Double Rainbow Appears At Buckingham Palace As Queen Elizabeth Dies

Posted on September 8, 2022 by macromon

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Econ 101: Thinking On The Margin In The Gym

Posted on September 6, 2022 by macromon

One of the most complex concepts for my students to internalize when I taught Econ 101 was that of thinking on the margin. You probably remember the theory of diminishing marginal productivity, diminishing marginal returns, and diminishing marginal utility (satisfaction).   For the math inclined, they are functions with a positive first derivative coupled with a negative second derivative.

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Economists like to dress up pretty straightforward ideas with very big words, most likely to obfuscate the fact that economics is just reasonably simple logic.

Traders And Investors Must Also Think On The Margin

It is also essential for traders and investors to think on the margin. They must understand and identify the marginal (last) buyers and sellers in the markets they traffic because those buyers and sellers set and determine the market price. It applies to all asset markets, from stocks to residential real estate.

You have undoubtedly heard the adage “retail always buys the top,” which was a reasonably good contrarian indicator before central banks flooded the markets with liquidity and repressed market interest rates. When I was a trader on Wall Street, the Japanese piling into a market was usually a sign of a top. Not because they were inferior but because they had so much asset purchasing power, i.e, money,  and their conservative culture of decision-making by committee almost guaranteed they were always late to the party.

Diminishing Marginal Returns In The Weight Room

I have discovered the law of diminishing marginal returns in the gym, which has changed my life and significantly improved my health.

In their MOOC (massive online open course) – Hacking Exercise For Health. The surprising new science of fitness –  Martin Gibala and Stuart Phillips of McMaster University teach the concept of diminishing marginal productivity or returns in the gym without using the economic mumbo jumbo.   It cut down my workout time from, say, two hours to just 30 minutes, and here’s how.

I used to be very rigid in my workout, never straying from three sets of 10 repetitions. That third set I hated most would slow me down,  procrastinating to pump it out until the cows came home.

Two or three hours in the gym was too much and led to an inconsistent workout schedule and less than optimal health.

I learned from the McMaster MOOC that 85 percent of the benefit of a three-set exercise comes from the first set!  Doing just one set over a 10-week period improves your strength by 30 percent, while doing three sets increases your muscle by 35 percent, just an extra 5 percent increase for the last two sets.

That is the best and most practical example of diminishing marginal productivity or returns I have seen and experienced. The second and third set, though, still improves overall strength, but most of the bang for your buck is in the first set.

I cut my workouts down to just two sets for each muscle group and get in and out of the gym in thirty minutes. I will trade off the extra 7 percent benefit of the third set for a shorter and more consistent and disciplined workout schedule, any day.

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Thirty minutes work for me.

Diminishing Marginal Utility (Satisfaction)  

I used a simple golf analogy to teach the concept of diminishing marginal utility, which my students could relate to.

After a four-hour round of golf in the hot sun, the first beer on the 19th hole tastes fabulous. The second is fantastic but not as awesome as the first. —a classic case of diminishing marginal utility (satisfaction). The third? Call an Uber. We’re talking craft beer, folks, not Coors Light.

Pretty simple, no?

Watch This Video! 

We highly recommend this video, which taught us how to make our exercise more efficient.  The five-minute investment of your time will change and may save your life.

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Memo to Wall Street:  The Monetary Cavalry Ain’t Coming

Posted on August 31, 2022 by macromon

For the past 25 years, markets have depended on central banks to bail them out because of the delusion that “inflation had been vanquished to the dustbin of history.”

Even after the Jay Powell smackdown, we still hear talk of a “pivot,” “close to neutral,” “imminent recession,”  “the lows are in,” blah, blah, blah.  It is getting close to bonus conversation time, ya’ know.

Inflation is still and will continue to run several laps ahead of the Fed for some time. There is way too much money — loosely undefined — in the global monetary system.

We are still not confident the Fed has the backbone to back up its tough talk, and may God help the ECB.

Steven Roach gets it.  The real Fed Funds rate needs to move “10 percent higher from its lows,” which would be through a combination of lower inflation and higher nominal rates.

