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Copyright Mauldin Economics. Unauthorized disclosure prohibited. Use of content subject to terms of use stated on last page.

That Was The Weak That Worked: Part I

"The best perfumes in the world are laced with something nasty."

Rosalyn Rosenfeld (Jennifer Lawrence), American Hustle

"That was the week that was,

It's over, let it go"

Millicent Marn, "That Was The Week That Was"

And the hardest part

Was letting go, not taking part

Was the hardest part

And the strangest thing

Was waiting for that bell to ring

It was the strangest start

I could feel it go down

Bittersweet, I could taste in my mouth

Silver lining the cloud

Oh and I, I wish that I could work it out

Coldplay, The Hardest Part

o learn more about Grant's new investment newsleer,

Bull's Eye Investor, Click here

THINGS THAT MAKE YOU GO

Hmmm...A walk around the fringes of nance

By Grant Williams

30 December
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30 December 2013

ContentsTHINGS THAT MAKE YOU GO HMMM... ....................................................3

Turkey First of Fed Taper Victims as Political Crisis Scares Investors ..........................23The Unintended Consequences of Abenomics .....................................................24

Still Lying After All These Years ......................................................................25

The Rise and Fall of a Local Ofcial Obsessed with GDP Growth ..............................27

What's Behind the Khodorkovsky Pardon? ..........................................................28

U.S. Stocks: Heading for a Bubble? .................................................................30

Miss Japan Ikumi Yoshimatsu Joins Battle Against Maa in the Media .........................31

2013 Year in Review ...................................................................................32

Moguls Rent South Dakota Addresses to Dodge Taxes Forever ..................................33

Spend, Spend, Spend. Because Your Savings Aren't Worth a Damn ............................35

CHARTS THAT MAKE YOU GO HMMM... ..................................................37

WORDS THAT MAKE YOU GO HMMM... ...................................................40

AND FINALLY... .............................................................................41

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30 December 2013

ThingsThat Make You GoHmmm...2013 saw the passing of many beloved celebrities, but one who perhaps seemed to receive lessattention than merited was Sir David Paradine Frost, who died of a heart attack, aged 74,

whilst aboard the MS Queen Elizabeth, where he had been due to give a speech the followingday.

Those aboard the ship were deprived of a chance tohear the words of a journalist and broadcaster withoutpeer in the modern world, whilst the rest of us woketo nd ourselves being reminded of the high points ofhis remarkable life, particularly his famous interviewswith Richard Nixon, which were immortalized a fewshort years ago in the stage play and subsequent movie

Frost/Nixon.

But Frost's star was set on its upward trajectory viaa completely different type of vehicle when, aftergraduating from Cambridge University in 1962, hewas selected to present a new weekly satirical review devised, produced, and directed by NedSherrin and entitled That Was The Week That Wasor, as it became colloquially known, TW3.

The writing staff of TW3 was a who's who of British comedy (John Cleese, Peter Cook, EricSykes, and Ronnie Barker were all amongst the contributors) but also included literary greatssuch as Dennis Potter, Roald Dahl, and Sir John Betjemin; and some of its sketches became the

stuff of British comedy folklore.

Wikipedia describes TW3 thus:

(Wikipedia): The programme is

considered a signicant element of thesatire boom in the United Kingdom in the

early 1960s. It broke ground in comedythrough lampooning the establishmentand political gures.

You can probably gure out why I'm a fan.TW3 liked to point out the absurdities of the political system and take pot-shots at politicalgures. If only they'd had some kind of nancial crisis in the 1960s, the symmetry would havebeen perfect ... but no. Instead, after a tumultuous four years between 1957 and 1961, theUS, though saddled with high unemployment and huge excess capacity, embarked upon a mid-decade boom, which hard though it is to believe was actually helped by constructivegovernment policy in the form of the Kennedy-Johnson tax cuts.

To receive Grant Williams'Things That Make You Go Hmmm...

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30 December 2013

Of course, there was the little matter of a war police action in Vietnam which led to a sudden3.5% surge in the PPI in 1965, but let's not let anybody get any ideas as to how combat might beused to create a little desired (but controllable) ination, shall we?

Let's change the subject.

Slightly.

The end of the year is inevitably a time when even the most hard-bitten amongst us waxnostalgic and reective, looking back on the previous 12 months as though the arbitrary breakin the calendar should have some meaningful effect on fortune or fate. Of course, it doesn't,except for the fact that enough people tend to subscribe to that line of reasoning that it feelsas though it actually matters.

Human beings change their behaviour around the end of one year and the beginning of thenext because over time they've been conditioned to believe that changes are justied. The

appropriation of that mindset by various groups over the course of the past twelve months hasbeen, for me, perhaps the most noticeable evolution in 2013.

The title of this week's Things That Make You Go Hmmm... says it all:

"That Was The Weak That Worked"

Throughout 2013, the distortions created by intervention in once-free markets have left many(myself included) scratching their heads. The interventions have worked almost faultlessly but for them to do so has required the suspension of one belief system (economic reality) andthe adoption of another namely, that everything will be OK because ... well, just because.

Can the fantasy persist into 2014? Yes. It most certainly can.

Will it continue into 2014? Most likely.

Will this new belief system become the new economic reality? Not a chance.

So we're going to end 2013 by taking a three-part look at "The Weak That Worked" to try toget a sense of what could take place in 2014 if it happens to be the year that economic realitynally reasserts itself.

This week in Part I, I will focus largely on equities, and next week we'll take a look at the bond

and housing markets before heading to Europe and beyond.

So let's get cracking, shall we?

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30 December 2013

2013 was another yearbrought to you by the letters Qand E.

Quantitative easing spanned the entirety of 2013 and,as was no doubt intended, the market, the publicat large, and most certainly just about every singleinhabitant of Capitol Hill became so inured to thecreation of $85 billion each and every month that theenormity of that policy dissolved from the collectiveconsciousness like early morning mist.

But amidst all the commentary and the debatesurrounding QE, most people lost sight of what itactually is even when we received the much-anticipated news in December that there would, infact, be a Taper after all.

Before we get to the Taper that happened, though, it'simportant to revisit the one that didn't.

On May 22nd, 2013, Ben Bernanke, in a question and answer session, said the following:

We're trying to make an assessment of whether or not we have seen real and sustainableprogress in the labor market outlook. If we see continued improvement and we havecondence that that is going to be sustained, then we could in in the next fewmeetings we could take a step down in our pace of purchases.

Boom!

The consequences of that statement and in particular, the last 20 words reverberatedaround the nancial world and wrought havoc in all sorts of weird and wonderful places.

(In a presentation entitled "A Confederacy of Dunces" that I gave to a small group in Spainin late June, after Bernanke's comments, I pointed out the effects of the Taper threat andpinpointed some of those weird and wonderful places.)

