Episode 15: Where’s the inflation? A discussion on monetary inflation and price inflation.
If you are interested in investing, there are 3 styles of analysis that you will want to learn about:
- Quant. This is the analysis of money flows and is sometimes called momentum investing. There are different aspects to it from basic charting, watching moving averages, watching trends, watching volatility, and looking at Volume Weighted Average Price (VWAP). VWAP especially has been a very successful way to invest in the last few years. Quant is relatively short term.
- Macro. Macro looks at economic trends and is more long term. It is important for reading where the market is at in an economic cycle. More and more it has been used to predict Central Bank action, since you no longer invest for economic growth and innovation, but instead speculate by placing bets on what the Fed is doing. For example, TESLA and Amazon are arguably worth about 10% of what they are currently priced, with TESLA probably worth zero due to its debts. But you can’t short them.
- Value. Value has been basically dead for a long time. Value looks at debt levels, profits, cash flows, and dividends. Ideally all you would look at would be value. You’d buy companies paying a nice dividend with potential for some growth. It still works in spotting egregiously crappy companies, and so can be helpful on the short side. However the main driver for stock price increases has been companies racking up debt and buying back their stocks.
In this Podcast I review the economic system known as distributism.
In this episode I define what social credit is, and how it is a major threat to Catholics from the Left.
I don’t want this to become an investment blog, but the ole Elliot Wave part of me is freaking out. Check out this beautiful set up:
Wave 1 finished around June ’11, Wave 3 ended around June ’15, and Wave 5 just completed a nice 1-3-5. This is the tricky part. We are definitely in the final wave 5, but it could extend.
Basically at a minimum be very defensive here. If you want to play it, don’t get greedy. Give up on Wave 1 down. Target would be somewhere around the 2200 level. Look for the A-B-C rebound then short. So if this wave 5 extends, no problem. Just be looking for that Wave 1 sell off for the short set-up. For reference, check out the beautiful A-B-C rally around March ’08.
Using the 2008 blood bath as a reference, the initial Wave 1 sell off took 2 months, with the snap back rally (Wave 2) lasting 1 month. If this is what is setting up, no need to get greedy, you’ll have time.
The Fed is going to raise again in September, so that may be the trigger.
Final note, chart was from a Zero Hedge article.
In this podcast I review Social Security and compare it to the program in Chile. I also comment on the future of Social Security, especially for the younger listeners.
I love the leftists in their lollipop world.
Owners of other kinds of plants keep shutting them down due to economic pressure: Massachusetts’ last coal-fired power plant just switched off, and one of three coal plants left in New England, in Connecticut, is slated to change to natural gas. The Pilgrim nuclear plant in Massachusetts is also scheduled to close.
But gas pipelines have proved challenging to build in the region, and capacity hasn’t expanded much. The grid operator has a new plan, starting next year, to offer financial rewards to generators that perform well when the system is taxed, though it acknowledged this may not be enough on the coldest days.
Peter Shattuck, who directs the Massachusetts office at the Acadia Center, which supports clean energy, said New England should rely on backup oil to run power plants until an expected surge in renewables comes in the next decade. He doesn’t favor gas pipelines.
“The big boost in renewables is coming,” he said. “We need to start using less gas.”
In summary, New England is shutting down coal and nuke plants, and plans on building more gas power plants. The only problem is that the eco-freaks won’t let anyone build new natural gas pipelines to supply the power plants. So the delusional Shattuck recommends running on backup oil. And how are you going to get the oil to the power plants idiot? If you can’t build a gas pipeline, how are you going to build an oil pipeline? You’ll also need huge tanks to store the oil. Then you can pay much higher rates for the oil fired electricity while you wait for the magical “renewables” to show up delivered by the flying unicorn that sh*ts rainbow skittles.
This reminds me of two quotes from Rand. In one, a producer was interogating a parasite trying to find out how he could be so delusional:
Producer: If you do these policies, you’ll starve. You are making it impossible to stay in business. How can you do this? What are you counting on?
Parasite: We don’t think about those things. That’s your business. You’ll figure it out.
Here Rand was showing that the problem is with the Producers agreeing to work in conditions where excellence is punished. Her solution is to let the parasites finally face the consequences of Leftism. This is known as Moral Hazard.
Next is her famous quote:
You can ignore reality, but you can’t ignore the consequences of ignoring reality.
So New England is heading full steam towards brown outs and black outs. Sit back and laugh. Take the advice of everyone’s favorite godless heathen (pray for his conversion) Aaron Clarey: Enjoy the Decline. (This is the title of his book, which will keep you sane. Pick up a copy.)
At some point (hopefully) we’ll have to fix the banking system and prevent the boom-bust cycles. Here’s a short list of requirements:
- End fractional reserve lending. All loans must come from deposits plus paid in capital.
- Eliminate Federal Reserve Notes and replace with the dollar.
- Preferably the dollar will be backed by gold, but there’s a chance all of our gold is gone.
- If we don’t have gold, switch to the green back. These are dollars issued by the treasury. The monetary base would grow 1% per year, i.e. the Treasury would issue 1% of monetary base each year and deposit the new money in the government account (reducing taxes).
- If GDP growth averaged 3%, we would have a mild deflation year in year out. So you would see a 2% real raise each year in falling prices. This is how economic productivity gains would be naturally spread out to the population.
- The FDIC would be eliminated.
- The Federal Reserve would become an insurance arm of the government, getting back to its original mission. It would buy long term instruments (e.g. mortgages) at a discount, and pay out the cash to troubled banks. So if your bank had a bank run, the bank would “repo” mortgages to the Fed, which would pay 90 cents on the dollar to the bank. Once the emergency is over, the bank would repay the money and get their mortgages back.
- End government usury, i.e. no government debt.
- Reinstate Glass Steagall. I don’t want my savings account dollars being invested in rehypothecated swaps on Albanian bond interest rate options.
Now I do have a problem with the greenback. The problem is the 1% limit. Given the history of our country where 90% of our government is unconstitutional (read the 9th and 10th amendment), you know they’d find a way around the 1% growth and start printing. This is why I prefer gold. However the greenback is superior to the Fed which quadrupled its balance sheet and is praying that the excess reserves don’t start draining into the economy (hyper inflation). I think the economy is so dead from Obama that they are safe, but it is a big risk to take.
I review the Lacy Hunt interview and posted on this blog. A discussion about usury and misallocation. Slight error, I said usury is charging interest on a “non-performing” loan. The correct definition is charging interest for a “non-productive” loan.
An excellent interview with Lacy Hunt. Ties in usury and misallocation. I’ll be picking up a copy of Kendlebergers Manias, Panics, and Crashes. Hunt seems to hold my thesis. Long bond yields go down and be very careful about the stock market. The purpose of this interview is not to advise you on investments, but to get you to think about the Austrian concept of misallocation, and how usury plays into that. Note Hunt uses the term “wrong kind of debt”. We’ll correctly identify that as USURY. Interview starts a few minutes in.