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No, You Can’t Get a Drink at 5 AM

The Baseline Scenario - 17 October 2014 - 12:28am

By James Kwak

I’m in the United Club at SFO waiting for a flight, and the bar is closed until 8. So much for business travel.

I just published a post over at Medium that is really about two things: how both airline marketers and on-campus recruiters perpetuate the idea that air travel is glamorous, even when all of us know that it isn’t. It’s sort of a sequel to one of my favorite posts of those I’ve written, “Why Do Harvard Kids Head to Wall Street?” which I think is the one Paul Tough mentioned in his book about grit. Now that it’s recruiting season in the Ivy League, I thought it might be useful.

Also, last week I wrote a post about the HP breakup and what it implies about corporate management.

Categories: Economics

Is Soil Carbon Enough?

Energy Bulletin - 16 October 2014 - 11:58pm

But are solutions enough anymore?...In other words, how do we help foster a regenerative carbon economy?

Categories: Peak oil news

Solidarity Economy Organizing in the Wake of Mike Brown

Energy Bulletin - 16 October 2014 - 11:57pm

Missourians Organizing for Reform and Empowerment (MORE) is a grassroots organization that has taken the lead in organizing the community around the Mike Brown case, systemic racism and building a solidarity economy in St. Louis through a new project called Solidarity Economy St. Louis.

Categories: Peak oil news

Want to Get into the Doughnut? Tackle Inequality

Energy Bulletin - 16 October 2014 - 11:56pm

...we need to get into the doughnut: the safe and just sweet spot between social and planetary boundaries

Categories: Peak oil news

The Market Ticker - Oh Look What The Cat Dragged In

The Market Ticker - 16 October 2014 - 11:15pm

There are times that all I can do is laugh.  This "revelation" by Matt Stoller is one of them.

In other words, Greenberg’s case is revealing that the bailouts were done selectively, and there was an attempt to cover up what happened. The Federal Reserve and the Treasury ended up treating Goldman/JP Morgan/Citigroup shareholders and employees exceptionally well, AIG shareholders less well, and the public like irrelevant peasants. 

Well, sort of.

What's really at issue here is that The Fed and Treasury (along with the Insurance Commissions involved) acted illegally, both in the first instance (either there was a duty to regulate if there was systemic risk and these were regulated industries, in which case they failed to do so, or there was no systemic risk in which case let 'em fail was the only proper outcome) and in the second instance in that the actions The Fed took were not authorized at the time by law and then everyone scrambled for retroactive means to cover their ass.

This narrative is fundamentally dishonest. Opponents of the bailouts said a lot of things at the time about the motives of the people in charge. It turns out that bailout opponents were largely correct, and the bailout apologists were lying and/or wrong. Increasingly, the public, judges, and politicians will recognize that the way the corrupt manner in which bailouts were done turned property rights into an explicit reflection of arbitrarily exercised political power.

This is not news.

Nor is it news that Bernanke lied regarding to the commercial paper market; he claimed TARP was necessary to protect it, TARP was passed, Paulson knew before it was passed that he had modified its intent to not rescue commercial paper but did not tell Congress this and then Bernanke set up his own facility at The Fed to perform that rescue -- without TARP, thereby proving it was unnecessary for that purpose (in other words, proving up his own lie.)  Neither Bernannke or the Fed ever answered for that lie or the myriad others he told during that period of time, despite myself and others calling him on the carpet for same.

One of the most-outrageous examples of these "fibs" was Bernanke's testimony shortly after the collapse occurred that he had been "adding liquidity" into the maw of the collapse itself.  As I pointed out at the time from data published by the NY Fed itself The Fed did no such thing -- it in fact drained system liquidity into the maw of the collapse.

GM was another example.  Those who held GM credit were unlawfully dispossessed of their right to recover in bankruptcy what was theirs because payouts were made to others who held inferior positions in the capital structure (primarily the UAW via their benefit programs.)  Those who were disadvantaged sued and lost.

Then there were those who bought various structured products that were designed so that in order to look at the documentation necessary to make a claim for fraud you needed a supermajority that included the super-senior tranche holders.  You could never get there, since those people were kept whole even if everyone else lost 100% of their money and, what's worse, since investigations and document production cost money to perform and that must come from the trust beneficiaries the super-senior holders not only had no incentive to cooperate they had an active incentive to obstruct any such attempt so long as their position was paid out. 

This little clever bit of design made it effectively impossible for any holder of these "products" to sue for fraud on the premise that the underlying loan quality was intentionally misrepresented because they could not gain the documentation necessary to file a suit and actually win, as you can't sue on speculation, you must sue on facts.  That in turn has led to those suits being thrown out.


Categories: Economics

Limits to Growth: Where We Are and What to Do About It

Energy Bulletin - 16 October 2014 - 11:03pm

In this talk, Nate Hagens synthesizes the current landscape of global energy, environment and financial risks while offering suggestions on what to do as a hominid living on a full planet.

Categories: Peak oil news

Peak Oil Notes - Oct 16

Energy Bulletin - 16 October 2014 - 11:02pm

The price plunge which began in mid-June when New York oil futures trading around $105 a barrel continued this week with oil touching $80 on Wednesday before recovering to close at $81.78.

Categories: Peak oil news

Internet should be 'for everybody' says rural broadband boss - Cable.co.uk

Transition Towns in the media - 16 October 2014 - 10:23pm


Internet should be 'for everybody' says rural broadband boss
"A lot of this came from looking Transition Towns movement. Transition Chipping Norton was all about sustainability of a small market town, and the only way to make that economically viable is to prepare for the future and help the villages around that ...

Categories: TT news

Learn to make juice at nature reserve - Dorset Echo

Transition Towns in the media - 16 October 2014 - 10:11pm

Dorset Echo

Learn to make juice at nature reserve
Dorset Echo
Dorset Wildlife Trust will be holding an open day at Lorton Meadows, Weymouth, on Saturday from 11am-3pm. Visitors can help make apple juice and cider, by helping chop, crush and squeeze local apples, with the Weymouth Transition Town Group.

Categories: TT news

Dark Age America: The Hour of the Knife

Energy Bulletin - 16 October 2014 - 8:48pm

The disintegration of social hierarchies, the senility of ruling elites, and the fossilization of institutions all lead to the hour of the knife...

