Sunday, February 23, 2014
THINGS ARE not what they seem
What does this mean? Markets keep rising to new highs, as FED policy SLOWLY tapers down the stimulus and free money that got it there. It is possible and even likely NEW new highs are coming! but my guess is no more than 10% from current levels! more likely a slopping around. And then one day......the FED WILL finally raise the funds rate from 0% and my guess also is the RICHY RICHY crowd will have slowly been hitting the exits leaving everyone else holding the bag. This repeats every single time a cycle ends....like summer turns to fall
Sunday, February 16, 2014
Financial game of Chicken
From Doug Noland at Prudentbrar.com
"There was a crucial policy debate from the late-twenties that has become increasingly pertinent, especially for Beijing and Washington. In the “Roaring Twenties” there was recognition within policy circles that heightened speculation was fostering financial excess including Credit financing speculative trading and other ventures. At the same time, heightened economic vulnerability and downward pricing pressures had policymakers searching for ways to direct Credit into productive investment and away from speculation. Yet, at the end of the day, the intensity of 1927-1929 “terminal phase” speculative excess ensured that liquidity and Credit flowed disproportionately to inflating market Bubbles. Thoughts, efforts and hopes that policy measures could redirect finance away from market Bubbles and to the real economy ended in complete and utter failure. "
There is much talk about how Fed policies and QE have not created Bubbles in assets, and how inflation is barely visible . Since 2011 wages have increased at a stagnant 1% a year! but health care has soared! meat prices and other food costs have also rose close to 20%. It is harder for the middle class to stretch their budgets, they are falling behind and lucky if they are running in place.
Monetary policy , as it did in 1929 era, has fallen short of influencing the real economy , but instead the flows have gone directly into risky asset classes. Without this flow, prices would be nowhere close to where they are now. Artificial sweetness are just that, and come with side effects.
After a week or two of correction , the VIX fear index has fallen back like nothing happened. The momo stocks didn't even correct much during this time. It is hard to predict the ultimate top of any market, but there are enough signs now to warrant caution.
As excessive as the stimulus has been, when it does reverse course, it might suddenly and viscously.
I am watching the transports, for now laggards , and gold prices are on rise, usually seen as a safe haven. Core mining such as copper which always rise in a recovery are in a downtrend.
China's runaway freight train bubble is on its last legs, a bursting there to the worlds second largest economy would have serious ripple effects across the world.
Not time to fall asleep in this game of musical chairs.
Duratek
"There was a crucial policy debate from the late-twenties that has become increasingly pertinent, especially for Beijing and Washington. In the “Roaring Twenties” there was recognition within policy circles that heightened speculation was fostering financial excess including Credit financing speculative trading and other ventures. At the same time, heightened economic vulnerability and downward pricing pressures had policymakers searching for ways to direct Credit into productive investment and away from speculation. Yet, at the end of the day, the intensity of 1927-1929 “terminal phase” speculative excess ensured that liquidity and Credit flowed disproportionately to inflating market Bubbles. Thoughts, efforts and hopes that policy measures could redirect finance away from market Bubbles and to the real economy ended in complete and utter failure. "
There is much talk about how Fed policies and QE have not created Bubbles in assets, and how inflation is barely visible . Since 2011 wages have increased at a stagnant 1% a year! but health care has soared! meat prices and other food costs have also rose close to 20%. It is harder for the middle class to stretch their budgets, they are falling behind and lucky if they are running in place.
Monetary policy , as it did in 1929 era, has fallen short of influencing the real economy , but instead the flows have gone directly into risky asset classes. Without this flow, prices would be nowhere close to where they are now. Artificial sweetness are just that, and come with side effects.
After a week or two of correction , the VIX fear index has fallen back like nothing happened. The momo stocks didn't even correct much during this time. It is hard to predict the ultimate top of any market, but there are enough signs now to warrant caution.
As excessive as the stimulus has been, when it does reverse course, it might suddenly and viscously.
I am watching the transports, for now laggards , and gold prices are on rise, usually seen as a safe haven. Core mining such as copper which always rise in a recovery are in a downtrend.
China's runaway freight train bubble is on its last legs, a bursting there to the worlds second largest economy would have serious ripple effects across the world.
Not time to fall asleep in this game of musical chairs.
Duratek
Saturday, February 08, 2014
The Future Is Tomorrow
On a quick note, I will begin posting on a regular basis again every Saturday, so if interested in my blog and disappointed I have not been regularly posting, this is the schedule I will work hard to keep.
I have mostly for the last 3 years been growing my business to provide for my family. The news is there is very encouraging , going into my third year my sales approaching $1 million and volume has grown about 25% over the previous year! even as my top customers volume dropped from 60% of my total sales to about 30%!
Let's turn our attention to the markets and economy.
