Thursday, July 25, 2024
Advancing Time: Looking Back, A 2018 Warning Of Markets Overdone
Advancing Time: Looking Back, A 2018 Warning Of Markets Overdone: While listening to a financial program recently I heard one of the participants mention and praise Fred Hickey, an analyst whom I was unfami...
Looking Back, A 2018 Warning Of Markets Overdone
While listening to a financial program recently I heard one of the participants mention and praise Fred Hickey, an analyst whom I was unfamiliar with. Upon researching this fella to get a feeling of his views, an interview he did years ago popped up. It appears that back in early 2018, Fred Hickey, a frequently cited expert on Bloomberg News and Barron's Round-table was more worried about the state of the financial markets than he had ever been.
Hickey, known for publishing his
extremely well-respected investment
newsletter, The High-Tech Strategist, took the stand that asset prices were dangerously overvalued. Today, the same markets are much higher, in truth, they never really retrenched.
While his primary focus had been on analyzing Tech stocks, over the years he had expanded his research into macro trend analysis. This includes how central banks started increasingly intervening in world markets and distorting the price of money. Rather than taking this post as a criticism of Hickey, consider it solid proof that we have again witnessed the adage often attributed to the famous economist John Maynard Keynes:
The market can remain irrational longer than you can remain solvent.
This saying is often cast out as a reminder that a person can be right
but timing often determines our destiny. It also underscores why,
capital preservation should be job one. The market will fail only when
something breaks. It is only then that delusion and despair will
overtake the optimist irresponsible central banks and the policies
politicians continue to crank out. History indicates that efforts to postpone the day of
reckoning only delay it.
As pointed out, Hickey, a
lifelong expert in "all things technology" was railing against market trends as far back as 2018. Even then he concluded that gold (the
"barbaric relic") had become the sanest asset to put one's capital. This was due to its safety factor and its current level of
undervaluation. This is why Hickey was out warning about how we were in an everything bubble.
His warning included how companies such as Tesla were doomed to fail. This argument held some truth but over the years, forces have pushed the boulder up the hill. Today markets are at insane levels and much higher than many of us thought possible. This is a time when it might be wise to remember trees, no matter how tall, do not grow to the sky.
In a very recent video on Thoughtful Money, Sven Henrich of NorthmanTrader.com reached out with the message that he closed out all his longs this week and moved to cash. While he has been a bit spooked by recent market action, he makes it clear be is not all that bearish. Based on his charts, he is cautious. This is due to the fact we are experiencing the most distorted markets in history. Whether this is a result of too much liquidity or passive investments driven by computer trading is an issue of debate.
The important thing is where the
market goes from here. Having been bearish far longer than I ever wanted to be, every time I turn towards capitulating, I try to remember that two wrongs don't make a right. This is particularly true in economics. When the numbers don't work it is only a matter of time before reality hits hard and long. The idea that this time is different has throughout history proven untrue. Whether the market pullback that started a few days ago is a preamble to something greater has yet to be determined.
(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)
Thursday, July 18, 2024
Advancing Time: China's Massive Three Gorges Dam Again In Peril
Advancing Time: China's Massive Three Gorges Dam Again In Peril: China is again facing massive flooding. Some problems are built to last and won't go away. The massive Three Gorges Dam and flooding iss...
China's Massive Three Gorges Dam Again In Peril
China is again facing massive flooding. Some problems are built to last and won't go away. The massive Three Gorges Dam and flooding issues in China fall into this category. This is a disaster waiting to happen.
The two AdvancingTime articles below from 2020 give details and indicate the dam's failure. This is most likely a case of when not if. Both articles have had some parts deleted to make them shorter and easier to read.
China's Massive Three Gorges Dam Is In Peril --- Sunday, July 19, 2020
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| Click On Image To Enlarge |
Over the last month, most people have not paid much attention to the
weather in China. This is because it is not something we dwell upon but
it merits our attention since word has been leaking out that China's
massive Three Gorges Dam is in peril. Most of us have little knowledge
of this dam which is the world's largest and the implications if it does
fail. Its failure would result in a massive loss of life and property. After record
rainfall with more expected concern is rising as the flooding continues.
