Sunday, April 27, 2014

Trickle down and QE easing has worked misracles?

"According to research from Redfin, a Seattle real estate brokerage firm, only 49% of homeowners say they are in a "financial position to sell" their homes right now. That leaves 51% who aren't ready to sell, for a variety of reasons.

NEW YORK (TheStreet) -- Eyebrows were raised all over Wall Street this week, and likely on Main Street, too, after the U.S. Commerce Department released its single-family home sales figure for March.
The news wasn't good for the real estate market, as sales fell by 14.5% for the month, and 13.3% against March 2013 figures.
Economists had estimated March residential homes sales at 450,000, but the market saw only 384,000 homes move from seller to buyer.
The BULL S market may have longer to run, higher to go. But from above stats, and others like people dropping out of the labor force to keep record low participation rate.....things may not be what they seem.

Even the new Pontif in Rome commented on the " trickle down" economics which he questioned was bringing equality to the world. NO, the current environment is bringing the largest gulf between the haves and nots and I think something is going to give down the road.
For a large percentage of people, maybe it seems like it is business's as usual. There is nice activity in certain sectors, but at same time many retail stores are closing locations, pulling back.
I think all the actions, now 5 years in, are part of a GRANDE experiment perpetrated by just a few people. Zero int rates still leave 50% of those wanting to sell their homes unable to do so.
Mortgage rates of 4.3% are said to be HIGH, and a culprit to slower sales.....need I add more?

Sunday, April 20, 2014

History tends to repeat

From weekend  Doug Noland

"It would be appropriate these days for the Fed to be under intense scrutiny. But with securities prices basically at all-time highs and “The Street” again showered with “money,” there will be no tough questions from the Big Apple crowd. I was struck by the following sentence from Yellen’s talk: “Fundamental to modern thinking on central banking is the idea that monetary policy is more effective when the public better understands and anticipates how the central bank will respond to evolving economic conditions.” It’s a ruse to suggest “public” understanding. Monetary policy has evolved over the years to pander directly to Wall Street and the financial markets. Everything – talk of unemployment, inflation, QE, forward guidance – revolves around maintaining market confidence"

Since the end of 2008 into 2009 the FED adopted a ZERO RATE policy in attempt to bail out financial markets and the banks. Now, here it is into 2014, and the " recovery" is NOT strong enough to begin to normalize rates?? 

Once tagged to unemployment rate, the FED recently disavowed that connection as a timeline to begin to normalize their rate policy, as we are within .2% of reaching their goal.

I have said before, and will again, how in the longer run, will forcing " everyone into the pool" of risk assets in desperate searched of returns, be a prudent policy when all is said and done? There is no free market that I see, and any mention of normalizing anything sends stock holders to the exits.

So, is this zero rate policy a permanent back stop? Will every speech by FED continue to be parsed into single words to extract life changing information .

Maybe too much has been made by HFT, and the anonymous computers that do more than half of the overall volume each day. It seems like the action is rigged for the players , but not for those forced into it with no reasonable alternative.

Being in the market during this back stop period has proved to bed a safe and rewarding decision.but my problem with all this is, artificial means cannot lift all boats for eternity and as always, like in 2000, and 2007, there will be a high price to pay for such historic manipulation and intrusion into free market system.

If from 2000-2003 we thought we saw lowest interest rates since Great Depression and very aggressive FED action to what was at the time a problem  segregated to the tech sector. Became a problem to the overall economy and financial sector as these same FED and govt regulators saw no problems breeding from holding rates down so low for 3 years.

Now we know what happened, this rate fixing and FED unnecessary meddling caused an even BIGGER problem that almost took down the banking system!!!! Worldwide!!!!

How did they respond in 2008-2009? They began an even greater historic intrusion and launched its zero rate policy, QE, and all kinds of games to bring us back from the brink. And maybe it worked to avoid another Great Depression.

But eventually the PIPER must be paid, and you cannot keep the patient on LIFE SUPPORT forever. You cannot create prosperity by printing money.

The top 1% see the FED as god. During this DEmocratic, BS for the people Administration, the divide between those top earners and everyone else grew exponentially.

Still nearly 18% of homeowners are under water in their mortgages. The vast majority of Americans have saved less than $30,000 for retirement.

If those who quit looking for jobs were counted, according to A Gary Shilling, we would have 13% unemployment.

Obamacare has NOT brought down the cost of healthcare, but helped fuel it's increase cost. Allowing  more competition from. State to State probably would have. Then you could update the few positives from ACA into policy and wouldn't need 2500 pages to explain it, or add 10,000 new FED employees to enforce it!!

There is opportunity out there, the economy always has some kind of engine even in the worst of times.OK, give FED credit for helping to avoid the worst of what it could have been back in 2009, but by continuing these policies well into 2014, there is NO doubt here they have LONG overstayed their welcome and like in the last bear market, there will also be a price to pay for all that they have done.

I could not find a time in history, where back to back bear markets separated by a cyclical bull reached LOWER LOWS, like in 2003 and 2009 lows.

IMHO, this suggests a real possibility, we are STILL in a long term, secular, bear market. It will resume with swift, hurtful consequences for the general public who will sit by, as always and do nothing to get out of the way.

We are all waiting for that brave new world, and next GREAT bull market and economic expansion that when the pain is paid and the dust will one day clear. There will be a true next great expansion, probably based on technology and energy advances that lead us into the future .

The trickle down economy, based solely on rising stock prices, will hopefully be once and for all dispelled.

Most small investors buy high and sell low, in the coming months and years, will that be you again?