December 14, 2012
- Syria, sequestration, and a six-year time warp… The 5 ponders, but mostly pokes fun at, the D.C. circus 11 days before Christmas
- Monetary policy as an Eagles song: The 5 sings in harmony with a Fed governor twice in a year (Uh-oh!)
- Scientist’s perfect indestructible cork… and the improbable investing angle
- Doug Casey on how the computer age has altered his reading habits
- The Boston Tea Party as a terrorist act… reader accuses us of “helpless self-involvement”… an obscure government report that could start making you money before day’s end… and more!
Terror Alert Orange:
Yesterday, we unveiled a theme we’ve been grappling with called “Making the Empire Pay.” The basic premise is: Many of the items you may get passionate about in the news are largely out of your hands… so what do you do?
Should the U.S. send troops to aid Syrian rebels? How the heck should we know?
Following the release of Empire of Debt, we were invited to join a group of foreign policy journalists who meet every six weeks or so at an event they call the Empire Salon. Whatever we know about the happenings in D.C. related to defense spending and military strategy comes by virtue of their internal listserv — a private email through which they keep each other apprised of their latest work.
A flurry of headlines from the listserv this morning urged and/or speculated intervention in Gaz… no… Ira… wait… Egy… hmmn… Syria, yeah that’s it, intervention in Syria:
“Can Lebanon Survive the Syrian Crisis?” asks one. “Is NATO Planning an Intervention in Syria?” implores another. “$100 Million New Saudi Aid to Bolster Syrian Revolution,” declares a third.
“Despite U.S. aid,” reads a fourth about the effectiveness of another U.S. engagement overseas, “Little Progress in Monitoring Kabul Airport Cash Flow.”
Why, you might wonder, the worry over Syria, given the “fiscal cliff” debt ceiling discussion that’s (not really) happening in Congress.
(We wonder the same thing. The U.S. military still has issues in Afghanistan, the most enduring war in the nation’s history… there’s ongoing speculation of Israel and Iran, which we try — but mostly fail — to keep up with. Now Syria? It’s a neocon’s wet dream!)
The fear among Republicans, at least, appears to be that “sequestration” — the process by which automatic spending cuts would take place across the federal balance sheet — would mean an unsafe reduction in defense spending.
“Even if ‘sequestration’ happens,” counters the Cato Institute’s Justin Logan, “military spending would wind up at 2007 levels in 2013 — 2007 was hardly a lean year at the Pentagon.”
House Speaker John Boehner’s proposal for averting the “fiscal cliff” doesn’t get specific on defense spending. However, it appears the recent purge of “Tea Party” candidates from committee leadership positions has something to do with support for cuts on everything… but defense.
“I think they [Republican leaders],” Justin Amash (R-Mich.), one of those recently purged, charges, “are willing to raise taxes to avoid any defense cuts and I think they’re willing to take any deals, even bad ones, to avoid defense cuts.”
Yeah. So much for the Tea Party revolution.
Since it’s Friday, a day on which we like to try to keep things light, we turn over commentary on the absurdity of the debate to our friend Julie Borowski, who’s conveniently recorded her thoughts on video and posted them to her YouTube channel:
“This is typical Republican logic,” Julie observes. “We must cut spending! It is unacceptable that we are passing this debt on to our children and our grandchildren! Well, I don’t mean defense spending… the pentagon, 20% of the federal budget, that’s off-limits!”
There was a time when Republicans represented fiscal responsibility in government. Heh. That idea left the building in the 1980s.
(Our working premise: Imperial logic now puts these events largely beyond your control… So what do you do now? Hold that thought. We’ll be returning to this theme much more aggressively in the new year. Stay tuned…)
“I argued,” Dallas Fed President Richard Fisher said yesterday, helping us to pivot to another topic that’s often in the news, but equally outside your control, “that basically we were at risk of what I call a ‘Hotel California’ monetary policy.”
As Fed governors go, Mr. Fisher isn’t completely insane. Well, maybe he is. Last March, we found ourselves largely agreeing with him on the folly of bailouts.
