Bonds & Interest Rates

Davos Without the Hookers

Screen Shot 2013-11-11 at 8.00.48 AM“Behind every great fortune there is a crime,” said Balzac. Before the age of capitalism – which gave people the means to build their fortunes without taking anything away from others – that was largely true. 

So, what lay behind the fortune which Anthony van Sallee used to buy up much of Long Island, New York, in the 17th century: larceny, murder, slavery? 

All of the above. This ancestor to the Vanderbilts… to the Whitneys… and through their mother to our own children was, in the language of Baltimore’s street life, “one mean motherf*****.” 

What did he do? Where was he from? The name gives us a clue… 

The “van” part is Dutch. Like most of New York’s early settlers, he carried the “van” which means “of” or “from” to tell us that he was from Sallee. 

But where is that? Ah. Check the map. You will find no Sallee anywhere near Amsterdam or Liege. In fact, it is not to be found anywhere in Europe. Instead, it is a city in North Africa. On what was known as the Barbary Coast, the center of the white slave trade. 

What follows is a discussion of involuntary servitude, capitalism and how to explain it to a hundred or so drunken Irishmen crammed into the back of a Kilkenny bar… 

A Strange Journey

Travel does not always take you where you want to go or where you expected to be. But you often end up where you ought to have gone in the first place. 

A recent trip took us to Kilkenny, Ireland, where we were to attend an economics festival called Kilkenomics, which can be loosely described as “Davos with jokes” or, perhaps more pertinently, as “Davos without the hookers.” 

In fact, it was not much like Davos in any way, except that a few people with PhDs in economics tried to tell others what to do. 

First, Kilkenny has little in common with Davos. The former is a tiny, quaint, medieval Irish city. The latter is a chic resort in the Swiss Alps. 

Second, the focus of the discussion at Kilkenomics was not on how to improve the world, but on how to give the limping Irish economy a boost. 

Third, the conference organizer – one of Ireland’s best-known and most savvy economists, David McWilliams – did not invite Janet Yellen or Paul Krugman. Instead, he invited your editor. (We took that as a sign of desperation. Or else there is something wrong with him. As a precaution, we avoided the tap water.) 

Kilkenny is a charmingly Irish city. There is a pub on every corner and two or three down the street. A man in need of another pint has only to haul himself a few steps in any direction. 

Even a few steps were too much for a couple of the girls we ran into on Saturday. They were dressed in the latest fashion for fat girls: tight white dresses cut off just below the crotch… and awkwardly balanced on high platform shoes (“arse-raisers” in the vernacular). 

It is hard enough to walk on stilts when you are sober. After three hours in Cleere’s bar, it is practically impossible. Coming out onto the street, they had scarcely gone three steps before they began listing dangerously. One caught a light-post and steadied herself. The other, no public utility within reach, sank to the street. There she lay, on the cobblestones, as we stepped over her. 

The Opening Salvo

We had just come from a discussion with economists. Every economist knows that people always act in their own rational self-interest. Since we couldn’t figure out any way in which the girl could benefit from laying in the middle of the street – in the rain… in a party dress hiked up to the very edge of decency – the girl could not exist. 

Inside Cleere’s, the discussion had been on the nature of capitalism. How could it be kept on the straight and narrow? This was the question we were meant to address. But the crowd had already been drinking for hours before we began. No two people had the same idea about what capitalism actually was. And our opponent was as well prepared as we with persuasive air. 

“These dreamers… these idealists… imagine a perfect world of commerce, invention, and freedom,” he began, pointing in our direction. 

“But it doesn’t work that way. In practice, they get a world where money talks… and it tells us all what to do. They preached deregulation… and brought about the worst financial crisis since the Great Depression. 

“They’re always complaining about the government, but if it were not for the government this crisis would have turned into another Great Depression. Without the government, we’d all be completely unprotected against these greedy, rapacious rich people. 

“Besides, they would be nothing without the government. The government provides the infrastructure. It provides a system of laws and justice that makes it possible for them to earn their fortunes. 

“Government is the source of major innovations, too. It wasn’t the free market, for example, that developed the Internet; it was the government. Private companies were offered the opportunity to develop it themselves. They refused. Because they couldn’t figure out how to make a profit on it. 

“So I say, stop bellyaching about the government. Stop pretending that the free market is the source of all good things. And sit down and figure out how we can get these banksters off our backs… and make this mixed system, of capitalism with some measure of state control, work better.” 

