Hot Off The Press, Here Is Gartman’s Nikkei “Target” In “Violently Plunging Yen” Terms

You asked for it, and here it is: Dennis Gartman’s take on the Great Nikkei “price target”

THE YEN HAS VIOLENTLY PLUNGED… VERY VIOLENTLY… and the Nikkei has soared, and they should given the “double barrel” announcements from the Bank of Japan and from the Japanese Government Pension Investment Fund with the former pledging to expand its balance sheet materially and with the latter finally give fuller guidance as to the expansion of investment in equities it shall allow for the nation’s pension funds.

 

… The Bank notes the better economic environs but it is far more concerned about the prospects of deflation and/or of dis-inflation and has moved aggressively to countermand those forces. Caution has been thrown to the winds in Japan and we shall applaud the Bank for taking this action.

 

It is not our duty to tell the monetary authorities what they should be doing for that is not our portfolio. Rather, our portfolio here is to be a mercantilist warrior on the battle field of investments, joining the fight on the side of the “team” that is winning and whose “weaponry” is both the best, the largest and the most prone to being used. Our portfolio is to be agnostic; to watch for changes and to act accordingly to those changes. Hence if the monetary authorities intend to act expansively, it is folly on our part to take the other side of their trade for their “margin accounts” are far, far larger than is ours. If the Bank of Japan is going to expand its reserves and if the guardians of the pension funds there are doing to toss caution to the wind then so too should we.

 

* * *

 

THE NIKKEI: BLAST OFF!: It shall be very, very hard to do, but the Nikkei is only now just breaking out to the upside and so we should buy it while selling the Yen at the same time. The “hard trade” is always the best trade and it is going to be very hard to buy this market but we have to with 24-25 thousand as a target.

Of course, Gartman had a typo: he meant the “herd trade.

And speaking of Gartman, here is a quick stroll down memory lane courtesy of @TMFHousel




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Fed Launches First Currency War Salvo, Tells ECB Not To Push Too Far

Now that The Fed is (however briefly) out of the money-printing business, it appears to have turned its attention to the rest of the world’s “despicable monetary policy” actions and fired what seems to be the first warning shot of ‘currency wars 2.0’, as MarketNews reports:

  • ECB SOURCE SAY EUR3 BILLION BALANCE SHEET TARGET NOT IN THE CARDS: MNI
  • ECB SOURCE FED HAS NOTICED EUR SLIDE AND ECB MUST NOT PUSH TOO FAR: MNI

One wonders how long before Jack Lew also proclaims Japan a ‘currency manipulator’ (and, gasp, the Eurozone) especially after Germany’s Wolfgang Schaeuble reminded the world this morning that “growth can’t be helped by printing money.” You don’t say…

The EUR reacted…

 




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Only A Few More QEs To Go Until Argentina

Because nothing says economic strength like nominal equity market gains

 

 

A gentle reminder from the past…

Amid the euphoria… Kyle Bass provided a few minutes of sanity this morning in an interview with CNBC's Gary Kaminsky. Bass starts by reflecting on the ongoing (and escalating) money-printing (or balance sheet expansion as we noted here) as the driver of stock movements currently and would not be surprised to see them move higher still (given the ongoing printing expected).

 

 

However, he caveats that nominally bullish statement with a critical point, "Zimbabwe's stock market was the best performer this decade – but your entire portfolio now buys you 3 eggs" as purchasing power is crushed. Investors, he says, are "too focused on nominal prices" as the rate of growth of the monetary base is destroying true wealth. Bass is convinced that cost-push inflation is coming (as the velocity of money will move once psychology shifts) and investors must not take their eye off the insidious nature of underlying inflation – no matter what we are told by the government (as they will always lie when its critical). Own 'productive assets', finance them at low fixed rates (thank you Ben)…

*  *  *

Just ask the Venezuelans…




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How Long Can The Top 10% Households Prop Up The “Recovery”?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The question of "recovery" really boils down to this: how much longer can the top 10% prop up the expansion?

A flurry of recent media stories have addressed housing unaffordability, for example Why Middle-Class Americans Can't Afford to Live in Liberal Cities.
 
The topic of housing unaffordability crosses party lines: Housing Ownership Back to 1995 Levels (U.S. Census Bureau).
 
Other stories reflect an enduring interest in the questions, what is a living wage?and what is a middle-class income? These questions express the anxiety that naturally arises from the sense that we're sliding downhill in terms of our purchasing power–a reality that is confirmed by this chart:
 
Here's a recent story that delves into the question of "getting by" versus "middle class": How Much Money Does the Middle Class Need to Get By?

