This Is Nothing

1,134 views

I was on a tropical island beach in the Gulf of Mexico during the first Greek crisis back in 2010. It was one of those tranquil weeks where you check in once during the morning and once at night, just to stay abreast of the world.

That morning I had skipped the internet check in altogether and just proceeded directly to the ocean to have morning breakfast with mimosa. After breakfast (if you count the next three hours of mimosa as part of breakfast) I proceeded inside.

I will never forget this short journey back to the residence where I was staying, as it was marked with a black omen. The backyard, you see, was guarded jealously by a spring loaded door hinge, which took its duties quite seriously. I had been careful to avoid its wrathful impertinence before now, but on this occasion could not evade the blow it dealt me. Bleeding copiously from the back of my heel, I left a trail of thick, ruby red blood towards the house.

After I was bandaged up, I realized that was the least amount of blood I would shed that day.

The losses from the original Greek crisis and the panic that followed were intense. The volatility cannot be understated, with the VIX ramping from the mid teens to over 40 in a matter of a few short weeks. The world “contagion” was being used by taxi drivers in day to day conversation.

This is nothing.

We have had 5 long years to prepare for this. If any institutions are holding Greek debt as leverage against other positions, they are the world’s biggest idiots. They would deserve to lose everything. In fact, given the zeal with which central banks have been policing finance lately, I’m not sure such a hypothetical institution could even exist in the first place.

Greek debt has been aggressively purchased and stored away in the vaults of the public, where it can be ignored for the next three decades.

I originally thought we were pretty screwed when the first European Debt Crisis hit the waves. Average maturities of European countries were something incomprehensibly stupid, like 2 years. There was no organization of the central banks. No mandate by the ECB to intervene. No control of the euro. I bet against them and then I lost.

If we were going to collapse from European incompetence, that was the time to do it.

My guess is, although Greece seems finally ready to go, this is more a blow to the reputations of the morons that started the EU project than it is to the financial system, at this point in time.

I Am Betting On The Status Quo

1,519 views

This has been a very difficult past 12 months for me. It’s not just the losses from the oil markets cratering like that. The other issue is that I am looking around, now 6 years since the end of the last recession, and I just cannot quite figure out what comes next.

I usually have a pretty good handle on which way the wind is blowing. Some sort of overarching theme about what the next 5 years have in store for them. That thesis was the emergence of an American oil powerhouse that shattered old regimes. And that has sort of played out, albeit not like I expected.

But what else is going on? European countries seem keen on not burning down EU administrative buildings, which is what it would take to really break up that bureaucracy, seeing how no party in Europe appears to have the balls to hold referendums. But you can’t necessarily bet on Europe either. In my 401K, I’ve been nibbling on European indices and mutual funds since at least 2011, but there’s nothing in particular I would invest in. Nothing worthy of iBankCoin.

And what else is happening? Technology continues to undergo a multi-decade of fast paced evolution. The thing about evolution; it’s a violent, messy process. Not conducive to buy and hold at all. The consumers get rich with wonderful goods while the investors get ground to bits by emerging players and turnover. There’s only a few walls in that village, and they have a high premium attached.

My biggest reservation is that I once mapped out frequencies of recession in America, and we are fast coming due for one.

So what are your thoughts? What will the second half of this decade bring?

Growth Is Sucking Wind

1,023 views

Happy Monday and welcome back to. The crisp morning air of a spring not quite ripe welcomed those of us in Michigan; our early treatment to hot weather broke abruptly on Friday night to yield cool weather over the weekend. That has held into the start of this week so far.

Growth reports have yielded steady disappointment. Each time we get hit with a lackluster outcome, since late last year, we shrug it off like high times are just on the horizon. What if they aren’t?

There is an old economic theory that maximum production is ultimately bounded above at any given point in time. A society overproducing for the benefit of one generation necessarily creates low demand for the next, ushering in economic hardships, under this treaty of thought. If we think of the 90’s and early 00’s as such a point in time of overproduction (<5% unemployment in the 90's?), then that could maybe explain the ever present weakness in the face of effervescent punditry which we have been subjected to.