Go to 1:50 into the video to get the upshot. 

Posted in Inflation/Deflation, Monetary Policy, Uncategorized | Tagged , , , , | 22 Comments

Should We Worry About The Rise Of Fascism?

Posted on August 25, 2022 by macromon

Uh…HELL YES!

 

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Julian Robertson, R.I.P.

Posted on August 23, 2022 by macromon

We are very sad to hear of the passing of the hedge fund great, Julian Robertson.  He was one helluva trader and an even better man. 

When I was working on the sell side, almost every visit to his office to meet with his portfolio managers, he would make it a point to stop in and say, “Hi, guys, how you doing?” 

Julian began his career on Wall Street at Kidder, Peabody as I did, and think he had a special affinity for us when we visited his office. 

JR also loved golf and helped develop many great courses, including Bandon Dunes on the southern coast  of Oregon and Cape Kidnappers in New Zealand. 

The view from his office was also stunning, which looked directly into the top of the Chrysler building.

 

Rest well, JR, we will all see you on the other side. The world is darker today, but your legacy shines even brighter. 

What I really liked about you?  This, 

In addition to his hedge-fund career, Robertson ran the Tiger Foundation to support low-income New Yorkers and their families. Since its inception in 1989, it has provided more than $250 million in grants to help schools, employment training programs and childhood education, according to its website. During his lifetime, he contributed more than $2 billion to charity.  – Bloomberg

You knew exactly where to store up your treasures. 

Treasures on earth are evanescent and corruptible, whereas treasures in heaven will never pass away or suffer corrosion. What one treasures matters, because “where your treasure is, there your heart will be also.” – Gospel of Matthew

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Book ‘em Horns

Posted on August 23, 2022 by macromon

The Texas university system is unlike other colleges because of its oil-rich land that’s driving record revenue this year.

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I have always (since my 20s) had a special spot in my heart for the University of Texas (UT) and its Longhorns.  I came oh-so-close to pulling the trigger on attending graduate school in Austin, but GWU offered more money and a venue for more grandiose politics, which you know I fancy. 

I am a full-on Georgia Bulldog now, as the late great CK was a very convincing evangelist, among many other good things.  Go Dawgs! 

Every day, the University of Texas System makes about $6 million off a mineral-rich swath of land it manages in the US’s largest oil field. Crude and natural gas, not fundraising or investing prowess, have positioned the school’s endowment to overtake Harvard University’s as the richest in US higher education.

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The University of Texas oversees 2.1 million acres—almost the size of Delaware and Rhode Island combined—in the Permian Basin. While other universities are shedding their fossil fuel holdings in the name of eco-consciousness, the Texas college system is leasing its land to drillers including ConocoPhillips, Continental Resources, Inc. and nearly 250 other operators. — Bloomberg 

 

Whole Foods

Many would hardly know and believe that Whole Foods Market was founded in Austin.  The granola crowd would think it was fake news:  “Texas?  Are you shitting me?”

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The National Football League (NFL) Is A Socialist State

Posted on August 21, 2022 by macromon

Shhhh, don’t tell the Dallas Cowboy fans!

Old Gold Post

We are reposting the following more than decade-old piece as the football season is about to get underway in a few weeks. We had no idea the Rams would move back to Los Angeles five years later, soon followed by the Chargers from San Diego.

NFL teams pool their media share and divide them equally among 32 teams, which allows small market teams to compete on a more level playing field with the large market teams.  Think Green Bay Packers.

That is socialism, folks. Not Soviet socialism but the same type of “socialism” the ignorant people and pols throw around so loosely like a pigskin to trigger and mislead the public and slander their opponents.  Bernie Sanders would be proud of the NFL;  DJT, and Ted Cruz would call it Satanic if they had a clue – about anything.

