The Executive Summary for the week of February 22-28, 2015

Several regional manufacturing surveys missed expectations, some by a large margin, over the last two weeks, from Bloomberg:

  • Feb. 17: Empire State Manufacturing Survey: 7.78, down from 9.95 previously. Slight miss on expectations of 8.0.

  • Feb. 19: Philadelphia Fed Business Outlook: 5.2, down from previous 6.3. Far below expectations of 9.0.

  • Feb. 23: Dallas Fed Manufacturing Activity: -11.2, down from previous -4.4. Far below expectations of -4.0.

  • Feb. 24: Richmond Fed Manufacturing Index: 0.0, down from previous 6.0. Far below expectations of 6.0.

  • Feb. 26: Kansas City Fed Manufacturing Activity: 1, down from previous 3. Below expectations of 3.

  • Feb. 27: Institute for Supply Management–Milwaukee: 50.32, down from previous 51.60. Below expectations of 54.0.

  • Feb. 27: Chicago Purchasing Managers: 45.8, down from previous 59.4. Far below expectations of 58.0.

But at least the War on Terror is showing signs of growth:

‘Jihadi John’, the star of ISIS’s execution videos, is revealed to be a British citizen

Mohammed Emwazi, nicknamed ‘Jihadi John’ by captives who were soon to lose their heads, was born in Kuwait (I knew Kuwait was never worth saving way back then). His parents emigrated to London when he was six.  He was a more or less regular kid, graduating from the University of Westminster in 2009. Now he’s an internet video sensation, lecturing the West on its evils in his prim and proper British accent, before lopping off the head of another of its unfortunate souls.

The renowned British Intelligence Service, MI-5, which is different from MI-6 in some way that I don’t care to figure out, did not untangle the enigma of Mr. Emwazi in time to prevent his radicalization.  They did detain him a couple of times as he was maybe trying to join the jihad, but ultimately, that just radicalized him more, or so said CAGE, a British outfit opposed to the War on Terror.

It’s not clear whether Mr. Emwazi will be able to convert his new found fame to wealth.  It’s hard to make a living off of videos distributed for free, as Google’s YouTube is finding out.

YouTube is losing money even though it has over a billion annual users Google bought YouTube for $1.7 billion in 2007. Even with over a billion annual users, it has yet to add anything to Google’s bottom line.  The video-sharing site brings in about $3.8 billion per year, but costs more than that to operate.  Its unique monthly visits of about 150 million views is double Facebook’s.  But Facebook sort of makes money.  Sometimes.  But  Google could have invested their $1.7 billion in Apple back in 2007 and made oodles of dough, enough to juice the following numbers even more.

Ultra luxury automobile sales have done just fine since the Great Recession, thank-you very much:

In case you were wondering how the rich fared in the wake of the financial crisis, the following chart from Bloomberg provides a poignant snapshot: There’s you some inequality.  What’s surprising is how low sales dipped during the crisis.  Did the super-rich  lose confidence in their ability to manipulate government and society to their advantage during that time?  Poor little rich people.

Jobless claims jump by most since December, 2013

First-time claims for unemployment benefits were up by 31,000 in the week ended February 21st over the previous week.  What does it mean?  Practically nothing, and not because, as commentators have variously offered, ‘there was a floating holiday that fell in the week’, or ‘this reflects single-company issues’ or ‘it was really cold in Boston’.  Okay, I made that last one up.  But the reason this doesn’t matter is because it is just one data point.  It does go along with a trend of declining job gains over the last three months, from a peak in November of 423,000 jobs added to only 257,000 added in January, a decline in job growth of 40% in just three months.  But one data point does not a trend make, not even when it is correlated to data points measuring similar economic phenomenon.

There is little doubt in my mind that the US economy is slowing its expansion a bit, perhaps even contracting a trifle even as I write.  The 2.2% growth rate for the fourth quarter, 2014  announced this week by the Commerce Dept., down from the third quarter’s 5%, bears that out.  But there is nothing to suggest the bottom is about to fall out.  Contrary to stock prognosticators, growth that isn’t the product of human speculation (such as obtains with stock prices, meaning the growth is often only illusory) does not go up in a straight line.  There is a ‘natural’ growth rate in any living organism of about e, or 2.718, a magical number.  And that’s about the medium-term average that a mature living organism known as an economic system is capable of.  Sort of like an adult crocodile.  In the long term, growth rates must always be zero (a mathematical certainty), and in the short term they can fluctuate wildly.  For the medium term in which a human life is lived, about 3% is a fair estimate of what to expect.

Apple Computer coyly announces a coming out party for its new watch

The invitations say ‘Spring Forward’. The ‘Special Event’ is the day after the country goes on daylight savings time, springing its clocks forward.  Get it?  Apple doesn’t actually mention the watch in the invitation to their announcement, but then, do they have to?  You’re smart and hip and all over Apple anything.  You get it.

The event is to announce their new watch.

Incidentally, they’re also counting on you not remembering that they announced the new watch when they announced the new iPhone 6.  But then they know they can count on you, gullible American public. Isn’t Apple just the coolest company in the world!  I don’t know how I could tolerate my miserable life if they didn’t provide me with a new toy on a regular basis.  Okay, maybe I could survive so long as I still had the Kardashians, which thankfully, I will.

NBC Universal announces a new three-year contract for “Keeping up with the Kardashians”

But not for the $100 million dollars it was rumored to be, and that NBC Universal vociferously denied.  And soon my world will be complete.  I will have my new Apple Watch buzzing to remind me when it’s time to tune in, and I’ll have Kris, Kim, Kourtney, Khloe, Kendall and Kylie and all the rest (except gender-confused Bruce and the perfect asshole, Kanye) to fill the existential void that arises from having so much time and so little to do. But if the Kardashians fail me, there’s always Taylor.

Taylor Swift intentionally releases photos revealing her bellybutton

Anything that a woman refuses to reveal–her bellybutton, her hands, her eyes, her ankles, her shoulders, her neck–anything, instantly becomes the most erotic, desirable part of her body.  Judging by the fashions worn by today’s women, not many understand this.  But Taylor Swift does.  Until her recent Hawaii vacation she had refused to reveal her bellybutton.  Then some paparazzi threatened to do it for her, catching her sunbathing in a bikini.  So she took some photos and posted them on Instagram before they had the chance. And it set the world a twitter.  And me.  I just love T Swizzle. And she’s just got the cutest little bellybutton.  Man, does it get any better than this?

Why the dress is black and blue for some, but is gold and white for others

Which do you see?  A black and blue dress or a white and gold one?  The explanation is not as exotic as you might imagine.  According to Wired, the brain’s automatic calibration for color according to light has nothing to do with it.  It is, instead the differences in the brightness on the screens on which it is being viewed.  Or, maybe not.  My daughter saw a black and blue dress and I saw a white and gold one when we saw it on the same television last night. Instead, it may be that the dress illumination sits right along the tipping point where our brains begin calibrating for lower light, such as we do when looking at the Rubric’s cube in shadow, below.

Both the top middle square and the side square are brown.  But we see orange/yellow in the side square because of the perceived shadow. Though the example is frivolous, the point is profound.  Our brains concoct reality for us.  Acknowledging as much does not mean accepting the claims of some philosophers that reality is strictly a figment of the imagination.  No, there are objects that absorb and reflect light of differing waves lengths that throw light on the back of the retina, which the brain then calculates and calibrates into a useful image; the key word being ‘useful’.  The brain is the body’s handmaiden, doing what the body needs in order for it to survive, because the body is the vessel for the DNA.  That’s the profundity buried in all that frivolity.

Kevin Garnett returns to the Minnesota Timberwolves to end his career where it began

KG has been either loved or loathed by fans.  The fans of the teams he plays on have loved him; the fans of teams playing against him have loathed him.  That’s about the best coda to an athletic career anyone could hope for.  Minnesota, where KG started in the NBA as a skinny eighteen-year-old kid, loves him still.  He came home this week, traded in the flurry of All-Star Week, to heart-felt adulation.  Welcome home KG. As for me, I root for the teams he’s on, just because he’s on them. He always shows up to play.

The Executive Summary for the week of February 15-21, 2015

The bond market appears to have lost its way

Back in 1962, the benchmark ten-year US Treasury bond paid interest at an annual rate a bit below 4%. From there, it quickly climbed, reaching its all-time apex almost twenty years later at 15.84%, in 1981. In other words, the rate more than quadrupled. A $100 ten-year zero-coupon bond with a present value of roughly $96.00 at 4% interest is worth only about $84.00 at 16% interest (more with compounding, but for simplicity’s sake). Bonds got killed from 1962 to 1981. However, after 1981, ten-year bond yields declined, reaching a nadir in July of 2012 at 1.51%, the lowest since record- keeping began, which also meant that bond prices were the highest ever. Bond traders have had it real tough making money since the eighties. Never mind the stock markets, bond markets have been relentlessly accommodating.

