Saturday, March 22, 2014

Squeezing the last 10%

From Doug Noland at Prudent Bear . Com

"Everything is just so much bigger than before: The Fed’s balance sheet; PBOC international reserves and the Chinese Credit system; the leveraged speculating community; the big “macro” hedge funds; the powerful “quant” funds; the sovereign wealth funds; the ETF complex; the big mutual fund companies. As history has shown, epic financial Bubbles by their nature spur a concentration of financial power. I often ponder how a marketplace dominated by big players tends to function differently than traditional decentralized marketplaces. Then I contemplate how such a “centralized” marketplace operates with assurances of ongoing central bank support. In my mind – and I see evidence for as much in the marketplace – the markets become more of a game, more speculative and increasingly detached from fundamental prospects."

Though this current Bull market may have further to go, it is more likely that it is in it's final stages of life. And I wonder why the FED feels it necessary to continue with its zero rate policy 5 years after it began, further punishing more conservative savers.

It seems more lucrative for companies to use their cash for stock buy backs , than build plant and buy equipment.

At the same period of time we find the highest level of Millionaires, we also find most citizens do not even have $30,000 saved away for retirement and many don't even have $1,000 in savings.

Things are anything but cut and dry my friends in the real world.


Saturday, March 08, 2014


Household Net Worth inflated a staggering $8.184 TN in 2013, or 11.8%, to a record $80.664 TN. For comparison, Household Net Worth jumped $7.089 TN during 2006 and $6.023 TN in 2007. Over the past five years, Household Net Worth inflated $23.484 TN, or 41%. In five years, Household holdings of financial assets surged 43.5% to end 2013 at a record $66.949 TN, or a record 399% of GDP. For comparison, Household holdings of financial assets ended 1995 at about 300% of GDP before peaking at 385% of GDP to end 2007. 

It is pretty obvious from the above stats, that the FED' S efforts to inflate household net worth has been a rousing success. Inflating stock market values and recovering home prices have added together to bring net worth to a new record.

Was this just accomplished by healing sentiment? Or perception of our world? Removing risk? 

But is this not a recovery which has shown anemic growth in wages? 0% returns for savers? A now falling workweek hours? Consumer Sentiment well below normal for a recovery?  

Nearly $4 trillion was created out of thin air by the Federal Reserve, and with keeping rates at 0% it has created a " can't lose attitude within the risk taker community. Overall the avg citizen rides the tides of these cycles, coming out on top in the LONG RUN. And sometimes many jump ship near the bottom never to return to risky assets or only begin coming back after years of gains lure them back. Thinking is they cannot lose. Hardly do we see even a 5% correction.

What you don't see, I see. A massive selling spree from insiders. Look at any popular stock, under armor, tesla, Facebook, or netflix ....look up insider selling and see how YOU are making the insiders wealthy beyond the avg mans dreams. You get peanuts as the INSIDERS get untold wealth.

Everyone does not and cannot make money in the stock market, as there must be someone buying what the other is selling. Someone wins, and someone loses. Maybe as the stocks can only rise, we only get winners and more winners.

Do you understand what a PONZI scheme is? ONE day, this bull cycle will end. And it will be very difficult to run for the exits. Consider the historic rise in stocks from 2009.

Like a casino! all your gains are on PAPER until you cash out. The Insiders are cashing out big time. The little is set up AGAIN to be the bag holder.

" .....pigs get slaughtered". Again, this is just my opinion , stocks are very inflated and overvalued. Revenues are slowing, profits are at or near a peak. Many companies using their cash for stock buy backs, instead of for productive means of investment. The face of retail has changed as many big box stores close locations and online sites abound.....losing many jobs and putting values of commercial real estate at risk.

The FED continues to slow its BOND QE purchases. They suggested to finally begin raising rates in 2015, some 6 years after bringing down to 0%!

What happened after FED left rates at only 1% for about 3 years beginning in 2003?

Need I say more, that this experiment may be the most dangerous game with unknown exit results in the history of money.