If one wants to identify bubbles, one must perforce study monetary conditions. The comparison of historical data on valuations and other ancillary factors can only take one so far. The problem is that in times of strongly inflationary policy, the economy's price structure becomes thoroughly distorted, and that therefore a great many “data” can no longer be regarded as reliable... Most of the time, it's the eventual slowdown of money supply growth that brings a bubble to its knees.
Yesterday, in what was probably a case of moronic drivel penner's remorse, the same firm which just upgraded its S&P price target by 150 points two weeks ago, decided to... downgrade stocks. But only kinda, sorta and only for the next 3 months: Kostin is unwilling to go so far as to tell the whole truth so while he did downgrade stocks to Neutral through October, he is still Overweight equities over the next 12 months. In other words, sell in July but don't go away, and keep on buying over the next 12 months, or something. To wit: "We downgrade to neutral over 3 months as a sell-off in bonds could lead to a temporary sell-off in equities. This makes the near-term risk/ reward less attractive despite our strong conviction that equities are the best positioned asset class over 12 months, where we remain overweight."
After all this time Greenspan still insists on blaming the people for the economic and financial havoc that he engendered from his perch in the Eccles Building. Indeed, posturing himself as some kind of latter day monetary Calvinist, he made it crystal clear in yesterday’s interview that the blame cannot be placed at his feet where it belongs:
"I have come to the conclusion that bubbles, as I noted, are a function of human nature."
Less than four weeks after starting his new job, Panama’s President Juan Carlos Varela already has a serious challenge to deal with: empty grocery shelves. This is largely a self-inflicted wound that was bound to happen.
Fresh on the heels of his victory in May, the then President-elect announced that one of his first orders would be to regulate prices for staple food products. He followed through on his promise, establishing price controls on certain brands of roughly two dozen items like chicken, rice, eggs, and bread. And within a matter of weeks, many grocery store shelves are already empty, at least for the regulated items. It’s not quite Venezuela or Cuba where it can be downright impossible to buy a roll of toilet paper. But it’s more proof that price controls almost always backfire.
Grab your popcorn as The Socialist Singularity comes to be... We are sure Steve Liesman will ask his 'economics reporter' questions while cow-towing to his glorious leader's position on job-destroying 'minimum wage' increases, unpatriotic (though legal) inversions, Fed-driven inequality, and the massive and unprecedented divergence between "bubble" markets and the minions that make it up... always remember "debt-is-good" but "hope-is-better."
There is confusion over what legal tender law does. It doesn't force merchants to accept dollars under threat of imprisonment. It attacks lender, by granting debtors a right to repay in dollars.
- Here come the gates which we predicted in 2010: SEC Is Set to Approve Money-Fund Rules (WSJ)
- Dick's cuts 400 jobs as golf now less popular (MW)
- Kerry arrives in Israel, pushes for peace (Reuters)
- Pay Penalty Haunts Recession Grads as U.S. Economy Mends (BBG)
- Appeals Courts Issue Conflicting Rulings on Health-Law Subsidies (WSJ)
- Rebel Stronghold Donetsk Holds Breath as Shellfire Mounts (BBG)
- Business executive wins Georgia Republican runoff in U.S. Senate race (Reuters)
- Five held in China food scandal probe, including head of Shanghai Husi Food (Reuters)
- Jobs Hold Sway Over Yellen-Carney as Central Banks Splinter (BBG)
Despite yesterday's lackluster earnings the most recent market levitation on low volume was largely due to what some considered a moderation in geopolitical tensions after Europe once again showed it is completely incapable of stopping Putin from dominating Europe with his energy trump card, and is so conflicted it is even unable to impose sanctions (despite the US prodding first France with BNP and now Germany with the latest DB revelations to get their act together), as well as it being, well, Tuesday, today's moderate run-up in equity futures can likely be best attributed to momentum algos, which are also rushing to recalibrate and follow the overnight surge in the AUDJPY while ignoring any drifting USDJPY signals.
In yet another example of central planners not comprehending the unintended consequences of their actions, Glenn Stevens - head of the Reserve Bank of Australia - commented last night on the curious lack of animal spirits holding back the global economic recovery. As Bloomberg's Richard Breslow notes though, of course, his argument is disingenuous at best since it is the actions (and consequences) of central banks crowding out other market participants and creating a culture of investors who moo (herd-like along with their yield-chasing, buyback purchasing, capex cutting peers) rather than roar... Central banks have turned investors from bulls to cows...
In the Golden Age of the Central Banker it is impossible to distinguish fundamental economic reasons for asset class price movements from politically-driven strategic reasons. When words are used for strategic effect rather than a genuine transmission of information you create a virtual stalking horse. It’s a focus on how something is said as opposed to what is described. It’s a focus on form rather than content, on truthiness rather than truth. It’s why authenticity is as rare as a unicorn in the public world today.
It is quite clear that Bernanke achieved his goal of inflating asset prices by expanding the Federal Reserve's balance sheet by 371.64% since the end of the financial crisis. However, was he as successful in fulfilling his other objectives? The following charts perform the same cost/benefit analysis on real economic health... Did the Fed's monetary intervention programs keep the economy from sliding into a much deeper recession? Probably. Have the programs been effective in achieving Bernanke's stated goals? Not really.
Today we’re going to explain what the “final outcome” for this process will be. The short version is what happens to a cancer patient who allows the disease to spread unchecked (death).
The actual state of employment in the U.S. is likely far weaker than the economic statistics currently suggest. If this is indeed the case, it creates a potential for policy mistakes that could have negative consequences to both the economy and the financial markets.
"The head of the International Monetary Fund warned on Friday that financial markets were "perhaps too upbeat" because high unemployment and high debt in Europe could drag down investment and hurt future growth prospects." To summarize: first the BIS, then the Fed and now the IMF are not only warning there is either a broad market bubble or a localized one, impacting primarily the momentum stocks (which is ironic in a new normal in which momentum ignition has replaced fundamentals as the main price discovery mechanism), they are doing so ever more frequently.
Fed history is riddled with examples of how ‘too-low-for-too-long’ Fed policies have created booms that caused busts. The crazy irony now is that current policy is specifically trying to create the boom with the belief that rules, promises, and a gradual change of any policy will be enough to massage a soft landing. Equally disturbing is the fact that the FOMC appears to believe that it has no choice but to keep policy exceptionally easy, because with rates at zero, it has no bullets left should the economy falter. It reminds me of that movie when Sargent Foley (Louis Gossett) was trying to get Mayo (Richard Gere) to quit boot camp and a broken Mayo cries out, “I’ve got nowhere else to go”.