Rush Limbaugh is a buffoon who just makes stuff up about the two dead policemen at Charlie Hebdo

Here, doing his very best to misinform as usual, and making a fool of himself:

"The two cops who were shot, do you know how they arrived on the scene?  They rode their bicycles.  That's right.  They came pedaling up.  After hearing about this attack, and the cops are dispatched, the two who were shot showed up on bicycles."

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One of the two dead policemen was a body guard of one of the employees of the French satirical publication targeted by two Muslim fanatics. He was already in the office when he was gunned down. He wasn't outside on a bicycle.

If there were two officers of the municipal police on bicycles dispatched to the scene, obviously only one of them was shot, and the other escaped.

The intricacies of the French police force obviously don't interest Rush Limbaugh, either. He would rather ridicule and caricature the French police as mindless victims of liberalism who must do their jobs without being able to defend themselves, when the fact is municipal police are typically unarmed but can choose to carry if they wish. Nevertheless the municipal police, which are basically the traffic division in France but enforce the local laws at the behest of mayors, represent barely 7% of the police force in France.

The national police are all armed, and the militarized units especially so.

TARP ends, but conservatives still don't realize it was just a sideshow

Existing crisis loans 1st of the month in billion$

That TARP was just a sideshow was not known at the time in 2008, but it should be known by now.

Too bad conservatives haven't paid attention.

TARP assumed the role of the main actor on the stage of the financial panic as the liberal government of George W. Bush tried to show that it was capable of doing something to bring the panic of 2008 to an end. Bush at length signed the TARP legislation on October 3, 2008, at which point the stock markets promptly rewarded him by caving over the next three weeks, setting the stage for the final denouement by March 2009. Only Securities and Exchange Commission changes to mark-to-market accounting rules at that point stopped the cratering and put a floor under stock prices. Meanwhile behind the scenes the liberal government of Woodrow Wilson in the form of the Federal Reserve had already been hard at work for months frantically doing the real rescue.

Now that TARP is over, liberal political operatives are wont to characterize TARP as a success because it supposedly made a profit accruing to the government, and hence to The People, who are ever almighty in liberalism. They also say this to keep our eyes off the ball. "Conservatives" continue to take that bait and argue there was a loss to TARP, never examining themselves to see if they are in the larger truth. National Review's Matt Palumbo is just the latest example, here, quibbling over a few measly billions of dollar based on an argument from inflation to substantiate a loss to TARP.

It doesn't get much more pathetic than that.

TARP became the sideshow it always was once and for all when Bloomberg News, using the Freedom of Information Act, forced the Fed long after the fact in late 2010 and early 2011 to reveal the true scope of its bailout of the world in 2008-2009. Behind the scenes the rest of us had groped in the dark trying to fathom TARP's $700 billion bailout, when that turned out to be just a decimal point in the real bailout, the Fed's $7.7 trillion lending authority through the discount window and other programs.

"Conservatives" still haven't grasped this.

Over five million Americans lost their homes in the wake of the panic, almost 30 million ended up filing first time claims for unemployment in 2009 (85% more than did just last year), and almost eight years after the employment peak of 2007 full-time jobs still have not recovered, the most disgraceful record in the post-war.

The Federal Reserve bailed out hundreds upon hundreds of large banks and corporations not just in the United States but all across the globe by backstopping them with promises of huge sums if needed while regular Americans were simply left to fend for themselves:

$7.77 trillion -- The amount the Fed pledged to rescue the financial industry, according to Bloomberg research that examined announced, implied or actual upper limits on lending and guarantees. This number, which represents potential commitments, not money out the door, was first published in March 2009, when it peaked.

“One of the keys to understanding why we’ve avoided another Great Depression, so far, is to see how bold the Fed was in 2008 and 2009,” said Niall Ferguson, a Harvard University history professor. “That boldness consisted of a range of contingency commitments that backstopped the banking system. Just because they weren’t used doesn’t mean they weren’t important.”

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Actual loans at rock bottom prices over time amounted to about half that, at $3.3 trillion, as can be appreciated here in just one of the lending programs of the Fed, the famous discount window. The low interest rates charged there, a sideshow in themselves, are thought to have benefited the banks at the same time by about $13 billion, according to Bloomberg, over what they would have had to pay at market rates.

That was simply the cherry on the gargantuan crony capitalism cake, an object, I am sure, of singular fascination for the likes of the Matt Palumbos of the world.

