Tag: news

Here’s a great way to lose a lot of money–

shutterstock 93925792 150x150 Heres a great way to lose a lot of money

January 16, 2014
Santiago, Chile

There’s a nasty little parasite that exists in nature known as the nematomorph hairworm (Spinochordodes tellinii) which typically infects grasshoppers and crickets.

Once fully grown, the worm is able to profoundly affect the behavior of its host; most notably, the worm can actually compel a grasshopper to throw itself into water.

This is great for the worm as it needs the moisture to reproduce. But for the grasshopper, it’s deadly.

There’s another vile protozoan known as Toxoplasma gondii. According to a 2007 study, rats and mice who are infected with it demonstrate a marked reduction in natural defenses, making them far more susceptible to being eaten by cats.

Nature is full of these unpleasant parasites which cause their hosts to engage in irrational, destructive, or even suicidal behavior.

Of course, they exist for humans too… especially for investors. In fact probably the number one parasite which affects investors is a very peculiar emotion: fear.

Specifically, it’s the fear of missing out that drives so much irrational investment behavior. Nobody wants to miss a big boom, no matter how baseless the fundamentals.

It’s this fear of missing out that compels people to continue investing in stocks, even though they are near all-time highs and trading at Price/Earnings ratios that are historically dangerous.

Ironically, this fear of missing out is stronger than the fear of loss. But if everyone else is jumping in, it’s easier to ignore the obvious risks of losing our life’s savings investing in ridiculously overvalued stocks.

Following the crowd is a great way to lose a lot of money.

Some of the most successful investors in history have been those who had the courage to go against the investment herd mentality. They conquered the fear of missing out, and they bought what everyone else hated… or looked where nobody else was looking.

In today’s investment climate, though, where central bankers are printing trillions of dollars per year and pushing up the prices of assets everywhere, it’s hard to find too many sectors or asset classes that are ‘hated’. But a few exist:

1) Precious metals

The market has all but stuck a fork in gold. It’s done. Or at least, so says the conventional wisdom. Taper talk and sentiment of stronger economic growth have prompted investors to mostly abandon gold, silver, platinum, etc.

2) Mining companies

With losses in the metals and mining margins declining, share prices for mining companies have gone from ugly to bufugly… and many long-term mining investors are collectively ripping their faces off.

3) Emerging market currencies

Currencies across the developing world– Turkey, India Indonesia, Uruguay, etc. have been battered senselessly over the last few months on fears of a global slowdown despite many of those nations’ stronger economic and demographic fundamentals.

As for what’s not hated– that’s easy. Stocks in the US and Western Europe are at/near all-time highs.

The Chinese renminbi is at a multi-year high. And inexplicably, the market is showing a lot of confidence in both the euro and the dollar right now.

Government bonds of heavily indebted western governments are still viewed as no-brainer safe havens.

The governments of Spain and Italy, in fact, just issued new bonds at a record low yields… nevermind 57.7% youth unemployment or obscene levels of debt and deficit spending.

And, despite gradually rising interest rates which adversely impact prices and affordability, US housing is once again front and center in the media as a safe investment.

Last– what’s not even on the radar of the collective investment herd?

In my view, few conventional investors are even thinking about farmland overseas (ex-US), or private equity in developing markets. More on those soon.

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Best Buy’s Collapse Was Not A Surprise To This Man

It would appear that the meteoric 300% rise of Best Buy’s shares last year was promoted to the general investing public as the renaissance of the on-the-verge-of-bankruptcy warehouse store and sure enough, the world and his mom piled in to chase the momo higher and higher… until today. With a 30% tumble this morning, those momo-chasing moms and pops may be less enamored to buy-the-dip but there was one ‘smart-money’ insider who was selling as fast as retail was buying. Co-Founder Richard Schulze (who indicated in August he would be selling to ‘diversify’ his holdings) piled out of the stock through most of the fourth quarter (at a level well above this morning’s opening print).

 

 

Chart: Bloomberg


    



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Best Buy's Collapse Was Not A Surprise To This Man

It would appear that the meteoric 300% rise of Best Buy’s shares last year was promoted to the general investing public as the renaissance of the on-the-verge-of-bankruptcy warehouse store and sure enough, the world and his mom piled in to chase the momo higher and higher… until today. With a 30% tumble this morning, those momo-chasing moms and pops may be less enamored to buy-the-dip but there was one ‘smart-money’ insider who was selling as fast as retail was buying. Co-Founder Richard Schulze (who indicated in August he would be selling to ‘diversify’ his holdings) piled out of the stock through most of the fourth quarter (at a level well above this morning’s opening print).