After reaching its nadir in July of 2012, the ten-year yield bounced up a bit, in fact doubling by December of 2013, to a bit above 3%. Temporary pain for bond traders. Then last month, because of the weather or that Santa Claus didn’t bring what people wanted or that ISIS keeps cutting off people’s heads in quite dramatic fashion or that the realization began sinking in that Ukrainians will soon be learning Russian, pick your rationale, bond yields cratered, again, declining in little over a month by over fifty basis points, falling from 2.27% on December 24, 2014 to 1.68% on February 4th. And through the month of January, yields rose and fell unpredictably, often five and six percent per day. It must have been a rollicking fun ride for the Bill Gross wannabes of the world. (Bill Gross is to bond trading what Warren Buffett is to stock trading). Now yields have climbed back over 2%, to 2.14% as of Wednesday, February 18, 2015. Down over fifty basis points in a little more than a month (a 22% decline) only to climb back up almost to where they started (roughly a 27% increase).

It is clear that the bond market hasn’t a fucking clue what is going on. Which is somewhat unsettling. Because bond markets throughout history have been generally very good at anticipating economic, political and social upheavals and trends. I think everyone understands that the world is reaching some sort of inflection point that will determine the path for the near future. If nothing else, in a bit less than two years, Obama will no longer be president. Considering how important politics has become to economics, the bond market is apt to be confused more and more as it gets closer and closer to election time, particularly if there arises an overbearing level of uncertainty as to who his successor will be. A fifty-fifty election would not auger well for the bond market.

But there are bigger trends that matter, rather than just the American election. The whole of the developed West (and Japan) is being shunted aside by the rising powers in the Orient, India and China and others. Europe is losing its preeminence. The decline started gradually, beginning around the end of the nineteenth century, but seems to be gathering momentum. Who was it said that they went bankrupt gradually, and then all at once? China still has some scores to settle with the West, particularly with Britain, who forcefully pried open China’s markets so it could sell its citizens opium. When the Chinese terra cotta army was commissioned by her first emperor, the people in what is now Great Britain were barbarians too savage for admission to the Roman Empire. History cycles, sometimes in quite expansive arcs, but cycle still it does. China is rapidly regaining her lost preeminence on the world stage. And that, in a rather indirect and convoluted way, might explain some of the decline in yields on US Treasuries. Or not.

The decline in Europe and Japan is even more pronounced. Japan effectively charges its lenders for safekeeping their money, sporting a negative yield on some instruments. And Europe’s governments, even ones with quite dicey prospects like Spain and Italy, pay less to borrow money than does the US government. Germany’s yield is comparable to Japan’s, as is Denmark’s.

So the bond markets are a confused mess. I can’t find any commentary that plausibly explains the situation. The US has the strongest economic system in the developed world, yet pays more than any other developed country when it borrows money, and the UK follows close behind in both economic strength and the rate at which it can borrow. The obvious answer is that the flat yields in Europe and Japan indicate expected future weakness, as has usually been the case. But yield also reflects risk, and if their economic systems aren’t expected to do so hot in the future, then the prospect of repayment dims.

All that can ultimately be said is that the bond markets are a quandary that nobody quite understands. They seem, like a Ouija board, to be trying to say something, but only a huckster would pretend to know exactly what.

Walmart plans to set its minimum pay at $9/hour

Walmart claims it is having trouble with turnover. Of course it is. Like most other low to middle-end retailers, Walmart treats its ‘associates’ not much differently than a carton of asparagus it pushes out the green grocer’s door—as resources to be exploited. It pays them the bare minimum it believes it must in order to get them to do its bidding. It does not consider them as anything other than commodities. It believes as much is part of its secret to delivering “value”. Walmart has come to represent all that is wrong with American capitalism vis a vis the people who the system is intended (or should be) to serve.

Walmart is not raising wages because it has suddenly, like the Tin Woodman in the Wizard of Oz, found a heart, but because it is beginning to realize that it may well cost more to depend upon antagonistic employees barely making enough to survive than it would cost to just share a bit of the profits with them. The stock price declined on the announcement but I think that’s foolish. There is a trickle-up effect to treating workers well. Pay them better and treat them better and they feel they are a valuable part of the team, and become more committed to doing their part well. The money lost to better pay and working conditions is more than made up in greater effort and efficiency.

For the high-powered human resources executive, the lesson perhaps is that you get what you pay for.

Citigroup Economic Surprise Index plunges

Leave it the guys at Citigroup to derive this second derivative index. It is not an index of leading economic indicators—things like employment and interest rates and housing starts and durable goods orders , and etc., that measures whether those things are increasing or declining. No, it is an index of whether the expectations for those sorts of things were exceeded by reality or disappointed by it. So, if the employment number for February is expected, presumably according to some poll taken of economists, to come in at 250,000 new jobs, but instead comes in at 300,000 new jobs, that would be a positive for the Citigroup Economic Surprise Index. If it comes in below expectations, that would be a negative. Assign weights to positives and negatives according to the impact each factor has on the overall economy, add them all up and you get a number. If the number is negative, people aren’t quite gloomy enough. If the number is positive, people aren’t quite ecstatic enough. At zero, the gloom and ecstasy balance out. I couldn’t make this shit up if I tried.

Lately, the index has plummeted from a recent high of 72 in mid-January, to -4 on Wednesday, February 18, 2015. It apparently operates with something of the volatility of Alabama’s winter temperatures. But the only thing the index really measures is how errant and ineffective is our ability to forecast the future. In particular, it should be a lagging indicator, as the main tool for forecasting the future is to assume it will look like the past, with a patina of optimism thrown in because nobody likes a sourpuss, even if he’s right, or perhaps exactly when he turns out to be right. But there will be those occasions, such as towards the end of the last recession, when pervasive gloom descends as if financial Armageddon were upon us, where the index will turn riotously positive for the assumption that things can only get worse. In effect, the index magnifies the latent manic-depressive psychoses of the markets and the economic system. I would say that it is to be ignored, except as an artifact to be studied of a socio-neural psychic network run amok with meaningless analyses. But it may well indirectly measure sentiment, and in a world with a glut of savings, sentiment can create its own reality. If enough people believe the market should be going up, actions taken commensurate with that belief will compel just that to happen, which will reinforce the sentiment, which will cause people to take further actions commensurate with their sentiments, etc., ad infinitum. Of course, the positive feedback loop can go either way.

In any event, sentiment can be brutally unpredictable, but this contrived index may provide some advance warning of the direction in which it may be heading.
There was a paucity of economic numbers that came out this week. But the ones that did obviously disappointed, including mainly new housing starts, which were off 2% last month, seasonally adjusted, from December. This decline was unexpected, so it would have factored into the Surprise Index’s decline. Housing starts are still up by almost 20% over January of 2014, and housing prices continue to climb, so nobody expected that starts would fall, or even stall. Expectations might be getting a bit ahead of reality, as so often happens in this greedily optimistic American culture.

Stocks

Perhaps reflecting the volatility, if only indirectly, of the bond markets, stocks have moved mainly sideways since retracing in the first part of February the ground that was lost in January. They started the week a bit off all-time highs, but mainly moved in minor increments, almost like it should be expected of these sorts of assets, which at least nominally represent the long-term prospects for a company, if the intervening psychological games of trading them in markets didn’t so often overshadow their true value. Their lazy stroll ended late Friday afternoon, when the ECB announced it had reached an extend and pretend agreement with Greece regarding debt that Greece will never pay back mainly because it doesn’t want to. In a few minutes, all the US indices shot upward, both the Dow and the S & P 500 ending at new all-time record highs. Down initially, fearing the worst if an agreement weren’t reached, the Dow traveled 262 points over the course of the day to end up about 150 points. Ho hum.

It would be an interesting study to investigate the correlation between bond market volatility and stock market volatility. My bet is that there is a generally negative correlation. When one is calm and quiescent, the other should be frustratingly unpredictable. The future is always uncertain. Apparent certainty in one of the arenas contrived for betting on the future ought to inure to the instability of another. While stocks were languidly trading all week until the last trading day, ten-year Treasury bonds violently whipsawed, starting the week a bit above 2%, hitting a high of 2.14%, and then settling back to roughly 2.04%. On Friday alone, yields tumbled about 8 basis points (from 2.12% to 2.04%) before retracing all that and then some, closing up slightly for the day.

There seems to be little agreement among bond traders as to what the future might hold. For stock traders, there seems to be no disagreement that there is no limit to how high stocks can go. Every day, week and month, it seems they believe, new record high valuations should post. The only thing with a more unitary upward direction than the stock market is the planet’s temperature. Bond traders perhaps better understand the dangerous implications of such beliefs.

The Ukraine/Russia war

Even as the videotaped beheadings posted on the internet by ISIS seem to have cornered the market on the macabre aspect of warfare, what ISIS is doing in the Middle East is of far less importance than what Russia is doing in Eastern Europe. In the grand economic scheme of things, the forlorn deserts of the Levant, where Syria and Iraq’s broken states are no longer powerful enough to govern, matter very little. Let ISIS have the Mad Max-looking deserts. It won’t matter. But let Russia take Ukraine, which has by now become almost an inevitability, and there will be real repercussions.

