Max Keiser And Sandeep Jaitly Explain Why Modern Economics Is "Rubbish" 

One of Zero Hedge's recurring peeves with modern economics (at its basis, the flawed premise behind modern broken capital markets) is that modern economics, as taught by every Ivy League, and other, institution, and implemented by modern acolytes of Keynes and other spin off theories, is nothing but garbage: a sham voodoo science, which attempts to attribute an empirical basis to something which is inherently irrational. It is this irrationality that alternative, and thus non-mainstream, approaches to popular economics attempt to discredit, so far with zero success, as such a coup d'etat would mean an immediate end of the "status quo"^TM which is for all intents and purposes the only thing that must be maintained in order for the wealthy to retain their wealth, and get far wealthier in the future (Paulson's 3 page blank check proposal to Congress was nothing but a band aid attempt to fix the cumlination of decades of Keynesian failure). The below attached interview between Max Keiser and Sandeep Jaitly provides a 3 minute, must watch glimpse into the basis of Austrian economics, although not through the lense of von Mises, but of Austrian founder Carl Menger, who founded the Austrian school on one axiom only: "value does not exist outside mankind's consciousness." As Jaitly goes on to say, "all other forms of economics, classical, neoclassical economics, ascribe value to something else other than the human mind." And the punchline, coming from a mathematician: "all of the equations in neoclassical economics are rubbish. The differential equations describe nothing. Economics is not about mathematics, it is about the human being."

Weekly Risk Technical Analysis And John Noyce Podcast 

Submitted by Tyler Durden on 06/25/2011 17:42 -0400

In the last week of trading, the only variable that mattered was the EURUSD, much more so than at any time in 2011, as the correlation between the FX pair and the SPX hit a near all time high. Which is why it is not surprising that China is now the de facto saviour not so much of Europe (as discussed earlier), but of America's wealthiest, as the only Central Planner mandate continues to be to keep the Russell artificially high for as long as possible while the oligarchy converts paper wealth into hard assets (yes, Comex physical silver just dropped to a new all time low on Friday). And with technicals mattering far more in FX than in stocks, we once again present John Noyce's weekly technical compendium and podcast, as all the major risk indices continue to be at key inflection points. This is particularly true of the GBPUSD, commodities (CRB), the Shanghai Composite (which just closed below the October 2008 primary updtrend, slide 13), Spanish 10 Years, also Irish and Portuguese bonds, the AUDUSD, but most importantly the EURUSD, which is at 2 standard deviations above fair value which is at about 1.15. Should it revert to that level, the S&P would find itself at about 900 if not lower.

"Hitting The Fan" - IceCap Asset Management June Presentation 

Submitted by Tyler Durden on 06/25/2011 13:49

If you are a human being, you should hold your self to certain standards, amongst which include-not lying. When you are the Prime Minister of a country, one would think, as an elected official, you should certainly adhere to the not lying principle. Now, if you are a human being, the prime minister of a country, AND the head of financial ministers for the Euro (2nd largest currency in the World), one would think and hope (keep your fingers crossed) that you would simply never ever lie. Not so for the dis-honourable Prime Minister of Luxembourg, Jean-Claude Juncker as he plainly stated that “when it becomes serious, you have to lie.” The European financial system is a “serious” mess. Greece is insolvent, Portugal and Ireland are not far behind. Spain is also clearly struggling as are certain Italian banks, meanwhile Belgium doesn’t even have a government. Mr.Juncker: here’s an idea–instead of lying, force the banks to accept losses on their bad investments in bonds from the just listed countries. Investors can use all of the information available in the World to make decisions, however when very powerful individuals resort to lying to keep things together you have to be concerned... Can Greece “grow” out of their problems? Acceleration in domestic growth is highly unlikely. The EU/ECB austerity medicine of higher taxes, lower wages and layoffs is guaranteed to reduce spending on everything. By default (pun intended), the only other option for Greece is to “export” its way to growth and prosperity. Now please excuse our ignorance, however we are not aware of (m)any Greek products or services that are of high value, needed all around the World and offered by no one else. Compounding the export challenge, is the inability of Greece to de-value their currency to make their exports cheaper. At the end of the day, it’s a “Heads Greece loses, Tails Greece still loses.” The only difference is how soon the “fan” comes back into play.

China's European Bailout (And TBTF) Bid Hits Overdrive, As Wen Jiabao Is Now In The Market For Hungarian Bonds 

Submitted by Tyler Durden on 06/25/2011 12:47 -0400

In continuing its recent pursuit of "white knight on full retard tilt" policies vis-a-vis the endless European bailout, and throwing good money after bad after horrible after totally lost, today Chinese premier Wen Jiabao said that not only would China do everything in its power to preserve the EUR (after all that CNY needs to be cheap against some currency) and "work for expeditious recovery and stable growth" but also unveiled that it is now preparing to go ahead an buy Hungarian bonds. As if owning Greek, Portuguese, Spanish and Irish debt was not enough. It seems China has learned from the best, and either knows something others don't (except for the SHIBOR market of course) or is actively preparing to become Too Biggest To Fail by making sure that should something bad happen to it literally the entire world will follow it into the depths of hell. Which, as Jamie Dimon, Vik Pandit, Lloyd et al have known for the past 3 years, is not a bad strategy. Look for China to keep buying up ever more European debt as it intertwines its fate with that of the rest of the central planning cartel: a development we can only compare to the ever deteriorating Spanish Cajas desire to buy up as many semi-healthy banks as they possibly can to prevent a policy determination to shut them, and their billions of bad debts, down.