"Just getting by" in costly coastal cities requires an income in the top 20%: around $60,000 for individuals and $100,000 for households.
 
The article references MIT's Living Wage Calculator, which I found to be unrealistic in terms of the high-cost cities I know well (Honolulu and the San Francisco Bay Area). It appears the calculator data does not represent actual rents or food prices; the general estimates it uses woefully under-represent on-the-ground reality.
 
Current market rents in the S.F. Bay Area far exceed the estimated housing costs in this calculator, and that one line item pushes the living wage from $36,000 for two adults closer to $45,000 in my estimate–roughly the average wage in the U.S. (not the median wage, which is $28,000).
 
If you want to know where you stand income-wise, here is a handy calculator: What Is Your U.S. Income Percentile Ranking?
 
Here are the data sources:
 
Wage Statistics for 2013 (Social Security Administration)
 
2013 Household Income Data Tables (U.S. Census Bureau)
 
There are many complexities in these questions. For example, Social Security data does not include food stamps, housing and healthcare subsidies provided by the government, etc., so lower-income households' real (equivalent) income is much higher than the published data.
 
Then there are the regional differences, which are considerable; $50,000 in a Left or Right Coast city is "just getting by" but it buys much more in other less pricey regions.
 
As for what household income qualifies as "middle class"–it depends on your definition of middle class. In my view, the definition has been watered down to the point that "middle class" today is actually working class, if we list attributes of the "middle class" that were taken for granted in the postwar era of widespread prosperity circa the 1960s.
 
In What Does It Take To Be Middle Class? (December 5, 2013), I listed 10 basic "threshold" attributes and two higher qualifications for membership in the middle class. Please have a look if you're interested.
 
I came up with an annual income of $106,000 for two self-employed wage earners and the mid-$90,000 range for two employed wage earners, the difference being the self-employed couple have to pay 100% of their healthcare insurance, as there is no employer to cover that staggering expense.
 
$90,000 puts a household in the top 25%, and $101,000 places the household in the top 20%. $150,000 a year qualifies as a top 10% household income.
 
If we set aside income and consider net worth, net worth (i.e. ownership of assets and wealth) of most households is modest:
 
This shows the decline in household wealth since 2003:
 
Can an economy in which the majority of households are "just getting by" experience robust growth, i.e. "recovery"? If we discount the millions of households who are paying for today's consumption with tomorrow's earnings, i.e. credit cards, auto loans, student loans, etc., I think it's self-evident that only the top 20% (and perhaps really only the top 10%) have the income and net worth to expand a $16 trillion economy.
 
By definition, the top 10% cannot be "middle class." Yet it seems that these top 12 million households are propping up the "recovery"–dining out at pricey bistros, paying $200 a night for hotels, buying homes that cost $500,000 and up, paying slip fees for their boats, funding their children's college education with cash rather than loans, etc.
 

The question of "recovery" really boils down to this: how much longer can the increasing debt of the bottom 90% and the wealth of the top 10% prop up the expansion?

 




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Fed’s Kocherlakota Explains Why He Wants Moar

The lone dissenting dove at this week’s ‘end-of-QE’ FOMC meeting has taken digital pen to pixelated paper to explain why moar is better and the Fed should not stop printing…“Of course, there are costs and benefits to every monetary policy action and inaction, and assessing those costs and benefits is by no means straightforward. On this occasion, my assessment differed from that of my colleagues,” as he believes the inflation outlook has worsened.

As a reminder, Kocherlakota was the ‘gentleman’ who fired dissenting economists at the Minneapolis Fed for disgreeing with his Neo-Keynesian philosophy.

*  *  *

Statement on Dissenting Vote at October 29, 2014, Meeting of the Federal Open Market Committee

Earlier this week, I dissented from the Federal Open Market Committee (FOMC) decision. I felt that the FOMC needed to reduce possible downside risk to the credibility of its 2 percent inflation target by taking more purposeful steps to move inflation back up to 2 percent. In this statement, I will elaborate on the thinking behind my decision.

 

At the launch of the reduction in asset purchases in December 2013, the FOMC statement said that the Committee would be “monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.” At this stage, I see no such evidence. In my assessment, the medium-term outlook for inflation has shown no overall improvement since last December and, indeed, is arguably worse. Failing to act in response to this subdued inflation outlook increases the downside risk to the credibility of our 2 percent inflation target. Market-based measures of longer-term inflation expectations have fallen recently to unusually low levels, a decline that I believe reflects that kind of increased downside risk.