 

 

Chart: Bloomberg


    



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Who Has The Time And Motivation to Comprehend The Mess We’re In? Almost Nobody

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action.

When it comes time to assess our grasp of the dynamics of this unprecedented era, how do you reckon historians will grade our collective political "leadership," intelligentsia, central state, corporate leadership and the "common man/woman" citizen? Did we rise to the occasion or did we falter, not in acting to counter the dissolution of the Status Quo, but in simply making a concerted effort to understand the tangled web of lies, corruption, perverse incentives, unintended consequences, simplistic (and utterly misguided) ideologies, not to mention the real-world limits of a supposedly limitless world, that have become the key dynamics of this era?

I suspect future historians (presuming the funding of such scholarly assessments survives) will grade all categories either F or D-. The reasons are not difficult to discern, and it behooves us to understand why we are collectively so ill-prepared to understand our era, much less fix what's broken before the whole over-ripe mess collapses in a heap.

1. Intellectual laziness. Very few people are willing to work hard enough to figure things out on their own. It's so much easier to join Paul Krugman dancing around the fire of the Keynesian Cargo Cult, chanting "aggregate demand! Humba-Humba!" while waving dead chickens than ditch reductionist, naive ideologies and actually work through an independent analysis.

2. Independent thinking is an excellent way to get fired, demoted or sent to Siberia. Though America claims to value independent thinking, this is just another pernicious lie: what America values is the ability to mask failing conventional ideas and systems with a thin gloss of "fresh thinking."
In other words, what the American state and corporatocracy value is the appearance of independent thinking, not the real thing. Since the real thing will get you fired, everyone who works for government or Corporate America masters the fine arts of producing simulacra, legerdemain and illusion. This only further obscures the real dynamics, making legitimate analysis that much more difficult.

3. Relatively few have any incentive to question authority, the state or the corporatocracy. Humans excel at figuring out which side of the bread is buttered, and who's lathering on the butter: self-interest is the ultimate human survival trait (we cooperate because it serves our self-interest to do so).

While we cannot hold the pursuit of self-interest against any individual–after all, who among us truly acts selflessly when push comes to shove?–we can monitor the monumentally negative consequences of self-interest and complicity on the systems and Commons we share.

When roughly half of all households are drawing direct cash/benefits from the central state, how many of those people are interested in doing anything that might put their place at the feeding trough at risk? Sure, people will grouse about this or that (usually related to the conviction that they deserve more or have been cheated out of "their fair share"), but as long as the government payments, direct deposits and benefits keep coming, what possible motivation is there for the recipients to devote energy to investigating the potential collapse of the gravy train?

Corporate America is no different. The store may be devoid of customers, but the employees will strive to look busy to keep the paychecks coming until the inevitable lay-off/implosion occurs. How many Corporate America employees will critique their way out of a paycheck? In an environment this difficult for job-seekers, you'd be nuts to bother figuring out why your division is failing, knowing as you do that the truth will result in the "termination with extreme prejudice" of the naive fools who presented the truth as if it would be welcome
.
Does anyone seriously imagine that any employee of a bloated bureaucracy will ever voluntarily challenge the squandering of revenues when that might cost them their own paycheck, bonus, contract for their brother-in-law, etc.? A few protected people (professors with tenure, for example) can be "brave," but their "bravery" is cheap: their protestations cannot trigger termination with extreme prejudice, so the gesture of resistance is just that, a gesture.

4. Those relative few who might have a real motivation to undertake independent analysis have little time to pursue this noble project. They are working absurd hours and enduring absurd commutes. Between getting the bundles of diapers into the elevator and planning what to cook for dinner, there is precious little time or energy left for figuring out the mess we're in. Just getting to a second or third job can suck up a significant amount of time, money amd energy.

And so the busy employee/sole-proprietor/contract worker listens to NPR or some talk radio program for a few minutes, reinforcing their ideology of choice, and turns on the "news" (laughably bad propaganda churned up with "if it bleeds, it leads") as background noise and spends whatever personal time they have on Roku, Netflix, Facebook, Twitter, email, etc. seeking distraction or solace from the daily workload.

In a strange irony, there are plenty of citizens who have plenty of time (recall that Americans manage to watch 6-8 hours of TV a day), but their marginalized status and dependence on the state drains them of motivation to do anything but seek amusement and distraction.

If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action. In other words, the four points above doom us just as surely as the dynamics of insolvency, corruption, debt servitude, Tyranny of the Majority, etc. etc. etc.