Vladimir Putin claimed this week, in a speech celebrating the 70th anniversary of victory in what Russia calls The Great Patriotic War, that Russia’s military might is unmatched the world over. This is at once delusional and partly true. Russia’s military might is certainly unmatched in Eastern Europe. Not even Germany matches up. After what the West calls World War Two ended, the US had been a counterbalancing force to Russian (or formerly, Soviet Union) hegemonic designs. But US presence and power has been drastically scaled back since the Cold War ended in the early nineties.

Imagine if Russia launched a full-scale offensive through the Fulda Gap in Germany, as the American Army stood ready for 45 years to repel during the Cold War. The prolonged peace has steadily eroded the West’s capacity for defense. But the probability of Russia trying such a thing is still very, very slim.

What most certainly will continue is that Russia will keep poking and prodding and pressing the West, to see how far it can go without ruffling the feathers enough to incite a military response. The West does not want to fight a ground war in Europe again. Russia doesn’t either, but is less reluctant, as such a war would be defending what it considers home turf. The West thinks and desperately hopes that ground wars in Europe ended with victory in the Cold War. The American political philosopher Francis Fukuyama went as far as to proclaim in “The End of History and the Last Man” that the end of the Cold War heralded the end of mankind’s sociopolitical evolution. The West would desperately like to believe it. Putin understands the West’s latent pacifism, but the West doesn’t really understand as much about itself, violating Sun Tzu’s first tenant of warfare to know thyself, which is no small part of why Putin has won in every confrontation so far, military or diplomatic.

Make no mistake that what is going on in Ukraine is a war with Russia. It is not a civil war between Ukrainian loyalists and Ukrainian separatists. The Ukrainian separatists are Russians with Ukrainian citizenship who are loyal to and supplied by Russia. They are no ragtag group of rebels like, for instance, ISIS is. They are winning at every turn, mostly recently taking the important rail hub, Debaltseve, (in violation of a recently implemented cease fire) at least in part because they are better equipped than the Ukrainian loyalists. The separatists have the latest in Russian artillery and tanks. True rebels are never better equipped than the state-sanctioned armies they seek to defeat. Ukraine’s military has arms and munitions mainly leftover from the Cold War.

So far as Ukraine is concerned, Putin’s claim that Russia’s military might is unmatched is true. While it would be easy enough for the West to supply Ukraine with better and more armaments, it is reluctant to do so out of fear that it might provoke a wider conflagration with Russia. If the West won’t even lend arms to a foe of Russia, then Putin may well be correct in perception, if not in reality. Russia’s military knows no match because it appears no one is willing to risk a head-on confrontation with it.

Greece gets another four months to pretend it might pay Germany back

Short of Germany invading, which seems taboo to even imagine (which is part of why, as previously noted, Putin is so easily having his way in Ukraine), Greece is never paying Germany back. But stock traders are like children. Or perhaps dogs. Their memories are short, incapable of recalling much of the past or imagining much of what the future might hold, which explains why they chased this car of a Greece debt deal all the way to record market highs as soon as the deal was announced late Friday afternoon.
Greece has been playing this game with Germany since at least 2011. And nothing’s changed, nor will it. Greece can’t pay back its debts short of liquidating its country and Germany, its biggest creditor, won’t invade to force liquidation, so extending in this instance really is pretending.

There is, though, precedence for a German invasion. France invaded Germany after World War One to force (mostly unsuccessfully) the repayment of reparations as agreed upon in the Treaty of Versailles. And Germany has invaded Greece before. During World War Two, it invaded while Greece was fighting a civil war between Communists and Nationalists. The Nazis naturally supported the Nationalists, who eventually won, but not before thousands died of starvation for the deprivations that occupation and civil war caused.

Greece won’t pay back its debts but it doesn’t matter whether it does. Just call it a German haircut and get it over with. In fact, if Greece actually mattered, there would be wailing and gnashing of teeth by now that the “crisis” hasn’t yet been conclusively resolved. Greece doesn’t matter to the Eurozone or to the world economy. Greece is too small to matter. It could leave the euro and you’d have to listen closely for the hiccup in economic activity its leaving caused. Stock traders would temporarily panic, but that’s because they’re paid to be either panicked or euphoric all the time, like children. It’s how they keep the markets in turmoil, which is how they keep the commissions flowing. The fact Greece is making headlines shows how little there is to report on about now.

Europe’s slow grind to second-tier economic status will mostly not be newsworthy. It will be like watching grass die in a drought. And the patch of grass that is Greece is already dead and has been for a long time.

Executive Summary, February 8-14, 2015

US farm income expected to decline by 32%

According to the US Department of Agriculture, low crop prices and increasing expenses are making a dent in farm income, which is expected to fall by over 30% this year, a drop of a magnitude not seen since 2009. This will be the second year in a row that farm income has declined. It is expected to be about $74 billion this year, down from $108 billion in 2014, which was down from a record $129 billion in 2013. The over 30% drop roughly doubles the rate income fell in 2014.

Citigroup faces a crucial Federal Reserve stress test in March

Citigroup was the only major bank to fail the stress test last year. If it fails this year, there’s no telling what might happen. Fear grips the banking community (gasp!). But since a failure is already being reported as catastrophic, failure would be anything but. It may mean the Fed requires a breakup. That would take years—perhaps longer than it will take for the next financial crisis to be resolved. Don’t be naive. Citigroup, the flagship bank of the American Empire, the US’s poor cousin to the British Empire’s HSBC, is indispensable to the designs of American capitalists and their political lackeys. Citigroup will fail, or barely pass, but it won’t mean a thing. Those American capitalists will get what they want. Or else.

Oil prices remain in flux as supplies build even as rig counts drop

From the International Energy Agency Oil Market Report:

A partial rebound in oil prices over the last month following a 60% crash since June suggests market participants are seeing light at the end of the tunnel and growing confident that spending cuts by oil companies will lead to a market recovery. The market rallied in late January on news of a steep drop in the US rig count. Since then, oil companies provided market participants with further insights in their quarterly earnings report into the full scope of their budget cuts. Yet supplies so far remain abundant, and it will take time for investment cuts to make more than a relatively small dent on production. In the meantime, inventories are likely to build further. Barring any unforeseen disruption, OECD stocks may by mid-2015 come close to revisiting the all-time high of 2.83 billion barrels reached in August 1998, shortly before WTI prices sank to an average monthly low of $11.22/bbl.

Obama asks Congress for authority to fight ISIL

Because things have gone so well in the 25 years that the US has been militarily engaged in the Levant and Mesopotamia, President Obama has decided that we should reenergize our commitment to the region in order to fight the ISIL, or ISIS, or whatever the hell acronym you’d like to use for the Islamic jihadists trying to fill the power void on the frontier between Syria and Iraq, as each of the failed states have done what failed states do, and been forced to reduce the footprint over which they claim dominion. The real fight here is between Iranian-backed Shiites and the Sunni combatants left over from the days when Sunnis ruled Iraq. The US will essentially be fighting to preserve Iranian hegemony in the Levant, which it unintentionally provided when it destroyed the existing power structure in Iraq. After it secures the Levant for Iran, again, it will undoubtedly be forced to unwind the effects of its Iranian welfare in the same manner as it unwound the effects of its Iraqi support during the Hussein regime.

Thus the US stokes the flames of conflict in the Middle East like a hobo in January stokes the flames of a campfire to keep from freezing. And like the hobo, the flames succor its existential needs. The latent ironies of geopolitics would be hilarious if they weren’t so deadly.

With at least one war flaring somewhere, the Military Industrial Complex’s hero-generation machine can keep on churning out courageous, altruistic heroes for our adulation. Note to the hero wannabes—being a sniper, “protecting” your fellow soldiers like a god slinging thunderbolts at their enemies, is now considered heroic, especially if you write a memoir dripping with self-aggrandizing, comic-book platitudes. You may even have a movie made of your “legendary” exploits.

To reiterate, because of the currency wars the Fed won’t raise rates this year, or next year, or the year after, or the year after that…

Just so it doesn’t seem I’m a kook when I say the Fed won’t be raising rates, I offer as authority both Warren Buffett and Goldman Sach’s CEO, Gary D Cohn, who have each explained that raising rates would be impossible with the dollar already so strong internationally.  Don’t think for a moment that the Fed isn’t listening.  The Fed works for the likes of Buffett and Goldman.

There is a currency war afoot. The combatants are all the developed economies that, ironically, depend on the US for providing the safety and security upon which world commerce depends. The US can’t ignore this battle with its allies, not if it is to remain strong enough to bring a measure of stability to world hotspots (Ukraine, the Levant, East and Central sub-Saharan Africa, etc.). It must engage the battle, and do whatever it takes to reduce the value of the dollar internationally. But if it succeeds in doing so, it will weaken the economies of its allies and trading partners, which will cause money to flow into the US , because of its safe haven status and because it is the only economic system faring reasonably well. Which will cause the dollar to appreciate. Which will require further measures (a helicopter ride, anyone?) to reduce its value. Which will cause the rest of the world’s economy to suffer, which will cause the dollar to appreciate, ad infinitum. A currency war is a hamster wheel to nowhere.

Currency wars, or mercantilist strategies, as they were known in the earlier centuries of the Industrial Revolution, are self-defeating (see previous paragraph) admissions of defeat. No, that’s not redundant. To a currency warrior country, life is a zero-sum game (i.e., it is an admission of defeat). The currency warrior gives up on finding ways to expand demand organically and accepts that the pie of demand is more or less a fixed quantity, the biggest pieces of which go to the countries with the cheapest currencies.

