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The Cost Of The 60% Market Move; The Benefits Of Free Liquidity
- Asset-Backed Securities
- Bank of America
- Bank of America
- Bank of England
- Bond
- Capital Markets
- Central Banks
- Credit Crisis
- Cumulative Losses
- Dark Pools
- dark pools
- default
- Default Rate
- Equity Markets
- Fund Flows
- Goldilocks
- High Yield
- Merrill
- Merrill Lynch
- Nationalization
- recovery
- TALF
- Unemployment
- World Trade
There is now no question that the sole, undisputed factor driving credit and equity markets is the dollar destructive collusion between the Fed and the major global central banks. As long as the Fed is dead set on inflation, and is willing to throw trillions of free liquidity at any problematic flare up, and is happy to keep interest rates at 0%, liquidity-addicted equities will likely push higher until such time that the incremental hopium "hit" does nothing, and markets overdose, ending up not just in the critical condition reminiscent of fall 2008, but outright death. Until then, expect to see your daily dose of market buoyancy from whatever algo is currently the dominant momentum platform gunning the market ever higher, even past all disconnect with traditional correlations such as FX, credit and commodities. If the Fed wills it, so it shall be. Alas, while the Bank of England was apparently an easy target, when it comes to massive financial fraud and malfeasance, the Fed is untouchable.
The major benefit to asset managers is that they can fire their entire analyst teams: the only relevant metric to determine where stocks will trade is reading between the lines of Fed statements and following the daily dollar action tick for tick. This way even hedge funds can start reporting phenomenal EPS on collapsing revenues (shockingly, redemptions are still occurring quite aggressively throughout the entire buyside community). For a more objective quantification of the near-term benefits and long-term catastrophe of the Fed's liquidity avalanche, Bank Of America has put together several observations on the matter.
That government intervention policy has successfully mitigated the credit crisis without a clear cost [$9 trillion apparently is not clear enough for Merrill Lynch. oh well] remains the key to the recovery in risk assets and our near term bullishness. However, that strategy front loads the benefits and back loads the risks. The benefits are manifest in the rebound in capital markets, the reopening of credit markets and the substantial reduction in credit costs bolstering risky asset pricing. These benefits follow direct and indirect government intervention in financial markets. Direct intervention through the effective nationalization in case of residential mortgages, TALF and PPIP support for consumer ABS and CMBS and ZIRP (zero interest rate policy) for corporate credit all resulted in the collapse in credit costs and the expansion of credit availability as Figure 1, Figure 2, and Figure 3 nearby highlight. This repair in credit markets further supported the rebound of equity markets.
Ah the American way: 150x P/E yesterday, benefits now, credit card statement later, payments never.
The cost for such a strategy remains the long term inflationary consequence of such policies. As Figure 1 highlights, near term, the inflationary “consequence” can be seen only in asset prices rather than in goods and services inflation. With substantial resource slack, coincident measures of inflation (core and headline) have continued to decline. And those declines have underpinned stable inflation expectations (which rose from their deflationary concerns of last
December).
The price of adjustment for those policies would be either interest rates or the dollar or both. Dollar declines highlight the concerns over these long run consequences though only bring the dollar back to its pre-crisis levels. Gold by contrast stands well above its pre-crisis levels indicating a higher level of inflationary concern.
However, the largest impact to the real economy would be through interest rates. Benign long term interest rates even in the face of rapidly expanding government deficits are critical to near term financial market performance, in our view. Longer term, our Interest Rate Committee expects a gradual rise in 10-year rates (4.25 YE 2010 and 4.45 YE 2011). Such a gradual increase would likely still be supportive of overall asset price inflation in risky assets (credit and equities). But faster increases in rates would clearly undermine near term support for risky assets. Our outlook remains that next week will not yield a new environment for the rates outlook from the FOMC meeting, the refunding announcement or the employment situation. Clearly though the risk is skewed to the surprise and the downside for risk assets and the upside for rates.