Friday we got govt data showing unemployment rate has dropped to 6.6%, at the same time fewer jobs are being created and the participation rate remains near the lowest in history. This could mean a horde of early baby boomer retires and or people dropping out of the hunt for a job and are no longer counted. Do we have a vibrant economy or just a vibrant stock market thriving in a world of liquidity?
The recovery continues at the slowest rate in history from a recessionary period. It is proven that all this liquidity , Fed action has of course led to this monster "cyclical bull market", but also shown there is little correlation between rising stock prices and consumer spending. But as the Fed slowly backs away from QE, at has not as yet sent investors to the exits. In the face of receding liquidity, any market convulsion could be greatly exacerbated with a lessening back stop. The Fed backstop has protected players for 5 years and counting.
It is my belief we are finally in the later stages of forming the top from the 2009 lows, stock buying is slowly becoming more selective, less and less stocks rising to new highs with the market. I have been hearing from a few conservative market gurus that think place to be is in the 30 year bond as disinflation is more likely than inflation. One on Bloomberg yesterday thought yields were headed to 2.5-3%.
Odd things persist in China as investment in housing continues as hordes of developments lay vacant, but buying and building continues. The Chinese stock market last made a high in 2011.
Aapl bought back $12 billion in shares to improve EPS, as growth slows. ACA has been anything but that , raising the costs of healthcare for millions of Americans and businesses. Most. US home owners are reluctant to use their homes as ATM machines to supplement spending, or cannot. Wage growth is stagnant, so where is the growth in Consumer spending going to come from? What is the next have to have product?
When liquidity is high is naturally flows into the easiest places it can go, almost always benefitting stocks. It looks like we have entered into a long term cycle of Booms to Busts, occurring since the late 90's. There are many pundits who continue to claim, buy the dips as we are in a Secular, long term Bull market that will last for many years, usually 10 or more.
Bear markets that follow 20 year plus bull markets have been known to last for up to 16 years. Since 2000 market top , we have had 3 year bear, 4 year bull, 2 year bear, now 5 year bull. IMHO we are at the latter stages of another cyclical bull , which resides inside a monster Secular Bear Market.
Inability to create inflation with record liquidity and intervention, money printing like never before. Inflation had been thought of as too much money chasing too few goods, like in late 70's, but the worlds producer China has fixed that.
But there are pockets of " inflation" risky assets like stocks and now pockets of real estate again! Energy prices and no affordable health care. Food prices also in some case affected by other things like draught in California . Stagnant wage growth, inability of many retailers to raise prices along with sluggish demand and tons of excess capacity keep other consumer prices in check.
We have slower profit growth for companies, so many like AAPL are using hordes of cash for non productive stock buy backs , many others borrowing to buy back stock to make their EPS look more appealing.
Little efforts from the FED have coerced companies to invest in plant and equipment, capital investments that help to create jobs. Stock buy backs do nothing to create jobs. Bubble in stock markets do little to create jobs . Govt policies do little to help create jobs. With ACA many small businesses are reluctant to hire. Taxes are rising for many groups including the middle class.
Under the Obama Administration, and fed chair Ben Bernanke, we have experienced the greatest gulf between the top wage earners and everyone else. The top 1% or so have left the other 99% in the dust!
At the same time we have large segment of the population entering the golden years and retiring, this period normally sets the stage for even more conservative investing, cannot find a safe yield anywhere. The FED holding discount rate to Banks at 0%, effectively takes short term rates out of the game and leaves 10 year yields at currently around 2.69%, Money Markets effectively yield 0%.
One of my past reliable indicators was about to trigger a Bear Market high alert warning, until this weeks rally held it at bay. A break of SPX 1700 could bring that about.
If we haven't reached THE HIGH for this cycle, my guess is we will in next 4-6 months, with an ultimate bottom to this Secular bear arriving sometime in 2016.
I do not know where the ultimate low is going to be, I do not know if 2009 was that low. Nothing is ever 100%. It is too hard to time tops and bottoms, avg investors sells low, buys high. So when using a very long term horizon, it is hard to argue to not ride out the bumps as the market has tended to always make new highs, even if it takes 25 years.
In our current case, it took 7 years from 2000 to 2007 to form a new all time high. We are now entering 2014, 7 years from the last mkt top. From the lows of 2002, it took 7 years to reach the lows of 2009. 7 more years if this 7 year cycle continues has our ultimate low around 2016.
And I think a darn good chance a final high is coming this year, in 2014, 7 years from the 2007 top.
