solarbird: (Lecturing)
I think it's an appropriate time to remind any actual conservatives out there that the last thing to make Marxism really popular - I mean, actually, legitimately popular - in the US? Fascism.

I mean it. Seriously. Actual fascism - and all it entails - managed to turn a rampaging monster like Stalin into our pal "Uncle Joe." That ... that took a lot.

So when you're thinking about exactly how hard should you hold onto your reflexive alliance with white supremacists and neofascists like Bannon and Milo, think about that history. Think about it real hard.

Because right now, you've got a whole generation of people who have grown up being told that online death and rape threats and doxxing, and systematic harassment, is just something they should deal with. Conservatives have been saying all that is just Free Speech, and embracing the abuse organisers and agreeing that the solution is that women should "just log off." They don't even bother addressing people of colour.

Like you can fucking log off. That's saying, "stop being in society." That's "hide thyself in a nunnery." That's "give in," that's "go die," that's "accept being absolutely without value to us." It's the opposite of an answer - it's support for the abusers.

Meanwhile, at the same time, and in response to this same situation, the so-called "liberal" side of things has been giving fuck and all of a response, with occasional dishwatery tsk-tsk statements and a lot of hand-writing about violating the rights of people who are literally trying to organise ethnic cleansing.

On the other hand, the Marxists were out way in front, talking about this in the context of economic politics, racial politics, and how fascism is the natural end-state of late-stage capitalism. Who is on the ground fighting the fascists? The antifa (anti-fascist) movement, which while not by any means universally Marxist, is generally very left.

When Richard Spencer - who has personally published articles supporting genocide - got oh-so-deservedly punched in the face on camera, who cheered? Everybody who has been targeted - almost all the women and a decent number of men of an entire generation, a lot of women of all generations, and a decent number of other men besides.

And, of these political factions, which said "about FUCKING time DO MORE OF THAT" and who, by contrast, lectured about how you have to have polite and respectful discussion with people who are literally planning your mass murder?

Conservatives, and mainstream liberals, you want a roadmap to actual popular Marxism? Guess what: you don't need a fucking roadmap. You've already built the road.
solarbird: (Default)
Finally reading Marx's Capital in order (instead of various excerpted sections, which is what I'd read until now), and I'm only 64 pages in but so far I'm mostly thinking, 'jfc this guy takes a long time to say the same damn thing over and over again.'

John Galt's terrible speech brick in Atlas Shrugged, though, makes a little more sense if you think of it as a failed parody of Capital's chapter 1.
solarbird: (Default)
GB£ is down now roughly 12% from pre-Brexit intraday high, the day before the vote.

Friday was the worst single-day stock rout by dollar value on record.

Asia did well overnight, Europe did very badly. North America isn't looking good today either, but is decently off morning lows.

£ vs. USD

Jun. 24th, 2016 05:00 pm
solarbird: (Default)
I did not realise that US$1.40 was such a big support level for the GBP, but it was:

Not Your Everyday Pounding
Dana Lyons
solarbird: (Default)
Royal Bank of Scotland plunges 34% after Brexit vote

U.K.'s FTSE 100 slides 7.7% at 5,849.41 after U.K. votes for Brexit

Breaking Barclays tanks 30% after U.K. votes to Brexit

Losses deepen for European banks, Stoxx banking index down 11%

U.K.'s midcap FTSE 250 plunges 11.5% as U.K. votes for Brexit (yes that's four points from the above AS I'M TYPING THIS)
solarbird: (Default)
But wow, Europe is not happy.

Barclays tanks 30% after U.K. votes to Brexit

Germany's DAX opens 10% lower at 9,232 after U.K. votes to leave the EU

Stoxx Europe 600 down 5.5%, falling further in opening trade

PM Cameron speaking in seven minutes.
solarbird: (molly-braceforimpact)
Whelp, the United Kingdom is leaving the EU. Europe has to be panicking, behind close doors, trying to figure out how to save the European project now that the second-largest economy in the EU has voted to leave.

The Pound Sterling is down around 12%-ish against the USD, lowest since the 1980s. The Nikkei is down close to 8%, with trading suspended by circuit breakers. London banking is going to be kneecapped. Do not get that wrong: kneecapped. People wanting access to the EU in English now need to go to Ireland.