This line of thought led to the infamous "smashing windows" comments that are so well known in Keynesianism. Maybe we just need to blow up some more Middle East pipelines…?

I cannot condone shorting assets though. It's just too stupid of a strategy. If this economic idea is behind our weakness, then it follows that the Central Banks are directly at fault (and also directly to be commended for preventing the collapse of civilization 5 years ago, all sort of murkily at the same time). But weak growth will also provide justification for more intervention on the part of the same, the gross irony there barely coming under scrutiny.

So yes the people who sort of set us up for this in the '90's and '00's will almost assuredly break things more, while blaring the catch phrase "WE'RE HELPING!". Which sort of sets us up for more QE and longer periods of lower interest rates and maybe other even more stupid policies we haven't even thought up yet.

Paying Lip Service To Rate Hikes

1,615 views

The Fed are “unlikely to hike rates in June”, according to the people who’s sole decision it is to hike rates in June.

Is it supposed to make me comfortable that people with absolute discretion to make a decision talk about themselves from a probabilistic, 3rd party frame of reference? If I walked around these halls muttering “Cain is unlikely to stab someone today”, I imagine I would get admitted.

We’re at the point where we talk about rate hikes because that’s what we’re supposed to do. That’s professional of us, to pretend like we earnestly believe that rates are at any point in the foreseeable future set to rise. It’s professional courtesy, you see.

What’s not professional (and maybe just rude) is to state the obvious; rates aren’t going higher and the Federal Reserve isn’t in control of the ball anymore. It’s not just that they won’t raise rates. They cannot raise them.

Not being able to do something so simple as raise interest rates from the lowest they have ever been is disconcerting. It’s not comfortable to admit.

So a few times a year we get together and in very serious voices hold loud talks concerning whether the big rate hike is imminent. But that day isn’t coming anytime soon and deep down, each of us knows that.

And if, it should perchance, that a major correction should hit us in this state of affairs, all confidence in the Federal Reserve would be completely broken, they would become the butt of jokes, and major change would rip through the system.

2015 DAY OF PATIENCING UPON US

2,824 views

Welcome, friends! For the 2015 DAY OF PATIENCING UPON US (blessings and praise) is, well…upon us!

In all of its infinite glory, the markets have ordained that, on this day, we should all be held hostage to the English predilections of a 68 year old woman.

Now! Wait with fearful deference to the Fed statement yet to be transcribed at the hands of careless twenty year old interns! And pray they do not forget to add the word “patience”. Twice for good measure.

On this remarkable day it is well worth it to go over the rules, which are completely capricious and still being made up at the moment. But here is a short breakdown:

1) IF Yellen says she is “patient”, then the market shall rejoice for no particular reason.
2) IF Yellen implies that she is, in fact, not patient, then the market shall despair for no particular reason.

So how does one know if Yellen is patient or not? Admittedly, it would be great if she just came out and say “Hey all, I’m taking a break from knitting, tending to my bonsai trees, and listening to a close, dear friend talking about her grandchildren to let each and every one of you know – I am super patient.”

That would be a most wonderful day and could very well touch off panacea.

Now, where it could get dicey is if Yellen says she is patient without just saying she is patient. Since these particular letters p-a-t-i-e-n-t seem to mean such a great deal, in that particular order, well then it could be quite a fit if she doesn’t use them.

In such an outcome, I suspect the best and brightest thirty year old micro managers would force their twenty year old trading slaves to lay down and cover their ears while they crosschecked the nearest thesaurus for clues.

To save you the trouble, I am providing you here a convenient list of synonyms for patience so that you can get ahead of the game, because that is the type of unparalleled service we provide around here.

Calm, forgiving, gentle, quiet, tolerant, long-suffering, understanding, accommodating, composed, easy-going, enduring, even-tempered, forbearing, imperturbable, indulgent, lenient, meek, mild, mild-tempered, persevering, persistent, philosophic, philosophical, resigned, self-possessed, serene, stoical, submissive, tranquil, uncomplaining, unruffled, untiring

But naturally this whole exercise is somewhat without purpose, as America’s most brilliant economists and laymen have already determined that interest rates shall be raised. Here is a direct quote from a recent publication:

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School.

