Unconventional Investing for Unconventional Times

Submitted by Marin Katusa  –  Casey Research

What is Casey’s Club?

Let me first share the evolution of Casey Research and why I think if you’re a serious speculator, you need to be part of Casey’s Club.

A little over a decade ago, I was a Casey subscriber. At the time, there was only the International Speculator, and the firm was made up of only Doug Casey and David Galland.

But as I got to know the power players in the industry, I learned that the savvy speculators made their millions investing via private placements (PPs) and clip and collect warrants.

Out of the gates, investors in PPs have an advantage over investors who buy in the open market. First off, you pay no buying commission to your broker when you buy via a private placement. More important, by buying into a PP, the investor gets exposure to warrants.

A warrant is essentially the right to buy a stock for a predetermined period of time at a fixed cost.

In the Casey Energy Confidential, we recommend both buying in the open market and private placements.

In an energy market where investors are getting slaughtered, we made money in 2014. How? Warrants. And we don’t even include the warrants in our portfolio performance until the warrant position is sold and gains are realized.

In 2014, I sent out 59 alerts to Casey Energy Confidential subscribers.

Let’s use an example of a stock we made great money on in 2014.

On October 29, 2013, I sent out an alert for subscribers to buy Blackbird Energy (BBI.V) in the open market under C$0.06 or in the private placement.

The PP units were priced at C$0.09 with a full, five-year transferable warrant priced at C$0.15.

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Greece Never Left, And Might Never Yet

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The growing appeal toward unease about the terms of Greece’s ongoing strangulation is more than just a simple, fleeting sense of déjà vu. It is exactly the same process only pushed forward three years. At the height of the “last” challenge that began in earnest in 2010, and nearly re-ignited a global bank run (among only banks) for a second time by December 2011, was this game of chicken between the Greek government and the “troika.” The governments have changed on both sides, but the game remains “unwon.”

Ostensibly, this is supposed to be about a fiscal imbalance in the government redistribution mechanics under the euro. However, I don’t really think anybody actually believes that as the problems are far, far deeper – to the point that banking became all-consuming not just in Greece but all over Europe (what was the point of the LTRO’s, nearly a trillion euros “worth”, if not to grease the skids of any Greek-driven discussions?). Despite the idea that banks operate credit policies under “fundamental” regimes, European banks across the continent “found themselves” ditching US MBS “products” in favor of all manner of “undervalued” (in light of coming central bank activities) sovereign debt – PIIGS and all.

It has always been a problem of financial imbalance. In the closer senses of 21st century financialism, the economy is malformed and therefore doesn’t create enough quality collateral by which to keep the entire plumbing network from disastrous dislocation. The LTRO’s gained much of the attention, but where Greece was concerned it was the OMT’s and especially the “waiver” of collateral rules allowing Greek government debt to remain eligible for ECB funding (a waiver which was just recently revoked as the game of chicken escalates once more) that contained the spread of illiquidity as it sought nothing short of insolvency revelation. Continue reading

Masters of Parallel Universes

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

Much as we may dislike the fact, the results from quantum physics are unequivocal: parallel universes do exist. Schrödinger’s cat is both alive and dead, at the same time, while it exists as a probability distribution, which is resolved into either a live cat or a dead one by the act of opening the box and observing it. But until the observation is made, both parallel universes can be said to exist, and there is no way for us to know which one of them we inhabit.

Quantum effects dominate in the micro realm of subatomic particles. For instance, the laptop on which I am typing this contains millions of transistors which are created by implanting ions into silicon substrates to create patches with built-in electric fields and interconnecting these patches with etched aluminum wiring. Each transistor relies on the phenomenon of quantum tunneling: while in normal physics it is impossible for an electron to find itself on the wrong side of a built-in electric field, in quantum physics the electron is a probability distribution, not a particle, and quantum tunneling works reliably enough to support the entire electronics industry. But if you scale your circuit up, the chance of a pickup truck successfully “tunneling” through a brick wall becomes too minuscule to be of practical interest. It is still possible, but it would take anywhere between right now and several lifetimes of the universe hence to observe that result.

