Jack Johnson: Crying Shame

From his album In Between Dreams:

Crying Shame Lyrics

It’s such a tight game
Will it ever stop?
How will this all play out?
Both sides out of mind now

By now we should know how to communicate instead of coming to blows
We’re on the road and there ain’t no stopping us now
We’re burning under control
Isn’t it strange how we’re all burning
Under the same sun
By now they say if it’s a war for peace
It’s the same old game
But do we really want to blame?
We could close our eyes it’s still there
We could say it’s us against them
We could try but nobody wins
Gravity has got a hold on us all
We could try to put it out
But it’s a growing flame
Using fear as fuel
Burning down our name
And it won’t take too long
Cause words are burned the same
Then who are we gonna blame
Now and all

It’s such a crying, crying, crying shame
It’s such a crying, crying, crying shame
It’s such a crying, crying, crying shame
Shame shame shame

By now it’s beginning to show
A number of people their numbers that ain’t coming home
I could close my eyes it’s still there
Close my mind, be alone
I could close my heart and not care
But gravity has got a hold on us all
It’s a terrific price to pay
But in the true sense of the word
Are we using what we’ve learned
In the true sense of the word
Are we losing what we were

It’s such a tight game
Will it ever stop?
It’s not for me to say
And is it in our blood?
Or is it just our fate?
And how will this all play out?
Both sides out of my mind now
Who are we gonna blame all and all?

It’s such a crying, crying crying shame
It’s such a crying, crying crying shame
It’s such a crying, crying crying shame, shame, shame

Read more: Jack Johnson – Crying Shame Lyrics | MetroLyrics

The habit of ubiquitous interventionism, combining pinprick strikes by precision weapons with pious invocations of high principle, would lead us into endless difficulties. Interventions must be limited in number and overwhelming in their impact.

Margaret Thatcher: Interventions

Portugal: What Happened After It Decriminalized Drugs | VICE

By Samuel Oakford

…..16 years ago, Portugal took a leap and decriminalized the possession of all drugs — everything from marijuana to heroin. By most measures, the move has paid off.

The rate of new HIV infections in Portugal has fallen precipitously since 2001, the year its law took effect, declining from 1,016 cases to only 56 in 2012. Overdose deaths decreased from 80 the year that decriminalization was enacted to only 16 in 2012. In the US, by comparison, more than 14,000 people died in 2014 from prescription opioid overdoses alone. Portugal’s current drug-induced death rate, three per million residents, is more than five times lower than the European Union’s average of 17.3, according to EU figures.

Source: Portugal’s Example: What Happened After It Decriminalized All Drugs, From Weed to Heroin | VICE News

Europe strengthens

Germany’s DAX respected its new support at 10500. Follow-through above 10800 would confirm the primary up-trend.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

Italy’s FTSE MIB (Milano Italia Borsa) Index remains in a primary down-trend. Breakout above 17000 and the descending trendline, however, would suggest that a base is forming. Rising Twiggs Money Flow highlights buying pressure.

FTSE MIB

The Footsie retreated from resistance at 7000 but short candles and rising Twiggs Money Flow suggest buying pressure. Expect another test of 7000/7100 but resistance is strong. Correction to 6500 would establish a more stable base for further advances.

FTSE 100

* Target calculation: 6500 + ( 6500 – 5900 ) = 7100

Asia pulls back

China’s Shanghai Composite Index retreated below resistance at 3100. Prospects of a primary up-trend have dimmed and further consolidation between 2800 and 3100 is likely.

Shanghai Composite Index

Japan’s Nikkei 225 Index is pretty directionless, retreating from resistance at 17000. Breach of 16000 would warn of another test of primary support at 15000. But a broad base between 15000 and 17000 is likely.

Nikkei 225 Index

India’s BSE Sensex is the most promising, consolidating in a bullish narrow range around 28000. Upward breakout would signal a further advance towards the 2015 high of 30000. Bearish divergence on Twiggs Money Flow warns of long-term selling pressure, however, and downward breakout would warn of a correction to 25000 or 26000.

SENSEX

Oil Industry Shifts From Survival to Growth | Bloomberg

There has been a spike in oil & gas mergers and takeovers in recent months as sellers expectations of a return to $100/barrel oil prices have finally faded.