Did someone just say Goldilocks economy? We all remember how that worked out last time. A direct consequence of everyone terrified of standing up to the Fed, especially with equity markets barely gathering enough volume to challenge dark pools, a better place to look at is credit.
Credit markets are outperforming equities across the board, both in higher and lower quality tiers of the universe. This relative outperformance has been driven to a large extent by the direction of fund flows, as we discussed above, where most of $430 billion in outflows this year from money market funds went into various bond funds – from municipal securities to corporate credit and emerging markets – with no meaningful flows into equities, see Figure 8 above.
Perhaps the best way to visualize the degree of impact from such a positive liquidity backdrop on credit markets is Figure 10 below, where we show the relationship between the stocks (S&P 500) and high grade corporate spreads. Normally we would expect an inverse relation where increasing stock prices are associated with tightening credit spreads3 and, while that relation generally holds, the recovery since March 2009 is following a different path than the financial crisis from July 2007 to March 2009. Clearly credit is recovering more rapidly than stocks – that is a result of the liquidity effect as investment flows have been directed toward corporate credit.
Another way to look at this issue in high yield is to show that excess liquidity is capable of moving spreads against their fundaments, ie, defaults. Figure 11 above shows that high yield spreads and defaults, which are naturally highly correlated with each other, have moved in dramatic opposite directions over the past year. While spreads have tightened from 2,000 bps late in 2008 to roughly 750 bps today, the default rate has increased from 3% to 12% over the same time interval. And while spreads normally anticipate future defaults, this time the turn was to an even grater degree as the benefits of liquidity postponed default risk. That liquidity conditions will mitigate future defaults is best summarized by our favorite quip: a rolling loan gathers no loss.
While not presenting anything new or original on the matter of defaults except for some witticisms that have long since stopped being witty, what BofAMLCFCTARP forgets to focus on is that any extension in death expectations comes at the cost of ultimate recoveries. Cumulative losses are being delayed indefinitely as trigger events are being virtually prohibited courtesy of the administration's loose actions. Yet the underlying asset values still get exhausted. The Fed can prolong the pain only so much before 20% real unemployment (the U-6 should get there within 3-6 months), vacant office buildings, and collapsing world trade extract their toll on cash flow generation capabilities. But if papering over a hollow economy has worked so far, why not let it work a little longer. As has been made all too clear, the 2-3 computers holding all the marginal stocks at the end of the rally will be wiped out, all the insiders will have sold their shares, and those in the middle class who think they can compete with Wall Street will be selling hot potatoes to themselves all they way down to whatever the new low becomes. If this low is accompanied, or preceded by the Fed's launch of a tightening strategy (very, very unlikely: the Fed will likely keep interest rates at zero as Australia's hit 20% at some point in 2012), we will see lows much worse than what was experienced in March 2009.
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Looking for a 30 x leverage long SPX ETF, any ideas?
i thought thats what Bernanke is?
OT
I'm looking to open an account with a Canadian bank but know little to nothing on the soundness of the institutions. I am familiar with RBC Bank, U.S. operations of RBC. Are there other banks you could recommend?
We only have five major banks. Royal Bank, TD Canada Trust, CIBC, Bank of Montreal, and ScotiaBank. All are reported to be financially sound.
TD is generally seen to be the most solid, followed by RBC, which is the biggest
BMO is probably the most risky. Scotiabank has a lot of Lat AM exposure. National Bank, based in Quebec is also decent.
Keep in mind though, that the Canadian government would NEVER let one of the big ones fail. Canada's worse than the US now for 'subprime' lending to fuel a real estate bubble, but don't let that scare you - it's 100% taxpayer funded.
You've obviously never tried to get a loan in Canada.
Thank you all for responding. I have a safe deposit box at the RBC branch near my home but I want to have a box outside the United States.
http://www.rbcbankusa.com/ (a subsidiary of Royal Bank of Canada) branches in the south east but fully set up for e-banking -
I personally, have a soft spot for RBC, because they don't mind custodying holdings in a small hedge fund in a client's IRA.