Oh, no excuse me for my confusion. That was not from this year, it was actually from 2010.

Here’s the real quote.

Last week, Narayana Kocherlakota, the governor of the Minneapolis Federal Reserve, predicted… the Federal Reserve could raise interest rates.

Wait, sorry…sorry…I lied. That was actually a murmur from 2011.

Alright here is the real quote. For real.

We could still see the euro weaken against the dollar from here, which would still result in lower commodity prices.

What has really changed is the prospect for another plunge. It is most unlikely, with the various central banks of the world looking to shore up Europe, that we go back to an across the board sell off. That does not mean we go higher. It just means we don’t go to $0.

It also means that safe haven plays are at extreme risk. If Europe is not going to disintegrate before our eyes, then why hold half your net worth in gold.

Or treasuries…

…okay, I lied again. This time that was me in 2011 betting on higher treasury rates. I cannot recall if I ever made a specific bet on when the Fed exactly would raise interest rates, precisely. I wouldn’t doubt it though. But let’s agree that betting against treasuries in 2011 was just as wrong, shall we?

Here’s a Reuters article in 2012 betting the rate hike would be before late 2014. A cadre of economists actually thought the Fed would just pull the trigger right then and there.

(Reuters) – There is a good chance the Federal Reserve will raise interest rates before the end of 2014, according to a Reuters poll which also showed a significant minority of economists still expect a further easing of monetary policy in coming months.

The poll saw a 50-50 chance the U.S. central bank will break the pledge it made last month to keep benchmark overnight borrowing costs at near-zero for the next two years.

Here’s Fed chair Bullard in 2012 suggesting it would come in 2013.

March 23 (Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard said U.S. monetary policy may be at a turning point and the Fed’s first interest-rate increase since the global financial crisis could come as soon as late 2013.

With policy currently “on pause, it may be a good time to take stock of whether we may be at a turning point,” Bullard said in a speech in Hong Kong today. “As the U.S. economy continues to rebound and repair,” further action “may create an overcommitment to ultra-easy monetary policy.”

Here is LaVorgna, chief U.S. economist at Deutsche Bank, hanging out at with our good pals at CNBC in 2013, ignoring everything the Fed said completely and still suggesting the rate hike would be imminent.

History, in fact, suggests that when the claims number averages below 350,000, you can safely bet a Fed interest rate hike will come within the year, according to research from Joe LaVorgna, chief U.S. economist at Deutsche Bank.

In the current Fed forecasts, rate hikes wouldn’t come until mid-2015, when it expects a rate of 5.8 percent to 6.2 percent.

But rate hikes came when claims averaged 350,000 in 1958, 331,000 in 1961, 345,000 in 1984 and 344,000 in 1987.

“If past is prologue, whereby low and declining claims accurately foreshadow a noticeable pickup in hiring—and hence a sharp decline in the unemployment rate—then monetary policymakers will not be waiting until 2015 before raising the fed funds rate,” LaVorgna said.

Which brings us to 2014, just three months ago, when we started this comical jig, waiting on an old woman to assure us she is still, in fact, patient.

For reference, see Bloomberg.

So let’s have a moment of contrite honesty together. You…me…all of us have been absolutely terrible at guessing when the Fed will raise interest rates. Even the Fed themselves have been terrible about guessing when they will raise interest rates.

The dance above us that you see, prancing over five years, is a display of failure. It is time to admit that candidly amongst one another.

This economics game we play – the underpinning of everything in investing – is not a science. It is an art form, rather; one which is prone to fits and everyone gets to be wrong quite a lot.

So why, dear reader, should I believe that now – with such rampant destruction in forex markets and the US dollar almost audibly sucking air out of the room – is the time to raise interest rates?

Why would you be right this time?

Oil Markets Are Destroying Themselves

3,613 views

We’re still in the midst of watching the oil industry unravel in spectacular fashion. I do not feel comfortable even uttering the word “bottom”, not even in jest, for the fear the entire structure would unwind and usher in $10 oil for two decades.

We need more expensive oil. I know you do not want to hear that; why just a few weeks ago I saw a long dormant Hummer H3 roaming the tundra planes of southeast Michigan. A once formidable species, these vehicles could once be seen all across the North American continent.