Oddly enough, such quantum effects are quite normal to observe within the political space. Here the physical objects involved are far too large to give rise to the parallel universes of quantum physics, but the narratives they give rise to are not. This is because the narratives are a matter of perception, and there can be historical periods, such as the present one, when the peephole through which the political establishment and the mainstream media allow us to see the world becomes so tiny that it becomes a toss-up as to whether or not any given photon will manage to find its way through it. Continue reading

BRICS SDR TO BAILOUT EUROZONE

Submitted by JC Collins  –  philosophyofmetrics

BRICS SDR to Bailout EurozoneThe different angles of geopolitical and macroeconomic events are beginning to coalesce into the direct 90 degree turn which will shift the global financial system in the direction of the multilateral architecture. The apparent movement away from the USD unipolar structure towards the multilateral framework which is being implemented in stages is becoming more visible with each passing day.

This movement is taking the “two steps away from the USD and one step back” approach, and with each turn and shift the USD is being further removed as the primary reserve currency used in global trade. The much promoted death of the dollar in the alternative media is largely based on misinformation and unintended breaks in analytical rationalization as the full scope of the multilateral structure, and the global support from all countries of the world for such a system, has been cleverly hidden behind a script of geopolitical tension, as well as the dual crisis of growing sovereign debt and currency imbalances.

It should be stated that the USD will categorically remain as one of many reserve currencies with it’s position secure in the SDR basket composition, alongside the Chinese renminbi, among others, potentially even the Russian ruble.  The path of the Special Drawing Right is being drawn along the transition points of the multilateral structure.  These transition points exist as both geopolitical and macro-prudential positions which have been carefully scattered across the global landscape. Continue reading

The Euro’s Exponential Decay

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


Dorothea Lange American River camp, Sacramento, CA. Destitute family. 1936

I don’t know about you, but I’m having a ball reading up on the preparations for the Wednesday/Thursday talks between Greece and .. well, everybody else. German FinMin Schäuble proudly declares that it’s do what I tell you or you’re finished, Greek FinMin Varoufakis says prepare for a clash. Greek advisors Lazard say a $100 billion debt reduction sounds reasonable, and some anonymous EU official says Lazard are incompetent and counterproductive (not smart, that).

When will the Brussels luxury cubicles understand that the Greek people have voted down their approach fair and square? That they voted down the government that made deals with the Troika for the very and explicit reason that they made those deals in the first place, and that telling the newly elected government to stick by those deals regardless is a corruption of democracy? So far, all the EU has (anyone notice how silent the IMF has been?) is hubris, bluster and chest-thumping.

They play politicians, but Syriza plays real life. Tsipras and Varoufakis stand up for real people, while Schäuble and Dijsselbloem and their ilk stand up only for themselves. And then pretend, in front of their bathroom mirrors and the news cameras, that they protect their own people against the greedy Greeks. As for the 50%+ of young Greeks who have no future, or the countless elderly who go without basic health care, too bad and boo hoo hoo. Continue reading

Small Business Optimism and the Death of Entrepreneurship

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Small Business Optimism Retreats

Today the NFIB (National Federation of Independent Business) data for January were released. Late last year, the small business optimism index climbed above the 100 level for the first time in eight years. However, this still compared quite unfavorably with what used to be the norm in recoveries during the “normal” bubble era prior to the 2008 crisis.

nfib

In January, the gauge fell by a rather pronounced 2.5 points to 97.9. The reasons for this decline are summarized in a Reuters report:

“The National Federation of Independent Business said on Tuesday its Small Business Optimism Index fell 2.5 points to 97.9 last month, reversing December’s gains, which had taken the index over the 100 threshold for the first time in eight years.

