Saturday, September 29, 2012
Wednesday, September 26, 2012
" Today, employment growth remains below 1.5% YoY, a rate insufficient to reduce unemployment. Nominal wages are growing 1.2% while inflation is 1.7% and threatens to accelerate, in large part due to the impact that the Fed's actions are having on commodity prices, particularly oil prices.
The Fed wants to grow employment faster, but jobs don't grow out of thin air. Corporations create jobs when they have the means, they see a need, and there is visibility to commit.
The problem with Bernanke's wealth effect thesis lies with the new reality in America. Income and assets have lately been so significantly redistributed that only a tiny few actually feel a wealth effect from rising equity prices. "
Today on CNBCBS, "expert" came on ans basically said only worry is some short term turbulence, but longer term NO PROBLEMS as the FED has put a price under market and that we "won't see ANY 200 pt delines as long as FED is there.
All the traders know the FED IS THERE, and maybe this guy is right. But I ask the question, where is it in the FED mandate they target the stock market?
There is a YING and and YANG to everything, and it seems obvious to me, the FED policy for what it is costing, is VERY INEFFECTIVE in helping their #1, and #2 mandates.....full employment and price stability as it also relates to the protection of the reserve currency.
Props to Richard Russell http://ww2.dowtheoryletters.com/dtlol.nsf who is still writing one of the best letters available, especially for the layman, and is going strong well into his 80's. If there was a HALL OF FAME for this, he surely would be there.
Tuesday, September 25, 2012
Monday, September 24, 2012
http://www.dallasfed.org/news/speeches/fisher/2012/fs120919.cfm SEPT 19th
"We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course. And nobody—in fact, no central bank anywhere on the planet—has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank—not, at least, the Federal Reserve—has ever been on this cruise before."
"This much we do know: Our engine room is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash—or fuel for investment—is burning a hole in the pockets of money market funds and other non depository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?"
The FED's MANDATE:
"As you all know, the Federal Reserve’s mission is mandated by the Congress. It calls for us to steer a monetary course according to a dual mandate—we are charged with maintaining price stability while conducting policy so as to best assist in achieving full employment."
"In the current tumultuous economic sea, facing strong headwinds common in the aftermath of financial crises and balance-sheet recessions, our desired port is increased employment. Certain theories and various hypothetical studies and models tell us that flooding the markets with copious amounts of cheap, plentiful liquidity will lift final demand, both through the “wealth effect” channel and by directly stimulating businesses to expand and hire. And yet from the perspective of my watch station—as I have reported time and again—the very people we wish to stoke consumption and final demand by creating jobs and expanding business fixed investment are not responding to our policy initiatives as well as theory might suggest."
"Surveys of small and medium-size businesses, the wellsprings of job creation, are telling us that nine out of 10 of those businesses are either not interested in borrowing or have no problem accessing cheap financing if they want it. The National Federation of Independent Business (NFIB), for example, makes clear that monetary policy is not on its members’ radar screen of concerns, except that it raises fear among some of future inflationary consequences; the principal concern of the randomly sampled small businesses surveyed by the NFIB is with regulatory and fiscal uncertainty." "“If your costs of borrowing were to decrease by 25 or more basis points, would this induce you to spend more on job-creating expansion?” The answer from nine out of 10 was No.”
"To be sure, buying in stock will have a positive wealth effect on that company’s shareholders, but putting the equivalent amount of money to work in spending on plant and equipment would put more people back to work more quickly."
Bottom line is, from the FED's horses mouth, current FED policy is not having the desired effect on business, but yet they just announced a scaling up of QE to another new level of historical insanity....as they have PROOF it's not working, not aiding business borrow nor investment...but they keep piling on!
And Fisher also points out, from these uncertain, uncharted waters Bernanke has swam us into.....there is NO SURE WAY TO GET OUT!
Sunday, September 23, 2012
"Deleveraging – the process of unwinding the economic damage wrought from years of excess - will be a quite arduous economic process; one that will commence at some unknown date in the future. Oh, I guess I failed to mention that total (financial and non-financial) Credit ended Q2 at a record $55.031 TN, or 353% of GDP. And Rest of World holdings of our financial assets ended the quarter at a record $19.100 TN, a $3.860 TN increase from the end of 2008. "
"In 2010, the number of Federal Register pages devoted to proposed new rules broke its previous all-time record for the second consecutive year. It's up by 25% compared to 2008. These regulations alone will impose large costs and create heightened uncertainty for business and especially small business."
