-strapped Caribbean governments simultaneously praising China as a welcome benefactor and questioning what the country wants in exchange.
“Nearly every island in the Caribbean, from the smallest on up, currently has a substantial investment from China,” said David Jessop, managing director of the Caribbean Council, a London-based consultancy that works with Caribbean governments. “It seems that what nobody knows is what is motivating China.”
The total investment is difficult to quantify. China’s Ministry of Commerce reported that foreign direct investment in Caribbean countries by Chinese firms totaled nearly $7 billion in 2009, a more than 300 percent increase from the 2004 foreign direct investment of $1.7 billion. Those figures are somewhat misleading because of Chinese use of Caribbean tax havens — such as the Cayman Islands, which received $5.3 billion in Chinese foreign direct investment in 2009.
That aside, Caribbean islands have clearly been the recipients of investment by both Chinese firms and the government of the People’s Republic of China, which is financing some of the Caribbean’s most notable, and largest, projects.
The boldest broke ground last month: The Chinese government’s Export-Import Bank is putting $2.4 billion toward the construction of a 3,800-room resort in the Bahamas that will boast the largest casino in the Caribbean. Roughly 5,000 Chinese workers will be brought in to construct the Baha Mar resort on Cable Beach.
Others projects recently agreed to or completed by Chinese firms or the government include…
Filed Under: Market Bytes
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Posted April 21, 2011 at 4:08 pm
From Richard Russell in Dow Theory Letters:
This nation is so riddled with lies and corruption, sometimes I wonder how the U.S. has survived the many centuries since the Founding Fathers gave us our great Constitution.
No wonder Fed Chief Bernanke fought so hard to keep the Fed’s lending a secret. I just read in Rolling Stone magazine a story entitled “The Real Housewives of Wall Street.” It seems that the Fed loaned bailout money of $220 million to the wives of two Morgan Stanley bigwigs. After his wife got a big taxpayers bailout John Mack, CEO of Morgan Stanley, bought a $15 million home equipped with a 12-car garage. Outrageous!
When you think about it, it’s no wonder that Wall Street and the Fed hate gold. Gold exists outside the system. The Fed can’t manipulate or create gold the way they do Federal Reserve Notes. When gold rises, as it has been doing, it hoists a red flag over Wall Street, the Fed, and the economy.
Surging gold tells the world that something is terribly wrong. All the lies, corruption, and secrets of the Fed and the politicians can’t erase the dire message of gold.
Gold is the protector and refuge of the common man. No wonder all the recent record highs in gold remain unreported by the media.
Editor’s Note: Learn more about the excellent Dow Theory Letters here.
Filed Under: Market Bytes
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Posted April 20, 2011 at 6:36 am
by Damien Hoffman:
Professor Antony Davies at Duquesne University’s Donahue School of Business says we shouldn’t waste our time listening to lies about the so-called “Debt Ceiling” because … it doesn’t really exist!
Antony Davies: First, the “ceiling” part is a fiction. Congress has raised the ceiling more than 70 times since the 1970s. In other words, every time the Federal debt approaches the ceiling, Congress just bumps the ceiling up a few notches.
The term “ceiling” implies a solid barrier beyond which one cannot pass. What we have is something more akin to a debt low-hanging-mist.
Beyond being a fiction, the debt ceiling focuses our attention on the wrong thing. A debt problem is the effect of…
Filed Under: Market Bytes
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Posted April 20, 2011 at 4:59 am
by William Pesek:
Timothy Geithner says borrowing more from China to finance tax cuts for the most affluent Americans would be irresponsible.
The Treasury secretary has it backward. The real question is whether Beijing is willing to double down on a nation whose balance sheet makes Italy look good. Holding $1.2 trillion of U.S. debt is a fast-growing risk to China.
Traders have a theory about why the euro is reasonably stable amid a broadening debt crisis: Asian central banks are converting proceeds from recent intervention moves into other currencies. “Asian central banks” has become a euphemism for China, whose reserves now exceed $3 trillion.
