Murder Your Unicorns: Warren Buffett Eats Zuckerpuffs For Breakfast

‘Kill all your darlings.’
-William Faulkner
Imagine an epic battle to the financial death between Warren Buffett and Mark Zuckerberg. (Best mental picture of 2017.)
Who do you think would win?
(SPOILER ALERT: Buffett eats Zuckerpuffs for breakfast. Obviously.)
Buffett’s not a magic man by any means.
His secret sauce, like many geniuses, is that he simply loves to do what everybody loves to hate…
The man loves his accounting. For him, it is an art. In his eyes, well-balanced books are masterpieces. And he has a great eye for the chef d’oeuvre.
Zuckerberg, on the other hand, represents a different model of moneymaking. Which is, of course, the startup model.
The Buffett model is based on checks and balances – on double-entry accounting – on being in touch with the real world of real (and finite) things.
The Facebook model – the modern startup model, that is – is based on white-knuckling the handlebars, burning money and making a whole lot of sacrifices to the Startup Gods in hopes that Lady Luck bestows you with her blessings.
One of these models, if applied to your entire life, will almost guarantee growth. The other, on the other hand, will almost guarantee you will crash, burn, curse the Gods and cry.
We trust you can tell which is which. The next question, then, is how to implement it into your life without wanting to rip off your fingernails.
Well, you’re in luck.

This post was published at Laissez Faire on Feb 3, 2017.

“We’re Way Past Humpty Dumpty”

The most basic link in finance is that between risk and reward. Just like alchemists who once sought a path to gold from lead, a great deal of modern finance was built around finding a shortcut between them. Discovering the great asymmetry where risks would be low but rewards sky high was the Holy Grail of later 20th century mathematics. If you studied advanced math or economics (same thing, unfortunately) at an Ivy League school at that time chances were that at the end of your college career was one on Wall Street.
It was almost like a series of Nigerian princes had descended upon the financial districts of each of the world’s great money centers, promising each and every bank (really ‘banks’) as much wealth as they could possibly want should they only take a small risk. The most famous of them was Robert Merton and Myron Scholes, who got involved with LTCM, and though they nearly brought down the financial world in 1997 and 1998, that was merely the re-imposition of risk/reward that had never really been altered.
That was one of the great ironies about LTCM. It introduced math in a way that actually preyed upon biases. The allure of math is its scientific senses, the way in which it is pitched under objectivity, as if great formulas and complex equations can see the future because there they have no emotion or individuality. In truth, this financial math is sleight of hand, a magic trick performed by the best of illusionists.

This post was published at Zero Hedge on Feb 5, 2017.

‘The Only Ones Who Don’t Seem To Understand Are The Economists,’ Said The Economist

Presenting the latest weekly anecdote from Eric Peters, CIO of One River Asset Management
‘The only ones who don’t seem to understand are the economists,’ said the economist, a Nobel Laureate. He was discussing the importance of narrative in society. ‘Economists talk about interest rates, price-to-earnings ratios, and obscure formulas as if we’ve arrived from a different planet. These things don’t drive people. Stories drive people.’ Of course, economists may not know how to tell a good bedtime story, but they sure can put a room filled with middle-aged nerds to sleep.
Which may explain why sociologists, anthropologists, linguists and just about every other scientific group studies the importance of narrative, but not economists.
‘I’m particularly intrigued by something coming out of the medical field called Mathematical Epidemiology,’ he said, using a really complex term to describe the spread of infectious disease. ‘Scientists are becoming aware of the spread of thought viruses, memes, idea-microbes. It turns out they’re contagious just like diseases.’

This post was published at Zero Hedge on Feb 5, 2017.

Debt Apocalypse Beckons As U.S. Consumer Bankruptcies Do Something They Haven’t Done In Almost 7 Years

When debt grows much faster than GDP for an extended period of time, it is inevitable that a good portion of that debt will start to go bad at some point. We witnessed a perfect example of this in 2008, and now it is starting to happen again. Commercial bankruptcies have been rising on a year-over-year basis since late 2015, and this is something that I have written about previously, but now consumer bankruptcies are also increasing. In fact, we have just witnessed U. S. consumer bankruptcies do something that they haven’t done in nearly 7 years. The following comes from Wolf Richter…
US bankruptcy filings by consumers rose 5.4% in January, compared to January last year, to 52,421 according to the American Bankruptcy Institute. In December, they’d already risen 4.5% from a year earlier. This was the first time that consumer bankruptcies increased back-to-back since 2010.
However, business bankruptcies began to surge in November 2015 and continued surging on a year-over-year basis in 2016, to reach a full-year total of 37,823 filings, up 26% from the prior year and the highest since 2014.
Of course consumer bankruptcies are still much lower than they were during the last financial crisis, but what this could mean is that we have reached a turning point.