Choose your metaphor of choice, but rearranging the deck chairs on the Titanic has a nice ironic texture in an election year, when the "news" will be focusing on rearranging the political deck chairs on the first class deck–at least when there's no celebrity ruckus or "if it bleeds, it leads" to crowd out what passes for "hard news" in a regime dedicated to the distractions of bread and circuses.


    



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Who Has The Time And Motivation to Comprehend The Mess We're In? Almost Nobody

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action.

When it comes time to assess our grasp of the dynamics of this unprecedented era, how do you reckon historians will grade our collective political "leadership," intelligentsia, central state, corporate leadership and the "common man/woman" citizen? Did we rise to the occasion or did we falter, not in acting to counter the dissolution of the Status Quo, but in simply making a concerted effort to understand the tangled web of lies, corruption, perverse incentives, unintended consequences, simplistic (and utterly misguided) ideologies, not to mention the real-world limits of a supposedly limitless world, that have become the key dynamics of this era?

I suspect future historians (presuming the funding of such scholarly assessments survives) will grade all categories either F or D-. The reasons are not difficult to discern, and it behooves us to understand why we are collectively so ill-prepared to understand our era, much less fix what's broken before the whole over-ripe mess collapses in a heap.

1. Intellectual laziness. Very few people are willing to work hard enough to figure things out on their own. It's so much easier to join Paul Krugman dancing around the fire of the Keynesian Cargo Cult, chanting "aggregate demand! Humba-Humba!" while waving dead chickens than ditch reductionist, naive ideologies and actually work through an independent analysis.

2. Independent thinking is an excellent way to get fired, demoted or sent to Siberia. Though America claims to value independent thinking, this is just another pernicious lie: what America values is the ability to mask failing conventional ideas and systems with a thin gloss of "fresh thinking."
In other words, what the American state and corporatocracy value is the appearance of independent thinking, not the real thing. Since the real thing will get you fired, everyone who works for government or Corporate America masters the fine arts of producing simulacra, legerdemain and illusion. This only further obscures the real dynamics, making legitimate analysis that much more difficult.

3. Relatively few have any incentive to question authority, the state or the corporatocracy. Humans excel at figuring out which side of the bread is buttered, and who's lathering on the butter: self-interest is the ultimate human survival trait (we cooperate because it serves our self-interest to do so).

While we cannot hold the pursuit of self-interest against any individual–after all, who among us truly acts selflessly when push comes to shove?–we can monitor the monumentally negative consequences of self-interest and complicity on the systems and Commons we share.

When roughly half of all households are drawing direct cash/benefits from the central state, how many of those people are interested in doing anything that might put their place at the feeding trough at risk? Sure, people will grouse about this or that (usually related to the conviction that they deserve more or have been cheated out of "their fair share"), but as long as the government payments, direct deposits and benefits keep coming, what possible motivation is there for the recipients to devote energy to investigating the potential collapse of the gravy train?

Corporate America is no different. The store may be devoid of customers, but the employees will strive to look busy to keep the paychecks coming until the inevitable lay-off/implosion occurs. How many Corporate America employees will critique their way out of a paycheck? In an environment this difficult for job-seekers, you'd be nuts to bother figuring out why your division is failing, knowing as you do that the truth will result in the "termination with extreme prejudice" of the naive fools who presented the truth as if it would be welcome
.
Does anyone seriously imagine that any employee of a bloated bureaucracy will ever voluntarily challenge the squandering of revenues when that might cost them their own paycheck, bonus, contract for their brother-in-law, etc.? A few protected people (professors with tenure, for example) can be "brave," but their "bravery" is cheap: their protestations cannot trigger termination with extreme prejudice, so the gesture of resistance is just that, a gesture.

4. Those relative few who might have a real motivation to undertake independent analysis have little time to pursue this noble project. They are working absurd hours and enduring absurd commutes. Between getting the bundles of diapers into the elevator and planning what to cook for dinner, there is precious little time or energy left for figuring out the mess we're in. Just getting to a second or third job can suck up a significant amount of time, money amd energy.

And so the busy employee/sole-proprietor/contract worker listens to NPR or some talk radio program for a few minutes, reinforcing their ideology of choice, and turns on the "news" (laughably bad propaganda churned up with "if it bleeds, it leads") as background noise and spends whatever personal time they have on Roku, Netflix, Facebook, Twitter, email, etc. seeking distraction or solace from the daily workload.

