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Macro (117)

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Throwback Thursday Reads

  • On this day in 1965: In a boardroom on Cove St. in New Bedford, MA, a young, crew-cut Warren Buffett takes control of decrepit textile maker Berkshire Hathaway Inc., whose stock closes that day at $18 a share. Over the next thirty-three years, the stock price rises to $84,000 a share.  Source: Roger Lowenstein, Buffett: The Making of an American Capitalist (Random House, New York, 1995), p. 130. Courtesy of JasonZweig
  • GS, MS and others revised their GDP # to a negative after today's poor construction spending numbers.  A negative GDP print has many wondering if we are, in fact, in a recession.  A recession as defined by the Fed is two consecutive GDP reports. 
  • The weak U.S. recovery has nothing to do…

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China Firm Can Build TEN 3-D Houses In One Day

For a nifty $5,000, this too can be yours. Ouch!  OK clearly it's not luxury construction but for temporary housing, sturdy weather-resistance storage, camping (?) and housing the poor, quite the innovation. One can only imagine the long term implications for both housing..............and the construction worker.

A private company in east China recently used a giant printer set to print out ten full-sized houses within just one day.

The stand-alone one-story houses in the Shanghai Hi-Tech Industrial Park look just like ordinary buildings. They were created using an intelligent printing array in east China's city of Suzhou.

The array consists of four printers that are 10 meters wide and 6.6 meters high and use multi-directional automated sprays. The sprays emit a combination of cement and construction waste that…

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The Capital Flight No One Is Talking About

With recent market weakness, I'm amazed that supposedly factual, informative and unbiased (cough cough) news television isn't pondering the markets recent weakness being at all tied to FACTA. 

The Foreign Account Tax Compliance Act ("FATCA"), enacted in 2010, imposes a variety of requirements on foreign banks however foreign banks that do not report such information may be subject to a 30% withholding tax on payments they receive from U.S. sources. In order to avoid this withholding, beginning July 1, 2014, certain foreign banks will be required to report information to the IRS about U.S. account holders with accounts of $50,000 or more.

Let that sink in a moment.  That's HUUUGE money we're talking about.

Beginning July 1st, there will be…

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Education Cost Concerns Highest Among Young Adults

High cost of tuition and college loans ties with overall lack of money or low wages as the top concern of those aged 30 to 49. Housing costs also emerge as a relatively bigger concern for younger adults (14%)

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Admin

Is Clean Energy A Fad?

At their inception, autos were considered speculative investments. In fact, so were railroads, the light bulb, telephone and internet.  They'll never catch on.  It'll be too expensive.  No one will be able to afford it.  There's no infrastructure for it.  It'll pass.  It's a FAD.

McKinsey feels "The world is on the cusp of a resource revolution". 

So, is cleantech failing? In a word, no. Rather, the sector has experienced a cycle of excitement followed by high (and often inflated) expectations, disillusionment, consolidation, and then…

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Robot vs. Worker

Eerie or creeped out is a good way to explain how you'll feel watching this video on how much robots have replaced the worker but it's estimated that nearly 50% of jobs out there could be replaced by automation over the next few decades.  50% MORE!  Bottom line:  Force your kid to stay in school, no matter what it takes.

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Admin

China's Hard Landing Ahead?

I drink my tea on this cold and rainy day and my first thought, as I looked at this chart, that screamed in my brain was "the debt the debt!  omg what are they thinking?"

History suggests that China’s Minsky Moment is approaching quickly, since corporate debt has topped 150% and total debt is over 210%. Investors around the world should prepare for the inevitable demand shocks and falloff in global growth … regardless of the specific outcome. The Chinese government may have the assets to backstop a truly horrific crisis and maintain slow growth in the 2-3% range, but history suggests that China could land very hard.

Over the last fifty years, every investment boom coupled with…

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We Have No Inflation? What Of Cost To Rent?

It makes me insane when the Fed says inflation remains subdued.  Subdued?  idk where they live but my rent in 2013 went up 7% and this year, 9%.  A 2-liter bottle of CocaCola used to be .99 cents.  Now it's $1.99.  Don't even get me started on the ridiculous increase in crude oil versus a few years ago (doubled) and how small a bag of my favorite chips has become 1/3 the size for the same price.  Oh, that's right.  They don't include food and energy (the stuff that always goes up).

Last time I looked, housing cost was still included in inflation numbers but yet today a minimum wage person would have to work two weeks just to pay the rent.  Forget about the electric, cable, phone or food.  Oh wait, let's see…

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China Beware The Ides Of March?

While the U.S. saw their home prices plunge and begin to recover, China and Canada have still been in what's been considered a housing price bubble.  China even more worrisome when you consider their large shadow banking system (alleged to be 25-30% of their entire financial system) which runs behind the scenes and basically ignored by larger banks.  They are, after all, providing a service to small business and investor but at risk and what cost? 

(China home price index to the left - Canada's home pricing index to the right. )

In 2013 Fitch estimated China's shadow banking…

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S&P - Slower Growth in China; Inevitable And Necesssary

  • The days of GDP growth of over 9% in China appear over. Growth of 7%-7.5% seems to be the "new normal"; the authorities now seem comfortable with growth rates that they recently viewed as unacceptably low.
  • We see three elements at work in the restrained policy reaction: first, growth was bound to slow inevitably as China converges with the advanced economies; second, more leverage in the economy means that the growth versus a trade-off in financial stability is more fully in play; and third, a tighter labor market with higher wage growth means that slower GDP growth is now more politically palatable.
  • While slower growth will make the Chinese economy more sustainable on some metrics, there is still a need to rotate the drivers of growth toward consumption, which has yet to happen.…

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Admin
As it stands, JPM believes the Fed will not being to taper until their December meeting UNLESS labor improvements continue as they have the last six months; at which point then they look to the September meeting as the most obvious time (after Jackson Hole).

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The Cost of Robbing Peter To Pay Paul

The government now has a greater command over the nation’s resources. But it is equally obvious that no one can raise revenue without someone else bearing the cost. To deny it would imply revenues could be raised for free, which would imply that wealth could be created by printing more money........ So now we know we have a slightly better understanding of who pays: whoever is furthest away from the newly created money. And we have a better understanding of how they pay: through a reduction in their own spending power.

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Admin

Crude Oil Spikes and Historic Recessions

"I've just completed a new research paper that surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Here I report the paper's summary of oil market disruptions and economic downturns since the Second World War. Every recession (with one exception) was preceded by an increase in oil prices, and every oil market disruption (with one exception) was followed by an economic recession."

The table above itemizes the particular postwar events that are reviewed in detail in my paper. The paper also provides the following summary…

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