The extremes of the bond market rarely make sense

So says Eric D. Nelson of Servo Wealth Management, here:

For diversified, long-term oriented investment portfolios, interest rate and bond price changes matter very little. Most of a portfolio’s volatility comes from stocks.

Interest rate cycles can last for very long periods of time which makes interest-rate forecasting almost impossible. Further, the extremes of the bond market (cash or long-term bonds) rarely make sense. Sticking with bonds of between one and five years in maturity works best. Long-term bonds sometimes produce the best returns, but this tends to coincide with periods when stocks are also doing very well, when the bond component of a diversified portfolio is needed the least.

A “variable maturity” strategy is superior to simple indexing or the “laddering” of bonds by taking advantage of current bond prices and higher-expected return environments when yields are significantly higher for longer-maturities (up to five years), while limiting interest rate risk when yields are flat or inverted across the bond market. This approach eliminates any need to forecast future interest rates, even if such a thing were possible.

Current premiums you will have to pay to own popular Vanguard bond funds

Trading above the 10.40 level since August 2009, almost 5 years, Vanguard's short term bond index fund VBISX is currently priced at 10.55, a premium of 1.44%. The average annual return for the last three years through April has been 1.53% according to Vanguard. Current assets total $35.7 billion.

Trading above the 11.00 level since May 2010, 4 years, Vanguard's intermediate term bond index fund VBIIX is currently priced at 11.48, a premium of 4.36%. The average annual return for the last three years through April has been 4.92% according to Vanguard. Current assets total $14.7 billion.

Trading above the 12.00 level since April 2011, 3 years, Vanguard's long term bond index fund VBLTX is currently priced at 13.55, a premium of 12.92%. The average annual return for the last five years through April has been 9.73% according to Vanguard. Current assets total just $6.5 billion.

Trading above 10.50 since April 2010, 4 years, Vanguard's total bond market index fund VBMFX is currently priced at 10.83, a premium of 3.14%. The average annual return for the last three years through April has been 3.41% according to Vanguard. Current assets total a whopping $113.6 billion. 

The birth rate has fallen almost 12% under Obama to the lowest level in the post-war

The birth rate per 1000 women both in 2006 and 2007, according to the latest CDC figures, was 14.3, but in 2012 it had fallen to 12. 6 from 12.7 in 2011.

The falloff means that annually you get something like 364,000 fewer new Americans to take our place.

In the late 1950s peak birth rates were in excess of 25.0 per 1000 women.

So if we were doing our job reproducing ourselves today like we were in the 1950s, we'd have something like 7.9 million newborn Americans in 2012 instead of 3.95 million.

Birth rates fell into the 15-range in the 1970s and have stayed there pretty much ever since, until now.

Now you know why GDP is also half what it used to be.

We are literally committing suicide.

Zillow says 10 million mortgages remain underwater concentrated among homes worth less than $100,000

CNBC's Diana Olick reports here:

Nearly 10 million borrowers still owe more on mortgages than their homes are currently worth, according to Zillow. That has kept them stuck in place. ... affordable homes are still drowning disproportionately. They are three times more likely to be underwater than expensive homes, according to Zillow. Thirty percent of mortgaged homes in the bottom price tier ($98,400 and below) are in negative equity, compared with 18 percent in middle tier ($90,400 to $306,700) and 10.7 percent in top tier ($306,700-plus).

Junk thought from Mish on labor force, employment and population

Here:

Since April 2008, the population in age group 25-54 declined 0.8%, but the labor force declined 3.6%, and employment declined 4.6%. ...

In the core age 25-54 age group, the population is down 1,053,000 but employment is down a whopping 4,614,000.

Thus, in the 25-54 age group, roughly 3,561,000 people are not working who should be working. The figure is higher if you include other age groups.

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Mish is looking at the issue from a zero-sum perspective which forgets that the age groups have changed in composition over time. Of course employment levels are down. The question is where did it all go, and why did it go there.