It is said about 400 million people live downstream of the dam and
apparently no plans have been made for their evacuation. Here are a few
facts about the dam. The Three Gorges
Dam is around one and a half miles long and just over 600 feet tall. It is a hydroelectric
gravity dam that spans the Yangtze River by the
town of Sandouping, in Yiling District, Yichang, Hubei province, China.
Construction was started in the 1990s and completed in 2006. Its failure
would have catastrophic consequences and could kill around half a million people.
Vice Minister of Emergency Management Zheng Guoguang said on Monday that
the Yangtze, Asia's longest river, and parts of its watershed have seen
the second-highest rainfall since 1961 over the past six months.
Residents in the Yangtze River basin in recent weeks have expressed
concerns over the ability of the massive dam to handle more heavy rain,
even though authorities have been releasing floodwater from the
structure. If the dam does fail the province's capital Wuhan the
epicenter of China's coronavirus outbreak would be hard hit.
China's Massive Three Gorges Dam On Edge Of Failure --- Tuesday, July 28, 2020
The failure of this dam, which is the largest in the world, would have catastrophic consequences. It is estimated such an event could result in around half a million people being killed. The Asia Times reported several days ago that Beijing has admitted that its 2.4-kilometer Three Gorges Dam spanning the Yangtze River in Hubei province “deformed slightly” after record flooding. The deformation occurred last Saturday when waters from western provinces including Sichuan and Chongqing along the upper reaches of the Yangtze River peaked. At this, point the biggest concern is that rain continues and more is expected.
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| China's Three Gorges Dam |
The company that manages the dam noted that parts of the dam had “deformed slightly,”
displacing some external structures. Seepage into the main outlet
walls had also been reported throughout the 18 hours on Saturday and
Sunday when water was discharged through its outlets. Wang Hao, a member of the Chinese Academy of Engineering
and an authority on hydraulics who sits on the Yangtze River Administration Commission, has assured
that the dam is sound enough to withstand the impact from floods twice
the mass flow rate recorded on Saturday.
It should be noted that Wang’s remarks stoked a volley of mockery after he said the
flooding could be a good thing as the dam would only become more rigid
the longer it was steeped up to its top.
(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)
Sunday, July 14, 2024
Advancing Time: Velocity Of Money Is No Longer A Huge Inflation Fa...
Advancing Time: Velocity Of Money Is No Longer A Huge Inflation Fa...: Let's talk about the velocity of money! The speed at which money flows through the economy is often tied to speculation about the future...
Velocity Of Money Is No Longer A Huge Inflation Factor
Today, small businesses are suffering the most pain of cost increases since larger enterprises have a lot more ability to get cheap funding. More small businesses forced to close may result in stagflation in this economic cycle rather than deflation which is normally associated with downturns. This is a reason for concern on both the employment and inflationary front. Not only do small businesses employ a huge number of people but they generally resist raising prices due to close relationships with their patrons.
As for the velocity of money;
Velocity is the speed in combination with the direction of motion of an object. Velocity is a fundamental concept in the branch of classical mechanics that describes the motion of bodies.
The scalar absolute value (magnitude) of velocity is called speed.
The faster money moves through the economy is sometimes tied to demand in that John or Jo will take all their money on payday and spend it immediately if their demands are high. In such a situation, retailers and vendors will rush to replenish goods to refill shelves. During low demand, they will spend the money slowly over time and the vendor will pull from inventory rather than place new orders.
Please consider the possibility that what is considered a "slowing in the velocity of money" is rooted in where money or wealth is being placed. Another factor could be who holds the bulk of money in circulation. As inequality has grown and more wealth shifted into the hands of a few, the idea these few will park their wealth and money for long periods of time feeds into why velocity is falling. Then, please consider, that a shift in investor attitudes causing a shift away from intangible to more tangible investments could spark a surge in both velocity and inflation.
Over time, changes in the way people handle transactions, such as using more or less charge cards or debit cards as well as the way financial institutions facilitate such transactions may affect how velocity is viewed. Still, how much the velocity of money affects inflation is difficult to assess. This leads us to the question of whether inflation is being driven by demand factors or simply increases in cost being passed along.
Much of the inflation we have witnessed in recent years has been attributed to supply chain shock as well as a large increase in the money supply. Huge government deficits and spending as a result of Covid and efforts to get the economy moving post Covid have acerbated the situation. This brings up the question of what we should expect going forward. Demand-pull inflation, cost-push inflation, or if the economy continues to fall, stagflation.
