Category Archives: Business

He Said That? 12/6/18

From Henry Ford (1863–1947), American captain of industry, business magnate, founder of the Ford Motor Company, and the sponsor of the development of the assembly line technique of mass production:

Failure is only the opportunity more intelligently to begin again.

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The Myth Of American Capitalism Exposed: Competition Is Dying As The Biggest Corporations Gobble Up Everything, by Michael Snyder

Many industries are becoming increasingly concentrated or are already alarmingly concentrated. From Michael Snyder at endoftheamericandream.com:

Vibrant competition is absolutely essential in order for a capitalist economic system to function effectively.  Unfortunately, in the United States today we are witnessing the death of competition in industry after industry as the biggest corporations increasingly gobble up all of their competitors.  John D. Rockefeller famously once said that “competition is a sin”, and he was one of America’s very first oligopolists.  According to Google, an oligopoly is “a state of limited competition, in which a market is shared by a small number of producers or sellers”, and that is a perfect description of the current state of affairs in many major industries.  In early America, corporations were greatly limited in scope, and in most instances they were only supposed to exist temporarily.  But today the largest corporations have become so huge that they literally dominate our entire society, and that is not good for any of us.

Just look at what is happening in the airline industry.  When I was growing up, there were literally dozens of airlines, but now four major corporations control everything and they have been making gigantic profits

AMERICA’S airlines used to be famous for two things: terrible service and worse finances. Today flyers still endure hidden fees, late flights, bruised knees, clapped-out fittings and sub-par food. Yet airlines now make juicy profits. Scheduled passenger airlines reported an after-tax net profit of $15.5bn in 2017, up from $14bn in 2016.

What is true of the airline industry is increasingly true of America’s economy. Profits have risen in most rich countries over the past ten years but the increase has been biggest for American firms. Coupled with an increasing concentration of ownership, this means the fruits of economic growth are being monopolised.

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China Outraged At Arrest Of Huawei CFO, Warns It Will “Take All Measures”, by Tyler Durden

US relations with China go from bad to worse. From Tyler Durden at zerohedge.com:

So much for a trade war truce between China and the US, or a stock market Christmas rally for that matter.

Shortly after the news hit that Huawei CFO Wanzhou Meng — also deputy chairwoman and the daughter of Huawei’s founder — was arrested on December 1, or right around the time Trump and Xi were having dinner in Buenos Aires last Saturday, and faces extradition to the U.S. as a result of a DOJ investigation into whether the Chinese telecom giant sold gear to Iran despite sanctions on exports to the region, China immediately lodged a formal protest publishing a statement at its embassy in Canada, and demanding the U.S. and its neighbor “rectify wrongdoings” and free Meng, warning it would “closely follow the development of the issue” and will “take all measures” to protect the legitimate rights and interests of Chinese citizens.

Full statement below:

Remarks of the Spokesperson of the Chinese Embassy in Canada on the issue of a Chinese citizen arrested by the Canadian side

At the request of the US side, the Canadian side arrested a Chinese citizen not violating any American or Canadian law. The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim. The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou.

We will closely follow the development of the issue and take all measures to resolutely protect the legitimate rights and interests of Chinese citizens.

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Recession Incoming or Something Worse? 2/10 Spread Collapses, by Tom Luongo

A classic indicator of impending recession is when the yield curve inverts. In other words, short maturity bonds yield more than longer maturity bonds. From Tom Luongo at tomluongo.me:

UPDATE: Now stocks are selling off and the 2/10 spread is less than 10 basis points.  Gold, however, refuses to sell off while the euro pulls back versus the dollar.

Mike Shedlock over at Mishtalk noted yesterday that there have been a couple of troubling inversions in the U.S. yield curve recently.  They happened in the 2/3 and 3/5 year space.

Mike went on to say that the normal recession indicator, the 2/10 spread, may not invert before the economy turns down.

For further discussion, please see First Inversion in Seven Years: Can a Recession be Far Off?

I repeat my assessment:

  • The classic recession signal that most follow is a 2-10 inversion. I doubt we see a 2-10 inversion before recession hits.
  • My call: There will not be the warning nearly everyone is waiting for

I don’t mean to rain on Mike’s parade, because I fundamentally agree with him that the Fed is raising rates into a global slow-down but the 2/10 spread is collapsing this morning pretty quickly.

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BEWARE: New Plan to Censor Health Websites, by Joseph Mercola

How nice, the drug companies are going to let us know which health websites we should be reading. From Dr. Joseph Mercola at lewrockwell.com:

Americans’ trust in the media is at an all-time low. According to a 2017 Survey on Trust, Media and Democracy1 by the Knight Foundation, 43 percent of Americans have a negative view of news media compared to 33 percent reporting a positive view, while 66 percent believe “most news media do not do a good job of separating fact from opinion.”

Seventy-three percent believe the proliferation of “fake news” on the internet is a major problem, and only half feel confident that readers can get to the facts by sorting through bias.

However, individual perception about what is true and what actually constitutes fake news varies. As reported by Medium,2 “A majority of Americans believe people knowingly portraying false information as if it were true ‘always’ constitutes fake news.”

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Lenin would be so proud, by Simon Black

By socializing risk, in other words by making others pay for someone else’s mistakes, we make sure those risks will be taken again and again. From Simon Black at sovereignman.com:

Several years ago back in 2004-2006, if you had a pulse, you could borrow money from a bank to buy a house.

In fact, bank lending standards were so loose back then that there were some infamous cases of people who DIDN’T have a pulse who were still able to borrow money.

That’s right. Some banks were so irresponsible that they actually loaned money to dead people.

Of course, it turned out that lending money to dead people… or people with terrible credit who had a history of default, was a bad idea.

And the entire financial system almost blew up as a result of this reckless stupidity.

But then something even crazier happened: the Federal Reserve came in and bailed out all the banks with trillions of dollars of free money.

That was utterly nuts. Instead of being wiped out by their idiotic mistakes, the banks learned that they would always be bailed out no matter how stupid or greedy they acted.

The key lesson was that there would be zero consequences for bad behavior.

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Putin initiates trilateral summit with India and China, by Melkulangara Bhadrakumar

The three heavyweights of Eurasia, Russia, India, and China, move closer together, which almost by definition means they’re moving away from the US. From Melkulangara Bhadrakumar at strategic-culture.org:

The trilateral summit meeting of Russia, India and China on the sidelines of the G20 at Buenos Aires on December 1 becomes a landmark event in Asian security and global politics. The so-called RIC format has taken a big leap forward with the leaderships of the three countries agreeing “to hold further such trilateral meetings on multilateral occasions” – to quote from an Indian External Affairs Ministry statement.

What is of particular interest is that Russian President Vladimir Putin took the initiative and both Indian Prime Minister Narendra Modi and Chinese Presdient Xi Jinping instinctively warmed up to the idea. The three leaders were intensely conscious of the backdrop in which the meeting took place.

They referred to the imperatives of cooperation and coordination between their countries in meeting the challenges to security and development. Promotion of the multilateral system, the democratization of the international order and world peace and stability was repeatedly stressed.

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