The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

What took place in Haiti might make you want to stop and ask: if there was a natural disaster in my home, would I know what to do? Would I have all of the necessary supplies to ride it out until help arrived?

From basic survival gear, to making sure you and your family are comfortable, there is plenty you can do in advance. I don’t mean the bat-shit crazy survivalist fall out shelters, but a handful of easy things to do the next time you go to the Wal-Mart or Target or even the supermarket.

Start with the basics: Store in a cool dry place plenty of bottled water, batteries, flashlights, and a radio. Candles, waterproof matches, a can opener, a Swiss army knife, are also helpful. Formula or baby food if applicable. First aid kit, aspirin, disinfectant. If you have small children, simple games and toys will keep them busy as opposed to frightened. Depending upon the prescription drugs you take, a few days to a weeks worth. Pet food if applicable. Basic camping gear sleeping bags and blankets, water filters, dried foods are also helpful. (If using your basement, get them off the floor and onto shelves).

Popular Mechanics posted a number of special issues on disaster preparedness, with stories on:

• 7 Best First Aid Kits For Any Situation;

• Steps to save yourself when a natural disaster hits;

• Smart survival tactics that saved lives;

• Unexpected, But Essential Survival Kit Items

• Must-have survival gadgets and gear;

• SURVIVE ANYTHING: Guide to Worst-Case Scenarios

• 8 Tools and Gadgets to Prepare Your Home For Any Disaster

• There is an emergency preparedness guide by the L.A. Fire Department (pdf);• You can find more info at Ready.gov.

Good stuff worth a look . . .

U.S. Pay Czar Kenneth Feinberg explains why CEOs are continuing to profit from bank bonuses at the cost of taxpayers.

Visit msnbc.com for breaking news, world news, and news about the economy

Pretty wild: Panoramic video of Haiti, via CNN.

Use your mouse to click and drag around the video to change the view. You can also zoom in and out. Pause and explore at any time by pressing the play/pause button under the video to stop and look around — all while the video plays.

The video was shot on Sunday, January 17, at 3:53 p.m. EST in Port-au-Prince, Haiti.

hat tip kottke

Via the NYTimes, this Danzinger cartoon seems to capture the moment

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Thoughts on the End Game
This Time is Different
Quarterly Review and Outlook
Home Again

When I was at Rice University, so many decades ago, I played a lot of bridge. I was only mediocre, but enjoyed it. We had a professor, Dr. Culbertson, who was a bridge Life Master at an early age. He was single and lived in our college, playing bridge with us almost every night. He was a master of the “end game.” He had an uncanny ability to seemingly force his opponents into no-win situations, understanding where the cards had to lie and taking advantage.

Traveling to London and on into Europe, I have some time to think away from the tyranny of the computer. Over the last year, and especially the last few months, I have written in depth about the problems we face all across the developed world. We have no good choices left, so making the correct unpleasant choice is now our most hopeful option.

As I wrote in my 2010 forecast, this year is a waiting game. There are so many choices we must make, and the paths we will take from those choices vary wildly. But make no mistake, we are coming close to the end game. Some countries and economies are closer to that point than others, but the entire developed world is lurching, in almost drunken fashion, towards our economic denouement.

Over the next several months, we are going to start to explore various aspects of the end game. Whither Japan? Are they actually, as I think, a bug in search of a windshield? What does that mean for the world? How safe is the euro? Everyone over here seems to think Germany will bail out Greece. A breakup seems unthinkable to the people I’ve been talking to (so far). But what about Spain? Italy? Can you spell moral hazard?

The Fed has said it will exit quantitative easing (QE) at the end of March. But what if mortgage rates rise? Where do we find $1 trillion (plus!!!) in US savings to fund the deficit, assuming foreigners buy about $400 billion? By definition, savings and foreign investment and the federal deficit must add up to zero. (We will go into that later – just take it as gospel for now.) How can we run 10% of GDP deficits if the Fed does not print money (as they did by buying Fannie and Freddie paper, which became treasuries, as I outlined last week)? That would require almost a 10% savings rate – with it all ending up in treasuries. How can that happen? Really?

But before we get into that, a few housekeeping items. First, more than a few of you have written to say you are not getting the letter as usual. There are some problems when your distribution list is 1.5 million closest friends. We try to fix them, working with the various ISPs to stay “white-listed.” It is actually a lot of work for Doug and my publisher. If for whatever reason your letter does not get into your inbox, just go to www.2000wave.com and find the letter there. And we are working on other mechanisms as well to insure you get this letter. And thanks for letting us know of problems. Rest assured, we do not randomly drop any of my closest friends from this list.

Second, the invitations are starting to go out for our annual Strategic Investment Conference (co-sponsored by my partners Altegris Investments) which will be April 22-24 in La Jolla. In addition to David Rosenberg, Dr. Lacy Hunt, your humble analyst, Niall Ferguson, and George Friedman, my good friend Dr. Gary Shilling has agreed to come. There are several more rather exciting announcements I will be making in a few weeks. This conference will sell out. Unfortunately, for regulatory reasons, it is limited to accredited investors. If you have not already received an invitation, contact your Altegris Investments professional, drop a note to me, or register at www.accreditedinvestor.ws and you will get a call and an invitation.