So we have world Central Bankers printing money like there's no tomorrow, and it is the OPINION of many letter writers that YOU "have to be in stocks for long term...." BUY NOW AND BUY OFTEN!
Is it any wonder, while some who come here and post how great the stock mkt is, how I'm missing the boat, is that THEY are missing the point of my blog.....the greater risk IMHO is not understanding the greater issues and what might their impact be at some point.
I can't predict THE TOP or when the TIPPING POINT will arrive, what I am saying is current policies are aimed at one sector, STOCK PRICES, and a WHOLE LOT OF AMMO has been used to gain higher prices, but what has been the EFFECT on the overall economy?
Higher spending, consumption.....and a LOT of it is Gov't, but stock prices back to near record highs has increased Household wealth. Housing prices had been a more stable storehouse for personal wealth until the BUBBLE....again created by reckless FED policy of unusually LOW Interest rates held low for TOO LONG, in the face of OBVIOUS price speculation that only after the crash was anyone complaining.
ALL this money thrown at the core problems? Is creating even MORE and larger dysfunction, and total credit market debt is still near 350% of GDP....for now the DAY OF RECKONING has been pushed back.......looking at these 2 charts, especially the one showing debt in 1929 (we know what happened next) and where we are standing today......DO NOT LOOK DOWN!
Saturday, September 22, 2012
Depending on your age, and goals you would perhaps look at your investment future differently. I will make it clear again, my goal is not to give you any advice, and everything I post is just my opinion, and articles posted I share opinions, charts of others.
YOU should not make ant decision based on what I think, of course as any writer would suggest, you should work with a financial advisor, professional and make it clear what your objectives are.
I believe we are in a SECULAR BEAR MKT, so that means over a LONG period of time stocks are in for a rough ride. These long term trends can last longer than you think, some of that depends on how hard OTHER FORCES, like the FED fight the prevailing trend.
ALL a BEAR MKT tries to do is RESET things, return the economy and market to a balance, a natural balance so REAL GROWTH can return and the previous imbalances and speculation, excesses can be healed so we can start anew.
This Bear has been fought like no other, HISTORIC, NEVER BEFORE SEEN measures have been taken by the Gov't and especially the Federal Reserve which has overstepped its mandate.
It IS NORMAL to experience periods (CYCLICAL BULLS) of 3 years or more of counter trend rallies and bullish periods, stocks usually react positively to FED MEASURES.
My personal finances aside, I am VERY CONSERVATIVE, so what I do (which I don't usually publish) may not be for everyone.
One of the MORE difficult things to do is ride the bull, especially while it undergoes a shakeout, draw down...like in early 1998 right before one of the greatest rises in stock wealth ever seen in such a short period of time. FED INDUCES TECH CRAZE...worries over Y2K....1998 crash..but that wasn't sustainable, nor was 2003-2007....each time with more disastrous results.
SO either I am 100% WRONG for worry now, and we have sustainable recovery built on SOUND economic policy......or the mother of all shit will hit the fan based on the level of attack fighting the inevitable reconciliation which will bring us to ground zero and true healing to build again from a sound base.
With 30% of US homeowners underwater, all that has been done is keep them indebted, transfer debt to the FED, give Treasuries to the deadbeat Banks, bailing them out, in turn they buy stocks, gold....Fed and govt buy ALL US mortgages....stocks are targeted....manipulated
There is your answer why so many remain unemployed, if the economy dips down again, what tools are left to combat it?
WTF happened to all those m'fers who cheated and were a part of this financial disaster certainly committing felonies against the people?
JUSTICE? NOT ONE TRIAL, NOT ONE CONVICTION.
The Gov't represents the people?
Friday, September 21, 2012
Thursday, September 20, 2012
Crude oil's biggest drop in two month's this week signals investors are deeply skeptical about whether recent stimulus efforts by global central banks - including last week's announcement by the U.S. Federal Reserve of a third round of quantitative easing - will have a meaningful impact on restoring growth, analysts and traders told CNBC.
