What has always separated successful professional gamblers from the "weekend sucker" is knowing when to step away from the table.
"The Danger Is That It Bursts Just Like In The US": Sweden Goes Full Krugman, Gets Massive Housing BubbleSubmitted by Tyler Durden on 09/14/2015 18:45 -0400
Never go full Krugman...
Late last year, Paul Krugman took a field trip to Japan to observe Keynesian insanity prowling around in its natural habitat. While he was there, he gave Prime Minister Shinzo Abe some sage advice which can be roughly summarized as follows: "Abenomics is working so why would you screw it up by getting fiscally responsible all of the sudden?" Nine months later, Japan is still a deflationary deathtrap and Krugman is "really, really worried"...
"This is a dangerous time," warns Nobel laureate Bob Schiller as he warns of the false signal that typical P/E ratios are misleading and in fact his CAPE ratio (looking through the cycle) implies "fair value" for The Dow should trade around 11,000 and around 1300 for the S&P 500. "There is a risk of a substantial decline," he adds, warning that the recent rebound "maybe someone's good will effort to stabilize the market," and in fact the market's valuation is high now and people are over-exposed.
In the midst of turmoil among asset classes, investors tend to make irrational decisions, such as panicking and liquidating at inopportune times. Nobel Prize-winning Psychologist Daniel Kahneman helps explain ill-conceived reactions to the market with his concept of loss aversion. That’s the fear and feelings of loss surpass the joy one may receive from a similarly sized potential gain. In order to frame this discussion of volatility, we dug up old surveys of institutional and individual investors that recorded their responses to the 1987 market crash
As the capital markets from Shanghai to New York were melting down in ways hearkening back to the early days of the prior financial crisis - a period of time many would like to forget (or act) as if it never happened - the Nobel Laureate economist Paul Krugman decided it was time once again to weigh in with what will surely be viewed by the so-called “smart crowd” as a brilliant perspective on what ails the world: Not enough debt. He came out blazing with what seems the only bullet in his arsenal as a cure-all for what ever the ailment might be (e.g., debt.) as he argues this view in his latest: Debt Is Good.
"Turkey's interest in northern Syria and northern Iraq is not an abstraction triggered by a group of religious fanatics calling themselves the Islamic State; it is the bypass, intersection and reinforcement of multiple geopolitical wavelengths creating an invisible force behind Ankara to re-extend Turkey's formal and informal boundaries beyond Anatolia."
The Export-Import Bank died last night when its charter expired. After 81 years, what is commonly known as Boeing’s Bank is headed toward Washington’s trash bin. When Congress returns it could revive Ex-Im, which primarily subsidizes big business exports. But a proper burial for what Barack Obama once called “corporate welfare” would save Americans money, reduce economic injustice, and promote economic growth. Ex-Im’s closure is a very rare victory for the good guys in Washington. Crony capitalism is running rampant in America, undermining confidence in a market economy.
When in a hole, stop digging. But when in a bubble, keep blowing. Our ruling and wealthy elite are worried that they are stuck in their own ponzi scheme or bubble and are suffering from the general problem of all ponzis and bubbles – how to get out.
Angela Merkel is attempting to head off staunch opposition from lawmakers concerning further coddling of what they perceive to be a belligerent Greek government. As we reported earlier this month, the German Chancellor has been under pressure from members of her Christian Democratic bloc to essentially cut Greece loose. Now that pressure is building, leaving Merkel with the unenviable task of selling yet another Greek bailout to an increasingly hostile audience.
In his recidivist attacks on the gold standard Prof. Krugman tediously resurrects and refutes straw man arguments drawn from marginal thinkers. Prof. Krugman sets his phaser on stun and points it at the ghost of Ayn Rand rather than tangling with his peers. But boiled to its essence, Krugman's sciencefictiononomics is a tug of war between believers in mathematical modeling and believers in common sense. One also can cast this as a war between elitists (i.e believers in the ability of an elite to manage society’s affairs better than can the society itself) and populists (i.e. believers in the ability of society to manage its own affairs better than an elite can do so for it).
"...The negative divergence of the markets from economic strength and momentum are simply warning signs and do not currently suggest becoming grossly underweight equity exposure. However, warning signs exist for a reason, and much like Wyle E. Coyote chasing the Roadrunner, not paying attention to the signs has tended to have rather severe consequences."
The major sudden bear markets of the last decades were not dreaded “black swan” events at all. They were perfectly predictable, by economic logic alone, the same logic that says governments cannot manipulate market prices without creating distortions that will always, without exception, be counterproductive. In the next stock market crash, we will be told that the fault was some surprising economic or geopolitical shock. Let’s remind ourselves now that this will be false.
Rather than be a problem, Syriza may well be a solution, if it plays its cards right, but that still leaves politicians and investors denominating Tsipras et al as a problem, if not a menace. The world’s major banks got rich off the back of the Greek population at large, and when their wagers got so absurd they collapsed, the banks saw to it that their losses were transferred to European -and American – taxpayers. And those taxpayers are now told to vent their anger at 'those cheating, lazy Greeks'. The Troika, the EU, the IMF, and the banks whose sock puppets they have chosen to be, are a predatory force that has come a long way towards wiping Greece off the map. And that’s what Syriza has set out to remediate. And for that, they deserve, and probably will need, our unmitigated support.
Amid the collapse in crude oil prices, the Norwegian central bank cut rates in December (after 1000 days on hold) and is likely to cut again as economic growth stalls. However, the country's financial regulator is warning falling interest rates risk pushing the Norwegian housing market beyond its breaking point into a "self-augmenting spiral." With prices up 8.1% YoY, and up 85% nationwide in the last decade, even Robert Shiller warned of Norway's housing bubble in 2012 - and since then household debt (and home prices) have surged. As Bloomberg reports, Morten Baltzersen, head of Norway’s Financial Supervisory Authority stressed "continued rapid growth in debt and house prices isn’t sustainable." Unintended consequences?