It was held back by a plunge in expectations for the next six months as well as pessimism over sales and earnings. Businesses were also less enthusiastic about increasing inventories, undertaking capital investment projects and expansion plans. Still, they retained an upbeat view of the jobs market.

“Job creation is the core of growth and the small business sector appears to have shifted to second gear,” the NFIB said. Employment growth is accelerating, with government data last Friday showing the economy added more than a million jobs over the past three months, a feat last achieved in late 1997.

The increase in the number of people receiving a paycheck, combined with the stimulus from lower gasoline prices, should boost consumer spending and blunt the blow on the economy from weaker exports and business investment.

Softening global demand is weighing on U.S. exports, while lower crude oil prices have forced businesses to curtail capital expenditure projects. These factors combined to hold back the economy to a 2.6 percent annual growth pace in the fourth quarter.

The NFIB survey found that although capital spending plans fell in January, they remained near cycle highs, as did actual capital spending.

(emphasis added)

In short, the report was a mixed bag. We would however note that employment is a lagging economic indicator. Contrary to what is implied above, employment does not “produce” economic growth, but is the result of economic growth. It remains to be seen to what extent the boost to personal incomes from lower energy prices can really offset the curtailment of capital expenditure and the coming wave of liquidation of malinvested capital in the oil patch, given the overwhelming contribution to US economic growth provided by this bubble sector in recent years.

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The Final Chapter in the Credit Bubble Story

Submitted by William Bonner, Chairman – Bonner & Partners

The Final Chapter in the Credit Bubble Story

Before we get to that, we note that the Dow fell 60 points, or 0.3%, on Friday. Gold was more or less unchanged. An ounce of the yellow metal traded at $1,242 at last check.

Not to leave our dear Diary readers in doubt, we expect a crack… or even a crash… in stocks sometime this year. But that won’t be the end of the story. We suspect it will mark the end of one chapter and the beginning of another – the final chapter in the credit bubble story that began in the early 1970s.

It’s a long story. And it’s a big story. Too bad it has been so overshadowed. Watergate … Vietnam … massacres from Hanoi to Bombay … Boy George and J-Lo. The plain people have time for the Super Bowl, but certainly not for the Super Bubble … even though it is more important to them.

Nafea-Faa-Ipoipo-1892

A famous – and horrendously expensive – painting by Paul Gauguin (Nafea faa ipoipo? – when will you marry?). In fact, it just became the most expensive art work in all of history.

Besides, the Super Bubble story has yet to be told. The best we can do is to give it to you in little bits and pieces, as we uncover them.

The $300 Million Painting

In case your Tahitian is foggy, Nafea faa ipoipo? means “When will you marry?”

It now has the distinction of being the most expensive work of art ever sold.

Painted by the French post-Impressionist artist Paul Gauguin in 1892, it brought $300 million at auction on Friday.

Paul-Gauguin.-Self-Portrait.1889

Paul Gauguin in a self-portrait painted in 1889. He probably never imagined that one of his paintings would end up the most expensive work of art ever. Then again, we may assume that he didn’t foresee “quantitative easing”.

What makes it so valuable?

“Gauguin won’t paint any more pictures,” you may say. But that could be said of any dead artist.

“He was a great genius,” you may add.

But if he was a great artist, he was no less of a great artist 10 or 50 years ago, when his paintings sold for a fraction of last week’s price.

Yes, he is dead. And yes, maybe he was a genius… but what makes a run-of-the-mill work by a Frenchman with rigor mortis so valuable?

We propose a better explanation: The price has been refracted by the worldwide credit bubble. In other words, this is yet another thing that makes us say, “Huh?”

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The Greek ‘Premium’ Revealed?

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

I’ve had my suspicions for some time that December saw a(n) (il)liquidity event throughout the “dollar” system. The problem with that supposition is the lack of corroborating price action in riskier markets where you would expect the most impact. That was the pattern revealed by the end of the last event on October 15, where risky credit, especially corporate junk (leveraged loans and high yield bonds) and even stocks, took severe notice of a low and no bid environment. Downstream of that, issuance has been impaired.