China is making deals with nations such as Brazil to conduct trade in yuan. It’s also making noises about the Federal Reserve’s zero interest-rate policies and Congress playing games with the debt limit. If you were managing China’s reserves, how many more dollars would you really want in this environment?
Heck, China is even loading up on Spanish debt these days. “China’s open admission of continual purchases of European debt shows it doesn’t consider the U.S. any safer,” says Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore.
America’s Sugar Daddy
The risk that America’s sugar daddy is getting fed up hasn’t escaped U.S. officials. It’s probably no coincidence that Fed officials are…
Filed Under: Market Bytes
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Posted April 19, 2011 at 10:44 pm
by Jeff Miller:
The big story of the day was the S&P decision to put US debt on watch with a negative outlook. This led to a strange trading day where stocks traded lower, bonds moved higher (!), the dollar strengthened, and the CDS spread on US debt (measured in Euros) move up a few bps.
Nearly everyone discussing the markets was spinning the data for political purposes. I usually do not write on Mondays, since it takes me about six hours of work for my weekend preview, but I had a lot of email today requesting a reaction. There is mass confusion!
Let us start from strength.
Get Perspective from the Pulitzer Winner
I extend hearty congratulations to David Leonhardt on his well-deserved Pulitzer Prize. The deficit question was one of his important themes, and we all have a chance to learn from his work. Before leaping to some conclusion about the best public policy and what everyone in Washington is doing wrong, why not get a fact-based perspective.
If we want to criticize those in power, we should have our own plan — -right?
Filed Under: Market Bytes
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Posted March 4, 2011 at 1:14 am
by Daniel Gross:
With the U.S. facing large, structural deficits, analysts of all stripes are taking an inventory of the nation’s assets and liabilities. Mary Meeker, famed for her coverage of Internet stocks, has produced a long presentation on the nation’s balance sheet, as if it were a private-sector company.
Historian Niall Ferguson suggests in Newsweek that the U.S. start selling off some of its assets. “The U.S. government currently has $233 billion worth of non-defense ‘property, plant and equipment’,” he noted. Plus there’s land, power-generating assets and roads. (As if somebody would buy I-95).
On Tuesday, word came that President Obama is set to propose setting up a board to look at whether the U.S. can sell off some of its real estate holdings, a move that might raise some $15 billion.
But they’re missing a big source. To quote the Seinfeld character Kenny Bania: “That’s gold, Jerry. Gold!”
For a good chunk of its modern history, the U.S. was on the gold standard. That meant the Treasury and central bank had to keep a ready supply of the metal on hand in case anybody wanted to turn in paper money for bullion.
While the U.S. left the gold standard for good in 1973, it has held on to its stash of what economist John Maynard Keynes called a “barbarous relic.”
And so there’s lots of it lying around, in Fort Knox in the fortress-like Federal Reserve Bank of New York, in various U.S. Mint operations. Some of it is used to make gold coins. But most of it is in bullion. Tons of it.
In the following Tech Ticker video, Aaron Task and I discuss the hidden asset…
Filed Under: Market Bytes
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Posted March 1, 2011 at 8:55 pm
by Mike Shedlock (Mish):
A number of sites are commenting on a Bloomberg video in which El-Erian, PIMCO Co-CEO says “Dollar could lose its reserve currency status”.
Bloomberg: “Mohammad what does a weak dollar signal to you, a dollar that can’t jump up here on a day like we’ve seen today?”
El-Erian: “It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S. They are starting to worry about the level of debt. They are starting to worry about what they hear about states and municipalities. So, I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past.”
Reserve Currency Definition
Before we can debate whether or not the US will lose reserve currency standing, we must first define what it means.
Investopedia defines Reserve Currency as follows.
“A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate.”
I accept that definition. Unfortunately Investopedia rambles on with nonsense about the implications: “A large percentage of commodities, such as gold and oil, are usually priced in the reserve currency, causing other countries to hold this currency to pay for these goods.”
That sentence is a widely believed fallacy. The reality is no country is obligated to hold dollars to buy goods denominated in dollars.
Filed Under: Market Bytes
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