That spike in the graph is the discount window lending in the 2008 panic

John Early's model predicts 4Q2014 GDP between -1.2% and +1.4%

See John Early's "5 Reasons GDP Growth in Q4 May be 0%" at Seeking Alpha, here.

The House has a Boehner again

Top 10 investing years for subsequent 10 year returns since 1965 to date

1988: 18.80% nominal per annum average from the S&P500 12/'88-12/'98

1987: 18.15%

1989: 17.99%

1990: 17.57%

1979: 17.27%

1981: 16.53%

1982: 16.16%

1978: 16.14%

1977: 15.02%

1985: 14.98%

These years have an average total S&P500 market capitalization to GDP (in trillions) ratio of 48.

The ratio at the end of 3Q2014 was 112, which historically produces 10 year returns averaging about 3.24% nominal.

Rush Limbaugh is back for 2015 and he's dumber than ever, just like Zero Hedge

Here:

And the second thing I saw was the economy is growing at this 5% rate.  By the way, do you know how that happened, folks?  Do you know what the bulk of the economic growth -- I mean, what is the economy?  The economy is consumer spending, essentially, consumer spending and consumption, commerce.  You know what the majority of spending was in the fourth quarter was people spending money on Obamacare, mandated by law.  The vast majority of our economic growth -- this was made public by Tyler Durden at -- I forget the website.  It's off the top of my head.  Well-known business website.  Over half of the spending in this country in the fourth quarter was you and me and everybody else spending money on health care. ... Well, some economic growth, when over half of it is essentially required by the government? 

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Aside from the fact that the quarter in question is stated in error as the fourth, the idea that "the majority of spending . . . was people spending money on Obamacare" is ludicrous.

Line 17 in the snapshot above from the GDP report shows that 3Q2014 healthcare spending was $2.0089 trillion. Line 2 shows the total of all personal spending at $12.002 trillion. Healthcare spending thus represented just 16.7% of that in 3Q. And that percentage is identical to the percentage spent also on healthcare in 2013. Healthcare spending is not anywhere near "over half of the spending in this country in the fourth [sic] quarter".

ObamaCare hasn't suddenly driven up healthcare spending in 2014 at all. Maybe after the fourth quarter is over and we get the final number for that in March 2015 we will be able to say that Obamacare has driven up healthcare spending overall, but so far we cannot say that. So far such increases have been born by too small a percentage of the adult population to show up in the data.

What we can say is that so far healthcare spending is growing at a pace slightly behind the pace of the overall economy, which grew at 4.96% annualized in 3Q. Healthcare spending grew at a slightly less robust 4.6% rate.

It is likewise incorrect to say as Rush Limbaugh says that healthcare spending accounts for "the bulk of the economic growth" in 3Q. Healthcare spending grew $88.6 billion in 3Q2014 from 2013, which represents just 10.65% of the $831.7 billion overall increase in GDP over 2013 in the latest report. Over 89% of the increased growth thus came from other categories.

Conservatism is not about fighting lies with more lies.

John Tamny of Forbes spends four pages trying to convince us falling oil prices are always due to a rising dollar

Here, in Forbes:

"Falling crude prices ... were a function of a rising dollar that revealed itself in a major decline in the price of gold that is and was priced in dollars."

I don't know. Maybe he's trying to convince himself, not us. Reminds me of listening to a religious fanatic who can't stop talking. You know the kind. They usually get older and eventually think the better of it and move on. But not John Tamny.

The idea that a falling dollar produces higher oil prices is a nice theory occasionally supported by the data. The trouble is, there are too many examples of the correlation breaking down.

Crude oil prices from the mid-1980s to 2004 were remarkably range-bound between $12 and $35 a barrel despite the huge drop in the dollar from 1985 and its subsequent rise through the early 2000s. The dollar's rise in the late 1990s did nothing to change this. In fact, oil rose in tandem with the dollar then, as it did marginally after 1995 and as it did at the end of the late recession.

The sheer scale of the moves in oil prices is not commensurate with the relatively small moves in the dollar since 2005, nor is the relative tranquility of oil prices before that explained by the out-sized moves in the dollar.

The case is similar with gold, which at the current price of the dollar is still much, much higher than a dollar at this level in the past would indicate is called for. Gold was quiescent for 20 years and a lot lower than now all the while the dollar moved dramatically down and up again and down, off the 85 level. Contrary to Tamny, the recent decline in the price of gold has hardly been major, and hardly enough to convince that it is hewing to the performance of the dollar.

