Fuck You Bears Monday Wrap Up

I guess we all saw this one coming – after all the script has been the very same for the past two years. First you whipsaw the crap out of everyone ahead of a holiday, then you kill the bears right at the open the day after:

Now the ZL signal was pretty flat throughout the day which means that participation here is pretty minimal. Even that last big spike up only registered at 0.6 on the ZL Richter scale which is nothing but a hiccup. Which leads me to believe that this thing can melt higher, yes – but I don’t think that we’re at the onset of a protracted short squeeze. I’m looking forward to see the spoos paint new highs because the way momentum is playing out right now I see them running this thing into a wall around 1360.

Geronimo had the right idea but missed the target by a tick or two and in the end got stopped out. The fact that it didn’t get an entry at the EOD is a bit puzzling – there quite a bit of tape banging going on and I would have liked to see a long trade there. Well, that’s how it goes – one down for the day. If we melt higher from here I expect Geronimo to squeeze in a few long scalps as well. In some ways it has served me well as an implicit medium term trend indicator.

Crude completed to target exactly the way I suggested last week (to the subs). I am being super conservative here by taking profits early – yes this thing could run all the way up to 110 but since we are knocking at a resistance line I’m gone in sixty seconds. It’s permissible to hold a handful of lottery tickets for a run higher but I would be rather cautious with the stops.

A few more short term charts for the subs:

Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

Late Afternoon Reading

Quite a few things added to my Instapaper today — This is what I will be reading on the way home tonight:

• Not a Flashy Investor, Just Successful (NYT)
• House to reject debt limit increase without cuts (BusinessWeek/AP)
• Five Questions on Tuesday’s  Case-Shiller (WSJ) see also New Blog from S&P/Case Shiller (Housing Views)
• R.I.P. Reaganomics Revolution: 1981-2011 (Market Watch)
• iCloud, YouCloud, We All Scream For iCloud. But What Exactly Will It Be? (Tech Crunch)
• Public Wants 60 MPG Cars, But Don’t Listen To Them (AOL Autos)
• The U.S. Postal Service Nears Collapse (Bloomberg)
• Readers of the Pack: American Best-Selling (Book Forum)
• John Lasseter/Pixar: Father of the Year (Esquire)
• Pete Townsend at 66: Won’t Get Fooled Again (More Intelligent Life)

What are you reading?

The Marx-Mellon-Schumpeter-Hoover-Hayek Axis Is Back!


Economics, politics, and distraction from productive activity: Since the recession began, Arnold Kling has been trumpeting a very non-traditional way of thinking about the economy. At first this went by the name of "recalculation," but Kling has now settled upon "PSST," which stands for "Patterns of Sustainable Specialization and Trade."... I'll let Kling sketch the idea in his own words:

Regular readers know that I am trying to nudge them toward a different paradigm in macroeconomics. I want to get away from thinking of economic activity as spending, and instead move toward thinking of it as patterns of sustainable specialization and trade.... I believe that trying to describe economic activity using an aggregate production function is a mistake.... The advantage of the aggregate production function is that...it yields an aggregate supply curve. This allows macro to be presented using the familiar tools of supply and demand.... Instead, I think that the right tools to use for macro are the two-country, two-good models of international trade.... At full employment, both countries are taking advantage of specialization and trading with one another. When something happens to adversely affect the pattern of trade, some workers shift from market activities to non-market activities, mostly in the form of involuntary unemployment. Gradually, new patterns of specialization and trade emerge, and full employment returns. That is what I have been calling the Recalculation Story....

Every first-time econ student who has ever been presented with a macroeconomic aggregate probably has some variant of this reaction. Economies are just too complex to be modeled with this handful of variables! Then someone raises his hand and asks the Teaching Assistant if that isn't the case, and the Teaching Assistant shakes his head and says "Yeah, well, just try to model a complex system like that and see how far you get!" Because it is hard...

The teaching assistant's answer seems to me to be wrong. Modeling 140 million workers, 10 million firms, and 20 million commodities is really complex--that's why we don't do it, and don't have a big computer centrally-planning our economy. That is why we use the market system.

But when it comes to business-cycles--to recessions and depressions and downturns--we don't need to model 140 million workers, 10 million firms, and 20 million commodities: we only need to model two: (OK, four): currently-produced goods and services on the one hand, and (perhaps three types of) financial assets on the other. A business-cycle downturn comes when--for any of a number of possible reasons--there is an excess demand for financial assets and a corresponding deficient demand for currently-produced goods and services, which leads to rising inventories, falling sales, rising unemployment, falling incomes, and multiplies itself into general deficient demand for pretty much all currently-produced goods and services in the economy. The downturn comes to an end when incomes have fallen so far that households and businesses are so strapped that they cease trying to build up their stocks of financial assets, and the aggregate supply-aggregate demand balance comes to an end. The depressed state of the economy comes to an end when an excess supply of financial markets induces an excess demand for currently-produced goods and services that pushes inventories down, sales up, unemployment down, incomes up, and multiplies itself into general prosperity.