The effect Ben's pronouncement on both the S&P 500 and the US 10-year yield wereimmediately obvious:

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30 December 2013

1570

1580

1590

1600

1610

1620

1630

1640

1650

1660

1670

28 June20 June10 June30 May20 May

2013

1.8

2.0

2.2

2.4

2.6

%

S&P500 Indexvs US 10-Year Treasury Yield(inverted)May 20 2013 - June 30 2013

Source: Bloomberg

The S&P dropped a quick 6%, and 10-year rates (seen inverted in the chart above) spiked frombelow 2% to 2.6% a big move.

But some of the other instruments affected by Bernanke's carefully oated idea weren't quiteso readily apparent. Nonetheless, they demonstrated just how pernicious and far-reaching thetendrils of QE had grown.

Like all the way to Indonesian bond yields, for example:

Source: Bloomberg / Grant Williams, "A Confederacy of Dunces"

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30 December 2013

Or those here in Singapore:

Source: Bloomberg / Grant Williams, "A Confederacy of Dunces"

And even those who held Brazilian bonds saw something meaningful shaved off:

Source: Bloomberg / Grant Williams "A Confederacy of Dunces"

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30 December 2013

Bernanke also committed the cardinal error of announcing that QE would END onceunemployment fell to 7% a statement he had to back away from, rather embarrassingly,as the slump in the participation rate brought 7% unemployment closer, rather faster thanexpected:

(WSJ, Dec 6, 2013 ): Back in June, when Fed Chairman Ben Bernanke laid out a tentativetimeline for winding down the bond-buying program, he said 7% is where the Fedexpected the unemployment rate to be when it ended the purchases. He said centralbank ofcials expected that to occur around mid-2014. Friday's jobs report showed the

jobless rate hit that level in November, and the Fed hasn't even started scaling back theprogram.

The jobless rate for May, the latest data Mr. Bernanke had when he laid out thatguidepost, stood at 7.6%. Then it fell much more quickly than Fed ofcials expected,dropping to 7.4% in July and 7.3% in August.

In September, the Fed surprised many market participants and held the quantitative-easing program steady. At his press conference after that meeting, Mr. Bernanke madeno mention of the 7% guidepost he'd set out a mere three months earlier. When askedabout it, he downplayed the importance.

"There is not any magic number that we are shooting for," he said. "We're looking foroverall improvement in the labor market."

In short, the trial balloon oated to gauge potential reaction to a $20 bn per month Taper was adisaster, and that meant that when the September FOMC meeting came around, the governorsin the voting seats just couldn't bring themselves to pull the trigger.

Oopsies!

When the minutes of the October meeting were released in November, it became clear that theFOMC, lessons duly learned, were going to try out the Taper again perhaps in December:

(Fox Business): Federal Reserve policy makers are still struggling to nd the rightmessage for conveying to investors their plans for scaling back their easy-money

policies, notes from the Fed's October meeting reveal.

The minutes, released Wednesday, also said members of the policy-setting Federal Open

Markets Committee could see the central bank trimming its $85-billion-a-month bond-buying program at "one of its next few meetings."

If at rst you don't succeed...

But they had clearly realized that even a $20 bn Taper was going to be taken poorly by themarkets, and so the FOMC (and in particular its soon-to-be-retired chairman) needed to pull offa delicate balancing act.

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On the one hand, Bernanke would want to leave the Fed with the wind-down of his expansionistpolicy underway so that he would have the kind of plausible deniability that history hasgradually been stripping away from Alan Greenspan. ("Hey, don't blame ME. We were exitingQE when I left ofce!") On the other hand, though, he wouldn't want to hand Janet Yellen animpossible situation.

The solution?

Taper Lite!

"All the goodness of the Taper with no bitteraftertaste!"

... and the markets, after the scares in May and June,LOVEDit!!

(CNBC): U.S. stocks surged on Wednesday, with theS&P 500 and Dow industrials closing at records, afterthe Federal Reserve moved to cut stimulus, saying itexpects the labor market will continue to improveand vowing to keep interest rates low.

"Investors are looking past the taper and looking atthe strength of the economy that is perceived with

this news," said Chris Gaffney, senior market strategist at EverBank.

"The Fed did a great job telegraphing it to the markets, as stocks are moving in the

opposite direction than you'd think," he added of equities rallying on the news.Errrr ... sorry to spoil the party, but a couple of things here:

Firstly, the reason the market spiked is that the Fed's Taper turned out to be a paltry $10bn a month and notthe "whopping" $20 bn a month that had been oated by various Fedmouthpieces back in May cough-cough-cough-hilsenrath-cough.

Secondly, the Fed were at great pains to promise low rates for much, much longer so thefree-money party can continue.

(WSJ): The Fed went to great lengths to send the message that interest rates are staying

low even longer than the Fed indicated earlier. It said today that it will keep interestrates low "well past" the time when the unemployment rate reaches 6.5%.

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30 December 2013

"The Committee now anticipates, based on its assessment of these factors, that it likelywill be appropriate to maintain the current target range for the federal funds rate well

past the time that the unemployment rate declines below 6-1/2 percent, especially ifprojected ination continues to run below the Committee's 2 percent longer-run goal.When the Committee decides to begin to remove policy accommodation, it will take a

balanced approach consistent with its longer-run goals of maximum employment andination of 2 percent."

Got that folks? Repeat after Ben:

"Tapering isn't tightening."

Thirdly, they managed to communicate that thispolicy will be reversible at the drop of a hat shouldthings start to look as though the vaunted "recovery" isnothing more than a mirage conjured by their actions.

The danger in that reversibility is one for discussionanother day. For now, the markets reacted just as youwould expect, once they realized that they had faceddown the Fed in the summer and forced them into a

taper that is essentially a non-event.

"Only" $75 bn a month from now on? Of course the market went up after the announcement!

Source: WSJ

But amazingly, the mere fact that the Fed had committed to a tiny reduction in their rabidspending led to all sorts of people heralding the greatest monetary victory of the modern age.

Ambrose Evans-Pritchard, for whom I have a great deal of respect despite his somewhatKeynesian leanings, wrote a piece almost inconceivably entitled (and this deserves a line all ofits own):

"Farewell QE, You Have Been a Magnifcent Success"

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30 December 2013

Wait ... WHAT?

Now, I've seen a few medals handed out halfwaythrough races in my time ... but THIS???

Ambrose, puh-leeze.

(Ambrose Evans-Pritchard): As the US Federal Reservestarts to drain dollar liquidity from the global systemat long last, let us celebrate success. Quantitativeeasing has worked marvellously well. Monetary policyhas been vindicated.

That's just for starters. Once he hits his stride, Ambrose looks like a thoroughbred racehorse.QE Biscuit, if you will:

(Ambrose Evans-Pritchard): The US, UK and Japan are all recovering, moving closer to

"escape velocity". The Swiss National Bank that bastion of orthodoxy has kept itseconomy on an even keel by quietly amassing a bond portfolio equal to 85pc of GDP.

Call me old-fashioned, but "amassing a bond portfolio equal to 85pc of GDP" simply to keep youreconomy on an "even keel" doesn't sound like success to me.