Their reemergence was a startling sign. Gasoline has gotten cheap.

It is comforting to think of these lower input costs as an unchallenged blessing to America. It is more complicated than that, I am afraid.

High oil prices have been one of very few elements that has actually helped foster stability in third world countries. Watching the recent turmoil and wars, it is easy to forget just how unnaturally peaceful the most recent decades have been in the grand scheme of things. Oil money has been used to weave the social fabric in these places and if oil prices stay low for a sustained period, we are going to see much more egregious cases of foreign sovereign collapse.

Oil prices have also driven the US recovery. The shale revolution was named thusly for a reason; job growth in the US would not have been possible without the advances in shale oil. This is a major pillar of the US recovery and without it our economy is going to suffer. High input costs were a minor inconvenience that came with job growth.

And of course there is the euro. The euro may just be the cause of the oil collapse in and of itself. I cannot say for certain yet, but I am suspicious. The euro and dollar are now almost at parity and this has crippled US exporters. If our own markets are suddenly sloshing around with oil to spare, it is because we are suddenly priced out of foreign markets. This is a precarious barrier…how cheap would oil need to be in this country to enable exporters to compete against euro/dollar parity? The dollar is going to isolate our business and tank us if we let this continue.

We need to start taking steps to regain stability. Bernanke would have never let this happen. Yellen is pushing for normalization of policy and this is not a bad thing. But they are far too comfortable watching a currency move like this happen with our probably largest trade group. We need a weaker dollar and we need more expensive oil and we need it now.

Now, because oil is so cheap, struggling shale producers are clocking overtime to meet payments. This is the exact opposite of what the oil markets need to find a bottom – a glut of even more oil.

In addition to addressing currency and demand issues, we really need a JP Morgan figure to emerge and start brokering some M&A moves that stitch up the supply side. Oil markets are leaking supply uncontrollably and this is going to cause extensive damage if not treated like the dire risk that it is.

The weak hands need to be either bought out or flushed or secured with long term financing. If we can’t shut some of these wells off, we’re going to have irreparable damage on our hands.

This Is Nothing

1,134 views

I was on a tropical island beach in the Gulf of Mexico during the first Greek crisis back in 2010. It was one of those tranquil weeks where you check in once during the morning and once at night, just to stay abreast of the world.

That morning I had skipped the internet check in altogether and just proceeded directly to the ocean to have morning breakfast with mimosa. After breakfast (if you count the next three hours of mimosa as part of breakfast) I proceeded inside.

I will never forget this short journey back to the residence where I was staying, as it was marked with a black omen. The backyard, you see, was guarded jealously by a spring loaded door hinge, which took its duties quite seriously. I had been careful to avoid its wrathful impertinence before now, but on this occasion could not evade the blow it dealt me. Bleeding copiously from the back of my heel, I left a trail of thick, ruby red blood towards the house.

After I was bandaged up, I realized that was the least amount of blood I would shed that day.

The losses from the original Greek crisis and the panic that followed were intense. The volatility cannot be understated, with the VIX ramping from the mid teens to over 40 in a matter of a few short weeks. The world “contagion” was being used by taxi drivers in day to day conversation.

This is nothing.

We have had 5 long years to prepare for this. If any institutions are holding Greek debt as leverage against other positions, they are the world’s biggest idiots. They would deserve to lose everything. In fact, given the zeal with which central banks have been policing finance lately, I’m not sure such a hypothetical institution could even exist in the first place.

Greek debt has been aggressively purchased and stored away in the vaults of the public, where it can be ignored for the next three decades.

I originally thought we were pretty screwed when the first European Debt Crisis hit the waves. Average maturities of European countries were something incomprehensibly stupid, like 2 years. There was no organization of the central banks. No mandate by the ECB to intervene. No control of the euro. I bet against them and then I lost.

If we were going to collapse from European incompetence, that was the time to do it.

My guess is, although Greece seems finally ready to go, this is more a blow to the reputations of the morons that started the EU project than it is to the financial system, at this point in time.

I Am Betting On The Status Quo

1,519 views

This has been a very difficult past 12 months for me. It’s not just the losses from the oil markets cratering like that. The other issue is that I am looking around, now 6 years since the end of the last recession, and I just cannot quite figure out what comes next.