Now he’s invoking the vastly overplayed Eagles song (sorry if we’ve put it in your head for the rest of the day) in saying the accelerating pace of “QE” announced on Wednesday will prove hard to reverse. “You can check out anytime you want,” Fisher channels Henley and Frey, “but you can never leave.”
Here again, we can’t argue. But we much prefer the lodging analogy invoked by our macro strategist Dan Amoss 18 months ago on the day the Fed nominally exited QE2: “QE2 (and 3, 4 and 5) will be like a roach motel: easy to enter and impossible to exit in a practical manner.”
In the meantime, we’ve run across two other penetrating analyses of Fed policy this week… in the form of flowcharts:
Or if you prefer your sarcasm with a bit more complexity, let’s take a stab at explaining it this way:
Back to Fisher: “I’m a little bit worried we are getting tangled up in our own knickers here,” he says, regarding the practice of tying the fed funds rate to unemployment. Again, because it’s Friday, and for the sake of propriety, we’ll let you evoke your own imagery here…
“Today’s report,” says an understated Bloomberg account of the consumer price index, “clearly is favorable toward the Fed continuing extremely loose monetary policy.”
After performing its substitutions, geometric weightings and hedonic adjustments, the Bureau of Labor Statistics pulled the November number from its posterior this morning — a drop of 0.3%, owing mostly to falling gasoline prices. The year-over-year increase works out to 1.8%.
Stocks are flat this morning after a bout of post-QE letdown yesterday. The Dow sits at 13,167. The Nasdaq has once again slipped below 3,000.
Gold has moved little in the last 24 hours, the spot price $1,696.
[Ed note: The market action of late has been very kind to readers who took us up on the 21-Day Trading Challenge. Jonas Elmerraji and Greg Guenthner told them on Wednesday to book 16% gains on First Solar -- yes, a solar stock! -- after only six trading days.
"I am very happy," writes a reader from Atlanta "to say that the very first trade you recommended (FSLR) as part of the trading challenge has made me just over 15% and $1,200. This very first trade has paid back my subscription multiple times over!!"
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Jonas and Greg are monitoring literally dozens of charts, waiting to pounce on the next trading opportunity. And we won't make you watch a "long-winded" presentation: You can get started right here.
"Mimicking the structure of cork has made possible what was thought to be impossible," says professor Dan Li, yet another scientist on the graphene bandwagon.
If the sky was once the limit for graphene... it just high-tailed to megacosmic.
"Smart walls," bendy phones, paper-thin solar panels... Only a few short weeks ago, it was thought graphene could dominate only the 2-D world. Now even that's changed.
By using a method called "freeze casting," professor Li's team at Monash University was able to modify graphene into imitating the structure of cork, creating a once highly unlikely 3-D object.
Lighter than air... yet able to support more than 50,000 times its weight
"The graphene blocks produced were lighter than air," researchers at Monash University report, "able to support over 50,000 times their own weight, good conductors of electricity and highly elastic -- able to recover from over 80% deformation."
[Ed. note: With the advent of 3-D printing upon us, we're confident someone is already connecting the dots. Our resource man Byron King has identified a few good ways to play them. We've updated his "technology metals" report and put it back online. If you missed it before, it's once again worth a look.]
“I have to say, much to my shame,” says the enormously well-read Doug Casey, “that I hardly read books anymore — not since I got a computer.
“There are significant mitigating circumstances,” he avers. “I’ve gone to reading articles — anything you want is available on the Internet. Although reading books is part of my mental self-image, what I wind up reading most of the time these days is a wide variety of articles online.
“I read articles about books mostly from dreadfully left-wing magazines like The New York Review of Books, The New Yorker, The Atlantic and such. But by the time you finish all these articles, you don’t have time to actually sit down and read a book. Talk about perverse… although at this moment on my bed stand, there’s a book on the Dowager Empress, and I’m reading that for about a half-hour every night.”
But online media consumption requires discipline, Doug says: “Pareto’s principle operates online, as everywhere: 80% of everything is crap, and the other 20% breaks down ad infinitum with a repetition of the 80-20 rule.” Twitter and Facebook? “These things consume huge amounts of time, usually only to transmit trivial information; they just serve to clutter your mind.
