Meet Emerge Energy Services: the poster boy for the “irrational exuberance” that has become institutionalized throughout the length and breadth of the Wall Street casino. Today’s Wall Street Journal story coming just five months after last summers potboiler is therefore not simply an update on a speculation gone horribly wrong. It’s actually a template for the deluge to come.
If the tech mania was based on magic, and the housing mania was based on a supposed fact that was historically untrue, today’s mania is a mania of manias, interlinked and resting on premises that are patently illogical, contradicted by both the historical record and current experience. Those premises are: central planning works, government debt promotes prosperity, and economic growth stems from central banks buying that debt with money they create from thin air. On these premises rest manias in governments, their debts, and central banking.
According to KickassTorrents (KAT), which is now the world’s most popular website to download torrents, showed that the number of downloads for “The Interview” surpassed 1 million on early Friday. The tally includes copies which were later deleted due to copyright infringement claims but does not include downloads through other file-sharing services. The figure puts “The Interview” on track to become one of the most pirated movies of the year.
"Back in the halcyon days of summer, it seemed nothing could go wrong; but now, ...the uncertainties presently being generated have the potential to undermine two crucial kinds of trust – that one must have in the merits of one’s own exposure and that equally critical faith in the reliability of one’s counterparties. If it does, the third great bull run of the 20-year age of Irrational Exuberance could well reach its culmination, after a rally of almost exactly the same magnitude as and of similar duration to the one which ushered it in, all those years ago."
China faces epic unintended consequences in its efforts to 'manage' everything. As Bloomberg rhetorically asks, what if a central bank cut interest rates and borrowing costs rose?
The central banks are now out of dry powder - impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to “stimulate” the macro-economy by temporarily driving interest rates to “extraordinarily” low levels. They are already there. Instead, a Bernanke style balance sheet explosion like that which stopped the financial meltdown in the fall and winter of 2008-2009 will be seen for exactly what it is—-an exercise in pure monetary desperation and quackery. So duck and cover. This storm could be a monster.
Fraud generates risk, and risk eventually breaks out in the "safest" parts of the financial plumbing, the ones nobody gives a second thought to because they're "low risk." Using unspeakable powers to generate global fraud is not as sustainable as punters imagine. Those who don't believe in risk can alternatively ponder karma as a guide to the future.
December 5th 1996: After rising 210% off the 1987 crash lows, Alan Greenspan speaking at the American Enterprise Institute in Washington, asks: "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" The next day, the Dow Jones Industrial Average slumps by 1% to close at 6,381.94; over the next three years, the market nearly doubles...then crashes...then doubles... then crashes... and then triples in the last five years... "rational exuberance"
In some respects we’re in danger of running out of appropriate descriptive superlatives for the current bout of “irrational exuberance” (we’re open for suggestions). The current asset bubble is in many respects reminiscent of the late 1990s tech bubble, but it also differs from it in a number of ways. One of the major differences is that the exuberance recorded in the data is largely confined to professional investors, while the broader public is still licking its wounds from the demise of the previous two asset bubbles and remains largely disengaged (although this has actually changed a bit this year). Monetary pumping merely redistributes existing real wealth (no additional wealth can be created by money printing) and falsifies economic calculation. This in turn distorts the economy’s production structure and leads to capital consumption, thus the foundation of real wealth that allows the policy to seemingly “work” is consistently undermined. At some point, the economy’s pool of real funding will be in grave trouble (in fact, there are a number of signs that this is already the case). Widespread recognition of such a development can lead to the demise of an asset bubble as well.
The financial, economic and political system has been captured by corporate fascist psychopaths. The Federal Reserve has aided and abetted this takeover. Their monetary manipulations have resulted in this deformity. The American middle class has been murdered. Decades of declining real wages have left them virtually penniless, in debt up to their eyeballs, angry, frustrated, and unable to jump start our moribund economy by buying more Chinese produced crap. Yellen, her Wall Street puppeteers, and the corporate titans should enjoy those record profits and record stock market highs. The artificial boom will lead to a real depression. Luckily for the oligarchs, most middle class Americans are already experiencing a depression and won’t notice the difference.
Bankruptcies in Japan more than doubled in the first nine months of 2014 compared with the same period a year ago. Japan has embarked on a radical monetary experiment to spur inflation. But it may backfire and lead to stagflation and in a worst case scenario a German ‘Weimar’ style hyperinflation ...
This week has seen some market volatility (see VIX Chart) reminiscent of the functioning market from days of old. The markets are spooked, bad news is overtaking good news and bearish views are becoming vogue. We are seeing a titanic battle taking place between the various bull and bear camps and they are starting to unleash some serious firepower.
“We are mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility,” the G-20 officials said in a communique released in Cairns, Australia. “We welcome the stronger economic conditions in some key economies, although growth in the global economy is uneven.”It is unclear just what that statement means: BTFATH, but only on a downtick?
As the marginal investing bot continues to invest his marginal leveraged dollar-on-the-sideline on an equity market that, as Janet Yellen has explained to the poor, will create a "wealth effect" to sustain everyone through rainy days and retirement, we thought some context worthwhile. On December 5th 1996, Alan Greenspan - upon the recognition that equity market capitalization has bubbled to over 100% of nominal GDP - opined that investors had succumbed to "irrational exuberance." Since then, that 'exuberance' has become increasingly rational as the Fed pulls all its monetary-base expanding, deficit-funding, asset-purchases to keep the American Dream alive for a select (and shrinking) few...
Rising rates would hurt bonds and equities but would support gold. This was clearly seen in the 1970s when rising interest rates corresponded with rising gold prices. Gold becomes vulnerable towards the end of an interest rate tightening cycle when there are positive real interest rates and savers earn something on their deposits.