Remembering The Impetus Of ‘Irrational Exuberance’ As We Approach Its 20th Anniversary

We are approaching the 20th anniversary of Alan Greenspan’s famous ‘irrational exuberance’ speech. Many remember those two words but few remember their context:
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past.
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability.
Indeed, the sharp stock market break of 1987 had few negative consequences for the economy. But we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy.
In December of 1996, Greenspan was clearly beginning to worry about the economic fallout of a bursting asset bubble. Back then he had a front row seat and, in fact, a strong hand in creating the dotcom bubble, whether he admits it or not. He was so worried about the consequences of ‘irrational exuberance’ that he declared these concerns ‘must be an integral part of the development of monetary policy.’ And this was before he had even witnessed any of the actual economic consequences we have now lived with for two decades. Clearly, his worries were well founded but he wasn’t quite worried enough.

This post was published at Wall Street Examiner by Jesse Felder ‘ October 20, 2016.

Who Benefits from the Wind-Power Boom in the US?

Wind energy is changing the economy of the Midwest. Wind is the fastest growing source of electricity in the United States, and about 70 percent of wind power is located in low income counties. These counties are typically rural, often Midwestern areas, where the dominant industry for decades has been agriculture.
Increasingly though, many farmers are finding that leasing space to wind turbine operators is more lucrative than growing corn. That trend is likely to continue going forward, and it should alter the way energy companies and investors alike should think about wind power.
Wind power represents an important economic boost in many areas of the U. S. and as a result local farmers and communities welcome wind turbine developers. Farmers benefit directly from wind turbines to tune of between $7,000 and $10,000 per turbine in annual leasing fees. A farmer who could lease land for 10 wind turbines would likely receive between $70K and $100K in annual lease income with essentially no overhead for that income.

This post was published at Wolf Street on October 20, 2016.

Black Worker Wages Rise The Most On Record

Who says there is no wage growth? Certainly not the Labor Department, and certainly not African American workers.
In a release on Thursday, the DOL reported that seven years after the “end” of the recession, median wages for full-time black workers jumped by 9.8% in the Q3 – the biggest quarterly jump since record began in 2000.
According to WSJ calculations, the recent wage gains means that blacks are the one racial group with the highest cumulative increase in their wages since since the recession ended in mid-2009, clocking in at 15.7%, and outpacing the gain for whites, 13.3%, Asians, 11.1% and Latinos, 15.5%.
However, in what will likely become a political talking point to be paraded over the last few weeks of the presidential campaign, the bulk of the improvement for blacks and Latinos has occurred in the past two years, ever since Obama’s push for raising minimum wages across the country, which have indeed resulted in higher median wages for many workers, however – as the infamous Stabucks example showed – at the expense of declining total works hours and/or a cut back in benefits.

This post was published at Zero Hedge on Oct 20, 2016.

OCT 20/ALMOST 28 TONNES OF GOLD STANDING FOR OCTOBER/EXODUS OF GOLD CONTINUES FROM THE COMEX/SHANGHAI CONTINUES TO LEAD IN THE PRICING OF GOLD AS DUBAI AGREES TO USE THE SHANGHAI FIX AND NOT THE …

Gold $1265.60 DOWN $2.30
Silver 17.50 DOWN 12 cents
In the access market 5:15 pm
Gold: 1266.00
Silver: 17.50
THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON
The Shanghai fix is at 10:15 pm est and 2:15 am est
The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
And now the fix recordings:
Shanghai morning fix OCT 18 (10:15 pm est last night): $ 1276.80
NY ACCESS PRICE: $1271.50 (AT THE EXACT SAME TIME)
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1274.31
NY ACCESS PRICE: 1269.70 (AT THE EXACT SAME TIME)
HUGE SPREAD TODAY!! 5 dollars
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: OCT 20: 5:30 am est: $1269.20 (NY: same time: $1269.30: 5:30AM)
London Second fix OCT 20: 10 am est: $1271.65 (NY same time: $1271.70 , 10 AM)
Shanghai premium in silver over NY: 87 cents.
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.

