Markets crept up to end the week on a five year high. The debt cliff is still a fair bit ahead of us; people are drawing their lines in the sand and staking out positions, but no negotiations are happening at any level revealed to the public. Obama has said he will not mint a platinum coin and the Fed has questioned its legality. Obama has also said he will not invoke the 14th amendment and ignore congress. What we have right now is a couple of 14 year olds high on testosterone, building up speed on their bicycles for a game of chicken. It's about time for a market correction, which I expect in the next week or so, but then Bernanke is paying a lot of money to pump up the stock market so I expect the markets will recover and perhaps even hit higher highs in a couple of weeks.
Last week investment funds took in $19 billion in new money, the fourth highest number since 1992. In the graph below, you can see this number really sticks out. Since it's considered axiomatic on Wall Street that Joe Average Investor is always wrong, this is considered a clear sign that we're near a market top. With the debt crisis ahead, a $200 billion tax increase just passed two weeks ago, and serious questions about Europe, economist Gary Shilling is calling for a 42% drop in the markets to an S&P level of 850. JPMorgan recently put out a similar warning to their customers, implying a fall to perhaps S&P 600 over the next two years. Will it happen? Not if Bernanke has anything to say about it. The US, Japan and Europe are all printing money, which will, for a time, put off any such major market drop. But I'm a big believer that in the long run, the market always has its way. Sort of like your wife. . .
Europe's unemployment numbers came out, and they continue to get worse. Youth (under 25) unemployment europe-wide continues to rise and is approaching 25% averaged over all of Europe. Spain comes in at #1 with 56% youth unemployment. Youth unemployment is particularly damaging as it drops incentives to learn to work, cuts expected lifetime income by scary factors, damages self-esteem, and sends them home to live with their broke parents. Any hope Europe has to resolve their debt problems requires that unemployment drop dramatically, wages remain high, and tax revenues increase by large factors. Youth unemployment calls this long term plan into question. Overall unemployment also continues to rise and is approaching 12% for the eurozone, higher than the peak of our unemployment. Spain's industrial production fell 7.2% in November - this economy is coming apart. Meanwhile the Euro is shooting through the roof, hitting $1.33 and on its way to $1.37 according to Goldman Sachs. Such a high Euro makes it very hard for european companies to export, but it does make imports from China and the US cheaper.
Law schools require LSAT test scores for admission. The number of people taking the LSAT has dropped by 16% recently. It seems law schools are going to graduate about 44,000 new lawyers this year for about 26,000 new jobs. You'll be shocked, shocked to learn we apparently have a surplus of lawyers.
Global Warming: China is experiencing a cold snap with the lowest temperatures recorded in 28 years. Farmers in north east China are losing crops to freezing at a record rate. Prices on effected foods are up 55%. Forecasters say the freeze will likely last several more weeks. Coupled with the US drought last summer, this is very bad for the world's food supply this coming summer. Wheat and corn prices are already rising due to our drought. There will be serious trouble in some parts of the world this year over food prices.
A couple of weeks ago I noted that China and Japan were moving in the direction of armed conflict. They're fussing over some uninhabited rocks just south of Okinawa that are thought to sit on major gas and oil reserves. China is now routinely flying fighter planes around the area, and Japan is considering having their F-15 pilots fire tracers as warning shots at Chinese military aircraft. China has warned their citizens to "prepare for the worst."
Obama will nominate Jack Lew, a 30 year Washington insider, for Sec.Treasury. In the past he has proven a calm and informed negotiator, so there are hopes he will help get the debt limit negotiation resolved in a calm, if not exactly timely fashion. He also has a reputation for being very liberal, he's not going to want to cut any spending except maybe the military. There are many who are concerned that Lew has no background in economics and is unqualified for the job. The exact same thing can be said for nearly every elected official in Washington. Geithner and Bernanke are highly qualified, and I'm not at all sure I like the job they have done. Sometimes I think being qualified in economics is closely related to being qualified in voodoo.
California claims to have moved their budget into an actual surplus, from a $30 billion deficit to an $850 million surplus. I dunno, these guys are masters of obfuscation, but raising taxes is apparently working really well in the short run. In the long run we'll see if startups continue moving to Silicon Valley.
The Fiscal Cliff bill includes tax credits for gas stations that start selling E15 - gasoline that's 15% ethanol. Using this will void your engine warranty unless you have a Flex Fuel vehicle (you don't.) Watch for it and don't use it. E10 is the most ethanol allowed in new vehicles. What are the Feds doing? Helping Archer-Daniels-Midland, the huge conglomerate that grows most of the corn in this country; helping Detroit sell more cars as you blow up yours; helping people in 3rd world countries starve to death due to higher grain prices. They're just being helpful.
A few weeks ago I noted that in the past twelve months the Department of Homeland Security (KGB in Russian) had put out requisitions for 1.4 billion assault rifle bullets - a 20 year supply for the Iraq war, 5 bullets for every American citizen. Well, they just put out a requisition for 450 million more - two billion rounds of .223 hollow point ammo total. Who are they planning on shooting? Remember, hollow point is against the Geneva Convention, so they can't be considering shooting Canadian businessmen or Asian tourist/shoppers. Nope, it pretty much has to be us.
