Irrational Exuberance

In His Own Words: From Maestro To Mea Culpa

Alan Greenspan is shamelessly trying to get ahead of what he seems to be calling the mob, the crazies who at some point will start digging into what he actually did at the Fed rather than simply accepting the myths that he still manages to live by.

Investors Are Sticking With Pavlov's Dog Until Everything Breaks

Remember when “bad news is good news” first leapt into common parlance? At first it was used as a way to describe the reaction function of Fed policy-makers. It was taken as a cute turn of phrase in encapsulating the state the of the world. Over time, as Bloomberg's Richard Breslow explains, it’s morphed into an ugly and cynical way of justifying mindless investing behavior.

Low-Volatility Stocks At Risk As Credit Cycle Ends, UBS Warns A Crash Is Coming

UBS' Paul Winter believes we are witnessing the end of the credit cycle - earnings growth rates are flat, and the stock market impact has been increasing. Importantly, from a risk perspective, Winter warns that Systemic Risk is rising, and Economic Policy Uncertainty has hit all-time highs, warning that the key risk today lies in low-volatility stocks and the broad market's equity risk premia - "either earnings need to pick up dramatically, or alternately, equities would need to correct by around 20% to bring the equation back into equilibrium."

Weekend Reading: Valuationally Challenged

As another week comes to a close, we continue to wrestle with a market that remains detached from underlying economic data and clings to recent levels of over overbought, overextended and low reward/risk outcomes. Of course, in the final stages of a bull market, this is what has historically been the case.

Trickle-Down Crash? Trophy Assets Suddenly Tanking

One of the defining traits of the past few years’ “recovery” has been the torrent of money flowing from big banks to favored clients, and from there into trophy properties like high-end real estate, superyachts, and fine art. This might be the first financial bubble to completely bypass the 99%. And now it’s ending...

Steve H. Hanke's picture

Ever since the U.S. Federal Reserve (Fed) began to consider raising the federal funds rate, which it eventually did in December 2015, a cottage industry has grown up around taper talk. Will the Fed raise rates, or won’t it? Each time a consensus congeals around the answer to that question, all the world’s markets either soar or dive.

The Most Dangerous Divergence

The dangerous divergence will then take a nasty turn. The bottom half of the 1% will now be as angry as the 99%. Any attempt by the establishment to further screw the nation by bailing themselves out will be met with violent disapproval. The country is a powder keg. The upcoming election is guaranteed to inflame opposing factions. A stock market crash in the next six months would sow the seeds of financial, political, and social upheaval not seen in this country since the 1960s. The established social order will be swept away in a swirl of chaos and retribution. The dangerous divergence will be resolved.

Knave Dave's picture

Irrational market exuberance hits its zenith after Doha talks fail as oil prices rise, instead of fall, because of minor Kuwait oil strike, then stay up after the strike fails within a day, then rise more when Saudis promise to retaliate with more production and stay up when Russians promise to retailiate with still more production.