"It's only a question of time before the central banks lose control," David Stockman warns a shocked CNBC anchor, "and a panic sets in when people realize that these values are massively overstated." The outspoken author of The Great Deformation rages "the Fed is exporting its lunatic policies worldwide." If one cares to look, Stockman adds, "there are bubbles everywhere," citing Russell 2000 valuations of 75x LTM earnings as an example, "that makes no sense. It's up 43% in the last year, but earnings of the Russell 2000 companies have not increased at all." This is dangerous, he strongly cautions, "I haven't seen too many bubbles in history" that haven't ended violently.
SSDD. Collapsing confidence, check. Housing Recovery meme toast, check. Volume at 2013 lows, check. BTFATH and send Trannies up for 13th of last 15 days (+10.4%), Dow near all-time highs again (thank you IBM buybacks), and S&P to new all-time highs... but don't tell Treasuries (which stand +/-1bps on the week). VIX wasn't drinking the kool-aid but the NASDARK session enabled futures to drag us back to higher before limping lower into the closer. The USD oscilatted around Nowotny comments and POMO ending the day up a rather notable 0.5% from Friday's close and that pressured commodities in general lower (gold hovering at $1345). Credit, Treasuries, VIX, and volume are all diverging from equity exuberance. The last 2 minutes saw stocks scream higher on their own as the world was terrified it would miss out on something (but no other market moved) and all the major indices managed new highs.
If you’re anything like us, you may have reached the conclusions that:
- Our elected officials are charting a course to a fiscal disaster.
- The Fed is repeating past mistakes by setting us up for another bust.
After the drama of the debt ceiling debate and the Fed’s non-tapering surprise, we see no reason to doubt these views. But the latest developments got us thinking, and we have an unusual proposal.
Once the economy's capital structure is distorted beyond a certain threshold, it won't matter anymore how much more monetary pumping the central bank engages in – instead of creating a temporary illusion of prosperity, the negative effects of the policy will begin to predominate almost immediately. Given that we have evidence that the distortion is already at quite a 'ripe' stage, it should be expected that the economy will perform far worse in the near to medium term than was hitherto widely believed. This also means that monetary pumping will likely continue at full blast, as central bankers continue to erroneously assume that the policy is 'helping' the economy to recover.
Fingers of Instability
Stanley Druckenmiller's World View: "Catastrophic" Entitlement Spending, "Bizarre" & "Illusory" Asset Markets, & Beware The TaperSubmitted by Tyler Durden on 09/11/2013 20:50 -0500
During an extended interview with Bloomberg TV, billionaire investor Stanley Druckenmiller provided a seemingly fact-based (and non-status-quo sustaining, commission-taking, media-whoring) perspective on a very wide variety of topics. The brief clips below touch the surface, with the detailed annotated transcript below providing details, as Druckenmiller opines on the looming catastrophe in entitlement spending "when you hear about the National debt being $16tn; if you actually took what we promised to seniors and future taxes, present value to both of them, that number is $200tn," why the Fed exit will be a big deal for markets, "it is my belief that QE has subsidized all asset prices and when you remove that, the market will go down," and his changing views on Obama "I was drinking the hope and change Kool-aid... in hindsight, he probably needed more experience for this job." Looking back to the financial crisis, he warns, "...a necessary condition to have a financial crisis, in my opinion, is too loose monetary policy that encourages people to take undue risk and go on the risk curve and do silly things. We should have shut this down in 1998, 1999. The NASDAQ bubble, we should have raised rates, we didn’t. Then we got the implosion."
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"Can central banks now really do “whatever it takes”? As each day goes by, it seems less and less likely... Six years have passed since the eruption of the global financial crisis, yet robust, self-sustaining, well balanced growth still eludes the global economy. If there were an easy path to that goal, we would have found it by now. Monetary stimulus alone cannot provide the answer because the roots of the problem are not monetary. Many large corporations are using cheap bond funding to lengthen the duration of their liabilities instead of investing in new production capacity...Continued low interest rates and unconventional policies have made it easy for the government to finance deficits, and easy for the authorities to delay needed reforms in the real economy and in the financial system... Overindebtedness is one of the major barriers on the path to growth after a financial crisis. Borrowing more year after year is not the cure...in some places it may be difficult to avoid an overall reduction in accommodation because some policies have clearly hit their limits." - Bank of International Settlements
One of the problems with QE is that the Fed is forcing people to buy riskier investments than they otherwise would have. The immorality of their actions aside, they create a significant psychological mismatch between assets and their holders. Stocks are in weak hands, insuring one great stampede for the chairs when the music stops.
Corruption thrives when good people do nothing. Societies rebound when good people do something. Isn't it time to make democratic capitalism happen. Democratic capitalism is about worthwhile production and exchange by communities of people who give a damn. It is expressly not about either crony-driven concentration of wealth or government redistribution.
Hi-tech sleuthing for rounding up leakers...how innovative!
A 'second Economic Miracle' and other psychedelic feats, but inconvenient data gets in the way.
The economy has changed in structural ways; preparing for the old economy is a sure path to disappointment. Millions of young people will be graduating from college over the next four years, and unfortunately, they will be entering an economy that has changed in structural ways for the worse. It's easy to blame politics or the Baby Boomers (that's like shooting fish in a barrel), but the dynamics are deeper than policy or one generation's foolish belief in endless good times and rising housing prices.
Why the Western Banking Cartel’s Gold and Silver Price Slam Will Backfire - And How You Can Protect Yourself from the BlowbackSubmitted by smartknowledgeu on 04/22/2013 04:27 -0500
Let's get down to the facts of the recent banker gold & silver paper price smash and the lies about the banker gold & silver paper price smash being propagated by the mass media and banking shills like Paul Krugman so everyone can understand why this smash will blow up in the face of the very bankers that executed it at some point down the road. Retail individuals AND global institutions all around the world are finally beginning to understand that physical ownership of gold and silver is how to counter banker fraud & intervention into the gold and silver markets and this realization is going to produce massive blowback.
Over the past four years one of the dominant "deflationists" has been Gluskin Sheff's David Rosenberg. And, for the most part, his corresponding thesis - long bonds - has been a correct and lucrative one, if not so much for any inherent deflation in the system but because of the Fed's actual control of the entire bond curve and Bernanke's monetization of the primary deflationary signal the 10 and certainly the 30 Year bond. The endless purchases of these two security classes, coupled with periodic flights to safety into the bond complex have validated his call. Until now.