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Beautiful Day?
Sometimes
in life, you got to get back to basics. My trainer reminded me that
this morning when I hit the gym at 6 a.m. and he made me do what looked
like simple exercises. I started by standing straight and lifting each
leg up like a marching soldier, always trying to maintain my balance. I
then held the railing bending my leg back so my shin touches my bum.
Finally, he made me go down stairs (allowing me to hold the railing), do
five squats, then march right back up the stairs as fast as possible without holding the railing. I
ended off with a series of hard stretches.
It all looked so
simple but after 45 minutes, I was exhausted. My trainer asked me how I
felt and I told him that "it's embarrassing that I can't do these simple
things." He replied: "There is nothing to be embarrassed of, you got to
get back to basics and retrain your body. What looks daunting now will
be effortless in three months. Look at how your body has transformed for
the better since April." Then he added: "just stay off the bloody
alcohol!"
What does this have to do with pensions and financial
markets? Why did I call this post "Beautiful Day"? There was certainly
nothing beautiful about the stock market on Monday and it looks even
worse Tuesday morning as global shares tumbled following fears that
Spain and Italy are next in line to default on their debt. Fear is back with a vengeance and algo traders have marching orders, RISK OFF!
On Monday, oil prices tumbled, the US dollar was up and gold shot up. This is an interesting dynamic. As Martin Feldstein has noted,
the relationship between the US dollar and the price of oil isn't as
straightforward as people think. Typically, we've seen the US dollar
fall as the price of oil surges. And gold prices should be falling as
fears of debt deflation mount.
So what's going on? I spoke to a commodities trader yesterday and he
told me that we're seeing the "rise of systemic fear," which explains
why we're seeing the disconnect between commodities, currencies and
inflation. "When systemic fear rises, investors look for refuge in hard
assets and precious metals." He also sent me a Business Insider article
stating that there's a huge unforeseen amount of demand coming in the
physical gold and silver market. Here's why: The Pan Asia Gold Exchange.
As for the US dollar, the flight to safety bolstered it as global
investors rushed to buy US Treasuries, bringing the 10-year bond yields
down to 2.91%.
We also spoke about the debt discussions being
hammered out in Washington between Republicans and Democrats. President
Obama is now seeking a grand bargain on the deficit,
but the truth is he'll have to negotiate some cuts on entitlement
spending that Republicans are demanding. The trader and I agree on
one crucial point: any fiscal tightening in the US pretty much ensures
that the Federal Reserve will proceed with more quantitative easing, ie.
get ready for QE3!
Why does this ensure QE3? Remember my theory:
The Fed and the financial oligarchs will do whatever it takes to avoid a
prolonged Japanese-style debt deflation scenario. And when I say
whatever it takes, I mean whatever it takes. They want to bid up risk
assets, introduce more inflation in the global economy, and kill any
deflationary headwinds that might destroy their ability to make
substantial profits in the future.
It's not going to be easy.
This strategy could easily fail and sow the seeds of the next financial
crisis, but at the end of the day, the Fed will shun Congress and
counteract any fiscal tightening that increases the risk of deflation.
So
while everyone is worried about Spain, Italy, Portugal, Greece,
Ireland, and the US debt ceiling deal, I tell them to relax, keep buying
the dips because once a debt deal is finalized (neither Republicans nor President Obama want the US to default on their watch), you're going
to witness a massive relief rally in risk assets. And when I say
massive, I mean MASSIVE.
How do I know this? Am I God? Will I get
my head handed to me like millions did during the Great Depression? Of
course not. All I know is that the power elite have too much at stake to
let the global financial system implode. They will keep pumping massive
liquidity into the system until they kill deflationary headwinds. And
that means risks assets will continue being bid up.
Sometimes in
life, you have to get back to basics. You have to take a step back and
learn to take baby steps before you start walking and running. And
remember no matter how ugly it looks now, the sun will keep shining and
the world will forge ahead. On that note, I leave you with U2's
"Beautiful Day" which they sang over the weekend at the Montreal Hypodrome. Have yourself a beautiful day. :)
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Oh,... and as for gold going down due to inflation? Maybe,... someday. But not now. Do a little research dude. That last time we had what is now repeating itself in Europe and the EU was 1931, the end of the 'Phony Gold Standard'. As each window closed the world flocked to the US window to exchange dollars for gold and the run was stopped only by a strong dollar interest rate rise.
That isn't going to happen this time. First, there's no window. Second, the dollar isn't strong. Third, the central bank here in America can't raise rates because the whole stinkin mess is held in place by low rates, dried spit, and chewing gum.
