How Hedge Funds Are Making Money In 2014: The Full Strategy Breakdown

As part of his latest weekly report, Goldman’s David Kostin breaks down the full array of strategy “baskets” used by hedge funds at this moment to outperform the market in 2014. In a nutshell, the best performing strats right now involve betting on a high vs low tax rate divergence (perhaps because companies facing high tax regimes are soaring on hopes they will engage in a price-boosting tax inversion deal), and shorting BRIC exposure:

This post was published at Zero Hedge on 08/24/2014

How to Obscure one of the Biggest Economic Problems in the US

By Doug Short, Advisor Perspectives:
Earlier this week I updated my commentary on Five Decades of Middle Class Wages, an analysis of Real Average Hourly Earnings of Production and Nonsupervisory Employees. During the 21st century and especially since the end of the Great Recession, wages have clearly been stagnant.
But, as Mark Twain famously remarked, ‘there are three kinds of lies: lies, damned lies, and statistics.’
I was, therefore, not surprised when a reader sent me a link to a blog article entitled ‘Real Wage Stagnation Is a Bit of a Myth.’ Seriously! The article featured a chart that included the very same earnings data series that I had used, but it came to quite the opposite conclusion:
‘Contrary to popular belief, wages have been rising a bit faster than prices. In other words, real wages haven’t stagnated as widely believed, but have been moving higher, albeit at a slow pace.’ All it takes is a simple statistical manipulation to paint a smiley face on the real wage data. And what is that? Choose a tame deflator for your inflation adjustment.
Below are two charts of the Average Hourly Earnings of Production and Nonsupervisory Employees stretching back to 1964, the year the Bureau of Labor Statistics (BLS) initiated the series. The top chart is my analysis. The one below it is the optimistic variant that claims stagnation is a ‘myth’ (click them for larger versions).

This post was published at Wolf Street on August 24, 2014

India Imports 2559 MT Silver In 5 Months

While silver has been widely used as money in history, at the beginning of the 19th century gold became the dominant metal in trade. At the end of the 19th century central banks erupted around the world and began holding gold in reserve to back their currencies, the international monetary system in this period is known as the classic gold standard. When the last remnants of the gold standard were officially left behind n 1974, and the world was on a fiat standard, central banks held on to their gold. This can only be explained as insurance in case the fiat standard wouldn’t succeed, concomitant admitting there is a reasonable chance fiat money will fail.
Nowadays central bankers sporadically tell us about the true function of gold in the international monetary system. This is only logic if one realizes they (/the US) preferred to minimize the role of gold, in the hopes the fiat standard would provide them maximum flexibility to manage the monetary system. Jelle Zijlstra, president of the central bank of the Netherlands from 1967 to 1982, wrote in his autobiography of 1992:
Gold as the monetary cosmos’ sun.
To analyze gold’s gravity in its ultimate role as the sun in our monetary system I try to be acquainted with all the planets in orbit, black holes nearby and comets crossing the solar system. For example: foreign exchange markets, inflation, quantitative easing, too big to fail banks, derivatives, oil, geo-politics, the media, technical analysis, commodities and silver. I certainly do not pretend to be an expert in all fields (the cosmos), but to make a long story short; while always attributing more importance to gold I recently decided to pay more attention to the global silver market. Few events happen in isolation these days and I did some interesting findings with regard to the silver market worth digging into. In this post we’ll be examining some data from India.
Silver Because of the pressure on the current account deficit the Central Board of Excise and Customs of the Indian Government, raised the gold import duty in January 2013 from 4% to 6 %, in June to 8 % and in August to 10 %. The silver import duty was raised in January 2012 from 1,500 Rs/Kg to 6 % of the silver price and in August 2013 to 10 %. Since the import duties, or tariffs, were raised, the price of gold in India developed a higher premium (excluding the import duty) than silver, as can be seen in the charts below.

This post was published at Bullion Star on 21-08-2014

Russia Asks If America Is Still Fit To “Participate In Solving International Problems”

Yesterday it was China slamming America’s superpower status (and thus dollar reserve currency status) when in Sina News it stated the following:
Their various reconnaissance aircraft have been wandering around foreign airspace for decades and watching the military secrets of other countries like a disgusting thief spying over his neighbor’s fence. However, when the neighbor comes back with a big stick, the thief will turn tail and run away, blaming the neighbor. When you show people weakness, they will bully you. When you show people strength, they will respect you.
We [the newspaper] believe the Chinese Air Force and Naval aviation should maintain a high level of vigilence and morale in southeast coastal region to prevent the further US action.
America has lost face and does not want to show the world they are sick. They have been lording over other countries for so long, and they will never let it go after they eat this loss.