And as much is more or less true among the developed world these days. Aggregate demand can’t grow, or not by much, when the population is in stasis or decline. And populations are in stasis or decline practically all over the developed world (e.g., Japan, Europe, etc.) and into the developing world (China, etc.). Part of why the US is doing so well is because its population is still slowly growing, though mainly through immigration.

Tesla loses 14 cents per share, a bit off the expected profit of 32 cents per share

Elon Musk (the CEO of Tesla) is a visionary, or so he thinks. Many compare him to Steve Jobs. Except that Steve Jobs made Apple Computer one of the most profitable companies in the world. Musk’s Tesla, not so much, at least not yet. Tesla expects to sell about 50,000 cars this year, about a quarter of what Toyota will sell in Camry’s alone. Their cars are all- electric, eliminating the need for spewing greenhouse gases through a tailpipe, which seems to reduce the carbon footprint of the automobile relative to gas-guzzling Suburbans, but only if you don’t count the carbons emitted by the power plant that generates the electricity to charge the car. Or the ones generated to create the massive batteries that power the vehicles.

In other words, the notion that Tesla’s cars are environmentally less damaging than regular old cars is tenuous at best. But Musk has some measure of followers who believe in his vision and herald him as a savior who will lead us to a promised land where fossil fuels are a historical relic. It is almost cultish, the adoration he receives. But it won’t last long if Tesla can’t make money. And at anything less than about $100 oil, it’s hard to see where Tesla makes money or sense.

Missing the Street’s expectations of profit by about 144% caused Tesla stock to fall about 5%. Shares that had risen eightfold (yes, that’s right–eight times) over 18 months to Sept. 4, had lost a quarter of their value by Wednesday’s close, before the fourth-quarter results were announced. Tesla claimed it had difficulties cracking the Chinese market, contributing to its loss. The Chinese don’t seem as enamored with a car that takes several hours to charge as were the first-adopting, status-conscious Americans and Europeans comprising the Tesla’s initial market.

Tesla is a good stock to watch to figure larger trends, if only because it is so hypersensitive to swings in sentiment. Tesla has never made a full-year profit, and claims it won’t do so until 2020, and especially now that it’s building its own battery factory. Buying Tesla stock expresses a mixture of visceral optimism and hubris. You have to believe that you are smart enough to know whether Tesla is the next big thing (Elon Musk claims it will have a market cap as big as Apple in ten years) or a flash in the pan. If the hubris or latent optimism fails, all bets are off so far as the company’s stock goes. Tesla, in other words, is a confidence game. The question is whether Elon Musk is a con-man or a visionary. Time will tell.

Russia and Ukraine and the Ukrainian rebels reach a tentative cease-fire agreement

Everyone involved agreed to quit shooting on February 15, 2015. The Ukrainian rebels, otherwise known as Russian proxies, have been pounding Ukraine’s regular forces, and have carved out a more or less autonomous zone for themselves in Eastern Ukraine, which Ukraine conceded in the cease fire. Donetsk and Luhansk, the two largest cities in the Donetsk Region, will be in the autonomous region in Eastern Ukraine. Ukraine will be forced to treat the region’s people as Ukrainian citizens when it comes to doling out government benefits, without the authority of governance.

All in all, this is a big win for Putin, which translates on the ground to a bonanza for the Ukrainian insurgents. Putin got all that he could have hoped for, short of having actually invaded and won a military victory. Ukraine is not conclusively reestablished in Russia’s orbit as is Putin’s ultimate goal, but it is now wary that as much is within the Russian Bear’s grasp. And it should by now know that it can’t look to the West to prevent its eventual re-annexation. The West has offered nothing more than platitudes (Obama observing that Putin had a twentieth century mindset really helped Ukraine battle Russian-equipped and backed rebels) and mealy economic sanctions and surely won’t now agree to allow Ukraine to join Nato. If the West didn’t want the fight before, it surely doesn’t want the fight now.

Thus this match goes to Putin. It’s taken a while, but he’s probed and prodded and found the West’s soft underbelly: It can’t imagine fighting another Great Power war on the European Continent.

The West believes human history is linear and progressive, rejecting all the evidence to the contrary that it is instead circular and cyclical. For the West, a problem once solved, such as the existential threat presented by the old Soviet Union, cannot arise again. The West cannot imagine the return of wholesale bloodshed as engulfed the Continent less than a century ago, or of Russia throwing its imperial weight around, so it does not prepare for such things, mentally or materially, and its lack of preparation makes it more likely that just those same problems come around again. History did not end when the Berlin Wall fell, but the West likes to pretend that it did, and that sort of thinking leaves it profoundly vulnerable, as now, when the Russian Bear has awakened from a long hibernation.

It would seem the two and a half decades the West has spent running in circles in Iraq ought to clue it in to the inherently cyclical nature of history, but apparently not. The futility of its effort in Mesopotamia contributes to the distaste for muscular military interventions the world over, particularly in Ukraine. Putin gets all this. The West’s politicians don’t realize even today how vulnerable and weak their position has become.

Retail sales in January down 0.8%; Consumer sentiment falls

The US Census Bureau announced February 12, 2015 that US retail and food services sales for January, adjusted for seasonal variations but not price changes, declined 0.8% from December, 2014, but up 3.3% from January of 20014. Far and away the biggest declines were experienced by gasoline stations, which were down 23.5% from a year earlier.

The long-only business news media (the WSJ, Bloomberg, etc.) can’t figure out what’s going on. The economy is humming. People are back at work, and incomes are finally now climbing. The gas station declines are understandable, but the decline in spending there should show up as an increase elsewhere, but didn’t. Without the gas retailers, spending was up a measly 0.1% from December, 2014.

It is hard to say what’s happening. All we really know for sure is that retail sales declined. My guess is that lower gas prices are not an unmitigated good for retail consumers. People who make their living in the energy industry—everyone from roughnecks on oil rigs to clerks at the minimarts–are also retail consumers. The extra cash that other consumers have in their pockets over lower gas prices is translated to less cash in theirs.

Whatever explains the decline in retail sales probably also explains the decline in consumer sentiment, which dropped from an eleven-year high last month to a level three points below what even the most pessimistic economist polled by Bloomberg thought would happen. Consumer sentiment was 98.1 last month, and declined to 93.6 in this month’s poll (the range of 69 economists polled by Bloomberg was 96-100). The last time sentiment was above 100 was from 1996 to 2000, in the midst of the dotcom boom. That perennial bogeyman, bad weather was blamed for part of the fall, but curiously, it wasn’t cited as a problem when the automobile markets saw record sales last month.  Note to readers:  When it comes to figuring the whyfores of economic figures, it is never, never, never about weather or the holidays or any other extraneous thing.  And a corollary:  Not much of anything can be inferred from one data set.  Everything must be considered in a context that can mainly ignore stuff like snowstorms, hurricanes, droughts, etc.  The US economic system is well enough geographically diversified that local weather phenomenon generally counterbalance each other.

Stocks, bonds and interest rates

The S & P 500, the Dow Industrial Average and Nasdaq have all retraced the ground lost in January, the worst month in a year, and are poised to exceed all-time highs by healthy margins by the end of the month, unless of course they don’t. Bonds declined as interest rates climbed, the ten-year US treasury settling at about 1.9%. After days on end of price swings in the 5-6% range for the bond markets, things seem to have settled down to almost where they started. Mortgage rates have bounced off lows in January that hadn’t been seen since 2013.

And from the social cesspool—

The US champion Little League team last year had its championship vacated for having cheated

The story of the Jackie Robinson West Little League team from, like bad, bad, Leroy Brown, the Southside of Chicago, was supposed to have been a heart-warming tale of how black kids in the inner city learned how to win in life by winning at baseball. Everyone in Chicago was rooting for them to win; even Cub’s players were caught between innings of their own games watching the team play, perhaps so they might learn something of how championships are won.  The team visited Obama in the White House after winning the US championship.

Alas, the team turned out to be a fraud. It was not comprised solely of kids from the inner-city neighborhoods that comprised its territory. It sua sponte redrew its territorial lines (i.e., without league approval) so that it could pull in kids from the suburbs. When Little League officials finally found out about it and investigated, they vacated its wins.

Thus the kids were taught a very good rule for life: Cheating wins championships, but only if you don’t get caught.  But don’t blame the kids.  It was the rabidly competitive adults who are to blame, as Obama correctly pointed out.  Vacating the kids’ wins seems a bit harsh in that regard.  The problem is how to reward the kids for their efforts while simultaneously punishing the adults.

But isn’t it about time we become a bit less credible and gullible? How many times do these heartwarming tales have to turn into jaw-grinding frauds until we learn our lesson?  The hearts of the team’s supporters won’t be swayed. They are already claiming, with Jesse Jackson and Rahm Emanuel’s help, that the championship should be reinstated, another example of what should by now be called the OJ principle, a principle which essentially acknowledges that the Scottish philosopher David Hume got things right in the eighteenth century–the head is the handmaiden of the heart. Once the heart has decided upon a thing, it won’t allow the head to even consider evidence to the contrary.

