Saturday, November 16, 2013
Neither Ben, nor Yellen saw the housing bubble forming, and now she does not see an equity bubble forming either. So the market and the leveraged privaledge class are ALL IN and THEN SOME.
FED balance sheet rose 35% this year alone ($1T), so have stocks....certainly NO correlation here.
Though I cannot argue I rather have an economy limping along then one in a death spiral, but when does it go along on its own 2 feet? The LONGER everything is supported by the QE and ZERO interest rates, the harder it will be to function without it. And the higher we go, the harder the fall will be.
Is the market "meltup" being supported durectly by FED policy?
"Investors aren’t worrying much about the stock market, and that worries Edward Yardeni. "
I think this current bull market has further to go, and THE END I don't think can occur without one violent zap hgiher in a blowoff top sort of action, where we might get an intraday top and reversal.
And it must go along that the masses, will not see danger, and will continue to sit tight as this mess unravels.
Even Yardini, in the above piece see SPX 2000 plus in 2014. Other measures of this bull mkt show a healthy one, without many of the normal signals it might give that a top is in the near future (up to 6 months out).
It may be long in the tooth, but that doesn't rule out much higher prices, or even a nasty correction is around the corner.
We arrive in November a normal bullish period thru Xmas, with markets already enjoying a helluva year.
I dont care what the FED says or anyone else, the action since 2009 is ALL but supported by the FED balance sheet.
Is it any wonder the FED can create a $1T a year out of thin air, and same time BITCOIN appears, a "VIRTUAL" currency, and it (digitally) is tearing through the roof in value....
I say, and repeat buyer beware, but calling tops a tricky business and at this point, and its backed up by the fear guages....not a lot of worry out there....not at all.
PROBLEM is, sooner or later there will be and we are not talking 1 for 1, players are playing with OPM...and it will unwind and feed on itself, a lot faster on the way down, then it did on the way up.
We ARE in the process of forming a top, but the level that occurs may even surprise me.
How we got here, ignorance to bubble formation, will insure a painful retreat
Saturday, November 02, 2013
U.S. and global finance were going through epic changes. Meanwhile, policymakers and the economics community stuck their heads in the sand, clinging steadfastly to their outdated old models and analytical frameworks. Greenspan became a vocal proponent for derivatives and Wall Street risk intermediation. He also used the rapidly expanding global leveraged speculating community as the most powerful monetary policy transmission mechanism ever (spur risk-taking and “wealth creation” with a mere hint of a 25bps rate cut!). And with Greenspan (along with the GSEs) backstopping the markets, the bubbling derivatives marketplace could mushroom to hundreds of Trillions on the specious assumption of “continuous and liquid markets.” Opportunistic hedge fund managers could incorporate enormous leverage on (Fed-assured) high probability bets – and become billionaires."
Saturday, October 19, 2013
They can raise the debt ceiling and act as if K2 summit has been reached, this is as hollow a victory as one could get. NO issues were resolved, only put off again! No solutions offered, no comprimises to be found or offered. We are again at the crossroads of bigger gov't and a loss of freedoms, higher taxation, OR smaller gov't ( or at least one that won't add another layer) and a resolve to keep more money in your hands, so YOU can decide where to spend, not the gov't.
NAME ME ONE THING once the gov;t gains control that is better off then before they intervened?
It will cost more, it will get f'd up!
How many gov't employees does it take to change a light bulb....
"However, when an economy is excessively over-indebted and disinflationary factors force central banks to cut overnight interest rates to as close to zero as possible, central bank policy is powerless to further move inflation or growth metrics. The periods between 1927 and 1939 in the U.S. (and elsewhere), and from 1989 to the present in Japan, are clear examples of the impotence of central bank policy actions during periods of over-indebtedness.
Four considerations suggest the Fed will continue to be unsuccessful in engineering increasing growth and higher inflation with their continuation of the current program of Large Scale Asset Purchases (LSAP):
- First, the Fed's forecasts have consistently been too optimistic, which indicates that their knowledge of how LSAP operates is flawed. LSAP obviously is not working in the way they had hoped, and they are unable to make needed course corrections.
- Second, debt levels in the U.S. are so excessive that monetary policy's traditional transmission mechanism is broken.
- Third, recent scholarly studies, all employing different rigorous analytical methods, indicate LSAP is ineffective.
- Fourth, the velocity of money has slumped, and that trend will continue—which deprives the Fed of the ability to have a measurable influence on aggregate economic activity and is an alternative way of confirming the validity of the aforementioned academic studies."
"The QE-enhanced 2013 version of “how crazy do things get?” is outshining even the 1999 speculative melee. "
Friday, October 18, 2013
Thursday, October 17, 2013
The Fed continues to POUR $85B a month into the system and most of that ends up in risk assets putting a seemingly permanent back stop to stock prices. There has been little in the normal base building or corrections that take some steam and froth out of the markets allowing them to remain healthy and continue in a long term bull trend......on their own accord.
have we since the Greenspan era just become an economy built on bubbles and bursts of these? Pouring even more FED fuel as mop up, preferred action for them just so we can reflate and blow even greater bubbles.
LOW LOW long term rates have allowed the US Gov't the ability to continue to fund its long term debts as they grow upwards of $17 TRILLION, about $55,000 per American, but about $135,000 if you only count those with jobs!
If it were you or me, at some point the bank would not allow us to continue borrowing. How does the US Gov't pay back this debt? Never will, but they have to do, is be able to pay the interest on that accumulating debt.
So as the masses and the govt cronies back slap themselves for another kick down the road.....that path may lead to eventual tax increases that won't be called that, they will be called "closing of loopholes".
And cutting of Gov't spending? both these actions would take away from the US economy.
An even SLIGHT rise in borrowing costs could be devastating to this country, considering that for as far as anyone can see, we will continue to add to the national deficit. EVERY $ of interest paid is non productive waste.
ObamaCare has come at a most unfortunate time in history, added another HUGE layer of gov't, and has changed the landscape of our freedoms....I don't know if there is any turning back. Also the gulf between the very wealthy and poor has never been wider, all this under the most Liberal Dem president???
Mere mention of FED tapering had sent stock markets into a downward spiral......if that doesn't tell you what is propping up stock prices, I don't know what will.
As they go ever upward ignoring any warnings or corrections, the gulf between value and cost widens to dangerous levels. After almost 5 years of intervention we cannot stand on our own 2 feet? And cannot maintain an even 3% GDP.
When a BEAR MKT finally takes hold, I do not know what the catalyst will be, but I'm pretty sure of how much pain is down that road near where the can was kicked again.
Tuesday, October 15, 2013
Saturday, September 28, 2013
The mere mention of a SLOWING of FED asset purchases down from the current $85B a month would have risk markets convulsing, interest rates shooting higher. SO at the last FED meeting we had a STATUS QUO instead of any even mild change in FED actions and policy.
The predictions now for GDP and the REAL economy are weaker for the 2nd half than just earlier this summer? How can this be? New highs in the stock markets, near or record lows in junk bonds and yields in general?
Federal spending and FED asset purchases have replaced SOUND money and investment, which lead to REAL economic growth and solid job formation.....now RISK assets vs home owners equity are where the avg citizens wealth resides.......I don't like the sound of that....
I think the FED has now painted itself in a corner, the crack addict economy needs to know there will be NO change in the dose, or withdrawl symptons will surely be manifested.
We have the ILLUSION of a real economy and sound policy....imagine that.