But risky credit prices were not much perturbed, that we can observe directly, in this latest gyration. In fact, even the currencies we have come to view as proxies for this kind of dysfunction were relativelyuntouched (at least by the standards of the “tightening” of the dramatic swings in early December). By process of elimination, that left European factors as prime candidates.

That would certainly make sense on the surface, as there was no shortage of European drama in late December/early January. That starts with Greece’s political change (which was just a possibility at that point) followed by rumors of ECB QE, and then the utter upset of the Swiss franc. All of those factors are certainly represented in “dollar” positioning via European bank participation in both arenas.

Liquidity issues of a broad nature seem to feature almost always a collateral component. That would make intuitive sense even if you don’t have much working knowledge of interbank conditions, as funding “tightness” might at least force some collateral calls or just the additional secured lines of funding. And so a dramatic increase in collateral need is spelled out via “unusually” strong bids for UST.

ABOOK Feb 2015 Greecepremium CMT 10s5s

That was clearly the case beginning in late September as it led to the ultimate rupture on October 15. This follow-on heavy and sustained bid in UST was initiated just after the Christmas holiday. Nominal yields all across the treasury curve began to drop, and do so precipitously and in sustained fashion.

ABOOK Feb 2015 Greecepremium CMT 10s30s

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Syriza Stands Defiant, US tries to calm EU stance while Greenspan predicts Grexit

Submitted by Mark O’Byrne  –  GoldCore

– Tsipras to push ahead with counter-reforms “in their entirety”

– Dijsselbloem tells Syriza it must comply with Troika this week or have funding cut from February 28th

– Varoufakis calls the Eurogroups bluff – does not believe EU would risk expelling Greece from Euro

– US apply pressure on EU to keep Greece in the fold, fears “Grexit” would push Greece into Russia’s arms

– Greeks buying gold as insurance against uncertainty

Despite attempts last week by EU technocrats to browbeat the new and inexperienced Greek government into submission, Syriza appear to have grown even more resolute to fulfil their mandate.

Alan Greenspan has thrown down the gauntlet and predicted a Greek exit from the Euro. Noting the contradiction at the heart of Europe Greenspan pointed out that without political unity you can not have a fiscal unity.

“The problem is that there is no way that I can conceive of the euro of continuing, unless and until all of the members of the eurozone become politically integrated – actually even just fiscally integrated won’t do it.”

Greenspan’s words may prove to be prophetic as European rhetoric has become increasingly polarized and the only leader with any real power, Merkel, seems to be captured by special interests within the financial services apparatus. The  contagious effects of a Greek exit could be catastrophic for the EU as other debt laden countries eject centrist technocratic parties in favour of new nationalist parties, typically filled with nuevo politicians with very little experience. Watch for swift elections in Italy, Portugal, Spain and Ireland. Should Europe sneeze then the United States could catch the cold. An exit and its repercussions could make Lehman look like a picnic.

Varoufakis and Dijsselbloem Varoufakis and Dijsselbloem

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UK Government Wastes Huge Amounts on Watching Assange

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Dangerous Whistleblowers

It is quite amazing how much money and effort is poured into catching a man who has contributed greatly to revealing the machinations of the government’s propaganda and war machine to the public. It is however symptomatic of the treatment meted out to the government critics who are considered most dangerous to the establishment. This is to say, those who provide the public with incontrovertible proof of the things that are done in its name under a cloak of secrecy, allegedly in the interest of “national security”.

Edward Snowden is certainly not hiding out in Moscow because he likes it there. He is hiding out there because he knows perfectly well what happens to whistleblowers under the Obama administration. Never has there been a more vindictive approach. The rule seems to be that it is not the criminals who are punished, but those who have revealed the criminal activity. We still remember how Mr. Obama asserted with a straight face: “I welcome the discussion (over the NSA)”. Actually, his face was not entirely straight: it looked like he had bitten into a lemon.

ecuador-embassy-london.siThe small police presence in front of the Ecuadorean embassy, to ensure no evil thoughts can escape and infect the cattle.