Before he's done, Ambrose takes time out to laud Abenomics; and buried within the story of thestunning success of Abe's policy, there lies, as the Bard would say, the rub:

(Ambrose Evans-Pritchard): Japan, too, has grasped the nettle, breaking free of itsdeation trap with the most radical policy experiment of modern era, a repeat of

Takahashi Korekiyo's brilliant policies from 1931 until his assassination by militaryofcers in 1936.

After two decades of monetary tinkering the Bank of Japan is mopping up 7.5 trillionyen worth of bonds each month, almost as much as the Fed in an economy barely morethan a third the size. It is buying long-term debt for the rst time. This ignites thebroad M3 supply, now humming at a 3.4pc growth rate, the highest this century.

Japan was the fastest growing economy in the OECD bloc in the rst half of thisyear. There was a hiccup in the third quarter, causing the faint-of-heart to write off

Abenomics.

Yet Nomura's Shuichi Obata says the December Tankan survey of business shows thatcondence is at last spreading from big companies to small rms, with the servicesindex rising above zero for the rst time since 1991.

Much can still go wrong. Next year's rise in consumption tax from 5pc to 8pc could abortrecovery. The "Third Arrow" of Thatcherite reform planned by premier Shinzo Abe hasyet to y with much force. The Japanese bond market may take fright once inationnears the 2pc target. Yet the Bank of Japan's belated panache under Haruhiko Kuroda atleast gives Japan a chance of averting slow collapse.

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30 December 2013

Yes, Japan has a chance of averting a slow collapse ... and it may now be able to avoid thatfate in favour of a swift one.

Back in the 1930s, the rub came when Takahashi's policies needed to be reversed once Japan,too, was on a somewhat "even keel."

Whilst "Takahashinomics"(as the policies would no doubt have been dubbed had the Japanesepress of the 1930s possessed anypanache) did engineer a remarkable turnaround in Japan'sfortunes, it featured military spending that increased as a percentage of the total budget everyyear, from 31% in 1931, at the beginning of his tenure, to 47% in 1936.

When Takahashi set about unwinding his mammoth stimulus in 1936, however, things got a bit... sticky, as Myung Soo Cha notes in a paper entitled "Did Takahashi Korekiyo Rescue Japanfrom the Great Depression?":

... when the worst seemed over, Takahashi began to be concerned about ination and

tried to revert to stabilization. Reducing expenditures, he attempted to put an end todebt nancing, while at the same time urging the Bank of Japan to absorb money it hadsupplied in the course of debt monetization.

Ahhhh ... the rst Taper.

"What happened next?" I hear you ask. Well, I'll tell you:

(Wikipedia): Despite considerable success, his scal policies involving reduction ofmilitary expenditures created many enemies within the military, and he was amongthose assassinated by rebelling military ofcers in the February 26 Incident of 1936.

The original Taper Tantrum, whilst extreme, demonstrates the problems that may be associatedwith taking away stimulus.

That is, the people who have benetted from it may not like it.

They didn't in 1936, and they won't in 2014.

Before we move on, let's see what Ambrose's "Farewell To QE" looks like in graphical form.
http://yu.ac.kr/~mscha/papers/takahashi.pdfhttp://yu.ac.kr/~mscha/papers/takahashi.pdfhttp://yu.ac.kr/~mscha/papers/takahashi.pdfhttp://yu.ac.kr/~mscha/papers/takahashi.pdf

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30 December 2013

This is a chart I've used many times, but the good folks at ZeroHedge have kindly updated it forme to reect the reality of Taper Lite:

Source: Zerohedge

Farewell QE, indeed!

But, although 2013 was most denitely the year of QE, there were other interesting facets of"The Weak That Worked" that also bear scrutiny.

Take the strength in the US stock market, for example.

The S&P 500 made a seemingly relentless series of new highs as it powered through 2013.With a couple of light sessions still remaining, the total number of new highs for the year is anastonishing 44.

To put that into perspective, it means a new high was made by the S&P 500 Index arguablythe most important equity benchmark in the world every 5.68 trading sessions during 2013.

On average that's nearly a new all-time high once a week throughout the entire year!

Of course, that's not how these things work, but the point is valid. The winning strategy for thisyear was to buy equities.

Not companies.

Equities.

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30 December 2013

Let me explain what I mean.

1425

1475

1525

1575

1625

1675

1725

1775

1825

1875

2013

S&P500 Index2013

Source: Bloomberg

Behold the mighty S&P 500 Index as it makes its way from bottom left to top right with nothingbut a few short-lived corrections impeding its stately progress.

Now behold the ows out of mutual funds and into ETFs:

Source: Gerard Minack (via Dave Collum)

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At the risk of harping on, this is a phenomenon I've also spoken about before: the dumbing-down of investing.

In today's markets, which function at the whim of the Federal Reserve as opposed to marketforces, the art of researching companies, analyzing their balance sheets and the strengths and

weaknesses of their business, and then trying to sort the wheat from the chaff has been lost.

Only a tiny minority buys companies anymore everybody else just buys markets.

And it's hard to blame them.

A look at the correlation of the S&P 500 to the Fed's balance sheet tells you just about all youneed to know. Since 2009, the correlation has been an astonishing 89.7%. Why would anybodynot just buy markets, given that they are going to go up based purely on the Fed's aggressivestimulus?

Sure, you could make more money by buying all the shares that might go up because they weregood, well-managed companies with good businesses, and by shorting those that were goingto go down because they weren't, but contained within THAT strategy (which used to be called"investing") is the risk that you could be (GASP!) wrong so why bother?

Bizarrely, by creating an environment that forces those with capital to seek out additionalrisk due to the paltry returns afforded by zero percent rates, the Federal Reserve has steeredinvestors to seek out the least-risky place to invest their money, and that has been equities.

Source: Greg Weldon

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30 December 2013

And 2013 saw the Fed take a BIG step up after what, in hindsight, was a rather anemic 2012campaign.

Below is the percentage change in the Fed's balance sheet during the calendar year 2012. Thechart also shows the date QE4 was announced in December:

95

96

97

98

99

100

101

2012

US Federal Reserve Total Assets(% Change) Jan 2012 - Dec 2012

%

QE4

Announced

Source: Bloomberg

And THIS is the same chart for 2013:

100

110

120

130

140

2013

37% Increase

In 12 Months

Federal Reserve Total Assets(% Change) Jan 2013 - Dec 2013

Source: Bloomberg

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See how this works now?

Nice and reliable. Consistent amounts of "liquidity" are pumped into the system every month,and things gently oat ever higher. The only real hiccup for equities in all of 2013 was, in fact,the Taper Tantrum in May, when this stability was briey threatened.

Doesn't bode well, I'm afraid.

The chart below, deating the S&P 500 by the ongoing QE experiment, which I included a fewweeks ago courtesy of Raoul Pal & Remi Tetot of Global Macro Investor, strips away the effect ofthe Fed's pumping and lays bare the market's real performance. It's one of the best charts I'veseen this year, and it speaks volumes.

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 2012 2013

S&P500 Deflated by QE2005 - 2013

Source: Raoul Pal & Remi Tetot, GMI

Equity prices used to be a reection of the strength of the underlying economy after all,the component pieces of benchmark indices were functioning companies that existed in thereal world where they need to manufacture something and sell it to a buyer in order to stay inbusiness and make a prot.