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Major League Baseball (MLB)

In contrast to the NFL, the MLB is little less socialist but socialist, indeed:

Along with the TV deals, MLB teams also receive extra money through revenue sharing. Each team pools 48% of the revenue they earn, and the total amount is then split evenly (3.3% of the total) and given to each team. Teams receive more than $110 million through revenue sharing. – DodgerBlue

The percentage system still allows the large market teams to dominate the post-season almost, but not every year.  Think New York Yankees and Los Angeles Dodgers with their massive payrolls. How ’bout a progressive percentage allocation for the bigger market teams?

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Three cheers for Cleveland, who currently leads the AL Central by one game.  The other four are in the celler or a step above.  Money, the Guardians don’t make the World Series, however.

Golf And “Food Stamps”

Another ironic and seemingly contradictory twist in sports is the USGA golf handicap system.

Handicaps are also used as a measure of how ‘good’ a player is. Players with a ‘high’ handicap will be allowed a higher number of extra strokes over the course par. Players with a ‘low’ handicap are expected to take fewer additional strokes to get around the course. – FairwayApproach 

In a sport traditionally dominated by “country club” conservative Republicans, “trying to level the playing field” among golfers would seem an abomination.

I never liked country clubs and thought of them as legalized segregation, but I did join one because of their quick play and pristine pool table-like greens.  However, I do curse myself for violating my principles whenever I shank a shot.  Yes, folks, I am a hypocrite.

Golf’s Ugly History

Golf has a horrible history of discrimination.

I love this story about the late Senator Barry Goldwater, the 1964 Republican Presidential Candidate,

Arizona native Barry Goldwater once visited a golf club on the East Coast that would not allow Jewish people on its links. When he was informed that he couldn’t play the 18 holes he came for, he famously responded, “Well, my father was Jewish but my mother was Episcopalian, so can I play nine holes?” – FEE Stories

It pisses me off playing a golf match with some of my more conservative friends, who are constantly complaining how their taxes are being wasted helping the poor “who have made bad choices.”  I have to give some of these bozos two strokes or “welfare” on every hole to even the playing field so they will have a better chance of winning (on a net basis).

When we approach every tee box, I ask them,

“How many food stamps do I have to give you on this hole?”    

That’s the most excellent troll, especially to those “welfare queens ” who pad (cheat) their handicaps.

So, folks, next time you hear people spouting off, accusing somebody of being socialist, especially on the links, politely in a quiet and genteel voice, tell them to,

“STFU, you have no idea what you’re talking about.”

Then take their money.  Fore!

The 49ers take the Super Bowl this year. Bank it!

Why Los Angeles Doesn’t Have An NFL Football Team

Originally posted on January 23, 2011 by macromon

We grew up in Los Angeles watching our beloved Rams, who fled for St. Louis in 1994.  The city was also a temporary home for the  Oakland Raiders from 1982-94 as the Rams played their home games in Anaheim for almost 15 years.  It has always been a mystery to us why Los Angeles, the second largest city in the U.S., has been without an NFL team since 1994.

In his excellent piece posted on the Globe and Mail blog, Frances Wooley, a professor at Carleton University, states it all about economics. He points out something we did not know,

The NFL, however, is egalitarian. All national revenues, such as sales of television rights, are divided 32 ways. Each NFL franchise receives an equal share. It is impossible to say how important national revenues are relative to other revenues for the league as a whole, as only one NFL team — the publicly owned, small-market Green Bay Packers — makes its financial information publicly available. In 2010, three-fifths of the Packer’s income – $157- out of $258-million – came from its 1/32 share of national revenues.

The revenue sharing system means there is little incentive for a team to move from a small to a large market. Yes, if the Vikings moved to LA, the NFL could potentially gain millions of additional Southern California viewers – and millions more in revenue. Yet the Vikings would only receive 1/32, or about 3 per cent, of that revenue. That’s not enough to offset higher stadium or property tax costs…

Interesting and helps explain why two relatively small market teams are headed to the Super Bowl and why the NFL, unlike Major League Baseball, has fewer major market Yankee-like dynasties.   The piece is short, concise, and worth the read.

Posted in Economics, General Interest, Sports | Tagged , , , , , | 8 Comments

How The U.S. Made Inflation Worse

Posted on August 16, 2022 by macromon

Not a bad primer video from CNBC on the Fed’s policy mistakes, which we all are now, literally, paying for.