Ask your broker at Smith Barney if they'll do that for you... "Well, technically we can, but I wouldn't get my wrap fee, so what's the point?"
Actually, Smith Barney (pre-MSSB) would do exactly what you're describing.
However, they required a minimum household asset level of $500,000 to do it.
All the big 5 up there (I'm a Canuck and former Cdn banker living in the US) are very safe. TD Canada Trust is probably the most consumer-innovative of the bunch for most personal banking and investment services. TD is also growing it's consumer network in the US aggressively but the two are unrelated - so far - with little or no efficiency cross-border. This is more of a regulatory reason, so none of them is better in that regard.
Feel free. Apparently buying into this market is a good idea. LOL
"What I found was that the winning trades, though intraday, tended to ride
weakness that showed up day over day, particularly among "overbought" markets
and strength that manifested day over day following "oversold" conditions.
The greatest losing trades occurred when I saw an intraday pattern of strength
or weakness that was not confirmed by what the market was doing day over day. As
a result, the strength turned out to be but a bounce in a falling market; the
weakness was a dip in a rising market."
http://traderfeed.blogspot.com/2009/11/when-is-there-no-opportunity-for-...
May sound crazy, but I'm all in short ETFs and cash. I'm not going to stand on the long rope bridge thinking that I'll be able to determine exactly when it's going to snap.
Eventual reward/risk? 5:1, 10:1, 20:1, 50:1, 100:1? Any educated guesses out there?
It's all so surreal. We'll tell our grandkids that we were there when the "big one" happened.
I hope you're not in leveraged short ETFs, i.e. those designed to move 2-3X inverse the index on a daily basis. You can be right on the long-term direction and end up losing a lot of money anyway because of the mathematics of how daily compounding works in those funds.
Here we go again. Yes, you can, but you can also do really, really well over a 1-6 month period as a look at last year's chart on ANY OF THEM will verify
Yeah, and you can also win big playing the lottery but the odds are against it.
-999,999,999,999,999,999,999
You can short dollars without being in the markets at all.
HOLD GOLD.
Even a nonleveraged inverse ETF will decay (i.e., lose you money) over time.
For example, say the target index has the following sequence of six days:
+10%, +10%, -5%, -5%, -5%, -3.6%
(That is, it goes up by 10%, up by 10%, down by 5%, etc.)
Starting with 100k in an ETF that directly tracks the index you would end up back where you started:
100k * 1.1 * 1.1 * 0.95 * 0.95 * 0.95 * 0.964 = 100.01k
However, in the nonleveraged inverse ETF you end up with:
100k * 0.9 * 0.9 * 1.05 * 1.05 * 1.05 * 1.036 = 97.14k
So you lose about 3k.
so am I... I got in last friday though... will stick around with discipline until it pops
http://www.proshares.com/funds/performance/TheUniversalEffectsofCompound...
love the volumes on spx today. will today be another record breaker for low vols?
Yes but low vols these days equals higher prices. it's the new normal, or should that be the new bullshit. There is no market integrity and we are all dollar traders now, assuming that people are still trading that is. Pretty much every market hangs on what the dollar does.
The bigger issue(s) are whether SPY can make through 1100 on an oddlot, today?
And an over/under on days until DOW 10,000 hats are replaced by S&P 10,000 hats (followed by fed pnl quadrillion hats)?
The amerikan empire continues its fall.
Somebody is supporting 75 on the DXY.
I've been watching the DXY for many years and I don't recall seeing a chart as flat as today when looking at US trading hours. In fact, pull out to a 3 or 5 day view and look at the past 3 trading days (US trading hours) for what I consider a very suspicious and abnormal pattern. Basically flat except for the whoosh down early Monday AM before the US markets opened.
I had thought Thursday and Friday were remarkably flat and steady. But today takes the cake. Of course, the DXY was murdered over night and opened down around 75 and basically hung a round there all trading day.
Another abnormal normal day in OZ.
Roubini's op-ed in the FT, discussing the imminent reversal of the dollar carry trade has caused me to take a small position here.
http://www.zerohedge.com/article/roubini-dollar-carry-reversal-and-why-h...