The SNP have already said that this abrogates the promises made in the independence referendum in 2014, and Scotland in this election voted overwhelmingly (and in all ridings) to stay in Europe; commentators are assuming there will be another independence vote in the next couple of years, and that it's likely it will pass. Even one of the BBC's Scottish employees said that last time they didn't take independence seriously and of course voted against, but this time, they will.

In the short term this is going to throw a chunk of money at the US and Japan, as perceived safe havens, but that'll mostly be currency; the general freak-out will hammer the markets and won't help any part of any economies. (I just saw a flash update that Dow futures are down 650 points, which is a pretty big gut-punch.)

Everyone is assuming that PM Cameron is going to stay on for a bit; possibly even a few months, until the summer Conservative Party conference, at which point there'll be a transition and possibly a new election.

This is a remarkable monkeywrenching. Even the Leave side going into tonight were talking up the idea of this being proof that people have to take Euro-scepticism seriously - not that they were going to win. And now they have a victory.

The EU needs to be scrambling now, as hard as it can, to try to figure out how to salvage the rest of the project. Europe has a long and very, very bloody history. It does not need to be starting that up again, and a lot of the hopes have been hooked to the EU.
solarbird: (Lecturing)
Those who are interested in thinking about macroeconomics at this point in time should probably be reading the blog Pragmatic Capitalism. And not just because he likes picking fights with Krugman, though that is a bonus.

You see, most people - even very smart people - tend to pick a system of how the world works, then fit the real world's data to that system. Pragmatic Capitalism is not, as far as I know, an exception - tho' I'm fairly new to it, so I won't rule that out, either.

But bear (ha, bear) with me.

Prudent Bear did that, and Market Ticker did that, and Zero Hedge did (and still, do, really, only their model has just launched off into paranoid conspiracy theory)... and the thing is, when the world matches they're model, that makes them very, very good.

Prudent Bear's systemic views matched the actual world situation in 1999-2001. Market Ticker and Zero Hedge's systemic views matched the actual world situation in 2006-2009. They were on top of shit.

Pragmatic Capitalism just might be matching the now. Nobody else is, and for whatever it's worth, the theory that they lay out seems to be the least bad fit I've seen as yet.

All of which should serve as a reminder: if the valid data doesn't match the theory, it's not the valid data - it's the theory. I wish more people could internalise that.
solarbird: (korra-fruck-out)
Thursday, the S&P 500 and DIJA both closed below the support levels I've discussed as of late; the DIJA is worse, having violated Dow Theory support rules discussed here. The Baltic Dry Index daily numbers have a 2-handle, which I've never seen before - but then, so is oil, in a lot of ways. Phillips 66 just dumped a bunch of crude at a substantial loss per barrel.

But where we're headed into very strange territory is the introduction of negative interest rates on a larger scale. Recent thinking on interest rates is that negative interest - I will pay you to borrow money from me - isn't truly "negative" until the cost of storage exceeds the rate of payment for borrowing. Depending upon how you work those numbers, studies referenced at the last Fed statement suggested that rates would have to sink as far down as -4.5% to get to actual zero. (Seeking Alpha has a partial transcript.)

(Relatedly: Robert Michele of J.P. Morgan thinks there's a serious contraction in credit. I'm not confident this reflects functional credit, though I think he has a good point if you're talking financial instrument credit - which isn't actually very productive. Still, these negative rates are not good for banks.)

The primary instigators in this at the moment are Sweden (which just cut rates further negative) and Japan (I kind of hate to link to Zero Hedge, but they're the only ones carrying the Morgan Stanley commentary on the yen's strengthening in the face of NIRP (Negative Interest Rate Policy)). But they're not alone.

There are a lot of states working to keep their currencies lower-valued, in no small part - goes the theory - to try to stimulate inflation. It didn't work for the yen; the central bank had to intervene directly again. There's also real concern building about a currency-devaluation war, enough that mainstream sites are raising the question of a co-ordinated response to the Chinese Yuan.

Let's be pretty clear about this though: nobody has any fucking idea how this works, because this is a new trick. And that includes me. (My favourite line on it is from Alphaville, a succinct "We dunno." Yes, that's a quote.)

Pragmatic Capitalist talks about why anyone would buy a negative-interest bond, and how a bond-buyer in that position could still make money. But he, too, notes this is getting into very strange territory. Seeking Alpha doesn't understand the Swede central bank motivation here, running the numbers. Their economy is in good shape, their balance of trade is overwhelmingly in their favour, they have inflation, what are we all missing?