The positive effect of the Fed's much-awaited stimulus announced last week wore off more quickly than many thought in the oil markets, which are considered a leading indicator of future economic activity.
"The oil market is telling us there is not much faith in another round of QE," said John Licata, Chief Energy Strategist for Blue Phoenix Inc., an independent energy research and consulting company.
Tuesday, September 18, 2012
Sunday, September 16, 2012
Saturday, September 15, 2012
Friday, September 14, 2012
"Central bankers are "counterfeit money printers" and Federal Reserve Chairman Ben Bernanke should resign for messing up the U.S. economy so badly, Marc Faber, author of the Gloom, Doom and Boom, told CNBC on Friday.
He said Bernanke was one of the main proponents of an ultra-expansionist economic monetary policy that was to blame for the latest financial crisis.
"If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous - it doesn't work that way. It's a temporary boost followed by a crash," Faber said."
World stock markets bounded higher Friday after investors got just what they wanted — big moves by the Federal Reserve to help the U.S. economy out of its funk. More »
Problem is, this move creates asset bubbles, moves stocks, does LITTLE or NOTHING for job creation....I Love a bull mkt like the next guy..I'd rather see people get jobs and a sustainable recovery.
Ask yourself this WHY WOULD THE TARGET THE STOCK MKT NEAR ITS HIGHS?
Monday, September 10, 2012
- Consumer Credit Falls Unexpectedly in July ReutersConsumer credit fell in July for the first time in nearly a year as Americans reduced credit card debt, a worrisome sign for the economy.
I've said it once, if I have to say it 1,000 X's, Investors are set for a FLEECING.
The minutes may have been stale, the Jackson Hole speech uncertain, but the August payrolls report last Friday was crystal clear in its warning on jobs.
**Problem is, preserve some jobs? Maybe....CREATE LOTS OF JOBS? NO. QE has one purpose and only one purpose, to goose stock markets. While in and of itself not a bad thing in the short term, this is CRACK, artificial sweetner.....and it WILL LEAVE a bitter after taste
Sunday, September 09, 2012
FED has lowered Bank rates to basically 0%, this in turn lowers mortgage rates to historical lows, now after 4 years of this CRACK, can they afford to ever let rates rise?
Savers get 0% on MM savings, this CRACK leads to a BAD TRIP. MARKET is addicted to CRACK rates at 0%. Take it away and the addict will foam at the mouth.
What all this does, is embolden the RISK TAKERS, create worse imbalances, and makes for a pretty lopsided trade. SHORTS serve a purpose, they bring balance and sometimes FUEL for rally....ECB move last week was to BURN shorts, stem EURO weakness.....supply CRACK to the addict.....now maybe this buys time as Doug points out in the previous piece posted, but it only ADDS to the lopsided PUT on the market and rates......each time the addict needs MORE and STRONGER CRACK.....we are nearing the law of diminishing returns.
WHEN CRACK IS SUPPLIED, YOU can't take it away, certainly not suddenly, How do you ease out of a MULTI TRILLION FIX?
My friends, and JACK (my bullish needler), all I want is BALANCE restored, you don't reach sustained economic activity with CRACK, you get it with balance and not with ONLY supporting the risk markets and rewarding wild speculation.
As I said, the FED and ECB have been chasing everyone out of the POOL, and onto the same side of the BOAT....my vision is of the TITANIC.
As in previous attempts to NOT allow the economy to HEAL without excessive intervention...AKA tech bubble, Housing Bubble.....Tulips and on and on.....2 MEN DRAGHI and BERNANKE seem to hold the WORLD in the palm of their hands, that my friends is a SCAREY thought indeed. That's a lot of power between just 2 men.....what if their assinine experiment goes wrong? EVERY BUBBLE in history POPS.....and my thinking is what is perculating now is GOV't DEBT....the biggest bubble of them all.
IT is being MISPRICED, risk is because of all the intervention and manipulation, it just will end badly....I'm afraid.
Already you see how this HISTORIC CRACK is passing by the very economy it is said to benefit, how IRONIC....yet these....2 men persist....more and MORE of the same...NO TURNING BACK NOW>
Saturday, September 08, 2012
5 years of EASY money policies with unimpressive economic results. Unemployment goes down as job seekers give up in droves. What more can be done? A most noted wise man once said taxing is not the answer its the government spending that is the problem.