The 25-54 age group was full of Baby Boomers in 2008 who in 2014 are now in the 55+ category where the employment level has continued to grow and grow despite the recession. What has happened is that the Baby Boomers in the 25-54 age group have been replaced by subsequent demographic tranches bringing up the rear which were much less numerous because birth rates to Baby Boomers dropped dramatically compared to their parents' era. As a consequence no age group will ever reproduce labor force sizes which match what they were as the Baby Boomers grew up. In fact, the size of the 25-54 group will continue to decline for five more years until all the Baby Boomers cross over to the 55+ group.

The supposed four million+ deficit in employment in the 25-54 age group today can be explained entirely by demographics.

I presented the data here, concluding:

"It appears therefore that the fall-off in the employment level of those 25-54 can be explained entirely by the aging of their cohort in which many millions over the last seven years have moved on to the next level, and by the failure of the younger members of this group to bring up the rear in terms of their aggregate numbers because there just weren't enough of them born. The reason for the decline of their employment level is therefore structural, not economic, and will continue to be so for the next five years.

"Indeed, workers aged 55 and older have escaped a decline in their employment level. There are in fact 6.9 million more working at this age right now in 2014 than there were exactly seven years ago, which is what one would expect from the data. The Baby Boom is simply aging and continuing to work as it did before, and it has a lot of room left to run."

Facebook's Zuckerberg is the poster child for H-1B visa sins

From a story reported here by Breitbart's Tony Lee:

High-tech lobbies like Facebook co-founder Mark Zuckerberg's FWD.us have poured in millions of dollars in high-profile campaigns to secure more high-tech visas.

And they have partly been succeeding. The Senate's amnesty bill that passed last year would double and possibly triple the number of high-tech visas and, as Breitbart News has reported, House Judiciary Committee Chair Rep. Bob Goodlatte's (R-VA) "SKILLS" Act that ... passed out of his committee would double the number of H-1B visas.

Ron Hira, a public policy professor at the Rochester Institute of Technology who has worked on these issues for more than a decade, said on the conference call that the H-1B visas that are filling the supposed "gaps" are "doing more harm than good" to the U.S. science and engineering workforce.

He noted that the majority of the H-1B visas are being used for "cheaper workers" from abroad and mentioned that offshoring firms used 50% of the cap last year to further their business model of bringing in "lower-cost H-1B workers to replace American workers." [Rutgers University's Hal] Salzman said that even after American software engineers train their replacements, they cannot speak out about their experiences for fear of being blackballed or having to forfeit their severance payments.

Hira said that the H-1B program has run amok because "Congress sets the wage floors way too low" and "far below the market wages for American workers" while not placing any "requirement to look for or recruit American workers first, so there is no displacement of American workers."

"As a result, you are basically inducing companies to game the system to bring foreign workers to undercut American workers," Hira noted. "Instead of complimenting the U.S. workers as it should, it's substituting for the U.S. workforce and taking away future opportunities by shifting the work overseas."

Salzman said that in this arrangement, the employer has nearly total control of the "indentured" H-1B workers because they hold their work permits. ...

Further, Matloff emphasized that H-1B visa holders earn 5-10% less on average than American workers and there is a high churn rate that gives companies a "never-ending supply of new hires," allowing them to replace workers over the age of 35 while weakening the "bargaining position of current workers." The Senate bill, Matloff said, exacerbates this problem by providing 150% of the visas that the IT industry has said they needed at the beginning of the debate.

Obama is using the Justice Dept. and FDIC member banking system to choke the gun industry

Just like he has used the IRS to stop his political opposition in the Tea Party.

From the top of the story here:

Gun retailers say the Obama administration is trying to put them out of business with regulations and investigations that bypass Congress and choke off their lines of credit, freeze their assets and prohibit online sales.

Since 2011, regulators have increased scrutiny on banks’ customers. The Federal Deposit Insurance Corp. in 2011 urged banks to better manage the risks of their merchant customers who employ payment processors, such as PayPal, for credit card transactions. The FDIC listed gun retailers as “high risk” along with porn stores and drug paraphernalia shops.

Meanwhile, the Justice Department has launched Operation Choke Point, a credit card fraud probe focusing on banks and payment processors. The threat of enforcement has prompted some banks to cut ties with online gun retailers, even if those companies have valid licenses and good credit histories.

