The lagging indicator MACD told you to sell the S&P 500 in January 2008, and buy it in August 2009

Three months after the 2007 top, and five months after the 2009 bottom. That's how lagging indicators work: better on the front end and poorer on the back end.

But hey! Close counts in grenades and horseshoes.

Germany repatriated 120 metric tons of gold to the Fatherland in 2014

From the story here:

"The Bundesbank successfully continued and further stepped up its transfers of gold," the central bank said in a statement. "In 2014, 120 tonnes of gold were transferred to Frankfurt from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York. Germany's gold reserves are the second-biggest in the world after those of the United States and totalled 3,384.2 tonnes this month, according to the latest data compiled by the World Gold Council. ... Under the Bundesbank's new gold storage plan in 2013, it decided to bring back 674 tonnes from abroad by 2020 and store half of its gold in its own vaults. ... Since the transfers began in 2013, the Bundesbank said it has relocated a total of 157 tonnes of gold to Frankfurt -- 67 tonnes from Paris and 90 tonnes from New York.

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If I'm doing the math right, that means that in 2013 New York coughed up just 5 metric tons of Germany's gold to Germany, and Paris 32 metric tons.

If the plan is to repatriate 674 metric tons by 2020, the 157 repatriated so far means there are just 517 to go, or about 86.1 metric tons per year through 2020, to put half of Germany's gold back in Germany.

The story line not included above includes the narrative that it was unsafe to let Germany store its own gold in its homeland during the Cold War. But there were already 1,018.1 metric tons stored in Germany all those years, not quite a third of its holdings. Seems like a pretty big target to me.

An interesting assessment of the risks, wouldn't you say? Or was something else at work here? Versailles, and all that.

Bob Brinker's advice to stay fully invested in stocks in 2008 beats Jim Cramer's to sell

Bob Brinker famously said on his radio show Moneytalk during the 2008-2009 market meltdown that "no one could have predicted this".

As a market timer, he's taken a lot of heat for this statement, including from me, but it is time to reassess his 2003 call to return to a fully-invested position in the stock market and to stick to it in 2008 despite the meltdown.

How has that worked out? 

"Fully invested" means different things to different people. This is because it is a question of asset allocation. Asset allocation strategies are by definition highly individualized to meet objectives while minimizing risk, and they depend on many factors including income and age, which change over time and thus necessitate adjustments to the strategy periodically. So to be clear, a person who allocates 50% of all resources to stocks at any given time is fully invested when that is so. But that means that a person who has much more tolerance for risk and normally invests 90% of all resources in stocks by definition has a greater percentage of all his resources in stocks, yet both individuals are "fully invested".

OK, so let's take the hypothetical person born in 1949 who just retired at the age of 65 in November 2014. That person has had theoretically 43 years of continuous investing life, let's say beginning from November 1971 after landing that first job out of college in the spring of that year.

Now whatever this person had allocated to stocks over the course of those 43 years, using the S&P 500 as a proxy for the part allocated to stocks, he or she has averaged a nominal return of 10.68% annually with dividends fully reinvested through November 2014, including the crash periods of 2000 and 2008.

But back in March 2003 this person was turning 54 years old and was worried about the future after the stock market crash he had just experienced. And let's say he had ridden his investments all the way down in that crash by being fully invested through the 2000 debacle. From 1971 to that point in 2003 his average annual performance had been 10.94%.

Had he heard Bob Brinker's advice to be fully invested going forward and stayed the course he had been on, how did remaining in the market as before repay him as part of the overall average performance of 10.68% which he ended up achieving annually on average through November 2014?

The answer might surprise you: The average annual performance of the S&P 500 from March 2003 through November 2014 has been 10.01%. The market crash of 2008-2009 might certainly have unnerved this investor, who was then turning 60, to the point of utter capitulation, for it reduced his performance from 1971 through March 2009 to 9.11% per year on average.

It's clear, however, that cutting and running after the fact in 2008-2009 was not the answer. That was Jim Cramer's answer in October 2008, on morning television no less, but it wasn't Bob Brinker's.

Simply staying the course was like putting back on a point and a half for every year of the 43 year investing life of our hypothetical investor in a matter of just five years.

Kudos to Bob Brinker. Raspberries to Cramer.

Editor of Charlie Hebdo, Gerard Biard, attacks the pope for his "provocateur" comment

Here, after stating that "religion has no place in the political arena":

GERARD BIARD: We do not kill anyone. We should stop conflating the murderers and the victims. We must stop declaring that those who write and draw are “provocateurs,” that they are throwing gas on the fire. We must not place thinkers and artists in the same category as murderers. We are not warriors. We only defend one thing: Freedom, our freedom, secularism, freedom of conscience and democracy.

