It is perhaps an emblematic description for our current bubble age; QE doesn’t work but “we” can’t wait for more. Maybe that is just the logical evolution of monetary magic, since QE was brought on with almost mythical properties that were going to cure a lot of financial and economic ills (Bernanke the former). Now resignation (Bernanke the latter) has left it with only the hope that it can just save us from the worst downside, even without any real expectation of a true upside in the economy. In other words, markets hope for the QE zombie, where the economy is kept from death by it, with full recognition now that it will never regain full life either.
What's the opposite of 'Goldilocks'?
Despite the exuberant goldilocks-esque meme from Friday's payrolls reports (and revision), The Fed's very own multi-factor Labor Market Conditions Index fell in April by the most since June 2012. Certainly not the Goldilocks data we have been propagandized... The Labor market has only fallen more than this once since the great recession.
We currently have over 93 Million able-bodied people without jobs – and growing. This is why it’s near incomprehensible, as well as outright disgusting to me that such a dismal showing in both the headline number as well as the onerous implications of such a downward revision to the month prior, coupled with the outright fallacy of suggesting the rate of unemployment has moved closer still to statistical “full employment” came with near giddiness and if not outright back slapping. i.e., “This is a Goldilocks print. Not too hot – not too cold. With a report like this – The Federal Reserve won’t dare raise rates and might actually have to contemplate instituting another round of QE if not outright QE4ever!” And yes; that was the reaction paraphrased across the financial media outlets. Again, personally – I found it all repulsive.
In welfare state America its virtually certain that through one artifice or another taxes will go up and the national debt burden will rise to crushing heights in order to keep the baby boomers’ entitlements funded. While Keynesians and Wall Street stock peddlers are clueless about the implications of this - it actually doesn’t take too much common sense to get the drift. Namely, under a long-term path of fewer producers, higher taxes and more public debt, the prospects for rejuvenating the previous historically average rates of real output growth are somewhere between slim and none - to say nothing of the super-normal rates implied by the markets’ current bullish enthusiasm.
Despite goldilocks (to use a financial market cliche) conditions characterized by the interplay between yield-starved investors, rock-bottom borrowing costs, and companies’ propensity to leverage their balance sheet in order to inflate earnings and underwrite their stock price, at least one leading indicator is flashing red.
Despite US business media's propagandic imploring that Europe is recovering, is in a Goldilocks scenario, and is the best place to invest - all thanks to the magic of Q€ - it appears they forgot to tell the Germans. The ZEW Investor Expectations index fell for the first time in 6 months, without making a higher high, as Germany's DAX index rose to record-er higher highs. We've seen this pattern of momentum exuberance before...
"This is not investing," exclaims Ed Yardeni in this brief clip, "it is all about central bankers... these markets are all rigged." That is not a criticism he notes, "I just say that factually... I love these central bankers, they've been very good to the stock market." The clip is then followed by a defense of this pumping by central banks, because "we are a 401(k) society." Which apparently ignores the whole "massive inequality gap" issue that is staring America right in the eyes... But for now stocks are up so "shut up and enjoy it" as Larry Kudlow said yesterday.
This time is not different. The excesses being built up in the markets today will eventually revert just as they have been at every other peak in market history. The only question, of which no one has the answer to, is exactly when this occurs. With this in mind, there are 10-basic investment rules that have historically kept investors out of trouble over the long term. These are not unique by any means but rather a list of investment rules that in some shape, or form, has been uttered by every great investor in history.
It's different this time... "decoupled" "cleanest dirty shirt" "goldilocks" - oh wait!
But, the jobs data was awesome? Greece is contained? "goldilocks"??
The price of crude has collapsed by 50% in a few months (and 40% since the end of QE3), which can only mean one thing: the Wall Street penguin brigade is out in full force with its spate of energy sector downgrades, none of which is more bombastic than that of Citigroup's Robert Morris who in 118 pages just crucified the entire energy space, lowering his target price for every single company in his coverage universe, and declaring that "Goldilocks has left the building."