The Perils of Fed Gradualism

Stephen Roach pens an article on Project Syndicate outlining the Monster that the Fed has created - financial markets.  He does on to discuss what the Fed should do to address overheated financial markets:

Only by shortening the normalization timeline can the Fed hope to reduce the build-up of systemic risks. The sooner the Fed takes on the markets, the less likely the markets will be to take on the economy. Yes, a steeper normalization path would produce an outcry. But that would be far preferable to another devastating crisis.

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Financial Advice For my New Son

Morgan Housel at the Motley Fool writes a piece on financial advise for his son.  And what great advice it is.  From the article:

Change your mind when you need to. I've noticed a tendency for people to think they've mastered investing when they're young. They start investing at age 18, and think they have it all figured out by age 19. They never do. Confidence rises faster than ability, especially in young men. Learn the skill of changing your mind, discarding old beliefs and replacing them with new truths. It's hard, but necessary. Don't feel bad about it. The ability to change your mind when you're wrong is a sign of intelligence.

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The day the Fed was created

From the Library of Congress:

On December 23, 1913, President Woodrow Wilson signed the Owen-Glass Act, creating the Federal Reserve System, an independent agency of the U.S. Government. Before the Federal Reserve began its operations in November 1914, America's banks functioned in widely divergent ways. These varied banking practices resulted in four major financial crises in less than forty years.

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Oil Inventories Peaking?

Existing Home Sales Plunge

The NAR is blaming a new Dodd/Frank regulation as the cause.  This is entirely possible, so we will have to wait for the coming months to see if this is a minor issue or something larger:

Mises on Money

Mises was a true intellectual giant.  What would our society look like if the majority of people understood the teachings of Mises?

Leuthold Group has been calling a market top for some time

Leuthold outlines the topping process in the below timeline:

Insightful and candid interview about the US empire

Why Capitalists Are Repeatedly "Fooled" By Business Cycles

Frank Shostak, one of my favorite modern Austrian Economists, outlines why capitalists are fooled by the lowering of interest rates.

The business cycle last many years.  So even if business men feel that the economy is weak and the government is attempting to coax them to invest by lowering interest rates, eventually, they will have to invest or go out of business.  

Interest rates must rise significantly in the future to extinguish the mal-investment that exists throughout the world.  It will be painful, but necessary.  From the article:

A businessman has only two options — either to be in a particular business or not to be there at all. Once he has decided to be in a given business this means that the businessman is likely to cater for changes in the demand for goods and services in this particular business irrespective of the underlying causes behind changes in demand.

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India could be an economic powerhouse, but it's not meant to be

This is a wonderful article about the outrageous bureaucracy that stifles the Indian economy like a wet blanket.  From the FT article:

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/d0378a54-a046-11e5-beba-5e33e2b79e46.html#ixzz3uyLHBnYU

On my desk is the latest copy of the Indian magazine, Bureaucracy Today (“Fearless journalism, our habit, our history!”). It is not satirical. The cover story examines the merits of the budget-busting 23 per cent pay rise awarded to more than 10m serving and retired civil servants . Anil Kumar Jain’s astrology column in the magazine is notable for the way it recycles phrases through the 12 signs of the zodiac. They include “Planets indicate unbelievable financial gains during this month” and “You may be nominated for a plum post or for a foreign assignment”; or the disconcerting “The unusual behaviour of your spouse may be a cause of concern”.

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Intrinsic Versus Subjective Value

Many investors, some very talented investors, believe an asset has intrinsic value. But Austrian Economists believe assets have subjective value.  Meaning, we rank ordinally our preference for A over B.

Intrinsic value must have a fixed point to be measured against, but no such fixed point exists within human action.  Everything really is different this time.

So how is one to use this knowledge for investment purposes?

I will be starting an investment letter outlining the answers to this question.  Look for more to come.

"Value is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men."

Carl Menger. "1. The Nature and Origin of Value", Principles of Economics online edition, Chapter III., The Theory of Value, referenced 2009-05-14.

Planning for the new year: Ben Franklin style

And other amazing creations and facts about Ben.  From the NY Times Article:

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Much talk from the Fed on neutral interest rates

But Frank Shostak destroys the myth of a neutral interest rate:

Interest rates directly effect asset price levels:

Lower interest rates, higher asset prices; higher interest rates, lower asset prices.  See the report from Haver Analytics:

What I learned when I followed Benjamin Franklin’s schedule for a week

By J. Money

As many of you know, I’ve been following in the steps of Benjamin Franklin all week long in an effort to find a better, and more productive, schedule for myself.

I’ve heard time and again that the most successful people in life rise and reflect before the sun does, so I figured why not give it a shot myself and see if I magically get successful over night too?

Even though I hated myself the second I hit “publish” on that post, because who the hell wants to wake up at 5 a.m. every day?

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International Rig Count

The average Baker Hughes International Rig Count for 2015 matches that of 2009.  How low can the count go?