Categories: Peak oil news

Dark Age America: The Hour of the Knife

The Archdruid Report - 16 October 2014 - 3:15pm
It was definitely the sort of week that could benefit from a little comic relief. The Ebola epidemic marked another week of rising death tolls and inadequate international response . Bombs rained down ineffectually on various corners of Iraq and Syria as the United States and an assortment of putative allies launched air strikes at the Islamic State insurgents; since air strikes by themselves don’t win wars, and none of the combatants except Islamic State and the people they’re attacking have shown any inclination to put boots on the ground, that high-tech tantrum also counts in every practical sense as an admission of defeat, a point which is doubtless not lost on Islamic State. Meanwhile stock markets worldwide plunged on an assortment of ghastly economic news, with most indexes giving up their 2014 gains and then some, and oil prices dropped on weakening demand, reaching levels that put a good many fracking firms in imminent danger of bankruptcy.
In the teeth of all this bad news, I’m pleased to say, Paul Krugman rose to the occasion and gave all of us in the peak oil scene something to laugh about.  My regular readers will recall that Krugman assailed Post Carbon Institute a couple of weeks ago for having the temerity to point out that transitioning away from fossil fuels was, ahem, actually going to cost money. His piece was rebutted at once by Post Carbon’s Richard Heinberg and others, who challenged Krugman’s crackpot optimism and pointed out that the laws of physics and geology really do trump those of economics.
Krugman’s response—it really is a comic masterpiece, better than anything I’ve seen since the heyday of Francis Fukuyama—involved, among other non sequiturs and dubious claims, assailing mere scientists for thinking that they know more than economists. Er, let’s see: which of these two groups of people is expected to test their predictions against hard facts and discard a theory that produces inaccurate predictions? That’s what scientists do every working day, while economists apparently have something else to occupy their time. This may be why, when it comes to predicting macroeconomic conditions, economists these days are rarely as accurate as a tossed coin: consider the IMF’s continued advocacy of austerity programs as the road to prosperity when no country that has ever implemented them has ever achieved prosperity thereby, or for that matter the huge majority of economists who insisted the housing bubble wasn’t a bubble and wouldn’t crash, right up until the bottom dropped out.
Like so much great comedy, though, Krugman’s jest has its serious side. He sees a permanent condition of economic growth as the normal, indeed the inevitable state of affairs; it has doubtless never occurred to him that it might merely be a temporary anomaly, made possible only by the reckless extraction and consumption of half a billion years of fossil sunlight in a few short centuries. That the needle on the world’s fossil fuel gauge is swinging inexorably over toward E, to him, thus can only mean that some other source of cheap, abundant, highly concentrated energy will have to be found to keep the engines of economic growth roaring on at full throttle. That there may be no such replacement for fossil fuels ready and waiting in Nature’s cookie jar, and that economic growth can thus give way to an economic contraction extending over decades and centuries to come, has never entered his darkest dream.
That is to say, Krugman is still thinking the thoughts of a bygone era when the assumptions guiding those thoughts are long past their pull date and a very different era is taking shape around him. That’s a common source of confusion in times of rapid change, and never more so than in the decline and fall of civilizations—the theme of the current series of posts here. One specific form of that confusion very often becomes the mechanism by which the governing elite of a society in decline removes itself from power, and that mechanism is what I want to discuss this week.
To make sense of that process, it’s going to be necessary to take a step back and revisit some of the points made in an earlier post in this series. I discussed there the way that the complex social hierarchies common to mature civilizations break down into larger and less stable masses in which new loyalties and hatreds more easily build to explosive intensity. America’s as good an example of that as any.  A century ago, for example, racists in this country were at great pains to distinguish various classes of whiteness, with people of Anglo-Saxon ancestry at the pinnacle of whiteness and everybody else fitted into an intricate scheme of less-white categories below. Over the course of the twentieth century, those categories collapsed into a handful of abstract ethnicities—white, black, Hispanic, Asian—and can be counted on to collapse further as we proceed, until there are just two categories left, which are not determined by ethnicity but purely by access to the machinery of power.
Arnold Toynbee, whose immensely detailed exploration of this process remains the best account for our purposes, called those two the dominant minority and the internal proletariat. The dominant minority is the governing elite of a civilization in its last phases, a group of people united not by ethnic, cultural, religious, or ideological ties, but purely by their success in either clawing their way up the social ladder to a position of power, or hanging on to a position inherited from their forebears. Toynbee draws a sharp division between a dominant minority and the governing elite of a civilization that hasn’t yet begun to decline, which he calls a creative minority. The difference is that a creative minority hasn’t yet gone through the descent into senility that afflicts elites, and still recalls its dependence on the loyalty of those further down the social ladder; a dominant minority or, in my terms, a senile elite has lost track of that, and has to demand and enforce obedience because it can no longer inspire respect.
Everyone else in a declining civilization belongs to the second category, the internal proletariat. Like the dominant minority, the internal proletariat has nothing to unite it but its relationship to political power: it consists of all those people who have none. In the face of that fact, other social divisions gradually evaporate.  Social hierarchies are a form of capital, and like any form of capital, they have maintenance costs, which are paid out in the form of influence and wealth.   The higher someone stands in the social hierarchy, the more access to influence and wealth they have; that’s their payoff for cooperating with the system and enforcing its norms on those further down.
As resources run short and a civilization in decline has to start cutting its maintenance costs, though, the payoffs get cut. For obvious reasons, the higher someone is on the ladder to begin with, the more influence they have over whose payoffs get cut, and that reliably works out to “not mine.” The further down you go, by contrast, the more likely people are to get the short end of the stick. That said, until the civilization actually comes apart, there’s normally a floor to the process, somewhere around the minimum necessary to actually sustain life; an unlucky few get pushed below this, but normally it’s easier to maintain social order when the very poor get just enough to survive. Thus social hierarchies disintegrate from the bottom up, as more and more people on the lower rungs of the latter are pushed down to the bottom, erasing the social distinctions that once differentiated them from the lowest rung.
That happens in society as a whole; it also happens in each of the broad divisions of the caste system—in the United States, those would be the major ethnic divisions. The many shades of relative whiteness that used to divide white Americans into an intricate array of castes, for instance, have almost entirely gone by the boards; you have to go pretty far up the ladder to find white Americans who differentiate themselves from other white Americans on the basis of whose descendants they are. Further down the ladder, Americans of Italian, Irish, and Polish descent—once strictly defined castes with their own churches, neighborhoods, and institutions—now as often as not think of themselves as white without further qualification.
The same process has gotten under way to one extent or another in the other major ethnic divisions of American society, and it’s also started to dissolve even those divisions among the growing masses of the very poor.  I have something of a front-row seat on that last process; I live on the edge of the low-rent district in an old mill town in the Appalachians, and shopping and other errands take me through the neighborhood on foot quite often. I walk past couples pushing baby carriages, kids playing in backyards or vacant lots, neighbors hanging out together on porches, and as often as not these days the people in these groups don’t all have the same skin color. Head into the expensive part of town and you won’t see that; the dissolution of the caste system hasn’t extended that far up the ladder—yet.
This is business as usual in a collapsing civilization.  Sooner or later, no matter how intricate the caste system you start with, you end up with a society divided along the lines sketched out by Toynbee, with a dominant minority defined solely by its access to power and wealth and an internal proletariat defined solely by its exclusion from these things. We’re not there yet, not in the United States; there are still an assortment of intermediate castes between the two final divisions of society—but as Bob Dylan said a long time ago, you don’t have to be a weatherman to know which way the wind is blowing.