This post was published at The Economic Collapse Blog on February 5th, 2017.

Desperation Invades Vancouver Housing Bubble, as Hot Money Still Pumps up Toronto, Hype Overflows

In Toronto, ‘home ownership continues to be a great investment,’ which is what they said about Vancouver a year ago.
So the bottom has fallen out of the Greater Vancouver housing market, a process that started after the crazy peak in July. According to the Real Estate Board of Greater Vancouver (REBGV), sales of homes of all types – detached, attached, and condos – plunged 40% in January compared to a year ago, with sales of condos dropping 25% and of attached properties 32%. Detached homes got hit the hardest: sales plummeted 58%.
There was no way to put a positive spin on it, not even for a real estate board. REBGV president Dan Morrison put it this way: ‘It’s a lukewarm start to the year compared to 2016.’
Even as sales collapsed from the record-breaking bubble-pace a year ago, the number of homes newly listed for sales in January rose 7% year-over-year to 4,140. And the total number of homes listed for sale rose 9% to 7,238.
The benchmark price – a theoretical price that the REBGV uses instead of the more typical median price – for detached homes has fallen 7% since the July peak, to C$1.475 million.
By the same measure, condo prices inched up 0.3% to C$512,300. And prices of attached homes inched down 0.4% to C$666,500. For the Greater Vancouver area, the composite benchmark price for all residential properties is down 3.7% over the past six months to C$896,000.

This post was published at Wolf Street by Wolf Richter ‘ Feb 5, 2017.

Arizona House Committee Passes Bill To Support Sound Money

An Arizona bill that would eliminate state capital gains taxes on gold and silver specie, and encourage its use as currency, passed an important House committee this week. Final approval of the legislation would help undermine the Federal Reserve’s monopoly on money.
Rep. Mark Finchem (R-Tucson) introduced House Bill 2014 (HB2014) on Jan. 9. The legislation would eliminate state capital gains taxes on income ‘derived from the exchange of one kind of legal tender for another kind of legal tender.’ The bill defines legal tender as ‘a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.’ ‘Specie’ means coins having precious metal content.
In effect, passage of the bill would ‘legalize the Constitution’ by treating gold and silver specie as money.
HB2014 passed the House Ways and Means Committee by a 5-0 vote, with four members abstaining.

This post was published at Zero Hedge on Feb 5, 2017.

World’s Largest Actively Managed-Bond Fund Dumps “Excessively Risky” Eurozone Bank Debt

Back in September, Tad Rivelle, Chief Investment Officer for fixed income at LA-based TCW, said in a note that “the time has come to leave the dance floor”, noting that “corporate leverage, which has exceeded levels reached before the 2008 financial crisis, is a sign that investors should start preparing for the end of the credit cycle.” Ominously, he added that ‘we’ve lived this story before.’ Five months later, the FT reports that TCW, which is also the US asset manager that runs the world’s largest actively managed bond fund, has put its money where its bearish mouth is, and has eliminated its exposure to eurozone bank debt over fears these lenders are “excessively risky.”
In an interview with the FT, Rivelle said the company began to reduce its exposure to debt issued by eurozone lenders following the UK’s vote to leave the EU last June. In the first half of last year TCW, which oversees $160bn in fixed income strategies, had around $2bn invested in European bank debt. This has fallen to less than $500m since the Brexit vote, most of it in UK banks.
Rivelle, who previously was a bond fund manager at PIMCO, said his biggest concern was the number of toxic loans held by eurozone lenders, which amount to more than 1 trilion. Last month Andrea Enria, chairman of the European Banking Authority, said the scale of the region’s bad-debt problem had become ‘urgent and actionable’, and called for the creation of a ‘bad bank’ to help lenders deal with the issue. Rivelle said: ‘The [eurozone] banking system [has] a bad combination of negative rates, slow growth and lots of problem non-performing loans. It is inherently prone to a potential crisis should global economic conditions, or European economic conditions, worsen. [These are] the preconditions of a potential banking crisis.’

This post was published at Zero Hedge on Feb 5, 2017.