The fact that "Investors are Reducing Short Positions Before the Holiday" could make me some lunch money.
http://www.bloomberg.com/apps/news?pid=20601101&sid=ajpPfvtKmwKM
"The dollar rebounded from a two-week low against the euro on prospects investors moved before a U.S. public holiday to pare back bets the greenback will slide."
The end game to the liquidity binge is the brick wall of environmental constraints. The Fed is great with the printing press, but you can't print natural resources unfortunately. This latest market madness is not just a short-term detachment of asset prices from value- it's probably the culmination of our long-standing collective attempt to detach representations of wealth from physical reality. Forget future cash flows, are liquidity levels even remotely connected to tangible resources anymore? Oops, yeah, I guess that went the way of the dodo with the arrival of fiat money. But then again, what the hell is gold? A shiny bar that's nice to look at? Gold as a store of value, currently quite the hot topic, unfortunately only makes sense within the same insane financial paradigm as fiat money. It is also a representation of wealth that has no practical use in of itself.
Sorry for the amateurish financial philosophy, but it's the best I can do as I watch a civilization so gleefully self-destruct its means of genuine wealth creation and survival.
Wow, to think that humanity has been wrong about gold for thousands of years! And how do you yourself preserve wealth, pray tell?
Not only that, but WOW, all those people buying jewelry for thousands of years had it totally wrong. They actually didnt WANT it. So there never should have been demand.
And all those industrial uses for gold, wow, MarginCall you really should be going around the world giving speeches to these people how they got it all wrong. I think your client list would be a LOT larger than you think.
Ouch, sorry for thinking out loud a bit! I guess it wasn't clear that I was musing at a very broad philosophical level, you know those thoughts you can have that don't involve planning how to build a client list.
I'm in your camp. There's no such thing as stored wealth in the natural world, except fat, nuts, dried meat, territory, breeding stock, etc.. The idea that we can store wealth beyond our immediate needs is a tempory one. Granted it's an intoxicating concept. We're watching a generational accumulation of false wealth erode before our eyes. Goodbye pension plans. Growing populations consuming fewer resources equals less wealth. Unless I'm missing something this is the reality. There is going to be a mad grab to control what's remaining of a limited supply of stuff that has practical value and it won't be pretty. Forget dollars and gold. Think oil, minerals, trees, agricultural land, and fresh water.
Anonymous,
Look, gold might be a sound investment for one reason or other- but this is a "sound investment" as defined within a particular financial-economic paradigm in which representations of wealth are taken as wealth themselves. But step away, and of how much more practical use is gold than currency? (Although, I guess you could club someone with it if you had to). I'm not trashing gold as an investment, just saying that it works within the same paradigm as fiat money in a philosopical sense. If the fiat money system crashes, I don't see owning claims to physical gold located in some bank vault somewhere as being much help.
As Winisk says, if things get ugly (as they have a decent chance of doing bar some pretty major technological change which won't happen if people are too busy puffing up asset prices of zombie financial companies) then it will all be about control of real resources, not claims to them. Ultimately, the only real guarantee of wealth preservation on a global scale is force. I mean really, is it any mystery that China has been scrambling like crazy to transform its financial wealth into military hardware?
Gold actually does have a lot of great physical properties for industrial applications. It's better than copper for most things copper is used for. If it wasn't so precious because of the much lower supply, you would see it in more products and appreciate it's usefullness. It's just that society has decided that gold's most valuable application is money.
Meaning: You have little use for gold if there is nothing to buy, or if (as is more likely) nobody is willing to part with what they do have for any amount of abstract "value" in exchange.
All your gold bars won't buy the last loaf of bread on the shelf. To get the last loaf of bread you'll have to kill whoever lay hands on it before you did.
"Value" has less meaning as things degrade, or as there are fewer real things to exchange for "valuable" things. We may be only at the top of that slide now -- and we might not slide very far down in this episode -- but somewhere in the human future is the bottom, and the last loaf of bread.