 

As we have seen in Japan and may now be seeing in Europe, the credibility of central bank inflation targets cannot be taken for granted. Rather, central banks need to take actions on an ongoing basis to ensure that inflation stays at target. In light of the evolution of the data over the past few months, I believe we needed to take such actions on Wednesday.

 

There are a number of possible actions that I would have seen as responsive to the evolution of the data. Let me describe two in particular. First, the Committee could have continued to buy $15 billion of longer-term assets per month. Second, it could have committed to keeping the target range for the federal funds rate at its current level at least until the one- to two-year-ahead inflation outlook has risen back to 2 percent, as long as risks to financial stability remain well-contained. These actions would have put upward pressure on the demand for goods and services and on prices. Just as importantly, these actions would have communicated that the Committee is determined to do what it takes to push inflation back to 2 percent as rapidly as is possible.

 

Of course, there are costs and benefits to every monetary policy action and inaction, and assessing those costs and benefits is by no means straightforward. On this occasion, my assessment differed from that of my colleagues. Such occasional differences in perspectives are, I think, hardly surprising given the complicated nature of the decision problem that we face. But those differences should not obscure the collective commitment that my FOMC colleagues and I all share to the dual mandate objectives of price stability and maximum employment that Congress has established for the Committee. I look forward to working with my colleagues in future meetings, under Chair Yellen’s leadership, to achieve those objectives.

*  *  *




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L.P. Candidate Sean Haugh Makes No Bones About His Support for Medicaid Expansion

Sean Haugh, Libertarian candidate for U.S. SenateMost of Sean Haugh’s positions are pretty
much what you would expect from a Libertarian Party candidate.
Haugh, who’s running for U.S. Senate in North Carolina, favors
legalizing marijuana and opposes any restrictions on abortion. He
says his top priority is to end “all war.” But nestled among the
unremarkable is one stance that’s, well, not like the others.
The Weekly Standard
reports
:

Asked if he thought it was a mistake to reject additional
federal funding to expand Medicaid under Obamacare, Haugh replied,
“I do.”

“The rejection of the Medicaid expansion dollars—which on the
surface you could kind of make a libertarian case for—but the end
users have suffered.”

The notion that choosing not to expand a massive welfare program
is only “kind of” a libertarian thing to do is a bit of a head
scratcher. Federal grants to the states for Medicaid and the Child
Health Insurance Program totaled $265 billion in 2012. Under
Obamacare, states can get even more money in exchange for agreeing
to let a wider population, including non-disabled adults without
children, into the program.

A number of states, including North Carolina, have opted to
forgo the extra funds after the Supreme Court in 2012 issued a
decision that safeguards their ability to do so without facing
retribution from Washington.

Haugh’s position seems to be that lawmakers in Raleigh were
wrong for not voluntarily adding another 800,000-or-so people to
their Medicaid rolls. In a July 12
Facebook post
, the Senate hopeful went even
further, implying that when states don’t expand the program,
“people die.” As evidence, he linked to a
news story
about a North Carolina hospital that will soon be
shuttered:

Vidant Health System executives cited North Carolina’s decision
not to participate in federally funded Medicaid expansion as a
factor in the decision to close the hospital.

Haugh, who has worked in the hospital industry, talked about
this issue at more length in a
video
 for his campaign website. “As a libertarian, I
definitely want to reform and eventually eliminate federal
involvement in health care,” he says in the video. “But I’ll be
damned if I’m going to throw grandma out on the street to
accomplish that.”

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Democrats are Running on the Wrong Issues

In the Colorado Senate race, Democrat
Mark Udall, the incumbent, has arguably pursued the “War on Women”
strategy with more vigor than any other Democrat this year. He’s
run so many ads focused on the “women’s issues” of contraception
and abortion that he’s been dubbed “Mark
Uterus.”

The strategy doesn’t appear to be working very well. Although
Udall leads by six points amongst likely women voters, who support
him 45-39, Udall is down overall against his Republican opponent,
Cory Gardner, who leads with 46 percent of likely voters overall,
according to a Quinnipac poll released yesterday. With just 39
percent of likely voters saying they plan to support Udall, he’s

down
by seven points. 

A new poll from the Associated Press helps explain why this
strategy, versions of which are being run by Democratic candidates
across the country, is falling flat: This year, most voters care
more about economic issues than social issues.
Via
the AP:

Only 32 percent of likely voters called gay marriage an
important issue, compared with 91 percent ranking the economy
important, 78 percent with similar concerns about health care and
74 percent naming Ebola important. The issue that some Democrats
have emphasized most of all – abortion rights – also has been a
relatively low priority, with only 43 percent of likely voters in a
September poll ranking it important.