From Bloomberg:

While crude has recovered, “there seems to be an increasing consensus that oil will not go back to over $100 any time soon,” said Philipp Chladek, a senior industry analyst for BI in London. “So the differing perceptions about the asset values that, next to the volatility, was the main deal-breaker in the past, are gradually converging.”

Light crude prices have rallied from early 2016 lows to test resistance above $50/barrel. December futures retreated from $52/barrel but this does not seem to indicate a reversal. Breakout above $52 would signal a long-term up-trend with a test of resistance around $64/barrel. With slow global growth, however, further consolidation below $52 is more likely.

WTI Light Crude - December 2016

From Tsvetana Paraskova at Oilprice.com:

Earlier this week, the Russian Economy Ministry said that it expected crude oil prices to remain stable at their current range of US$45-50 over the next two years, with a sustainable improvement beginning in late 2017.

The latest rally in prices, according to a statement by the ministry, has “a speculative nature” and will not last long. The Economy Ministry went on to add in the statement that oil fundamentals were moving in line with “basic forecasts”; that is, the market is on its way to rebalancing, with the glut gradually easing. But this process will take time.

Source: Oil Industry Shifts From Survival to Growth – Bloomberg

Gold, rising interest rates and the falling Yuan

Interest rates are rising. Upward breakout from an ascending triangle formation on 10-year Treasury yields indicates an up-trend.

10-year Treasury Yield

A rate hike from the Fed would increase pressure on the Chinese Yuan, leaving the PBOC with a dilemma. Either allow the Yuan to slide, which could panic investors and borrowers into a rout, or sell off more of its $3.2 trillion foreign exchange reserves to slow Dollar appreciation against the Yuan.

USDCNY

Long tails on USDCNY indicate buying at the 6.60 support level. Breakout above 6.70 would warn of another advance (decline for the Yuan).

Rising interest rates increase downward pressure on gold but a falling Yuan would boost demand as a store of value. Spot Gold is above the rising trendline on a weekly chart but expect a test of support at $1300/ounce. Momentum holding above zero continues to indicate a healthy primary up-trend. Respect of support at $1300 would confirm. Breach of support remains unlikely but would signal trend weakness and a test of primary support at $1200.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

UK investor Neil Woodford scraps bonuses as it leads to ‘wrong behaviours’

Colin Kruger, CBD:

One of Britain’s most respected investors, Neil Woodford, has scrapped staff bonuses at his investment group, saying it has proved to be “largely ineffective” which can lead to “wrong behaviours” by staff.

“There is little correlation between bonus and performance, and this is backed by widespread academic evidence,” said the firm’s chief executive Craig Newman.

The academic evidence directly cited by the group was even more damning. “Financial incentives are often counterproductive as they encourage gaming, fraud and other dysfunctional behaviours that damage the reputation and culture of the organisation,” said an extract from The Journal of Corporation Law. “They produce the misleading assumption that most people are selfish and self-interested, which in turn erodes trust.”

I hope we see more of this. Large corporations need to wake up to the fact that bonuses are counter-productive. Not only do they encourage “wrong behaviors” among company executives, they also destroy trust within the organization and with shareholders and the public. Share options are simply a variation on the same theme.

Rather encourage staff to become shareholders, with low-interest loans linked to a clause that prevents sale of the shares for a minimum of 5 to 10 years. That gives employees some skin in the game and aligns their interests with shareholders.

Source: UK investor Neil Woodford scraps bonuses as it leads to ‘wrong behaviours’

US equity prices | Bob Doll

Bob Doll’s view on equities:

Equity indices have again hit new records, but we believe fundamental changes may be necessary for prices to continue advancing strongly. Specifically, earnings would have to improve further and/or investor flows would have to turn notably toward stocks. Neither is out of the question, but aren’t likely….

Source: Weekly Investment Commentary from Bob Doll | Nuveen

Political correctness: the demise of debate | On Line Opinion

By Louis O’Neill:

Frequently I find myself holding what one might consider a politically incorrect opinion, such as having scorn for Islam, disagreeing with myths peddled by the third wave feminist movement or finding no legitimacy in the claims of the black lives matter movement.

As a result my adversaries are more than ready to deviate from the laws of discourse, veering off into ad hominem, red herring or appeal to emotion fallacies…..

To disagree with the wage gap myth should not equate to being misogynist. One who believes that the doctrines of Islam and tenets of Sharia Law cannot peacefully run alongside a secular, democratic society should not be labelled “Islamophobic” or xenophobic.