Why do I continue to insist on a Secular Bear market ? One reason is the 2009 low was a lower low than the 2002-2003 lows. I could not find in my research another period where 2 preceding bear markets did that. I also did not see divergences at the lows. So IMHO, this sets up an ultimate test of the 2009 lows at some point. And one of two things is going to happen. We make a new low, a final low that is lower than 2009 but the momo indicators diverge and do not make a lower low. Or we bottom above the 2009 lows where the fear indicators show record fear but this does not push stocks to new lows. That might tell us the sellers are finally exhausted.
I do not think the " system" is cleansed of the debt that built up from 2003-2007 housing/credit bubble , instead it has been hidden, not marked down to market, papered over....shifted around, switched to the FED balance sheet. What mechanisms are left for the FED, now backing away for its backstops, when next rubber meets the road moment comes. Will they go back to what they had already been doing? Will they increase purchases, reverse tapering?
I'm afraid at that point, they would have lost credibility and have few weapons stashed away, like lowering interest rates to try to stem the tide.
Nope, 5 years running, rates stay at 0%, also continuing to batter savers with 0 returns. Savers do spend interest payments too....just not in last 5 years in the BS unbalanced approach. There are those wanting to jump into the lifeboats , but for yield, income are forced back onto the US TITANIC.
You can grow and start anew by cleansing the system, clearing the path to normal organic growth which will benefit a large portion of our country, not just the top 1%, those who hold the most stocks.
Allowing savers to gain a decent return without fear of losing principal.
IMHO, now is not the time to rest complacent, but for me anyway, I am on high alert.
Duratek
I have mostly for the last 3 years been growing my business to provide for my family. The news is there is very encouraging , going into my third year my sales approaching $1 million and volume has grown about 25% over the previous year! even as my top customers volume dropped from 60% of my total sales to about 30%!
Let's turn our attention to the markets and economy.
Friday we got govt data showing unemployment rate has dropped to 6.6%, at the same time fewer jobs are being created and the participation rate remains near the lowest in history. This could mean a horde of early baby boomer retires and or people dropping out of the hunt for a job and are no longer counted. Do we have a vibrant economy or just a vibrant stock market thriving in a world of liquidity?
The recovery continues at the slowest rate in history from a recessionary period. It is proven that all this liquidity , Fed action has of course led to this monster "cyclical bull market", but also shown there is little correlation between rising stock prices and consumer spending. But as the Fed slowly backs away from QE, at has not as yet sent investors to the exits. In the face of receding liquidity, any market convulsion could be greatly exacerbated with a lessening back stop. The Fed backstop has protected players for 5 years and counting.
It is my belief we are finally in the later stages of forming the top from the 2009 lows, stock buying is slowly becoming more selective, less and less stocks rising to new highs with the market. I have been hearing from a few conservative market gurus that think place to be is in the 30 year bond as disinflation is more likely than inflation. One on Bloomberg yesterday thought yields were headed to 2.5-3%.
Odd things persist in China as investment in housing continues as hordes of developments lay vacant, but buying and building continues. The Chinese stock market last made a high in 2011.
Aapl bought back $12 billion in shares to improve EPS, as growth slows. ACA has been anything but that , raising the costs of healthcare for millions of Americans and businesses. Most. US home owners are reluctant to use their homes as ATM machines to supplement spending, or cannot. Wage growth is stagnant, so where is the growth in Consumer spending going to come from? What is the next have to have product?
When liquidity is high is naturally flows into the easiest places it can go, almost always benefitting stocks. It looks like we have entered into a long term cycle of Booms to Busts, occurring since the late 90's. There are many pundits who continue to claim, buy the dips as we are in a Secular, long term Bull market that will last for many years, usually 10 or more.
Bear markets that follow 20 year plus bull markets have been known to last for up to 16 years. Since 2000 market top , we have had 3 year bear, 4 year bull, 2 year bear, now 5 year bull. IMHO we are at the latter stages of another cyclical bull , which resides inside a monster Secular Bear Market.
Inability to create inflation with record liquidity and intervention, money printing like never before. Inflation had been thought of as too much money chasing too few goods, like in late 70's, but the worlds producer China has fixed that.
But there are pockets of " inflation" risky assets like stocks and now pockets of real estate again! Energy prices and no affordable health care. Food prices also in some case affected by other things like draught in California . Stagnant wage growth, inability of many retailers to raise prices along with sluggish demand and tons of excess capacity keep other consumer prices in check.
We have slower profit growth for companies, so many like AAPL are using hordes of cash for non productive stock buy backs , many others borrowing to buy back stock to make their EPS look more appealing.
Little efforts from the FED have coerced companies to invest in plant and equipment, capital investments that help to create jobs. Stock buy backs do nothing to create jobs. Bubble in stock markets do little to create jobs . Govt policies do little to help create jobs. With ACA many small businesses are reluctant to hire. Taxes are rising for many groups including the middle class.