I usually have a pretty good handle on which way the wind is blowing. Some sort of overarching theme about what the next 5 years have in store for them. That thesis was the emergence of an American oil powerhouse that shattered old regimes. And that has sort of played out, albeit not like I expected.

But what else is going on? European countries seem keen on not burning down EU administrative buildings, which is what it would take to really break up that bureaucracy, seeing how no party in Europe appears to have the balls to hold referendums. But you can’t necessarily bet on Europe either. In my 401K, I’ve been nibbling on European indices and mutual funds since at least 2011, but there’s nothing in particular I would invest in. Nothing worthy of iBankCoin.

And what else is happening? Technology continues to undergo a multi-decade of fast paced evolution. The thing about evolution; it’s a violent, messy process. Not conducive to buy and hold at all. The consumers get rich with wonderful goods while the investors get ground to bits by emerging players and turnover. There’s only a few walls in that village, and they have a high premium attached.

My biggest reservation is that I once mapped out frequencies of recession in America, and we are fast coming due for one.

So what are your thoughts? What will the second half of this decade bring?

Growth Is Sucking Wind

1,023 views

Happy Monday and welcome back to. The crisp morning air of a spring not quite ripe welcomed those of us in Michigan; our early treatment to hot weather broke abruptly on Friday night to yield cool weather over the weekend. That has held into the start of this week so far.

Growth reports have yielded steady disappointment. Each time we get hit with a lackluster outcome, since late last year, we shrug it off like high times are just on the horizon. What if they aren’t?

There is an old economic theory that maximum production is ultimately bounded above at any given point in time. A society overproducing for the benefit of one generation necessarily creates low demand for the next, ushering in economic hardships, under this treaty of thought. If we think of the 90’s and early 00’s as such a point in time of overproduction (<5% unemployment in the 90's?), then that could maybe explain the ever present weakness in the face of effervescent punditry which we have been subjected to.

This line of thought led to the infamous "smashing windows" comments that are so well known in Keynesianism. Maybe we just need to blow up some more Middle East pipelines…?

I cannot condone shorting assets though. It's just too stupid of a strategy. If this economic idea is behind our weakness, then it follows that the Central Banks are directly at fault (and also directly to be commended for preventing the collapse of civilization 5 years ago, all sort of murkily at the same time). But weak growth will also provide justification for more intervention on the part of the same, the gross irony there barely coming under scrutiny.

So yes the people who sort of set us up for this in the '90's and '00's will almost assuredly break things more, while blaring the catch phrase "WE'RE HELPING!". Which sort of sets us up for more QE and longer periods of lower interest rates and maybe other even more stupid policies we haven't even thought up yet.

Paying Lip Service To Rate Hikes

1,615 views

The Fed are “unlikely to hike rates in June”, according to the people who’s sole decision it is to hike rates in June.

Is it supposed to make me comfortable that people with absolute discretion to make a decision talk about themselves from a probabilistic, 3rd party frame of reference? If I walked around these halls muttering “Cain is unlikely to stab someone today”, I imagine I would get admitted.

We’re at the point where we talk about rate hikes because that’s what we’re supposed to do. That’s professional of us, to pretend like we earnestly believe that rates are at any point in the foreseeable future set to rise. It’s professional courtesy, you see.

What’s not professional (and maybe just rude) is to state the obvious; rates aren’t going higher and the Federal Reserve isn’t in control of the ball anymore. It’s not just that they won’t raise rates. They cannot raise them.

Not being able to do something so simple as raise interest rates from the lowest they have ever been is disconcerting. It’s not comfortable to admit.

So a few times a year we get together and in very serious voices hold loud talks concerning whether the big rate hike is imminent. But that day isn’t coming anytime soon and deep down, each of us knows that.

And if, it should perchance, that a major correction should hit us in this state of affairs, all confidence in the Federal Reserve would be completely broken, they would become the butt of jokes, and major change would rip through the system.

2015 DAY OF PATIENCING UPON US

2,824 views

Welcome, friends! For the 2015 DAY OF PATIENCING UPON US (blessings and praise) is, well…upon us!