This opening salvo drew a warm applause. He had scored a direct hit amidships. He had the drunks on his side. We hadn’t said a word and we were already taking on water. 

More tomorrow… 

Regards,

Bill

Can we finally start learning and changing from Remembrance Day?

Remembrance Day is always highly emotional for me, increasingly so as I mature, reflect back

on my youth and gain new perspective from these memories. So here is my question for

readers: Can we finally start learning and changing from Remembrance Day? Yes.

 

Before anyone tunes out because they think this article is unsupportive of our Canadian Armed

Forces, let me first share with you exactly where I’m coming from.

 

My parents were born in 1927 and 1934 in small‐town Holland, each part of large Catholic

families whose fathers were skilled craftsmen. My grandparents had dignity, made enough to

support their families, and wanted exactly what most parents want today: to help their children

grow up healthy, strong and responsible with the best of what each parent and their

community had to offer.

 

World War 2 changed their lives, along with millions around the globe. Everyone and everything

went into survival mode, there was fear everywhere…all the time. The Nazi German occupation

brought Holland to its knees through a deliberate process of starvation. My mom’s family had

to eat its own cat when there was nothing else; a potato that fell from a farmer’s sack added

substantially to that day’s nutrition. Millions of families on both sides of the conflict

experienced this to one degree or another, and it scarred them for life. Everyone loses in war,

except the bankers and the military‐industrial complex.

 

New generations were instilled with the fear of scarcity, prejudice, divisiveness and violence.

Hope for the future was nearly extinguished, but the human spirit in its purest and most loving

form is quite literally invincible. This invincible spark holds the key to the change that my title

seeks.

 

In a recent conversation with a 34 year‐old construction worker who showed up to play pick‐up

basketball alongside his brother at the Eau Claire YMCA, I was taken back to my childhood. This

young fellow told me the story of how he and his brother and their wives immigrated to Canada

four years ago from Latvia, leaving the rest of their families behind. He had a slight smile on his

face the whole time, because he feels so fortunate to live here, but his face burst into an ear‐toear

grin when he mentioned that they recently welcomed a new daughter. He could not

contain his joy when he said two simple words: “She’s Canadian.” I teared up with him.

 

In an instant I was transported back in time to my humble upbringing in the Village of Oliver in

the South Okanagan. We used to travel across the border to Prince’s in Oroville, Washington

just to save a few dollars on groceries – especially eggs and dairy products. Occasionally the U.S.

border guard would ask if we were Canadian citizens, and my mom could hardly wait for this

question. She would proudly reach into her wallet and pull out her Canadian Citizenship card,

grinning from ear to ear; she even made the stoic border guards smile. Both my parents told me

repeatedly that the day they were sworn in as Canadian citizens was the proudest day of their

lives.

 

In the summer of 1953, a newlywed Dutch couple named Henry and Cornelia Ruhland boarded

a crude passenger ship headed for Canada. They spoke only their native language; they had

little money in their pockets and had no idea what they were in for. They came to Canada only

for a fresh start and opportunity, not for hand‐outs. They had learned that Pier 21 in Halifax,

Canada was their destination only a few weeks before. In their social circles, everyone agreed

to that they had literally won the lottery. They got to start a new life in the land of heroes, with

space and peace.

 

Many people from many nations sacrificed their lives and health to stop the genocidal insanity

of the Nazi’s, but it was the Canadian soldiers who did the dirty work on the Dutch coast in the

winter of 1944‐45. They were ill‐equipped but toughened by life north of the 49th Parallel.

Many had volunteered because they believed in the cause of freedom, humanity and the evils

of racial prejudice. They were all wily, courageous and relentless in their determination to fulfill

their mission and return home to their own families, and get back to living.

 

When Holland was finally liberated in May of 1945, the liberators were Canadians. In Holland,

Canadians are still viewed as heroes. They still call it “The Canadian Summer.”

http://www.thecanadianencyclopedia.com/articles/liberation‐of‐holland

 

Canadians enjoy a unique reputation globally even today. The men and women and families of

the Canadian Armed Forces have earned that reputation quite literally with their blood, sweat

and tears. On November 11th, show your respect for their sacrifice, but don’t let it stop there,

please. Yes, donate generously and wear the red poppy, but let that be the beginning of the

change, not the end.

 

At this point, you might doubt that you as an individual can make a meaningful difference, but

that is simply not true. That’s what the war‐mongers want you to believe, but the truth is that

we can all make a difference. Stay with me, because this is important: it starts with all of us

individually, with our own relationship with ourselves.