Vancouver Home Sales Crash 40%, As Toronto Home Prices Soar 22%

What a difference a year makes.
In January of 2016 horror stories were beginning to emerge about what would soon be confirmed as the biggest housing bubble in Canadian history, courtesy of a massive flood of Chinese “hot money” flooding into Vancouver, which quickly became one of world’s hottest housing markets. As Bloomberg writes, buyers turned up throughout the winter for bidding wars and sales reached an all-time high. Fast forward to last week, when the Real Estate Board of Greater Vancouver reported transactions in Metro Vancouver plunged 40% in January over a year earlier, and down 11.1% relative to December, as both buyers and sellers continue to sit on the amid confusion over whether the recent price gains will continue or whether the bubble has – as we reported last summer – finally burst.
That’s the seventh straight month of declines, according to data
compiled by Bloomberg, and January’s sales were 10.3% below the 10-year average for the month. The ratio of sales to listings – used by the
industry as a harbinger of prices – is also at a two-year low, according

This post was published at Zero Hedge on Feb 5, 2017.

Why Gold is the Ace Up Trump’s Sleeve

Trends are born, they grow, mature, reach old age and die…
The Donald Trump, businessman/reality show star turned President of the United States trend has just been born.
I’ve never seen anything like it.
Never in modern history has the nation stood so divided and nations across the globe so alarmed following the election of the leader of the world’s largest economy and most powerful military.
And with each passing day, social tensions rise, equity markets tremble and geopolitical uncertainty grows with each new executive order, accusation, proclamation and tweet.
People are taking to the streets.
Immediately following Trump’s inauguration, The Women’s March of nearly 5 million women and men across America and throughout much of the western world took a stand, vowing to protect ‘our rights, our safety, our health, and our families… and that women’s rights are human rights.’

This post was published at Wall Street Examiner on February 3, 2017.

Deplorable? Obama Sent $27 Billion Taxpayer Money To Fund Sanctuary Cities In 2016

In the President Donald Trump-era, there could be a high-cost to running a sanctuary city…
On January 25, 2017, the President issued an Executive Order denying federal funding to sanctuary cities who choose not to comply with federal laws regarding deportation of illegal entrants.
Reaction to the new policy from across the political spectrum was immediate. However, the politicians, pundits and journalists admitted that the total amount of federal funding was undetermined.
Our organization, American Transparency (website: OpenTheBooks.com) was able to identify that number. We found nearly $27 billion ($26.74 billion to be exact) in federal funding (FY2016) for America’s 106 Sanctuary Cities. Our new report, ‘Federal Funding of America’s Sanctuary Cites’ details federal grants and other forms of federal spending that flow to those cities.

This post was published at Zero Hedge on Feb 5, 2017.

The Metals Mixed Messages

A great week for stocks and you can find out a bit more on my thoughts about that at my free blog and I’m sure you’ll enjoy my short thoughts.
The metals continue to show some mixed strength, and weakness, but the week ahead should tell us if a low is in fact in, or if more basing is needed.
Gold gained 2.73% as we moved through the first week of Chinese New Year.
Not bad action at all but gold still can’t get, and stay, above $1,220.
A move above said level would be positive but I see the more likely scenario to play out being a chop between $1,160 and $1,220 until May or so.
Time will tell.

This post was published at GoldSeek on 5 February 2017.

Grant Williams: A Punch To The Face For Central Banks

The following video was published by ChrisMartensondotcom on Feb 5, 2017
Grant Williams, publisher of the economic blog Things That Make You Go Hmmm and principal of Real Vision TV, returns to the podcast this week to discuss his expectation of a return of volatility to the markets.
Grant warns that over the past seven years, the various financial markets around the globe have melded into a single world market dominated by trading algorithms and the central banks. This new system only knows how to operate effectively in one direction: Up.
Grant is very concerned that a return of volatility will act as a wrench tossed into the gears, quickly throwing the world financial system into panic.

5/2/17: European Patents and Ireland’s ‘Knowledge Economy’ Myths

Irish policymakers are keen on promoting Ireland as a technology and R&D centre of excellence, often claiming the country is a ‘Knowledge Economy’, a ‘Data Island’, a ‘Europe’s Tech Capital’ and so on. While catchy, these tag lines are far from reality, and, in fact, represent an empirically dubious proposition. To establish this claim, consider the European Patent Office data on patent filings and approvals, with the latest data set covering the period of 2006-2015. As chart below clearly shows, Ireland is far from being a significant source of patent filing in Europe, despite the fact that many patents from Ireland are filed by the U. S. and other multinationals, including a score of foreign companies that choose to tax-invert into Ireland. The EPO data, in fact, fails to control for this distortion. Still, even with those companies filings counted as ‘Irish’ by origin, Ireland ranks 14th in a key metric of the rate of European Patent Applications per million of inhabitants.

This post was published at True Economics on Sunday, February 5, 2017.