In all of its infinite glory, the markets have ordained that, on this day, we should all be held hostage to the English predilections of a 68 year old woman.

Now! Wait with fearful deference to the Fed statement yet to be transcribed at the hands of careless twenty year old interns! And pray they do not forget to add the word “patience”. Twice for good measure.

On this remarkable day it is well worth it to go over the rules, which are completely capricious and still being made up at the moment. But here is a short breakdown:

1) IF Yellen says she is “patient”, then the market shall rejoice for no particular reason.
2) IF Yellen implies that she is, in fact, not patient, then the market shall despair for no particular reason.

So how does one know if Yellen is patient or not? Admittedly, it would be great if she just came out and say “Hey all, I’m taking a break from knitting, tending to my bonsai trees, and listening to a close, dear friend talking about her grandchildren to let each and every one of you know – I am super patient.”

That would be a most wonderful day and could very well touch off panacea.

Now, where it could get dicey is if Yellen says she is patient without just saying she is patient. Since these particular letters p-a-t-i-e-n-t seem to mean such a great deal, in that particular order, well then it could be quite a fit if she doesn’t use them.

In such an outcome, I suspect the best and brightest thirty year old micro managers would force their twenty year old trading slaves to lay down and cover their ears while they crosschecked the nearest thesaurus for clues.

To save you the trouble, I am providing you here a convenient list of synonyms for patience so that you can get ahead of the game, because that is the type of unparalleled service we provide around here.

Calm, forgiving, gentle, quiet, tolerant, long-suffering, understanding, accommodating, composed, easy-going, enduring, even-tempered, forbearing, imperturbable, indulgent, lenient, meek, mild, mild-tempered, persevering, persistent, philosophic, philosophical, resigned, self-possessed, serene, stoical, submissive, tranquil, uncomplaining, unruffled, untiring

But naturally this whole exercise is somewhat without purpose, as America’s most brilliant economists and laymen have already determined that interest rates shall be raised. Here is a direct quote from a recent publication:

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School.

Oh, no excuse me for my confusion. That was not from this year, it was actually from 2010.

Here’s the real quote.

Last week, Narayana Kocherlakota, the governor of the Minneapolis Federal Reserve, predicted… the Federal Reserve could raise interest rates.

Wait, sorry…sorry…I lied. That was actually a murmur from 2011.

Alright here is the real quote. For real.

We could still see the euro weaken against the dollar from here, which would still result in lower commodity prices.

What has really changed is the prospect for another plunge. It is most unlikely, with the various central banks of the world looking to shore up Europe, that we go back to an across the board sell off. That does not mean we go higher. It just means we don’t go to $0.

It also means that safe haven plays are at extreme risk. If Europe is not going to disintegrate before our eyes, then why hold half your net worth in gold.

Or treasuries…

…okay, I lied again. This time that was me in 2011 betting on higher treasury rates. I cannot recall if I ever made a specific bet on when the Fed exactly would raise interest rates, precisely. I wouldn’t doubt it though. But let’s agree that betting against treasuries in 2011 was just as wrong, shall we?

Here’s a Reuters article in 2012 betting the rate hike would be before late 2014. A cadre of economists actually thought the Fed would just pull the trigger right then and there.

(Reuters) – There is a good chance the Federal Reserve will raise interest rates before the end of 2014, according to a Reuters poll which also showed a significant minority of economists still expect a further easing of monetary policy in coming months.

The poll saw a 50-50 chance the U.S. central bank will break the pledge it made last month to keep benchmark overnight borrowing costs at near-zero for the next two years.

Here’s Fed chair Bullard in 2012 suggesting it would come in 2013.

March 23 (Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard said U.S. monetary policy may be at a turning point and the Fed’s first interest-rate increase since the global financial crisis could come as soon as late 2013.

With policy currently “on pause, it may be a good time to take stock of whether we may be at a turning point,” Bullard said in a speech in Hong Kong today. “As the U.S. economy continues to rebound and repair,” further action “may create an overcommitment to ultra-easy monetary policy.”