Photo credit: Chris Helgren / Reuters

He neglected to mention a few details, such that there wouldn’t even have been a discussion if not for Mr. Snowden’s actions. He also neglected to mention that the US would definitely not be grateful to Mr. Snowden for having given the president this rare opportunity to have the discussion he allegedly “welcomes” so much. Most likely Snowden would be thrown into a brig and the key would be thrown away. As an aside, the discussion has had no tangible results, except for intimidating people into watching what they are saying. Other than that, nothing has changed – ubiquitous surveillance continues unabated Continue reading

Gold Turned Upside Down

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

After having been subjected to the serious temper of the “dollar” for much of the past few years, with requisite calm periods interspersed, the Brazilian economy is finally reaching the epic inevitability of it all. “Inflation” in January broke out of the “band” set by Banco do Brasil’s policy target to the highest level, in the IPCA series, since 2011(when, not coincidentally, most of this trouble all started).

To slow price increases, policy makers have raised the benchmark rate three straight times since Rousseff won re-election to 12.25 percent, the highest level in more than three years. Economists surveyed by the central bank Jan. 30 forecast the bank will raise the Selic another quarter-point by year-end as economic growth is set to slow to 0.03 percent. Some economists, including Itau Unibanco SA’s Ilan Goldfajn, are predicting recession.

Brazil has been in no-growth for most of 2014, and an outright recession is looking more and more likely. That is particularly true given the slowdown in China that is preceded, in time and in process, by the inability of the US economy, or Europe and Japan, to do much of anything like actually grow. The continued decline in economic fortunes throughout the world is inextricable from own condition.

Unfortunately for Brazil, that means a cross-current of the worst of the worst – they get the trade end of the diminishment in global appetite for their resources at the very same time Brazilian banks are way, way over-exposed to the contrary (but related) tide of the tightening eurodollar world.

ABOOK Feb 2015 Dollar Trade WeightedABOOK Feb 2015 Dollar Brazil IPCA Continue reading

FOURTH TURNING – THE SHADOW OF CRISIS HAS NOT PASSED – PART ONE

Submitted by Jim Quinn  –  The Burning Platform

“Imagine some national (and probably global) volcanic eruption, initially flowing along channels of distress that were created during the Unraveling era and further widened by the catalyst. Trying to foresee where the eruption will go once it bursts free of the channels is like trying to predict the exact fault line of an earthquake. All you know in advance is something about the molten ingredients of the climax, which could include the following:

  • Economic distress, with public debt in default, entitlement trust funds in bankruptcy, mounting poverty and unemployment, trade wars, collapsing financial markets, and hyperinflation (or deflation)
  • Social distress, with violence fueled by class, race, nativism, or religion and abetted by armed gangs, underground militias, and mercenaries hired by walled communities
  • Political distress, with institutional collapse, open tax revolts, one-party hegemony, major constitutional change, secessionism, authoritarianism, and altered national borders
  • Military distress, with war against terrorists or foreign regimes equipped with weapons of mass destruction” 

 The Fourth Turning – Strauss & Howe – 1997

When you read pertinent passages from Strauss & Howe’s prophetic assessment of history from a generational perspective, eighteen years after its publication and seven years into the Crisis they forecasted with uncanny accuracy, you find yourself shaking your head and appreciating their visionary generational appraisal of antiquity. Those who scorn The Fourth Turning either haven’t read it, are ignorant of the cyclical nature of history, blindly believe in never ending human progress, or their salary is dependent upon not acknowledging the truth. A year consists of four seasons – Spring, Summer, Fall, and Winter. A long human life of 80 years consists of four phases – childhood, young adulthood, mid-life, and old age. Human beings tend to associate themselves with the cohort born within the roughly 20 year period that makes up one phase of life. Continue reading