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Assets less liabilities for corporations economy-wide are approximately where theywere in the last quarter of 2004 or the rst quarter of 2005. But stock prices are muchhigher in aggregate. That's the correct measurement of operating leverage relative tothe market not how much cash they have or how many dollars of earnings they returntoday. It's what the "corpus", that is, what your ownership interest as a stockholder(that's what you are when you buy stock) is that underlies your investment and thus howmuch you're paying for a given unit of tangible assets less liabilities.

Source: The Market Ticker

This chart was bad at the end of 2012 in bubble territory, for sure which was a bigpart of why I didn't think we'd get through 2013. Well, we did and now it's worse,because this is only updated through the end of September and of course the market has

gone screaming higher in the last three months.

With that said, that which cannot go on forever won't, and this clearly can't and thuswon't. The only question is exactly when, and what, triggers the corrective move back

down.US Q3 GDP was revised up to an eye-watering 4.1% annualized rate, and that headline wasreceived as conrmation that the Fed's policies are working; but a rudimentary dig beneaththe surface reveals that a signicant contributor to the strong performance was our old friendconsumer spending:

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(USA Today): Boosting optimism for the new year ahead, the government announcedFriday that the economy in the third quarter grew at its fastest rate in nearly two yearsand much better than previously estimated.

Higher consumer spending was largely responsible for the economy's annual growth rate

of 4.1% from July through September, the Commerce Department said. Last month, itestimated a 3.6% rate. In the second quarter the economy grew at a 2.5% annual pace.

Last quarter's better-than-expected performance was spurred by consumers spendingmore over the summer on health care, recreation and other services.

The government says consumer spending grew at an annual rate of 2.0%, up from 1.6% inits previous estimate last month.

"The consumer is back in the game," exulted Chris Rupkey, chief nancial economistof Bank of Tokyo-Mitsubishi UFJ, in a client note Friday. "Is this economic growth fast

enough to put America back to work? The answer is, yes. The wheels of the economy areturning fast enough to bring down the unemployment rate further."

Folks, take it from me, any time you see the words "chief nancial economist" and "exulted" inthe same sentence, be afraid.

Be very afraid.

Meanwhile, over a third of the strength in the economy was down to private inventory buildup the biggest such buildup since records began almost 70 years ago:

Source: St. Louis Fed

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30 December 2013

And the farm component of that particular datapoint provides an even more staggeringanomaly:

Source: St. Louis Fed

So, despite equity markets making all-time highs in 2013 more often than Miley Cyrus gaveoffence, beneath the surface, the economy which equities are supposed to reect didn'tperform as well as the headlines would have you believe; and by far the biggest driving forcebehind the strength of the equity market was free money courtesy of QE.

Though QE has morphed into the means to create trickle-down wealth through higher equitymarkets, quantitative easing was, of course, a program originally designed to savestabilizebond markets; but there's only so much you can do once bond prices reach the levels they didthis past year. And so next week, in Part II of "The Weak That Worked," we'll take a look atground zero for the Fed's intervention and a few related issues that unwittingly saw themselvesdragged into the ring.

As we take a look at the bond and housing markets, we'll see a bunch more headlines that don'tquite tally with what's going on under the hood and that show that the "recovery" is really notall that it's cracked up to be.

Until next time...*******

This week hasturned into something of a world tour. We begin in Turkey, where a newscandal threatens to topple the government, and then move on to Japan for a look at theunintended consequences of Abenomics. Then we're off to Argentina, where the governmentis at least consistent, before we head to China to lift the veil off a corruption scandal thatcouldn't possibly happen in the Westinvolving an ofcial obsessed with reporting growth whether it was genuine or not .

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Mark Carney, Governor of the Bank of England, warned before Christmas that the epicentre ofglobal stress has shifted from West to East. "The greatest risk is the parallel banking sector inthe big developing countries," he said.

Emerging markets have been sputtering since 2011, with Brazil and Russia irting with recession

this year. Some have hit the buffers as the commodity supercycle fades or because they haveexhausted the low hanging fruit from their catch-up growth models.

The MSCI Emerging Markets index is down 9pc this year, in stark contrast to the 28pc boomon Wall Street's S&P 500. Investors appear deeply divided over whether this is a "contrarian"chance to buy cheap.

The global bond giant Pimco says Fed tapering is already priced into markets, while countrieshave ample foreign reserves to counter shocks, unlike earlier Fed tightening episodes in the1980s and 1990s.

Yet Goldman Sachs once the cheerleader of the 'BRICS' said the shift in global economicpower had been over-dramatised and advised clients to trim emerging market holdings from9pc to 6pc of their portfolio until the dust settles.

"The returns were not as attractive as expected, the economic growth rates were not assustainable as imagined, and the countries were not as stable as believed," it said.

Berkeley professor Barry Eichengreen said the coming turn in the Fed's liquidity cycle remainsa threat, with no guarantee that those with stronger fundamentals will be spared. "A revival oflast summer's emerging economy turmoil is a real concern," he said.

Turkey has become the immediate ash point as the country's political storm turns into aconstitutional crisis. Recep Tayyip Erdogan, Turkey's Islamist premier, red half his cabinet onThursday to tighten his grip....

***AMBROSE EVANS-PRITCHARD / LINK

The unintended consequences of AbenomicsAs discussed earlier, Japan continues to struggle in its endeavor to generate demand-drivenination. To a large extent, price increases have been the result of costlier imports due to aweaker yen, particularly items related to food and energy. Outside of those sectors, pricesremain soft.

The danger of Japan's current policy (Abenomics) is that the outcome could turn out to be theexact opposite of what was originally intended. With wages stagnant, these import-driven priceincreases are hitting the Japanese consumer quite hard. As a result, spending on domesticallyproduced goods and services could end up falling, constraining domestic prices instead ofincreasing them.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10539706/Turkey-first-of-Fed-Taper-victims-as-political-crisis-scares-investors.htmlhttp://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10539706/Turkey-first-of-Fed-Taper-victims-as-political-crisis-scares-investors.html

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This threat was unprecedented in the fund's history. Yet it seems it was a largely empty one.On December 9th the IMF board met to review Argentina's progress on a new ination index.It declared that, although the country had not adopted the measures the fund wanted, it"recognised" the government's "ongoing work" and deferred further action until March.

Certainly, those who care about the integrity of statistics cheered the recent resignationof Guillermo Moreno, the secretary for interior commerce. Mr Moreno was the man whointervened at INDEC, the statistics institute, in 2007, after which it began to fudge inationdata. Many ofcials nowadays take less care to pretend that ination is around 10% rather thanthe true gure of around double that.

Some economists believe the new ination index will be an improvement. Others doubt that thegovernment has suddenly embraced numerical honesty. INDEC is likely to cherry pick items forwhich the government has ordered price freezes and leave out those whose prices rise, thinksJuan Luis Bour of FIEL, a think-tank in Buenos Aires.