…One domestic issue that remains a priority for Americans is
health care. Only 3 in 10 say they support the overhaul passed in
2010, while nearly half (48 percent) oppose it.

Democrats are running on issues that many voters consider low
priority. But they may not have had much choice. As a Gallup poll
foundrecently, Democrats are winning on issues like contraception,
but Republicans are now
more trusted
on higher priority issues like the economy and the
budget deficit. As Gallup concluded, “it has become pretty clear
that Republicans have a distinct and emerging issue advantage in
the 2014 campaign.”

Part of what’s fascinating is that this is happening despite how
thin the GOP agenda continues to be. Republicans have campaigned
heavily against Obama this year, but have been reluctant to offer
specifics about what they support. Democrats are running on the
wrong issues; Republicans are running on no issues. Yet voters seem
to prefer whatever it is the GOP stands for to what Democrats have
already done and still have to offer.

But what this also suggests is the increasing weakness of the
Democratic agenda as well. We have been hearing for years now that
the GOP is out of ideas, and there is an awful lot of truth to
that. But Democrats do not seem to have much of a grand to-do list
either. And what they do have does not seem to be particularly
motivating. As I’ve argued before, we’ve entered a post-policy
moment
for both parties, in which both sides have exhausted
their agendas. Whatever comes next is going to be very
interesting. 

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The City of South Miami Wants to Split Florida in Two

But I repeat myself.The City of South Miami wants to secede from
Florida. No, not by itself: In a
resolution
passed earlier this month, the mayor and city
commission proposed that 24 counties leave the state together,
setting up a new state that they’d call South Florida and forcing
the rest of us to confront the thought of a world with two Floridas
in it.

Like many of the country’s secessionist movements, which pop up
periodically in regions ranging from eastern
Washington
to
western Maryland
, from northern
California
to New
York City
, the Miami revolt reflects a cultural divide. North
Florida is more southern than South Florida—yes, I know how weird
that sentence sounds—and that sometimes manifests itself in ways
more consequential than whether there are any good Cuban
restaurants in town. Right now, the resolution complains, “in order
to address the concerns of South Florida, it is necessary to travel
to Tallahassee in North Florida. Often South Florida issues do not
receive the support of Tallahassee. This is despite the fact that
South Florida generates more than 69% of the state’s revenue and
contains 67% of the state’s population.” Similar sentiments
inspired a pair of split-the-state resolutions a few years ago in
the towns of
North Lauderdale and Margate
.

But there’s another factor this time: fear of climate change.
The built-up coastal communities on the southern tip of the state
are worried about rising sea levels, and they don’t think they’re
getting the support they need from the legislature. Here’s a
section from the South Miami resolution:

Whereas, climate change is a
scientific reality resulting in global warming and rising sea
level; and

Whereas, it is estimated that there will be a 3 to
6 foot sea level rise by the end of this century. In addition,
South Florida has very porous rock and, as the level of the sea
rises, the pressure will cause water to rise up through the ground
and flood the inland areas; and

Whereas, South Florida’s situation is very
precarious and in need of immediate attention. Many of the issues
facing South Florida are not political, but are now significant
safety issues…

We’re used to hearing global warming invoked to justify
centralization, not decentralization. Occasionally someone like
Elinor Ostrom will break with
that consensus
, but that’s rare. The general assumption is that
the way to deal with climate change is to try to prevent it at
the source, and that the way to prevent it is to create a globally
binding agreement. World leaders haven’t
had much luck
with that plan so far, and I doubt that’s going
to change anytime soon.

And so we’re hearing more about adaptation as
well as prevention. But adaptation is a decentralized process, not
a centralized one, with adjustments made by ports, private
companies, city and county governments, and other entities directly
affected by changing conditions. That doesn’t mean the feds are
left out—they’re getting hit up for subsidies and other sorts of
help—but the decisions are being made at relatively local levels,
and not always in the public sector. Those decisions don’t
always even require people to agree about what causes warming or
whether it’s happening at all. When my wife covers the effects of
rising sea levels on the Eastern Shore or the
islands of the Chesapeake Bay
, the locals will often tell her
they think the streets are being flooded because of erosion or poor
drainage rather than climate change. But that doesn’t mean they
don’t want to do anything about it.

This is the other side of climate politics: a messy and largely
local trial-and-error process being carried out far from the
international summits that seize the headlines. That, plus the
occasional flare-up into something strange, like a secessionist
movement in the Miami suburbs. Save your Spanish doubloons, boys,
South Florida will rise again!

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