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Charlie Hebdo isn't just against Islam, it's against anyone with faith. It excludes everyone with faith from the political process. The only equality secularism recognizes is the equality of secularists. People of faith are second class citizens, or worse, totalitarian monsters, never mind that the worst totalitarian monsters were all extreme secularists. The crimes against humanity committed by religious fanaticism pale in comparison to the crimes of the Stalins, Hitlers and Maos of the world.

The main reason we are still in a secular bear market

Ed Easterling, Crestmont Holdings LLC, quoted here:

"P/E has not declined to levels that are required to drive a secular bull market.”

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Other forces have been hard at work manipulating prices, inhibiting discovery of actual value.

The wisdom of Mingdong Wu: How to raise interest rates without raising them

The Fed owns in excess of $2.4 trillion in Treasury securities.

Mingdong Wu is a very smart guy, knowing that Treasury securities are in short supply because government spending has been flat to negative since 2009. That makes the price of existing securities go up. This means interest rates are low, because those move inversely to price. To make interest rates go up, increase the supply, as he tells us here:

"The Fed should gradually sell its Treasury holdings to rebalance supply and demand."

Simply brilliant. Of the $2.4+ trillion held by the Fed, $1.1 trillion are 1 to 5-year instruments.

Voila!

Reuters agrees: the middle class is worse off now than when Obama took office

Here:

Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office. ...

In the middle, the economy has shed positions - whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators. ... 

Between 2010 and 2013, as recovery took hold and stock markets soared, the average net worth of families in the top 40 percent of income earners grew. For all others average net worth shrank, declining 19 percent for the middle fifth. Similarly, the average earnings for families in the top 10 percent grew more than 9 percent from 2010 through 2013, while those at other levels stagnated or shrank. For the middle fifth, average earnings fell 4.6 percent. Over the six years through 2013, the middle fifth's average annual family earnings fell to $47,243 from $53,008 while their average net worth dropped to $170,066 from $236,525.

Hillary Clinton doesn't have a Charlie Hebdo problem: The Neoconservatives have a pope problem

The Weekly Standard thinks Hillary Clinton has a Charlie Hebdo problem, here:

Clinton blamed an "awful internet video that we had nothing to do with" for the "rage and violence directed at American embassies." Clinton did not, in the course of her speech, defend the right to free speech. ... [D]oes Clinton see any difference between the blasphemous Charlie Hebdo cartoons and the blasphemous anti-Islam YouTube video?

All Hillary has to do is quote the pope:

"One cannot provoke, one cannot insult other people's faith, one cannot make fun of faith. There are so many people who speak badly about religions, who make fun of them ... they are provocateurs. And what happens to them is what would happen to [my dear friend] if he says a word against my mother."

Bank failure number one of 2015 is in Crestview, Florida

First National Bank of Crestview, Crestview, Florida, failed last night, costing the FDIC $4.4 million.

6,589 institutions remained insured under the FDIC through 9/30/14.

18 banks failed in 2014, 24 in 2013, 51 in 2012, 92 in 2011, 157 in 2010, 140 in 2009, and 25 in 2008 when there were still 8,384 banks and savings and loans in the FDIC system.

The shrinkage of membership in the system by about 1,800 over this period includes the 508 failures since 2007 and about 1,287 sales, mergers and consolidations.

Costs to the FDIC system for failures since the beginning of 2007 to date are close to $90 billion.

Liberty! Fraternity! Israel!

Ann Sterzinger on sex-obsessed Islam

Here:

"[A]mong religions in modern vogue, none is more explosively kinky than Islam."

It's true, Islam is sex-obsessed:

"[T]he world’s top porn consumers come out of the Middle East. According to data released by Google, six of the top eight porn-searching countries are Muslim states. Pakistan tops the list at number one, followed by Egypt at number two. Iran, Morocco, Saudi Arabia and Turkey come in at numbers four, five, seven and eight, respectively. Pakistan leads the way in porn searches for animals like pigs, donkeys, dogs, cats and snakes."

Victor Davis Hanson's loyalty is to a part of antiquity about free speech admired by the Enlightenment, not to all of it

Here, idealizing the record of the ancient world on freedom of speech, which is much more complicated than he lets on:

Western civilization’s creed is free thought and expression, the lubricant of everything from democracy to human rights. Even a simpleton in the West accepts that protecting free expression is not the easy task of ensuring the right to read Homer’s Iliad or do the New York Times crossword puzzle. It entails instead the unpleasant duty of allowing offensive expression. ...