Super Bowl Inflation – 2017 Edition: This Is The Year To Go

If seeing a Super Bowl in person is on your ‘Bucket List’, this is the year to go. That’s the upshot of ConvergEx’s annual review of prices associated with the event.
The get-in price of ticket in Houston is currently $2,019, well less than last year’s $2,900 minimum cost. Average ticket prices are also lower than 2016, at $4,417 versus $6,007 last year.
For Pat’s fans, airfare is only 1.7x the usual charge to fly to Houston (one-stop), well below the usual pricing airlines charge during Super Bowl weekend. Atlanta fans will have to fork over far more – just over 6x the normal rate – but they do at least have a direct flight. One positive point: both teams’ fans can book local hotel rooms for less than $100/night, even if the nicer ones are closer to $1,000. And if you are thinking of advertising during the big game, you are in luck. The price of a 30 second spot is still $5 million, just like last year.
The economic message out of this data: either the high end consumer (about the only people that can afford to attend the game) is cutting back on his/her leisure budget, or the Super Bowl is losing a little of its destination-event appeal. With the current point spread at just 3 points, at least it should be a good game.
With the Super Bowl just a few hours away, you have probably plunked down your cash to participate in one or more of those ‘Buy a square’ pools at the office or your local bar. The big advantage to those games is that you don’t need to know anything about football (proof: I won a pool once) and it makes watching the game a little more fun since you have something riding on the outcome.

This post was published at Zero Hedge on Feb 5, 2017.

Carlson Capital Warns Border Adjustment Tax Would Lead To “Global Depression”

In their latest quarterly letter, Carlson Capital’s Black Diamond Thematic Fund (which was up 9.27% in Q4 and up net 19% in 2016) portfolio managers Richard Maraviglia and Matt Barkoff, who unlike Carl Icahn, Stanley Druckenmiller, Dan Loeb and most of the market, turned rather bearish weeks into the Trump victory, warn that ‘we may be looking at the grisly spectacle of stagflation’, echoing ongoing warnings from virtually all major banks that the market is wildly overpriced:
If the economy slows down against expectations it will have little effect on the upward direction of inflation. The rationale of inflation was cost-push and supply side constraints not demand side stimulus. Thus, we may be looking at the grisly spectacle of stagflation with the equity market on the highest cyclically adjusted valuations ever.

This post was published at Zero Hedge on Feb 5, 2017.

U.S. Dollar Store empire: Making $20 billion a year one dollar at a time on broke Americans. 8,000 dollar stores blanket the U.S.

Most people have been to a Starbucks and readily admit it, even if they never go back. Many people have been to dollar stores but rarely admit this. Dollar stores are doing exceptionally well with over 8,000 stores in the United States with revenues well above $20 billion a year. Their target audience is working class Americans. Dollar stores also cater to the massive number of Americans on food stamps. At last count there were 43 million Americans on food stamps. This at a time when the economy is supposedly robust and creating jobs left and right. The reality is that many Americans are now fully left behind by the new economic forces changing the world. The grand rift in our country is stemming from this unrelenting change but one thing is certain. Broke Americans and dollar stores go hand and hand.
The dollar store empire
Since 2008 the number of dollar stores has ballooned by 22 percent increasing to 8,042 (we’ll break it down further when we include Dollar General) when the last measure was taken in 2014. That figure is without a doubt higher today. It is a safe market to invest in given that you have 43 million Americans that receive government assistance each month because they are too poor to get by without it.

This post was published at MyBudget360 on February 6, 2017.

Is America In A Bubble (And Can It Ever Return To “Normal”)?

Analysts and talking heads have an awful lot of opinions. Are we in a bubble or aren’t we? Rather than offer another opinion, I’ll offer the relationship of US economic activity (GDP) against the Wilshire 5000 (representing US equities) and the Federal Reserves gauge of American wealth, Z1 Household Net Worth series. These are the preferred establishment gauges, so take a look and then you decide.
Gross domestic product (GDP) is a monetary measure of the market value of all final goods and services produced annually in the US. The chart below shows the annual real GDP growth decelerating since 1950.

This post was published at Zero Hedge on Feb 5, 2017.

Employment: LIES, All LIES!

Wow, man, 227,000 employment screams the Bureau of Lies and Scams.
Uh huh. Sure.
Ok, ok, the ADP report was strong too. But if there’s something to take from this report and the market’s reaction (which was a bit muted) it’s short everything. The folks over in the Treasury pits didn’t seem to have trouble deciphering it, incidentally, as the /ZN was bid hard on the release.
Why?
Well, let’s look at a few things.

This post was published at Market-Ticker on 2017-02-03.