Obama is said to be considering using executive orders to implement some form of gun control. No one, apparently including Obama, knows what this
means right now. Being considered: required federal background checks for all gun purchases including gun shows and private transactions; limiting
magazines to ten rounds; a national gun ownership database; new rules on violence in movies and video games; new mental health initiatives. Some make
the argument that assault rifles aren't any good for hunting deer, so what are they for? The 2nd amendment isn't about hunting deer, it's about
hunting bureaucrats. And the bureaucrats are heavily armed with their own assault weapons with 30 round clips and two billion rounds of hollow point
ammo. One thing I'm personally clear on: if they're going to outlaw assault weapons, then they must be illegal for everyone but the military - no
police, no swat teams, no
KGB DHS guys, no forestry or SS agents, no one gets them. If DHS is going to stockpile ammo and assault weapons,
then I think we should have them too.
The first tuna catch of the year came in. A 500 pound tuna set a new record, selling for $1.7m, double the previous record. A single piece of sushi from this tuna costs about $10. A 6oz can of this tuna would be $215. Japanese are nuts. And tuna is getting scarce. A recent study found that blue fin tuna population has dropped more than 96 percent from its unfished levels. Who is to blame? Most of the fishing of blue fin tuna happens off the coast of Japan, which has virtually no limits on tuna fishing. 80 percent of blue fin tuna are used for sushi.
Robert F. Kennedy Jr. is convinced that a lone gunman wasn't solely responsible for the assassination of his uncle, President John F. Kennedy, and said his father believed the Warren Commission report was a "shoddy piece of craftsmanship." "The evidence at this point I think is very, very convincing that it was not a lone gunman." When asked if he believed his father, the U.S. attorney general at the time of his brother's death, felt "some sense of guilt because he thought there might have been a link between his very aggressive efforts against organized crime." Kennedy replied: "I think that's true. He talked about that. He publicly supported the Warren Commission report but privately he was dismissive of it." He said his father had investigators do research into the assassination and found that phone records of Oswald and nightclub owner Jack Ruby, who killed Oswald two days after the president's assassination, "were like an inventory" of mafia leaders the government had been investigating.
Interested in some free education? Check out coursera.org. They have a broad selection of good, free, online courses with optional grades and course credit, taught by folks from Caltech, Stanford, Duke, UCI, Vanderbilt, U. of London, Ohio State.
About every nine years or so a new Corvette is announced, and it happened again today. The Corvette C7, shown below. The average Corvette owner is a white guy in his '50s, a lot like me and my readers; Chevy hopes this new model will appeal to a younger crowd. It's 100 pounds lighter due to lots of aluminum and carbon fiber, and there's an all new engine. The 5th generation small block is all aluminum, has direct injection and variable valve timing, and substantially more torque and horsepower; the base Corvette is said to go zero to 60 in under 4 seconds, then another 15 minutes or so for the officer write your ticket for exhibition of speed that will suspend your license. It will also be rated at about 30mpg highway and have 25% lower emissions at startup - an Eco-Vette. The new interior has been called a "carbon fiber and leather sex dungeon" which should play well with all those 40-something women who read Fifty Shades of Grey. Coming to your local Chevy dealer this summer, about $55,000. Click on each image for a larger version.
Science 1: There are about 200 billion stars in our galaxy, and with our telescopes we can see about 200 billion galaxies. Scientists estimated this week that at least 15% of all those stars have an earth-sized planet. About 500 years ago Copernicus noted that the Earth revolved around the Sun, ending the idea that the Earth was at the middle of the universe. About 75 years ago George Gamow announced the Big Bang theory, which says the universe has no center. However religion and biology still haven't caught up: it's still believed by most that life originated on Earth, perhaps by lightning hitting a mud puddle, perhaps by a mystical old man breathing on a handful of dust. Thus making the Earth the biological center of the universe. 10 billion trillion earth-sized planets in our Universe and God/Evolution chose this planet only and uniquely? As Carl Sagan used to put it, what a waste of space.
Science 2: Astronomers announced Friday that they had found a cluster of quasars that was 4 billion light years across, and about 1.5 billion light years deep and 1.5 billion high. It's been shown that nothing bigger than about 1 billion light years could have formed in the 13.7 billion years since the big bang. So it seems the universe contains an object which is older than the universe. No big surprise to readers of my blog: I've pointed out this sort of thing several times now. Science these days finds itself in the uncomfortable position of assuring the public at large that we know how the universe got started, we know how life got started, and we know how people evolved, but meanwhile we keep finding these things that really don't fit in at all, like huge quasar groups or people with brain damage that suddenly know how to paint. "There are more things in heaven and earth than are dreamt of in your philosophy." -- Shakespeare, about 400 years ago, and just as true today.