This post was published at Harvey Organ Blog on October 20, 2016.

Did Hillary Expose Nuclear National Secret In Last Night’s Debate?

Hillary’s comments in last night’s debate about nuclear response times caught a lot of people off-guard. Here’s what she said:
“The bottom line on nuclear weapons is when the President gives the order it must be followed. There’s about 4 minutes between the order being given and the people responsible for launching nuclear weapons to do so. And that’s why 10 people who have had that awesome responsibility have come out and, in an unprecedented way, said they would not trust Donald Trump with the nuclear codes or to have his finger on the nuclear button.”


This post was published at Zero Hedge on Oct 20, 2016.

The Entire Economy Is At A Tipping Point – Episode 1106a

The following video was published by X22Report on Oct 20, 2016
Tax burdened people in Greece are leaving for Bulgaria, taxes are lower and social security contributions are lower. Initial jobless claims surged unexpectedly. Consumer confidence tumbles to its lowest since 2015. Existing homes sales are stagnant and have not gone anywhere. Hanjin shipping is getting rid of 60% of its employees. The ECB sees no bubbles at all.

Everything You Need To Know About Money In The 2016 Presidential Race

Money runs politics, and the charts below show just how much of it has been raised and spent on the 2016 presidential election.
New research by payment service provider WePay provides some amazing revelations about the election’s finances. First and foremost, Republican nominee Donald Trump – despite investing millions of his own money in his campaign – is sorely behind Democratic nominee Hillary Clinton when it comes to cold, hard cash.

This post was published at Zero Hedge on Oct 20, 2016.

David Rosenberg Calls For A Multi-Trillion, “Helicopter Money” Stimulus Package

With the inherent weakness in US GDP and the rising probability of a recession (two weeks ago Bank of America modeled that the next recession would likely start roughly one year from now), Gluskin Sheff’s David Rosenberg thinks that with monetary options exhausted it will take a fiscal boost in the trillions of dollars to kickstart the economy. These issues were discussed in an extended interview with Real Vision TV, where the chief economist and strategist at Gluskin Sheff proposed some radical policies to engineer the growth needed in nominal income.
His ideas, some of which can be seen here in a clip of the interview, include helicopter money attached to a $2 trillion perpetual bond, massive infrastructure spending and measures to tackle the $1 trillion student debt load that has seriously hamstrung the economy.

This post was published at Zero Hedge on Oct 20, 2016.

To Some, it ‘Feels More Like a Crash’

These US Markets Have Cracked, and the Cracks are Spreading
‘There’s enormous risk in public markets because that’s the one that central banks have distorted to the greatest extent,’ El-Erian, chief economic adviser at Allianz SE, told Bloomberg TV, in reference to stock and bond markets. He confessed to the heresy of holding 30% of his portfolio in cash.
‘It’s very hard to say I’m going to buy a basket of public equities and go to sleep for the next five to 10 years and feel good about the returns. Similarly with bonds,’ he said.
These ‘public markets’ are not the only markets that central banks have totally distorted and larded with ‘enormous risks.’ Practically everything that is an asset has been inflated, including residential and commercial real estate in much of the country, and assets that are the objects of admiration of the wealthy: collector cars and art.
But these markets have started to crack at the edges, and some of the cracks are spreading.
Collector car prices fell again in October. They’ve been on a relentless skid since their peak in September 2015, according to data by Hagerty, which specializes in insuring classic cars. Auction activity experienced ‘another significant drop this month,’ Hagerty reported. Over the past 12 months, the number of cars sold at North American collector car auctions has dropped 8%. Among the other observations:

This post was published at Wolf Street by Wolf Richter ‘ October 20, 2016.

Microsoft Hits All Time High After Smashing Estimates

Microsoft shares just traded $60.00 for the first time in history, reaching record highs after smashing earnings expectations thanks to “the cloud.”
*MICROSOFT 1Q ADJ REV. $22.3B, EST. $21.7B; ADJ EPS BEATS EST. *MICROSOFT 1Q ADJ EPS 76C, EST. 68C ‘Our first quarter results showed continued demand for our cloud-based services,” said Amy Hood, executive vice president and chief financial officer at Microsoft. ‘We continue to invest, position ourselves for long-term growth, and execute well across our businesses.’

