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Mark's Market Blog

8-17-14: Still Debt.

By Mark Lawrence

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We broke through S&P 1950 on the second try but didn't shoot up from there. The market's primary job is thought by many to be to confuse and surprise as many people as possible. This market is doing a great job: the bears can't catch a break, the market simply won't substantially correct. And the bulls haven't really had anything to cheer about all summer. But I predicted we'd make our way to S&P 2150 or so, and I see no reason to change that prediction.

S&P 500 February 122 2014 to August 15 2014

Fracking - ruining our environment? Fixing our oil dependency? I dunno, but it's huge and getting huger. It does not seem to be lowering oil prices, however.

Japan's economy grew 6.1% in Q1 as people stocked up before the impending raise in the national sales tax. Now the Q2 results are in, and their economy shrank by 6.8%. Abenomics is not a run-away success, that much is clear. Japan has not re

I don't like George Soros. As a human being, I think he's below pond scum. His life - a Hungarian Jewish boy who collaborated with the Nazis to turn in fellow Jews for gold - makes me sick. Having said all that, he's also one of the world's best investors. And he's recently committed a full sixth of his investment portfolio to S&P puts, a heavy bet that the S&P will fall substantially in the next couple of months. Warren Buffer is sitting on $50 billion of cash - he can't find anything he wants to buy at these prices.

In her most recent testimony before congress, Yellen said she would rather fight inflation than another economic downturn - in other words, low interest rates will stick around for a long time, until inflation gets pretty bad. When she talks in public it's often about jobs, something I think has absolutely nothing to do with interest rates and bank reserves. And if inflation rears its ugly head, then what? Under Reagan, Paul Volker drove interest rates up to nearly 20% and killed off inflation in just over a year. Or did he? Many note that oil prices came down at the same time and say that's what killed inflation. If Yellen finds herself with high inflation, will she have the guts to raise interest rates to the sky? And will oil prices plummet in half at the same time? My answer is no to both. Just as we have all known for years, this massive government debt means massive inflation, especially for our children. They tell me inflation is running right now at about 2%. All I know is compared to when Obama was elected, I'm paying double for gas, double for milk, double for apples and oranges. However my house hasn't appreciated at all. Our kids who have math based degrees and own real estate will do ok, not great, but ok. Everyone else? forget it. And of course the banks and Wall Street will clean up.

When I was a kid there were some businesses that were run by the mob: trash collection, prostitution, loan sharking and the numbers racket. The numbers racket meant you placed a bet on the last four digits of the DOW closing value. That's gone now, the states run this and it's now called the lottery. As a friend of mine said, the beautiful thing about the lottery is its inherent symmetry: your chances of winning are the same whether or not you buy a ticket. Loan sharking? That's gone too, replaced by payday loans. There are more payday loan businesses in the US than McDonalds and Starbucks. You pay interest on the loan of course, and also an origination fee, with the result that these loans go out at an annualized percentage rate of 300% (low) to 1800% (high). The excuse is that if you pay the loan back with your next paycheck the annualized rate doesn't apply. Three-quarters of all borrowers fail to pay the loan back on time. In fact one payday loan company has a chart in their employee training manual showing the loan cycle as a never-ending circle, the circle of death. Several states have made half-hearted attempts to regulate this business; the result is that may payday loan companies are changing over to title loans (you put up your car), mortgage loans (you put up your house), or my favorite, the company partners with an Indian tribe and is no longer subject to federal or state law.

ok, it's not pretty, but here it is: Hello. My name is Mark, and I'm a science nerd. There, that said, here's some must see-TV. A fan based effort to put together a *real* Star Trek film, true to the history of the series and to Roddenberry's original vision. funding via Kickstarter. It's about the four years when the Federation was at war with the Klingons. Here's their extraordinarily compelling 21 minute intro film.

Science factoids: Imagine you're showing a puppet show to a group of children. There are two small boxes on the puppet stage, red and blue. Punch puts a jelly bean under the red box, then leaves the stage. Judy moves the jelly bean from the red box to the blue box. Then Punch returns. You now ask the children which box Punch thinks has the jelly bean. Children under about 5 will say "blue," because they saw the jelly bean move to the blue box and they figure everyone knows that. Children over about 5 will say "red" because they understand that Punch didn't see the jelly bean move and so he doesn't know. This is called a "theory of mind," the idea that others have their own knowledge and perspective. Children develop it sometime in their 4s. This seems to be a uniquely human property. For example, several people have trained various primates to use sign language; the run-away winner is a gorilla, Koko, currently 43 and going strong, who can sign over 1000 words and recognizes over 2000 spoken words. But about a dozen other primates have been so trained. Here's the interesting point: no primate who has learned to sign has ever asked a question. They don't seem to have the concept of acquiring knowledge from someone else e who perhaps knows more. Personally, I have Aspergers and I didn't have a well developed theory of mind until I was in my 20's. People on the autism spectrum do poorly at this. I'm still a little iffy on it - I'm a poor teacher due to a lack of patience with people who don't get it as quickly as I would, or who don't react well to my particular teaching method.

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