Mixed into this brew is the idea trade is good for all parties concerned, trade deficits, the value of fiat currencies, and tariffs. Several flaws
regarding the idea that "free trade" is the answer to many of our problems have revealed themselves in recent years. In short, it is time to honestly look at the role of trade and why it should be considered a double-edged sword. While the
idea behind trade has a great deal of
merit it is often given far more credit for economic growth than it
should.
With government spending predicted to grow in coming years, and a continued debasement of fiat currencies, deflation is unlikely. No matter how those in the know or in charge of such policies seek to spin it, they can’t lead countries out of what appears to be persistent economic trends. While the rate of price inflation is easing, core inflation remains stubbornly high.
The problem is continued government spending. The Fed’s efforts to ease inflation and the easing rate of inflation are both about to run into major resistance. A recent article published in The Daily Signal told how The Tax Relief for American Families and Workers Act of 2024 is nothing of the kind. Instead, it is a mixed bag that includes welfare expansions, corporate windfalls, and inflationary deficits.
It is logical to envision that huge government deficits will result in further inflation and increasing interest rates as the government generates new money without increases in real productive capacity. such spending tends to crowd out private borrowing. In short, bigger government acts as an impediment or roadblock to increasing supply while increasing demand. While the velocity of money does affect inflation, government spending is where economist should center their focus.
(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)
Sunday, July 7, 2024
Advancing Time: Danger Ahead, China Is Pushing, Pushing, Pushing
Advancing Time: Danger Ahead, China Is Pushing, Pushing, Pushing: There is danger ahead and the ramifications have the potential to be massive and devastating. China is pushing to become the automaker of th...
Danger Ahead, China Is Pushing, Pushing, Pushing
In the area of efficient economies, a system of state-controlled markets and subsidies has a strong advantage over market-driven capitalism in the short term. Time and time again, it has been proven that heavy-handed government interference in a market can rapidly ramp up an industry far faster than free market forces. Governments can change rules, expedite approvals, fund, or turn a blind eye to those they favor.
I contend that China is using Elon Musk and Tesla as a useful pawn to muddy the issue of what is fair in the area of free trade. After all, if Tesla, which is identified as an American company, is allowed to sell cars in China, why shouldn't Chinese companies be allowed to sell their cars in America? Furthermore, isn't Tesla's success an indication or even proof that EVs are the future and best way to avert climate change. These are both conclusions I do not accept.
A CNBC video recently explored how China has the manufacturing capacity to supply half the world's cars. It delves into how China has its eyes on the United States and why insiders say it's only a matter of time until it affects America's auto industry. Even though. President Biden slapped Chinese automakers with stiff tariffs that effectively double the price of an imported EV some insiders warn tariffs may not be that effective in the long run, and may even do more harm than good.
This push to export Chinese cars all over the world is another gambit to expand China's power and decimate its rivals and competition. China has and is playing the same game in a slew of other industries. This has not yet gained the attention it should, and by the time it is obvious to most people, China will be the only go-to option in many key industries. Sadly, the auto industry is an area where Chinese products can rapidly make major inroads or progress if allowed. This is indeed a gambit that will be difficult to halt because consumers want inexpensive vehicles.
How do people across the world feel about China?
The number of countries looking unfavorably at China has increased since the poll started in 2019. The
countries with the most respondents favoring China were Nigeria, Kenya,
Thailand, Russia, Egypt, and Saudi Arabia. Still, views
of China are broadly negative across most of the advanced
economies. Roughly three-quarters of respondents in
Japan, Sweden, Australia, Denmark, the United Kingdom, and Germany had a
negative view of China. It is important to note these "feelings" are fluid.
We must remember, China's economy is false and manipulated, much of China's growth came from "over-constructing everything," this is equivalent to building bridges to nowhere. Now China wants to, in a predatory manner, take jobs away from other countries to expand its manufacturing away from constructing ghost cities and towards producing high-end items needed across the world.
To be clear, I do not consider myself a "Chinaphob," or should I say, to be sporting an exaggerated or unfounded fear of China. My concerns are deeply rooted in China's actions over the last several decades. Rather than becoming more open and free, its government has become more controlling and authoritarian. It is far past the time we should be calling a spade a spade.