This post was published at Zero Hedge on Oct 20, 2016.

Outrageous Profit Potential from Three of the World’s Worst Companies

Many investors focus exclusively on buying the best stocks, which is great… until they realize that they’re missing out on half the profit potential in front of them.
That’s not good enough for me; I don’t ever want to see you leave money on the table that could otherwise be in your pocket.
So I want to show you how to find the outrageous profit potential…
…associated with three of the world’s worst companies.
Triple-Digit Profits from Losers

Most investors have a one-track mind, meaning they’re limited to thinking about how to make money when stocks are headed higher. And they freak out if there’s even the slightest squiggle on a chart in the other direction.
To be sure, there are great investments for these people. Take this small tech stock I’ve been tracking – it’s nearly doubled its customer base in the past year, and on Nov. 1, it’s expected to announce a 325% earnings growth, which could send its shares skyrocketing.

This post was published at Wall Street Examiner by Keith Fitz-Gerald ‘ October 20, 2016.

Leaked Podesta Email Reveals Why Larry Summers Did Not Become Obama’s Treasury Secretary

Three years ago, a very unhappy Larry Summers conceded that he would not become Fed Chair when he withdrew from the running to become Ben Bernanke‘s replacement on September 15, 2013, following some dramatic pressure by the press and numerous liberal economists. However, we now know that that was only the most recent of Larry’s disappointments. According to one of the Podesta emails released today, it appears that America was this close to having Larry Summers as the appointed replacement to Hank Paulson as Treasury Secretary by the Obama administration in 2009. However, that did not happen as a result of what may have been a letter from the late powerful corporate lawyer Bob Pirie, founder of Skadden Arps, who on November 7, 2008 wrote an email to John Podesta by way of Harold Ickes, explaining why Obama should pick Tim Geithner or Paul Volcker, and not Larry Summers.
From the leaked Podesta email:

This post was published at Zero Hedge on Oct 20, 2016.

The Federal Reserve Is Hillary Clinton’s Secret Weapon

Say what you want about Donald J. Trump, but he is correct about one thing: the Federal Reserve has, with near certainty, been holding interest rates down for political purposes – namely, to aid Hillary Clinton in getting elected president of the United States.
In September’s first presidential debate, Mr. Trump said:
We have a Fed that’s doing political things. … The Fed is [being awfully] political by keeping the interest rates at this level. And believe me: The day Obama goes off, and he leaves [office], and goes out to the golf course for the rest of his life to play golf, [is the day that] they raise interest rates. … The Fed is being more political than Secretary Clinton.
The Federal Open Market Committee’s (FOMC) September meeting minutes, released on Wednesday, have proven Mr. Trump’s assertion to be true. As the 2016 election season draws to a close, the Fed has suddenly become more bullish on the prospect of raising interest rates – and this precipitous change-of-heart has come despite there being few notable signs of hope in the US’s economic data.
The meeting minutes detailed one FOMC member’s worry that low interest rates are unfairly hurting investors, particularly those with pension funds and endowments, and that these easy-money policies may be ‘depressing’ economic growth:

This post was published at Ludwig von Mises Institute on Oct 20, 2016.

El-Erian Warns Of “Enormous Risk In Public Markets… Better Seller Of Stocks Than Buyer”

Investors “have been conditioned to believe, over and over again, that central banks can shield them,” but, as Allianz’ Mohamed El-Erian warns “the probabilities are now starting to tip in the likelihood of a bad outcome.” Simply put, El-Erian explains that financial markets have “decoupled” from the economic problems of the world leaving “enormous risk in public markets because that’s the one that central banks have distorted to the greatest extent.”

This post was published at Zero Hedge on Oct 20, 2016.