This year we are going to focus on “The End Game.” I can guarantee you lively debate, fun times, and over-the-top wines – plus, you will be with people who are simply the coolest ever. The speakers are all friends who “get it.” They called the crisis well in advance. These are the guys who sit and think every day about how this will all end up. The panels are going to be fun. Do not procrastinate. Register now.

This Time is Different

“But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked.” – Carmen M. Reinhart and Kenneth Rogoff from their new book, This Time is Different.

I am reading (on my new Kindle as I travel through Europe) a very important book, which I will be referring to a lot in the future. Reinhart and Rogoff have catalogued over 250 financial crises in 66 countries over 800 years and then analyzed them for differences and similarities. This is a VERY sobering book. It does not augur well for the developed world to blithely exit from our woes. The book gives evidence to my adamant statement that we have a lot of pain to experience because of the bad choices we have made. This is the entire developed world, and the emerging world will suffer, too, as we go through it. It is not a matter of pain or no pain. There is no way to avoid it. It is simply a matter of when and over how long a period.

In fact, Reinhart and Rogoff’s research suggests that the longer we try to put off the pain, the worse the total pain will be. We have simply overleveraged ourselves, and the deleveraging process is not fun, whether on a personal or a country basis.

Let’s look at part of their conclusion, which I think eloquently sums up the problems we face:

“The lesson of history, then, is that even as institutions and policy makers improve, there will always be a temptation to stretch the limits. Just as an individual can go bankrupt no matter how rich she starts out, a financial system can collapse under the pressure of greed, politics, and profits no matter how well regulated it seems to be. Technology has changed, the height of humans has changed, and fashions have changed.

“Yet the ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant. No careful reader of Friedman and Schwartz will be surprised by this lesson about the ability of governments to mismanage financial markets, a key theme of their analysis.

“As for financial markets, we have come full circle to the concept of financial fragility in economies with massive indebtedness. All too often, periods of heavy borrowing can take place in a bubble and last for a surprisingly long time.

“This time may seem different, but all too often a deeper look shows it is not. Encouragingly, history does point to warning signs that policy makers can look at to assess risk – if only they do not become too drunk with their credit bubble – fueled success and say, as their predecessors have for centuries, “This time is different.”

A small confession. I am in a London hotel, it is late on a Friday, and my mind is slowing down. So rather than ramble, I am going to hand you off to Van Hoisington and Dr. Lacy Hunt, two of the brightest economists I know (Lacy will be at my conference). The following is their latest quarterly letter. I have already read it five times. It is THAT important, and chock full of intriguing concepts.

They also reference Reinhart and Rogoff, and offer up a very contrarian view about deflation. Open your minds, and let’s jump in.

Read the rest of this entry »

The DJ is reporting that the UK raised its terror threat level to ‘Severe’ from ‘Substantial.’ They define ‘Substantial’ as an ‘attack is a strong possibility’ whereas ‘Severe’ is defined as ‘an attack is highly likely.’

Start marinating those ice cubes — the weekend is here:

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click for bigger graphic

Hat tip: Flowing Data

This is a variation of a chart I like to show, via Visual Economics:

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click for larger graphic

Following a week of mediocre economic data, a mixed response so far to earnings season and more steps by China to tame inflation pressures and slow the pace of their extraordinary lending program, the July fed funds futures, which capture the June meeting, are today trading below 25 bps (top end of the Fed’s current fed funds target range), for the first time. There is also no longer a 100% chance of a fed hike by the Sept meeting where Tuesday had priced one in. Today those odds are down to 30%. It is not until the Nov meeting now that the market has fully priced in a 25 bps rate hike. Easy for longer remains the bet on the part of the market.

After this morning’s WSJ post, I was contacted by several different people from WSJ/Dow Jones I have known over the years.

Each of them are people I have read for a long time, and each covers different parts of markets and investing. All 3 of them told me that they have never experienced anyone “messing around” with what they write or telling them what to say.

In fact, they each pointed to other stories in today’s WSJ that did a much better job covering the factors impacting the markets than that front page story did.

Consider these articles:

• China, Not Obama, Sinks Stocks (Marketbeat)

• Dow’s Two-Day Hit: 335.55 Points (WSJ)
Stocks Pummeled From Two Sides, Both the Obama Bank Proposal and China’s Pressure

• The WSJ Jumped The Shark? No It Hasn’t (DJMT)

I will state I think that these are significant, and contradict the front page DC article.

In considering this, there are two other factors that are noteworthy:

First, the headlines across the paper have become screamingly sensationalistic generally. Not only are the heds more about marketing than reporting, they very often belie what is actually discussed in the article. Indeed, they occasionally contradict it.

This isn’t a politicization of the Journal, it is more accurately described as a tabloidization of it. So its not bias that seems to be impacting the other sections of the paper, its marketing.

Now combine this headline stuff with the new political slant of the Washington DC coverage. Then add in the major changes (for the worse, IMHO) of how the front page has changed — the offbeat, esoteric (A-hed) articles, the long form magazine style stories — all have been replaced with much more prominent DC coverage, where the greatest political shift has taken place.

I am willing to give the Marketplace and Money & Investing sections the benefit of the doubt. But it seems weird to me to say that I am now sequestering the OpEd pages AND much of the A section.  Once the political motivations of the owner leave the Opinion pages, it is a slippery slope down towards yellow journalism.