The political implications of this shift are worth watching. As I’ve noted here more than once, ruling elites in mature civilizations don’t actually exercise power themselves; they issue general directives to their immediate subordinates, who hand them further down the pyramid; along the way the general directives are turned into specific orders, which finally go to the ordinary working Joes and Janes who actually do the work of maintaining the status quo against potential rivals, rebels, and dissidents. A governing elite that hasn’t yet gone senile knows that it has to keep the members of its overseer class happy, and provides them with appropriate perks and privileges toward this end. As the caste system starts to disintegrate due to a shortage of resources to meet maintenance costs, though, the salaries and benefits at the bottom of the overseer class get cut, and more and more of the work of maintaining the system is assigned to poorly paid, poorly trained, and poorly motivated temp workers whose loyalties don’t necessarily lie with their putative masters.
You might think that even an elite gone senile would have enough basic common sense left to notice that losing the loyalty of the people who keep the elite in power is a fatal error.  In practice, though, the disconnection between the world of the dominant elite and the world of the internal proletariat quickly becomes total, and the former can be completely convinced that everything is fine when the latter know otherwise. As I write this, there’s a timely example unfolding at Texas Health Presbyterian Hospital in Dallas, where hospital administrators have been insisting at the top of their lungs that every possible precaution was taken when the late Thomas Duncan was being treated there for Ebola. According to the nursing staff—two of whom have now come down with the disease—“every possible precaution” amounted to no training, inadequate protective gear, and work schedules that had nurses who treated Duncan go on to tend other patients immediately thereafter.
A few weeks ago, the US media was full of confident bluster about how our high-tech medical industry would swing into action and stop the disease in its tracks; the gap between those easy assurances and the Keystone Kops response currently under way in Dallas is the same, mutatis mutandis, as the gap between the august edicts proclaimed in the capital during the last years of every civilization and the chaos in the streets and on the borders. You can see the same gap at work every time the US government trots out the latest round of heavily massaged economic statistics claiming that prosperity is just around the corner, or—well, I could go on listing examples for any number of pages.
So the gap that opens up between the dominant minority and the internal proletariat is much easier to see from below than from above. Left to itself, that gap would probably keep widening until the dominant minority toppled into it. It’s an interesting regularity of history, though, that this process is almost never left to run its full length. Instead, another series of events overtakes it, with the same harsh consequences for the dominant minority.
To understand this it’s necessary to include another aspect of Toynbee’s analysis, and look at what’s going on just outside the borders of a civilization in decline. Civilizations prosper by preying on their neighbors; the mechanism may be invasion and outright pillage, demands for tribute backed up by the threat of armed force, unbalanced systems of exchange that concentrate wealth in an imperial center at the expense of the periphery, or what have you, but the process is the same in every case, and so are the results. One way or another, the heartland of every civilization ends up surrounded by an impoverished borderland, scaled according to the transport technologies of the era.  In the case of the ancient Maya, the borderland extended only a modest distance in any direction; in the case of ancient Rome, it extended north to the Baltic Sea and east up to the borders of Parthia; in the case of modern industrial society, the borderland includes the entire Third World.
However large the borderland may be, its inhabitants fill a distinctive role in the decline and fall of a civilization. Toynbee calls them the external proletariat; as a civilization matures, their labor provides a steadily increasing share of the wealth that keeps the civilization and its dominant elite afloat, but they receive essentially nothing in return, and they’re keenly aware of this. Civilizations in their prime keep their external proletariats under control by finding and funding compliant despots to rule over the borderlands and, not incidentally, distract the rage of the external proletariat to some target more expendable than the civilization’s dominant minority. Here again, though, maintenance costs are the critical issue. When a dominant minority can no longer afford the subsidies and regular military expeditions needed to keep their puppet despots on their thrones, and try to maintain peace along the borders on teh cheap, they invariably catalyze the birth of the social form that brings them down.
Historians call it the warband: a group of young men whose sole trade is violence, gathered around a charismatic leader.  Warbands spring up in the borderlands of a civilization as the dominant minority or its pet despots lose their grip, and go through a brutally Darwinian process of evolution thereafter in constant struggle with each other and with every other present or potential rival in range. Once they start forming, there seems to be little that a declining civilization can do to derail that evolutionary process; warbands are born of chaos, their activities add to the chaos, and every attempt to pacify the borderlands by force simply adds to the chaos that feeds them. In their early days, warbands cover their expenses by whatever form of violent activity will pay the bills, from armed robbery to smuggling to mercenary service; as they grow, raids across the border are the next step; as the civilization falls apart and the age of migrations begins, warbands are the cutting edge of the process that shreds nations and scatters their people across the map.
The process of warband formation itself can quite readily bring a civilization down. Very often, though, the dominant minority of the declining civilization gives the process a good hard shove. As the chasm between the dominant minority and the internal proletariat becomes wider, remember, the overseer class that used to take care of crowd control and the like for the dominant minority becomes less and less reliable, as their morale and effectiveness are hammered by ongoing budget cuts, and the social barriers that once divided them from the people they are supposed to control will have begun to dissolve if they haven’t entirely given way yet. What’s the obvious option for a dominant minority that is worried about its ability to control the internal proletariat, can no longer rely on its own overseer class, and also has a desperate need to find something to distract the warbands on its borders?
They hire the warbands, of course.
That’s what inspired the Roman-British despot Vortigern to hire the Saxon warlord Hengist and three shiploads of his heavily armed friends to help keep the peace in Britannia after the legions departed. That’s what led the Fujiwara family, the uncrowned rulers of Japan, to hire uncouth samurai from the distant, half-barbarous Kanto plain to maintain peace in the twilight years of the Heian period. That’s why scores of other ruling elites have made the obvious, logical, and lethal choice to hire their own replacements and hand over the actual administration of power to them.
That latter is the moment toward which all the political trends examined in the last four posts in this sequence converge. The disintegration of social hierarchies, the senility of ruling elites, and the fossilization of institutions all lead to the hour of the knife, the point at those who think they still rule a civilization discover the hard way—sometimes the very hard way—that effective power has transferred to new and more muscular hands. Those of the elites that attempt to resist this transfer rarely survive the experience.  Those who accommodate themselves to the new state of affairs may be able to prosper for a time, but only so long as their ability to manipulate what’s left of the old system makes them useful to its new overlords. As what was once a complex society governed by bureaucratic institutions dissolves into a much simpler society governed by the personal rule of warlords, that skill set does not necessarily wear well.
In some cases—Hengist is an example—the warlords allow the old institutions to fall to pieces all at once, and the transition from an urban civilization to a protofeudal rural society takes place in a few generations at most. In others—the samurai of the Minamoto clan, who came out on top in the furious struggles that surrounded the end of the Heian period, are an example here—the warlords try to maintain the existing order of society as best they can, and get dragged down by the same catabolic trap that overwhelmed their predecessors. In an unusually complex case—for example, post-Roman Italy—one warlord after another can seize what’s left of the institutional structure of a dead empire, try to run it for a while, and then get replaced by someone else with the same agenda, each change driving one more step down the long stair that turned the Forum into a sheep pasture.
Exactly how this process will play out in the present case is impossible to predict in advance. We’ve got warband formation well under way in quite a few corners of industrial civilization’s borderlands, the southern border of the United States among them; we’ve got a dominant minority far advanced in the state of senility described in an earlier post; we’ve got a society equally well advanced in the dissolution of castes into dominant minority and internal proletariat. Where we are now in the process is clear enough; what will come out the other side, which will be discussed in a future post, is equally clear; the exact series of steps between them is of less importance—except, of course, to those who have the most to fear when the hour of the knife arrives.