Kim Kardashian, Millionaire Cops and the 1%

Recent reports suggest that Kim Kardashian is pulling back from social media, in the wake of a reported $10 million robbery of her jewelry by Paris assailants.
The move, which according to sister Kourtney, is being made ‘just [to] make sure we’re protected as well as possible,’ illustrates a lesson the nouveau riche often learn the hard way: it generally pays to be discreet about wealth.
Consider the contrasting positions of two classes of millionaires. The first is the 1% of income earners, whose wealth has attracted increased attention in recent years.
The second is government employees with gold-plated pension plans, often worth millions, whose wealth generally passes unnoticed.
Dangers to the 1%
Like Kim Kardashian’s jewels, the assets and incomes of the 1% have attracted enormous attention in recent years from a group far more effective at wealth appropriation than mere thieves: governments.
As Nobel laureate Joseph Stiglitz noted at a presentation in Quebec City earlier this month: ‘Incomes of the top 1% of the population have been growing exponentially for the past three or four decades, while those of the bottom 90% have stagnated. We have more money at the top, more people in poverty and the middle class is being eviscerated.’

This post was published at GoldSeek on 20 October 2016.

Nigeria Slashes Oil Prices, Admits There Is A “Huge” Cargo Glut

Something ironic happened on the way to OPEC’s alleged production cut: the world finds itself drowning in excess oil.
We touched on this first last week when we observed that according to the latest OPEC monthly production numbers, OPEC had produced a record 33.4mmbpd, with some expectations that by the time the November Vinna OPEC summit takes place, there will be another million barrels in output. And while the market, or at least the marginal price setting algos have been reluctant to admit the excess supply reality and adjust prices accordingly, OPEC member Nigeria has found the hard way that when there is a glut, the only way to gain market share is to underprice the competition.

This post was published at Zero Hedge on Oct 20, 2016.

Opportunity Grows in Indonesia as Tourism Sector Blooms

Although Bali has traditionally dominated tourism in Indonesia, the government’s ‘Wonderful Indonesia’ campaign has shown the country in a new light. But it also reveals the plethora of still-untapped economic opportunity contained within this vast island archipelago.
Targeting Tourism in Indonesia
The government’s ‘Wonderful Indonesia’ campaign (which began in 2011) has transformed Indonesian tourism into a vibrant, lucrative, and rapidly growing industry. Alongside national ‘gems’ like the ancient Borobudur Temple, the divers’ haven of Raja Ampat, and the Komodo National Park, a host of new destinations are becoming established – among them Bintan, Maluku, and Lombok.
Tourism is responsible for creating close to 10 million jobs, and last year the government allocated a further Rp.1.3 trillion (US$98.4 million) to promote tourism. That year it contributed 9.6% of total GDP – behind Indonesia’s top earners of oil, gas, coal, and palm oil.
Minister of Tourism Arief Yahya announced that in 2019, tourism would be Indonesia’s biggest foreign exchange earner. By that time, he wants tourism’s contribution to national GDP to have doubled, bringing in US$24 billion annually.
The objective to reach 20 million tourists by 2019 is equally ambitious. This year’s target is 12 million; the total last year was 9.73 million. To support these targets, the Asian Development Bank agreed to lend Indonesia US$10 billion over the next five years.

This post was published at FinancialSense on 10/20/2016.

Hedge Fund Managers Expect “Massive” Pay Cut In 2016

With soaring hedge fund shutdowns, and countless “smart money” asset managers underperforming either their benchmark or the overall market, 2016 is shaping up as the worst year for the hedge fund industry since the financial crisis. Actually, in some respects it is even worse than that: according to Eurekahedge, the number of hedge fund startups, which were surging a decade ago, have fallen off a cliff in 2016 and are heading for their worst year since 2000.
According to Bloomberg, there have been just 457 fund launches through the first nine months of this year, compared to 876 in 2015, citing Eurekahedge numbers. “The capital raising environment for newer launches is quite difficult to put it mildly and with existing offerings out there returning low-single digits over the last three years, investor appetite is quite selective to say the least,” said Mohammad Hassan, senior analyst at Eurekahedge.

This post was published at Zero Hedge on Oct 20, 2016.