Another way of putting things is how St. Augustine described the best approach to Christianity:  Believe so that you might understand.  Which might work in matters of faith.  But in the secular world of baseball (and most other things), I’d prefer that we drew our conclusions from the evidence.

Fifty Shades of Grey opens in theaters this weekend; A.O. Scott’s review in the New York Times all but says don’t bother

The first paragraph of Scott’s review:

At the end of a recent New York sneak preview of “Fifty Shades of Grey” — in the blackout between the final lines of dialogue (“Anastasia!” “Christian!”) and the first breathy notes of the last Beyoncé song — a lot of the audience burst out laughing. The source of that laughter continues to puzzle and intrigue me, perhaps more than the actual movie did. Was it delight? Derision? Embarrassment? Surprise? All of the above?

Laughter?  Over what Scott calls “commoditized fetishism”?  Need you really know more?  Seems the serious business of kinky sex doesn’t transfer well to the big screen.  Or maybe the laughter is something like whistling past the graveyard, an attempt to pretend to fellow movie goers that light S & M is not arousing in the least, while secretly finding it a bit interesting (otherwise explain the novel’s phenomenal success), but not when displayed in a respectable movie theater which the preacher and the neighbor might attend.

Maybe the New York Times can do a graphic on witch burnings in the Northeast

It would be nice if I one day opened the New York Times website and, no matter how hard I looked, couldn’t find an article denigrating Alabama or the South.

The Southern denigration de jour is served in an article (click for link) detailing lynchings in the South, a report on research conducted by the Equal Justice Initiative, a Montgomery, Alabama legal-do-gooder non-profit.  Exactly how this project is doing anyone alive today any good is beyond me.

Here’s the graphic, just to prove that Alabama maybe wasn’t as bad as its reputation, if only by comparison with its neighbors.

The heaviest band of lynchings lies right alongside the Mississippi River, which is not surprising.  Alongside the River is also where plantation agriculture was concentrated.  North central and northeast Alabama–the portions of the state economically devoted to mineral extraction and yeoman farming–show relatively fewer episodes.  Louisiana, Mississippi and Arkansas are covered in lynchings, along with parts of Georgia and Florida.  The data set runs from 1877 to 1950, and the dots are apportioned according to the number of lynchings, not the proportion of the population that is affected, so it may be that Georgia and Florida have had more lynchings simply because they had more people.  Population certainly explains the big dot dead center in Alabama, as it appears to be exactly where Birmingham is located, and during the latter part of that time period, Birmingham was far and away the largest metropolitan area in the state.

According to the article, the Equal Justice Initiative wants to put markers to commemorate lynchings.  Really.  They want to make sure people don’t forget.  That should help move things Progressively along.  While it may well be true that “the past is never dead, it’s not even past” (in the words of William Faulkner), is there any reason to stay ever mindful of its less humane episodes?  I think everyone pretty much gets it by now–blacks were sometimes treated dreadfully awfully in the South (just as they, and suspected witches were treated in the North).  Things aren’t that way now, but picking at old wounds while they are desperately trying to scab over often makes them bleed again.

The US Supreme Court could fix the gay marriage mess in Alabama with a “Vegas” ruling

What happens in Vegas doesn’t really stay there. Particularly not if you swing by one of those wedding chapels for a quickie ceremony. A Vegas marriage is just as legally enforceable in all fifty states as any other (assuming it wasn’t like rape, entered without one’s lucid, sober consent). So the adage isn’t necessarily true.  What happens in Vegas may well come home with you.

Alabama’s gay community is in a state of confusion. (See the New York Times article).  Some probate courts (there is one in each of its 67 counties) are issuing marriage licenses to gay couples and some are not. A Federal District Court judge, Callie V Ganade, ruled last month that Alabama’s prohibition against same sex marriage is unconstitutional. Her ruling took effect today, February 9, 2015. Alabama Supreme Court Chief Justice Roy Moore, he of Ten Commandments fame who was impeached for refusing to follow a federal court order in 2003, but was reelected to the bench during the last election cycle, has issued an order to the Probate Courts that no gay marriage licenses are to be issued until the US Supreme Court rules on the matter.

In this one instance, as a legal matter, Judge Moore has a point. Federal District Courts are federal trial courts. One judge, appointed for life, presides over the courtroom. It is generally assumed that District Court jurisdiction does not extend outside of its geographic area, which in Alabama usually comprises a dozen or so counties. If District Court constitutional judgments had effect anywhere and everywhere, it would mean that one lonely Federal District Court Judge might decide matters of national importance. And that shouldn’t happen. Nor should it happen that a Federal District Court judge decides upon constitutional matters affecting a whole state. Constitutional questions of national or statewide import are for the appellate federal courts to decide, including if necessary the US Supreme Court.

But the gay marriage legal imbroglio could be resolved the nation over with just one case. All the US Supreme Court has to do is take a case questioning the enforceability of a gay marriage lawfully entered in a state different than the one in question. If the marriage is enforceable under the Full Faith and Credit Clause of the Constitution*, as it well should be, then the federal legality of gay marriage need not be determined. If gay marriage is legal in one state, it will effectively be legal in all states, and marriage will remain, as it always has been, an issue left to the states to resolve. Alabama can remain obstinately unwilling to allow gay marriage, but if Florida allows it, then a gay Alabama couple need only go to Florida and get married for it to have full validity under Alabama law. Call it the Vegas ruling. Because what happens in Vegas doesn’t really stay there.  It never really did.

*Found in Article IV, Section I, the clause is stated as follows:

Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.

Ask Kanye. That’s all you need to know.

Kanye West was right last night at the Grammy’s (but he don’t need me to tell him). The award for best album should have gone to bubble-butted Beyonce, just like Kanye said. I didn’t see her sing, because the awards show mercifully withheld her performance until almost the very end of the three and a half hour marathon and by then, I was already in bed. And I can’t name a single song bubble-butted Beyonce has ever sung, but I know that she really should have won. Because I know that Kanye is the arbiter of musical tastes for English speaking culture, someone who is bigger than the Beatles, which, given that John Lennon was more popular than Christ, means that Kanye is also more popular than Christ. And how do I know all these things? Because Kanye said them or acted them out, and that’s enough for me. It isn’t bias, racial or otherwise, to believe yourself and your people (particularly your bubble-butted broads), better than everyone else if it’s true. And even if your bias and self-regard so fucks your perception that you couldn’t tell a good singer from a yelping coyote, it still doesn’t matter if you is rich and famous enough. Money talks and bullshit walks. This is America, motherfucker. Ask Kanye.

So Beyonce’s album was far and away the best album nominated for best album. In fact, Beyonce’s album should have been the only album nominated for best album. That pencil-necked British kid, Sam Smith? Pffft. Are you kidding me? He’d already gotten three awards for one song. And every last one of Beyonce’s songs are better than his one lone song. And that other pencil-necked white kid (how come all the white kids in music look so emaciated?) who tries to be like Kanye and go by only one name—Beck, I think it is—is not even worthy of spit-shining Beyonce’s heels with his tongue. Honestly, Beck? What the hell is a Beck? Is it a ripoff from Jeff Beck, the awesome axeman from back in the day? This new Beck plays guitar, too, so probably. White kids these days. They rip off their elders and they rip off the brothers and they rip off each other, and still they barely manage to keep from stinking like a Bavarian cabbage.

Kanye bitch-slapped that little white kid after the show for stealing what rightfully belonged to Beyonce and refusing to give it back. He almost went up on the stage to grab the mic from him and lodge his protest against the Grammy gods when it happened, like he did when Taylor Swift stole an award from him in 2009. But instead he just pretended the redux, and waited until the show was over to blast the academy for not awarding musical genius standing right in front of it. I mean, how could they miss Beyonce for Beck? Beyonce’s butt probably weighs more than Beck’s whole torso.

And you know Beck is Kanye’s bitch because after Kanye ripped him a new asshole, Beck practically begged for it again, praising Kanye as someone he tries to emulate.

Kanye did, however, do a fashion redux, bringing back velour jogging suits, and in a big way, wearing one for his song about something that was really serious and cool but I’m not sure what. I bet his wife Kim helped out with that splendiferous sartorial surprise. And I bet “velour jogging suit” has been trending big on Google ever since all lights but the spotlight on Kanye were extinguished in the auditorium for his soulful, meaningful song about something, I’m sure. Everybody’s gonna want one of his velour jogging suits. In fact, I may get one for running the upcoming half-marathon. Kanye never claimed that he was bigger than Elvis (probably it was implied), but after last night, he doesn’t have to. He worked that velour jogging suit like the King never could.

Kanye let President Obama have a few minutes of air time for a public service announcement about domestic violence and rape. He knew the dopey old President wouldn’t upstage him. For his part, Kanye don’t care none about domestic violence and rape—he don’t need that shit to get what he wants out of women. Did you see Taylor Swift cowering back in 2009 when he jumped on stage and grabbed the mic from her? Who needs to beat women up when they already be scared of you? But it was big of him to let the President have air time on his show, what with the President having called him an asshole or something before. It showed Kanye’s humble and forgiving side that he allowed it.

