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Hope, Hoax, And "Bah Humbug"
Submitted by Mark J. Grant, author of Out of the Box,
Steer the Course
I have said, for the past two years, that the euphoria would end. I said it would either come from some "Event" or from the Fed changing course. I also said that until one of these two occurrences took place to play the game as long as possible. That was my consistent advise.
Honestly, I thought the "Event" would take place before the Fed changed their direction and while there were certainly events during this time period none were serious enough to derail the train. You will also note that the moment, the instant, that Bernanke changed direction that I said to take money off the table. I said it that day and I have said it every day since then.
Now the bond market has led the way; yields back, back and back some more. Equities have also declined and I think they have further to fall. Bonds, on the other hand, will reach a point fairly close to here and rally as yields entice buyers back into the market.
We will have days of course when both markets rally as bounces from the fall-off but the overall trend in equities is down. The actions by the world's central banks have affected everything. The markets in a very positive way but the underlying economies; not so much. You would have thought that the Fed's actions would have caused a growth rate in America of more than 1.5%-2.0% which is a dismal showing given the amount of money that has been sloshing around.
With the spigot about to be turned down there will be a marked effect on earnings and profits in American corporations as borrowing costs rise and as all of the gains that could be taken were utilized from our very low interest rate environment. Much of the corporate earnings gains during the last two years did not result from growth but from financial management which was to be anticipated and expected. Those schemes, however, have been brought to an end by the rise in interest rates.
In the meantime the Fed, in every manner possible, will try to downplay what Mr. Bernanke has done. The Governors will make speeches. Tidbit swill be handed to the Press. Calming remarks will come from every corner of the great machine and every stock guru on the planet will focus on the Bernanke's remark that the overall economy is improving. Fortunately I have seen this game before exorcised by every Fed during the last forty years. The correct response is, "Bah Humbug" and the correct viewpoint is to watch what they do and not what they say. They will say what suits them. What they do will be a different story.
Europe will continue to be a major drag on the world. They play "extend and pretend." The don't count various liabilities, assets are marked "risk free" which is a ridiculous claim and they assure us that loans and securitizations are paying with the flip of some accountant's wink. Their bank stress tests for the Continent and for Spain have had all of the accuracy the old gods still being in residence on Mt. Olympus while the IMF trots out financial projections for Europe which are akin to the value of a three dollar bill and about as useful.
The problem here, however, is that what is not counted does not erase what must be paid. The liabilities mount up. The cash is never enough to make the payments. The finances of most of the sovereigns and banks in Europe are a hoax. America is not good, Europe is far worse and China is a box that lacks any clarity at all.
The problem with the governments in Europe is that they make up numbers to suit themselves. Then they loudly proclaim them from each capital on the Continent as if the multiple proclamations will prove their accuracy. Now they are claiming that "The crisis is over" when the real data suggests that it is worsening. If you make up stuff it is one thing but to believe it and act upon it is a far worse sin. There is also a negative side.
We breathed the opiates. We went on about our drug induced way. I predict that we will have Christmas again this December but that the word "Merry" will not be appended.
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It's just for growing room. When you hit top, state you'll pull back and watch, then as if by magic you have some more growing room, repeat and hope no one's looking. Shake it baby, shake it...
There's just 1 planet here, only so big....no more room to grow so here comes the pain.
Why does everyone assume rates are going to skyrocket when QE ends: http://static.seekingalpha.com/uploads/2011/9/30/475264-131740565684694-...
http://seekingalpha.com/article/1518282-the-inflation-hoax
from the article....
"Last I checked, the items I buy most (food, fuel, rent) have all increased dramatically. I don't give a rat's behind what your "data" says, my wallet data tells me that if you believe inflation is low, then you probably also believe in unicorns. "
While all of these items are a part of the costs we incur when we spend, they are also some of the most violently moving prices in the index. I am not sure why everyone likes to jump to these items as proof that the government is lying to us about the true inflation numbers, but the rhetoric is thick anytime someone makes a claim AGAINST there being massive inflation."
Okay bud, how about healthcare, education.....
what the fuck is deflating? Other than wages?
Laptops and computer gadgets. Can't eat those, though.
Yer but they make good trade items until they EMP'us back to the stone age. Read a good article on Weimar Republic where workers wifes bought anything in order to trade for what they wanted.
actually the reason for them to deflate in price is the integration of the chinese labor force which is ultra-cheap compared to that in taiwan. also, the undervalued renminbi has a tremendous impact on prices.
in a fiat system deflation is not possible. it never happens. only overinflated prices roll back for a while but later they keep inflating. for example, keep your eyes on gold and watch where it will go in the long run.
