Unemployment Claims Data Disappoints [View article]
In socialist France, unemployment payments begin to decline after a few months of collecting them, and terminate after one year. Makes me wonder if the US is really less socialist than Europe, as many Americans would like to think.
Which Way Is Inflation Headed? Time for a Third Opinion [View article]
Inflation is not just coming, it is already here, and interest rates are already below inflation, and we have already resumed the deadly paradigm of asset speculation, and this too will end with a bang and with the banks whinning for another round of taxpayer bailouts to pay their bonuses.
The real problem lies ahead, because commodity price inflation will raise cost of living at a faster rate than wages in developed Western countries. This will put more pressure on consumers, and they will be less able to afford mortgage payments and discretionary spending as food and fuel claim a larger portion of incomes. Then it will become apparent that the unrealistic promises that have been made cannot be fulfilled, as is already happening in Greece, other European states, and some US states like CA and NJ.
All this implies that the equities markets may again disappoint.
Wall Street Breakfast: Must-Know News [View article]
..... Thomas Hoenig said the central bank should start to raise the fed funds rate “sometime soon” to about 1% to prevent asset bubbles from emerging. ....
Does anyone really think that there is any difference between 0.25% and 1%, whether to prevent bubbles, encourage savings, or ensure that capital is borrowed for a useful purpose ?
The entire capitalist paradigm has been killed by artificially low interest rates for too long. Instead of successful entrepreneurs creating capital by accumulating their savings (the original notion of capital is saved labor), we get capital that is just printed at the whims of bank clerks. So, instead of having successful entrepreneurs be the stewards of creating and allocating society's capital resources, we have ignorant people creating money at will. The result is that society's resources are misallocated, wasted for unproductive activities, and loaned out to those who dissipate them and never pay them back.
Fed Policy Minutes Show Double-Dip Concern [View article]
Your call of Dow 8500 before 11500 is logical in a normal free market based on rational analysis of risk/reward. The past year's market run-up is policy driven and hence highly unusual, so there is no way for outsiders to tell if, when, and how it may turn, especially with elections coming in November.
Wild-eyed optimists and adventurers may wish to enter the market at this point, but cautious and prudent individuals should make the hard choice between exiting with the profits they have gained or waiting for further upside.
Attractive Stock Valuations – Here Today, Gone Tomorrow [View article]
By the standards of the latest bubble era (1994-2008), stocks are indeed attractively priced. By long-term historic metrics, they are way too expensive, with a paltry dividend yield that does not in any way compensate for the significant risks going forwards.
If you think the attempts to extend the bubble era will succeed, then by all means load up on stocks and enjoy the ride to the next top, just be prepared to get out before the bubble collapses again. If, like me, you think we are returning to more normal valuations based on long-term metrics, then its time to get out of equities.
There is a saying amongst traders and investors that "... you should always leave something on the table for the next guy..", so if you are sitting on profits and cash out, you should not be disappointed if the market climbs another 10% or 20%, as you have already gotten your profit, and the next guy should get some too ! On my part, I have been gratefully cashing out slowly but surely, as I suspect we are near a new top. I am not begrudging any profits I left on the table for others who follow this author's advice and perhaps get further upside.
Rates are unlikely to go up in any meaningful fashion, as the Fed will "buy" the treasuries that no one else wants. This would end if there is a global collapse of the USD, but this is unlikely for some time as other "developed economies" are also quietly monetising, so there are no viable paper-money alternatives. The only event that can thwart the global printing presses is a massive flight to physical commodities, but then we may see price controls instituted.
The reality is that the March 2009 lows had nothing to do with "armageddon", "melt-down", or "black swans". All that happened in Spring 2009 was a very brief return to intrinsic value for equities, and your charts make this inconvenient truth very clear.
At current valuations, investors get a paltry dividend yield of 2% or so, which does not compensate for the substantial risk of losing principal. The only reason to buy equities is that a greater fool will pay more for them later, regardless of the fact that they are already above their intrinsic value as a risk asset with a stream of modest future dividends.
