The Self-Preservation of Government Regulators

Michael Lewis wrote Liar’s Poker, The Big Short, Moneyball, The Blind Side, and The Undoing Project, which may be the worst title for a great book in recent history. It is about Amos Tversky and David Kahneman, Israeli psychologists, who together created a new field of economics, behavioral economics.
Lewis has a gift for words. If I could be as good as any non-fiction author, I would choose Lewis as my model, even without his movie royalties.
In The Blind Side, he describes a lady from the NCAA’s department of improper boosterism. It looks for money or other favors that are given to college athletes.
The NCAA was best described 20 years ago by free market economist Ben Rogge [ROWEguee]. He said the NCAA is a cartel of officially non-profit enterprises that collude to keep down the price of college athletes.
Higher education in the United States is a government-created cartel. It is based on government licensing of what constitutes higher education. It is also based on a self-policing system of academic accreditation. The NCAA is simply an extension of the larger cartel.
In the book and in the movie, we see a grilling of All-American high school football star Michael Oher by an NCAA investigator. She comes to investigate whether the Tuohy family improperly provided Oher with gifts to get him to attend the University of Mississippi, their alma mater. Since the Tuohys were multimillionaire whites who had adopted the homeless black giant of a teenager, there was at least plausible suspicion that something fishy was going on.
Lewis offers this assessment of the NCAA’s investigatory department. He begins by describing the views of Sean Tuohy, the man who adopted Oher.

This post was published at Gary North on July 17, 2017.

CME Group CEO: Gold Extremely Undervalued; Should Be $5,000 to $6,000 Per Ounce (Video)

In his Gold Videocast last week, Peter Schiff made the case that silver is extremely undervalued, especially when compared with gold.
In a recent interview with Neil Cavuto on Fox Business, CME Group Chairman Terry Duffy says gold is undervalued as well. He said he believes realistically, gold should be at $5,000 to $6,000 per ounce.
And at some point, the price will catch up with reality.
If you look at the price of gold today, just around $1,200 an ounce, and if you look at back in the early 80s. it was trading around $800 an ounce. So, if you adjust for inflation, you should have gold at around $2,000 or $3,000 an ounce, and if you look at what’s gone on in the world, it should probably be at $5,000 or $6,000 an ounce.’
Duffy said he thinks the main reason gold and silver remain undervalued has to do with the fact that most people misjudge and downplay the amount of instability and economic chaos in the world. But at some point, the blinders will fall off.

This post was published at Schiffgold on JULY 17, 2017.

One Trader Warns “We Just Heard A Distinct Chirping From China’s Coalmine Canary

With the 24/7 pump from mainstream media that everything is awesome (look at record high stocks) – despite President Trump – it’s all too easy to ignore collapsing ‘hard’ data, geopolitical turmoil, and the looming reality that the world’s central bankers are taking a distinctly hawkish turn. However, as former fund manager Richard Breslow notes, overnight we just got a big reminder that butterflies’ wings are flapping around the world, and no one knows when the chaotic hurricane will follow…
Via Bloomberg,
There’s no escaping the fact that the financial world is completely interconnected. Everyday, we say some market was up or down because some other one made a move. In a more direct context, there’s been a lively debate on whether rates can go up in parts of the world and not others. And we’ve pretty much accepted that it will be a global phenomenon, if and when it happens. This morning, I was told that Asian equities were mostly up due to strong economic data from China. And it was good data, so that made sense. But look at the wild ride Chinese equities went on and be reminded that what looks like a hazy, lazy summer Monday is masking a lot of potential volatility out there while markets continue on believing, correctly, that the central bank ‘puts’ are very much still in effect.

This post was published at Zero Hedge on Jul 17, 2017.

SWOT Analysis: A Closer Look at Novo Resources

The best performing precious metal for the week was silver, climbing up 2.35 percent with the changing sentiment toward precious metals. Gold notched its first weekly gain in a number of weeks on weaker-than-expected inflation and retail sales data. Federal Reserve Chair Janet Yellen took a decidedly dovish stance this week, signaling the Fed was in no hurry to tighten monetary policy with monthly consumer prices growth falling short of the Fed’s target 2 percent. The gold market responded positively, with gold futures jumping sharply above $1,220 after her testimony.

This post was published at GoldSeek on Monday, 17 July 2017.

