Monthly Archives: January 2020

Front Running – Green New Deal

In this episode, Front Running looks at the jobs program called the Green New Deal, most associated at the moment with Congresswoman Alexandria Ocasio-Cortez but which has been formulated for quite some years with the ambition to provide an FDR-like jobs program to put Americans to work rebuilding its infrastructure for a post-carbon world.

Two guests join Front Running to discuss the Green New Deal; James (Jim) Howard Kunstler, author of “The Geography of Nowhere” and “The Long Emergency,” and Randy Voller, former mayor of Pittsboro, North Carolina, as well as the former chair of the Democratic Party of North Carolina.

Together they look at the ability of the Green New Deal to be a jobs program of the magnitude that could restore US infrastructure and manufacturing capacity. Kunstler believes that it is a ‘when-you-wish-upon-a-star’ program filled with ‘wishful thinking’ because we can’t keep our fantasy land of suburbia, Walt Disney World, and the US military afloat on alternative energy as these all need an underlying platform built on oil, gas, and coal. Voller has more hope that the Green New Deal can succeed and programs can be implemented locally and immediately for genuine benefit.

You can listen to the podcast of this instead by clicking here.

Transcript is below the fold — >

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Just a Friendly Heads-Up, Bulls: The Fed Just Slashed its Balance Sheet

Just a friendly heads-up to all the Bulls bowing and murmuring prayers to the Golden Idol of the Federal Reserve: the Fed just slashed its balance sheet–yes, reduced its assets. After panic-printing $410 billion in a few months, a $24 billion decline isn’t much, but it does suggest the Fed might finally be worrying about the reckless, insane bubble it inflated:

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Was Marx Right about Capitalism Destroying Itself from Within?

One of the core tenets of Marx’s work is that capitalism will be undone by internal contradictions that would manifest as ever-greater crises that would eventually destroy the system from within.

As the global economy continues to unravel beneath the surface, it’s a good time to re-examine Marx’s claim. If if turns out the current version of global capitalism is indeed unraveling due to its internal contradictions, it would be valuable to understand this now rather than later.

Sartre once observed that students are only taught enough about Marx’s work to refute it. Despite the difficulty of Marx’s writings (only German philosophers can be so convoluted), its elevation to scripture by various academic tribes, and his failure to describe his “scientific socialism” alternative to capitalism in the same detail he devoted to his critique of capitalism, Marx’s work remains relevant and insightful.

Thus we continue to see articles such as Capitalism is unfolding exactly as Karl Marx predicted.

I’m not in either of the two camps, those trained to dismiss Marx’s critiques or those who devote their careers to jousting over Marxist minutiae. It’s been decades since I studied Marx in a college classroom, but I’ve continued to apply his core insights to our era.

To understand Marx’s critique of capitalism, we have to understand that he came to economics via philosophy, specifically the writings of Hegel. In other words, Marx did not approach the study of capitalism from the abstractions of classical 19th century economics (Marx was born in 1818) but from a profound interest in history, social and spiritual development and human alienation. Marx ended up devoting his life to an understanding of capitalism because it is a world-system that drives history and society.

Hegel believed human history wasn’t just “one damn thing after another;” he saw it as teleological, i.e. on a trajectory leading to higher social and spiritual development. Given this context, it’s little wonder that Marx viewed capitalism as a necessary stage of history creating the conditions for the next advancement.

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[KR1486] Keiser Report: Vietnam for a ‘Decent Standard of Living’

In this episode of Keiser Report, Max and Stacy look at the irony of US veterans of the Vietnam War retiring to Vietnam, where they can afford a better standard of living, including healthcare. They also discuss the ‘three truths’ that the Democrats need to accept about 2016 in order to win in 2020.

In the second half, Max continues his interview with Mitch Feierstein of PlanetPonzi.com about the euphoria in the markets. They discuss gold, what Japan’s economy can tell us about the US zombie future and what his predictions are for the 2020 election.

The Fed Can’t Reverse the Decline of Financialization and Globalization

The global economy and financial system are both running on the last toxic fumes of financialization and globalization.

For two generations, globalization and financialization have been the two engines of global growth and soaring assets. Globalization can mean many things, but its beating heart is the arbitraging of the labor of the powerless, and commodity, environmental and tax costs by the powerful to increase their profits and wealth.

In other words, globalization is the result of those at the top of the wealth-power pyramid shifting capital around the world to exploit lower costs of labor, commodities, environmental regulations and taxes.

This manifests as offshoring of jobs, the stripmining of forests, minerals, etc., the degradation of local ecosystems, the decline of tax revenues derived from capital and the explosive rise in stock market valuations as wages stagnate or decline.

A key element in globalization is the transfer of risk from the owners of capital to the workers and public resources. Examples of this transfer of risk abound: rather than pay workers benefits, corporations game part-time/full-time labor laws so workers’ health insurance is paid by taxpayers (Medicaid). Corporations pay wages too low to survive so workers depend on public-sector assistance (food stamps, etc.)

Rather than provide vehicles to workers who drive for a living, corporations such as Uber and Lyft transfer all the risks of ownership, maintenance and enterprise to the drivers. And so on.

Financialization is the exploitation of assets/income that were previously safe from predation by those with access to low-cost central bank credit. While definitions vary, mine is:

Financialization is the mass commoditization of debt collaterized by previously unsecuritized assets, a pyramiding of risk and speculation that is only possible in a massive expansion of low-cost credit and leverage for those at the top of the wealth-power pyramid: financiers, banks and corporations.

One example is the student loan “industry,” which prior to financialization did not exist. A previously safe from predation asset/source of income–college degrees–has been securitized so that loans issued to students for largely worthless diplomas can be sold globally as “secure assets with guaranteed yields.”

