“Cash On The Sidelines.” is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets. However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and now global Q.E., exactly what will that catalyst be? However, Clifford Asness summed up the problem with this myth the best and is worth repeating...
Having flirted with recession and escaped that fate, the mainstream assumes that 'it' is all over and that prior expectations should only resume. This binary arrangement has clearly colored recent analysis, and as such it has led to really unhinged commentary...but "abundance of strong U.S. economic data" is pushing very close to wishful blindness.
In Amazon's latest attempt to entice shoppers into its premium Prime program, Wells Fargo will cut half a percentage point from its interest rate on student loans to Amazon customers who pay for a "Prime Student" subscription, which provides the traditional Prime benefits such as free two-day shipping and access to movies, television shows and photo storage.
Following the previously noted fireworks from Kuroda, who in a BBC interview said that there is "no possibility" of helicopter money (which however the WSJ quickly added was based on an interview conducted in mid-June which supposedly means there is possibility now) In under an hour the market will turn its attention to the ECB's latest statement, where as SocGen's Anatoli Annenkov writes, it is "time to send another dovish signal."
In a surprising rejection of Ben Bernanke, BOJ governor Haruhiko Kuroda said that there will be no helicopter money in Japan, amid increasing speculation over monetary and fiscal policy in the world’s third-largest economy. Given the current institutional setting, there is "no need and no possibility for helicopter money," Kuroda said in a BBC Radio 4 program that was broadcast Thursday. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates."
As we laid out over a year ago,, this simple combination of productivity and demographic trends reveals that U.S. trend GDP growth is converging toward 1%. This is reminiscent of Japan during its "lost decades." Expanding this analysis to the rest of the G7, we find that every economy is effectively becoming Japan, and the sharpest slowdowns are happening outside North America.
Most of what passes for modern monetary policy is nothing more than one assumption piled upon another (and then another, and so on). Taken for granted for so long, rarely are these unproven precepts ever challenged to justify themselves to the minimal standard of internal consistency, let alone prove discrete validity by parts. The latest is “helicopter money”, another sham in a long line of them proffered by at least one central bank today because it knows, as the others, nothing they have done has worked.
When you want to get your message across, you sponsor a study that is 100% guaranteed to come to the conclusion you demanded from the outset. In this case, a White House study allegedly proves Student Debt Helps, Not Harms, the U.S. Economy. However, the study is fatally flawed... just don't tell the mainstream media.
"The IMF has serious credibility problems. It has been seriously wrong for years. I hope that one of the things that the new government does is push to have some credible people running this institution... rather than the clowns currently running it," exclaimed UKIP MP Douglas Carswell, pointing out Lagarde's legion of fools flip-flop that the British economy will grow faster than Germany and France in the next two years - only weeks after its doom-laden warnings about Brexit.
One place which fails to corroborate the narrative of a "recovering economy" are the monthly Gallup surveys, and especially the most recent one released earlier today. At -17, this reading is tied for the worst economic confidence reading recorded in the last few years, and suggests that Americans' take on the economy is getting worse, not better.
Given the rather extreme nature of the times, extreme statistics are more prevalent perhaps than at any other point. They run the spectrum, as do human intentions, from the purely mistake to the malicious. The better stats, as the best lies, are often difficult to discern because they contain some truth such as the oft-quoted relationship between P/E’s and inflation. However, facts - those annoyingly unspinnable demons - show the 'stocks are cheap based on inflation-based multiples' essentially advises that the last big stock bubble justifies why we shouldn’t be worried about another one.
In short, the market is not trading on a rebound in GDP, revenue growth or a breakout of already elevated profit margins. It’s just high on one more dose of monetary cocaine that in short order will prove to have been not even that.