 

Before healing can begin, wounds must first stop bleeding. This begins with compassion for and

forgiveness of yourself and it spreads outward from each of us. Next, we must take coordinated

and meaningful actions toward the goal, and this is where big ideas start small and get big very

fast. Scientific studies have proven that it only takes the square root of 1% of a given population

to change any situation. Here in the Calgary area with our population of about 1 million that

means that it only takes about 100 people who focus on changing something to get the ball

rolling. Each of you is literally the seed of positive change – you are powerful!

 

Gandhi said “Be the change you want to see in the world,” so let’s get off our assets and initiate

some change in respect of global violence, whose worst form is war. Perhaps this is through

your church, a community group, your business or a circle of friends.

 

Don’t over‐think this, just get started. It doesn’t have to be perfect. It could be meditation,

prayer, posting articles like this on social media, starting the conversation with your inner circle

and letting the great idea of peace spread like a bad idea. Why not open your heart to that

estranged family member or friend?

 

If you are truly serious about honouring the sacrifice of the men, women and children who died

or have been physically and emotionally scarred by the horrors of war, then DO SOMETHING at

a personal level to reduce conflict and violence in your own circle. When you reduce your own

appetite for conflict and violence of any description you reduce the nation’s appetite for war.

 

The learning and change that I hope for from this Remembrance Day is that a handful of

ordinary Canadians start exercising more enthusiastically the important virtues of compassion,

forgiveness and collaboration. Amongst other things, the essence of this amazing country called

Canada is compassion and collaboration, innovation and creativity, and tenacity and

unrelenting determination in the face of adversity. Are you up for the challenge? I thought so!

 

“Be the change you want to see in the world.”

 

‐ Andrew Henry Ruhland

 

3 REASONS OIL WILL SOAR AGAIN … AFTER IT BOTTOMS

The bear market I’ve been tracking for you isn’t confined only to gold.

I warned you quite some time ago that the price of crude oil would fall substantially, to below $70 a barrel and quite possibly lower, before it bottoms.

Since Oct. 16, oil has plunged from $102.49 a barrel to $94.11, an 8.2 percent hit.

More losses are coming for oil. This monthly chart confirms it.

Screen Shot 2013-11-11 at 5.11.02 AMAs you can clearly see, oil’s rally since its 2009 crash-era low has been choppy, with overlapping waves. This is not the kind of action that is conducive to a bottom.

Instead, it’s typical of a bear market that has not ended, and that has another leg to the downside coming.

That leg down is beginning now. Major technical support lies at $60-$62, and should that give way, oil will not bottom until it falls to as low as $40.

Hard to believe, when there are so many die-hard oil bulls out there? When there are so many political hotspots around the world that could cause oil to rally?

Well, that’s what they said about gold back in September 2011 when the Fed announced QEIII. No way, they said, could gold go down. But it did, and it fell hard.

From a fundamental point of view, oil is not bullish. Oil inventories have been rising for seven straight weeks. Last week, they rose 5.2 million barrels. Over the past four weeks, inventories have risen by 22 million barrels, the second largest increase since February 2009.

What’s especially difficult for oil right now is Europe. The euro region is in a freefall. Almost every country in Europe is contracting, severely. Unemployment continues to soar. Disinflation has tightened its grip, with the latest inflation data so bad — at 0.7 percent year-over-year, that the European Central Bank cut rates to 0.25 percent, a record low.

In addition, the U.S. is well on its way to 100 percent energy independence. OPEC is losing control over the energy markets, and right now, that’s hugely bearish for crude oil.

But mark my words, once oil bottoms, a new bull market will be hatched.

How so, when there are do many dynamic changes occurring in the oil market, with the U.S. set to become energy independent?

There are three reasons oil will soar again, after it bottoms.

First, there’s China. While China is home to oodles of natural gas, its economy is still oil thirsty and will be for a very long time.

In September, China surpassed the U.S. as the largest buyer of oil in international markets. China’s net oil imports reached 6.3 million barrels a day, passing the U.S. at 6.2 million barrels per day, according to U.S. government reports.

Total Chinese demand for oil could reach about 10 million barrels per day and rise to a staggering 18 million barrels per day by 2035, according to data compiled by the World Bank.

In terms of dependence on oil, the U.S. and China are moving in opposite directions. While the U.S. will soon be energy independent, China will soon be the No. 1 consumer of oil and almost entirely dependent upon foreign supplies.