To suggest that black-on-black crime is a cause for increased police confrontations in African American communities should not equate to being a racist. To comment that the institution of marriage is aimed at incentivising long-term heterosexual relationships as they are most conducive to a positive upbringing for a child, should not be tantamount to homophobia.

We are amidst an era of ideological fascism, incited by the left-leaning media, celebrities and television which has begun to pervade every crevice of popular thought……

Source: Political correctness: the demise of debate – On Line Opinion – 19/8/2016

Gold trend continues

Interest rates have stabilised with an ascending triangle formation on 10-year Treasury yields suggesting reversal to an up-trend. Recovery above 1.60% would confirm.

10-year Treasury Yield

Rising interest rates increase downward pressure on gold. Tall shadows for the last three weeks indicate selling pressure and a test of support at $1300 is likely. But the metal remains well above the rising trendline on a weekly chart and Momentum holding above zero indicates a healthy primary up-trend. Respect of support at $1300 would confirm. Breach of support is unlikely but would signal weakness.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

How to Counter the Putin Playbook | The New York Times

Michael A. McFaul, director of the Freeman Spogli Institute and a senior fellow at the Hoover Institution, both at Stanford, served as United States ambassador to the Russian Federation from 2012 to 2014:

…We will not find security in isolationism. No missile defense shield, cybersecurity program, tariff or border wall can protect us if we disengage. Menacing autocracies, illiberal ideas, and antidemocratic and terrorist movements will not just leave us alone or wither away. The threats will grow and eventually endanger our peace, as we saw in Europe and Japan in the 1930s, and Afghanistan in the 1990s.

Conversely, the growth of democracy around the world serves American interests. Democracies do not threaten us; autocracies do. Democratic allies also vote with us at the United Nations, go to war with us, support international treaties and norms, and stand with us against tyranny.

So we must push back, in new ways. Just as the Kremlin has become more sophisticated at exporting its ideas and supporting its friends, so must we.

We should think of advancing democratic ideas abroad primarily as an educational project, almost never as a military campaign. Universities, books and websites are the best tools, not the 82nd Airborne. The United States can expand resources for learning about democracy……

I agree with the sentiment but not the execution. Win friends by promoting education and building infrastructure abroad. These have practical, tangible benefits to citizens of developing nations. Democracy can come later. In many parts of the world it is as foreign a concept as gay marriage.

Source: How to Counter the Putin Playbook – The New York Times

In every act observe the things which come first and those which follow…. If you do not, at first you will approach it with alacrity…. but afterward you will be ashamed. A man wishes to conquer the Olympic games…. But observe the things which come first and the things which follow…. You must do everything according to the rule: eat according to strict orders, abstain from delicacies, exercise yourself at appointed times, in heat and cold, you must not drink cold water, nor wine as you choose…. And sometimes you will strain the hand, put the ankle out of joint, swallow much dust, sometimes be flogged, and after all this be defeated. When you have considered all this, if you still choose, go to the contest. If you do not (consider) you will behave like children, who at one time play as wrestlers, another time as flute players…. but with your whole soul you will be nothing at all.

~ Epictetus: Enchiridion (A.D. 55 – A.D. 135)

Epictetus

Imaginary portrait of Epictetus. Engraved frontispiece of Edward Ivie’s Latin translation (or versification) of Epictetus’ Enchiridon, printed in Oxford in 1751. Original title of the book: “Epicteti Enchiridion Latinis versibus adumbratum. Per Eduardum Ivie A. M. Ædis Christi Alumn. […] Oxoniæ, Theatro Sheldoniano, MDCCXV. […]” The subscription is an epigramm from the Anthologia Palatina (VII 676) and reads: Δοῦλος Ἐπίκτητος γενόμην, καὶ σῶμ’ ἀνάπηρος, καὶ πενίην Ἶρος, καὶ φίλος ἀθανάτοις. “I was Epictetus the slave, and not sound in all my limbs, and poor as Irus, and beloved by the gods.” (Irus is the beggar in the Odyssey.) Source: Wikipedia

Epictetus: Commitment

Beware of recency bias

Every the year the 2016 Russell Investments/ASX Long-term Investing Report provides an invaluable summary of before and after-tax returns on various asset classes for Australian investors, over 10 and 20 years.