Covering up the true rate of ination has knock-on effects on other statistics. Take poverty. Thegovernment says only 4.7% of the urban population is poor. Oddly, the UN Economic Commissionfor Latin America and the Caribbean has an even lower number, at 4.3%. But the CatholicUniversity of Argentina calculates that, going by the true cost of living, the correct gure is27%.

Source: Economist

Similarly, underestimating ination has had the effect of bloating the ofcial calculation ofGDP since 2007 (see chart). In September the government raised eyebrows when it reportedsuspiciously buoyant quarterly growth gures.

That was despite the IMF's warning and the fact that the ofcial numbers could trigger a multi-billion-dollar payment to holders of GDP-linked bonds. The economy ministry's forecast of 5.1%growth in 2013 exceeds that of most private analysts by more than two percentage points.

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One of the most important projects supported by Guo was a 20 billion yuan investment in theThree Gorges Quantong Coated and Galvanized Plate Co., which opened in late 2008. Startingin mid-2011, the company has faced big debts and suspended production.

Guo graduated from college in 1982, and joined ofcialdom in 1993 by becoming human

resources director of the Hubei water bureau.

An expert at the Hubei Academy of Environmental Science said the position was a springboardfor Guo. At that time, he was believed to be one of the most promising young ofcials in theprovince.

Three years later, the 39-year-old Guo was appointed deputy director of the provincial waterbureau. Later, he became Yichang's deputy party chief.

Yichang carries a special weight in Hubei because two major water projects are in its territory:the Gezhou Dam and the Three Gorges Dam. Over the past two decades, Yichang has grown

from a small town to a major city.

In 2004, Yichang's GDP hit 54 billion yuan, which trailed only the province capital, Wuhan.

In 2008, in the face of a slowdown linked to the Global Financial Crisis and the completion ofthe Three Gorges Dam, Guo pushed forward a number of major industrial and infrastructureprojects, attracting investors in a bid to maintain the city's growth.

During the rst half of 2009, city ofcials traveled the country aiming to promote the cityand invite investors. Tens of billions of yuan in agreements were signed, the biggest being theQuantong galvanized plate project, which started out as an 11 billion yuan deal.

In 2010, Guo said the city should have GDP of 400 billion yuan by 2016, emphasizing chemical,equipment manufacturing, electricity, food and medicine industries.

Guo's economic success led to a promotion to the provincial level. In August 2011, he waspromoted to deputy governor of Hubei and in July the next year he left Yichang.

His successor soon ran into trouble. Quantong, once the pride of Yichang, faced a crisis....

***CAIXIN / LINK

What's Behind the Khodorkovsky Pardon?A few weeks ago, Maxim Dbar, the spokesman for jailed Russian oligarch Mikhail Khodorkovsky,was sitting in a Moscow caf and talking about the former oil tycoon's current situation. Dbarsaid it boiled down to the old struggle between the hardliners surrounding Russian PresidentVladimir Putin and the relatively liberal politicians in Prime Minister Dmitry Medvedev's camp.
http://english.caixin.com/2013-12-27/100622716.htmlhttp://english.caixin.com/2013-12-27/100622716.html

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For months now, Russian judicial authorities have been preparing a third trial againstthe former magnate. The public prosecutor has also targeted German law professor OttoLuchterhandt, who has criticized the verdicts handed down against Khodorkovsky.

Then Dbar lowered his voice: "We have a glint of hope again." And he dropped another hint:

"Ten years behind bars of course take their toll, even on a man with Khodorkovsky's enormouswillpower and energy." It's very possible that Khodorkovsky's lawyers and closest aides alreadyrealized back then that he was about to abandon his long-standing policy of not seeking apardon.

On Friday morning, Mikhail Khodorkovsky walked out of a prison camp in northern Russia afree man for the rst time in a decade. Putin signed a decree pardoning him on the basis of"humanitarian principles," ofcially releasing the staunch Kremlin critic and former oil magnatewho was once Russia's richest man. Hours later, Russian prison authorities reported he was beingown to Germany.

The decree came just one day after Putin made the surprise announcement that he planned topardon Khodorkovsky following his marathon annual press conference on Thursday, adding thatthe prisoner had already submitted a request for his release. The news hit like a bombshell.

Kremlin critic and nationalist-communist writer Eduard Limonov called the upcoming releasethe "sensation of the decade." Sergei Guriev the former rector of Moscow's New EconomicSchool who ed to Paris in April was also quick to comment on the news. "Khodorkovsky wasreleased because Russia's image has continuously deteriorated lately," he said. There has beenwidespread speculation that Guriev will also be charged in a third trial against the oligarch.

The timing of Putin's announcement of the Khodorkovsky pardon is clever. For weeks now, hehas been criticized for his handling of the situation with Ukraine. The United States and theEuropean Union allege that the Russian leader exerted massive pressure on Kiev to reject anassociation agreement with the EU all in a bid to pull the neighboring country back intoRussia's sphere of power. Critics say Putin's actions disregard the nearly 50 percent of Ukrainianswho favor closer relations with Europe.

With his decision to release Khodorkovsky, Putin intends to show that he knows how to use notonly the stick, but also the carrot and that the West's allegations that Russia is a profoundlyundemocratic country do not line up with reality. Given this situation, it's not surprisingthat Putin has explicitly pointed out that he was moved to issue the pardon by humanitarian

concerns: In his speech, he cited the critical condition of Khodorkovsky's 78-year-old mother.

Svetlana Bakhmina, a former legal executive who worked for Khodorkovsky and has herselfspent four years in prison, conrmed on Thursday that the poor health of his mother "is the onlypossible reason Mikhail could have asked for a pardon. Nothing else could have forced him toyield."

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The seamlessness between Putin's announcement and his signing of the decree probablyindicates that the president himself is pulling the strings when it comes to Khodorkovsky'sfate. This approach is reminiscent of the case of prominent opposition politician and bloggerAlexey Navalny. In July 2013, Navalny was convicted of embezzlement by a court in Kirov andsentenced to ve years in prison, effectively making him ineligible to hold any political ofce.One day later, he was surprisingly released, and was later even allowed to run in the Moscowmayoral election.

Putin had a major hand in that decision, as well. He had arranged the pardon of sorts withMoscow's incumbent mayor to take the wind out of the sails of the opposition and Westerncritics. Putin publicly stated he found Navalny's initial verdict "strange," because a co-defendanthad received a suspended sentence, but not Navalny. The intervention suggests there must havebeen divergent opinions on this issue among the Kremlin elite....

***DER SPIEGEL / LINK

U.S. Stocks: Heading For A Bubble?A global resynchronized recovery is good news for corporate prots. But better prot growth isno longer news for the stock market because the S&P 500 has already discounted a 10% increasein forward earnings in the next 12 months. Therefore, if stock prices make continued advances,the expected price gains will have to primarily come from a multiple expansion.

U.S. equity prices are no longer cheap. Various valuation indexes suggest the market is eitherfairly valued or borders on slight overvaluation. Nonetheless, macroeconomic and nancial

conditions are conducive for further P/E ination. There is a clear link between equitymultiples and the yield curve. A steeper yield curve is indicative of better growth and very easymonetary policy. As such, it often coexists with expanding equity multiples.