Stockholm Syndrome Gold Report

Stockholm Syndrome is defined as ‘…a condition that causes hostages to develop a psychological alliance with their captors as a survival strategy during captivity.’ While observers would expect kidnapping victims to fear and loathe the gang who imprison and threaten them, the reality is that some don’t.
There is a loose analogy between being held hostage and being an investor in a regime of irredeemable paper currency and zero interest rates. In both cases, the victim has little hope of escape and must seek to somehow survive under malevolent conditions.
Key behaviors in Stockholm Syndrome are positive feelings for their captors, a refusal to work with law enforcement afterwards, and even a belief in the terrorist’s humanity.
Key behaviors of investors today show eerie parallels: a desire to bid on dollars with their assets, a refusal to support the gold standard, and even a belief that the dollar is money. This last always shows when someone – even a gold bug – says gold is going up, or gold is the best performing currency, or gold has good returns.
These words up, performance, and returns indicate that the victim accepts the dollar as money, the dollar as the measure of value, the dollar as the unit of account. The victim seeks to view gold in terms of his captor’s paradigm. Much the way the kidnapping victim seeks to understand his capture and even geopolitics in terms of his captor’s world view.

This post was published at GoldSeek on Monday, 17 July 2017.

How to Look at Tariffs

The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries.
Political boundaries of nations may be important for other reasons, but they have no economic meaning whatever. Suppose, for example, that each state of the United States were a separate nation. Then we would hear a lot of protectionist bellyaching that we are now fortunately spared. Think of the howls by inefficient, high, priced New York or Rhode Island textile manufacturers who would then be complaining about the “unfair,” “cheap labor” competition from various low, type “foreigners” from Tennessee or North Carolina, or vice versa. Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on interstate trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.
If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure ripoff of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by inefficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.

This post was published at Ludwig von Mises Institute on July 17, 2017.

“We Are Living In A Different World”: BofA Can’t Explain What Is Going On With Volatility

With the VIX once again pummeled on Friday and set to open below 10 yet again, here are some statistics from Kyle Beard of Bloomsbury advisory: “The VIX has only traded below 10 41 times since 1993 (intra-day). 21 of those occurrences have taken place since May 1, 2017. When you consider there have been 6,179 trading days since 1993, you realize how incredible this is.”
However, it’s not just the VIX: as BofA’s David Woo points out, volatility across financial markets has collapsed in recent months:
The MOVE index, which measures interest rate volatility across the US yield curve, is hovering just above the 52 level that represents the trough of the index since 1988. Only in 2007 and 2013 was the index lower, and only barely. VIX has again dropped below 10. The only time it was lower since the inception of the index in 1990 was briefly in 1993. 3-month EUR/USD vol is now below 7. Since the inception of the euro, EUR/USD vol was only lower twice, in 2007 and 2014.

This post was published at Zero Hedge on Jul 17, 2017.

Greatest Fools? The Countries That Trust Their Government Most (And Least)

Trust in government serves as a vital driving force for a country’s economic development, increases the effectiveness of governmental decisions, as well as leading to greater compliance with regulations and the tax system. As Statista’s Niall McCarthy notes, the level of confidence in a country’s government is generally determined by whether people think their government is reliable, if it can protect its citizens from risk and whether or not it is capable of effectively delivering public services.
The latest edition of the OECD’s Government at a Glance report has found that confidence in government varies widely between countries.
Unsurprisingly, Greece has the lowest level of confidence in its government, unsurprising given the economic pain it has suffered since the onset of the financial crisis. In recent years, Greece has had to deal with multiple elections, bank shutdowns, defaulting, the introduction of capital controls and being on the frontline of the European migration crisis. That has all led to 13 percent of the Greek public having confidence in their government. South Korea also has a low level of confidence at 24 percent, most likely due to President Park Geun-hye’s impeachment scandal.

This post was published at Zero Hedge on Jul 17, 2017.

Where is Investigative Reporting?

Folks, brain surgery is not routine. Ever.
Further, you do not discover a blood clot in the brain during a routine physical. In fact a so-called “routine physical” in today’s world catches damn near nothing — ever — simply by design, since you usually spend less than 5 minutes with an actual physician. Granted, a Senator doesn’t get “your” physical, he probably gets an hour with an actual physician. But the point here, in addition to the vast difference between “you” and “Senators”, is that there is no instrument that a doctor has in his office that is diagnostic for a clot on the brain. Generally you find them on a CT (or similar), which is never done routinely because (1) it is relatively expensive and (2) it involves ionizing radiation exposure, which is never appropriate without a damn good reason.
A 2 centimeter “clot” is of course inadequate to describe what was found, since it only speaks to one dimension and such a thing occurs in three dimensions. Second, a clot occurs after bleeding does, which leads to the next question: What caused it?

This post was published at Market-Ticker on 2017-07-17.