This post was published at Zero Hedge on 08/24/2014

Building for a future of American renting serfs: Private housing starts for structures with at least 5 units hits a post recession high. More than 11 million Americans spend more than 50 percent …

There was much celebration regarding the jump in private housing starts. However, once you begin to look beyond the headlines you realize that the big jump came largely because of multi-family starts. In other words, building more rentals in the form of apartments for a growing population that rents. Private starts for places with 5 units or more has now hit a post recession high. This makes sense given the fall in rental vacancy rates and the rise in rental prices. Yet what we find is that more income is being siphoned off into a less productive sector of our economy. Real estate tends to be a big plus for an economy when it happens organically with rising incomes, good overall employment prospects, and first time buyers leading the charge. Today it is more of a shifting of assets into fewer hands while extracting more income from the productive sectors of the economy. Not everyone can have their flipping show on cable television. For example, over 11 million Americans now pay 50 percent or more of their income to rent. Many of those people are here in California. The trend to building rentals aligns with the underlying reality that many future Americans will be less affluent compared to their parents.
Multi-unit starts
Builders realize there is pent up demand but not for expensive new homes. New demand is in the form of rentals where little savings are required and incomes are less scrutinized. Although I will say in many tight rental markets like San Francisco getting a rental is even more stringent than purchasing a home. The charge for private housing starts is being pushed by rental housing. In some way more supply of this kind of housing should alleviate some of the short-term pressure we are seeing on rental prices.
Take a look at private starts for structures with 5 units or more:

This post was published at Doctor Housing Bubble on August 24th, 2014

The Federal Reserve Explained in 7 Minutes

Is the Federal Reserve a government institution? How and when was this central bank of the United States formed? Why are US citizens forced to divulge all their financial information under penalty of law, yet that of the Federal Reserve remains veiled? The following short video sheds light on this otherwise dark banking enigma.

For more information on this shady outfit, read this brief article on exactly how the Federal Reserve System works. And see a simple, illustrated example of the subtle fleecing of the US currency system since the Fed’s inception.

Russia Dumping US Treasuries? But Why the Heck in Belgium?

Belgium is known for its surprises. For example, it got by amazingly well for a couple of years without a national government, and without breaking apart, to the endless chagrin of a lot of people. And it has a great variety of delicious beers, which I amply tested during the three years I was there. But now, that tiny country with a tiny economy is suddenly piling up a mountain of US Treasuries.

In March, according to new data from the US Treasury Department, it added another $40.2 billion to its existing mountain of Treasuries, now at the dizzying height of $381.4 billion, or 79% of GDP!

Read more …

Flash Boys – CBS 60 Minutes

It’s not just the Federal Reserve setting interest rates swaying global markets back and forth. Evidence shows that financial firms are using high speed computers and networks to front-run average traders and manipulate prices to their own advantage. It’s all explained in Michael Lewis’ book, Flash Boys. This CBS 60 Minutes episode reviews the situation and explains what’s happening in easy terms.

Is Money the Root of All Evil?

Mike Maloney reads from Ayn Rand’s Atlas Shrugged.  Specifically, the part of the story where Francisco d’Anconia gives his discourse on money, how it is earned by productive people and either looted or mooched away by unproductive people.  After questioning whether or not money is the root of all evil, Francisco asks, “What the root of money?

Francisco’s ‘money speech’ can also be read at Capitalismmagazine.com.

A most excellent excerpt:

When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.

The Retail Death Rattle

A stunning, must-read dose of economic reality entitled, The Retail Death Rattle, is posted over at The Burning Platform.

Excerpt: The entire economic recovery storyline is a sham built upon easy money funneled by the Fed to the Too Big To Trust Wall Street banks so they can use their HFT supercomputers to drive the stock market higher, buy up the millions of homes they foreclosed upon to artificially drive up home prices, and generate profits through rigging commodity, currency, and bond markets, while reducing loan loss reserves because they are free to value their toxic assets at anything they please – compliments of the spineless nerds at the FASB. GDP has been artificially propped up by the Federal government through the magic of EBT cards, SSDI for the depressed and downtrodden, never ending extensions of unemployment benefits, billions in student loans to University of Phoenix prodigies, and subprime auto loans to deadbeats from the Government Motors financing arm – Ally Financial (85% owned by you the taxpayer). The country is being kept afloat on an ocean of debt and delusional belief in the power of central bankers to steer this ship through a sea of icebergs just below the surface.

Read the entire post at The Burning Platform.