Kanye’s got another bubble-butted broad besides Beyonce who he defends with the same alacrity. No, the bubble-butted similarity has nothing to do with it. His wife, Kim Kardashian, recently displayed her bubble-butted self in all its her glory in a magazine spread. She’s soon to become an author, publishing a book about taking selfies. Okay, it’s really just a book of selfies she’s taken, with nothing of the writing thingy that authorship sort of implies. But isn’t a book of Kim’s selfies enough? You bet it is. You should already be on the waiting list at Amazon. Ask Kanye. He’ll tell you. And what he tells you? That’s all you need to know.

Executive Summary, Week of February 1-7, 2015

Employment rolls expand by 257,000 in January

The Labor Department’s employment report is a lagging indicator. It shows what we already should know—that economic activity has recently been expanding or declining. Aggregate employment and aggregate economic activity are almost perfectly correlated, but the evidence for employment gains takes longer to reach us than for GDP gains; if economic activity has been increasing, i.e., if GDP has been going up, then employment will almost always have also been going up, though the indications of rising GDP generally precede those of rising employment. It takes longer to report the hiring of an employee than to report the sale of a widget.

The 257,000 number is a decline from November and December’s numbers, which were 423,000 and 329,000, respectively, after revisions. Though it would never be spun in such a manner on the long-only news outlets (Bloomberg, The Wall Street Journal, i.e., basically any mainstream business media), the numbers point to a declining level of gains. From November’s 423,000 to December’s 329,000 is a drop of 94,000, or about a 22% reduction in monthly gains. From December’s 329,000 to January’s 257,000 is a drop of 72,000, also a 22% reduction in additional jobs. If the trend of dropping about 22% each month continues, the gains to employment in February will barely tip 200,000, which is a perfectly meaningless observation to make, except that it does a fine job of helping flip the idea that January’s numbers were great on its ear. Employment gains will turn negative by the end of the year if current trends continue.

The unemployment rate increased an insignificant amount, by .1%, to 5.7% from 5.6%, due, as the long-only news outlets put it, to people being encouraged to look for work because of the strengthening employment picture. Of course, nobody knows why unemployment ticked up. More plausibly, and Occam’s Razorishly, it had to do with the failure of the expanding job market to accommodate the labor pool growth. Through immigration and indigenous population growth, there are about 300,000 or so people added to the pool of potential laborers each month. If the number of jobs doesn’t expand by about that much, the unemployment rate is apt to climb, presuming that a significant proportion of the new entrants to the labor pool desire work.

Three deeply conflicted government economic prognosticators agree—2015 and on will be just great.

2015 starts off with a forecast sure to send shivers down even the most difficult-to-spook investors. Like a triple witch’s curse, all three government economic forecasters predict that happy days are here again, with the White House, Congressional Budget Office and Federal Reserve predicting that the US economy will keep growing above a 3% rate indefinitely, while unemployment will shortly decline to at or below 5% and stay there.

I believe they are mainly correct about the remainder of this year, unless some fat-tail geopolitical event, like Russia moving to bring East Germany back into its fold (true headline), whipsaws things. My guess is that things will peak by mid-year unless world growth (particularly China) picks back up. Then things won’t get much worse for awhile, but they won’t get any better. Unemployment will hit about 5% and stall its improvement. Unemployment is at about 5.6% right now, and GDP grew by about 2.5% in 2014.

If things are to get better and better as the government oracles predict, some of the economic stats, like durable goods orders last week, or manufacturing growth this week, had better decide to play along.

US manufacturing growth slowed the most in a year; Chinese manufacturing contracted

The Institute for Supply Management’s manufacturing index fell to 53.5 last month for the US, from December’s 55.1. Anything above 50 indicates growth.
HSBC’s purchasing managers index for China was indicating contraction again last month, at 49.7, up slightly from December’s 49.6. As with the US manufacturing index, anything above 50 is considered expansion, anything below is contraction. Thus Chinese manufacturing has gone much further than slow its explosive growth; over the last two months it has actually contracted. Which explains a good deal about the commodities slump. The official report of the Chinese Federation of Logistics and Purchasing, a state-sanctioned report that focuses more on state owned and operated enterprises, showed manufacturing activity fell to a 28 month low in January. China’s GDP grew at only 7.4% last year, the slowest in a quarter century.

It seems to me that the question of whether the government’s Panglossian forecasts will prove true or not depends on whether China has the depression that it is due for, and it is well overdue for a depression given its moment in the developmental cycle, or if it sloughs off the troubles and goes back to minting millionaires from former PRC Communist Party peasants.

Consumer spending declines by most since 2009, along with consumer price rises as muted as in 2009

Consumer spending declined in December by 0.3 %, which was the biggest decline since September of 2009, and came off relatively huge gains of 0.5% in November and 0.3% in October.

The Fed’s favorite index of consumer prices, the Personal Consumption Expenditures index, showed gains for last year of only 0.7%, the slowest rate of gain since October of 2009. Excluding volatile food and energy prices, prices were unchanged for the second straight month.

Of course, there is more than just a correlation between consumer prices barely increasing or not at all, and consumer spending declining. If the overall price level declines, then the overall spending level will decline with it, ceteris paribus. If a hundred gallons of gas that was consumed monthly goes from $4/gallon to $2/gallon, but the same quantity of gas must be purchased, it will appear as if the quantity of consumer demand has declined by half, when no such thing has occurred. It is a sometimes tricky thing to tease the value of money from the value of the goods and services it is intended to represent, particularly in a regime of freely floating exchange rates. Of course it is this same trickiness upon which the Fed depends for creating its monetary illusions.

Factory orders fall for the fifth straight month

Factory orders fell in December by 3.4%, helping make business spending on equipment the weakest since mid-2009. Orders fell in December after having fallen a revised 1.7% in November.

Passenger vehicle sales hit new highs

The domestic US vehicle market is expected to show sales in January that increased about 8.5% by number of cars sold. If the numbers hold for the year, the sales pace will be the best in ten years. Toyota, GM, Ford and Chrysler all had double-digit sales increases.

China loosens the monetary reins

The People’s Bank of China announced it would lower its reserve ratio by 0.5 %, bring the ratio down to 19.5% for most banks, while some rural banks will get bigger reductions. The reserve ratio is the percentage of deposited money that banks must keep on hand in order to meet withdrawal demand. By reducing the ratio, more money is made available for making loans. The PBOC expects at least four more cuts in 2015 in an attempt to spur activity in an economy whose growth is rapidly slowing. China is mired in a deep deflation, with prices declining in December by 3.3% over the year earlier period, the 34th straight month of price declines. If this were happening in the US, the Fed Reserve would be in a panic.

Thus is China the latest combatant to join the currency war fray. Loosening monetary policy domestically tends to decrease the value of a currency internationally. In truth, the deflationary spiral which China has entered and is trying to combat with its loosening monetary policy is its own fault for having tried to neutralize the monetary effects of the massive trade surpluses it has had with US for decades. Throughout the eighties, nineties, and early 2000’s, the Chinese yuan either declined in value or stayed the same relative to the US dollar (China’s official peg was above 8 yuan/dollar from 1995 to 2005, after having declined in value from about 1 yuan per dollar in the early eighties), which is precisely the opposite of what the economic tides wished for it to do. Massive misallocations of capital ensued, in China with the building of ghost towns; in the US with the building of ghost suburbs.

Trade surpluses are most naturally resolved through currency fluctuations, where the surplus country’s currency appreciates in value relative to the country with a deficit. China refused to allow its currency to appreciate, presumably so that it could capture more of the gains from trade for itself. It is now paying the price. The economic tides can’t be denied, only sometimes temporarily delayed or deflected. Deflation delayed is not deflation denied. The Chinese relented in their currency peg and allowed the yuan to decline a bit in the middle part of the 21st century’s first decade, but it has been too little, too late.

Now, with the latest loosening of monetary policy, China will likely see a further increase in borrowing, which was already at record levels for the 2009-2013 period, as China tried to mitigate the effects of the international financial crisis.

There is no way to tell by exactly what magnitude, but China’s slowdown has got to be at least partially responsible for the glut of oil that caused the crash in oil prices. China had been growing so rapidly before that world oil producers could safely assume any excess supply would be quickly mopped up to fuel China’s burgeoning love affair with the car. Not so fast. Growth rates of the sort China has experienced are simply not sustainable, and so long as they continue past the point of viability, production overshoots demand. Economic contraction ultimately ensues, which can be either mild or severe, depending on how far supply outpaced demand. Falling prices, which China has experienced for almost three years, closely correlate to demand contraction and/or money supply contraction.

And Now, News from the social cesspool

Another China story

Two cult members in China were executed for their role in the beating death of a young woman at a McDonald’s restaurant.  The two were members of something called the Church of Almighty God, a Christian cult with the quite odd view that Christ came back to earth as a Chinese peasant woman who will save its followers from the apocalypse. The cult pledges to slay the “Great Red Dragon”, an allusion to the Chinese Communist Party, which has held the reins of power in China for sixty-five years. The CCP began cracking down on the cult after this latest incident.