“The Kindle revolution, on the other hand, offers huge advantages — you can read almost any book you want, anywhere, and never have to remember to take the right one with you. But I still don’t cotton to Kindles, as much as I appreciate the concept. Maybe I’m just a dinosaur, but I prefer reading words printed on paper.”
You can read Doug’s new book — his first in 15 years — in either paperback or e-book format. Totally Incorrect is a rollicking collection of 43 conversations with his colleague Louis James. For some choice excerpts and an order form, click here.
Sunday is the 239th anniversary of the Boston Tea Party. Pay attention…
As the auspicious date approaches, we realize we’ve been remiss. Glenn Beck’s curious online enterprise, TheBlaze, points out that the Tea Party, the event some folks consider a seminal event in the nation’s founding, is now labeled an “act of terrorism” in the classroom.
Background: A suggested lesson plan by CSCOPE — a nonprofit that develops curricula for Texas schools — instructs “social studies” teachers to read this story to students as if it were breaking news: “A local militia, believed to be a terrorist organization, attacked the property of private citizens today at our nation’s busiest port. Although no one was injured in the attack, a large quantity of merchandise, considered to be valuable to its owners and loathsome to the perpetrators, was destroyed…”
Then teachers are meant to open the class up for discussion — described as such in a screengrab from the CSCOPE website:
Surprise, surprise. Since TheBlaze’s observation, CSCOPE has clammed up. The lesson plan has been scrubbed from its website.
If it quacks like a duck… it’s a duck.
Rhetoric through the ages doesn’t change much, anyway. Rather than scrub the exercise from the website… the exercise should be introduced to the curriculum in top-down form from the Department of Education — then maybe folks would see that imperial roles have simply evolved.
“You people are so helplessly self-involved,” writes a reader, “as are many of your readers [oooh, them's fightin' words]. You, of course, fail to realize that food stamps help keep human beings alive and F-35′s have the opposite intention.
[Darn, how did we miss that? Note to research department: Get off your asses!]
“In the big picture,” our conscientious reader continues “all social programs are intended to help people; the military on the other hand, except for those garnering a paycheck, have a more sinister set of marching orders.
[Ibid. reiterate note to research department. Damn it!]
“If America wants to prosper in the world, we need to give serious consideration to the humanitarian potential of the United States military — so that roses will actually been thrown into the streets before the brigades of the 101st, 82nd or USMC.
“This approach would provide the basis for a new world outlook: that when an American carrier or nuclear sub arrives in a foreign port, it is a cause for celebration in a poor and depressed country seeking help — not subjugation — and that the United States of America is there to help, without expecting anything in return.
“Too bad nobody in your organization [ha, ha, ha] or in Washington, D.C., can actually think about this approach.
“As such, I’ll give you an idea to run with [sweet, we're saved]: Let’s spend some money to convert the SS United States into a world-class hospital ship, which can be deployed to help in places like earthquake-ravaged Haiti or Indonesian/Japanese tsunami-damaged areas.
“Lord knows even the Japanese are very unhappy about permanent American bases. Let’s change the perception of America one country at a time. ”
The 5: Amen. Get on it. Let us know how your well-spent time gets… well, spent.
“Addison,” asks another after Ritholtz’s suggested branding effort for the Fed yesterday, “why not the Mobius curve, instead of the infinity symbol?
The Mobius strip, no obvious resemblance to emerging market guru Mark Mobius.“This single continuous curve demonstrates that the Möbius strip has only one boundary. Just like the White House, it covers all sides of the equation!”
The 5: Heh.
“Seems like the Fed will find its way out of QEinfinty after all,” counters another. “With the number of people ‘seeking work’ declining every month, the unemployment rate keeps falling. All the Fed has to do now is encourage enough workers to leave the workforce and the economy will look spectacular!
“I should apply for a policy job in D.C.,” the reader then whispers to the audience, “I could double my income.”
The 5: [Polite applause.]
The 5 Min. Forecast
P.S. Before day’s end, a report may be posted on an obscure federal website that could change the way every American thinks about money. If you act soon enough, you could pocket a tidy sum — up to a 238% gain, in fact. Check out the details at this link — while there’s still time.