If our macroeconomic story of synchronized globalgrowth with low ination plays out, then the yieldcurve will likely stay rather steep for a while longer:the long end of the curve will be held high by realeconomic growth and better protability, while theshort end of the curve will be suppressed by the Fed.

This creates fertile ground for asset price ination.In addition, once in a liquidity trap where interestrates reach the zero boundary, the linkage betweenmonetary policy and the real economy is assetmarkets: zero rates act to subsidize corporate prots,drive up asset prices and encourage risk-taking.
http://www.spiegel.de/international/world/why-putin-freed-kremlin-opponent-and-oligarch-khodorkovsky-a-940336.htmlhttp://www.spiegel.de/international/world/why-putin-freed-kremlin-opponent-and-oligarch-khodorkovsky-a-940336.html

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At present, we could be at the very early stages of a broad transition from strengthening assetvalues to better spending power by businesses and consumers. Nonetheless monetary policy willstay extremely easy to ensure this process takes hold rmly.

Bottom Line: We are still operating in an environment where monetary conditions are

hyper stimulative and ination is extremely low, and corporate prots will accelerate. Thisenvironment ferments asset bubbles, and underscores why there are high odds that equityprices move into bubbly territory next year.

***BCA RESEARCH / LINK

Miss Japan joins battle against maa in the mediaA softly spoken, willowy beauty who weeps when she describes her ordeal, Ikumi Yoshimatsu

seems an unlikely gure to lead a ght against one of Japan's most powerful talent agencies.Yet she has become the heroine in a drama that her supporters say has exposed one of thenation's dirtiest secrets: claims that the Yakuza helps to run the entertainment industry.

Since she became the rst Japanese woman to win the Miss International title, Ms Yoshimatsusays she has been blackballed by the industry, stalked and threatened for refusing to join atalent agency. She is now in hiding after ling a criminal complaint against a top executive withthe rm. "I am afraid for my life," she said in a telephone interview.

Last week, Ms Yoshimatsu went public and accused the executive, Genichi Taniguchi, of startinga campaign of intimidation against her shortly after she was crowned Miss International Japan

in 2012. She claimed she refused to sign a contract with Mr Taniguchi when an internet searchrevealed allegations that his company had alleged links to the Yamaguchi-gumi Japan's largestcrime syndicate. "I told them, morally and ethically I cannot work with such people," she said.

In documents and tape recordings submitted to the police, Ms Yoshimatsu claims Mr Taniguchithreatened her and used his industry connections to hound her out of modelling and actingwork. At one point, he allegedly burst into a television studio and, she claims, tried to abducther. Ms Yoshimatsu's lawyer, Norio Nishikawa, said: "We have recordings proving all this." He hasled civil and criminal complaints demanding his client be left alone. Calls to Mr. Taniguchi andthe talent agency went unanswered, and the police also declined to comment on the case. MrTaniguchi has denied doing anything to Ms Yoshimatsu. "I'm no stalker," he told The Japan Times.

"I called her father at least twice to try and reach her manager to solve my nancial disputewith him. I have no grudge against her."

Coverage of Ms Yoshimatsu's claims by the television networks, however, has been strangelymuted. Critics claim this is due to the inuence of the talent agency and other powerfulagencies that keep them supplied with actors and stars. Jake Adelstein, a specialist on Japan'scrime syndicates, said that Ms Yoshimatsu's ght had embarrassed the industry. "Most of themainstream media has refused to cover the story because that means no access to talent," hesaid.
http://blog.bcaresearch.com/u-s-stocks-heading-for-a-bubblehttp://blog.bcaresearch.com/u-s-stocks-heading-for-a-bubble

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On Tuesday last week, the scandal deepened at a Tokyo ceremony to hand the Miss Internationalcrown to Ms Yoshimatsu's successor, Bea Rose Santiago of the Philippines. The chair of thecurrent title-holder was empty because, Ms Yoshimatsu claimed, she was barred fromattending. She said sponsors and shareholders had been threatened and she was told to "playsick" and stay away. When asked about the situation, a spokesperson for the event organiser,International Culture Association, told the AP news agency it did not want the controversy "toovershadow the event".

***THE UK INDEPENDENT / LINK

2013 Year In ReviewWho's to say that markets are under- or overpriced? The price is the price, right? Two NewYork Federal Reserve economists delivered a paper concluding that U.S. stocks were as cheap

today as any time in history, which is a little odd given they were 60% cheaper in March 2009.Although the world equity markets rise, the GDP is looking a little green around the gills (Figure10, below). You can graphically overlay anything on anything and say anything, but Figure 10does seem to say something.

Let's focus on the U.S. forward-looking earnings, which are said to appear reasonable. Ofcourse, these earnings do not exist except in the minds of optimistic analysts. By contrast,the Case-Shiller p/e using time-averaged earnings is in the scary 24 zone. John Hussman, abrilliant analyst who must be losing clients by the scores owing to his attempts to protectthem, suggests bear market bottoms occur at a Case-Shiller p/e of about 8. The S&P 500 price/revenue ratio of 1.6 is twice its pre-bubble historical norm of about 0.8.
http://www.independent.co.uk/news/world/asia/miss-japan-ikumi-yoshimatsu-joins-battle-against-mafia-in-the-media-9027501.htmlhttp://www.independent.co.uk/news/world/asia/miss-japan-ikumi-yoshimatsu-joins-battle-against-mafia-in-the-media-9027501.html

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(The 1987 peak occurred at a price/revenue ratio of less than 1.0.) The Russell 2000 is nowsporting a p/e of 40 using 2014 fabricated earnings but a p/e of 60 times trailing earnings.Stockman says that by excluding charges"ex-items"companies fabricate an additional 30% tothe earnings numbers. You can nd distortions of comparable magnitude by using the forwardearnings that are invariably waaaay too optimistic. As the forward earnings become discreditedby reality, analysts quickly switch to forward earnings.

There are smart guys questioning whether price discovery is working (Fama aside). JeremyGrantham, the wise old man with $150 billion under management, puts fair market value onthe S&P 70% below the current levels, coincidentally the same percentile as the bloated protmargins. Cliff Asness, looking across all markets, concludes that "the 60-40 portfolio has beencheaper than it is now 98% of the time." (Cliff wins no award for direct prose.) David Einhornnotes that "the S&P 500 index has advanced this year mostly through multiple expansion"; thegains of 2012 were all multiple expansion as well. Are the distortions attributable to "ex-items"and "forward earnings" additive? I don't know, but Peter Boockvar summed it up nicely: "There is

0% chance this ends well."...

***DAVE COLLUM (VIA PEAK PROSPERITY) / LINK

Moguls Rent South Dakota Addresses to Dodge Taxes ForeverAmong the nation's billionaires, one of the most sought-after pieces of real estate right now is aquiet storefront in Sioux Falls, South Dakota.

A branch of Chicago's Pritzker family rents space here, down the hall from the Minnesota clan

that controls the Radisson hotel chain, and other rooms held by Miami and Hong Kong money.