Under the Obama Administration, and fed chair Ben Bernanke, we have experienced the greatest gulf between the top wage earners and everyone else. The top 1% or so have left the other 99% in the dust!
At the same time we have large segment of the population entering the golden years and retiring, this period normally sets the stage for even more conservative investing, cannot find a safe yield anywhere. The FED holding discount rate to Banks at 0%, effectively takes short term rates out of the game and leaves 10 year yields at currently around 2.69%, Money Markets effectively yield 0%.
One of my past reliable indicators was about to trigger a Bear Market high alert warning, until this weeks rally held it at bay. A break of SPX 1700 could bring that about.
If we haven't reached THE HIGH for this cycle, my guess is we will in next 4-6 months, with an ultimate bottom to this Secular bear arriving sometime in 2016.
I do not know where the ultimate low is going to be, I do not know if 2009 was that low. Nothing is ever 100%. It is too hard to time tops and bottoms, avg investors sells low, buys high. So when using a very long term horizon, it is hard to argue to not ride out the bumps as the market has tended to always make new highs, even if it takes 25 years.
In our current case, it took 7 years from 2000 to 2007 to form a new all time high. We are now entering 2014, 7 years from the last mkt top. From the lows of 2002, it took 7 years to reach the lows of 2009. 7 more years if this 7 year cycle continues has our ultimate low around 2016.
And I think a darn good chance a final high is coming this year, in 2014, 7 years from the 2007 top.
Why do I continue to insist on a Secular Bear market ? One reason is the 2009 low was a lower low than the 2002-2003 lows. I could not find in my research another period where 2 preceding bear markets did that. I also did not see divergences at the lows. So IMHO, this sets up an ultimate test of the 2009 lows at some point. And one of two things is going to happen. We make a new low, a final low that is lower than 2009 but the momo indicators diverge and do not make a lower low. Or we bottom above the 2009 lows where the fear indicators show record fear but this does not push stocks to new lows. That might tell us the sellers are finally exhausted.
I do not think the " system" is cleansed of the debt that built up from 2003-2007 housing/credit bubble , instead it has been hidden, not marked down to market, papered over....shifted around, switched to the FED balance sheet. What mechanisms are left for the FED, now backing away for its backstops, when next rubber meets the road moment comes. Will they go back to what they had already been doing? Will they increase purchases, reverse tapering?
I'm afraid at that point, they would have lost credibility and have few weapons stashed away, like lowering interest rates to try to stem the tide.
Nope, 5 years running, rates stay at 0%, also continuing to batter savers with 0 returns. Savers do spend interest payments too....just not in last 5 years in the BS unbalanced approach. There are those wanting to jump into the lifeboats , but for yield, income are forced back onto the US TITANIC.
You can grow and start anew by cleansing the system, clearing the path to normal organic growth which will benefit a large portion of our country, not just the top 1%, those who hold the most stocks.
Allowing savers to gain a decent return without fear of losing principal.
IMHO, now is not the time to rest complacent, but for me anyway, I am on high alert.
Duratek
Friday, January 03, 2014
WILL YIELDS HOLD THE KEY FOR 2014?
D
Saturday, November 16, 2013
"HEARING JANET YELLEN"
http://www.prudentbear.com/2013/11/hearing-janet-yellen.html Doug Noland's latest.
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. "
http://www.nytimes.com/2013/11/03/your-money/the-dangers-of-a-stock-market-melt-up.html?_r=0
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
D
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. "
http://www.nytimes.com/2013/11/03/your-money/the-dangers-of-a-stock-market-melt-up.html?_r=0
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
D
Saturday, November 02, 2013
WHY I think SECULAR BEAR IS NOT OVER:
**note from my prorpietary TA MODEL
>RSI not made new high yet....though MACD reaching to or near
it's higest point.....I would suggest we could see another 100 pts or so tacked
onto SPX before THE TOP.<
WHY I think SECULAR BEAR NOT OVER:
2003 and 2009......MOMO signals were of greater magnatude
and did not offer a divergence in force and price. COntrary...so far
anywho...RSI, CCI making lower highs...that can change of course.
SECULAR BEAR should last about 16 years (conventional top was 2000)
putting in a LOW LOW
(OUR LIFETIME) in the 2014-2016 time frame (it IS still possible that 2009 low will hold but feel it COULD get tested) . What that
will look like I don't know.
IMHO ENERGY, delivery , storage many facets of it
will LEAD the "next great bull MKT" as cost for energy DROPS, jobs
created, consumers have more spendable income (unlike todays stagnant income
growth), manufacturers costs drop dramatically as energy costs drop more will
be made in this country.