In other news, I'm pleased to announce that my latest book from New Society Publications, After Progress: Reason, Religion, and the End of the Industrial Age is now available for preorder, with a 20% discount off the cover price as an additional temptation. Those readers who enjoyed last year's series of posts on religion and the end of progress will find this very much to their taste. 
Categories: Peak oil news

5 Reasons Why Stocks Are Falling

The Daily Reckoning - 16 October 2014 - 9:12am

Ed. Note: On Oct. 3 The Daily Reckoning‘s Managing Editor, Peter Coyne met with Steve Forbes at his 5th Ave. office in New York to discuss the topic of Mr. Forbes’ new book — Money: How the Destruction of the Dollar Threatens the Global Economy — And What We Can Do About It. The interview they recorded contained several nuggets of wisdom from Mr. Forbes including how an unstable money contributes to social and political unrest, and how it directly frames your investment decisions. That exclusive interview will be available shortly, but before you see it, check out the 5 main reasons Mr. Forbes thinks stocks are falling, right now, below…

1. The U.S. Senate. Despite President Obama’s abysmal approval ratings on all fronts, Republican capture of the Senate — if some polls are to be believed — is suddenly in doubt. That South Dakota, once a surefire GOP pickup, is in play is the latest shock to Republican hopes. A GOP-dominated upper house would severely limit Obama’s ability to do more harm, which would be great for equities.

2. Misbehavior by the Fed. Fed hints that it will continue to muck up credit markets is a setback to job-creating new and small businesses.

3. The profit picture is getting blurry. Reported profits are, overall, still moving up, but the more realistic measure of earnings — the Bureau of Economic Analysis’ national income and product accounts — is gloomy. NIPA numbers come from tax returns; thus, there’s no incentive for companies to inflate their bottom lines.

4. World economies are a mess. Germany’s economic growth is coming to a stop, and the rest of the European continent is either in recession or barely showing a pulse. Brazil is slumping, as is Japan. China’s economic growth is problematical. India’s new reform government has been overly cautious, so far. The U.S. economy is still stuck in a 2.5% growth rut.

5. The world security situation is worsening. Our President — who, in comparison, makes Jimmy Carter look like a Ronald Reagan — resolutely sticks to his adolescent far-left worldview, that the U.S. is a global menace and must therefore take an isolationist stance. The bungling of the Ebola outbreak only underscores the sense that things are drifting dangerously.

Not all is gloom and doom, however. The GOP, in spite of itself, will do well next month. While earnings aren’t surging, corporate balance sheets are in excellent shape. Any positive change in business taxes next year — there’s a congressional consensus on this — would unleash a torrent of new investment. Following the elections look for intense pressure on the White House — from both parties — for it to do more overseas, such as arming beleaguered Ukraine.

At any rate, trying to time the market is a fool’s game. Ride the storm. After 2016 the U.S. will experience a Reaganesque revival. Markets will go up before then in anticipation of a better era ahead.


Steve Forbes
for The Daily Reckoning

Ed. Note: Okay… So stocks are falling right now. But that doesn’t mean you need to panic. Quite the opposite, in fact. There are plenty of safe places to put your money right now, no matter what’s going on in the markets. And readers of the FREE Daily Reckoning email edition are given regular opportunities to discover these safe-haven plays, in every single issue. Don’t miss out on your chance to discover them for yourself. Click here to sign up for The Daily Reckoning, for FREE, right now.

(See Steve Forbes’ new book, Money: How the Destruction of the Dollar Threatens the Global Economy — And What We Can Do About It.)

This article originally appeared here on Forbes.com

Categories: Economics

The Market Ticker - Netfux Is Done (-26%)

The Market Ticker - 16 October 2014 - 8:39am

Vindication comes to the patient...

HBO's streaming announcement didn't help, and neither did weak guidance and decelerating growth.

When you're priced at 134x earnings absolutely nothing can go wrong or you get destroyed.

In this case if you were long the stock you just saw 26% of your money evaporate within 30 minutes.

PS: Just wait until the other dominoes come down on this one...... Raise your glass to stupidity America, bidding up stocks to 134x earnings is, well, stupid -- and when you get reamed doing it just remember who's fault it is that you got so greedy as to not sell out before this point -- YOURS.

Oh, by the way, what's Amazon's P/E?

Categories: Economics

8 Unusual Rules to Help You Become a Better Investor

The Daily Reckoning - 16 October 2014 - 8:21am

Where do great investors come from?

I’m not sure what the hurdle rate for greatness is, but Guy Spier has put up impressive results.

His Aquamarine Fund has returned 463% since inception in 1997, versus just 167% for the S&P 500 (a broad proxy for the market). Put another way, $1 million invested at the fund’s inception is worth about $5.6 million today, versus $2.7 million for the market.

In his new book, The Education of a Value Investor, Spier gives you his eight rules for better investing. Unlike with most such advice, Spier is quite qualified to give it. Below are some thoughts on the book.

As the title hints, Spier is a value investor, which doesn’t tell you much. It’s a vague term, but in general, it conveys the big tent of ideas normally associated with its ringmaster, Warren Buffett. Your editor is from the same troupe.

I saw Spier speak recently at the Value Investing Congress, and I just finished reading his book. Spier takes you through the early trials and wrong turns of his own career. The subtitle of the book is My Transformative Quest for Wealth, Wisdom and Enlightenment, which goes to show you it’s about more than just stock picking.