BOE Warns Popular 35-Year Mortgages Shackle Consumers With “Lifetime Of Debt”

Consumers in the UK have been on a credit binge since the Bank of England cut its benchmark interest rate to an all-time low as investors braced for the widely anticipated economic shock of Brexit – a shock that, unsurprisingly, has yet to arrive, despite warnings from the academic establishment that a “leave” vote would trigger an imminent economic catastrophe. And now, with total credit growth rising at 10% a year, the BOE is warning that the increase in unsecured lending is becoming increasingly unsustainable.
While the central bank is less concerned with mortgage debt than credit-card debt and other types of consumer credit, some at the bank are beginning to worry that the growing demand for long-term mortgages will shackle borrowers with a lifetime of debt, according to the Telegraph.
‘British families are signing up for a lifetime of debt with almost one in seven borrowers now taking out mortgages of 35 years or more, official figures show. Rapid house price growth has encouraged borrowers to sign longer mortgage deals as a way of reducing monthly payments and easing affordability pressures.

This post was published at Zero Hedge on Jul 17, 2017.

China Small Caps Crash To Lowest Since 2015 Amid Deleveraging “Selling Panic”

Despite China reporting solid economic data on Monday, with beats across the board in everything from retail sales, fixed asset investment, industrial production and GDP printing at 6.9% and on track for its first annual increase since 2010…

… despite the biggest net liquidity injection by the PBOC since mid June after the central bank injected a net 130 billion yuan, and despite yet another rebound in the Yuan, overnight China’s Shanghai Composite slumped by 1.4%, the most since December as a result of a plunge in the small-cap ChiNext index, which tumbled by 5.1%, and is now down 16% in 2017 to levels not seen since January 2015 following a fresh round of broad deleveraging amid concerns about tougher regulations and more IPOs following a high-level conference over the weekend attended by President Xi Jinping in which China hinted at the formation of a “super-regulator”.

This post was published at Zero Hedge on Jul 17, 2017.

‘Bigger Systemic Risk’ Now Than 2008 – Bank of England

– Bank of England warn that ‘bigger systemic risk’ now than in 2008
– BOE, Prudential Regulation Authority (PRA) concerns re financial system
– Banks accused of ‘balance sheet trickery’ -undermining spirit of post-08 rules
– EU & UK corporate bond markets may be bigger source of instability than ’08
– Credit card debt and car loan surge could cause another financial crisis
– PRA warn banks returning to similar practices to those that sparked 08 crisis
– ‘Conscious that corporate memories can be shed surprisingly fast’ warns PRA Chair
Editor Mark O’Byrne
Stark warnings have been issued by the Bank of England and its regulatory arm, the Prudential Regulation Authority (PRA).
In less than one week the two bodies issued papers and speeches to warn industry members that many banks are showing signs of making the same mistakes that led to the 2008 financial crisis – the outcomes of which are predicted to be worse than those seen just nine years ago.

This post was published at Gold Core on July 17, 2017.

Earth’s Economy Glorifies Waste, Exploitation, Debt, Expediency and Magical Thinking

Humanity appears to default to magical thinking when faced with untenable situations that demand systemic change.
How would extraterrestrial anthropologists characterize Earth’s dominant socio-economic system? It’s not difficult to imagine their dismaying report: “Earth’s economy glorifies waste. Its economists rejoice when a product is disposed as waste and replaced with a new product. This waste is perversely labeled ‘growth.’ Aimless wandering that consumes fossil fuels is likewise rejoiced as ‘growth.’ The stripping of the planet’s oceans for a few favored species of edible fish is also considered ‘growth’ as the process of destroying the ocean ecosystem generates sales of the desired seafood. Even more perversely, the resulting shortages are also causes of rejoicing by the planet’s elites, as their ability to purchase the now-scarce resources boosts their social status and grandiose sense of self-worth.

This post was published at Charles Hugh Smith on SUNDAY, JULY 16, 2017.

$2-Billion Private Equity Fund Collapses to almost Zero

Worst PE-fund collapse ever. The oil bust just keeps on giving. Investors who’d plowed $2 billion four years ago into a private equity fund that had also borrowed $1.3 billion to lever up may receive ‘at most, pennies for every dollar they invested,’ people familiar with the matter told the Wall Street Journal.
Fund raising and investing started in 2013. Houston-based EnerVest manages the fund. This could be the first time ever that a PE fund larger than $1 billion lost nearly all of its value.
The lenders to the fund are now negotiating to take control of the fund’s assets, these ‘people familiar with the matter’ told the Journal. Wells Fargo is leading the negotiations.

This post was published at Wolf Street on Jul 17, 2017.