Don't look for any heiresses in this former ve-and-dime. Most days, the small ofces thatrepresent these families are shut. Even empty, they provide their owners with an importantasset: a South Dakota address for their trust funds.

In the past four years, the amount of money administered by South Dakota trust companieslike these has tripled to $121 billion, almost all of it from out of state. The families needn'tactually move to South Dakota, or deposit their money at a local bank, or even touch down inthe private jet. Little more than renting an address in Sioux Falls is required to take advantageof South Dakota's tax-friendly trust laws.

States like South Dakota are "creating laws that are conducive to a massive exploitation ofa federal tax loophole," said Edward McCaffery, a professor at the University of SouthernCalifornia's Gould School of Law. "We have a tax haven in our midst."
http://www.peakprosperity.com/blog/84101/2013-year-in-reviewhttp://www.peakprosperity.com/blog/84101/2013-year-in-review

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South Dakota's sudden popularity illustrates how, at a time of rising U.S. economic inequality,the wealthiest Americans are embracing ever more creative ways to reduce taxes legally.Executives at South Dakota Trust Co., one of the biggest in the state, estimate that one-quarterof their business comes from special vehicles known as "dynasty trusts," which are designed toavoid the federal estate tax. Creation of such trusts has surged in recent years as changes infederal law enabled more money to be placed in them.

While the super-rich use various tools to escape the levy some have exotic names like the"Jackie O" trust and the "Walton GRAT" the advantage of dynasty trusts is that they shield afamily's wealth forever. That dees the spirit of the estate tax, enacted almost 100 years ago todiscourage the perpetuation of dynastic wealth.

The dynasty trust isn't South Dakota's only lure. Another attraction, for customers in placeslike New York and Massachusetts, is the chance to shelter their investments from incometaxes in their home states. In November, a government commission in New York recommendedtightening trust laws to avoid income-tax leakage to states like South Dakota, estimating thechange would raise an extra $150 million a year.

Still others are drawn to South Dakota's iron-clad secrecy, and protections of trust assets fromcreditors and ex-wives. Many of these features emulate those available in Bermuda and otherisland havens. Some wealthy families are also attracted by South Dakota rules that enhancetheir control over investment decisions and make it easier for them to set up their own trustcompanies rather than rely on a bank trustee.

In South Dakota, a farm state that's home to two of the 10 poorest counties in the U.S.,lawmakers say they're bolstering the trust industry to generate work for local law rms and

bankers, and forge ties with prosperous families that may one day decide to build a factory or awarehouse here. The legislators are turning the Mount Rushmore State into the Bermuda of theprairie.

As much as anyone, Pierce H. McDowell III can take credit for this transformation. He worksupstairs from the hall of empty ofces, on the second oor of the old Kresge ve-and-dime,where he's president of South Dakota Trust Co.

At 56, McDowell has been promoting the state he affectionately calls "North America's Siberia"for most of his career. In 1993, he published an article in a national estate-planning journalrecommending that wealthy people across the country establish dynasty trusts in South Dakota.

Because the estate tax is imposed on large fortunes at death, McDowell wrote, wealth that'sbig enough to last for generations will have to contend with multiple tax bills. A father paysthe tax when he leaves his money to his children, who pay again when they pass it down. Eachgeneration faces a toll. The current rate is 40 percent.

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McDowell's solution was for the father to establish a never-ending trust that pays eachgeneration of heirs only what they spend, while the rest of the money grows. In 1993, whenMcDowell was writing, that wasn't possible in 47 of the 50 states because of an ancient rulelimiting the duration of trusts to the lifetime of a living heir, plus 21 years. The concept hasbeen a part of Anglo-American jurisprudence since a case decided by England's Lord Nottinghamin 1681....

***BLOOMBERG / LINK

Spend, spend, spend. Because your savings aren't worth a

damnOrganising my 2012-13 UK tax return this month, I compiled the year's interest earnings. Joint

current account: net interest received 1.68, tax 0.39. Personal current account: interestreceived 0.19, tax 0.06. Then the big kahuna, my savings account, where I really sock awaywhat I might need for a rainy day: interest received 14.10, tax 3.55. Wow at least enoughto pick up a handsome selection of Quality Street.

I can't be the only UK taxpayer who records these miserable bank payments in a state of rage.I could have earned more than I made in interest last year in the time it took me to type theaccount numbers. Such a pittance does interest income now produce that savers would at leastappreciate the issuance of a blanket policy statement: "Not wishing to add insult to injury,HMRC no longer requires taxpayers to humiliate themselves by reporting contemptuously smallinterest payments, in which the nation's scal authorities are complicit. FYI, we'll no longer

dun your pathetic interest for taxes, either, as it costs us more than 6p to extract those penniesfrom your current account."

The recent economic recovery in the UK is apparently driven not only by a renewed propertyboom, but by savers spending their reserves quite sensibly, too.

With interest zilch and ination at 2.1% down from 5.2% in September 2011, the highestin the history of the consumer price index keeping cash in the bank is like stufng yourrefrigerator with red meat. It doesn't accrue value. It rots. It's little wonder that rationalcitizens are rushing out to turn their putrefying pounds into iPads and Xboxes before the smellsets in.

This is just the behaviour that the government and the Bank of England have hoped for.Spending born of hysteria that money is spoiling helps to jack up the GDP stats. But for theeconomy, the spree is a short-term windfall. Sadly for account holders and statisticians both,savings run out.
http://www.bloomberg.com/news/2013-12-27/moguls-rent-south-dakota-addresses-to-dodge-taxes-forever.htmlhttp://www.bloomberg.com/news/2013-12-27/moguls-rent-south-dakota-addresses-to-dodge-taxes-forever.html

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More crucially, unprecedentedly low interest rates for ve years and counting have protecteddebtors mortgage holders, of course, but also this country's biggest debtor by a mile, HerMajesty's Government. Negligible interest rates so brilliantly depress the cost of servicinggovernment debt that neither Whitehall nor Threadneedle Street has any motivation to raisethem well, ever.

So you'd be a fool to imagine that the governor of the Bank of England is happy thatunemployment is dropping to the supposed benchmark of 7% much faster than expected,perhaps even by the end of this year at which point interest rates were meant to rise. On thecontrary, Mark Carney has been cool on the matter. A 7% unemployment rate will not, he's madeclear, obligate him to raise interest rates a jot. The metaphorical goalposts will simply shimmydown the eld, for ination combined with an articially farcical interest rate "nancialrepression" is a nefariously lucrative form of tax.

Of course, we occasionally hear lip service paid to what a pity it is that we are "punishingsavers" in the same casual spirit in which people say: "Isn't it a shame the pub has run out ofprawn crackers?"

Anyone who has built a nest egg by scrimping, canniness, and self-denial we are not talkingof the super-rich here has been railroaded into choosing between unpalatable options: 1) putcapital at risk in shares. This option explains the growing stock-market bubble money has togo somewhere. But many an investment ends in tears. 2) Watch the cash evaporate, an evenmore miserable exercise than watching paint dry. 3) Spend everything now. Alas, how many tinsof chilli con carne can the average household stockpile?...

