Investors who believe that history has lessons to teach should take our present concerns with significant weight, but should also recognize that tendencies that repeatedly prove reliable over complete market cycles are sometimes defied over portions of those cycles. Meanwhile, investors who are convinced that this time is different can ignore what follows. The primary reason not to listen to a word of it is that similar concerns, particularly since late-2011, have been followed by yet further market gains. If one places full weight on this recent period, and no weight on history, it follows that stocks can only advance forever. What seems different this time, enough to revive the conclusion that “this time is different,” is faith in the Federal Reserve’s policy of quantitative easing. The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak...
TedBits - Newsletter
Yes... a rating agency - the same entity that enabled the last housing market crash - just warned of a housing bubble. How the times have changed - maybe it is different this time?
As Mike "Hidden Secrets Of Money" Maloney has said many times before, the economic crisis of 2008 was only a speed bump on the way to the main event. He believes that before the end of this decade there will be an economic crisis so historic that it will eclipse the crash of 29 and the subsequent great depression. He also believes it is both unavoidable and inevitable, because it is merely the free market releasing the stored up energy from decades of economic manipulation. As Maolney notes, "the best investment that you will ever make in your lifetime is your own financial education," and the following provides a succinct reminder of the top reasons to buy gold and silver...
Real estate guru Mark Hanson updates his housing view following this week's dismal housing industry data:
Sept. Pending Sales... the largest MoM drop since Sept 2001... not 2011... yes, 2001.
Don't let them tell you 'this is normal for Sept'. The 'oh-crap' moment is now in the can. Going forward, "Existing Sales" volume will disappoint on a YoY basis for several quarters. There is no way around it...
While Eike Batista's collapse from grace may be the poster child for the country, this deep dive into the Latin American economy concludes Brazil’s flaws are clear. Commodity prices have been volatile; global growth has been weak and inconsistent. Brazil can no longer depend on these factors for growth. A closer look reveals that internal conditions are progressively becoming Brazil’s main economic foe. Ironically this is good news as the country is increasingly in a position to take control of its destiny. What is needed is decisive leadership and effective solutions to the long-term problems plaguing the country. Short-term stimulus measures and even supply-side measures such as reduced taxes have clearly not stimulated the economy. Brazil must invest in its own future.
In the aftermath of the latest House Republican debacle, the Senate had no choice but to go back to where it was on Thursday morning, and attempt to cobble a deal together. Only unlike Thursday, it now has just a little over 24 hours, and a House that it knows will not play ball with pretty much anything that the Senate proposes (at least not until that ultimate arbiter Joe Biden shows up and starts laughing). So while the outcome of this latest regression to square 0 is unknown, one thing we do know is that when it comes to matters such as these, Harry Reid is one very optimistic guy.
I like Professor Shiller and respect his work. Really, I do, but... Massive bubbles, the sort of the proportion of the 2008 crisis, are nigh impossible to miss if you can add single digits successfully and are able to keep your eyes open for a few minutes at a time. Yes, I truly do feel its that simple. I saw the property bubble over a year in advance, cashed out and came back in shorting - all for a very profitable round trip. Was I a genius soothsayer? Well, maybe in my own mind, but the reality of the situation is I was simply paying attention. Let's recap:
With the possibility of a US government default growing day by day (1Y USA CDS rose 12bps today to 72bps) amid impasse after impasse in DC, Bloomberg's Mike McKee looks at the five possible scenarios should the debt ceiling be breached (however unlikely and ridiculous some may appear). From prioritization of payments to across-the-board cuts, 14th amendment interventions and delaying payments, McKee explains the process and implications of each. There are no good options left but we can't help but get the sense the Republicans might just be playing a longer-game here to take us beyond the Democrats' "red-line" of October 17th to highlight their fear-mongering (remember the shut-down devastation?) and potentially regain some election capital (in this increasingly twisted game of picking the worst of two evils)... and indeed, as we have long argued, until we see the market crash, nothing will be resolved.
White House Was Not "Expecting A Stock Rebound" This Morning, "They Were Bracing For A Negative Market Reaction"Submitted by Tyler Durden on 10/14/2013 12:05 -0500
When asked by Tom Keene about the "modest recovery" in stocks earlier this morning (which as of this post are unchanged), Bloomberg TV's Julianna Goldman responds quite simply: "that's not what White House officials were expecting or necessarily wanting this morning. They were all bracing for some negative market reaction that's going to be the fire that's alight under everyone."
Obama "Prepared To Negotiate" (After Government Reopens), Says This Time "Wall Street Should Be Concerned"Submitted by Tyler Durden on 10/02/2013 15:24 -0500
In an interview with CNBC's John Harwood, Obama once again shows why the polarization in Congress is at record levels. In a brief: he said he is "exasperated", and that the shutdown is "entirely unncessary" but adds that he is (finally?) prepared to negotiate, however only after he gets his way namely after the government is reopened. And another important talking point: Obama added that while gridlock in D.C. is nothing new, "this time I think Wall Street should be concerned." It is unclear how that statement makes any sense in light of Obama's right hand senator Chuck Schumer telling the man who is really in charge, Ben Bernanke, to get to work. Unless of course, Obama is now angling for a "concerning" market crash, which sends the Dow down by 20% like in the summer of 2011, and Obama can tell the stunned public "I told you so."
"One day this whole credit bubble will be deflated very badly - you are going to experience a complete implosion of all asset prices and the credit system..."
This is at a time when we have real economic growth barely above 2% and nominal growth of just over 3% (abysmal by any standards) after six years of monetary easing and 5 years of QE1; QE 2; Operation twist; QE “infinity” and huge fiscal deficits. After last week Citi notes it is not clear that this set of policies is going to end anytime soon. It seems far more likely that these policies will be continued as far as the eye can see and even if there are “anecdotal” signs of inflation this Fed (Or the next one) is not a Volcker fed. This Fed does not see inflation as the evil but rather the solution. Gold should also do well as it did from 1977-1980 (while the Fed stays deliberately behind the curve). Unfortunately Citi fears that the backdrop will more closely resemble the late 1970’s/early 1980’s than the “Golden period” of 1995-2000 and that we will have a quite difficult backdrop to manage over the next 2-3 years.
Fingers of Instability
The last time the top 10% of the US income distribution had such a large proportion of the entire nation's income was the 1920s - a period that culminated in the Great Depression and a collapse in that exuberance. As AP reports, the very wealthiest Americans earned more than 19% of the country's household income last year — their biggest share since 1928, the year before the stock market crash. And the top 10% captured a record 48.2% of total earnings last year. Analysis by Emanuael Saez shows that, based on IRS data, in 2012, the incomes of the top 1% rose nearly 20% compared with a 1% increase for the remaining 99%. Economists point to several reasons for widening income inequality including globalization and technology. However, as John Taylor explains in his recent WSJ Op-Ed, using this as a lever for Obama's "middle-out" policies - higher tax rates, more intrusive regulations, more targeted fiscal policies - will not revive the economy. More likely they will perpetuate the weak economy we have and cause real incomes—including for those in the middle—to continue to stagnate.