You talk too much dude.
It will be a beautiful day when Bono dies.
Interesting attempt at building your self esteem. Fail.
Self esteem is for posers worried about what other people think of himself or herself. Contact your human resources dept for the rest of the day off because of the trauma i caused you, pansy.
+1
LOL! Bono is a wanker of the highest order. He deserves a wanker knighthood.
A Lordship? Lord Wanker! Duke of Dumbasses!
or tossed in an Irish prison for tax evasion.
http://www.globalpost.com/dispatch/ireland/090303/bono-tax-evader
No recovery for you, ten years!
http://www.youtube.com/watch?v=WZ3AOmZ2fps
"The Fed and the financial oligarchs will do whatever it takes to avoid a prolonged Japanese-style debt deflation scenario... All I know is that the power elite have too much at stake to let the global financial system implode."
Dream On (Dreamer)
Have you ever seen Govt "control" anything? How are the EU doing with fixing contagion? How are the US Govts efforts coming along with the US property market Einstein? Presumably the power elites, Goldman Sucks and JP Morgan, "controlled" their own kamakazi dive into bankruptcies in 2008 yes? You think these any of these guys are smart and in control when all evidence points to them being pretty stupid and losing control don't you think?
"They will keep pumping massive liquidity into the system until they kill deflationary headwinds. And that means risks assets will continue being bid up."
And what does massive inflation bake-in? Massive deflation. Try looking just for once at reality, study the efforts of the big finance houses to stop deflation and pump confidence in 1929. It failed. This is because inflation/deflation are not economic events, they are human social events. Society has had its fill of credit/debt binging. When society no longer wants credit/debt, wants to pay off (or default on) its debt there is sweet fuk-all your power elite can do about it.
Try looking at Bennys efforts to date. He's tripled his balance sheet and how's the credit mountain doing? It's actually contracted (deflation). Benny has lost all control. Fast as Benny pumps the credit/debt mountain it is still deflating. Obumma wants us to "spend, spend, spend" and keep the economy growing but what has business and society done? Given him the big fat finger. Where's authorities control???
Once again the Canadian moron believes authority and the State can fix things. The whole of history teaches you they do the opposite and make matters worse. Benny is not baking in a recovery or inflation of assets (has it worked on The Feds own toxic property portfolio?). He is baking in the mother of all deflationary Depressions.
When are you ever going to learn about reality with that peanut brain of yours pickled in idealogical hopium?
There will be a great "Minsky melt up" ...soon.
We got the what and where, now all we need to fill in is the when.
Six AM? Personal Trainer? Kicking your leg back to your ???? And you can't run up a flight of stairs? Jeez,... I thought you were a chick until I looked up at the name. Dude, you talk too much. AND,... NO SHIT, they won't let the Ruling Elite eat the big one. That's why we're going to have a Revolution. What do you know about Revolutions, genius?
Don't worry, my book will be out soon enough so America can front run the one that's coming.
duplicate
I got news for you - well over 50% of adult americans probably can't do those things without getting totally winded. Leo, one piece of advice, exercise works just as well a little later in the morning. 6:00 AM is a terrible time to do anything except drink coffee and read ZH.
Leo has MS, dimwit.
Now roll over before you get a bedsore, knuckle-dragging mouthbreather.
And that is just divine punishment for little leo permanently having his nose stuck to bernanke's anus.
Leo - people are doing there best to simply carry on, beautiful day or not. But we have a demand recession emerging. People in businesses are focused on hunkering down, not building for the future because they believe the future is dreary. This is hitting all the services firms in North America, which translates into lower incomes (and no employment growth) and thus lower spending. We saw this before in 2008, when this precipitated a crisis of faith in the financial system, which came unstuck over a period of 6 months between Bear (March) and Lehman (September). Between those milestones, people carried on, but there was a serious storm brewing.
We have that situation all over again, but the economic leaders are trying to prevent a first casualty in Europe, even while doing so simply delays a meaningful resolution to the crisis. Meanwhile, here in the US, we have two lousy choices: (1) austerity, which stops the debt from getting bigger, but likely comes with a(nother) major recession/depression, or (2) status quo QE, which destroys the dollar further, but guarantees that bad things will happen elsewhere (China, Europe), which is tantamount to economic warfare, and likely gives us a recession anyway.
Which of these is better?
Good on you with the health kick though. The world may go to pieces but we might as well be fit during it!
Have to disagree with several presumptions in here.
1. 'And gold prices should be falling as fears of deflation mount.'
