Adapting To The Coming Change In The New Normal

CalibratedConfidence's picture

Some good charts, links take you to the full post.

Via Jason Raznick's Tumblr:

Last week I touched on the housing market, the yield curve and the Federal Reserve’s expected continued taper action.  Cruising through earnings, it is now time to revisit certain indicators that speak to the underlying health of the economy and that of the US equity and Treasury bond market.  The Federal Reserve’s QE policy has punished savers in terms of real rates of return in an effort to spur spending to drive a recovery.  Looking at the difference between the 10 Year Treasury Note and the annual change in the CPI, otherwise known as the Real Rate, the pressure from the Fed on savers to spend is evident:


The spread on the US Treasury 10-Year Note and its 3-Month Bill shows how large an impact the Fed’s buying program has had on the fixed income market.  Their purchase of MBS securities and Treasury paper has dropped long-term yields in an effort to spur the housing market with cheaper rates.



The knock-on effect of the Fed QE policy has driven up the Equity Risk Premium as money flows into the equity market.  Now as participants prepare for the Fed to cease QE, the ERP has dropped dramatically since 2012 relative to its past 30 years.


Click here to read the rest of the post

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Moliie's picture

Is not true that the 'financial system' isn't designed for people who have very little FRNs.  It's designed to maximize the luxuries of the 1%.  The Financial System is working perfectly, like one of those machines the queers can buy that rhythmically jam a proboscis in and out of their bleached butt holes.

Everyone can make money in "this system" but someone more than rest.

elwind45's picture

If capicity U. Was 100% we would be seeing that inflation everybody is talking abut but its not and not even close? Productivity is thru the roof and the ones making a difference are over 65 and wont be replaced when they retire? CHINA. HAS VAST CITIES OF EMPTY BUILDINGS WAITING TO PRODUCE GOODS AT A RATE THAT DOOMS YOUR PRODUCTIVITY ONCE AND FOR ALL! Finally if you cant afford Chinese products THAN MAKE YOUR OWN parasites

elwind45's picture

Artificially low rates since when? I could make a case that the meltdown was about artificially too high rates in '07?! There is no way a person who follow bonds would not find amusement in your throwaway statements! Recent interest in the long end makes rates too high and interesting while your prose about artificially low rates complete bullshit! QE crowds out investments in the bond market because of the FEDXactions and not inspite of them? Believing the hidden hand would make you a lot more money than blaming every new impute as manipulation when it does not fit your poor narratives!

OC Sure's picture




The sky is blue, the stars are bright, and the ocean is deep. Thanks.

AdvancingTime's picture

Much of the demand we see today is driven by artificially low interest rates and a mirage in the markets they distort. By this I mean the distortion and illusion that the economy is healthy tends to cause people to make poor economic choices. Still CEO's are unenthusiastic about investing and banks have little incentive to loan money on half backed ideas for which there is little demand.

It is becoming apparent to many the financial system has become dysfunctional.  People are forced to loan their savings to governments and banks with negative interest after adjusting for inflation. Today for other than student and auto loans there is scant demand even at low interest rates. It is becoming apparent the momentum of lower rates has begun to ebb.  More on this in the following article.

Comte d'herblay's picture

"......................yada, yada, the financial system has become dysfunctional".

Why don't pundits stop with this nonsense that the financial system is somehow incapacitated when the 1% are doing gloriously well?

The 'financial system' isn't designed for people who have very little FRNs.   It's designed to maximize the luxuries of the 1%.

The Financial System is working perfectly, like one of those machines the queers can buy that rhythmically jam a proboscis in and out of their bleached butt holes.

AdvancingTime's picture

One area we should pay more attention to is how the different sectors of the economy dependent on discretionary spending fared. I contend a shift is occurring within the ranks of shoppers and consumers that is causing the little economic growth occurring to be the "wrong kind of growth" and not healthy over the long term.

Recent job numbers create a false illusion that mask over what is really happening as incomes grind to a halt and inflation nibbles at the buying power of the average American. In my opinion the wrong people are buying the wrong things. Auto sales, student loans, and healthcare spending have become key drivers in this economy. Below I reconcile the recent job numbers and why spending trends signal danger ahead.