In the background the market system is trying as best as it can to find the best uses and production plans for 140 million workers, 10 million firms, and 20 million commodities given the state of aggregate demand. But that is not of the essence in understanding low capacity utilization and high unemployment. The aggregate demand shortfall is.

When you ask believers in "recalculation" what pattern of production and trade proved to be unsustainable in 2007, they answer: "building so many houses." When you ask believers why the market economy has been unable to sort out this problem in three years, they answer with nothing--silence. When you say that OK, there were $300 billion of excess houses at the start of 2007 but now construction has been so depressed for so long that there are $1 trillion fewer of houses than trend and why isn't the 2007 pattern of production and trade sustainable again, they answer once again with nothing--silence.

That annoys me.

It is possible to find in history economic catastrophes produced by the disruption of patterns of sustainable specialization and trade--the Bengal famine of 1942 comes immediately to mind. But there is literally no evidence at all that we have such a problem right now. Our problem right now is that demand is low because incomes are low, and incomes right now are low because demand is low, and demand is not rising because there is no excess supply of financial assets to goose people to spend more. If you want to argue that there is a disruption of patterns of sustainable specialization and trade, you need to point to such a disruption right now that is large enough to produce an 8% shortfall in spending. Nobody has. Nobody has because nobody can.

The other thing that annoys me is that this is presented as something new when it is actually something very old--and it is presented without acknowledgement of the arguments made against it in the 1930s and, indeed, in the 1840s when it was made before. Friedrich Hayek and Andrew Mellon claimed--and Mellon dragged Herbert Hoover along into policies of austerity, of tax increases and spending cuts during the Great Depression--that as a result of lax monetary policy in the 1920s the economy in 1930s had too much plant and equipment and too many workers employed making capital goods, and had to suffer from a "prolonged liquidation" in order to productively redeploy resources into the consumer goods industries where they really should be. Joseph Schumpeter cheered them on, claiming that without the boom-and-bust cycle the economy would die, for it was its "respiration." But if Hayek were correct we should see depressions both when the economy is switching resources from capital to consumer goods and when the economy is switching resources form consumer to capital goods, and we don't: while an economy making too little in the way of consumption goods is ripe for a downturn, an economy making too little in the way of capital goods is ripe for a boom.

And a century earlier Marx had the original story: because workers earned less than they produced, full employment could only be maintained if capitalists purchased the excess, but capitalists would do so only if they believed the boom would continue and they could keep making money by expanding their operations, but expanding operations meant that the gap between what workers produced and what they earned would grow, and so full employment required that capitalists not just anticipate that growth would continue but that growth would continue at an increasing rate--and somebody capitalists would lose their confidence that the rate of growth would keep increasing, and then would come the depression. The depression would continue, Marx thought, until the waste and destruction of the depression had gone on for long enough that capitalists concluded that the economy was once again short of capital, and that they could safely and profitably expand their operations again.

It was not an implausible theory--for 1848.

But it was a wrong theory.

And it is an especially wrong theory now: We have worked off our housing overhang. We have worked off our housing overhang fourfold. We are now $1 trillion short of houses in the United States. But where is our robust recovery?

Band of the Hand (by Iggy)

Ladies, Gentlemen, Slopers and Sloperettes,

I have an important announcement to make.  As many of you are aware, one of our trading family members has been diagnosed with brain cancer.  Tazman is a close personal friend of mine and he's the real deal.  The man we know out here is the same one you meet when you have the pleasure of meeting him and shaking his hand.

I had that distinct pleasure in February when Mrs. Ig and I took a vacation to Orlando and arranged to visit his home.  Thinking back to that visit and what a great time we had as he and his wife hosted us is a fabulous memory and even moreso knowing that not 2 months later he was going to the hospital due to slurred speech.

Here's the scoop… HumbleDukes and I have designed and ordered TAZSTRONG bracelets, similar to those everyone has seen with LIVESTRONG on them.  The link below will take you to a picture of them.  100% of the sale price will go to Taz and his family.  For a mere $10 each, you and your family can show your support of our friend and family member.  They're available in blue and green.  I can't guarantee which color you'll get, but if you order more than one you'll be sure you get a mix of colors.

The easiest way to order will be via PayPal.  I will use the contact information form PayPal to mail out the bracelets ordered.  $10 each, plus a one time $1 fee for shipping no matter how many bracelets you order.

My PayPal info is NC_PEPSI @YAHOO.COM (be sure to remove the spaces)

If you do not have a PayPal account but wish to order, email me at iggyslopefest @ gmail and we'll figure something out.