We are becoming, will be huge net exporter of
energy...spurring a real economic boom, IMHO
Last weeks Noland
" guess it took the 2008 crisis for
economists to finally acknowledge that their models might be deeply flawed,
though one would have thought the previous 20-years (plus) of serial global
booms and busts would have raised some concerns. I have argued that we’ve been
witnessing a unique period in history: For the first time, during recent
decades there have seen no constraints on either the quality or quantity of
Credit issued on a global basis. No one should expect that unlimited cheap Credit
would prove conducive to system stability, and we’re now privy to sufficient
history to be certain it’s not. All along the way, policymakers have seemed to
go out of their way to avoid learning lessons.
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."
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
MUST READS: FED POLICY IS FAILING TO IGNITE ECONOMY, BUT HAS THE STOCK MARKETS
My point being is each time this has occurred, it has ended horribly with the bubble bursting. First in 2000, then 2007, and each phase was magnitudes worse with its aftermath. Gov't debt has grown from $7T to $17T this deacde.
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....
http://www.zerohedge.com/news/2013-10-18/lacy-hunt-warns-federal-reserve-policy-failures-are-mounting
"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):
http://www.prudentbear.com/2013/10/oct-18.html
"The QE-enhanced 2013 version of “how crazy do things get?” is outshining even the 1999 speculative melee. "
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....
http://www.zerohedge.com/news/2013-10-18/lacy-hunt-warns-federal-reserve-policy-failures-are-mounting
"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."
http://www.prudentbear.com/2013/10/oct-18.html
"The QE-enhanced 2013 version of “how crazy do things get?” is outshining even the 1999 speculative melee. "
Friday, October 18, 2013
CHINA HAS A DEBT PROBLEM???
http://money.cnn.com/2013/10/17/news/economy/china-government-debt/index.html?iid=HP_LN
The crowded risky asset trade Titanic is near fully loaded, when it hits the iceberg! and it
will, you know it will. I DO NOT know when as the game
continues it would seem to NO end. ADJ Money
base has already grown by $1 T this yr alone....these are all historical records!
IMHO, valuations are far beyond the fundamentals, and other
things like Int rates are DRAMATICALLY lower and away from their
mean.....manipulation by the FED is at historical levels and is the MAIN driver
of asset prices.....all this while our economy is running aground and cannot
even produce a 2% GDP.....
Things will eventually SNAP my friends, no one knows at what point, when........we have a critically maladjusted economy, cannot function without MASSIVE FED interference and is addicted to FED QE, now at $85B a month. ANY normalization of longer term rates would cripple the US ability to pay the interest on the debt.
Obama says in a recent BS speech " I have cut the deficit by more than any time in the last 50 years"
IS this true? Only if you realize under him it grew to $1.5T and is now back to $750B.....still higher than at anytime while Bush was President, and the 2 faced chided him over this debt pile up.
Now with "affordable care act" we have grown the gov't intrusion and size to new bounds. We have an over bloated system as it was......you know it takes 2 Federal employess to do the job of one private sector....we keep paying and paying......
Cheap money allows this game to continue, the day of reckoning pushed farther back. But at some point the rubber band is going to break.
Money put in a safe place returns you NOTHING, forcing the FLOW into one space, the stock market looks good now....but history tells me its just another bubble. Just another in a series of boom/busts we have seen before....
WHEN the music stops, that will be one time......you don't want to be holding these same moon shooting risky assets.....they are NOT moving of their own accord, IMHO
D
Thursday, October 17, 2013
CRISIS AVERTED
That is what you will read in the headlines. All that was accomplished was another kick the can down the road moment, and the markets are exuberant by a rise in the "debt ceiling"? Growth going forward predicted to be sub 2% as we have added another major gov't intrusion and the cost is enormous.
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.
D
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.
D
Tuesday, October 15, 2013
"BRIGHT DAY"
Who would have thought that by just RAISING the debt limit
without ANY progress in correcting the issuing of the debt nor the imbalances
could exude hope and confidence?
D
Saturday, September 28, 2013
SOUND FOOTING? ILLUSIONS
"Those of a bullish
persuasion would argue these dynamics confirm the underlying strength and
stability of the U.S. economy. I’ll
counter with the view – one supported by Fed data - that massive federal
deficits and Federal Reserve monetization have created unprecedented and deeply
systemic financial and economic distortions.
An economy on firm
footing would be one demonstrating at least a reasonable balance within the
real and financial sectors. One would hope to see sound money and productive
Credit financing capital investments throughout the economy - liquidity/spending power entering the
system primarily in the process of financing economic wealth creation in the
real economy (as opposed to financing consumption and asset speculation).
"
Friday, September 27, 2013
LIFE SUPPORT
Fed doves make case for patience on tightening policy Reuters
The Federal Reserve must be patient in deciding when to scale back bond purchases, top officials said on Friday, with one arguing it could wait "years" to lift interest rates and another suggesting ...