And given that the US's numbers look pretty decent too, but people are starting to talk about the possibility of a US Fed NIRP in the 6-10 month timeframe, I have to ask what they're seeing, because I am not seeing this. But then, I don't know why the Yen is being treated as such a safe haven, given that the Japanese government is pushing it down as hard as they can manage.

Eastern Asia down overnight, particularly Japan. (See above: this is a safe haven?) India up as I'm writing this; Europe opened broadly higher and is holding it at the moment. LIBOR is stable and well in normal ranges. Money multiplier is still bad, but actually the best it's been in two and a half years (smoothed out - there was a spike up, then back down, then regression to an upward curve). Railcar loadings have been really shitty - January was bad - but all the latest numbers (February 6) are up across all carriers.

If there's a liquidity issue, I'm not seeing it.
solarbird: (Default)
Previous post noted that US stocks were testing support levels; those levels held, and all indices climbed back out of the testing range. But overnight, Asia stocks were hit hard again, even Shanghai, despite Chinese government stoking. Right now, Europe is looking very bad - the CAC 40 is currently cleanly below the equivalent support shelf the US tested on Tuesday, as is the FTSE 100. The DAX has not broken south of that support yet.

A lot of this is lead by the energy sector, particularly oil, with oil dropping below $28/barrel for the first time in a while. Thermal coal isn't doing well either. There are some signs of metallurgical coal price recovery, though - that's coal used to make refined metals, such as steel. A recovery there may indicate a pickup of metal commodities markets, which is, in turn, a positive indicator for manufacturing. We'll see.

Regardless, even dipping below support mid-day doesn't mean much; it's not yet a sustained dip. But in all of these cases, we're talking big gaps down at opens - 2.5% - with more following. As it's 1:15AM Cascadian time, I need to go to bed. Things could be exciting tomorrow, if traders in those markets need money to cover losses.
solarbird: (Lecturing)
The S&P 500 is testing some important support levels right now, as I type. The markets bounced off this level in the previous dip.

This dip, percentage-wise, is I think about half of the average bear market decline? Which is why by the time people admit it's a bear market, the bear market is usually almost over.
solarbird: (Lecturing)
Over on Facebook, people are getting weird and panicky, and posting various bits of data out of context. They're freaking out more than I think they should about the Baltic Dry Index, in particular, and are starting to do things like quote Superstation 95 as a source. (Pro tip: SUPERSTATION 95 IS NOT A SOURCE. DO NOT QUOTE IT. EVER.*)

Anyway, here's a cross-comparison chart you should consider before panicking about the Baltic Dry Index; it's oil price against BDI. Fuel is a meaningful part of the cost of shipping. Note that the BDI follows (in part) the chart of oil, and oil hasn't been this cheap in a while:

Note further that crude oil imports in North America are at lows not seen in a long time due to domestic production; consider the implications of that on an overbuilt shipping fleet. Note further further that China went off its binge of years-in-advance commodity buying a few years ago and a couple of years ago dropped out of that entirely. Note the effects of that on copper and other important industrial commodities, and the effects of that on the value of shipping any of those things around, and the effects of that on demand for shipping and - therefore - price demand ability of an overbuilt shipping fleet.

Get the picture?

I'm not saying shipping isn't slowing. It is, for all the reasons related above. Earnings are also disappointing this season, and the economy is showing stress. Automobile demand isn't great, for example. But these are secular realities in a commodities slump. This happens. Don't panic.

Really, I have to wonder how much recessions (and impressions thereof) are going to change once we get a generation of people who haven't been looking at an alternate mode of civilisation under a completely different economic system (the Communist bloc), and for whom each recession is not some sort of existential crisis leading to straight to international communism. I'm not even sure the millennials will be able to get past it - this might very well take another generation past that. We'll just have to see.

*: Superstation 95 is, in fact, a front for a white-supremacist revolutionary organisation (Hal Turner's, specifically), heavy on the conspiracy theory. A few days ago, they posted a "story" that got passed around through various blogs and ended up on Zero Hedge unquestioned, claiming that all ocean shipping had stopped. All of it. This was horseshit - even the graphic they posted showed cargo ships en route - but that didn't stop people from taking it at face value. Their goal is destabilisation through fear in order to launch a race war. They also claim to be a New York City radio station; they are not. There is no such license. If they exist at all on the air, it is as a pirate station.
solarbird: (molly-computer-all-lit-up)

Over on Medium, Bitcoin developer Mike Hearn writes about how the Bitcoin experiment has failed.

