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Commentary on The Capital Markets- Category [Market Musings]

The problem with pyramid structures isn't necessarily that they're illegal (especially considering that the rule of law is meaningless these days) -- it's that you eventually run out of room on the arithmetic.

Herbalife appears to have reached that point and now has missed twice sequentially on earnings.

Now consider what happens when the entire debt-financed economic structure reaches this same point, and it appears that it has as evidenced by central banks subsuming private credit creation with their "QE" programs.

Think about that one long and hard folks.....

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Beware the tricks in your bag today....

Today’s decision to expand Japan’s monetary stimulus may be regarded as shock treatment in the central bank’s effort to affect confidence levels.

Bank of Japan Governor Haruhiko Kuroda’s remedy to reflate the world’s third-largest economy through influencing expectations saw the yen sliding and stocks climbing. Kuroda led a divided board in Tokyo in a surprise decision to expand unprecedented monetary stimulus.

Remember, folks, QE works.

It works so well that it has be repeated.  Time and time again.  Every time.  All the time.

Where's the exit for Japan?  Two decades in coming, and yet here we still are, needing evermore.

What you got out of this was a big (~2%!) move in the Yen -- weaker.  That of course translated into a big move northbound in the futures.  Remember that a collapsing currency results in a skyrocketing stock market priced in that currency, but whether this is "good" depends on whether you can eat your (electronic) shares.

Given this enormous move (weaker) in the Yen would you mind explaining where the inflation is that the BOJ wants to see?  Since it has not materialized perhaps you might also muse on exactly what the impact of this "program" actually is.

And that's the paradox, you see -- despite the outrageously-large move in the Yen over the last few years there has been no inflation to be found in Japan itself -- at least as measured from the government's point of view, and thus what has been reported.  But that there's no reported inflation does not mean that your standard of living improved.  One need only look here where there has been essentially no inflation over the last several years either (as reported by the government) and square that with the median family income numbers, or for that matter other periods of time here in America, to see that these so-called reported numbers mean exactly bupkis when it comes to whether your net purchasing power, as measured in the goods and services you can buy with an hour of labor, have improved or deteriorated.

So what's to come for Japan?

Hint: If you're a Japanese citizen I hope you enjoy grabbing your ankles.

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2014-10-31 06:01 by Karl Denninger
in Market Musings , 198 references
 

Yeah, this is smart....

Another quarterly earnings report, another slam dunk for Facebook. The company made $3.2 billion in the third quarter, up 59 percent year-over-year, and grew to 1.35 billion monthly active users. More than 700 million people check Facebook on their phones every single day. These are impressive numbers. But Facebook is about to toy with the hearts and minds of investors, shareholders, and analysts by spending the next year investing heavily in its passion projects: WhatsApp, Oculus, and Internet.org.

Really?  Slam-dunk?  Like Spamazon?

Well, sure.  Why not?  As long as investors will put up with executives paying themselves billions via either cash or (worse) "buybacks" (that are not really buybacks, because the stock is not canceled -- it is instead put in the Treasury and then used to pay executives) while the firm returns zippo in dividends and earns no net profit, what's to deter this behavior?

The oddity in this isn't that it happens.  It's that traders and "investors" (if there are any left) sit back and allow it while holding their shares, permitting Bezos and Zuckerburgler to loot them under the guise of "future investment."

Uh huh.  Amazon has run this line of crap now for more than a decade sequentially and gotten away with it, so why not?  As long as Bezos can walk on water, who cares?  As long as Zuckerburgler can do so, who cares?

Well, obviously, not you and not I.  I find it utterly amazing -- and amusing -- that the so-called analyst community continues to give this sort of crap a pass as well, but I guess I shouldn't be.

After all, so long as there's someone standing around willing to bid up yet another zero-net business (FaceBook has a P/E of nearly 70, and Amazon's is negative) why, if you're an executive, should you not keep taking cash from the idgits that insist on shoving it into your hand?

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