We're all minions now of the stock market. By cowering in terror of a stock market tantrum, the Fed has surrendered everything: its vaunted (and completely phony) independence; its duty (yes, go ahead and laugh) to the nation and the real economy - everything. The Fed is nothing but an abject slave of the market.
It has been a while since Icahn, who is still looking for a $200+ print on AAPL stock courtesy of corporate buybacks, issued a "no brainer" investment alert. He did that moments ago, when he revealed a "large position" in AIG, whom he is now urging to follow John Paulson's advise in order to hit a $100/share price, by doing two things: "Pursue tax free separations of both its life and mortgage insurance subsidiaries to create three independent public companies" and to "embark on a much needed cost control program to close the gap with peers."
It is obvious that the Healthcare Industry in the US is in need of some major overhaul, and I am not talking about a politically expedient solution as was the latest undertaking by the Obama administration.
"Since Washington doesn't understand what went wrong in 2007 and 2008, so the Fed, the White House and Congress are recreating the very same conditions for another financial bubble. If it pops, we could replay the same devastating effects as occurred during the first bubble in 1999 and 2000.”
There are two parties to robbery – the taker and the takee. We have seen what happened to the victims. They are too busy picking through trash bins to go to the Walmart website. But what about the takers? They are busy too – lobbying… eating foie gras and caviar… and offering to save the world with increasingly radical monetary policies. It is time to undo the Fed’s control of the financial system. Let takees get the interest they are entitled to. And let the takers get what they’ve got coming to them.
As we have warned numerous times - and any trader old enough to have actually lived through a credit cycle can attest to - there is only so much releveraging shareholder-friendly exuberance firms can do before the company's balance sheet becomes questionable. That inflection point has come for US equities. The deterioration of balance-sheet health is "increasingly alarming" and will only worsen if earnings growth continues to stall amid a global economic slowdown, according to Goldman Sachs and JPMorgan's Eric Beinstein warns "the benefit of lower yields for corporate issuers is fading." The weakness is widespread as BlackRock fears "you’ll continue to see some land mines out there."
If you make it so burdensome to operate a legit business, then you're basically giving people without big lines of credit and capital few choices but to work in the cash-only underground economy.
The Federal Reserve-induced Echo Housing Bubble is finally starting to roll over, and the bubble's pop won't be pretty. Why is the bubble finally popping now? All the factors that inflated the Echo Housing bubble are running dry.
Great companies like Hewlett-Packard are now being run not by adult professionals but day-trading punters. Carly Fiorina was one of the latter. She excelled at mastering her flash cards and pitching financial bubbles from the time of the misbegotten Lucent IPO, to her campaign for the Compaq acquisition, to her final days at Hewlett-Packard. What she didn’t excel at was learning a single thing that qualifies her to be President of the United States - not the least of which is humility. Fiorina needs to shut-up, sit down and flush her flash cards. The furtherance of liberty, prosperity and peace are not what Torquemada’s do.
"Mainstream America with their 401Ks are in a similar pickle. Expecting 8-10% to pay for education, healthcare, retirement or simply taking an accustomed vacation, they won’t be doing much of it as long as short term yields are at zero. They are not so much in a pickle barrel as they are on a revolving spit, being slowly cooked alive while central bankers focus on their Taylor models and fight non-existent inflation."
What the Fed really decided Thursday was to ride the zero-bound right smack into the next recession. When that calamity happens not too many months from now, the 28-year experiment in monetary central planning inaugurated by a desperate Alan Greenspan after Black Monday in October 1987 will come to an abrupt and merciful halt. Yellen and Co should be so lucky as to only face torches and pitch forks.
The 2008 global financial crisis was centered on mortgage debt. There was too much of it that couldn’t be repaid. When the value of the collateral – homes – headed down, the bubble popped. Today, consumers have about the same amount of debt. But now the excesses are in auto loans and student debt... and again, the collateral is falling in value.
Since Icahn announced he was going activist on Cheniere Energy one month ago, he has not exactly hit a home run, with the stock tumbling 20% from Icahn's initial price, and closing at $56.75 yesterday: hardly good news for the outspoken billionaire. Today Icahn got some more bad news when famous short-seller Jim Chanos announced on CNBC that his latest heretofore undisclosed short is precisely Cheniere, which he described as a "looming disaster" alleging that demand for liquid natural gas isn’t growing.
When the bubble vision stock peddlers get desperate, they talk decoupling. So by the end of yesterday’s bloodbath you would have thought China was on another planet, and that “commodities” were some trinket-like collectibles gathered by people who don’t wear long pants, drink coca cola or jabber on their cell phones. On these fine shores, of course, its all awesome from sea to shinning sea. So don’t be troubled. Buy the dip.