Criminal GM discovers it can kill 13 people and it only costs them $2.9 million a pop

We bailed out these creeps, why?

The guilty should be in jail and the company dissolved. It remains arrogant about the matter to this day.

Story here:

WASHINGTON — Three months after announcing the start of a safety recall that has swelled to include 2.6 million cars, General Motors has agreed to pay the federal government $35 million -- the maximum penalty -- for failing to report the potentially deadly defect earlier. ... GM has asked a bankruptcy court in New York to rule that it is protected from economic loss claims associated with the recalled vehicles. GM went through a government-backed bankrutpcy reorganization in 2009, which voided any liability claims tied to products made before July 2009.

US Senate reaches new low under Democrat Leader Dingy Harry

TheHill.com reports here:

But even some Democrats have chafed under Reid’s refusal to allow votes on GOP-sponsored amendments, which derailed an energy efficiency bill last week and a package of temporary tax cuts this week. ... Senators have complained for months that the chamber, once dubbed “the most deliberative body in the world,” has become dysfunctional. The collapse of two modest bills with broad bipartisan support this month marked a new low in cooperation.

Justin Amash's pal John Conyers finally reaches the level of his incompetence

The 85 year old congressman famous for not reading bills because they're too dang complicated, preferring lighter fare with pictures like Playboy Magazine on crowded flights, has failed to get enough signatures to appear on the ballot after serving in Congress since 1965.

The Detroit Free Press reports:

Wayne County Clerk Cathy Garrett ruled earlier this week that Conyers’ petitions were insufficient to qualify for the ballot because at least three people gathering signatures were not properly registered to vote, a requirement of state law. Congressional candidates are required to have at least 1,000 valid signatures. Conyers turned in 2,000 and more than 700 were disqualified for a variety of reasons. Another 644 were thrown out because the circulators weren’t registered voters, leaving Conyers with only 592 valid signatures.

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It makes you wonder whether Conyers ever read the Amash-Conyers anti-NSA amendment in the first place, which was defeated 205-217, or whether Justin Amash's bi-partisan work with this patsy was nothing more than a cynical ploy.

Bank Failure Friday: AztecAmerica Bank, Berwyn, Illinois, the seventh bank failure of 2014

AztecAmerica Bank, Berwyn, Illinois, failed yesterday, costing the FDIC $18 million.

It is bank failure number seven in 2014.

That one didn't last long . . . it opened in 2005.

No word yet on whether it failed because it was appealing to Hispanic Americans, or unappealing.

Warped New York Times views inflation as sign of increased demand

Nelson D. Schwartz, here:

Besides the increase in consumer prices reported on Thursday, data Wednesday on producer prices showed a rise of 0.6 percent last month, the largest increase since September 2012 and an indication that demand for a number of basic goods is growing faster than economists expected.

Never mind industrial production fell 0.6% (expectation was 0.0%) along with capacity utilization, which dropped to 78.6% (expectation was 79.2%). Import prices were down 0.4% (expectation was for an increase of 0.3%). Retail sales also disappointed up just 0.1% vs. expectation of 0.4%. The expectation ex-autos was even higher up 0.6%, and the disappointment even lower with a flat 0.0%. Crude oil supplies were up .947M when they were expected to be down .400M. The housing index came in lower at 45 vs. expectation of 49.

Against this backdrop of soft demand, higher producer and consumer prices along with back to back months of flat wages are indicative of nothing so much as . . .

PAIN.

Which is what, evidently, The New York Times enjoys inflicting the most. 

Poster Child For America's Decline

Designed to make babies, has none (at least that we know of).

Jim Cramer reads fellow Democrat Tim Geithner and suddenly discovers frugality: both men are only five years behind the curve

THE MARKET IS UP 11% SINCE CRAMER SAID SELL IN SEPTEMBER 2013

Jim Cramer, quoted here:

"I think America's gone frugal. Just like our parents, or grandparents, or even great-grandparents changed their patterns of behavior somewhat radically after the Great Depression, I'm thinking we've changed ours, too."