I would add that monetary policy is a black box, mainly because we can’t define the money supply, much less measure it.  Using your brokerage account to write checks to pay for gas and groceries, for example, shouldn’t it be counted as part of the money supply?  Ditto for crypto, among others

Exogenous vs. Endogenous Money Supply 

No distinction either between exogenous money (created by the Fed) and endogenous money created by the private sector.  The Fed tries, and we stress, tries to control the endogenous money supply by interest rates and the exogenous money supply by its balance sheet.

Endogenous money is primarily created by leverage and is most likely easier to bring inflation down as assets deflate and credit slows.

The current inflation we are experiencing was mainly driven by exogenous money – Fed printing- and is much harder to break until quantitative tightening really begins to bite.  Think middle of 2023.

So, realize, folks, if asset prices are increasing, such as stocks, with a 10 percent inflation rate, it is inflationary.

The Fed has a tiger by the tail, mainly of its own doing, by allowing monetary policy to be, in the words of my good friend, Professor Constantin Gurdgiev, “hijacked by Goldman Sachs and Black Rock.”  Let’s throw in Jim Cramer just for fun.

The body politic gets it is unfair, and we see the political angst played out in today’s society.

Even a monkey will revolt against unfairness and inequality.

Money Quotes:

The two following money quotes from the vid could have been lifted straight from the Global Macro Monitor.

  • “If we were actually measuring inflation in a consistent manner, the peaks in the seventies and eighties are actually much more similar to the peak today than we would have initially thought.”

    See our post,  Today’s Inflation Rate And Nolan Ryan’s Fastball

  • “So I think at this point the Fed has to stick to its guns, even if that means taking speculators down.  And that really is what has scared the Fed in the past.  The Federal Reserve is supposed to make monetary policy in the whole of the public interest, not just that of investors. And this going to be a test of which they have not really had to take since 1981.”

    We have written many posts on this issue, but see this one, in particarlur,  The New “Supply-Side Economics” Fueling Asset Bubbles

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The Moment I Knew America Was In Trouble, 3.0

Posted on August 15, 2022 by macromon
We are reposting a piece from June 1, 2020 as we are very concerned about the stability of the American Street and how much of our country is slouching toward a bizarre and unprecedented form of a dangerous fascism.
[A]t least the Civil War…was about something. Compared with the bizarre ideas and half-baked wackiness that now infest American political life, the arguments between the North and the South look like a deep treatise on government. The United States now faces a different kind of violence, from people who believe in nothing—or at least, in nothing real. …all of us face random threats and unpredictable dangers from people among us who spend too much time watching television and plunging down internet rabbit holes. These people, acting individually or in small groups, will be led not by rebel generals but by narcissistic wannabe heroes, and they will be egged on by cowards and instigators who will inflame them from the safety of a television or radio studio—or from behind the shield of elected office. Occasionally, they will congeal into a mob, as they did on January 6, 2021. …I spoke with one of the original Never Trumpers over the weekend, a man who has lost friends and family because of his opposition to Trump, and he told me that one of the most unsettling things to him is that these same pro-Trump family and friends now say that they believe that Trump broke the law—but that they don’t care. They see Trump and his crusade—their crusade against evil, the drama that gives their lives meaning—as more important than the law.- The Atlantic 
Originally Posted on June 1, 2020 The Conversation:  When I Knew America Was In Deep Shit  In early February,  I drove to San Diego to attend a trade show.  I stayed overnight in the beautiful beach town of San Clemente, the home of President Richard Nixon’s Western White House. I awoke on Super Bowl Sunday and headed down to the ocean to grab some breakfast before driving down to San Diego to pick up my good friend and colleague at the airport and to prepare to watch my 49ers give an ass-kicking to the Chiefs.  Wrong! Bear Coast Coffee I had been pretty bearish on the market at the time and thought how appropriate it was to eat at the Bear Coast Coffee.  I do believe in omens, by the way.  This was about two weeks before the market peaked on February 19th [and experienced it’s sharpest and quickest bear market  in history, falling 35.4 percent over the next 24 trading days before a multi-trillion-dollar bailout, which was genesis of the inflation we now suffer.] I snapped this picture and even thought about posting it while I was eating breakfast.