Westerners cannot return to the Middle Ages to murder those whose ideas they don’t like. “Parody” and “satire” are, respectively, Greek and Latin words. In antiquity the non-Western tradition simply did not produce authors quite like the vicious Aristophanes, Petronius, and Juvenal, who unapologetically trashed the society around them. If the French satirical magazine Charlie Hebdo loses the millennia-old right to ridicule Islam from within a democracy, then there is no longer a West, at least as we know it.

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Do we really need to remind a classicist that Socrates was put to death for expressing ideas the Athenians didn't like, long before "the West" even got going?

Or that Solon's reforms of the Draconian laws were approved of in the time of Plutarch precisely for the way they restricted impious and intemperate speech?

"Praise is given also to that law of Solon which forbids speaking ill of the dead. For it is piety to regard the deceased as sacred, justice to spare the absent, and good policy to rob hatred of its perpetuity. He also forbade speaking ill of the living in temples, court-of‑law, public offices, and at festivals; the transgressor must pay three drachmas to the person injured, and two more into the public treasury. For never to master one's anger is a mark of intemperance and lack of training; but always to do so is difficult, and for some, impossible." -- Life of Solon 21.1

Or that the Bible has a venerable tradition advocating self-censorship, arguably with a greater claim to forming the basis of Western experience among more people than Petronius or Juvenal could ever make?

"A fool uttereth all his mind: but a wise man keepeth it in till afterwards." -- Proverbs 29:11

"I will guard my ways, Lest I sin with my tongue; I will restrain my mouth with a muzzle, While the wicked are before me." -- Psalm 39:1

"If any man among you seem to be religious, and bridleth not his tongue, but deceiveth his own heart, this man's religion is vain." -- James 1:26

"And the tongue is a fire, a world of iniquity: so is the tongue among our members, that it defileth the whole body, and setteth on fire the course of nature; and it is set on fire of hell." -- James 3:6

Or that certain forms of self-censorship could get a person killed under the Romans?

'And the Irenarch Herod, accompanied by his father Nicetes (both riding in a chariot), met him, and taking him up into the chariot, they seated themselves beside him, and endeavoured to persuade him, saying, "What harm is there in saying, Lord Cæsar, and in sacrificing, with the other ceremonies observed on such occasions, and so make sure of safety?" But he at first gave them no answer; and when they continued to urge him, he said, "I shall not do as you advise me." So they, having no hope of persuading him, began to speak bitter words unto him, and cast him with violence out of the chariot, insomuch that, in getting down from the carriage, he dislocated his leg [by the fall]. But without being disturbed, and as if suffering nothing, he went eagerly forward with all haste, and was conducted to the stadium, where the tumult was so great, that there was no possibility of being heard.' -- Martyrdom of Polycarp 8

All of these "speech codes" and more existed in the West long before the West became the West, right alongside the traditions challenging them which Hanson mentions. And speech codes also still exist in our own time, as the anti-Semitic laws of France and a few other countries demonstrate.

Arguably there should be more such laws punishing defamation of more religions if we are going to permit laws benefiting one religion in this respect, if, that is, we are going to continue to emphasize the Western principle of equality before the law. Otherwise the "duty of allowing offensive expression" must also apply to all, including Jews.

Bloomberg's Al Hunt hurls the loaded term "denier" at Republicans

Here's Al Hunt, insinuating that the doubters of climate change are in the same class as Holocaust deniers:

"Still, Francis's message is unsettling to more than a few conservatives, particularly his focus on climate change and his initiatives to influence the United Nations' conference in Paris this year. Some prominent Republicans, such as Senate Environment Committee Chairman James Inhofe, are climate-change deniers."

Bill Donohue to Hugh Hewitt: a single bishop has been found to agree with me, namely the Bishop of Rome

Bill Donohue of the Catholic League, here, happy that the pope agrees that there are limits to freedom of speech, limits we impose on ourselves:

"I am obviously delighted that the pope has taken the same position I have on this issue. Radio chatterbox Hugh Hewitt doubted last week whether a single bishop would side with me. What does he have to say now?"

Michael Savage attacks the pope for saying limits exist to free speech, ends up saying the same thing

Michael Alan Weiner

Michael Savage attacked the pope yesterday for two things: for stating that there are limits to freedom of speech, and for opining that human beings bear some responsibility for global warming.