Our policy makers have created a situation in which the economy is predicated on credit and asset values inflated by one bubble after the other, and they know that if they cannot inflate the next bubble, we shall have societal and political consequences to their discredit. Hence, rather than try to unwind the bubbles in a manageable, albeit painful, fashion; they have decided to pull out all the stops and try to inflate yet another asset bubble.
The stage is now set for a "showdown" between economic fundamentals, and policies attempting to desparately thwart said fundamentals at all costs; and it is hard to predict how this will play out, and in what time frame. Just to be on the safe side, I have been moving out of equities and into cash, slowly but surely, and only time will tell whether this has been a smart or dumb move.
"... If you are unfortunate enough to live in a small country like America, with only 300M people, when your Government runs a $1.5Tn annual deficit like ours does, that means they will be needing all 300M of us to send in $5,000 to cover the shortfall..."
I think you really mean that 30M of us, have to come up with an average of $50,000 each, and that is for a mere $1.5 Tn for just one year's deficit.
Is the Stock Market Setting Up a Top? [View article]
Agreed that equities are overvalued, but don't agree that Fed will "tighten", as they are irreversibly committed to inflation, come what may. So this time, the bull market will not be assassinated by tighter monetary policy, but by a paucity of buyers as baby boomers retire, and those who have less income or cash in their mutual funds for living expenses.
The correction this time will be triggered by the taxpayer funded trading desks realising they have no suckers left to buy their massive trading books at a profit. Thus, either a massive correction that brings in the smart money waiting on the sidelines, or the taxpayer-funded trading desks will find that they have become unwitting buy-and-hold investors.
Daniel Indiviglio has some problems with the government's foreclosure-prevention overhaul, but not with one part: the principal reduction piece, and he's got four reasons why it's smart. [View news story]
You make an excellent argument and I am sure that many millions of prudent and responsible Americans agree with your logic.
However, our policy makers have shown imprudent and irresponsible proclivities in the way they have run our economy, and so are more likely to side with the imprudent and irresponsible segment of the population, subsidizing them by over taxing the productive and fleecing the savers.
At the end of the day, this is more about public morality and integrity than about politics and economics. We have elections in November, and hopefully they will show that prudent and responsible people still outnumber the imprudent and the irresponsible.
Rest assured that Bernanke will not stop buying/monetising MBS. I suspect that the Fed have already developed ways to do so under the public radar screen, and that rabble rousers that expose these convoluted methods will be ignored by the MSM.
Massive Deficits, Debt Overhang and Rising Bond Yields [View article]
I suspect the Germans, French, and Northern Europeans will eventually rid themselves of "piggish" deadweights, either by hard love or by divorce. In the US, we lack the flexibility to shed deadweight, so the setback in EUR/USD will not last beyond 6-12 months.
I'd love to see Chinese stocks tumble so I can buy more of them. The Chinese work hard, have savings and surpluses, and spent their stimulus on valuable long-term infrastructure. By contrast, we spent our stimulus sending checks to people for doing nothing, so I've already taken most of my profits on stocks in the West's "advanced market economies", and am looking to invest at better prices in China.
Unemployment Claims Data Disappoints [View article]
Which Way Is Inflation Headed? Time for a Third Opinion [View article]
The real problem lies ahead, because commodity price inflation will raise cost of living at a faster rate than wages in developed Western countries. This will put more pressure on consumers, and they will be less able to afford mortgage payments and discretionary spending as food and fuel claim a larger portion of incomes. Then it will become apparent that the unrealistic promises that have been made cannot be fulfilled, as is already happening in Greece, other European states, and some US states like CA and NJ.
All this implies that the equities markets may again disappoint.
Wall Street Breakfast: Must-Know News [View article]
Does anyone really think that there is any difference between 0.25% and 1%, whether to prevent bubbles, encourage savings, or ensure that capital is borrowed for a useful purpose ?