One of the issues I’ve had with Bitcoin is that there is a 50% threshold of calculations which essentially allow any individual or allied group to take control of the currency processing if they can throw enough hardware at it. At that point, they can do pretty much whatever they want – they have functional control over the currency.

Two groups immediately came to mind when I heard about it – the American NSA and the Chinese government – but there are several groups so capable. And, well – perhaps predictably – that threshold is now hit 100% of the time, according to the article.

And that’s only one of the several extremely serious problems all hitting at the same time.

It’s a good piece, and very much a cyberpunk set of problems, really, with lots of drama, personality clash, censorship – the right author could write a really good novel around this. If you’re interested even vaguely in cryptographic currencies, give it a read.

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solarbird: (Lecturing)
The crux of the matter at hand - is this 2008 or 1998 echoing - probably rests on exactly what percentage of Chinese loans are bad. The official numbers are around 1.5%. That's a lie, and everybody knows it; the only question is what the number actually is.

A lot of people have been guessing 5-6%, and that's been enough to make people talk about the greatest opportunity at the moment being shorting the Yuan - and make some major trading houses warn people about possible abrupt - as in discontiguous - moves. (Particularly over weekends.) All the devaluation noise is because the Chinese government may devalue rather than face the political instability that would come from shutting down all those zombie businesses if the pain from the latter grows too great.

And that's at 5-6%. But what if it's 10%? Or 20%? Because if it's 20%, you're looking at a US$3.5 TRILLION shortfall.

Carl Bass thinks you only need a 10% cut to get that effect on total liquidity, but we don't know. Regardless, the situation is bad. It's bad enough that the People's Daily has been publishing warnings about the need to cut off "zombie companes":
On Monday, January 4th, 2016, the People’s Daily published a front-page editorial of 9,000-plus words written by an anonymous authority on the supply-side reform.... The paper compared the current reform with the bold structural reform in 1998 that founded an ensuing decade of growth. But 1998 was also a year of more than 30 million SOE workers being laid off, bad loans being as much as 40% of GDP and plunging economic growth. With strong words such as “indecision now leads to trouble later”, “no more stimulus for a v-shaped recovery” and “must bury ‘zombie’ companies”, it shows strong resolve to reform... Any reform carries costs. Indeed, our long-held view has been that the more we look forward to from the reform, the higher short-term costs we must bear.
Complicating everything is that China's PPI has been running at -5.9% (annualised) for the last several months. A lot of this is drops in commodities, particularly energy. (Most particularly, oil.) But... no amtter how you spell it, there are problems under the hood. And devaluing the yuan, well, that has cascading effects as well. From Alphaville:
Likewise, on the monetary side, if rates are cut to stem a downturn, the stress on the Yuan worsens. And however that is handled (via intervention, capital controls, band widening, or/and devaluation), it aggravates the US which is in the midst of a poisoned election campaign in which anti-China retaliation already features prominently. The leading Republican contender proposes a 45 percent tariff on all imports from China, before any of this Bull-comforting-China-monetary-stimulus has even begun. And the other Republicans and the leading Democrat have been silent on the subject.

...So alongside interest rate cuts, the PBOC would have to fully sterilize just to maintain the demand status quo, let alone to stimulate. Alternatively, if it lets the Yuan really float (down), it will be disorderly for lack of a policy framework to back a float, and it will set off major global currency shocks.
And we don't even have to talk about capital flight from all this - I'd think it'd have to be in the form of foreign currency reserves, given the restrictions on yuan exchange, but that will only put more downward pressure on the Yuan - an unvirtuous cycle indeed.

Meanwhile, the Baltic Dry Index is just now bouncing off new lows since 2008 (even lower than last year, though not by a whole lot - still, annual comparisons matter), and rail traffic loadings are well down vs. a year ago. No truck tonnage data for December yet; November was down about 0.9% year-to-year, but October had been up more than that - call it a wash. Money velocity (most particularly M1, but generally) continues to decline, but very slowly. None of this is setting off screaming alarms, just more of that welcome-to-another-Lost-Decade malaise.

Really, China has been the only thing powering the economy much through any of it. If they have a dislocation, well - that won't be much fun, now, will it?