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Is This “The Top”?

The consensus seems to be that the stock market is on its way to much higher levels, and soon. The near-term targets for the S&P 500 (SPX, currently around 3,235) range from 3,500 to 4,000, with longer-term targets reaching “the sky’s the limit.”

The consensus reasoning goes like this:

— Central banks can print a lot more money

— Stocks rise when central banks print more money.

The history of the 2009-2019 era strongly supports this simple cause-effect, and so just about everyone is on the same side of the boat, the “don’t fight the Fed” side of ever-higher stock multiples and ever-higher prices.

Simply put: sales and profits no longer matter, the only thing that matters is whether central banks are printing more money. And since we all know they’ll have to print more money to keep the flying pig (the stock market) aloft, then it follows as night follows day that stocks will rise essentially forever.

As soon as the consensus has settled complacently on one side of the boat, contrarians take notice as history has a perverse habit of foiling any overwhelmingly complacent consensus.

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[KR1485] Keiser Report: Stock Markets Party Like It’s 1999

Continuing with their look back on 2019 and their look forward to 2020, Max and Stacy look at the year end charts from 2019 as the NASDAQ (up nearly 40%) parties like it’s 1999 when the index closed up 85%. Could 2020 achieve even higher returns? The massive end of year rally in the stock markets matched the Fed’s v-shaped recovery in its balance sheet which ballooned by over a hundred billion per month in the last four months of the year. Should anyone fight the Fed? Or ride their free money helicopter to ever higher highs? In the second half, Max talks to Mitch Feierstein of PlanetPonzi.com about the euphoria in the markets. How long it might last, how big the Fed’s balance sheet might grow. Mitch admits that he had called 2019 wrongly because he looked at fundamentals rather than at the willingness of the Fed to print money with such enthusiasm. How long it may continue is anyone’s guess, but the higher the bubble goes, the bigger will be the eventual fall.

[KR1484] Keiser Report: Hard Money, Passive Indexation

Continuing with their look back on 2019 and their look forward to 2020, Max and Stacy look at the admissions of failure from the mainstream media at looking at stories and opinions from outside the metropolitan elite. They also look at passive indexation and how the Boomers are winning (again) at the expense of the younger generations and at what is next for Boeing as their 737MAX disaster continues.

In the second half, Max is joined by bitcoin core developer and author, Jimmy Song, to discuss the year ahead for bitcoin. They also talk about money and monetary policy and how that influences his understanding of hard money like bitcoin.

Front Running – China Policy

Watch the latest episode of Front Running here.

Front Running looks at the ‘Sputnik moment’ for the US as China overtakes it in high-tech achievements. Donald Trump won 2016 on the promise to ‘Make America Great Again’, but has imposing new trade conditions on China worked? Are any candidates proposing an industrial policy that can trump Trump’s policy? How was it that China was able to overtake America in the first place?

Max and Stacy are joined by guests Dan Collins, a businessman who lived and worked in China for 20 years, and Marshall Auerback, a market analyst and a researcher at the Levy Institute. They trace the history of the policy first set in motion by the Clinton administration in 2000 when Congress was urged to accept China into the WTO. Trump’s current trade representative, Robert Lighthizer, was almost the lone voice at the time arguing that allowing China into the WTO would destroy US manufacturing. He was right, everyone else was wrong. How can the US be extracted from its own disastrous mistakes? Is it possible to catch up to China’s high-tech advantage? Dan Collins notes that there has been a manufacturing boom over the past two decades, only it’s been happening in China, not America. Marshall Auerback believes it is possible to remedy that. Tune in to learn how.

If you can’t see it above, then watch here.

Transcript is below the fold — > (more…)

The Two Charts You Need to Ignore or Rationalize Away in 2020 (Unless You’re a Bear)

We’re awash in financial charts, but only a few crystallize an entire year. Here are the two charts that sum up everything you need to know about the stock market in 2020.

Put another way–these are the two charts you need to ignore or rationalize away–unless you’re a Bear, of course, in which case you’ll want to tape a printed copy next to your wall of curled Post-It notes for future reference.

These charts show that all the potential gains from a thee-year advance (2019-2021) in P-E multiples and stock valuations have already been front-run in a mere three months. This is a key dynamic in the diminishing returns on Federal Reserve stimulus. This is an important point that few seem to observe.

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The Fed’s “Not-QE” and the $33 Trillion Stock Market in Three Charts

The past decade has shown that when the Federal Reserve creates trillions of dollars out of thin air (QE), U.S. stocks rise accordingly. The correlation is very nearly perfect.

This has given rise to the belief that buyers of stocks will always be rewarded because “the Fed has our backs.” The evidence for this belief is the near-perfect correlation of Fed money-printing and stocks soaring.

This near-universal belief in the omnipotent Fed raises an interesting question: how much actual control does the Fed have on the U.S. stock market? One way to approach this question is to plot the size (to scale) of the Fed’s current money-printing campaign of $60 billion per month, “Not-QE,” to the market cap (total value) of U.S. stocks, using the Wilshire 5000 as the measuring stick and the St. Louis Federal Reserve database (FRED) as the data source.

This first chart shows the Fed’s $60 billion per month “Not-QE” in relation the $33 trillion market value of U.S. stocks.

The nearly invisible thin red line is $60 billion in relation to $33 trillion. So exactly how does this signal-noise sum translate into “the Fed has our backs”?

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[KR1482] Keiser Report: 2020 Predictions!!!

Hey all, thanks for visiting the site and being so awesome. Here is our New Year’s Eve special which aired yesterday and featuring Gerald Celente in the second half. Of course, we have loads of predictions. Let me know what you think of those ideas we have . . . and give us your own in the comments below. Hope you had a nice, sober New Years and are ready for a roaring 20s!