And we'll get there, eventually. Or at least a good portion of our 6+ billions will.
cougar
In my opinion, we're looking at a financial crack up that is driven by the widening disconnect between physical reality and the financial markets. Everyone expects that there is a way to make it all better again but what if there isn't? What if the new normal is going to end up being widely different than what we've been repeatedly told is our "manifest destiny"? How will people react then? Not so well, I think.
Amen brother Tyler ...
So ... how do we stop the merry-go-round?
How do we take this from the economic underground to main stream media time ... with bright lights and cameras?
BTW: I have and continue to write my elected officials. They don't seem to care what I think.
When Lily Sloane asked how much the USS Enterprise-E cost to build, Picard tells her "The economics of the future is somewhat different. You see, money doesn't exist in the 24th century... The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of Humanity." (Star Trek: First Contact)
Wow - I just lost a lot of respect for the writers of that show...
I never liked Star Trek. Given that I developed an allergy to Marxism so severe that I had to leave the country of my birth, I'm glad I was never forced to sit through that line.
How is that line any less or more believable than the Ponzi we are witnessing on a daily basis?
<sarcasm>
Where did you end up after you left the U.S. ?
Looks like we might get TD Sequential Sell Countdown and Buy Countdown signals on the S&P and DXY (respectively) today.
BankofUSTaxpayers and GEBanklikethingie more or less equal all other Dow components combined in volume. This is how it's been all year (since March but we have to forget everything before March...because it might be scary to remember).
Ugh. In Squid We Trust....
He who sells what isn't his'n, must deliver or goes to prison...
He who sells what isn't his'n, must deliver or goes to prison...
Markwach - 11/10/09 - Fed Hires Team Of Sherpas For Further Ascent To Higher Altitudes. "Bubbles Ben recently sent a former GS staffer to the top of the world to bring back 12 of the best Sherpas available to assist in the high altitude oxygen poor environment that only the computer bots can operate in. Apparently HAL9000 is attempting to eliminate all human intervention in the markets by relocating to altitudes that are beyond desirable for any possible human existence."
HAL9000 will be surprised to meet the BaloonBoy at that hight. A Dragon Ball style fight might ensue. Ah fuck, I could go on with the nonsense but I'm tired for today.
Because of all this balderdash from the authorities, these dei ex machina jonesing for stronger crack, I'm reduced to betting that an insolvent bank is going to skyrocket when some fool agrees to be their CEO. These are not supposed to be the capital allocation incentives provided for societies members. But I've lost too much calculating true economic values, balancing the risks of various scenarios, going long and short accordingly to hedge out everything but my valuation skills, then betting that capital market prices will ever reflect the economic value of productive organizations to society. I'm betting that greater fools will buy the shares of an insolvent bank, believing that even greater fools will believe those shares will ever have any cash flow to them, because some fool will agree to pretend to run the insolvent bank, while the government steals from my savings account to give them enough money to pretend to stay afloat, printing up money to put in their Fed accounts to fake in the capital ratios, since flouting common sense and arithmetic in accounting are not, by themselves, enough to fake it. Goodbye, republic! It was nice knowing you...
regarding inflationary ramifications down the road-
do you think the Fed gives a shit?
OK...."As long as the Fed is dead set on inflation, and is willing to throw trillions of free liquidity at any problematic flare up, and is happy to keep interest rates at 0%, liquidity-addicted equities will likely push higher until such time that the incremental hopium "hit" does nothing, and markets overdose, ending up not just in the critical condition reminiscent of fall 2008, but outright death."
How many timesdo we have to point out that inflation is not going to happen unless the Velocity of the money actually starts ramping up in earnest? All they are doing is creating another asset bubble with what they are doing. It too wil succumb to the debt deflation that will hamper our economy for 2 or 3 more years.
have funn trying to short the freight train knows as the US Government. Good thing I gave up trading for drinking.
Good thing I gave up trading for drinking.
clearly, you are way smarter than I am. These days, even when I make money, I still feel defeated.