Year after year, the US must borrow $1Trillion plus, we now owe over $16 TRILLION, and what happens is near 70% of the gov't budget is used to pay JUST the interest on the debt. This is NON PRODUCTIVE.
We are LOCKED into a war in Afghanistan that President Obama is too stupid to figure out cannot be won, costing precious lives and gobs of money. Did he forget to look up the Soviet's experience? or anyone who has tried to roll over that country.
What DOug's essay goes into detail is to try to explain that now the US and WORLD eonomies (and stock markets) are addicted to QE like a CRACK ADDICT.
The direction and gains in world indices are in stark contrast to what feet see on the ground.
Only one of 2 things can happen, a CRASH in the stock market, or a ROUSING revival of world economies, which will it be?
Thursday, September 06, 2012
For you EW's out there http://danericselliottwaves.blogspot.com/2012/09/elliott-wave-update-6-september-2012.html
"What FedEx had to say was in many ways not too surprising. Weak growth worldwide, with a Europe still in crisis and a slowing China, has crimped revenues for the company, forcing them to lower earnings estimates for the first quarter."
YRC Worldwide Inc. "has shrunk its headquarters staff from around 2,000 to less than 400 as the company tries to streamline its operations."
LONG BEACH, Calif. " (AP) -- UTi Worldwide Inc. reported Thursday that net income fell 17 percent in its fiscal second quarter as a weak economy hurt demand for freight services. CEO Eric W. Kirchner said companies were "increasingly careful" about spending on freight and logistics, and he doesn't expect weak trends to change in the second half of the year."
Jacob Kirkegaard of the Peterson Institute for International Economics says the plan is not a band-aid and "really does have the potential to be a game changer."
Here's how it will work: The ECB will buy unlimited government bonds so long as that euro zone government complies with an economic reform program approved by the euro zone leaders. The ECB, in turn, will offset those purchases by taking an equal amount of money out of circulation, keeping its mandate to maintain stable prices.
Wednesday, September 05, 2012
"And because the growth of electricity historically outpaces the growth of the economy, it means the economy can't be growing more than zero," he added.
"If you look at the manufacturing surveys, the price indices, they suggest zero growth, as do the mountains of copper in the car parks and the iron ore in the graineries."
Chang, author of "The Coming Collapse of China," said other headwinds, such as an anti-reform government, will also hurt its economy.
Tuesday, September 04, 2012
"Obama is preaching the destruction of the middle class small business owner in order to pay that pound of flesh now demanded by the bankers. He ignores the fact that almost 70% of the entire accumulated national debt went to interest payments to the bondholders – not to improve the lives of people. This idea of socialism has in itself been a lie. For you see, the numbers do not lie. The bulk of the national debt has been interest payments not to help anyone but the moneylenders. He preaches "socialism" while practicing the hypocrisy of lining the pockets of the New York bankers. MF Global will not be prosecuted. Why? Corzine is his buddy?"
Bottom line is out of one side of his mouth our President preaches equality, socialism and the EVIL of Wall Street, while his #1 contributor is Goldman Sachs? WHILE the FED chief under his rule has made it so the AVG American cannot find yield, but same FED chief has publicly admitted he has targeted the stock market for appreciation for its "WEALTH EFFECT"
Who benefits the most when stocks go up? Who owns more stocks? You guessed right, the wealthy. The Conservative saver, retires person, or the avg person with some stocks in his IRA benefits the least, and the SAVER is penalized.
They have it now, where you are literally FORCED into RISK ASSETS in a YIELD STARVATION environment, even as it is shown, that current policies are NOT putting enough people back to work, but it IS LINNG THE POCKETS of the bankers, INSIDERS, and Wall Street Elite.
Here is another good read http://www.mauldineconomics.com/frontlinethoughts?utm_source=newsletter&utm_medium=email&utm_campaign=frontline "The consequences of easy money policy"
Monday, September 03, 2012
In a NORMAL crisis, or Recession, there is usually a slowing demand for credit, and a retrenching by Consumers, after the period of slowing demand, the Consumer will have reset themselves, sentiment will improve and the economy heals and grows again, this will be a sustainable recovery.