Savage found the first idea an affront to the First Amendment of the US Bill of Rights ("Congress shall make no law abridging the freedom of speech, or of the press"), wondering how the pope never heard of it.

The pope in his capacity as the vicar of Christ on earth, however, wasn't telling Congress to abridge the freedom of speech of anyone. He was simply reminding Christians everywhere (and chiding the secularists of France and the United States especially--hello Hugh Hewitt) to restrain their own speech as a matter of spiritual principle, in obedience to the teaching of Jesus:

"Hear and understand: not what goes into the mouth defiles a man, but what comes out of the mouth, this defiles a man. ... [W]hat comes out of the mouth proceeds from the heart, and this defiles a man. For out of the heart come evil thoughts, murder, adultery, fornication, theft, false witness, slander. These are what defile a man; but to eat with unwashed hands does not defile a man."

-- Matthew 15:10f, 18ff.

The pope was reminding the world that there is a higher law than the laws of France or the laws of the United States when it comes to what we say. Every Jew should be able instantly to recognize this idea, since practicing Jews frequently restrain their own speech as a matter of principle. They will often write "G-d" instead of "God" for fear of taking God's name in vain as the commandment in the decalogue warns. More to the point, every Jew should already grasp the Jewish basis for the Christian idea of self-restrained speaking because it comes from the prophet Jeremiah who said that "the heart is evil above all things". And neither do Jews have any excuse to be surprised by the doctrine since it is well worked out by the rabbis in the doctrine of "the evil inclination" which must always be guarded against.

Michael Savage, however, is lately more interested in removing the guards, indeed in "unprotected talk", rather than in the circumspect speech implied by his well-known motto of borders, language, culture. Freedom of speech as understood absolutely by civil libertarians is at war with that, because it leads to open borders, many languages and multiculturalism. Savage should understand by now that such libertarianism is incompatible with conservatism, and that when it comes to mental disorders, liberalism does not have a corner on the market.

The coup de grace came yesterday when Savage turned to the global warming statement made by the pope. Savage said he objected to the pope addressing a matter that had nothing to do with religion because it was outside the pope's area of expertise, outside his scope, as Savage put it, which it certainly is.

But isn't that nice. The pope exercises his freedom of speech on a matter not expressly religious and Savage all of a sudden wants to limit it, obviously because he disagrees with it but also because the pope is not an expert. But the pope has every right to speak his nonsense in the United States, whether religious or otherwise. The point of criticism on this matter should be on the substance of what the pope says, not on his role as pope supposedly "pontificating" about it.

In this still Protestant country, the pope is viewed as nothing more than a man who is no different from us, whether he speaks about the teaching of Jesus or anything else. We can say that the pope is right about the limits to freedom of speech as he stated them, and that he is probably quite mistaken about the human role in global warming, because on both counts we can look into the matter and decide for ourselves from the evidence.

We read, mark, learn and inwardly digest, but unless we do, we risk appearing Christians or Jews or Americans in name only.

Gold and the dollar remain uncorrelated: Gold is not money and continues to rise with the dollar

.DXY is trading at about 92.50 today with gold at about 1235 yesterday, surging to 1262 at this hour.

On 1 November 2005 .DXY was 91.57 with gold at 460.

Pope Francis reminds everyone that freedom of speech is not absolute

Quoted here:

"If my good friend Dr. Gasparri says a curse word against my mother, he can expect a punch," Francis said, throwing a pretend punch his way. "It's normal. You cannot provoke. You cannot insult the faith of others. You cannot make fun of the faith of others."

"There are so many people who speak badly about religions or other religions, who make fun of them, who make a game out of the religions of others," he said. "They are provocateurs. And what happens to them is what would happen to Dr. Gasparri if he says a curse word against my mother. There is a limit."

Uh oh: Today's jobless claims soar well above 500k to within 1.2% of last year's level at this time

Best reason yet to vote for Romney in 2016: The enemy of my enemy is my friend

"Retail and Food Services Sales" falls 0.94% in December, which is cautionary for GDP

The drop is not that odd for a December.

In December 2007 we had a drop of 0.6%, in December 2008 a drop of 2.5% (part of the big whopper decline of 12.25% between summer 2008 and March 2009), and in December of 2011 a drop of 0.3%.

The drop in January 2014 when GDP went severely negative was 1.26%, so the 0.94% magnitude this time does not augur well for 4Q2014 GDP.