Category Archives: Essays

Seth Klarman On “Born Bulls”, Bitcoin, & “The Truman Show” Market

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“Robert Schiller’s cyclically adjusted P/E valuation is over 25, a level exceeded only three times before – prior to the 1929, 2000 and 2007 market crashes.  Even with the ranks of the unemployed and underemployed still bloated and the economy barely improved from a year ago, the S&P 500, Dow Jones Industrial Average, and Russell 2000 regularly posted new record highs.  Our assessment is that the Fed’s continuing stimulus and suppression of volatility has triggered a resurgence of speculative froth. Margin debt measured as a percentage of GDP recently neared an all-time high. IPO activity in 2013 was greater than it has been in years, approaching 2007’s record of 288 transactions.”

http://www.zerohedge.com/news/2014-03-08/seth-klarman-born-bulls-bitcoin-truman-show-market

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Peter Schiff and Doug Casey on the Real State of the Economy

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“The president is bragging now that the deficit is finally below $1 trillion, but that’s the deficit in the recovery. If we slip into a legitimate or acknowledged recession, where are the deficits going to go, $1.5 trillion, $2 trillion? And how can we possibly finance that when the world is already saturated with the debt that we’ve issued to stimulate us out of prior recessions?  [..]  I think we are on the edge of something that is much worse than what we had in 2008 and 2009. I look around the world at places where you can put your capital, real estate is overpriced, the stock market is greatly overpriced, the bond market is in a historic bubble, that’s about the best short sale I can think of in the world.”

http://www.internationalman.com/articles/peter-schiff-and-doug-casey-on-the-real-state-of-the-economy

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In Gold We Trust 2014

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“The In Gold We Trust 2014 report takes a sober look at the big picture in the monetary system and offers a holistic analysis of the gold sector. This is the eighth edtion of the report. It is written by Ronald Stoeferle who is the managing partner at Incrementum AG in Liechtenstein. He manages a global macro fund, focusing on a proprietary management approach, heavily influenced by the Austrian School of Economics.  Probably the most important of the ongoing trends is the frightening observation that we arrrived in terra incognita when it comes to our monetary world. This is the result of continuing monetary interventions by central banks around the world.”

http://www.incrementum.li/en/research-analysis/in-gold-we-trust-2014/

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Bill Bonner: There Is No Security in Bonds Right Now

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“Debt is always and everywhere a worry and a threat. It must be repaid. The more of it there is outstanding, the more cause for worry.  Who won’t be able to pay? And if he doesn’t pay, will his creditors still be solvent? What if the currency goes down? What if inflation goes up? Debt raises questions… and makes the financial system fragile.  As the quantity of debt increases, in other words, the quality should go the opposite direction. It doesn’t make sense for the amount of debt to increase as the price of it increases, too. It is contrary to the most basic law of supply and demand.  And yet, yesterday, the price of debt went up… even as the supply of debt worldwide reaches epochal levels.”

http://www.bonnerandpartners.com/there-is-no-security-in-bonds-right-now/

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Police Militarization: The New Search and Seizure

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“Supported by Minister of Defense Gustav Noske, right-wingers — including one Corporal Adolf Hitler — organized ex-soldiers into Freikorps, and armed them with surplus military weaponry. These militia brutally crushed Germany’s nascent post-war democratic movement. For the next 20 years, they provided the core of the feared Brownshirts, street thugs who helped Hitler and the Nazis into power.  Fast forward 100 years. Another faltering empire in domestic political crisis, the United States, brings its own frustrated warriors and their weapons back home.  Brownshirts in America — far-fetched? Not at all. They’re already here, this time dressed in black or camo.”

http://thesovereigninvestor.com/diversified-investments/police-militarization-new-search-seizure/

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How to Get Paid $28/Hour for Delivering Pizzas

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“Even notoriously stingy Walmart is starting new hires at $17 an hour.  Why are these businesses so eager to hire? Because business is booming. And business is booming because they’re near the Bakken, which is at the heart of America’s energy resurgence.  Oil companies, sensing an opportunity to profit, are luring workers to North Dakota by paying them top dollar. These workers then eat pizza and shop at Walmart. The result is a booming local economy.  Notice what is not part of this equation: the government.  Contrast North Dakota to the growing list of US cities that are attempting to force wages higher via minimum-wage increases.”

http://www.caseyresearch.com/cdd/how-to-get-paid-28-hour-for-delivering-pizzas

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When Zero’s Too High: Time preference versus central bankers

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“Central banking has taken interest rate reduction to its absurd conclusion. If observers thought the ECB had run out of room by holding its deposit rate at zero, Mario Draghi proved he is creative, cutting the ECB’s deposit rate to minus 0.10 percent, making it the first major central bank to institute a negative rate.  Can a central-bank edict force present goods to no longer have a premium over future goods?  Armed with high-powered math and models dancing in their heads, modern central bankers believe they are only limited by their imaginations.  More than half a decade of zero interest rates has not lifted anyone from poverty or created any jobs—it has simply caused more malinvestment.”

http://www.fee.org/the_freeman/detail/when-zeros-too-high

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Why the Resource Supercycle Is Still Intact

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“Strengthening copper prices, for example, do not immediately result in increased copper production in many market cycles, because the production cycle requires new deposits to be discovered, financed, and constructed—a process that can consume a decade.  Price declines—even declines below the industry’s total production costs—do not immediately cause massive production cuts. The ‘sunk capital’ involved in discovery and construction of mining projects and attendant infrastructure (such as smelters, railways, and ports) causes the industry to produce down to, and sometimes below, their cash costs of production.”

http://www.caseyresearch.com/articles/why-the-resource-supercycle-is-still-intact

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The Suicide of Communism: The Case for Patience

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“Through its satellite nations, it extended into Western Europe. It had been in operation for over 70 years. It had the most extensive system of control over thought and activities of any large society in the history of man. Yet, in one week, without any bloodshed, the leaders of the USSR simply abandoned it. Nothing like this had ever happened before.  Those of us who lived through it could barely appreciate the magnitude of it. That is because it was bloodless. There was almost no warning. The West had been involved in a great competition between the two systems from 1946 until 1991. Then, without warning, that competition ended. It caught Russians by surprise. It caught Westerners by surprise.”

http://www.garynorth.com/public/12642.cfm

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Withdrawing Political Legitimacy

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“The World Wide Web is the greatest idea-smuggling network in history. The question is: Which smuggling operations will put the Web to its most productive uses?  My statement of faith is this: not the state.  Smuggling can lead to secession. It can lead to a withdrawal of faith and hope in the messianic state. It can lead to institutional alternatives to the messianic state.  Example: online education as a substitute for tax-funded education. This is technically possible today. At some point, community by community, there will be a tipping point.  The mark of this tipping point will be this: the inability of local governments to get bond issues passed, despite the threatened loss of federal matching funds.”

http://www.garynorth.com/public/12641.cfm

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