Russian troops have invaded Ukraine, this is not in question. Whether or not they have the official sanction of Russia itself or are merely “on vacation” fighting for a good cause is up to the reader to decide. The main contention so far is what exactly Putin is doing by playing a very silly game by trying to invade without invading, telling the world a fairly transparent fairy tale that no one believes
I think that the key question has to lie in Putin’s head, which is to say how he is responding to the forces on him. That requires a lot of speculation in the absence of any good information. Good reporters (and bloggers) don’t go deep into speculation, so if you don’t want to read this I’ll understand. But it seems that Putin is eyeballs deep into a war he can’t lose but also can’t fight.
The Federal Reserve of Kansas City puts on the big event every year – and why not throw a big party when your territory includes Jackson Hole, Wyoming? This year’s production concluded after presentations and official pronouncements from all the top central bankers of the world – Mario Drahgi of the European Central Bank (ECB), Haruhiko Kuroda of the Bank of Japan (BOJ), and our own Janet Yellen. It’s a must-see event if you want a front row seat for the big show of policy changes among the most powerful people in the world.
This year, the theme was “Re-Evaluating Labor Market Dynamics”, and the power players from around the world made it clear that nothing is going to change in the near future. If that sounds like the biggest let-down for a big show ever, you’re right. The Fed never intended for this to be a huge theatrical spectacular. It’s a place for central bankers to get together and agree on things. And what they agreed on, more than anything, is that in the developed world there is nothing more important than figuring out just how much “slack” there is in labor markets and how to take it up.
But it’s more exciting than it seems if you want to predict what will happen in the next year.
The still summer evening was suddenly ripped apart by the heavy THWUP!-THWUP!-THWUP! of helicopters. In this part of St Paul copters are common enough as small emergencies across the state hurry themselves to nearby United Hospital. But this sound was different. It was heavy, immediate, and amplified by three of them flying low enough to sneak up on the otherwise placid city.
Then there was the shape. Medivac copters are small and light, but these were large and olive drab. Several low passes later they were joined by another sound, a gentle whoosh that might have been less disturbing had I not had the knowledge that this is what a Blackhawk sounds like.
Last Tuesday St Paul was the host to an unannounced training mission in urban warfare that included Navy Seals. Why? No one has been told why they did it here. Before, after, and during we all know essentially nothing. Our cities are being militarized and shown tremendous force behind a cloak of secrecy that is inappropriate – and naturally falls on the most vulnerable citizens of our community. But Ferguson, Missouri is hardly alone.
Is the stock market nothing but a bubble waiting to burst? There are many reasons to believe that there is one last downturn at the exit of this Managed Depression, which may indeed be slowly forming. The risk comes in the nature of how the economy is so carefully managed through monetary policy directed by the Federal Reserve. Years of zero interest and $3.7T in quantitative easing have produced a situation that’s hard to pull out of without a lot of collateral damage.
The problem is that a lot of money is chasing an awful lot of risk these days. Junk Bonds (aka “speculative grade investments”) are making a strong run, selling a record $265B through May 2014. The reason? Interest rates stuck near zero mean no return for investors, and as things turn around they have an appetite for risk. A rise in interest rates would slaughter this market and cause losses that will reverberate through equity markets before things really have a chance to turn around.
There are many ways to measure an economy, as we’ve discussed before. There are thousands of workers toiling away at the Bureau of Labor Statistics (BLS), Bureau of Economic Analysis (BEA) and many other agencies providing more data than anyone will ever be able to fully understand. It’s something like the internet in terms of data overload, except many of these measures were developed before the information age. It used to be fun to get the reports in big thick binders of paper that professionals at least pretended to read.
We have this all real-time now, and there is a lot of it. One of the most comprehensive employment reports that comes out monthly is the rarely lauded Job Openings and Labor Turnover Survey (JOLTS) from the BLS. It’s worth getting to know if you really want the details on the state of employment today.
The Dow Jones Industrial Average (DJIA) is down for the third straight day. News outlets that have to attribute it to something attribute it to “global tension,” which does appear to be running a bit higher than usual. But the entire exercise of watching an index from one day to the next is a bit silly from the start.
A more interesting question asked by some commentators is, “Does this mean that the bull market is over?” The short answer is no, it doesn’t, but not for the reasons that most people think. The reality is that we have been in a secular (or long term) bear market since 2000, roughly the start of what we call a “Managed Depression,” and this small correction is nothing but a regression to the mean that proves it.
There is a lot happening in the world today, and so much of it is just plain bad. Gaza, Ukraine, West African Ebola – none of this is good news. But there are some smaller stories that are bubbling up that are worth taking a look at. Some of them are from territory we’ve covered before. But I’d hate to have this get lost in the shuffle. Welcome to a Barataria roundup of some smaller stories that may be missed in the big (bad) news of the day. They are the little stories stuck inside the big ones, trapped like Matryoshka nesting dolls.