Gold is money; money is more valuable in deflation.
2. The Fed and the financial oligarchs will do whatever it takes to avoid a prolonged Japanese-style debt deflation scenario.
Why? The benefit from deflatonary forces. The elite are not "for" us; they are only "for" looting and pillaging amonst panic. I agree they don't want 'prolonged stagnation', but they certainly seek deflation if it serves their itnerests..
When I read comments like that, "Gold should be falling--"; I always think to myself, well just keep lecturing the market, maybe it'll start listening. I also sometimes remember that God follows prayers like a gang plow follows words.
or as the saying goes: "God answers all prayers...but sometimes the answer is NO".
All I know is that the power elite have too much at stake to let the global financial system implode. They will keep pumping massive liquidity into the system until they kill deflationary headwinds. And that means risks assets will continue being bid up.
At some point, bidding up asset prices with funny money (aka more cowbell) can't and won't actually create value or function as the activation energy that creates value and economic activity.
Even if we are in need of more top-down liquidity pumping the elephant still standing in the room is the crappy environment for the small businesses - outlined here in this excellent post from yesterday: Here's Why Small Business Isn't Hiring
The sunny uplands of economic prosperity (Beautiful Days) will never be reached absent conditions where small businesses can thrive.
one more time, dup.
dup
The Zimbabwe stock market had a bunch of 200%+ days, we will have ours, too.
I would suggest Benanke's "ringtone" instead of U2's "Beautiful Day":
http://www.youtube.com/watch?v=XgreyZR-KNk
LOL
You could well be right, Leo.
If they manage to keep the wheels on this thing for a couple of weeks there could well be a massive relief rally. Either that or a massive crash.
It's one or the other and so any bet becomes 'all in'.
Bet your house on it and let me know how it goes.
you're going to witness a massive relief rally in risk assets. And when I say massive, I mean MASSIVE.
So will this prediction go the way of your prior forecasts for massive increases in monthly non-farm payrolls?
Any day can be a beautiful day when you start it out by munching down more glass (solar panels).
Leo : Do you know of a web site or have list of major Canadian corporations that are underfunded in their pension plans? Thanks
A list isn't public for individual companies but in aggregate, OSFI provides statistics for federally regulated pension plans:
http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=216#rep
And debt ceiling deal accompanied by $2-4 trillion in market-unfriendly austerity measures will not result in a rally. On the contrary, the market will sell off, and U2, stuck in one of the most IMF-pauperized war zones of the world, will be singing "It's a horrible day."
"How do I know this? Am I God? Will I get my head handed to me like millions did during the Great Depression? Of course not. All I know is that the power elite have too much at stake to let the global financial system implode."
Jesus... yes, because "this time it is different" despite the fact that every other form of TPTB in all of history tried to stop the wheels from coming off their economies/societies and failed...
The error is Leo's logic can be found in the statement "All I know is that the power elite have too much at stake to let the global financial system implode.". If he changed that to "All I know is that the power elite have too much at stake to let the THEIR POSITIONS IN THE global financial system implode" he would draw different conclusions. My working premise is that the powers that be know the end game is on and are creating positions for themselves in the next version. Medium term equity valuation no longer becomes as important in that case. This premise doesn't have the pigmen looking at the Euro crisis running in circles shouting "Oh my!", it has them rubbing their hands saying "All according to the plan".
Fred,
Glad to see your rational post. Although, I would think there are some who would be thinking "Oh well, it was a good ride, now we go to option "B".
Interesting that tough talk is now being directed toward Iran. Maybe a "little war" will focus public anger on something else.
he, he, he,. he is pretty funny. he seems to believe that making bigger numbers of monetary units will fix something. Of course, this is the basic belief system of the Fed's personnel and so forth, but that's not much of an excuse. The Mises Institute educational material is available right here on-line. I think the Futures Trader he talked to was the useful reference; systemic fear, indeed.
Believe it
U2? Bono? pffft.
http://www.infowars.com/articles/nwo/bono_hypocrisy_third_world_scam.htm
<PAGING MR. AKAK.... PAGING MR. AKAK....>
LEO'S AT IT AGAIN...
U2? LOL! Corporate stooges for mega corps and the elites. Only little people pay taxes as bono does not pay em. The JP Morgan of "rock."
So I keep holding all the Greek bonds you told me to buy last year, Leo?
Hey LEO how's dem solar panels doing fer ya? Buying the dips?
Damn right, just selective and trading them.
he lost me at "just stay off the bloody alcohol"