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The Oil Crunch Begins To Bite

The repercussions are going to be vicious
Monday, February 2, 2015, 10:39 PM

While much of the financial press has been working to cast the drop in oil prices as 'unambiguously good' for US and global economies, the reality is, well, a lot more ambiguous. » Read more

video

This chapter of the new Crash Course series has not yet been made available to the public.

Each week over the rest of 2014, in sequential order, a new chapter will be made publicly available (we've currently published up to Chapter 17)

If you don't want to wait, you can:

 

 

 

 

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The Trouble with Numbers

Our 'good' data worsens the closer we look
Tuesday, June 10, 2014, 12:06 PM

According to the ever-strident popular press, the world is in recovery. The stock market says so, the bond market says so, and the politicians and monetary bureaucrats all say so.

The only trouble is the central banks continue to flood the world with liquidity, something they shouldn't need to be doing if a true recovery were really upon us. » Read more

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Why Demand Will Become Even More Scarce

Prospects for disinflation in 2014
Tuesday, April 22, 2014, 1:14 PM

Executive Summary

  • Anemic employment & wages growth depresses the odds of near-term interest rate hikes
  • Why energy costs increases are experiencing a lull, keeping inflation lower than many expected
  • The demographic arguments for deflation
  • Why the US is becoming more vulnerable to a repricing of natural gas -- vs oil -- in the coming decade

If you have not yet read Part I: When Every Country Wants to Sell, Who Buys?, available free to all readers, please click here to read it first.

The most recent US jobs report was once again a disappointment, despite the headline number of 192,000 jobs created. Over the past two years, the economy has reliably created about 150,000 jobs per month. This has been just enough to keep up with population growth, but alas, not enough to put the long-term unemployed back to work. The concerning data in the report came in the details of the jobs created: as usual--and this has been a trend for several years now--mostly in the lower wage sectors. A few wrap-up tweets from Dan Alpert of Westwood Capital summed up the facts rather nicely:

Other notable observations from recent trends in US jobs reports include the fact that job creation in 2013 was no higher than in 2012. Not exactly an encouraging trend for those who would be looking for inflation risk, or strong growth in 2014.

But perhaps worst of all has been the number of workers leaving the workforce. Part of this can be explained, of course, by demographic retirements. It's no secret that the US has an aging population, and there's a bulge of retiring workers that will admittedly create some gaps in the labor market over the next decade. But the large numbers of workers exiting the workforce is also explained by discouraged workers, and that unemployment benefits for many have started running out.

What many in the public do not understand, is that workers taking unemployment checks are counted as active seekers of employment. They are added to the composition of the workforce, and when they continue to take unemployment checks but do not find work, they serve to keep the unemployment rate elevated. But when unemployment benefits expire, and workers leave the workforce, the unemployment rate may... » Read more

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Off the Cuff: Baffling with B(L)S

When the numbers aren't good, change them
Thursday, August 1, 2013, 12:42 PM

In this week's Off the Cuff podcast, Chris and Charles discuss:

  • BLS B.S.
    • Almost a century of GDP numbers revised
  • Fed Fakeout
    • Markets rise on non-news from the Fed
  • The Next Fed Head
    • What the Chairmanship transition likely will bring
  • The Coming Correction
    • Smart ways to position in advance
Blog

2012 Year in Review

Free markets, rule of law, and other urban legends
Friday, December 21, 2012, 3:34 PM

Background

I was just trying to figure it all out.

~ Michael Burry, hedge fund manager

Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.

For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4

Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5 » Read more

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Dreamstime

Where Stock Prices Are Headed Over the Next Year

The battle between the real economy and asset prices
Tuesday, October 16, 2012, 11:12 AM

Executive Summary

  • Why household balance sheets are worse off than advertised
  • Why the recent rosy BLS jobs numbers actually mean bad news
  • How the Fed is squeezing investor capital out of other traditional asset pools and into the stock market
  • Expect to see the stock market moving higher in 2013; that is, until QE3 fails
  • What to expect if QE3 fails sooner than anticipated

If you have not yet read Part I: The Future of Gold, Oil & the Dollar, available free to all readers, please click here to read it first.

Market historians have recently started to point out that the current advance in the S&P500 is now 40 months old and has made gains of over 115% since the March 2009 lows. In other words, the doubling from the lows in price and the duration of the advance now late in its third year together suggest that a cyclical top is near. Furthermore, despite some noise in U.S. macro data – which has been briefly more hopeful, yet remains well within the phase of stagnation – earnings estimates have been coming down as the world economy continues to shift into lower gear.

Perhaps for the first time in a while, we can actually say that the Fed's decision to start QE3 was moderately anticipatory, in contrast to its ad-hoc and reactive policymaking over the past five years. It is not merely that the Fed soberly accepted that the economy was not getting better. The stagnant, tractionless macro data over the past year has spoken quite loudly to that fact. Indeed, the U.S. economy is merely treading water, and the Fed's move to QE3 serves as a sharp retort to those who would relentlessly attempt to portray stagnation as recovery. » Read more