Current policy coming from the Fed seems to be geared to create a never-ending series of booms and busts, with the hope that the busts can be shortened with more debt and easy money. Yet one major driver behind the financial crisis in 2008 was too much debt - much of which led to taxpayer-funded bailouts. In spite of this, the best the Fed can come up with now is to lower interest rates to boost demand to induce households and governments to borrow even more. Interfering with interest rates, however, is by far the most damaging policy. The economy is not a car, and interest rates are not the gas pedal. Interest rates play a critical role in aligning output with society’s demand across time. Fiddling with them only creates an ever-growing misalignment between demand and supply across time requiring an ever larger and more painful adjustment.
Here is what happens when mega-corporations such as WalMart and McDonalds, whose specialty are commoditized products and services and have razor thin margins, yet which try to give an appearance of doing the right thing, raise minimum wages. They start flexing their muscles, and in the process trample all over the companies that comprise their own cost overhead: their suppliers and vendors.Take the case of WalMart: the world's biggest retailer "is increasing the pressure on suppliers to cut the cost of their products, in an effort to regain the mantle of low-price leader and turn around its sluggish U.S. sales."
No one thinks this market is real. Everyone believes that it’s a by-product of outrageously extraordinary monetary policy actions rather than the by-product of fundamental economic growth and productivity, and what the Fed giveth … the Fed can taketh away. This is a big problem for the Fed, as their efforts to force greater risk-taking in markets through LSAP and QE (and thus more productive risk-taking, or at least inflation, in the real economy) have failed to take hold in investor hearts and minds. Yes, we’re fully invested, but only because we have to be. To paraphrase the old saying about beauty, risk-taking is only skin deep for today’s investor, but risk-aversion goes clear to the bone. It’s also the root of our current advisor-investor malaise. De-risking a bull market is a very different animal than de-risking a bear market. And neither is the same as diversification.
Chinese Retail Investors Open Enough Brokerage Accounts In March For Every Man, Woman, and Child In LASubmitted by Tyler Durden on 04/01/2015 20:40 -0400
Inexperienced, uneducated "investors" piling in by the millions, preposterous margin debt, and a relentless rally. What could go wrong?
When an economic crisis is coming, there are usually certain indicators that appear in advance...
Not an April Fool?
Grandson Of Oil Tycoon J. Paul Getty Found Dead, "Traumatic Injury To Rectal Area" Alleged Source Of DeathSubmitted by Tyler Durden on 04/01/2015 19:21 -0400
In a story which we initially thought was an early April fool's prank, but subsequently turned out to be all too real, and all too tragic, yesterday afternoon Andrew Rork Getty, the 47-year-old grandson of oil tycoon J. Paul Getty who once was the richest living man in the world and member of the Getty trust, was found dead at his Hollywood Hills home, the latest chapter in a saga involving the Getty family which has seen kidnappings (including a tax-deductible ransom payment), mutilations, drug use and now, allegedly, murder.
Now we can see the real tragedy of negative interest rates: they not only have the perverse effect of reversing the flow of time, but they demonstrate that borrowers are not acting with the good faith incentives normally associated with someone who needs money. Rather than paying forward, borrowers are paying backwards because they are effectively trying to return something they don’t want. Such an arrangement renders it impossible for an economy to grow. By destroying the temporal and moral structure of money, negative interest rates destroy the economy. When tomorrow cannot be paid, the current regime must fail. The only question to be determined is the form that failure will assume. This may sound like philosophy but it is cold, hard reality.
He must have accidently veered off script during the press conference.
Not only did Q1 mark a record quarter for issuance, March supply also hit a record at $143 billion, tying the total put up in May of 2008. It should come as no surprise that Q1 was a banner quarter for corporate debt issuance as struggling oil producers tapped HY markets to stay afloat and companies scrambled to max out the stock-buyback-via-balance-sheet re-leveraging play before the Fed hike rates.
Why Is the U.S. Smack Dab In the Middle of a Religious War ... Backing the Most Violent Muslim Terrorists?
Now that the Atlanta Fed has determined that the US economy did not grow in the first quarter of the year - because, well, it snowed - even though said snow did not prevent the US from raking up $100 billion in public debt through March 30 (and likely much more, however since the US has again hit its debt ceiling we won't know the real level of US debt until some time in October), we can formally summarize the two most important changes in the US economy in the first three months of the year. Here they are.
Almost one quarter of Americans regularly "take drugs to affect their mood and help them relax" according to the latest poll by Gallup; but which states are the most (and least) medicated?
Who knew that the revolution would start with those radical Icelanders? It does, though. One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report today that suggests taking the power to create money away from commercial banks, and hand it to the central bank and, ultimately, Parliament.
Blogger Ben...have you ever heard anything so absolutely f$cking ridiculous?