Yep, WTF is 'deflating' other than wages indeed. Everything else real world 'stuff you need TODAY' is inflating in price.
I think the point of the article is not that inflation is not here..... just that it is over dramatized as being a terrible thing. Look at the comment section. Author asks...... if the price of onions rises, yet I am able to afford many more onions per hour of labor today....... who cares?
The example for gold is stunning. Gold today at $1290 is more affordable to the minimum wage worker than gold in 1980 at $615/oz. The minimum wage worker is earning many more dollars per hour today than he did in 1980..... so on a relative basis, gold is more affordable even though the price is 110% higher.
Just a new way to filter through the doom and gloom here.
The price of onions, wheat and rice is increasing faster than most wages over the last few years. Arab spring anyone?
Sure, there will always be flux. The ratio is not constant. Because they may have increased recently doesn't mean you can extrapolate that rate into the future. There is high probability that the ratio will reverse as well sometime in the future.
Productivity driven deflation is a good thing. TPTB prefer inflation because of their heavier borrowing.
Sure, there will be mean reversion in the future, but it could get worse before it gets better. If the kids are hungry, saying "Life is better now than in the middle ages", doesn't fill little bellies.
In your response to Fonz below, I'm not sure minimum wage is the correct yardstick to use. Mean or median income might be better as they are less politically driven.
Is life better now than the middle ages?
Depends on the metric of course, but I think there is a telling one: wealth inequality.
And its greater now, than it was in the times of kings and serfs!
I might use indoor plumbing as a metric.
How many minimum wage workers could afford to shelve $1,290 for an ounce of gold?
That math works for Gas also.... and rent..... and.......
the point here is that if fhe minimum wage worked WANTED to afford and oz, it would require him to exchange 30 less hours of labor to get it today than1980.
Extremely weak GDP would result in no reduction in QE.
So if GDP is strong, QE ends AND rates are driving up -- by both the eliminated QE bid on bonds and the effects of GDP.
"Tidbit swill be handed to the Press."
Tidbits will be handed to the Press.....or
"Tidbit Swill", handed to the Press?
Don't be so sure the spigot will actually be turned down.
Looks like another con-game to me. What exactly has Ben done? Incoherently threatening to turn down the spigot? This is supposed to represent market moving action?
LOL
This is nothing but another shake-down of the over-leveraged weak hands who were happily front-running the Fed without being club members.
IMO, it QE ever "tapers," it will be because they've created another hidden conduit to redirect the flow through. As for the idea that the Fed will let rates rise enough to take out fedgov itself? Someday, sure, but I don't think it will be anytime soon, as it still retains too much value to waste in such a fashion.
Oh, and it's now OFFICIALLY Operation "Throw Bernanke Under the Bus."
Did anyone ever think Krugstain would turn on his buddy Ben?
http://www.nytimes.com/2013/06/24/opinion/krugman-et-tu-bernanke.html?re...
Krug is just setting himself up to crow about the reincarnation of QE once it is "sold" as a given.
This just in ...
http://farm3.staticflickr.com/2817/9136427880_94b4161170_h_d.jpg
I predict that we will see a whole bunch of articles on how wonderful the Hamptons are in the summer.
Some of these guys are delusional, what do you mean 'every FED has done this for 40 years'? Bullshit.
Wow some people are real blockheads and still just don't get it, the monetization phase is being wound down and will end abruptly....the FED does not give a shit what your personal opinion is or how stocks do at all, that was all just crowd control to keep the sheeple placated while they were sheared....now it's off to the slaughterhouse!
ENJOY!
How will the USG fund itself then?
Handjobs?
I was being serious.
So was I. How did the 'USG' EVER fund itself except a bunch of fake promise handjobs?
In the last 5 years, we've seen ever increasing bouts of QE. "Taper", as referenced to the last 5 years, may not be a reduction in monetization, but a stand still, for all we know. If the FED does not increase QE, then in effect it is tapering because these fake markets require more dosage with each new version of QE.
Fact remains that the .gov needs to find a way to fund Treasury purchases, to keep the ponzi going. If they shut QE off like a light switch, the entire globe will go black and TBTF banks will be shutter overnight. I don't believe the Fed wants that to happen.