Regardless, let's hope this is more of a 1998 than a 2008, if we have to pick one. The currency dislocations of 1998 were bad, certainly, but they got ironed out over a few years and - more importantly - didn't cause either the dot-com bust or the property boom, not really. It'd be bigger this time because China is bigger, but even that's easier to contain than another liquidity collapse with everybody's interest rates still at nearly zero from the last time.
solarbird: (pony-dj-pon-3)
Lots of money!
From the Party!
They're gonna do / the best they can / to prop the Shanghai up
or at least to keep the Yuan above the floor...

solarbird: (utena)
Putting my subscription on "automatic renewal" without asking and then trying to charge me without my consent is the surest way to get me to drop your service or publication.

Sorry, Foreign Affairs, but no.

eta: I have room now for a better, more serious journal of the same sort. (I've been upset with their... fluffier... approach as of late, regardless. The special issue on retail shopping? I felt like burning it.) Suggestions, anyone?
solarbird: (Default)

wtf, markets?

This is unusual: a highly divergent set of indices. You don't see that much, typically they're in far more agreement - but the broadest market (S&P 500) is flat, the NASDAQ tanked, and the smallest sampling (DJIA) was up sharply. Even the curves aren't the best fit.

This was two things, and shows the occasional problem of relying on something like the Dow for your only market indicator. Nike soared today. Just exploded straight up, like 9% right out the gate, and kept pretty much all of it. Nike is in the DJIA, so sent that up in an outsized fashion - tho' to be fair, most Dow components were up today, just not like that.

And I suspect a lot of the reasons the Dow components were generally higher is because the market is shaky, market sentiment is irrationally terrible, and the biotech sector midday - see that slide down? That's the biotech sector. Some of that money would've flown to (perceived) quality - like the Dow 30.

And biotech is represented more heavily on the NASDAQ than anywhere else.

So there's your explanation. Dow oversampling, NASDAQ oversampling, and the S&P500 in the middle.
solarbird: (Default)
Pragmatic Capitalism sees the 1998 playbook as possibly applicable here, hearing echoes in the current charts. PC's low traffic, but it hits upon things other econ blogs don't, all without the 'k-we're-officially-nuts-now that's pretty much ruined the once-interesting Zero Hedge.

The President of China is visiting Cascadia this week, before going on to meet with American president Obama in DC. He'll be meeting with Jay Inslee and a lot of business leaders, and traffic is going to be a clusterfuck of the first order; they're basically telling Seattle and the eastside to stay off the roads if you can.

We get a visit because we run a substantial current-accounts surplus with China, making us a fairly rare beast indeed. (Airplanes, software, and agricultural products, in that order, if you're wondering, and we have then-governor Gary Locke's extensive trade work to thank for that in no small part.) The only downside is three days of traffic nightmare downtown; several blocks around Belltown and South Lake Union will be closed to all vehicle traffic, and if he decides to go out for pizza or something, they'll be closing the primary freeway through down with literally zero notice. ADVENTURES!

Hopefully he'll order in Pagliacci's, or just walk over to MOD. MOD's pretty good.

A couple of links:

5,000 years of interest rates. Except not really. But kind of. Spoiler: 0-0.25 is extremely unusual.

Commentary on the so-called sharing economy companies, vs the current death of the actual sharing economy.

Rail freight is still down vs. a year ago. Baltic Dry Index is pretty low. Last data I had on truck freight indicated a mild year-over-year decline, but not like rail. But none of it is enough to make me go eek.
solarbird: (Default)
The stock markets have been shooting up like a rocket for the last few days, recovering all of the losses from last week. I've seen commentary to the effect of, "See? No big deal. Everything's fine." But healthy markets do not do shit like this. Not ever.


That down spike at 3pm Eastern in that chart? That's 2% of total market down and right back up, in a bounce. That's broken. (3pm is also margin-call time, I might add.) We are almost certainly now in a bear market in equities.

China desperately needs capital inflow right now. There is a general consensus that China's growth is overstated; some estimates say that the economy actually shrank last month. That's one of the motives for the devaluation of late.

But devaluations cost money, particularly slow ones, which is capital outflow, the opposite of what China needs. So they're dumping US treasuries to compensate for that. How much? Good question. Sale rate has been accelerating. $170B is one estimate I'm seeing around. But depending upon how things go, that's as much as $1T to keep the Yuan stable in devaluation.

As noted at the second link, that kind of undoes a lot of QE3 and forces up interest rates, particularly in the 10-year space. Which makes a lot less room for the scheduled rate hikes which had been coming up next quarter.


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