Real Interest Rates

Why The Casino Is Dangerous: There Is Nothing Below

The algos and chart traders are making another run at 2000 on the S&P 500, attempting to convince the wary investor one more time that buying on the dips is a no brainer. And in that proposition they are, ironically, correct.  To buy this utterly manipulated market at these nosebleed valuation levels is about as brainless of an undertaking as is imaginable.

This Is Your Recovery, And This Is Your Recovery Without Drugs

The arrogance, hubris and contempt for morality displayed by the ruling class is breathtaking to behold. They think they are untouchable and impervious to norms followed by the rest of society. They may have won the opening battle, but will lose the war. Discontent among the masses grows by the day. The critical thinking citizens are growing restless and angry. They are beginning to grasp the true enemy. The system has been captured by a few malevolent men. When the stock, bond and housing bubbles all implode simultaneously, all hell will break loose in this country. It will make Ferguson, Missouri look like a walk in the park.

What's So Special About A 17x PE Multiple?

Is there something particularly notable about a 17x trailing PE multiple on the S&P 500? According to Deustche's David Bianco, there is especially during mid to late cycle expansions, i.e., after three (or much more in this case with the S&P 500 now repoting 5+ years of EPS growth) years of rising earnings. In fact, as DB calculates, the only two periods of a PE over 17 after 3 years from the last EPS decline are 1965-66 and 1996-98 (Figure 2) below. And right now. It should be self-explanatory that both of those historic periods ended with a sharp equity correction.

"It Can't Be A Bubble!"

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.

The Keynesian Apotheosis Is Here; But Blame The Final Destruction Of Sound Money On The Bushes

The only thing that can be said about Janet Yellen’s simple-minded paint-by-the-numbers performance yesterday is that the Keynesian apotheosis is complete. American capitalism and all political life, too, is now ruled by a 12-member monetary politburo, which is essentially accountable to no one except its own misbegotten doctrine that prosperity flows from the end of a printing press.

Japanese Bond Futures Volume Collapses To Zero Even As Service Sector Implodes

You know things have got a little too strange when the largest government bond market in the world saw no futures trades in the morning session last night. We may complain in the US of falling volumes but none, zero, zip, nada is about as low as it gets; and that is how many trades occurred in the 20Y futures contract in Japan (and 10Y cash bond market). This is not the first time as Mizuho warned in Nov 2013 that "to all intents and purposes, there is no JGB market." And this lack of trading on a day when major macro data printed far worse than expected... well played Abe... you entirely broke your bond market.

Bubble, Bubble, Toil, And Monetary Policy Trouble

In his recent note “Treacherous Market Conditions,” Scotiabank's Guy Haselmann attempted to outline the precarious position the FOMC has put itself in. The Fed’s depleted ammunition applies greater pressure on its attempts to ensure a strong recovery; yet, as Haselmann hinted, the Fed is in a race against time, because risks to financial stability aggregate with each passing day, while economic benefits approach zero. Despite differences as to the extent and degree of financial risks, FOMC members have (finally) become aware that they have arisen. Draghi seems to share concerns about bubble conditions... and now the BIS fears that a "persistently aggressive monetary policy risks exacerbating collateral damage."

GoldCore's picture

Gold surged 1.6% in euros to €928/oz after the historic ECB announcement to adopt negative interest rates. Cheap money, financial repression and currency debasement are classic recipes for short term financial and economic gains. Throughout history, they have been the easy options for emperors, kings, queens and governments. They are the easy option for the ECB and central banks today.

The Eight Characteristics Of Stock Market Manias

This time is different - check; Moral Hazard - check; Easy Money - check; Overblown growth stories - check; No valuation anchor - check; Conspicuous consumption - check; Ponzi finance - check... and, of course, Irrational exuberance: check!

Janet Yellen's First Monetary Policy Speech - Live Feed

*YELLEN SAYS FED COMMITTED TO ACCOMMODATION TO SUPPORT RECOVERY

Markets will be hanging on every word of what is likely Janet Yellen's first monetary policy speech and even more so the Q&A afterwards as she suggests that a considerable time is more than 6 months, and the delicate balance she has to play between admitting the economy is ugly while admitting that QE is over no matter what... all the while maintaining some semblance of credibility. One has to wonder if the ripfest rally of the last 24 hours is a buy the rumor ramp ahead of a sell the Yellen news event as once again she is tested...

GoldCore's picture

The EU agreement on a common rulebook for handling bank failures, including bail-ins, is in danger of unravelling over the fine print restricting when a state can intervene to rescue a struggling bank. It is important to realise that not just the EU, but also the UK, the U.S., Canada, Australia, New Zealand and most G20 nations have plans for depositor bail-ins ...