Second, there’s incipient global inflation and a coming end to the dollar reserve system. Europe won’t be stuck in disinflation for long. Nor will anyone else. At some point in the not-too-distant future, central bank money printing will result in much higher inflation and that will be bullish for oil prices.

In addition, the U.S. dollar will eventually lose its reserve currency role, and be supplanted by a new global reserve currency, in electronic form. The dollar’s diminished role and the uncertainty of a new monetary system and reserve currency is bound to be very bullish for oil prices.

Third, there’s the war cycles. As I’ve discussed and showed you before, the cycles of war point consistently higher into the year 2020. Rising geo-political tension around the globe is going to accelerate in the months and years ahead, putting a firm bid under oil prices.

How can you play the downside in oil over the next few months, as oil heads toward a major bottom?

Simple. Consider buying shares in an inverse ETF. My favorite oil ETF is the ProShares UltraShort DJ-UBS Crude Oil (SCO).

What about energy shares? With very few exceptions, most should trade lower along with oil over the next few months. Then, energy shares will become a fantastic buy.

Lastly, as noted in my previous columns, keep a close eye on gold right now. The action in the yellow metal is critical; it’s in the middle of a timeframe for a major low. And while new lows in gold are still possible, gold is inching its way closer to that point in time where it blasts off again.

Best wishes,

Larry

 

INTENSIVE: THE MARKET IN PICTURES

INSIDE THIS ISSUE

  • Signs Of A Market Top
  • Valuation & Deviation
  • Technicals

Sector Analysis

  • Major Markets
  • S&P 500 Strong Sectors
  • S&P 500 Weak Sectors
  • Interest Rates, Gold, Oil

Suggested Reading

  • 5+1 Things To Ponder
  • GDP-A Restocking Story
  • LEI-Fed Skewing Data
  • Fed Won’t Taper Soon
  • Economy In Pictures
  • Bond Strategies

The Market In Pictures

This past week I wrote an article entitled “The Economy In Pictures”which was a pictorial tour of various aspects of the economy to let you decide for yourself about the real strength, or weakness, of the economy. 

This past week we got two economic reports, GDP and Employment, which blew past consensus expectations at the headline number. The problem, however, is that the internal details of the reports told a very different story. For example, the bulk of the surge in the GDP report came from unwanted inventory builds as consumption has slowed. Much of the same was evident in the October jobs report that showed a headline increase of 204,000 jobs even as over 900,000 individuals left the workforce entirely. 

This is very representative of the problem that has existed for much of the past 4 years. While there has been a sluggish “statistical”economic recovery because of the way things are counted; the“actual” recovery on “Main Street” has been starkly different.

Yet, even as I write these words, the stock market has been pushing all-time highs as the Federal Reserve remains committed to its current liquidity programs. There are relatively few headwinds ahead of the market currently and even the upcoming return of the debt ceiling debate in January is likely to be a fairly quiet and non-market moving event.

Therefore, the bias of the market at the moment remains to the upside as technical trends remain in place. The control is currently in the grasp of the bulls and we remain allocated to the markets currently. However, that does not mean that it can’t, and won’t, change in the future. It will. What goes up will come down and the farther from the earth the market has traveled the greater the fall will be.

This week’s missive will have minimal commentary. However, I present to you the market in pictures so that you can judge for yourself.

Screen Shot 2013-11-10 at 11.28.41 AM

Screen Shot 2013-11-10 at 11.28.57 AM

Screen Shot 2013-11-10 at 11.29.11 AM

 

.….read more and view 26 more pictures HERE

 

 

Lance Roberts is the General Partner & CEO of STA Wealth Management, Host of the “Streettalk Live” Daily Radio Show (streamed live at www.streettalklive.com), and Chief Editor of the X-Report and the Daily X-Change Blog.
Follow me on Twitter: @streettalklive

 

 

 

 

 

 

Michael Campbell’s Money Talks Show for Nov. 9th

Michael Mike Campbell image The 1st 1/2 hour begins with Michael’s Terrific Commentary that if nothing else, will stop and make you think!

{mp3}mtnov913leadfp{/mp3}

The second hour of Money Talks begins with Michael interviewing Michael interviews Danielle Park Portfolio Manager, attorney, finance author, a regular guest on North American media. Danielle Park is the author of the best selling myth-busting book “Juggling Dynamite: An insider’s wisdom on money management, markets and wealth that lasts,” as well as a popular daily financial blog:www.jugglingdynamite.com

{mp3}mtnov913hourfp{/mp3}