Visual Summary Of The World's High Net Worth Individuals 

Submitted by Tyler Durden on 06/25/2011 11:47 -0400

With a record 44 million Americans collecting foodstamps, the topic of a systemic and systematic class divides (especially now that Mort Zuckerman picked up on some of the very troubling developments to Marxists everywhere, first caught by Zero Hedge) will only get increasingly pronounced, and of all troubling trends in global finance, is likely the one to be the catalyst (as it always has in world history) for less than peaceful class upheavals. We have written extensively on the topic in the past (here and here), although for those new to this theme, below is a chart from the Guardian which effectively summarizes the snapshot distribution of the world's wealthiest at the end of 2010. As the bottom chart shows, the aftereffects of the financial crisis may be here to stay for 99% of the population... but not for the world's wealthiest 1%.

Guest Post: Financial Profits Reduce Economic Prosperity 

Submitted by Tyler Durden on 06/25/2011 11:41 -0400

With today's release of the corporate profit data I thought it was important to remind you of the demise of America at the expense of Wall Street.   America was once a country built on the solid foundation of the hard work, satisfaction and pride in the building of stuff.   We aren't talking about "namby pamby" stuff - we are talking about real stuff.   We used to produce everything from automobiles to steel to blue jeans; right here in America.   We ran telephone lines, built roadways and bridges, drilled for oil and constructed buildings.    It was the sweat of the brow and the strain on the back that built America into its former shining self.  A country of opportunity and prosperity with a solid moral foundation and a strong military to back it up.

Peak "Portfolio Manager Frustration": Goldman Weekly Chartology Update 

Submitted by Tyler Durden on 06/25/2011 11:25 -0400

It must come as music to every fundamental analyst's ears to learn that, as Goldman's David Kostin puts it in the his latest weekly chartology, "Frustration is clearly evident across the portfolio manager community. The S&P 500 has returned 3.0% YTD compared with 2.7% for  the typical large cap core mutual fund and 1% for the average hedge fund." It gets worse: "Investors of all styles are lagging their benchmarks. With just a week to go before mid-year, 78% of the large cap growth mutual funds are lagging the 3.6% return of the Russell 1000 Growth Index by a median of 150 bp. Similarly, 63% of large-cap value mutual funds lag the Russell 1000 Value index. Just under half (49%) of core funds are underperforming the S&P 500." It is stunning how when the levered beta tide goes out, i.e., the only strategy that has been working for everyone, that we learn point blank how asset managers are nothing but levered lemming with access to a repo desk and a 200/20 record net leverage exposure (not to mention a penchant for investing in Chinese fraud companies without any diligence). It gets even worse: "The levered investment community is faring no better than long-only institutions. The typical hedge fund has returned roughly 1% YTD. However, capital is still flowing into absolute return strategies as evidenced by our conversations with pension funds, endowments, and family office representatives attending two recent Goldman Sachs Capital Introduction events in New York and Rome. In contrast, mutual funds have experienced outflows totaling cumulative $6 billion during the past two months." Odd, it seems like only yesterday that Zero Hedge was warning about the combustible effects of mixing 8 weeks of consecutive outflows and a near record margin debt exposure. And lucky for these same leveraged, and long-only critters, the pain has yet to unfold. The 20% drop in the S&P which has to happen for Operation Twist 2 is inevitable and will put many of them out of business. As such we hope Kostin revisits the them of portfolio manager desperation in a few months.

KWN Weekly Metals Wrap

June 25, 2011, at 2:19 pm
by Dan Norcini in the category King World News, Trader Dan Norcini |  Print This Post |  Email This Post

 

Dear CIGAs,
Please click the link below to listen to this week’s metals wrap up from King World News, featuring our very own Trader Dan Norcini.
Click here to listen to the weekly metals wrap up…

Jim’s Mailbox

June 25, 2011, at 2:18 pm
by Jim Sinclair in the category Jim's Mailbox |  Print This Post |  Email This Post

Releasing Snake Oil From The Strategic Stockpile  
CIGA Eric

Unbelievable, huh? Headline hype has been quick to embrace the benefits of lower gas prices on travel and household budgets. Meanwhile, objective capital ignores the hype and quietly buys the decline.
Eric
Crude Oil (WTI) and Crude Oil Diffusion Index (DI)
Headline: Drivers catch a break as gasoline prices fall
A summer road trip may not be such a bad idea after all.
Gasoline prices are falling fast. In the past 7 weeks, the average U.S. retail prices has dropped 38 cents to $3.60 per gallon. Another 25-cent drop is expected by mid-July.
When prices approached $4 in early May, drivers were worried that $5 gasoline was a possibility this summer. But since then, oil prices have collapsed, the result of slowing economic growth in developed countries, weaker demand for oil and gas and this week’s decision by the U.S. and other countries to release 60 million barrels of oil from strategic reserves. Economists say falling prices will benefit consumers by leaving money in their wallets, and making them feel freer to spend on travel, shopping and dining.
Source: finance.yahoo.com
Maybe the Italians will release from Strategic Stockpile pasta in a vain attempt to hold down the cost on Angle Hair & Penne. It will work as poorly as the release from of oil to try and control the oil price.
Jim
Headline: Pasta Price May Jump as North Dakota Durum Floods Boost Campbell’s Costs
Unrelenting rainfall may have slashed U.S. planting of durum wheat to the lowest level in more than 50 years, fueling a surge in the price of pasta and noodles as mills scramble for supply of the grain.
Farmers who normally are finished planting by now had completed just 44 percent as of June 19 in North Dakota, which produces more than two-thirds of U.S. durum, government data show. It’s too late to sow more without delaying the harvest to the winter-frost period, said Frayne Olson, an agricultural economist at North Dakota State University in Fargo.

Source: bloomberg.com

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