The woman was beaten after refusing the advances of a mob of about thirty or so of the cult members gathered at the restaurant to recruit members.

News from Portlandia

Strippers in Oregon are demanding better working conditions. And it’s fairly clear that a Yahoo! Report on the matter didn’t intend to be humorous, but still was, from the report:

Around the country, strippers have stepped up their fight for better working conditions. Some are suing. Others have filed complaints with state regulators. A handful have unionized. But the effort in Oregon to work directly with the Legislature — with the support of lobbyists — is unique.

Did they really say that it was unique to Oregon that strippers work with lobbyists and legislatures? Everyone knows that strippers and lobbyists go together like pimps and crack ho’s.

Ideally, they want to see strip clubs comply with mandatory health and safety standards — clean stages, structurally sound poles, adequate security. But that could be a tough sell in the Legislature.

It surely sucks when a stripper slithers around a structurally unsound pole. But is a pole even a necessary accouterment for stripping? Can’t you just take your clothes off? Seductively, I mean. Not like you’re going to bed to sleep, but for something else.

And from The New York Times, the international oracle of the gender confused, a glossary of terms used to refer to gender orientation, something every high –priced human resources professional at a too-big-to-fail bank should know:

SEX Classification as male or female or, rarely, intersex (not exclusively male or female). Sex is usually assigned based on external anatomy but is determined by characteristics like chromosomes, hormones and reproductive organs.

GENDER Roles, behaviors and activities that a given society considers appropriate for males or females. “Sex” and “gender” are often mistakenly used interchangeably.

GENDER IDENTITY Internal, deeply held sense of one’s gender.

GENDER NONCONFORMING Expressing gender outside of conventions (clothes, behavior) typically associated with masculinity or femininity. Not all nonconformists are transgender.

TRANSGENDER Umbrella term for any gender identity that differs from the one associated with the sex assigned at birth.

TRANS* Short for transgender, with the asterisk meant to indicate the wide range of identities beyond the norm.

GENDERQUEER A gender identity that falls outside of the male/female binary. A third gender.

PANGENDER Having a fluid identity. Might be expressed as both male and female, or shift from one gender to the other. Under the umbrella term genderqueer.

CISGENDER Possessing the gender identity commonly associated with one’s biological sex. “Cis-” is a Latin prefix meaning “on the same side as.”

TRANNSEXUAL Out-of-favor term for those who alter their bodies hormonally or surgically to align with their internal gender identity.

SEXUAL ORIENTATION Romantic, physical attraction, be it homosexual, heterosexual, bisexual, asexual, polysexual, pansexual.

Whether you are genderqueer or pangender (the latter being a subset of the former) or just a boring old cisgender, just be comforted in the knowledge that your gender orientation is really only important to you and to whomever is the object of your desire. Please don’t parade down the street informing me of which gender identity is yours and which you find desirable. Neither I nor anyone else cares.

Widespread acceptance of the notion that there are multiple (beyond two) gender identities says something about the culture, perhaps that life is too easy for sanity to prevail. There is a direct and positive correlation between cultural wealth and cultural stupidity and psychoses. We have got, therefore, to be stupendously wealthy.

Does ISIS’s incineration of a Jordanian airman vindicate Chris Kyle?

In the memoir that Chris Kyle wrote that became the blockbuster movie, The American Sniper, Kyle referred to the people he killed as “savages”, claiming that what we were fighting in Iraq was “savage, despicable evil.”

The Wall Street Journal’s Review and Outlook (February 5,, 2015) thinks that the images released by ISIS of their burning to death a caged Jordanian airman proves Kyle was right.  From the article:

‘Savage, despicable evil. That’s what we were fighting in Iraq.” Those were among the words the late Chris Kyle, of “American Sniper” fame, used to describe the enemy he and fellow veterans of the Iraq war faced. After seeing images this week of Islamic State jihadists murdering a caged Jordanian pilot by burning him alive, can there be any real doubt that Kyle was right?

Soldiers in combat have to demonize their foes.  They have to imagine their adversaries to be something other than human to overcome the innate revulsion that all species have for unnecessarily killing their own kind.  But a newspaper’s editorial staff hasn’t the need to demonize its foes.  Nobody is asking the pencil-necked editorialists to become savages in the service of their country.  Review and Outlook should be ashamed for its endorsement of Kyle’s dehumanization of Iraqis.  Kyle had an excuse.  Review and Outlook did not.

But the paper didn’t stop there.  It went from mere demonizing Iraqis to mythologizing Kyle’s heroism for killing so many of the same sort as ISIS, trying to connect the rather tenuous dots between our enemy in Iraq circa 2005, and our enemy in Iraq a decade later:

The account of this killing—one of thousands carried out by AQI—continues this way: “The kidnappers then tied the Egyptian’s hands behind his back and asked him to state his name. . . . After complying, he was about to apologize for his acts, but a man gave a sign to the ‘executioner’ standing behind the hostage, who grabbed the man’s tongue and cut it off, stating that the time for excuses was past.” The man was then beheaded.

It was on such executioners that Chris Kyle trained his sights. Messrs. Maher and Moore may want to hold up the Iraq war as evidence of American perfidy, but as the atrocities of Islamic State are again reminding us, the moral balance in that war was exactly the opposite. No wonder millions of Americans admire Kyle and are flocking to see the movie that treats him like a patriot in full.

It’s all nonsense.  We have no evidence that Kyle trained his sights on the sort of killers described here as al Qaeda operatives in Iraq.

Part of the reluctance to afford Kyle full American Hero status is that he was a sniper who killed people from afar.  The rebuttal is that he killed people to save the lives of American Marines.  If the Wall Street Journal is to be believed, he also killed to save the lives of random Egyptians.  Chris Kyle is not The American Sniper but The American Superman, swooping in to save lives wherever they might be threatened by savages perpetuating despicable evil.  At least he’s got the initials (CK, i.e., Clark Kent) for it.

The real Chris Kyle had a rather complicated relationship to the truth.  He lied about beating up Jesse Ventura (proved in court).  He lied about killing two men at a convenience store south of Dallas who were trying to steal his truck.  He lied about climbing to the roof of the Superdome in New Orleans and picking off thirty or so looters after Hurricane Katrina.  If Chris Kyle is the New American Hero, a Patriot in Full, as the Wall Street Journal claims with such alacrity, it must be the case that our standards for creating mythological heroes has precipitously slipped.  From George Washington, the military genius (not really, but facts around the margins matter little in mythology) and penultimate Founding Father, who could not tell a lie, not even about chopping down the cherry tree, to Chris Kyle, with a proven pattern and practice of lying about his exploits, but whose myth nonetheless arose out of his own self-aggrandizing tale.  This must be what a devalued currency in mythology looks like.

Book Review: “On Human Nature” by Edward O. Wilson (1978)

Edward O. Wilson does not have the wild-eyed countenance of an Albert Einstein to make him a caricature of the mad scientist, the persona that Einstein so fastidiously crafted. In fact, he’s only just one eye with which to reckon the world, but it’s hard to tell right off hand when looking at him which is the bad one. And outside of his bad eye, he’s a rather ordinary looking fellow. One who would appear could be an insurance agent, possibly, or maybe the neighbor with a winter garden of fresh greens you pass by on a walk.

Wilson is not from an exotic locale and he doesn’t speak only haltingly passable English. He grew up on Mobile Bay, in South Alabama, and his command of English is utterly brilliant, rivaling even his command and understanding of the social insects, particularly ants, which first gained him notoriety as a Harvard biologist.

Outside of his monocular disadvantages, he’s not afflicted with any peculiar wasting diseases slowly turning him into a disembodied mind such as the leading popular physicist of today endures with a resolve sufficient to contribute to his celebrity.

Edward O Wilson is today only a minor deity in the pantheon of science, popular and otherwise. But one day, undoubtedly posthumously as he’s getting along in age, he will be lionized as the genius who first had the courage to revolutionize and synthesize the various studies of human beings, from anthropology to sociology to economics, around the theory of evolution by natural selection, the abiding principle governing all of life. It is Wilson who first popularized the notion that all behavior in animals, including man, has a discoverable basis in genetics. It is Wilson who set the social sciences academy on its ear by speculating, and then backfilling with proof, that the mind is not a tabula rasa, to be written upon at will by social scientists. It is Wilson who first had the temerity to claim that the human mind arrives innately attributed, not capable of being pliantly molded in any manner a Skinnerian behaviorist might wish.

Ultimately, Wilson may one day remembered as the prophet who warned the world that its zeal for solutions to social problems was leading it in the wrong direction; that the progressive engineering of social environments can have only the level of impact as the genes allow; that practically all of what we believe about human beings is wrong, and so practically all our attempts at modifying behavior is wrong.

Edward O. Wilson might be vilified instead of lionized, if in some future Dark Ages, people forget everything that objective inquiry into human nature has revealed, and revert to the mysticism of shamans and priests in providing their reason to endure the pain of existence.

The picture Wilson paints is undoubtedly a bleak one in some quarters. He accounts for religion and the notion of higher power and purpose in the same manner as all other human attributes are accounted, as relevant and important only because of how such beliefs tend to contribute to genetic fitness, to the individual and collective ability to survive and prosper.