In a strange irony, there are plenty of citizens who have plenty of time (recall that Americans manage to watch 6-8 hours of TV a day), but their marginalized status and dependence on the state drains them of motivation to do anything but seek amusement and distraction.

If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action. In other words, the four points above doom us just as surely as the dynamics of insolvency, corruption, debt servitude, Tyranny of the Majority, etc. etc. etc.

Choose your metaphor of choice, but rearranging the deck chairs on the Titanic has a nice ironic texture in an election year, when the "news" will be focusing on rearranging the political deck chairs on the first class deck–at least when there's no celebrity ruckus or "if it bleeds, it leads" to crowd out what passes for "hard news" in a regime dedicated to the distractions of bread and circuses.


    



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Prescription Drug Price Plunging By Most On Record Keeps Tepid Inflation In Line With Expectations

If yesterday’s rising PPI print suggested the Fed may continue its $10 billion a month taper at its next meeting, today’s comparably rising CPI for December will likely mean that absent another payroll-like shock, the Fed will soon monetize “only” $65 billion per month. The reason: in December core consumer inflation rose by 0.3%, compared to the 0.0% change in November, and in line with expectations. Stripping away food and energy however, the increase was only 0.1%, also in line with expectations, and a decline from November’s 0.2% increase. More importantly, on a Y/Y basis, core CPI was up by 1.7%, still shy of the Fed’s 2% target but not too far.

This is where the BLS said the growth was:

Advances in energy and shelter indexes were major factors in the increase in the seasonally adjusted all items index. The gasoline index rose 3.1 percent, and the fuel oil and electricity indexes also increased, resulting in a 2.1 percent increase in the energy index. The shelter index rose 0.2 percent in December. The indexes for apparel, tobacco, and personal care increased as well. These increases more than offset declines in the indexes for airline fares, for recreation, for household furnishings and operations, and for used cars and trucks, resulting in the index for all items less food and energy rising 0.1 percent.

For those seeking the lack of inflation in food, the BLS suggests you look in the fruit section:

The food index rose slightly in December, increasing 0.1 percent. The food at home index was unchanged for the third time in four months, as a sharp decline in the fruits and vegetables index offset other increases. The food index has not posted a monthly increase larger than 0.1 percent since June

The full breakdown by component:

The narrative from the report:

Food

 

The food index rose 0.1 percent in December, the same increase as in November. The index for food at home was unchanged, although four of the six major grocery store food groups posted increases. The index for nonalcoholic beverages, which declined in November, rose 0.5 percent in December. The index for dairy and related products rose 0.4 percent for the second month in a row, while the indexes for meats, poultry, fish, and eggs and for other food at home both rose 0.3 percent. Offsetting these increases was a sharp decline in the fruits and vegetables index; it fell 1.5 percent as the fresh vegetables index declined 2.7 percent. The index for cereals and bakery products also declined, falling 0.1 percent. The index for food away from home rose 0.1 percent in December after a 0.3 percent increase in November.

 

Energy

 

The energy index rose 2.1 percent in December after falling in October and November. The energy index has now risen 0.2 percent over the last six months. The gasoline index, which fell 1.6 percent in November, rose 3.1 percent in December. (Before seasonal adjustment, gasoline prices rose 0.7 percent in December.) The fuel oil index also rose, increasing 2.4 percent in December. The electricity index rose 0.4 percent, its fourth consecutive increase. The only major energy component index to decline was the index for natural gas, which fell 0.4 percent, its third consecutive decrease.

 

All items less food and energy

 

The index for all items less food and energy rose 0.1 percent in December after a 0.2 percent advance in November. The shelter index rose 0.2 percent in December after a 0.3 percent increase in November. The rent index increased 0.3 percent, while the index for owners’ equivalent rent rose 0.2 percent. The index for lodging away from home fell 0.3 percent after rising in November. The apparel index rose 0.9 percent in December after declining in each of the three previous months. The tobacco index rose 0.6 percent and the personal care index increased 0.3 percent. The new vehicles index was unchanged in December, as was the medical care index. The index for medical care services rose 0.3 percent, but the index for medical care commodities fell 0.8 percent, as the prescription drugs index declined 0.9 percent. The airline fares index declined sharply in December, falling 4.7 percent after increasing in recent months. The indexes for recreation, for household furnishings and operations, and for used cars and trucks also fell in December.

But while the surge in gasoline prices was notable, despite the relentless din of empty CNBC chatterboxes pronouncing the plunge in gas prices, the biggest surprise was the collapse in prescrption drug prices, whichin December fell by the most on record. Thanks Obamacare!