“It’s a wonderful release to see that your portfolio does just fine when you don’t check it…”

Instead, the focus is more on thoughtful advice about how to become a better investor. Much of this is not at all conventional advice, such as the discussion about creating an ideal workplace and controlling your interactions with other people. There’s also just a lot of thinking about thinking. Investing is a game that goes on largely in your head.

Spier does offer eight concrete rules, which are worth a look:

1) Stop checking stock prices so much. You probably check your stocks every day — probably several times a day. The problem with checking stock prices so frequently is the effect it has on your brain. It’s a call to action. It makes you impatient.

Spier checks his stocks no more than once a week! “It’s a wonderful release to see that your portfolio does just fine when you don’t check it,” he writes. Instead, he can focus the limited resources of his brain on more productive ends.

This is also a matter of style. Spier, like us, invests in long-term outcomes that seem inexorable. In that case, it’s not important to know what’s going on every day.

2) If someone tries to sell you something, don’t buy it. This is an attempt to ward off all sales reps and ads. “I soon began to see that I made lousy decisions when I bought things that salespeople were hawking to me,” Spier writes.

The reason, he says, is again about the limits of our poor brains. They have a hard time resisting a “detailed pitch from a gifted salesperson.” So he simply adopts the rule that he doesn’t buy anything from anyone who has a self-interest in him buying.

3) Don’t talk to management. This one is something I’ve wrestled with for years. CEOs are often charismatic people. This is part of why they are where they are. They have the gift of charm, the ability to win over audiences. This is not to say they are bad people. It’s just to recognize their skills and the effect they can have on your brain.

“Wall Street is rewarded for activity. My shareholders and I are rewarded for inactivity.”

As investors, we want to get a realistic look at a stock. It can be harder to be impartial if you like the CEO. Spier does make an exception to this rule. There are a small number of investor-CEOs he cites as worth talking to, including Warren Buffett at Berkshire. I would second that. I’ve found talking with managers who are investors and have a close-up view of what’s going on in their markets helpful.

4) Gather investment research in the right order. The basic idea here is to start your research with the most impartial information. Look first at public filings — 10-Ks, 10-Qs, etc. After he digests those, Spier works his way toward “less objective corporate documents” — such as press releases and transcripts of conference calls. His analogy for doing it this way is that it’s like eating your meat and vegetables before you eat dessert.

“These ideas about the sequencing of information may seem trite,” Spier writes. “But minor shifts in how we operate can have a major impact.” The idea again is to try to manage the influences hitting your brain. “I don’t want my mind’s chain being yanked,” he writes. It’s all an attempt to stem the bright lights and candy-colored lures that distract sober analysis.

5) Discuss your investment ideas only with people who have no ax to grind. If I had to sum it up, I’d say this rule is about sharing your knowledge with a circle of people you trust. And these should be people who won’t tell you what to do. You just want to have reliable like-minded people in your circle who will help clarify your thinking about your ideas.

6) Never buy or sell stocks when the market is open. Well, I can hear you saying, “When the hell am I supposed to buy or sell stocks?” Here, Spier really means don’t make the decision while the market is open. Cooler heads prevail and all that. Detach yourself from the market and give it a good think.

The idea is similar to not watching your stock prices. It’s a way to calm down and act less. As Spier says: “What I need to do is simply invest in a handful of great but undervalued businesses and then stay put. Wall Street is rewarded for activity. My shareholders and I are rewarded for inactivity.”

7) If a stock tumbles after you buy it, don’t sell it for two years. It sounds weird and arbitrary, but Spier swears by it. He got the idea from fellow investor Mohnish Pabrai, a good friend of Spier’s and a fine investor in his own right.

The rule makes you much more careful about what you’ll buy, because you know if it drops, you’ll have to sit with it for years. “In fact,” Spier writes, “before buying a stock, I consciously assume that the price will immediately fall by 50% and I ask myself if I’ll be able to live through it.”

…when you talk about your investment idea, it could… [change] the way you look at the stock.

Most of Spier’s rules, as you can tell by now, are essentially mental circuit breakers. They aim to get you to stop doing anything impulsive.

8) Don’t talk about your current investments. Again, it is because of the effect this has on our low-wattage brains. If you talk, you become more invested in the idea than otherwise. Spier writes about doing an interview and giving out a stock tip. He felt more committed to it afterward, which prevented him from selling it when he should have.

As a newsletter writer, I believe I’ve mastered the weakness this one aims to cover. I have no problem changing my mind. I have done so many times before. But you should be aware that when you talk about your investment idea, it could have an undesirable side effect in changing the way you look at the stock.

Of course, I’ve given you just the basic summaries of Spier’s rules. The book has more to offer. There is an interesting discussion on the use of investor checklists, for example. Spier also doesn’t hide from writing about his own inadequacies. My main criticism is that he lays on the praise of Buffett and Pabrai way too thick.

I also have to say Spier comes across as kind of neurotic and weak-minded. He is a guy who is a blue blood all the way, a product of privilege. He screws up in unsympathetic ways early on, only to get bailed out by daddy’s money. It’s not easy to relate to him or feel sorry for him when he stumbles.

Nonetheless, if you enjoy reading about the art of successful investing, you’ll like Spier’s book. It’s a quick read and quite accessible.


Chris Mayer
for The Daily Reckoning

P.S. I follow a similar set of investment rules, they’re acronym is CODE. If you use them when investing your money, this recent correction in stocks could be an opportunity for you. Today, I gave readers of The Daily Reckoning email edition a unique chance to access this CODE system. If you’d like to discover it for yourself, one of the first steps you can take is to sign up for The Daily Reckoning, for FREE, right now.

Categories: Economics

Prepare to Profit from the “Combat Cloud”

The Daily Reckoning - 16 October 2014 - 6:30am

Let’s begin up in the clouds, so to speak.

Here’s a photo of an F-22 “Raptor” aircraft, as seen from the “boom” position of a refueling aircraft one night as U.S. forces prepared to bomb targets in Syria.

Only thing more difficult than doing it by day…
…is doing it by night.

Pretty slick, eh?

The downside, though, is that we’re looking at 1980s and 1990s technology.

In other words, the F-22 is certainly an advanced weapon system. Yet it’s “old tech,” as I’ll explain in a moment.

As you can imagine, people who run the Pentagon view “old tech” as a problem, and they’re searching for a solution.

In fact, the Defense Department will soon start spending big bucks to fix things.

I’m looking for ways to help you invest ahead of the news…

We’re at the cusp of a new set of Fifth Domain of War programs… [called] “Combat Cloud.”

First, let me give you an example of what I mean when I say that F-22 is “old” tech.