Instead, what we have now is an Historically LOW recovery in Consumer sentiment, remember the Consumer is 70% of the US economy. In fact in the latest poll sentiment fell the most in the last 9 months, considering at same time STOCKS were near their highs is disconcerting.
The FED was not watching the excessive speculation in the late 90'S? The PENNY STOCK FEVER would rival any TULIP MANIA of the past 100 years. High tech stocks soared almost every day with DOT COMS springing up on the HOUR and had no trouble getting funding, went public , then shortly went bust, but not before we saw MANIC behavior and WILD SPECULATION.
Since it was more an inventory, and tech related specific mania....stock mania, the REAL economy would have recovered. NOT GOOD ENOUGH for the FED, they had to MEDDLE again, but who remembers they were the BOZO'S ON THE BUS, asleep at the wheel while all the wild speculation was at play, visible in PLAIN SIGHT for anyone to see. But they didn't see? SURE , they saw, but maybe purposely did nothing. WAS this an experiment for Greenspan the financial monarch to prove he could cure a BURST BUBBLE?
Here comes his successor, Ben Bernanke, as we live and breathe GREENSPAN CLONE ON STEROIDS!
"How do you deal with a burst bubble? INDUCE ANOTHER ONE, but the next one proved to be even more unwieldy and harder to manage and again, the FED induced REAL ESTATE speculative BUBBLE, MANIA went unchecked by anyone? Including those in charge whose mandate is SOUND MONEY POLICIES and FULL EMPLOYMENT?
Now we have the BANKS and many FINANCIAL institutions involved in the mess....so what do we do? CREATE $16 Trillion out of thin air and bail then all out, HELICOPTER BEN.
Now he has his European DOUBLE?
0% FED FUNDS for almost 4 years, yet we suffer from PLUS 8% unemployment, that tells me the policies are ineffective in fixing the real economy. But this has fostered ANOTHER, perhaps even more dangerous BUBBLE to cover the previous one (see how this works)....
A GOV'T DEBT BUBBLE.....and an asset bubble AGAIN. AND if the FED is backstopping everything then isn't this setting up a worldwide MISPRICING OF RISK ASSETS????
You have a FED and world CB'S showing all their cards on the table, "WE GOT YOUR BACK" keep doing what you are doing. Meaning, we have PUT on the market, it can't fall because we would just print more money...and cover it all up.
BUT, the lack of ANY YIELD IS causing many to do just about anything to find yield. Even John Mauldin has just issued his new newsletter called "Yield Shark", to help subscribers find yield in an environment where it is harder and harder to find ANYTHING SAFE!~
IS FORCING almost all of the investors to ONE SIDE OF THE BOAT a good idea? ALL BUBBLES eventually burst.
AS Consumers have cut back on spending Governments have tried to STEP IN and replace them, making it an even more unbalanced economy. Gov't spending VS BUSINESS OR CONSUMER spending tends to be a LOT less efficient. It is speculated that it takes $800,000 per person for the Gov't to create a single job. (that figure comes from the govt's own figures)
Now there is mounting pressure to curb gov't spending, as we run $TRILLION plus deficits, and an audit the FED bill passed.
Wall Street reveres the FED, what if the FED Loses credibility? What appears stable is not, in round #3 of BUBBLE BLOWING the FED has outdone itself, for every action there is an equal but opposite reaction.......I DON'T like the sound of that.
Sunday, September 02, 2012
$16 TRILLION out of thin air, there's your under pinnings of this "great" stock rally.
Saturday, September 01, 2012
The SEC proposed some new rules yesterday on this issue. .......
"..As predicted, hedge funds remain a surprise beneficiary of this legislative and regulatory bonanza. Of particular interest to hedge fund managers, privately offered funds will be able to conduct offerings using general solicitations or general advertisements under the new amendments, without losing either of the very important exclusions under Sections 3(c)(1) or 3(c)(7) of the Investment Company Act. Is it only a matter of time now before the cold callings, mass mailings and full-page glossy ads in “Vanity Fair” and “GQ” begin?"
Doug on POLICY RISK
"Before delving into his cost-benefit framework, it is worth mentioning that the word “Bubble” is nowhere to be found in Bernanke’s paper. I strongly argue that the issue of whether the Fed is once again accommodating a Credit (“government finance”) Bubble is today’s prevailing – potentially catastrophic - policy risk."