    



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A.M. Links: House Approves Trillion Dollar Spending Bill, LAPD Testing Body Cameras, 2013 Hot and Wet

  • kinda like 2013The House of Representatives overwhelmingly

    approved     a 1,582-page, trillion dollar spending bill.
  • Computer security experts are
    warning     the government that the Obamacare website is not
    protected from hackers.
  • The DEA’s chief of operations
    called     state efforts to legalize marijuana “reckless and
    irresponsible.”
  • The LAPD is testing
    body cameras for 90 days with 30 cops who volunteered to wear
    them.
  • The IMF’s Christine Lagarde
    thinks     this could be the year the global economy finally gets
    better.
  • The French ambassador to the UN
    explained     his country had underestimated the level of hatred
    between Muslims and Christians before intervening in the Central
    African Republic.
  • 90 percent of Egyptians
    voted     to approve the new constitution, in an election boycotted
    by the banned-again Muslim Brotherhood.
  • 2013 was a hotter and wetter than average year in the U.S.,

    according     to government data.
  • Oscar nominations were announced
    this morning. 12 Years a Slave, Gravity, and American Hustle lead
    in nominations, while Jeremy Scahill’s documentary about U.S.
    covert warfare, Dirty Wars, also received a nomination. Maybe the
    First Lady will announce that winner this year?

Follow Reason and Reason 24/7 on
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Continuing Claims Surge Most In Over 5 Years To 6-Month Highs.

Initial claims beat expectations very modestly (326k vs 328k expected) and hover at their average level of the last 6 months. Non-seasonally-adjusted saw initial claims surge to 438k. It would appear the trend of improving claims has ended for now. What is perhaps more worrying is the continuing claims surged by their most in over 5 years – at 3.03 million, this is the highest in 6 months (and the biggest miss in 6 months. It is worth noting that this is before the emergency benefits for 1.3 million Americans disappear (which will likely begin to show up next week or the week after).

 

 

This is the worst weekly shift in continuing claims since November 2008…


    



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Best Buy Plummets 30%, Is Better Sell Following Abysmal Holiday Sales Update

Despite several apparently well respected sell-side shops proclaiming that all would be well, the electronics warehouse missed comps (Sales at stores open at least 14 months were down 0.9 percent in the US – compared to expectations of +2.0%) and is being punished. Revenues fell 2.6% for the comparable period also. Shares are down 30% in the pre-market to 7-month lows as the company claims an “intensely promotional holiday season.” It seems, perhaps, that following several other retailers’ earnings updates the holiday season was even worse than many had expected (especially in the brocks-and-mortar stores that actually employ real people).

 


    



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COMEX Gold Stocks At Record Lows As SGE Volumes Surge 61%

Today’s AM fix was USD 1,237.25, EUR 908.61 and GBP 757.19 per ounce.
Yesterday’s AM fix was USD 1,238.00, EUR 908.56 and GBP 753.91 per ounce.

Gold fell $2.80 or 0.23% yesterday, closing at $1,240.60/oz. Silver slipped $0.04 or 0.2% closing at $20.15/oz.

Gold prices are marginally lower again today in most currencies. Gold is more than 1% higher in Australian dollars after a very poor jobs number in Australia raised concerns about Australian asset bubbles and the Australian economy. The Aussie dollar has fallen by 4.4% against gold so far this year.

Technically, gold is looking sounder. Support is at $1,220, $1,200 and of course what appears to be a double bottom at $1,180/oz. A close above $1,270 could see gold quickly move to test resistance at $1,300 and $1,330.


Portion of Registered Comex Gold Stocks at Record Low: Bloomberg Industries Chart

The supply demand fundamentals of the gold market remain sound with the flow of gold from West to East.

COMEX gold stocks have fallen to new record lows (see chart) showing demand for physical bullion remains very robust. Indeed, the scale of the fall in COMEX gold stocks since 2007 and which accelerated in early April 2013 is important to note.


Daily Shanghai Gold Exchange Volumes Surge 61% Yoy: Bloomberg Industries Chart

Conversely, on the Shanghai Gold Exchange (SGE), volumes surged in the year 2013, particularly since the peculiar, sudden price drop in April and volumes traded surged 61% year on year.

The London bullion market has seen intermittent shortages of 400 ounce gold bars. Traders said the shortage of London Good Delivery Bars was pushing premiums for physical delivery for 400 ounce bars as high as 50 cents.

Physical buyers view the 28% sharp sell off in 2013 as an opportunity. They continue to accumulate on prices below the $1,300 per ounce level.

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