On a lighter note, one side says TAZSTRONG and the other side says FLAX MAN… the reason for that is that after Taz's first couple of radiation treatments, his trading was on fire, so a group of us put 2 and 2 together, just like Spiderman was bitten by a radioactive spider… Taz must have been benefiting from the effects of his treatments,, so we needed a super hero name for him.  Well, the Russian has him on a vegetarian diet heavy on the flax seed… so we now calll him FLAX MAN.  


Thank you and email me with any questions at iggyslopefest @ gmail


World Health Organization Says Cellphones Cause Cancer … Oh, And They’re Killing Off the Bees As Well

The World Health Organization just issued a report stating that cellphones are "possibly carcinogenic to humans".

Specifically, WHO found "an increased risk for glioma, a malignant type of brain cancer, associated with wireless phone use".

The WHO report notes that a previous study showed increased risk with increased cellphone use, and recommends taking actions - such as using hands-free equipment - to reduce exposure to the electromagnetic fields produced by cellphones.


(For another option for reducing cell phone exposure, see this.)

CNN points out:
The agency now lists mobile phone use in the same "carcinogenic hazard" category as lead, engine exhaust and chloroform.


The type of radiation coming out of a cell phone is called non-ionizing. It is not like an X-ray, but more like a very low-powered microwave oven.

"What microwave radiation does in most simplistic terms is similar to what happens to food in microwaves, essentially cooking the brain," Black said. "So in addition to leading to a development of cancer and tumors, there could be a whole host of other effects like cognitive memory function, since the memory temporal lobes are where we hold our cell phones."


Results from the largest international study on cell phones and cancer was released in 2010. It showed participants in the study who used a cell phone for 10 years or more had doubled the rate of brain glioma, a type of tumor. To date, there have been no long-term studies on the effects of cell phone usage among children.

"Children's skulls and scalps are thinner. So the radiation can penetrate deeper into the brain of children and young adults. Their cells are at a dividing faster rate, so the impact of radiation can be much larger." said Black of Cedars-Sinai Medical Center.


Manufacturers of many popular cell phones already warn consumers to keep their device away from their body.

It should be noted that WHO's findings are not strictly limited to cellphones. Specifically, the report discusses:
radio frequency electromagnetic fields, such as those emitted by wireless communication devices.
As such, the WHO report may give ammunition to those who oppose non-essential radio frequency electromagnetic fields, such as California residents who oppose the installation of "smart meters" by the local power company. The smart meters wirelessly beam electric usage information to the power company. The utility installed the smart meters on all customers' homes (without their consent) in order to save the cost of having workers manually check electric meters.

For those who are surprised that an electromagnetic fields can affect the human body, you are behind the times. As I noted last month:

It is well-known that humans and animals have many electric currents inside of us, and that we interact with electric fields and electric currents outside of our bodies. For example, the pumping of our hearts is driven by an electrical system, and EKGs measure the electrical activity in our heart:

The [EKG]works mostly by detecting and amplifying the tiny electrical changes on the skin that are caused when the heart muscle "depolarizes" during each heart beat.
Electrocution can kill by disrupting the heart's electrical system.

Our brains are also largely electrical systems, and EEGs measure electrical activity in our brain:

Electroencephalography (EEG) is the recording of electrical activity along the scalp produced by the firing of neurons within the brain.[2] In clinical contexts, EEG refers to the recording of the brain's spontaneous electrical activity over a short period of time ....
Both EKGs and EEGs use sensors on the outside of our bodies (on the skin) to measure electrical activity occurring inside our bodies.

Some animals can directly sense electric currents and electric fields of their prey, or produce electricity to stun or kill their prey. As About.com notes:

Electric fields are used in numerous ways by animals. Electric eels and some rays have modified muscle cells that produce an electric charge strong enough to shock and sometimes kill their prey. Other fish use weaker electric fields to navigate murky waters or to monitor their surroundings. For instance, bony fish and some frogs have a lateral line, a row of sensory pores in the skin, that enables them to detect electrical current in water.
The California Academy of Sciences points out:
Sharks are almost as precise as the best physics laboratories in the country when it comes to sensing tiny electric effects. They can use this "sixth sense" to find food and even mates, since all living animals create their own electric fields. When a fish swims, or even moves its gills, it creates a change in the surrounding electric field that sharks can detect ....
There are many other examples of our interaction with electromagnetism.
Bad for the Bees

Cellphones aren't just potentially hazardous to us.

As Digital Trends recently reported:

Researcher Daniel Favre of the Swiss Federal Institute of Technology has found that wireless signals cause honeybees to become so disoriented that they finally just die. [Link] Favre’s team conducted 83 separate experiments that tested bees’ reactions to a nearby cellphone.

The team found that honeybees made 10 times the amount of noise when a cell phone made or received a call than they did when the phone was in off or standby mode. As Fast Company reports, this noise (generally known as “worker piping”) usually signals the bees to leave the hive. But when the reaction is triggered by a cellular signal, the bees just became tragically befuddled.