The entire capitalist paradigm has been killed by artificially low interest rates for too long. Instead of successful entrepreneurs creating capital by accumulating their savings (the original notion of capital is saved labor), we get capital that is just printed at the whims of bank clerks. So, instead of having successful entrepreneurs be the stewards of creating and allocating society's capital resources, we have ignorant people creating money at will. The result is that society's resources are misallocated, wasted for unproductive activities, and loaned out to those who dissipate them and never pay them back.
Fed Policy Minutes Show Double-Dip Concern [View article]
Wild-eyed optimists and adventurers may wish to enter the market at this point, but cautious and prudent individuals should make the hard choice between exiting with the profits they have gained or waiting for further upside.
Attractive Stock Valuations – Here Today, Gone Tomorrow [View article]
If you think the attempts to extend the bubble era will succeed, then by all means load up on stocks and enjoy the ride to the next top, just be prepared to get out before the bubble collapses again. If, like me, you think we are returning to more normal valuations based on long-term metrics, then its time to get out of equities.
There is a saying amongst traders and investors that "... you should always leave something on the table for the next guy..", so if you are sitting on profits and cash out, you should not be disappointed if the market climbs another 10% or 20%, as you have already gotten your profit, and the next guy should get some too ! On my part, I have been gratefully cashing out slowly but surely, as I suspect we are near a new top. I am not begrudging any profits I left on the table for others who follow this author's advice and perhaps get further upside.
Another Panic Ahead? [View article]
Understanding the Bear Case [View article]
Understanding the Bear Case [View article]
Understanding the Bear Case [View article]
The reality is that the March 2009 lows had nothing to do with "armageddon", "melt-down", or "black swans". All that happened in Spring 2009 was a very brief return to intrinsic value for equities, and your charts make this inconvenient truth very clear.
At current valuations, investors get a paltry dividend yield of 2% or so, which does not compensate for the substantial risk of losing principal. The only reason to buy equities is that a greater fool will pay more for them later, regardless of the fact that they are already above their intrinsic value as a risk asset with a stream of modest future dividends.
Our policy makers have created a situation in which the economy is predicated on credit and asset values inflated by one bubble after the other, and they know that if they cannot inflate the next bubble, we shall have societal and political consequences to their discredit. Hence, rather than try to unwind the bubbles in a manageable, albeit painful, fashion; they have decided to pull out all the stops and try to inflate yet another asset bubble.
The stage is now set for a "showdown" between economic fundamentals, and policies attempting to desparately thwart said fundamentals at all costs; and it is hard to predict how this will play out, and in what time frame. Just to be on the safe side, I have been moving out of equities and into cash, slowly but surely, and only time will tell whether this has been a smart or dumb move.
Wednesday's Worry: Worldwide Cash Crunch [View article]
"... If you are unfortunate enough to live in a small country like America, with only 300M people, when your Government runs a $1.5Tn annual deficit like ours does, that means they will be needing all 300M of us to send in $5,000 to cover the shortfall..."
I think you really mean that 30M of us, have to come up with an average of $50,000 each, and that is for a mere $1.5 Tn for just one year's deficit.
Is the Stock Market Setting Up a Top? [View article]
The correction this time will be triggered by the taxpayer funded trading desks realising they have no suckers left to buy their massive trading books at a profit. Thus, either a massive correction that brings in the smart money waiting on the sidelines, or the taxpayer-funded trading desks will find that they have become unwitting buy-and-hold investors.
Daniel Indiviglio has some problems with the government's foreclosure-prevention overhaul, but not with one part: the principal reduction piece, and he's got four reasons why it's smart. [View news story]
However, our policy makers have shown imprudent and irresponsible proclivities in the way they have run our economy, and so are more likely to side with the imprudent and irresponsible segment of the population, subsidizing them by over taxing the productive and fleecing the savers.
At the end of the day, this is more about public morality and integrity than about politics and economics. We have elections in November, and hopefully they will show that prudent and responsible people still outnumber the imprudent and the irresponsible.
Greece R Us? [View article]
Massive Deficits, Debt Overhang and Rising Bond Yields [View article]
Cramer's Gone Crazy [View article]