Naive investors are likely to automatically pursue the asset classes that offer the highest yields. Recent performance is more likely to attract our attention than more stable longer-term performance. Josh Brown highlighted last year that mutual funds that attracted the most new investment tended to underperform funds that attracted the least new inflows. I suspect that the same applies to asset classes.

If we consider each of the asset classes highlighted, it is clear that performance over the next 10 years is likely to be substantially different from the last decade.

Australian Asset Classes 10-year Performance to 31 December 2015

Source: 2016 Russell Investments/ASX Long-term Investing Report

Australian Shares

Australian Shares endured a (hopefully) once-in-a-lifetime financial crisis in 2008. 10-Year performance is going to look a lot different in two years time (20-years is 8.7% p.a.). Prices of Defensive stocks, on the other hand, have since been inflated by record low interest rates.

Residential Property

Residential property prices boomed on the back of low interest rates and an influx of offshore investors. But growth is now slowing.

RBA: Australian Housing Growth

Listed Property

REITS were smashed in 2008 (20-years is 7.7% p.a.). But before contrarians leap into this sector they should consider the impact of low interest rates, with many trading at substantial premiums to net asset value.

Bonds & Cash

Low interest rates again are likely to impact future returns.

Global Shares

Global Shares also weathered the 2008 financial crisis (20-year performance (unhedged) is 6.4% p.a.). Subsequent low interest rates had the greatest impact on Defensives, while Growth & Cyclicals trade at more conservative PEs.

I won’t go through the rest of the classes, but there doesn’t seem to be many attractive alternatives. It may be a case of settling for the cleanest dirty shirt, and the least smelly pair of socks, in the laundry basket.

Defensive PE at a dangerous high

Low interest rates and the accompanying search for yield have driven the forward Price-Earnings ratio for Defensives to a 20-year high. This is likely to reverse when (not if) rates eventually rise. Cyclicals and Growth, however, still look reasonable.

Economists Turn a Blind Eye to Historical Data | Bloomberg View

Barry Ritholz explains where many economists are going wrong when comparing the current recovery to previous recessions:

Why are so many economists, journalists and asset managers using the wrong history for their analysis? In a word: context. As I have been pointing out for nearly a decade (see here, here and here), most are looking at the wrong data set to analyze and compare this recovery to prior ones, using post-World War II recession recoveries as their frame of reference. The proper frame of reference, as Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University explained in 2008, are debt-induced financial crises…..

Why is there such a difference between economic recoveries? The defining characteristic of any recovery from a credit crisis is ongoing debt deleveraging, meaning that households, companies and governments are primarily using any economic gains in income or borrowing costs to reduce their debt. Low rates are not being used to buy homes, but rather to refinance existing obligations. Hence, the entire current post-crisis period has seen only mediocre retail sales gains and slow GDP growth. Reinhart and Rogoff observed that, while rarer, post-credit-crisis recoveries are weaker, more protracted and much more painful.

There is normally only one credit crisis per generation. They take a long time to fade from memory. And recoveries are slow and protracted. Which is why we should insist that steps are taken to prevent rapid debt growth and a long-term repeat of the 2008 disaster. Increasing bank capital requirements and targeting nominal GDP growth (as suggested by market monetarists) are two important bulwarks against future credit crises.

Source: Economists Turn a Blind Eye to Historical Data – Bloomberg View

Valley of a Thousand Hills

I tried this as a test of Vimeo, but don’t you just love the attitude of these young Zulu kids. Few possessions other than a skateboard (most likely donated) but not a worry in the world.

Elon Musk’s Next Plan | Inc.com

By Kevin J. Ryan:

During Tuesday’s SolarCity earnings call, Elon Musk hopped in to let the world know what the company he co-founded plans to do next: create solar roofs. Not solar panels–entire roofs.

….”The point of all this was, and remains, accelerating the advent of sustainable energy,” Musk wrote in his recent Tesla “Master Plan Part Deux” blog post, “so that we can imagine far into the future and life is still good.”

Now, that plan is beginning to crystallize a bit more. Should Tesla close its $2.6 billion deal to buy SolarCity, it will bring Musk’s vision a little closer to reality–especially the part that entails creating cars that get their energy from solar-powered batteries.

A home that powers itself and perhaps the cars parked in its garage–and in the process, helps the world lessen its dependency on fossil fuels in a very big way–might not be that far off. And it might not look that bad, either.

Source: Elon Musk’s Next Plan: Do for Roofs What He Did for Cars | Inc.com