Within the avionics of a Raptor are computer processors — called “common integrated processors” (CIPs). Their speed is rated at 700 MIPS (million instructions per second).

That’s about the speed of a late-1990s vintage Intel Pentium III chip.

Heck, the iPhone in your pocket is built around a chip that can process signals about 50 times faster than that.

Of course, F-22 CIPs were designed 20 years ago, and they were very much state of the art back then. On the other hand, raw CIP speed isn’t everything.

These fighter jets have to work in tough, rugged environments — high “G loads,” rapid acceleration, vibration, wild swings in temperature, air pressure and humidity.

Those are things that your iPhone doesn’t have, or need.

In the end, builder Lockheed and buyer Air Force settled on a mix — call it “architecture” — of hardware and software. At some point, they froze the design and started assembling airplanes.

So what happens when combat commanders have to do their work with “frozen” designs based on relatively old tech?

Well, they usually salute smartly and carry on, but they also ask for a workaround. Indeed, that’s where we are now. We’re at the cusp of a new set of Fifth Domain of War programs, which top-level Pentagon guys call “Combat Cloud.”

Combat Cloud is a new vision for sharing data between aircraft, ships, ground points, satellites, undersea and… whoops — I better stop there (I can’t say too much).

Recently, the Naval Research Lab (NRL) released a request to other government labs, contractors, services and academia to come up with concepts for tying everything together.


Well, one key issue right now, per NRL, is that many high-end, expensive, stealthy systems cannot link up with many other legacy systems.

For example, F-22s can’t effectively share data with, say, F-15s or F-16s, let alone with, say, B-52 bombers. Without cross talk between platforms, combat effectiveness is diminished.

So what’s the plan?

The goal is to create an overarching, data-dense network that can access each platform.

In other words, each airplane, ship, satellite, etc. becomes an information-node — and signal processor as well — that both downloads and contributes to the cloud, even in the heat of battle.

“Old” CIPs are supplemented by new CIPs somewhere far away. Data become a “cloud”-like substance, as is the case with, say, global positioning, if not simply air.

Right now, individual services each have “baby step” programs to accomplish this end.

For example, the Navy is moving to connect forces with a program called NIFC-CA — Naval Integrated Fire Control-Counter Air. The idea is to network ships and aircraft to protect assets from attack. (Imagine a ship commander taking control of a distant aircraft, sending a targeting/firing solution and remotely shooting the airplane’s missiles.)

At Air Force, the task is shaping up even larger than that for Navy.

That is, in recent years, the USAF has picked up innumerable new missions based on processing 24/7 streams of data from satellites, drones, airborne control, ground control and more, but overall battle management is simply inadequate to make use of the mass of raw data.

It’s bad enough now, but looking ahead two decades and more? In the future, it’s almost inevitable that F-22s and F-35s will fight in the same airspace as legacy platforms like the F-15, the F-16 and even the old iron workhorse B-52. Yet there’s no comprehensive program in place to connect everything and “deliver effects” down on the battlefield.

So the future sounds great, but… right now, all that super-duper tech is a stand-alone capability with each F-22 airplane. There’s no way (no “secure” way) of integrating that hard-earned knowledge into the overall battle plan.

Over the summer, I heard a talk by then-head of Air Combat Command Gen. Michael Hostage. Gen. Hostage stated that he was “professionally appalled” to learn that fifth-generation platforms — F-22 and F-35 — “can’t talk to each other.” With money issues as they are, he opined, the Pentagon simply lacks the funding to buy and build a new fleet of aircraft up to “fifth generation” standards. Thus, the less expensive step has to be “fusion.” This drives a “fourth-to-fifth/fifth-to-fifth solution,” per Gen. Hostage.

Combat Cloud is coming, and it’s going to be a big, important program.

It all feeds into the “cloud” concept. It’s still early, and definitely in the research stage. But right now, we’re looking at a holistic approach toward development, involving all elements within government and outside, certainly the contractor community. Still, it’s so important that it has to happen; it can’t not happen.

Not only will it happen, but we’ll see the need to develop all manner of security and defenses along the way as well. That’s because one drawback to Combat Cloud would be if the system were hacked or corrupted.

According to one senior USAF official, “I need certainty of information. The adversary is going to blunt it, to try to knock it down, but [I don’t want] the adversary to change the information [in the cloud]. That’s worse than turning it off.”

At the same time, U.S. warfighters already operate every day under cyberattack. They deal with, say, GPS being jammed or altered, or other network intrusions. The idea is to build a cloud system and then train to react in case it’s degraded.

Combat Cloud is coming, and it’s going to be a big, important program.

I’ll have much more to tell you about Combat Cloud — and the investment opportunities — in future issues. That’s all for now.

Best wishes…

Byron W. King
for The Daily Reckoning

Ed. Note: Byron has actually prepared a full briefing on how to invest in the “combat cloud” as well as other advanced security systems. The information is too sensitive to share right here. But a unique opportunity to view it was just released to readers of the FREE Tomorrow in Review e-letter. You can join them by clicking here and signing up for FREE, right now. Once inside, you’ll see several opportunities just like this, every single trading day. Don’t miss another issue. Click here right now to get started.

Categories: Economics

An Insider Report from the World’s Largest Ebola Symposium

The Daily Reckoning - 16 October 2014 - 5:23am

Reporting from Johns Hopkins’ Ebola Symposium…

Yes. We made it in the symposium (did you doubt us?).

Apparently, simply telling them you’re with the media goes a long way.

They only started organizing this event seven days ago, the organizer said as she showed us to our seats.

This is the first time they’ve pulled an event together so quickly. Must be urgent.

Now we’re currently sitting inside the largest Ebola symposium in the world. The room is packed full of epidemiologists, virologists, professors, scientists, students, and even a few family doctors.

If you tuned in yesterday, we reported in from a coffee shop within the Johns Hopkins Hospital campus just before we were about to make our way in.

Fast-forward an hour and we’re sitting inside the symposium with more doctors than the entire country of Liberia.

We’re serious.

In 2006, after trying to recover from a savage civil war, Liberia clocked in with a total of about 50 doctors. Yes, in the entire country.

As Martin Robbins wrote on the Vice blog yesterday, “you’d struggle to find a worse place for an outbreak to happen if you tried.”

Here’s what the world’s leaders in medicine had to say…

“Ebola is the WHO’s Sept. 11,” Dr. Michael Osterholm announced from the podium.

“It will redefine the role of the WHO from this point on.”

Dr. Osterholm is the director of the Center for Infectious Disease Research and Policy at the University of Minnesota.

Source: JHU
Dr. Osterholm. Definitely the most candid of the bunch

He’s also the author of the New York Times best-selling book Living Terrors: What America Needs to Know to Survive the Coming Bioterrorist Catastrophe.