Here's a newsflash for you Jim: America went frugal already more than five years ago. Why do you think things are the way they are?

See Mish's "The Age of Frugality" here, from October 19, 2008, which noted that frugality had finally (!) made the cover of a magazine after he'd been talking about it since at least March:

"Frugality has finally made front page. BusinessWeek is commenting on The New Age of Frugality."

Cramer thinks there's a new opportunity in the "new" frugality. Remember, this is coming from the same guy who told you in October 2008 to get out of the market if you needed your money in the next five years. If you took his advice, you missed one of the most incredible bull markets in the history of investing. Unfortunately, being five years behind Jim doesn't realize we've already reaped the opportunity of the new frugality.

The future?

I'm still with Chris Whalen and Ambrose Evans-Pritchard: DECADES of economic shrinkage ahead. We've already enjoyed the prosperity which the debt we racked up provided. Civilizationally speaking: It's time to pay for all that.

Sorry old boy.

Unnumber'd Maladies each Joint invade,

Lay Siege to Life and press the dire Blockade;

But unextinguish'd Av'rice still remains,

And dreaded Losses aggravate his Pains;

He turns, with anxious Heart and cripled Hands,

His Bonds of Debt, and Mortgages of Lands;

Or views his Coffers with suspicious Eyes,

Unlocks his Gold, and counts it till he dies.

-- Samuel Johnson, 1749

Can you find yourself on this temperature chart?

The modern warm period is at the right in red.

Our entire history as a species as preserved in the usual objects of historical inquiry occurred in a period much warmer than now, and it could all be coming to an end because of cooling, not warming.

Discussed here, but from an inferior chart.

Why Republicans Must Not Get Control Of The US Senate And Hopefully Won't

Story here:

Two national surveys have shown that a plurality of voters would be "less likely" to support a candidate who favors amnesty, which could enhance the number of Democrats at the polls, which could make states like Arizona, Texas, and Georgia even more competitive. To complicate matters even more, an Eagle Forum report documented how mass immigration may doom a conservative Republican Party, by depressing conservative voters who may not turn out at the polls like they did not for Mitt Romney in 2012, while perpetually importing more Democrats.

Americans believe the most important problem facing the country involves representation, but don't say it quite that way

Dissatisfaction with the government, Congress and politicians took first place in a January Gallup poll. This includes dissatisfaction with poor leadership, corruption and abuse of power.

Perhaps if someone explained how too much power is concentrated there in too few hands the American people might be persuaded that more representatives with smaller districts might help solve the problem of our oligarchical Congress and improve its responsiveness to the people.

Results here.







h/t Laura Ingraham

Obama hates your guts, deliberately releases 36,000 violent aliens in 2013 to kill you, rape you, kidnap your children, beat you up, steal your car, deal drugs, drive under the influence

And he does it with a smile.

CBS News reports, of all people, here:

A majority of the releases were not required by law and were discretionary, the organization [ICE] says.

According to the report, the 36,007 individuals released represented nearly 88,000 convictions, including:

193 homicide convictions

426 sexual assault convictions

303 kidnapping convictions

1,075 aggravated assault convictions

1,160 stolen vehicle convictions

9,187 dangerous drug convictions

16,070 drunk or drugged driving convictions

303 flight escape convictions

Warren Buffett keeps the liberal wolves at bay by favoring higher taxes and now we learn abortion to the tune of $1.2 billion

In exchange for Warren Buffett's liberalism on tax increases on the rich and his support for abortion Obama is content to enrich Buffett with oil carried by Buffett's rail cars instead of approving the Keystone Pipeline, which in turn serves to strengthen Obama's support from the environmentalists while hurting Obama's conservative enemies as well as his greater enemy, the nation.

See how useful just one idiot can be?

Story here.

S&P500 ekes out another new high riding on the thermals, up just 0.8 points from yesterday's new high

Up 0.04% from yesterday.

Whoopee! Some new high.

"Are you going away with no word of farewell?

Will there be not a trace left behind?

Well, I could have loved you better,

Didn't mean to be unkind.

You know that was the last thing on my mind."

-- Tom Paxton