San Clemente,  February 2, 2020

San_C_3 Clean & Pristine San Clemente San Clemente wreaks of wealth (ranked 11th wealthiest city in the country), multi-million dollar ocean view homes, and I was very impressed by the clean and pristine character of the city.  I thought what a great summer vacation spot for my daughter and me.  Sat next to and had a great convo with a nice couple, who said their son commuted on the Amtrak to high school into Santa Ana.  Great morning.

San Clemente,  February 2, 2020

San_C_1 San_C_2 San Diego Convention Center After nursing the wounds of the 49ers fourth-quarter collapse, we were about two days into the trade show when an elderly gentleman stopped in our booth and began to chat with my colleague. Let’s call him Joe and my colleague Jim.  After exchanging niceties, the conversation went something like this. Joe:   Can you believe what is happening to the world?  The homeless are overrunning the country.  Shitting in public.  You can’t even walk in San Francisco now without stepping in human feces!  Those god damn liberals can’t run anything.  The homeless have even overrun my town of San Clemente.  God damn it!  Jim (from back east):  No, haven’t really thought about or noticed it.  I found out later Joe’s net worth puts him in the Top 1 percent and couldn’t really confirm if he was a college graduate.  I almost jumped in and told Joe he was full of shit and had been sniffing too much Faux News.  I was primed for such a debate as I’ve had many similar Twitter debates with people making the same argument about San Francisco but have, you guessed it, never set foot in the town.  Their perception was all painted by hard alt-right pundits. In fact, I was in San Francisco just the prior week and snapped the following picture to use in my Twitter debates.  If anyone can find a human turd in the photo, I will send you $1000.  The same goes for the pictures of San Clemente.  No photoshopping.

San Francisco,  January 2020

SF_1 Of course, every city has a homeless problem and San Francisco’s is more acute than most.  But the problem is not as ubiquitous as Faux News portrays. I also wanted to wrap Joe on the knuckles with the fact that the People’s Republic of SF sports the most billionaires per capita by a factor 8x to the second-highest, NYC, and the city has the highest rents in the nation, which might help explain, in part, its homeless problem.  See our post here.   I bit my tongue and kept quiet. The Bombshell Then the convo turned very ugly. Joe:  My wife told me the other day she wanted to buy a gun.  I said, “honey, why do you need a gun?  I have several and we have a very good and expensive alarm system for the house.  What’s up.”   She told me, “I don’t want a gun for protection,  I want one to shoot the liberals!” WTF? O.M.G! I thought WTF is wrong with this guy?  I am almost certain he was 100 percent serious.  The dude is not a poor uneducated cracker from some “‘Podunk’ Town In The Middle Of Nowhere”  He’s a one-percenter and lives in the 11th wealthiest city in the nation. How could this be?  Didn’t he realize he could just have been easily born a crack baby in Harlem if not for being born into the Lucky Sperm Club? Whatever happened to the noblesse oblige practiced by the likes of the Kennedy clan and George H.W. Bush, the unwritten obligation of people of means to act honorably and generously to others of lesser means? Right then and there, I realized the country was near a very ominous tipping point. What Next? If you think the instability in the American Street is going away anytime soon, think again.  There may be an ebb and flow of calm and violence but unless the underlying issues discussed above are addressed and mitigated the country has crossed the Rubicon into failed state territory. Trump can continue to talk tough and even send the M1 tanks into the streets but it won’t make a damn bit of difference but to make matters worse. It’s time to get to work and begin to really address the issues at their very core, America. All of us united, even if the goal is to save what’s left of our own personal and selfish interests.  The alternative is peril.
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QOTD: Time To Fear The American Street

Posted on August 14, 2022 by macromon

QOTD: Quote of the Day

Putin and Xi couldn’t do it better than Fox News.

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