What is bothering the Federal Reserve after holding down Fed Funds rate to 0 going on 5 years....we are "years away" from beginning to normalize interest rates and policies?
Economic growth is barely running at 2%, 5 years into the most dangerous FED experiement in their 100 years history, which has helped to create bubbles on multiple levels, including bonds, gov finance, interest rates, bond yields, corporate debt, stock valuations and who knows what else.
This feels like "in for a penny, in for a pound" policy making. And the model set where we will continue with the same policies even though we are not getting the results we want, so more of the same thing will eventually get us to where we need to be.
Each month adds another $85B that the FED will need to unwind at some point, most of the STIMULUS has found its way into NON PRODUCTIVE areas of economy like STOCKS.
But the new highs in stocks mostly seems to benefit the top 1% of our population, almost as deceptive as the "affordable care act", who has seen their healthcare bills go down?
I do think it could have been worse if the FED did nothing, but by now one would hope we were well on our way to a true healing and growing balanced economy not needing to be force fed $BILLIONS of printed $'s.
It feels like we HAVE NOT healed, but instead have reflated the bubbles and this leads me to conclude...they will BURST again.....my only hope is the fallout is not as bad as many predict it will be.
D
The Federal Reserve must be patient in deciding when to scale back bond purchases, top officials said on Friday, with one arguing it could wait "years" to lift interest rates and another suggesting ...
What is bothering the Federal Reserve after holding down Fed Funds rate to 0 going on 5 years....we are "years away" from beginning to normalize interest rates and policies?
Economic growth is barely running at 2%, 5 years into the most dangerous FED experiement in their 100 years history, which has helped to create bubbles on multiple levels, including bonds, gov finance, interest rates, bond yields, corporate debt, stock valuations and who knows what else.
This feels like "in for a penny, in for a pound" policy making. And the model set where we will continue with the same policies even though we are not getting the results we want, so more of the same thing will eventually get us to where we need to be.
Each month adds another $85B that the FED will need to unwind at some point, most of the STIMULUS has found its way into NON PRODUCTIVE areas of economy like STOCKS.
But the new highs in stocks mostly seems to benefit the top 1% of our population, almost as deceptive as the "affordable care act", who has seen their healthcare bills go down?
I do think it could have been worse if the FED did nothing, but by now one would hope we were well on our way to a true healing and growing balanced economy not needing to be force fed $BILLIONS of printed $'s.
It feels like we HAVE NOT healed, but instead have reflated the bubbles and this leads me to conclude...they will BURST again.....my only hope is the fallout is not as bad as many predict it will be.
D
Sunday, September 22, 2013
THE NEED FOR CONTINUED FED PROPPING
"Financial Conditions" http://www.prudentbear.com/2013/09/sept-20.html
"As someone who places “Financial Conditions” at the heart of market and economic analysis, I felt Bernanke had opened a real can of worms on the policy and communications front.
From Wednesday’s FOMC statement: “The committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. The committee recognizes that inflation persistently below its 2% objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”
Have Financial Conditions really tightened in recent months? Stock prices have surged to all-time record highs. The S&P500 has gained 7.7% in three months, with Nasdaq up 12.4%. The small cap Russell 2000 has surged 11.3% in three months. The Nasdaq Biotech index has jumped 24.8%, increasing its 2013 gain to 53.3% (2-yr gain of 116%). Internet stocks enjoy a three-month gain of 12.6%. The average stock (Value Line Arithmetic) is up 11.2% in three months. Stock prices indicate the opposite of tightening."
The mere mention of a SLOWING in QE by the FED had sent the markets into a tizzy. Prior to the recent FED meeting, it was widely anticipated that the FED would begin to lightenup the pace of their QE injections from current $85 B amonth to something slighly less. INSTEAD we got NO change to policy because of "tightening financial conditions". Was this mostly the back up of mortgage borrowing costs?
Re-INFLATING a burst bubble will only cause a new bubble to form of even greter proportions. The markets now will not tollerate even the mere mention of a change to the status quo, every month that passes and the staggering growth of the FED balance sheet makes any extracation from this to be less likely where it would not cause a gross reaction.
http://research.stlouisfed.org/publications/usfd/page3.pdf The adjusted Monetary BAse has grown by nearly $1 Trillion from just the start of this year......an historic amount judged against anything in history before it.
Yet 5 years of such actions have not YET brought us to a point where we can begin to see some unwinding, even a slowing of the CRISIS managment of our economy and money??
I think the FED and Central bankers have painted themselves into a corner, the further they went, the further they realized they would have to go. I do not think they know where this goes from here, this is a gross experiement, and we are the Guninee Pigs.
You cannot print your way to prosperity and an economy that can sustain itself, for now I guess we will have to make do with what we have. Not willing to deal with the withdrawl symptoms, the CRACK ADDICT ECONOMY will be continuously fed more drugs.....making the dependency greater, the withdrawl worse....when it comes.
