Royal Bank of Scotland to investors: 'Sell everything'

People who believe zero sum types of things astound me. What is particularly upsetting about it for me is that the people who start off with those ideas (and can never be swayed) often use it as the basis for how they are going to manage the world to make it great. It's like putting someone who is absolutely convinced that the sun revolves around the earth in charge of NASA. Actually worse, because these idiotic beliefs lead to things that negatively affect everyone else.

The unfortunate thing is that it is exactly the kind of ignorance behind a lot of the populism we are seeing here now. ... For example, the idiocy that we need to restrict immigration, because they are "taking away our jobs."

 

China bond yields invert for the first time on record

China's yield curve inverted overnight. That is not normal and it is a serious sign of credit distress.

The amount of leverage -- not just in China, although China is a ticking time bomb that very well could be the global catalyst -- out there reached insane levels over the last few years. It has created huge misallocations of capital that are going to bring about something that has always been rather predictable. But if we don't see a credit crisis or one of the multitude of bubbles worldwide that have been blown pop this week or in the next month or next 6 months, I'll get posts on here trying to turn what I have said into a market timing discussion. For what it is worth, prior to the financial crisis, the yield curve in the U.S. inverted in 2006, a full two years before it was on the radar screen of the typical person.

 

Aside from the fact that quote has nothing to do with anything I said (unless it wasn't directed at me and was meant to be a non sequitur). ... the funniest thing about it is that that forecasting record would be 100 percent better than the Federal Reserve's. ... which actually is in the business of making forecasts, which it then uses as its rationale to subvert our markets in an attempt to centrally plan the very thing they are utterly clueless about. It has the worst economic forecasting record imaginable.

2007. ... Central Tendency (i.e. Federal Reserve forecast) 2.4 to 2.5 percent. Actual Growth = 1.8 percent.
2008. ... Central Tendency (i.e. Federal Reserve forecast) 1.8 to 2.5 percent. Actual Growth = negative .3 percent
2009. ... Central Tendency (i.e. Federal Reserve forecast) negative .2 percent to 1.1 percent. Actual Growth = negative 2.8 percent
2010. ... Central Tendency (i.e. Federal Reserve forecast) 2.5 percent to 3.5 percent. Actual Growth = 2.5 percent
2011. ... Central Tendency (i.e. Federal Reserve forecast) 3.0 percent to 3.6 percent. Actual Growth = 1.6 percent

I can fill in more years, if you like. ...

These are great quotes, too.

"Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. " Ben Bernanke, May 17. 2007

"The Federal Reserve is not currently forecasting a recession," Ben Bernanke, January 10, 2008.

"The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." Ben Bernanke, June 9, 2008.

Those are just a couple of gems I can pull out from the last several Fed Chairs. Yet, their decisions have more impact on our lives than anyone we elect.