Two or three more years? Debt
deflation is going to hamper us until 2030
says the IMF. Check out the
latest figures on their website on the USA.
They have us rising to 108% debt to GDP
by 2014. Now take that and match that
up with the recent info that US GDP is
vastly overstated because our BLS clerks we can't separate
imports from exports.
Bwaahahahahahahaha....
http://www.structuredfinancenews.com/news/-199592-1.html
more bad news, please ignore when buying equities.
"The Federal Housing Finance Agency (FHFA) said late Friday that the Federal Home Loan Bank of Seattle remains "undercapitalized" and will not be allowed to redeem or repurchase stock or pay dividends."
this market blows.... MAN this is frustrating..
Great research! Great piece!
Those of you shorty shorts are going to get hurt something awful. At least three more months before this blows. Book it and hold gold!
I'm always amazed at ZeroHedgers frustration that the market won't recognize reality and go down. Why get upset over something that is irrational? The market is broken. It is disconnected from reality. It is irrational. Accept it and move on. There is no reason to trade this market. You are just giving your money away. Quit. Do something else. The BIG CRASH will happen but nobody knows the future or when it will happen. Here's a hint: it will occur when the rest of the world decides to make it happen. The rest of the world doesn't want to face reality yet. They think they can all quietly diversify from the USD. THEY CAN'T! There is no one to diversify with. If 70% of the world's reserves are in USDs then exactly who is going to "buy" them in exchange for something else? No one. They will all finally wake up one day and go: "Time to sell all my USDs." They will probably do this because one country decided to be first mover -- the one who panics first, wins. We don't know who that country will be or when they will make the decision. We can't because these are human beings and this is a step-change event. You will just wake up one day and poof! USD is gone. Turn your dollars into whatever you want today before it is too late.
+1 Thank you.
TD,
Best article so far.
Right on!!!!!!!
Keep digg'n and research'n and bringing all this good stuff to light.
Factors that will impede U.S. economic growth include: gyrating commodity prices; dollar value uncertainty; likelihood of future tax increases; inconsistent and politicized law enforcement; impoverished American consumers; concentration of wealth in the hands of a few; continued erosion of the manufacturing base; likelihood of increased union organizing activity; loss of export markets; an uneducated an undisciplined work force; government interference in the marketplace on behalf of its friends; lack of real capital due to massive capital misallocation; increasing racial and social tension; government intrusion into personnel policies; a litigious legal environment hostile to business; subversion of a patriotic political agenda by paid agents of rivals and competitors; efficient and well-capitalized competitors in China, Germany and elsewhere; lack of leading-edge engineering talent; crippling environmental regulations; rampant dishonesty and thievishness of employees; and decaying infrastructure. To name a few. To me this is not a buy signal.
But other than that I'm long America...for 5, 10, even 20 minutes at a time.
Bravo! Pithy and powerful. Investor’s Business Daily backs you up with its November 7 Job Report:
“Since the $787 billion stimulus was passed in February, the economy has lost 2.9 million jobs - for a total of 4.3 million since the end of 2008. The silver lining, some say, is the number of jobs lost each month is shrinking. But they lose sight of this: There's no guarantee the economy's 3.5% growth in the third quarter will continue.
"Indeed, some worry the economy is on a slow-growth path that will lead to permanently high joblessness, weaker income growth and fewer opportunities. The Blue Chip consensus of more than 50 economists nationwide expects unemployment to remain above 8% at least into 2012.
"Why should this be? Well, start with the fact that virtually all job growth comes from companies with fewer than 500 employees, and that startups and very small businesses are responsible for more than half of all new jobs.
"Today, these entrepreneurial job creators are running scared. That the White House vows to jack up taxes on those with 'high incomes' (that is, entrepreneurs) is one reason why. Next year's scheduled expiration of the Bush tax cuts that pulled the economy out of the 2001 recession is another.
"Higher income taxes, a flood of stiff new regulations and the possibility of at least $2 trillion in new taxes related to cap-and-trade and a health care overhaul over the next decade have created a climate of uncertainty - for small and large businesses alike.