***UK GUARDIAN / LINK
http://www.theguardian.com/commentisfree/2013/dec/28/uk-interest-rates-savings-spendhttp://www.theguardian.com/commentisfree/2013/dec/28/uk-interest-rates-savings-spend

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ChartsThat Make You GoHmmm...After falling to a low near 6,500 in March 2009, the Dow Jones Industrial Averagedoubled to hit an all-time high in March 2013. This is the rst time since October 2007, butinvestors have called it quits.A look at then and now suggests what may be driving thisbehavior.

"The stock market's volatility has scared retail investors for several years. A totalof $556 billion has been taken out of mutual funds focused on American stocks sinceOctober 2007, according to the Investment Company Institute. That is an enormous potof money that largely missed out on the market's recovery.

The New York Times, March 5, 2013.

***US GLOBAL INVESTORS

CLICK HERE TO VIEW INFOGRAPHIC
http://www.usfunds.com/media/images/investor-alert/_2013/2013-03-08/COM-Dow-Then-and-Now.pdfhttp://www.usfunds.com/media/images/investor-alert/_2013/2013-03-08/COM-Dow-Then-and-Now.pdf

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7

6

5

4

3

2

1

0

1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

?

You Are Here

Average: 3.86%

Average Real GDP By Decade

Source: Dave Collum / Measuring Worth

A couple ofcharts stood out in Dave Collum's year-end review (page 32), but I felt thisone deserved a page of its own.

As you can see, current real GDP the result of trillions in stimulus from the Federal Reserveover the last 5 years is currently at its lowest level in over 200 years.

Something is very wrong in paradise; and whatever this chart might say, there is one thing thatit doesn'tsay: "Buy equities at all-time highs."

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Source: Washington Post

Unemployment has reachedmulti-year lows in 27 states, a bit of positive newsfor state labor markets that are still struggling through a mild recovery.

In just over a third of states, there are more jobs now than there were when the recessionbegan, according to an analysis of new Labor Department data by the Economic Policy Institute,a think tank focused on the needs of low- and middle-income workers. There may be more jobsin many states since the recession, but there are also more people.

In only one state, oil-rich North Dakota, has the growth in jobs outpaced the growth in theworking-age population, according to the EPI analysis. Forty nine states have added more adultsin their working prime than jobs for them to ll. And the share of the working-age populationthat has jobs has declined in every state since 2007, though the fall has only been statisticallymeaningful for 35 of them, according to a Pew analysis....

***WASHINGTON POST (VIA BARRY RITHOLTZ) / LINK
http://www.washingtonpost.com/blogs/govbeat/wp/2013/12/23/in-27-states-unemployment-is-at-its-lowest-in-at-least-four-years/http://www.washingtonpost.com/blogs/govbeat/wp/2013/12/23/in-27-states-unemployment-is-at-its-lowest-in-at-least-four-years/

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WordsThat Make You GoHmmm...

Dave Collum is the most knowledgablenance guy many of you have never heard of.

An amateur investor with a distinctlyprofessional eye, Dave puts many in myindustry to shame.

Dave's "2013 Year in Review" (Page 32) is atour de force, and in this interview with ChrisMartenson, Dave discusses the issues with hiscustomary insight and sardonic wit.

CLICK TO WATCHSteen Jakobsen of Saxo Bank is aman I listen to and read whenever I get thechance.

He is amongst the rare few who seem to beable to call things exactly as they see themfrom within the connes of an investmentbank, and so Steen's views are always worthhearing.

This week, we get to hear his take on thedreaded Taper. (via Zerohedge)

CLICK TO LISTEN

Jim Rickards has been absent fromthese pages for quite some time, but he'sback today to discuss the history of the recent

tapering announcement by the Fed as well asthe likely effects on various asset classes andmarkets, particularly gold.

CLICK TO LISTEN
http://www.youtube.com/watch?v=ZWcZCqkOvfUhttp://www.zerohedge.com/news/2013-12-24/risk-and-reality-us-economyhttp://www.physicalgoldfund.com/podcasts/http://www.physicalgoldfund.com/podcasts/http://www.zerohedge.com/news/2013-12-24/risk-and-reality-us-economyhttp://www.youtube.com/watch?v=ZWcZCqkOvfU

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and fnally...Simon Beck isone crazy guy!

Who else would walk miles in the snow to create beautiful art when he knows the odds areheavily stacked against its surviving 24 hours?

The result of Simon's calculated wanderings, however, are utterly breathtaking, as this set ofamazing pictures shows.

Don't let the rather dull-looking teaser photo deter you from clicking on the link... I didn'twant to spoil it for you!

(Thanks Dody!)

CLICK HERE TO VIEW PHOTOS

Hmmm...
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30 December 2013

Grant Williams

Grant Williams is the portfolio manager of the VulpesPrecious Metals Fund and strategy advisor to VulpesInvestment Management in Singapore a hedge fundrunning over $280 million of largely partners' capitalacross multiple strategies.

The high level of capital committed by the Vulpespartners ensures the strongest possible alignmentbetween the rm and its investors.

Grant has 28 years of experience in nance on theAsian, Australian, European and US markets andhas held senior positions at several international

investment houses.Grant has been writing Things That Make You Go Hmmm...since 2009.

For more information on Vulpes, please visit www.vulpesinvest.com.

*******

Follow me on Twitter: @TTMYGH

YouTube Video Channel: http://www.youtube.com/user/GWTTMYGH

ASFA Annual Conference 2013: 'Wizened In Oz'

66th Annual CFA Conference, Singapore 2013 Presentation: 'Do The Math'

Mines & Money, Hong Kong 2013 Presentation: 'Risk: It's Not Just A Board Game'

Fall 2012 Presentation: 'Extraordinary Popular Delusions & the Madness of Markets'

As a result of my role at Vulpes Investment Management, it falls uponme to disclose that, from time to time, the views I express and/or thecommentary I write in the pages of Things That Make You Go Hmmm...may

reect the positioning of one or all of the Vulpes fundsthough I will not bemaking any specic recommendations in this publication.
http://www.vulpesinvest.com/https://twitter.com/ttmyghhttp://www.youtube.com/user/GWTTMYGHhttp://www.youtube.com/watch?v=Ab4yqaZ7GAUhttp://www.youtube.com/watch?v=Ab4yqaZ7GAUhttp://www.youtube.com/watch?v=Osq1yxSFVG0http://www.youtube.com/watch?v=Osq1yxSFVG0http://www.youtube.com/watch?v=wzzoBVK3fyEhttp://www.youtube.com/watch?v=b4zOAHoncF0http://www.youtube.com/watch?v=b4zOAHoncF0http://www.youtube.com/watch?v=wzzoBVK3fyEhttp://www.youtube.com/watch?v=Osq1yxSFVG0http://www.youtube.com/watch?v=Ab4yqaZ7GAUhttp://www.youtube.com/user/GWTTMYGHhttps://twitter.com/ttmyghhttp://www.vulpesinvest.com/

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