In the end, in what Wilson calls the ‘second dilemma’ that would befall a psychically adult humanity, is the realization that all we are is imperfect vessels for seeing our genes through this generation to the next as purely and preciously as possible. The apostle Paul told the Corinthians they carried the eternal word of God in jars of clay in order so that they might protect and propagate it. In Paul’s day, jars of clay were considered to be sturdy and dependable vessels. Nature gives us nothing but these corruptible bodies to carry along its holy and eternal writ, the genes written into our DNA. Though Wilson doesn’t explicitly say as much, the moralities of biology and theology are concerned with the same things. Whatever enhances the survival and propagation of God’s eternal word accomplishes the same for Mother Nature’s genes.

On Human Nature is the third in what Wilson says unwittingly became a trilogy, commencing with The Insect Societies in 1971, continuing with Sociobiology: The New Synthesis in 1975, and particularly its last chapter on applying sociobiological principles to the social behaviors of man. On Human Nature is a succinct masterpiece that won Wilson a Pulitzer Prize.  Running to only 260 pages, including glossary, notes and index, it synthesizes to a compact form, suitable to carry in every social scientist’s briefcase, what we’ve learned about human behaviors. The book is so good in dispensing so efficiently and effectively so much muddle-headed thinking in the humanities that it ought be required reading for every humanities major or biologist. And it wouldn’t hurt for everyone to read it, because everyone needs some insight as to how humans behave and why. Even the most astute physical scientist needs to understand the inherent imperfections of the vessel with which he is investigating the world. And he needs to understand that he is investigating the world with a vessel that was intended for a different purpose, and one whose biases are inescapable.

If you are interested in the biological sources of human behavior (who isn’t?) get the book and read it. And then go backwards, and read Sociobiology. And keep on to The Insect Societies, as I intend to do. The ideas propounded by sociobiology make it something like the Rosetta Stone for the humanities, translating them all into the language of evolution theory, as must be done if they are to have any hope of making sense. The theory of evolution is not just one of the most powerful theories in science, it is the most powerful theory in science. Regarding its specific application to life (and it is not just applicable to life), there is no hope of understanding without it.

Click here to read the full review and accompanying notes (about fifteen pages on the word processor).

The Super Bowl temporarily solves the first dilemma

The first dilemma, in a word, is that we have no particular place to go. The species lacks any goal external to its own biological nature. It could be that in the next hundred years humankind will thread the needles of technology and politics, solve the energy and materials crises, avert nuclear war, and control reproduction…But what then? Educated people everywhere like to believe that beyond material needs lie fulfillment and the realization of individual potential. But what is fulfillment, and to what ends may potential be realized? Traditional religious beliefs have been eroded, no so much by humiliating disproofs of their mythologies as by the growing awareness that beliefs are really enabling mechanisms for survival. Religions, like other human institutions, evolve so as to enhance the persistence and influence of their practitioners…
Thus the danger implicit in the first dilemma is the rapid dissolution of transcendental goals toward which societies can organize their energies. Those goals, the true moral equivalents of war, have faded; they went one by one, like mirages as we drew closer.

Edward O. Wilson, from On Human Nature, 1974, page 3.

The Super Bowl seemed glum (and not just for the commercials, but for that, too). And way less than Super, though I’ve never really considered it much of anything except just another football game. Don’t get me wrong, I love football, or did, before it was feminized to flag football death by Roger Goodell and the NFL. And I used to like (not love, mainly because of its routine failure to live up to the hype) watching the Super Bowl, but it is always a bittersweet experience. The Super Bowl means that football is over for another seven months, and before it comes around again there will be the added misery of an Alabama summer to endure. But football is mostly over in the two weeks leading up to the Super Bowl anyway, so the game itself is like a Fat Tuesday feast before the deprivations of Lent arrive.

Which almost works literally, as the Super Bowl is usually pretty close to the beginning of Christian Lent. It’s why if anybody asks what I’m giving up for Lent, I always tell them football. It usually gets a laugh. I’m not of a denomination that does the Lent deprivation thing, so don’t feel compelled to actually take the season too seriously. But I hope people who do take it seriously aren’t offended by my mild blaspheme. At least Catholics don’t often breed suicide bombers or holy assassins for the faith. Not anymore, anyway.

The Super Bowl seemed glum because it seems to be bumping up against Wilson’s observation of mankind’s first dilemma. It didn’t seem to have a point. Or that what little point it might have once had has been fulfilled, many times over, particularly so far as how ridiculous a spectacle a pop singer can make at halftime. I really wish for a halftime show where they’d have some folk singer come out and play an acoustic set of his hits while sitting on a wooden stool. Or maybe have marching bands from the high schools in the communities from which the teams hail.  The over-the-top halftime extravaganzas long ago turned ridiculous just for the point of spectacle, something like leisure suits in the seventies and skinny jeans today. I really like Katy Perry, not as a singer but mainly because she’s cute, but I thought she mostly just looked awkward and ridiculous Sunday night. To what end was the spectacle of her show directed? To prove that she could be as mindlessly outrageous as the next female pop star? And Lenny Kravitz had less than no point. In a kindergartner’s puzzle, he would have been the answer to the question of which piece didn’t belong.

The Super Bowl’s pointlessness seems indicative of the whole culture. The US no longer has a point. It has mainly solved the serious existential challenges facing its citizens, so now it thrashes about trying to also solve their higher-order challenges, like cajoling men to quit beating their wives and children, or finding ever more specific and narrow interests upon which to bestow civil rights (transgendered dogs might yet have their day in court). Every goal, every dream we could have possibly dreamed, has been achieved, or almost achieved, just as each one faded into a mirage of illusion. What’s the goal of next year’s Super Bowl? To be Supier even than this one?

Even the football was boring and predictable. Except for two plays, which sort of canceled each other out—the one where the Seattle receiver juggled the ball above the ground before making the catch at the five, and then the one where Seattle lost the game on an interception at the one—it looked like each team was painting by numbers. Which they were, because that’s how championships are won, but the notion isn’t novel anymore. Play good, boring, defensive-minded football and you’ll sometimes have a shot at winning a championship. Yeah, I get it. Move on to the next moral football principle steeped in profundity. But I did love that it was mostly dull football because it shows Roger Goodell that no matter all the pass-happy rules changes that are made, so long as football is football, i.e., so long as it involves blocking and tackling, defense will win championships.

But football generally, and halftime shows particularly, are just entertainment. They are attempts to fill the empty times between the fulfillment of our material needs. They so fanatically strive to be spectacular because they stand in defiant opposition to the first principle of life—that there is no discernible point to it. Entertainments are surrogate religions in this regard. If the point of life isn’t going to just be lunch (as I’ve said many times over that it was) because lunch is too easy to obtain, then it must be football, or halftime extravaganzas, or taking selfies of the fun that was had, or making sure the lunch is all organically grown breads, meats and vegetables whose source farmer is known on a first-name basis.

I know there is no point to football but I love it anyway, and for all the wrong reasons. I love the violence, the bone-crushing hits in the open field and the constant hand-to-hand war going on in the trenches. I love the thuggish attitudes of the guys who play the toughest positions, like cornerback and linebacker and lineman. I don’t love, but don’t dislike either, the quarterbacks and wide receivers. They seem to be a necessary nuisance. I love the tough running backs like Marshawn Lynch and Eddie Lacey, who punish opponents that suffer the audacity of trying to tackle them. And though I know there is ultimately no point to football, it nonetheless strikes an existential chord deep within my soul. I intuitively know that football is something very similar to the battles my hunter/gatherer ancestors had to fight in order to survive. I have never felt more alive than when I played it. And I never feel as alive today as when I watch it.

What I don’t like is when football is coopted by people trying to ease their own existential angst by making some social point. Football hasn’t a thing in the world to do with women’s breasts and how they sometimes grow cancerous, or with cancer generally. It hasn’t a thing to do with whether a man beats his wife or his children. It hasn’t a thing to do with whether a man smokes a little weed (but it does have something to do with whether he takes drugs that affect the game, i.e., PED’s). Half of the organizations wanting to make their points at the expense of football use its popularity in doing so.

Let football be. Don’t treat it as a social laboratory like politicians like to do with the military. Football should not be whored out to the services of social organizations in a vain grasp for popularity. Football should not be concerned with its popularity at all. People originally loved it because of the bone-crushing, woozy-head-inducing, mock combat that it is. It will cease being football, and thus being popular, when its primary focus is entertainment and not playing the game. Tweak the rules every now and then as needed to keep things in balance, but quit trying to Progressively reengineer the game to suit feminists tastes. Feminists won’t be satisfied until the expression of every specifically male attribute, like superior athletic ability and the stamina to endure pain, are outlawed in all arenas, not just football.

Though the feminists would surely disagree so long as football continues as a thorn in their Progressive sides that needs excising, there are no transcendental goals to which the US can organize its energies. It is as secure in its existence as it possibly can be. Transcendentalists looking for a purpose shouldn’t be allowed to piggy back their contrived goals on football’s popularity. Let them kvetch about hating the game, but at least give them something brutal and violent that’s worth the trouble.

Follow

Get every new post delivered to your Inbox.

Join 225 other followers