He’s known in the medical circles as one of the biggest critics of the lackadaisical and contradictory claims put out by the CDC and WHO about the Ebola crisis.

And the picture he paints of a future Africa is dark.

All of Africa is brewing a perfect storm for a continent-wide Ebola pandemic…

Let’s tick off the reasons…

First, on Monday, Osterholm reported, Liberian health care workers went on strike because of lack of gloves, masks, and goggles.

A mind-blowing 80% of them are expected to work with highly infectious Ebola victims without the proper protection. We’re talking about even the bare essentials here: gloves, gowns and bleach.

“If we can get iPhones delivered across the world in a day… why can’t we get equipment to Liberia?”

“If we can get iPhones delivered across the world in a day,” he said, “why can’t we get equipment to Liberia?” Osterholm asked, chastising the world’s response to the crisis.

We live in a country where we can give $384,949 to Yale University so they can study “Sexual Conflict, Social Behavior and the Evolution of Waterfowl Genitalia.”

(This happened last year. The researchers looked at… I’m not kidding… the ‘plasticity in duck penis length’.)

Yet they twiddle their thumbs for two weeks about spending a fraction of that to buy bleach and rubber gloves.

Proving that the so-called arbiter of humankind is only as quick to react as its self-interest will allow.

Meanwhile, Firestone Tire and Rubber Company has done more to help out with Ebola than Uncle Sam.

Yeah… Firestone.

“When it comes to Ebola,” Jason Beaubien wrote on NPR’s blog, “the rubber met the road at the Firestone rubber plantation in Harbel, Liberia.

“Harbel is a company town not far from the capital city of Monrovia. It was named in 1926 after the founder of the Firestone Tire and Rubber Company, Harvey and his wife, Idabelle.

“Today,” Jason writes, “Firestone workers and their families make up a community of 80,000 people across the plantation.

“Firestone detected its first Ebola case on March 30, when an employee’s wife arrived from northern Liberia. She’d been caring for a disease-stricken woman and was herself diagnosed with the disease.

“Since then Firestone has done a remarkable job of keeping the virus at bay. It built its own treatment center and set up a comprehensive response that’s managed to quickly stop transmission.”

This is only one example of the private sector leading the way to stop transmission. Nearly all the funding for new clinics is coming out of the private sector. One example is a group of 30 companies that was formed in August.

“Corporate and commercial firms have banded together to better coordinate efforts to eliminate Ebola in Liberia,” the All Africa blog reports. “The group, calling itself the Ebola Private Sector Mobilization Group (EPSMG), recently formed with the intent to support the government of Liberia and the Liberian people during this time of crisis.”

“The current Ebola virus’ hyper-evolution is unprecedented; there has been more human-to-human transmission in the past four months than most likely occurred in the last 500-1,000 years,” Osterholm recently wrote in an Op-Ed for NYT last month.

If certain mutations occurred… infections could spread quickly to every part of the globe…

“Each new infection represents trillions of throws of the genetic dice. If certain mutations occurred… infections could spread quickly to every part of the globe, as the H1N1 influenza virus did in 2009, after its birth in Mexico.”

Another speaker, Peter Jahrling, Chief Scientist at the National Institute of Allergy and Infectious Diseases’ Integrated Research Facility, is also worried about how the virus is mutating…

His first concern arose when his team ran tests on patients in Liberia.

According to what they found, this Ebola strain appeared to carry a much higher “viral load” than previous strains. Meaning the virus is taking over much more of its victims’ blood than prior strains — potentially making it much more contagious.

“If true,” he said in a recent interview with Vox, “that’s a very different bug…

“I have a field team in Monrovia. They are running [tests]. They are telling me that viral loads are coming up very quickly and really high, higher than they are used to seeing. It turns out that in limited studies with the evacuated patients, they continued to express virus in blood and semen. What does that mean? Right now, we just don’t know.

“You can argue that any time the virus replicates it’s going to mutate. So there is a potential for the thing to acquire an aerogenic property, but that would have to be a dramatic change.”

But dramatic changes are this particular strains’ modus operandi…

Early in the outbreak, a group of researchers looked at how the virus was changing in Sierra Leone. They discovered that there had already been more than 300 genetic mutations.

“It’s frightening to look at how much this virus has mutated within just three weeks,” Dr. Pardis Sabeti, an associate professor at Harvard, told CNN at the time.

Yeah… they’re saying it has the potential to go airborne…

“We have never been in a position to determine if airborne transmission is possible,” said Dr. Osterholm.

But he’s not ruling it out. And he said we shouldn’t let the possibility escape our minds. Because if it were to happen, we would need a concerted global action to stop it.

Imagine an airplane with just one person carrying the airborne virus. All that recycled air would likely infect every single person on that plane. Then all those people disperse at the next airport and get on a new plane. Ad infinitum.

Less than 21 days later, there are outbreaks in every corner of the world.

He said that many professionals are discounting it as if it were impossible. It’s not.

“Imagine,” Dr. C.J. Peters, a virologist at the University of Texas, said along the same lines, “every time you copy an essay, you change a word or two. Eventually, it’s going to change the meaning of an essay.”

Osterholm brought up one example of airborne denial in an article by New York Times columnist Carl Zimmer, who, in one tweet, summed up his opinion on the matter:

It’s not that simple, said Osterholm. But debunking Zimmer’s statement is.

  1. Wolves aren’t viruses
  2. Wolves don’t mutate rapidly after infecting hosts
  3. Because wolves aren’t viruses

“[Ebola going airborne is] the single greatest concern I’ve ever had in my 40-year public health career,” Osterholm told CNN recently.

“I can’t imagine anything in my career — and this includes HIV — that would be more devastating to the world than a respiratory transmissible Ebola virus.”

Even more frightening is how quickly the virus has spread in just the past three weeks…

Upon writing, there have been well over 4,400 deaths from this outbreak.

Incredibly, 40% of these cases have happened in the past three weeks.

And it’s about to get a lot worse (more on that in a moment).

And if the U.S. government is honest, says Dr. Osterholm, they’re pretty clueless as to how to help.

“The virus has hardly pinged us until now. Yet we act like we know so much about it,” said Dr. Osterholm.

“I know a hell of a lot less about Ebola than I did six months ago,” he admitted to the crowd.

“If West Africa was a tank of gas waiting for a match to hit it… the rest of Africa is a tanker.”

This is despite, he said, poring over 900 papers on the deadly disease.

In contrast, the CDC and the WHO — the two government organizations who have been the most vocal about our “handle” on the situation — are secretly flailing around trying to keep up appearances.

But all the blush in the world isn’t going to stop what could come to the entire continent of Africa… and then, potentially, the world.

“If West Africa was a tank of gas waiting for a match to hit it,” Dr. Osterholm said, “the rest of Africa is a tanker.”