D
"As someone who places “Financial Conditions” at the heart of market and economic analysis, I felt Bernanke had opened a real can of worms on the policy and communications front.
From Wednesday’s FOMC statement: “The committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. The committee recognizes that inflation persistently below its 2% objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”
Have Financial Conditions really tightened in recent months? Stock prices have surged to all-time record highs. The S&P500 has gained 7.7% in three months, with Nasdaq up 12.4%. The small cap Russell 2000 has surged 11.3% in three months. The Nasdaq Biotech index has jumped 24.8%, increasing its 2013 gain to 53.3% (2-yr gain of 116%). Internet stocks enjoy a three-month gain of 12.6%. The average stock (Value Line Arithmetic) is up 11.2% in three months. Stock prices indicate the opposite of tightening."
The mere mention of a SLOWING in QE by the FED had sent the markets into a tizzy. Prior to the recent FED meeting, it was widely anticipated that the FED would begin to lightenup the pace of their QE injections from current $85 B amonth to something slighly less. INSTEAD we got NO change to policy because of "tightening financial conditions". Was this mostly the back up of mortgage borrowing costs?
Re-INFLATING a burst bubble will only cause a new bubble to form of even greter proportions. The markets now will not tollerate even the mere mention of a change to the status quo, every month that passes and the staggering growth of the FED balance sheet makes any extracation from this to be less likely where it would not cause a gross reaction.
http://research.stlouisfed.org/publications/usfd/page3.pdf The adjusted Monetary BAse has grown by nearly $1 Trillion from just the start of this year......an historic amount judged against anything in history before it.
Yet 5 years of such actions have not YET brought us to a point where we can begin to see some unwinding, even a slowing of the CRISIS managment of our economy and money??
I think the FED and Central bankers have painted themselves into a corner, the further they went, the further they realized they would have to go. I do not think they know where this goes from here, this is a gross experiement, and we are the Guninee Pigs.
You cannot print your way to prosperity and an economy that can sustain itself, for now I guess we will have to make do with what we have. Not willing to deal with the withdrawl symptoms, the CRACK ADDICT ECONOMY will be continuously fed more drugs.....making the dependency greater, the withdrawl worse....when it comes.
D
Saturday, August 31, 2013
DOW MEGAPHONE TOPPING PATTERN
This formation is still in play. The adjustment process and deleveraging from decades of credit bubble activity has been delayed by historic Fed actions, and now world CB's.
Delaying is not fixing.
http://www.prudentbear.com/2013/08/weak-links-and-transmission-mechanisms.html
"Fed QE notwithstanding, I believe the market backdrop today implies an important tightening of financial conditions going forward. Policy measures – including boosting QE – do have the potential to delay this tightening, although with the cost of only exacerbating the wide gulf that has developed between inflated global securities prices and deteriorating economic prospects."
D
Monday, August 19, 2013
"SIGNS OF A TOP" MARGIN DEBT FOLLOW UP
http://www.mauldineconomics.com/frontlinethoughts/signs-of-the-top
D
When margin debt begins to unwind, that's when the selling gets
nasty, and why it leads to ALL bottoms. We are now in the TOP zone, more margin
can be added, but it's in process of peaking....that's how you make a top. BE
CAREFUL going forward, it doesn't matter WHY a stock should be good, they will
ALL stumble badly when the music stops.
D
Sunday, August 18, 2013
Monday, July 22, 2013
PENSION FUND TIME BOMB
"The recovery in the U.S. state pension system suffered a setback in 2012 as the huge funding shortfall in a large swath of state pensions swelled more than 20 percent, interrupting two years of improvement following the devastation of the financial crisis.
The shortfall in 109 of the nation's state pension plans, which guarantee retirement for millions of public workers such as police, firefighters, and teachers rose to $834.2 billion in 2012, up from $690.3 billion the previous year, according to a new report by Wilshire Consulting, a unit of independent investment management firm Wilshire Associates.
The report highlights the uphill struggle faced by many of the state pension plans nationwide and is a reminder that financially strained state governments will have to make some tough choices in order to make up the shortfall.
It also shows state pension fund managers are continuing to up their exposure to less conventional assets such as real estate, private equity, hedge funds and commodities as they try to boost their returns and diversify away from over exposure to volatile equities."
94% of Corporate pension funds underfunded
http://www.thinkadvisor.com/2013/04/11/94-of-pension-plans-underfunded-wilshire
Chicago debt downgraded
http://articles.chicagotribune.com/2013-06-06/business/chi-moodys-downgrades-illinois-20130606_1_pension-reform-negative-outlook-ratings-services
Detroit already bankrupt, will the FED now bail out the States? VIVA the recovery!
