Category Archive: Debt and the Fallacies of Paper Money

Punch-Drunk Investors & Extinct Bears, Part 1

We didn’t really plan on writing about investor sentiment again so soon, but last week a few articles in the financial press caught our eye and after reviewing the data, we thought it would be a good idea to post a brief update. When positioning and sentiment reach levels that were never seen before after the market has gone through a blow-off move for more than a year, it may well be that it means something for once.

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2018: The Weakest Year in the Presidential Election Cycle Has Begun

Our readers are probably aware of the influence the US election cycle has on the stock market. After Donald Trump was elected president, a particularly strong rally in stock prices ensued.  Contrary to what many market participants seem to believe, trends in the stock market depend only to a negligible extent on whether a Republican or a Democrat wins the presidency.

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Several Simple Suppositions and Suspicions for 2018

The New Year is nearly here. The slate’s been wiped clean. New hopes, new dreams, and new fantasies, are all within reach. Today is the day to make a double-fisted grab for them. Without question, 2018 will be the year in which everything happens exactly as it should. Some things you will be able to control, others will be well beyond your control.

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Why Monetary Policy Will Cancel Out Fiscal Policy

Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?

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Season’s Greetings

A Difficult, but Also Exciting Year… Dear Readers, Another year is coming to a close, and the team at Acting Man wishes you and your loved ones a Merry Christmas / Happy Holidays and all the best for the new year. You have probably noticed that your main scribe was a lot less prolific this year than he normally tends to be; unfortunately, we were held back by health-related issues.

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How the Asset Bubble Could End – Part 2

There is just one more positioning indicator we want to mention: after surging by around $126 billion since March of 2016, NYSE margin debt has reached a new all time high of more than $561 billion. The important point about this is that margin debt normally peaks well before the market does. Based on this indicator, one should not expect major upheaval anytime soon. There are exceptions to the rule though – see the caption below the chart.

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How the Asset Bubble Could End – Part 1

We recently pondered the markets while trying out our brand-new electric soup-cooling spoon (see below). We are pondering the markets quite often lately, because we believe tail risk has grown by leaps and bounds and we may be quite close to an important juncture, i.e., the kind of pivot that can generate both a lot of excitement and a lot of regret all around.

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The Santa Claus Rally is Especially Pronounced in the DAX

Every year a certain stock market phenomenon is said to recur, anticipated with excitement by investors: the Santa Claus rally. It is held that stock prices typically rise quite frequently and particularly strongly just before the turn of the year. I want to show you the Santa Claus rally in the German DAX Index as an example. Price moves are often exaggerated in the German stock market, which leads to quite pronounced – and hence profitable –...

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The Party of Spend More vs. the Party of Tax Less

The Senate just passed a 500-page tax reform bill. Assuming it lives up to its promise, it will cut taxes on corporations and individuals. Predictably, the Left hates it and the Right loves it. I am writing to argue why the Right should hate it (no, not for the reason the Left does, a desire to get the rich).

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The Complete Idiot’s Guide to Being an Idiot

There are many things that could be said about the GOP tax bill. But one thing is certain. It has been a great show. Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago. Instead of addressing the Country’s mounting insolvency, lawmakers chose expediency without exception. They kicked the can from yesterday to today.

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Japan: It isn’t What the Media Tell You

For the past few decades, Japan has been known for its stagnant economy, falling stock market, and most importantly its terrible demographics. For almost three decades, Japan’s GDP growth has mostly been less than 2%, has been negative for several of these years, and has often hovered close to zero. The net result is that its GDP is almost at the same level as 25 years ago.

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Lessons from Squanto

Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens. This is what our experiences and observations have shown. What gives? For one, politicians have an aversion to freedom and liberty. They want to control your behavior, choices, and decisions. What’s more, they want to use your money to do so.

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The Precious Metals Bears’ Fear of Fridays

In the last issue of Seasonal Insights I have shown that the gold price behaves quite peculiarly in the course of the trading week. On average, prices rise almost exclusively on Friday. It is as though investors in this market were mired in deep sleep for most of the week.

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How Uncle Sam Inflates Away Your Life

“Inflation is always and everywhere a monetary phenomenon,” economist and Nobel Prize recipient Milton Friedman once remarked. He likely meant that inflation is the more rapid increase in the supply of money relative to the output of goods and services which money is traded for.

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Business Cycles and Inflation, Part II

We recently received the following charts via email with a query whether they should worry stock market investors. They show two short term interest rates, namely the 2-year t-note yield and 3 month t-bill discount rate. Evidently the moves in short term rates over the past ~18 – 24 months were quite large, even if their absolute levels remain historically low.

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Business Cycles and Inflation – Part I

Incrementum Advisory Board Meeting Q4 2017 – Special Guest Ben Hunt, Author and Editor of Epsilon Theory. The quarterly meeting of the Incrementum Fund’s Advisory Board took place on October 10 and we had the great pleasure to be joined by special guest Ben Hunt this time, who is probably known to many of our readers as the main author and editor of Epsilon Theory.

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What President Trump and the West Can Learn from China

Expensive Politics. Instead of a demonstration of its overwhelming military might intended to intimidate tiny North Korea and pressure China to lean on its defiant communist neighbor, President Trump and the West should try to learn a few things from China.

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Heat Death of the Economic Universe

Physicists say that the universe is expanding. However, they hotly debate (OK, pun intended as a foreshadowing device) if the rate of expansion is sufficient to overcome gravity—called escape velocity. It may seem like an arcane topic, but the consequences are dire either way.

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The Downright Sinister Rearrangement of Riches

Simple Classifications. Let’s begin with facts. Cold hard unadorned facts. Water boils at 212 degrees Fahrenheit at standard atmospheric pressure. Squaring the circle using a compass and straightedge is impossible. The sun is a star.

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The Strange Behavior of Gold Investors from Monday to Thursday

Known and Unknown Anomalies. Readers are undoubtedly aware of one or another stock market anomaly, such as e.g. the frequently observed weakness in stock markets in the summer months, which the well-known saying “sell in May and go away” refers to. Apart from such widely known anomalies, there are many others though, which most investors have never heard of.

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