To illustrate how little gold has cared for the dollar's level, just look at how long it took for gold to peak after the 2008 all-time low in the dollar: over three years. And there is also that roughly 13 point rise in the dollar during the late recession when gold also began its long and biggest leg up.

That's not supposed to happen.

Sorry!

What does stock market valuation in 2014 portend for the future?

Using the S&P 500 index level at the end of 3Q2014 divided by the final report of GDP in trillions of dollars you get a ratio of 112. 

To put that in its proper context from 1965, the mother of all buying opportunities at the end of 1981 produced a level of 38 and the outlier year at the other end of the scale was 1999 at the end of which the level stood at 152. So 112 is well north of the Mason-Dixon line of 95 for this analysis.

The nominal average return per annum for the ten years from the end of 1981 was 16.53% with dividends fully reinvested, but from 1999 it was . . . wait for it . . . -0.73%.

Similar levels to 2014 have obtained at the end of 2001 (108), 1997 (113), 1968 (110), and 1967 (112). The respective subsequent 10 year average returns have been 2.79%, 6.02%, 2.81% and 3.49%, for an average of these of 3.78%.

In other words, the future doesn't look so hot. 

Stock market valuation illustrated by total market capitalization to GDP ratios, selected years

"Steven Goddard" has a little fun with WaPo for Alaska temperature alarum

Yeah, where are all the stories about last winter? All gone, down the memory hole.

Here:

"The US recorded [in 2014] the most nights below zero since 1989, but Anchorage now represents the global climate."

Dollar soars almost a percent to close at 91.15, highest close since December 2005

Grand Rapids, MI, finishes 2014 with a total temperature anomaly of -30.3 degrees F

December was 2.7 degrees F above normal and nearly snowless with just one inch, most of which came on December 31st, a welcome respite from the all-time record snows of November at 31 inches, accompanied as those were by below normal temperatures totaling 5.8 degrees F.

The temperature deficit from normal through November of 33 degrees F was thus reduced to 30.3 degrees F total for 2014, for a monthly average deficit of 2.525 degrees F.

Collapsing oil prices will blow a $1.4 billion hole in Canada's tax revenues, wiping out the projected surplus

So says Garth Turner, here, at The Greater Fool:

Fully 30% of the pump price is federal and provincial tax, of which 12% goes to Ottawa. It’s now clear that with buck-a-litre gasoline that Canadians will spend about $12 billion less filling up in 2015 than last year. There alone is $1.4 billion Joe Owe won’t have to play around with – and he was forecasting [a] surplus of less than a billion.

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Nice nuts on the truck, Garth.

Market valuation in 2014 is 15% above the 2007 level

Average market cap to GDP in 2006 and 2007 came in at 1.23, and then fell to 0.74 by the end of 2008.

As of the end of 3Q2014, the ratio has risen to 1.415, which is 15% above the level seven years ago before the stock market crash, and 91% above the 2008 level.

Current valuation is about 17.5% below the stratospheric level of 1.715 reached at the end of 1999, and almost 195% above the 1981 level at 0.48, the mother of all buying opportunities in our lifetimes.

Buy and Hold: Why bother with Bridgewater's All Weather or with a simple global market portfolio?

Meb Faber compares the returns from behemoth Bridgewater's All Weather portfolio to a simple global market portfolio (GAA) here, acknowledging that the leveraged version of the latter which beats All Weather is probably too expensive for individuals to implement:

All Weather, 1996-2014: 6.34% net of inflation

GAA (unleveraged), 1996-2014: 5.23% net of inflation.

I say, why bother?

You can invest very cheaply in a low-cost S&P500 index fund and do very nearly just as well on the stock side: The average annual return from the S&P500 net of inflation, 11/'95-11/'14, has been 6.23%.

And for the bond portion of your portfolio an investment in a low-cost long term bond index fund like VBLTX has yielded 7.89% since 1994. Net of inflation at about 2.31% this must come in in the neighborhood of 5.4% per annum.

Which begs the question, Why not just pick a decent low-cost balanced fund?

Actively managed Wellesley Income, VWINX, has yielded 10.09% per annum since 1970, with inflation annualizing at about 4.17%. And the traditional Balanced Index, VBINX, has yielded 8.38% since 1992, with inflation annualizing at about 2.38%. Either fund puts you in the vicinity of 5.9% to 6% per annum net of inflation. Expense ratios for these funds are less than a quarter point.

Just sayin'.

Tonight's S&P500 level is 0.8% above the inflation-adjusted August 2000 level, the previous high

2058 vs. 2041.