Here is LaVorgna, chief U.S. economist at Deutsche Bank, hanging out at with our good pals at CNBC in 2013, ignoring everything the Fed said completely and still suggesting the rate hike would be imminent.

History, in fact, suggests that when the claims number averages below 350,000, you can safely bet a Fed interest rate hike will come within the year, according to research from Joe LaVorgna, chief U.S. economist at Deutsche Bank.

In the current Fed forecasts, rate hikes wouldn’t come until mid-2015, when it expects a rate of 5.8 percent to 6.2 percent.

But rate hikes came when claims averaged 350,000 in 1958, 331,000 in 1961, 345,000 in 1984 and 344,000 in 1987.

“If past is prologue, whereby low and declining claims accurately foreshadow a noticeable pickup in hiring—and hence a sharp decline in the unemployment rate—then monetary policymakers will not be waiting until 2015 before raising the fed funds rate,” LaVorgna said.

Which brings us to 2014, just three months ago, when we started this comical jig, waiting on an old woman to assure us she is still, in fact, patient.

For reference, see Bloomberg.

So let’s have a moment of contrite honesty together. You…me…all of us have been absolutely terrible at guessing when the Fed will raise interest rates. Even the Fed themselves have been terrible about guessing when they will raise interest rates.

The dance above us that you see, prancing over five years, is a display of failure. It is time to admit that candidly amongst one another.

This economics game we play – the underpinning of everything in investing – is not a science. It is an art form, rather; one which is prone to fits and everyone gets to be wrong quite a lot.

So why, dear reader, should I believe that now – with such rampant destruction in forex markets and the US dollar almost audibly sucking air out of the room – is the time to raise interest rates?

Why would you be right this time?

Oil Markets Are Destroying Themselves

3,613 views

We’re still in the midst of watching the oil industry unravel in spectacular fashion. I do not feel comfortable even uttering the word “bottom”, not even in jest, for the fear the entire structure would unwind and usher in $10 oil for two decades.

We need more expensive oil. I know you do not want to hear that; why just a few weeks ago I saw a long dormant Hummer H3 roaming the tundra planes of southeast Michigan. A once formidable species, these vehicles could once be seen all across the North American continent.

Their reemergence was a startling sign. Gasoline has gotten cheap.

It is comforting to think of these lower input costs as an unchallenged blessing to America. It is more complicated than that, I am afraid.

High oil prices have been one of very few elements that has actually helped foster stability in third world countries. Watching the recent turmoil and wars, it is easy to forget just how unnaturally peaceful the most recent decades have been in the grand scheme of things. Oil money has been used to weave the social fabric in these places and if oil prices stay low for a sustained period, we are going to see much more egregious cases of foreign sovereign collapse.

Oil prices have also driven the US recovery. The shale revolution was named thusly for a reason; job growth in the US would not have been possible without the advances in shale oil. This is a major pillar of the US recovery and without it our economy is going to suffer. High input costs were a minor inconvenience that came with job growth.

And of course there is the euro. The euro may just be the cause of the oil collapse in and of itself. I cannot say for certain yet, but I am suspicious. The euro and dollar are now almost at parity and this has crippled US exporters. If our own markets are suddenly sloshing around with oil to spare, it is because we are suddenly priced out of foreign markets. This is a precarious barrier…how cheap would oil need to be in this country to enable exporters to compete against euro/dollar parity? The dollar is going to isolate our business and tank us if we let this continue.

We need to start taking steps to regain stability. Bernanke would have never let this happen. Yellen is pushing for normalization of policy and this is not a bad thing. But they are far too comfortable watching a currency move like this happen with our probably largest trade group. We need a weaker dollar and we need more expensive oil and we need it now.

Now, because oil is so cheap, struggling shale producers are clocking overtime to meet payments. This is the exact opposite of what the oil markets need to find a bottom – a glut of even more oil.

In addition to addressing currency and demand issues, we really need a JP Morgan figure to emerge and start brokering some M&A moves that stitch up the supply side. Oil markets are leaking supply uncontrollably and this is going to cause extensive damage if not treated like the dire risk that it is.

The weak hands need to be either bought out or flushed or secured with long term financing. If we can’t shut some of these wells off, we’re going to have irreparable damage on our hands.

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