"Businesses are hunkered down. They have $1 trillion in cash stashed away, but they won't invest out of fear it'll be taxed away or some government czar will tell them how to run their business.
"At the same time, banks have a record $800 billion in reserves but can't seem to find any worthy borrowers.
"The White House claims its stimulus 'saved or created' 640,000 to 1 million jobs. But no evidence shows that's true. Stimulus has failed. If anything, borrowing hundreds of billions of dollars to fund such feckless initiatives is destroying private-sector jobs. Time has come for a dramatic change of course."
Hey Stimulus, We got your back
http://img175.imageshack.us/img175/2555/greatwhiteshark.jpg
This is classic pre-crash euphoria, IMO—you know, strike-up-the-band time when everybody’s saying it’s time to throw in the towel and forget market principles, and jump on the wagon. PE ratios are high, volume is low, there’s been no correction for seven months, exuberance has gone irrational over tepid data and CBS has announced the recession is over.
But I have news for Bernanke and the IMF: Americans aren’t yet prepared for the globalists’ new world currency.
Nathan Martin had some interesting takes on the decline in the dollar and the new high made in the DOW Industrials on today’s Economic Edge:
Quote:
“I would first like to point out that the IMF, the world bankers, this weekend talked down the dollar while the G20, many of whom are the same central bankers, talked up the strong dollar policy. Meanwhile they reiterate their never-ending stimulus ways. Is it any wonder that the dollar is sinking? To those who say that ½ or even 1% currency moves in a day are no big deal, I will simply remind them to look at the dollar action prior to the crash of 1987.
“Can you imagine the government coming out and placing a 16% tax on everything you own and every dollar you hold, just for this year? Well, from the dollar’s most recent peak in March of this year, the dollar is down 16.4%, it is down more than 8% since the beginning of the year! Thus, if your dollar based assets and cash holdings exceed your stock market holdings by a great degree, as is true for the vast majority of Americans, then your real net worth is still going down. If you’re one who is gaining from this stock market melt-up, then you are a big time risk taker from my perspective, as the divergences in the market are huge and are growing larger. At some point, a declining dollar will hurt equities; do not be fooled by the soothsayers who chant that a falling dollar is ‘good for exports.'"
As for the DOW Industrials, says Nate: “No need for panic on the part of the bears, the fundamentals are well on your side as are the technicals. Now, many are going to decry the technicals are no longer working. To which I say again, patience. This reminds me of the signs of a bubble; the wise market observers trust the historical references and are gone. It is the new money that remains, and eventually they will all be caught at the exits at the same time. Patience, all the divergences WILL RESOLVE; the further out they are, the more likely the real correction will be swift and very painful.”
As for the IMF, says Nate: “the IMF needs to be disbanded! If you are an official outside of the U.S., I would strongly encourage you to not even talk to one of these criminals, much less do business or certainly not take a loan from them. They are the world’s current mafia, their crimes are on a much higher level than anything ever seen in the history of man.”
http://economicedge.blogspot.com/
Thanks Tyler:
Through the banal marketing term "outsourcing" our myopic corporations and government have gutted the American Middle Class by transferring manufacturing jobs to China. Supposedly, we will be a "service" economy- you do my laundry and I do yours. And when we are not vacationing in Vegas we can gamble on Wall Street.
Sadly, I think we are in the unstoppable decline of the American Empire. Obama and Bush, with the supporting cast of Bernanke, Greenspan, Paulson and Geithner are the last Emperors flailing around, afraid to tell the American people that there is no free lunch, afraid to tell China that American ports will no longer unload containers full of Junk.
When we look back in a couple of decades, we will see the one-way trade relationship with China (what pray tell is in this for the American people ?), the dangerous derivative markets (side bets designed to churn fees) and the loading of private debt onto the American taxpayer were the seeds of our destruction.
And our bought and paid-for politicians are trying to hide the truth by printing money and borrowing unrepayable sums to provide a short-term bandage on a mortal long-term wound.
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