Mario is dead: Long live the Mario

Mario Cuomo (1932-2015)

Happy talk from Robert Lenzner of Forbes misses the 180 month bear market in performance

Robert Lenzner of Forbes, here, is only off by an order of magnitude (18 months vs. 180):

Bull markets last on average about 97 months each and gain an average of 440 points in the Standard & Poor’s 500 stock index. By comparison bear markets since the 1930s have an average duration of only 18 months and an average loss in value of about 40 percent.

Let's talk the most recent bear market in performance.

If you invested your nest egg in the stock markets fifteen years ago in a total stock market index fund, your average return annually, say in VTSMX, would be 4.75% through 2014, per Morningstar.

On the other hand, if you had taken the safe route and invested everything in an intermediate term bond index fund, say in VBIIX, your average annual return would be 6.52% through 2014, also per Morningstar.

DESPITE THE PHENOMENAL PERFORMANCE OF STOCK MARKETS SINCE 2011, WHEN THE S&P500 REVISITED THE 2008 CLIFF LEVEL BEFORE THE BOTTOM IN 2009, STOCKS ARE STILL IN A BEAR MARKET. NO ONE REALISES HOW BAD THEIR CONDITION STILL IS.

Only fools are investing in the stock market today. Returns from stocks 10 years from now will be similarly disappointing as they have been since 1999. If you have physical gold, keep it, imho. And if you can, raise cash, imho. Opportunities for riches to agile investors who are prepared to scoop up bargains as in the 1930s are in the offing.

As everyone should know by now but doesn't, 1999 was a blow off top period leading up to the previous inflation-adjusted stock market peak of August 2000.

Valuations today have still not reproduced themselves in comparison to the end of 1999 on a total market cap to GDP basis, but they are way above the 2007 levels and represent an historically exceptionally rarefied level of valuation. Valuation at the end of 2014 based on total stock market cap to GDP will be relatively certain with the second report of 4Q2014 GDP at the end of February.

Stay tuned.

Erick Erickson asserts a difference between libertarianism and libertinism

Today filling in as guest host of the Rush Limbaugh Show in response to a caller recommending the Republican Party move in a more specifically libertarian direction.

The comment was more diplomacy than wisdom.

In the Molly Ball feature on Erickson for The Atlantic here, Erickson more than once eschews libertarianism, let alone libertinism:

“Nationally, people think of me as a Tea Party person, and I am,” Erickson told me. “But in Georgia, the Tea Party can’t stand me.” The local movement, he explained, is dominated by libertarian followers of former Congressman Ron Paul, and Erickson has opposed many of its chosen candidates. Erickson’s conservatism is of a more traditional bent, deeply informed by his evangelical faith. He believes Republicans must not yield in pursuit of small government, strong national defense, and the primacy of the traditional family.

Erickson sounded almost gleeful as he told me about the Tea Party hating him. He seems to delight in confounding expectations, and in almost every way, he refuses to be pigeonholed: he is a southerner who defines himself by his small-town sensibility, but he spent most of his childhood in Dubai. He speaks for the conservative grass roots, but he pals around with cable-news regulars and Beltway elites. He’s a strict no-compromises ideologue, but during his one foray into elected office, he was a model of bipartisan cooperation. ...

When I pressed him on whether his zeal for regulation while on the city council was at odds with his less-government philosophy, he said he believed human trafficking was a problem that government should have a role in solving. “I’m not a libertarian,” he said. Even small-government absolutists, after all, can agree that sexual slavery ought to be prevented.

Index fund flows in 2014 may indicate the top is in, or nearly in

Seen here:

The impact of index funds has been revolutionary. When John Bogle, the founder of Vanguard, introduced the first vehicle designed to passively track the performance of a stock index about 40 years ago, it was derided as “Bogle’s Folly.” Today the fund’s successors, at Vanguard and elsewhere, hold $2 trillion in assets. ...

Actively managed funds still hold a majority of total stock fund assets, 63% at the end of September. But in the first nine months of 2014, actively managed stock funds attracted $2.5 billion, while $173 billion found its way into index funds, or 98.6% of the total.

This flood of money into index funds came after the market already had recorded substantial gains. [James] Stack contends that such lopsided affection for passive investing — and the lack of concern for risk that he infers from it — hints at an approaching top, as does the evidence of history.

“Generally, the times when index investing reaches the highest popularity are in aging bull markets or near market peaks,” he says.