Stagflation

A Surprise From JPM: "Pundits Are Urging Investors To Chase Performance; We Believe This Would Be A Mistake"

"Equities had a meaningful rebound from the February lows, and we now find many who didn’t want to add at the time, are looking to enter the market at these levels. Indeed, pundits are urging investors to “chase performance”. We believe that this would be a mistake; complacency has crept into the market again, technicals appear overbought and the upturn in activity appears to be stalling."

Should Investors Be Bullish Or Bearish Right Now: BofA Explains

"Our “Japanification” theme argues for big, fat, volatile trading ranges being the norm. The rallies (Japan rallied +20% every year during the 1990s (Chart 8) and the fades are always driven by Policy (panic & complacency), Profits (troughs & peaks in PMI’s) & Positioning (fear & greed). As bulls begin to dominate, confidence in the macro improves & the Fed starts to talk-up prospect of rate hikes, we would use Q2 to add to volatility exposure." - BofA

"The Gold Price Has Been Captured By The Modern Banking System"

It is commonly assumed that the gold price and interest rates move in opposite directions. Like all assumptions about prices, sometimes it is true and sometimes not. The market today is all about synthetic gold, gold which is referred to but rarely delivered. The current relationship is therefore one of relative interest rates, because positions in synthetic gold are financed from wholesale money markets. This is why a rumour that interest rates might rise sooner than expected, if it is reflected in forward interbank rates, leads to a fall in the gold price. To the extent that this happens, the gold price has been captured by the modern banking system, but it was not always so.

For Albert Edwards, This Is The "One Failsafe Indicator" Of An Inevitable Recession

Despite risk assets enjoying a few weeks in the sun our failsafe recession indicator has stopped flashing amber and turned to red. Newly released US whole economy profits data show a gut wrenching slump. Whole economy profits never normally fall this deeply without a recession unfolding. Historically all recessions are effectively caused by slumps in business investment driven by a profits downturn.

On Goldman's "Dubious Advice To Short Gold”

Those betting against Goldman Sach’s retail investment advice have generally been on the right side of things. The same thing is about to happen again. “Short gold! Sell gold!” said Goldman’s head commodity trader, Jeff Currie, during a CNBC “Power Lunch” interview. Currie’s advice was in response to the question “Is there any commodity you are recommending that can help our viewers make some money?” Currie’s provided several reasons for shorting gold, blatantly wrong.

Why JPMorgan Believes Central Banks Can No Longer Save The Day

"We think that the recent rally in risk assets gained much from dovish actions and messages from central banks, in particular the ECB, Fed and the PBoC. One can only applaud the seriousness and pro-activeness that central banks apply to their mandates. But aren’t investors counting too much on central banks carrying the day if not the cycle?  This analyst thinks so, without disparaging their efforts, as central banks are almost out of ammo, and their tools are not well suited to handle the problems of slowing company profits and productivity."

The Next Big Problem: "Stagflation Is Starting To Show Across The Economy"

"I think stagflation is starting to show - that idea of stronger nominal growth but weaker real growth is starting to show up across the economy. It certainly is showing up with real personal consumption slowing; it's showing with slower job creation growth as the wage rate rises, and it's showing up in weaker profits as the share of labor income rises reducing profit margins for corporations."

Why We Have A Wage-Inequality Problem

Wage inequality is really a sign of a deeper problem; basically it reflects an economic system that is not growing rapidly enough to satisfy everyone. Our basic problem is that the world economy is growing so slowly that the ordinary workers at the bottom find themselves with less than an adequate quantity of goods and services. This problem seems to be getting worse rather than better, over time, making the problem a political issue.

"Free" Trade, Jobs, & Income Inequality: It's Not As Easy As We Might Think

Slapping fees on imports (which by the way is illegal in treaties such as the WTO) will not solve the larger problems of reduced employment, stagnant wages and rising income inequality. To make a dent in those issues, we'll need to tackle central bank and central-state policies that have pushed finance and speculative churn to supremacy over the productive economy.