Get this…

Every year, hundreds of thousands of workers migrate from East Africa to West Africa and back, looking for work.

And now… during the absolute worst of the infection… it’s time for migration.

“Each year,” Osterholm wrote in late September, “thousands of young West African men and boys are part of a migratory work population not too dissimilar from U.S. migrant farm workers. “Crop-friendly rains wash over West Africa from May-October, forming the growing season.

“These young men typically help with harvesting in their home villages from August to early October, but afterward head off for temporary jobs in artisanal gold mines in Burkina Faso, Mali, Niger, and Ghana; cocoa nut and palm oil plantations in Ghana and Cote d’Ivoire; palm date harvesting and fishing in Mauritania and Senegal; and illicit charcoal production in Senegal, Mali, Cote d’Ivoire, Ghana, Burkina Faso, and Niger.

“The migration is about to begin, even for young men whose villages have been recently hit by [Ebola]. These workers find daily laborer jobs at $5 per day, half of which they remit to their families back home. Like their ancestors before them, they use little-known routes and layovers through forests to avoid frontier checkpoints.

“They usually have ECOWAS ID cards, providing free passage to all member states of the Economic Community of West African States. It takes one to three days to travel from the EVD-affected countries to these work destinations. There is no need for Ebola to hop on an airplane to move across Africa: it can travel by foot.

“Control of Ebola,” says Dr. David Peters, MD, chair of the Department of International Health at Johns Hopkins, “actually depends on a community-based containment care strategy.”

Dr. Peters wasn’t offering idle speculation.

He was quoting the minister of health in Congo, Dr. Felix Kabange Numbi, who has seen his fair share of Ebola outbreaks.

Dr. Numbi says that the current outbreak marks the seventh time the people in DR Congo have dealt with Ebola since its identification in 1976.

Monday, Numbi held a press conference to announce there have been no new cases of Ebola for 20 days.

“This already shows that the disease is under control even if we do not talk about eradication, because you have to wait 42 days after the last case,” he said.

The last official tally reported a total of 71 cases, with 43 of them resulting in death.

The DR Congo’s apparent control of the disease is good news…

“The current virus,” Osterholm said, “is completely different from any strain we’ve seen.”

But the strain of Ebola in the Congo is different than what’s currently ravaging West Africa.

According to one speaker, Trish Perl, a professor of medicine and senior epidemiologist at Johns Hopkins, the virus in the Congo has been traced back to a pregnant mother who contracted it when she ate bush meat.

The one spreading through Liberia, Sierra Leone, and Guinea is of a different breed.

“The current virus,” Osterholm said, “is completely different from any strain we’ve seen.”

And it’s spreading at an accelerated rate. Every three to six weeks, the panel told us, the number of infected cases will double.

And it we don’t do anything, we’re going to have a massive global crisis on our hands.

Until tomorrow,

Chris Campbell
for The Daily Reckoning

Ed. Note: The Laissez Faire research team is currently pulling together to create one comprehensive Ebola disaster plan. Soon, they’ll disseminate this information to all of their readers. If you want to be first in line to receive it, become a member today, before it’s too late. Signing up is FREE and easy. Click here to get started.

Categories: Economics

Daze Of Peak Oil... Or At Least Peak Oil Production - Seeking Alpha (registration)

Peak Oil - Google - 16 October 2014 - 4:10am

Daze Of Peak Oil... Or At Least Peak Oil Production
Seeking Alpha (registration)
Production of crude oil has nearly stalled despite a near quadrupling in the price since '01 and it seems likely the world has entered the Peak Oil phase and neither the governments nor central banks (try as they may) can paper this over. Without the ...

and more »

Daze Of Peak Oil... Or At Least Peak Oil Production - Seeking Alpha (registration)

Peak Oil - Google - 16 October 2014 - 4:10am

Daze Of Peak Oil... Or At Least Peak Oil Production
Seeking Alpha (registration)
Production of crude oil has nearly stalled despite a near quadrupling in the price since '01 and it seems likely the world has entered the Peak Oil phase and neither the governments nor central banks (try as they may) can paper this over. Without the ...

and more »

How to Navigate the Worst Selloff of All Time

The Daily Reckoning - 16 October 2014 - 3:17am

Crude Awakening? Crude-pocalypse? Crude-mageddon?

Let’s just say that I haven’t experienced a nasty crash like we’re seeing right now in oil in a very, very long time.

Oil prices are dropping so fast, in fact, that I can’t even keep up. I’m sure that by the time you see this chart (which we made just a few minutes ago) crude will have tumbled another $1…

Right now, light crude is taking the express elevator toward $80 — and it doesn’t look like there’s much that can stop it. And it’s not just the West Texas stuff that’s getting mauled. As Zero Hedge pointed out yesterday, a weekly momentum gauge shows that the selloff in Brent is now the worst ever. That’s remarkable…

Here’s the thing about hitting these oversold extremes: Oversold doesn’t mean it’s time to buy. In fact, a strong oversold reading can actually signal the beginnings of a major push lower. Yes, we will probably see huge snapback rallies in oil and related stocks. But these bounces will likely be short-lived.

Let’s turn to our energy desk and Matt Insley for some more insight into this crash…

“Maybe China left the building? Maybe the Saudis finally went on the offensive? Whatever the case, the market is tasting sour crude on its lips,” Matt says. “In a sense, we really are seeing the perfect storm in the crude market. Remember, unlike some less-reactive markets, crude oil is highly impacted by supply and demand. To that extent we’re seeing WAY MORE supply, with U.S. shale production and OPEC opening the spigots. At the same time we’re seeing WAY LESS demand in the form of lower expectations from the Eurozone to Asia.”

Add it all up, Matt concludes, and crude prices are under pressure… big-time.

For days, Matt’s been waiting for a “big” move in crude oil. Well, yesterday we got a taste of a near-$5 drop in crude prices. That’s probably not the end of the carnage just yet. If history is any guide, we’ll need to see a big capitulation downside move before prices regroup.


Greg Guenthner
for The Daily Reckoning

P.S. The current US oil boom is a big reason why crude oil prices are dropping so sharply. And even if that means bad things for oil prices, it means very good things for savvy investors who know which companies are set to profit. There’s still plenty of money left to be made in this space… if you know where to look. I’ll be giving my Rude Awakening readers access to exclusive opportunities to help them discover just that. Click here to sign up for The Rude Awakening, for FREE, right now.

Categories: Economics

The Market Ticker - BlackBerry Passports Now On Amazon

The Market Ticker - 16 October 2014 - 3:17am

Showing still out of stock, but orderable with a firm commit on price.

Done.  Now I see how long it takes to actually get it.

Categories: Economics
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