U.S. stock investors may be complacent regarding the ability of the stock market to withstand higher interest rates. Their confidence may come from the fact that, historically, markets have not peaked until 12-24 months after the Fed begins to tighten. This assumes the tightening cycle begins with the first official rate hike. But if it really began with the increase in the Shadow Rate, then a December rate hike will already be 19 months into the tightening cycle! Plus, given how overvalued stocks may currently be, and the amount of corporate debt accumulated to finance share buybacks, this bull market may be far more vulnerable than most to higher interest rates.
Following this morning's basic admission by Janet Yellen that "no matter what" The Fed is raising rates in December (which was then solemnly supported by an obedient Bill Dudley who "100% agrees with Yellen"), Fed Vice-Chair Stan Fischer, speaking tonight, reaffirmed this belief by, as we detailed previously, telling investors to ignore weak inflation. After San Fran Fed's Williams admission that "there's something going on here we don't understand," Fischer tonight admitted "US inflation is not as low as you think," at once contradicting Yellen's earlier comments and the various market-based measures, while confirming our previous detailed solving of the mystery of the hidden inflation.
Almost all serious analysts see a Terminal problem developing - "We will go from deflation to hyperinflation without seeing inflation." But hyperinflation is a political phenomenon. It is caused by those same authorities the masses think they can trust. When they are threatened, they will protect themselves by printing money on a scale we haven’t seen since the War Between the States (consumer prices in Richmond, Virginia, had risen 6,700% by the end of the war).
If you’re sophisticated and have a bit of luck, you could end holding your gold exposure at zero or even make a profit.
Most of you will be quite familiar with Peter Schiff. Fewer of you will know much about his father, Irwin Schiff, who was posthumously referred to as the “grandfather of the contemporary tax protest movement” in Forbes. Irwin was treated very poorly by his own country, particularly toward the end of his life when, despite being legally blind and dying of cancer, he was not permitted to die in peace amongst family members.
The popular belief that the U.S. economy has been steadily recovering has endured months of disappointing data without losing much of its appeal. But the downright dismal September jobs report that was released last Friday may prove to be the flashing red beacon that even the most skilled apologists can't explain away. But rather than questioning the Fed's credibility in missing another forecast, most economists are lauding it for supposedly seeing weakness that others missed, which allowed it to wisely do nothing in September. But this is simply a continuation of the Fed's long-standing playbook: Talk the economy up through optimistic statements while continually holding off an actual rate hike that the Fed is concerned could undermine an economy teetering on the brink of recession.
Since the 2008 crash there has been much talk about how the fundamentals have not been dealt with and the fact that the can has only been kicked down the road. Political mavericks and commentators such as Ron Paul have frequently pointed out that nothing has really changed and that we are heading for even bigger disasters ahead if we continue to play ostrich... The truth is that we never left the economic downturn – we are currently in a period of manipulation that’s sole purpose is to mask the fact that there has not been a boom (or recovery if you like) to trigger the next bust.
"What we have had is a jobless recovery in the US and so the Fed could not afford to cause another depression by raising interest rates. QE4 will be their next move, which is now much more likely than a rate hike."
Every dictator knows that a continuous state of emergency is the best means to justify tyrannical policies. The trick is to keep the fictitious emergency from breeding so much paranoia that routine activities come to a halt. Many have discovered that its best to make the threat external, intangible and ultimately, unverifiable. In Orwell's 1984 the preferred mantra was "We've always been at war with Eurasia," even though everyone knew it wasn't true. In its rate decision this week the Federal Reserve, adopted a similar approach and conjured up an external threat to maintain a policy that is becoming increasingly absurd.
Will The Lone Star State Secede? Super Tuesday May Allow Voters To "Reassert Texas As Independent Nation"Submitted by Tyler Durden on 09/17/2015 21:30 -0500
“Most Texans do not want to break away from the United States. Most Texans consider themselves Americans. But if ever being American means sacrificing our liberties, we will just prefer to be Texans.”
As we have maintained continuously, rate hike talk from the Fed is just a bluff to disguise its inability to tighten, as even small increases could be sufficient to prick the biggest bubble it has ever inflated. When will these "experts" finally connect the real dots and discover that the monetary medicine that the Fed has doused over the economy since 2008 has only created a weak and utterly dependent economy. A rate hike is supposed to be a signal that the economy has a clean bill of health. But as the patient fails to recover, another dose of QE will be just what the doctor orders.
The correction may soon morph into a full-fledged bear market if the Fed makes good on its supposed intentions to raise interest rates this year. Have no illusions, while most market observers are quick to blame the sell-off on China, this market was given life by the Fed, and the Fed is the only force that will keep it alive. Unfortunately for the Fed, it won't be able to get away with doing nothing for too much longer. Events may soon force it to show its hand. Then perhaps some may notice that the Fed is holding absolutely nothing and has been bluffing the entire time.
While making its devaluation announcement, Beijing said that it wanted its currency "to reflect fundamentals" and to no longer simply mirror the movement of the dollar. It acknowledged the fact that its peg to the dollar was problematic and that it wanted a better, more natural mechanism. This is the key to understanding the announcement: The Chinese are preparing for a time in which the financial world does not spin in orbit around the dollar. Such a reality must make us think about the future.