August

In the middle of August, the summer of 2016, northern hemisphere edition.

  • Trump and Clinton are our choices for president, media want Hill.
  • US Fed debt at an all time high, $20,000,000,000,000.
  • Most big economy sovereign debt at or below zero.
  • Inflation non-existent.
  • PokemonGo occupies anyone under 30.
  • 94,000,000 people of working age NOT looking for/in work in US
  • Oil still under $45, US production steady.
  • Middle East still screwed based on Obama/Clinton/Kerry mess.
  • Obama pays $400,000,000 in CASH for hostages in Iran.

That’s all too depressing to continue.

Meanwhile…

In the middle of the northern summer now, although we are a month removed from the summer solstice, so at least we’re on the way to autumn.

Markets are as odd as ever, with the horror-show of European banks still leading the news. I really do not understand how this works; central banks print money, buy bonds and push interest rates below zero with the idea of creating demand for money. Cheap money should spark borrowing and then inflation. Is that right so far?

Here in the real world it’s confidence that creates demand for borrowing. If businesses can’t see a return on the money they borrow, plus a bit, they’re not going to. We’ve seen this in big US companies: they borrow only to buy back their own shares, pushing their price north. To Janet and her minions, that’s the real economy.

Meanwhile we have US GDP growth back down to 1%. Uh oh. What do we do now, FedHeads? Lower rates? Negative? Do a Kuroda and buy ETFs? Seems these bozos have backed us all into a corner and still the banks aren’t fixed.

Awesome.

Cable Magic

Bubbles are notorious for only being clear after they’ve burst.

There’s never a shortage of people willing to predict bubbles, which makes me think that might be the the biggest bubble, in bubble-sighters. Current thinking seems to be that bonds are in a bubble, that we’re buying new highs in the price of US govvie debt based on nothing but the idea that they’re going higher still.

If true, this bubble has been a long time coming. When President Reagan charged Paul Volcker with the job of killing inflation, it set in train the virtuous circumstances we have today, namely, low interest rates and relatively acceptable liquidity. That was 35 years ago now. Seems to me that we’re just about where we should be given the initial aim.

The difficulty lies with the fact that we might have gone a little too far. Negative interest rates are such an odd phenomenon, and are now so common, that talk of bubbles and such is almost the easy way out. The reasons we got to this extreme place are well known; thank you JP Morgan, Goldman Sachs, AIG, Morgan Stanley et al, but that doesn’t help with the fact of it.

Markets often overshoot what appear to be reasonable stopping points or rest areas. They’re more like trampolines than much else, absorbing energy and sending it back in the other direction. Witness the cable. With stocks dipping for only a week after Brexit, it was up to the currency to absorb the damage, and it did so pretty well.

That’s the wonder of open, market economies. When stuff happens, the pressure can be relieved in many ways, with the effect that the energy from shocks doesn’t wreck too much. In this case, almost all of the damage was done to the currency, the beauty of which is that people’s daily lives aren’t horribly dislocated. That’s a very good thing.

Visceral Ice-Cream

Selling can work its way into a place of cold-blooded logic pretty quickly. If you have a demonstrably superior product or service backed up with testimonials and data, why not use these facts to create space in someone’s – a potential customer’s – head?

Because we humans don’t work on data and facts, that’s why. We work on visceral reactions and perceived realities, our gut and emotions in other words. We also think about what other people will make of our choices and decisions, possibly a lot more that we’d imagine, and we want to be sure that any change we make won’t upset our routines too much.

I can say this because this is how I observe myself and those close to me behave, so I’m sticking with my gut and extrapolating that to everyone.

Right?