Juggling Dynamite

Background checks for guns couldn’t pass, but Congress did find common ground in passing a new loop hole to the barely minted Stop Trading on Congressional Knowledge (STOCK) Act.  The usually too-divided-to-act US Congress found the consensus needed to set aside financial disclosure requirements for executive branch staffers wishing to trade stocks in their own accounts.  The disclosure requirement was originally included as concession to an otherwise outright ban policy on staffers making trades.  They could avoid public disclosure if they chose not to make trades.  But the new amendment, effectively guts the intent of the original Act, making it easier for some government insiders to get away with corrupt trades on inside congressional information.  See:  Insider Trading in DC just got easier.

This type of unfair privilege and disrespect for public duty undermines the rule of law foundation on which the free world has grown.  The fact that so many today in business and government do not understand the necessity of basic tenants like fiduciary duty, disclosure, transparency and appearance of justice, speaks poorly for the prospects of meaningful recovery and progress forward.

The dramatic weakness in commodities and mining companies over the past week extends the secular decline we have noted since 2008. But on a shorter-term window, since 2011, price weakness in these sectors has been signaling the onset of a fresh cyclical downturn in the global economy. From the 2009 bottom to 2011, there was some intermittent hope that QE programs from Central Banks could blunt or suspend the resumption of a demand-led recession in the world. Those hopes have been steadily crushed by the weight of disappointing economic data year to date. Copper has been leading the revelation.

The words of the Tragically Hip come to mind:

“Its been a long time running.
Its been long time coming.
Its been a long time running.
Its well worth the wait.”

Chart source: Cory Venable, CMT, Cory Venable Park Investment Counsel Inc.

• CALPERS actuary admits math:  says time for deficits to be caught up through a fixed increase in contributions.  This marks the beginning of a new mindset and necessary contribution hikes in pension plans that will replace the “extend and pretend” stalling tactic of the past 13 years.  Necessary, but definitely a drag on consumer spending and corporate profits, as dedicated contributions ramp up over the next several years. See:  California Pension may ask for 50% boost to close gap
• A senior Chinese auditor is also admitting math this morning, with a warning in the Financial Times that Chinese local government debt is “out of control” and could spark a bigger financial crisis than the U.S. housing market crash. See: China local authority ‘debt out of control’
• Meanwhile European car sales just hit a 20 year low as the on-going debt crisis sent demand plunging last month in the region’s biggest economy:  “The western European passenger-car market is on track this year to hit levels last seen in 1993, and Germany seems to be in a free-fall.”  See:  Europe car sales
• Prostitution to construction:  A 2 Trillion shadow-economy in the US

Also see this chart of the S&P over the past year and the NASDAQ 1998 to its bubble peak in 2000, courtesy of Zerohedge: Party like its 1999?