So, what about a cell phone signal makes bees suicidally crazy? As Favre’s report explains: “Worker piping in a bee colony is not frequent, and when it occurs in a colony, that is not in a swarming process, no more than two bees are simultaneously active…The induction of honeybee worker piping by the electromagnetic fields of mobile phones might have dramatic consequences in terms of colony losses due to unexpected swarming.”

It’s the “dramatic…colony losses” part that everyone should be concerned about. Honeybees are responsible for pollinating about 70 percent of the 100 or so crops on the entire planet that humans use for food.

So-called “colony collapse disorder” among the world’s bee population has been recorded since 1972. But it wasn’t until 2006 that the drop in the bee population took a nosedive, with beekeepers noting a 30 to 90 percent loss of their bee colonies, up from 17 to 20 percent in previous years.

Favre’s study corroborates a 2008 report that showed that honeybees would not return to their hive when a cell phone was placed nearby, which sparked the theory that wireless signals are the problem.

(There are a number of other reasons bees are dying, as well.)

Update: Dr. Meryll Nass points out:
Several weeks a go a paper out of China provided powerful epidemiologic evidence for cell phone use and parotid gland tumors. (This salivary gland is located just below and in front of the ear.) Other tumors that have been linked to cell phone use include acoustic neuroma (a common, benign tumor of the cranial nerve to the inner ear), glioblastoma multiforme (a very malignant brain tumor seen most often in older ages) and meningioma (usually benign tumors of the brain and spinal cord lining). Although benign, these tumors still require very delicate brain surgery, and may still kill the patient.

It appears the tide has turned on this contentious issue.

On May 27 the Council of Europe adopted Resolution 1815 (2011):
The potential dangers of electromagnetic fields and their effect on the environment
-- whose text can be read here.

What to do? Luckily, there are easy fixes. Keep the phone away from your body, with an earpiece/headset or bluetooth device, since exposure is inversely proportional to the square of the distance from your tissues. (Even the package inserts tell you to keep the phone away; do you still have the information that came with your cell phone?) Use landlines (even better if they are not wireless). Or texting. Or email.

A peculiarity of US law: citizens are not allowed to reject the siting of cell phone towers on the basis of health risk for anything other than thermal effects.* Let me restate that. The law is a pre-emptive strike against the kinds of scientific research that now point to adverse effects of radiofrequency radiation (including microwaves) in addition to, and different from, the effect of heating up tissue. The law basically assumes such effects cannot exist, and prevents citizens from using such effects to fight cell tower installations.

With this law in mind, the local school superintendent recently announced that a cell tower would be placed at our high school, currently a dead zone for cell phones. If it doesn't cook you, the US Government has made it safe, by decree.

Unlimited service may give us new freedoms, but it has its own price.

Renters and the Mini-Boom in Miami

From Arian Campo-Flores at the WSJ: Miami Renters Fuel a Boomlet
When the real estate market collapsed five years ago, this city's downtown soon became an emblem of the worst excesses of the building boom. Glittering new towers sat mostly vacant.

Those towers are filling up much sooner than some analysts predicted. The new arrivals, mostly renters, are spurring the establishment of restaurants, bars and shops.
Condo sales here began surging after property owners slashed prices about two years ago, sometimes by 50% or more. ... Fewer than 4,000 out of the 22,000 new units built since 2003 remain unsold, according to Condo Vultures.
This is an example of excess inventory being absorbed. Many of these condos were bought by international buyers and / or investors, and many are now occupied by renters. These are not "accidental landlords" (homeowners who rented their homes because they couldn't sell) - these are cash flow investors. Yes, some investors will sell if prices start to increase, keeping prices from rising quickly, but they can also be patient since many paid cash - so I wouldn't count this as shadow inventory.

Note: The Case-Shiller index indicated prices in Miami are off 50.4% from the peak - and many of these condos sold for more than half off.

Earlier ...
Case Shiller: National Home Prices Hit New Low in 2011 Q1
Real House Prices and Price-to-Rent: Back to 1999
The Excess Vacant Housing Supply
Home Prices Graph Gallery

Dingbat Kabuki from the House Republicans

Stan Collender:

The Dirty Secret About Today's "Clean" Debt Ceiling Vote: The House Republican leadership wants everyone to think that the expected large “no” vote this evening on a “clean” debt ceiling will demonstrate that there’s no support for increasing the government’s borrowing limit unless deficit reductions are attached.  That’s simply not true.... [A] debt ceiling increase with deficit reductions attached would also very likely... if not certainly... be rejected [by the House].  In other words, just because a debt ceiling increase that doesn’t include spending cuts or revenue increases can’t be adopted doesn’t automatically mean that, as the [House] leadership wants us to believe, a bill with them will pass.

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