Footnote: I'm aware that the word "Chinaphob" may or may not exist or be recognized, yet. Below are several links to prior articles related to China. Some focus on its push into various industries. https://brucewilds.blogspot.com/2024/05/difference-between-fair-trade-and-free.html https://brucewilds.blogspot.com/2021/03/chinas-strength-should-be-evaluated.html https://brucewilds.blogspot.com/2023/09/subsidies-corrupt-economies-china.html https://brucewilds.blogspot.com/2023/04/china-is-staying-afloat-by-flooding-its.html https://brucewilds.blogspot.com/2018/08/china-has-no-intention-of-altering-its.html https://brucewilds.blogspot.
(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)
Saturday, July 6, 2024
Advancing Time: America's Trade Deficit Is Widening Again
Advancing Time: America's Trade Deficit Is Widening Again: While Americans go about their daily life not enough attention is being paid to the trade deficit. It is and has been widening, again. The...
America's Trade Deficit Is Widening Again
While Americans go about their daily life not enough attention is being paid to the trade deficit. It is and has been widening, again. The U.S. international trade deficit
widened 0.8% in May to $75.1 billion. This is the largest deficit since October 2022. Over all, the trade deficit is up $14.4 billion or 4.2% from the same period last year. These numbers, and those for the last several years highlight that for all the ruckus it created, the trade war failed to bring
down the trade deficit.
The world may have already hit peak globalization, much of which was promoted on the idea trade was good for all parties concerned. Several flaws regarding this notion have revealed themselves in recent years calling for a reassessment of this theory. In short, it is time to honestly look at the role of trade and why it should be considered a double-edged sword. While the idea behind trade has a great deal of merit it is often given far more credit for economic growth than it should.
First of all, trade must be fair or it has the potential to damage one party or the other. The promise that increased trade will create new jobs has turned out to be largely a myth. History has shown that trade agreements with low-wage nations are not the great job creators we have been told. Instead, we have experienced a hollowing out of the middle class. This is why AdvancingTime has in the past banged away at the fact that where and what consumers buy matters.
The trade deficit with China continues to weaken America and strengthen our rival. Making your rivals stronger at your expense has always proven to be a mistake in the long run. The belief trade is a huge benefit to the masses is championed by large multinational companies that influence trade policies and have the most to gain.
Many Americans tend to ignore the fact China is rapidly building factories in Mexico to sidestep tariffs. Geopolitics has made Mexico as a trade partner increasingly preferable to China. In 2023, Mexico overtook China as the United States’ largest goods exporter, based on recent trade figures.
The U.S. imported nearly $476 billion from Mexico and shipped roughly $323 billion to its southern neighbor in 2023. Meanwhile, the Bureau of Economic Analysis reported that imports from China to the US fell by approximately 20% to $427.2 billion. This is partly due to American firms seeking to diversify their supply chains due to strained relations between the US and China. Some of this centers around national security worries, particularly in the area of technology.
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| Once Wealth flows To Asia, It Stays There |
Even before China started manufacturing in Mexico, much of the money our neighbor to the south received by way of trading with America was quickly passing through Mexico and flowing to Asia. This means it could be argued that when all is said and done we were still transferring our wealth to the far east only by the scenic route. This is not a recent occurrence, numbers indicate that in addition to the United States, Mexico has for years been a huge importer of goods from China.
In 2017 Mexico ran a trade deficit with China of around 64 billion dollars. In 2019, trade between the two countries reached 100 billion dollars with the deficit growing even larger. Mexico recorded exports to the Chinese market worth 7.1 billion dollars while Chinese exports to the Mexican market rose to 93 billion dollars.
The question we should ask is whether free trade is really a win-win. The answer probably falls into a grey area based on the terms on which transactions are based. There is a lot to be said for being self-sufficient. A strong case can also be made for favoring trade with nearby friendly neighbors rather than distant countries, such trade can improve the neighborhood.
Those preaching the virtues of globalism and free trade point out that American consumers pay far lower prices because of this but overlook the fact that in the long run, such an imbalance will not end well. The reasoning that we are trading worthless dollars, currency, or paper for goods is a bit misleading. It might be more accurate to say we are trading away jobs, wealth, and even our future.
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