D
The shortfall in 109 of the nation's state pension plans, which guarantee retirement for millions of public workers such as police, firefighters, and teachers rose to $834.2 billion in 2012, up from $690.3 billion the previous year, according to a new report by Wilshire Consulting, a unit of independent investment management firm Wilshire Associates.
The report highlights the uphill struggle faced by many of the state pension plans nationwide and is a reminder that financially strained state governments will have to make some tough choices in order to make up the shortfall.
It also shows state pension fund managers are continuing to up their exposure to less conventional assets such as real estate, private equity, hedge funds and commodities as they try to boost their returns and diversify away from over exposure to volatile equities."
94% of Corporate pension funds underfunded
http://www.thinkadvisor.com/2013/04/11/94-of-pension-plans-underfunded-wilshire
Chicago debt downgraded
http://articles.chicagotribune.com/2013-06-06/business/chi-moodys-downgrades-illinois-20130606_1_pension-reform-negative-outlook-ratings-services
Detroit already bankrupt, will the FED now bail out the States? VIVA the recovery!
D
CLARIFY WHY QE WILL NOT, DOES NOT WORK IN THE LONG RUN
"Dr. Richebacher persuasively argued that rising consumer price inflation was the
least problematic inflationary manifestation, as it could be rectified by
determined (Volcker-style) monetary tightening. Presciently, Richebacher viewed
asset inflation and Bubbles as the much more dangerous inflationary strain - too
easily tolerated, accommodated or even propagated.
It’s no coincidence that periods of low consumer price inflation preceded the Great Depression and the bursting of the Japanese Bubble. I would further note that consumer price inflation was relatively contained prior to the bursting of the tech and mortgage finance Bubbles. But to claim this dynamic was caused by tight monetary policy is flawed thinking. It was just the opposite.
I would argue that major monetary inflations, along with attendant investment and asset Bubbles, tend to boost the supply of goods and services. Myriad outlets arise that readily absorb inflated spending levels, working to avail the system of a rapid increase in aggregate consumer prices. Booming asset markets become magnets for inflationary monetary flows, while a boom-time surge in more upscale and luxury spending patterns also works to restrain general price inflation. Moreover, a boom in trade and international flows ensures strong capital investment and an increased supply of inexpensive imports (think China, Asia and technology). "
http://www.prudentbear.com/2013/07/inflationphobia.html#more Doug Noland
The FED has NOT been able to create INFLATION, and the money they create each month goes into RISKY ASSETS, created myriad bubbles more dangerous than before returning NO longer benefits.
SO a FEW MEN determine the fate of everyone, f'ing it all up.....the rich got wealthier, the poor got poorer, all under the leadership of a popular Democrat, imagine the hypocrisy?
D
It’s no coincidence that periods of low consumer price inflation preceded the Great Depression and the bursting of the Japanese Bubble. I would further note that consumer price inflation was relatively contained prior to the bursting of the tech and mortgage finance Bubbles. But to claim this dynamic was caused by tight monetary policy is flawed thinking. It was just the opposite.
I would argue that major monetary inflations, along with attendant investment and asset Bubbles, tend to boost the supply of goods and services. Myriad outlets arise that readily absorb inflated spending levels, working to avail the system of a rapid increase in aggregate consumer prices. Booming asset markets become magnets for inflationary monetary flows, while a boom-time surge in more upscale and luxury spending patterns also works to restrain general price inflation. Moreover, a boom in trade and international flows ensures strong capital investment and an increased supply of inexpensive imports (think China, Asia and technology). "
http://www.prudentbear.com/2013/07/inflationphobia.html#more Doug Noland
The FED has NOT been able to create INFLATION, and the money they create each month goes into RISKY ASSETS, created myriad bubbles more dangerous than before returning NO longer benefits.
SO a FEW MEN determine the fate of everyone, f'ing it all up.....the rich got wealthier, the poor got poorer, all under the leadership of a popular Democrat, imagine the hypocrisy?
D
Friday, July 19, 2013
SPX 500 DIVIDEND YIELD DOES NOT CONFIRM BULL MKT
Does the current 1.9% yield look like this is what you see at beginning of Bull markets?
Exactly, with the new FED engineered stock market, we are witnessing the largest bubble blown in the history of the stock market.
It is my suspicion, when it BLOWS, what follows will also be historic.
D
Wednesday, July 17, 2013
Respected Prognosticator Bill Fleckenstein "This will end in disaster"
http://finance.yahoo.com/blogs/talking-numbers/fleckenstein-fed-policy-end-disaster-100312379.html
Worth a listen......"don't know WHEN, but this will ebnd in disaster"
Worth a listen......"don't know WHEN, but this will ebnd in disaster"
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