Yet maybe that's just what they do want and have planned for all along....how ELSE are they going to wheel in their 1 world bank/gov/currency other than that? By dropping the DOW a couple hundred points?
OK, I'll bite. The government continues QE until the wheels come off, but before then they prolong the agony by renaming it, and launching a rebranding media marketing blitz claiming QE is no longer necessary, even though it continues on.
The market is only going to go down until some muppets (read: not well-connected insiders) establish serious short positions. Then guess what, its up up and away again! (IMO)
Really....so how many times IYO will that happen? 50 already since 2008 isn't quite enough yet?
Nah I think these guys are done monetizing after all you only need 51% to own everything, and are about to take all the cheese and run into 1 world bank, 1 world currency, 1 world govt, etc.
The problem with letting everything crash, and trying to rebuild a world that you are 100% in control of (and own), is that you take a BIG hit to your credibility (banks and governments and the media, esp.).
That credibility is not so easily regained.
'Credibility' is of no concern in their ultimate plan of 1 global bank/currency/govt....in fact ushering in that plan requires a complete sudden collapse of it all and it's just what's been planned many decades ago.
This is where I disagree with you, and I count myself among the most cynical and paranoid humanity has to offer.
Your disagreement is inconsequential, that IS the plan whether people see it and realize it or not. Funny to see so many n ZH just don't get the overall scheme at all.
this "one world government" that is so prominent on some US minds: do you have an idea for it's... capital? Washington? Beijing? NY?
btw, one government would mean one army, or none. which way? and how?
Basically, the system which exists today (USD, worldwide military empire), except instead of US taxpayers (nominally) being in charge, it will be Multinational Banksters. How they get the Armed Forces to accept that is beyond me, esp. the firing on citizens aspect.
so basically this goal is achieved by 50% - at least on the military expenses side. but how to get the rest?
and does this not clash with the fears of being soon pacified by UN troops? seriously, thanks for the answer, but I do find all this very confusing, and Sheep-Dog-One seems quite convinced
Santa wont be coming this year
http://www.youtube.com/watch?v=XU8IQqcq270
Our sales are down in Peru vs. 2012 (albeit 2012 was a great year). We do not have a good explanation for this yet, perhaps part is due to problems in China (which buys Peruvian natural resources).
True, this is just anecdotal evidence, but the world economy does appear to be slowing. Despite what the MSM and .gov cheerleaders say.
How can this guy say " watch what they do and not what they say" when his whole thesis is based around what the fed said? They said they may taper, there is no sign they have done so yet. He makes no sense.
What I think is they've already started the 'taper' a couple months ago.
Many people have said that the Fed keeping QE steady was a form of taper in itself because of the market's increased 'tolerance' for QE.
Well, crystal meth addicts also build up an 'increased tolerance' but that doesn't mean it ever ends well.
Well, thats the major argument right now, does it end in a crash, or does it end in a dash to the moon (meaningless, because we are valuing a market in a devalued currency).
Or does it crash and then dash (Ka-Poom/biflation)?
Well what people are missing is the actual plan here, many decades in the works. People still actually think this is all about 'working to fix economies'? Wow.
We are just one crisis away from people accepting a one world government
Rockefeller
His bond fund is down Doc. That's about the sum of it.
Wow, many people still believe this was all about how the Fed can make stocks green and 'happy-time public'? Whoa do they ever 'not get it'.
They will say what suits them. What they do will be a different story.
Reminds me of, "I'm quitting smoking"
Nobody answers the big supply vs. demand question.
Supply (Treasuries) is increasing by 600B to 1T a year. The Fed is talking (I know, just talk) about slowing down its purchasing.
Slowing down? Shoot, even maintaining isn't going to keep up.
...Who here can possibly buy into the corporate earnings scam that has taken place over the last 10 years?? These multi-national corporations MAKE THE LAW...This means they build in all sorts of evaluation gimmicks on their balance sheets. They've grown profits while the country experienced; A housing crash, a credit crisis, stock market crash, rocketing unemployment, wage stagnation and savings deterioration - YET, they beat analyst expectation every quarter. Geez!!
Someone simplify this for me please.
New Home Sales Hit Third Straight Month Of Gains
http://www.cnbc.com/id/100841346
Yet, mortgage applications are dropping?
http://www.zerohedge.com/news/2013-06-25/flip-house-these-bubbling-cities
What gives?
Desperation?
Buying foreclosures w/ cash?
What Recovery? Americans on Food Stamps Outnumber Population of Spain
http://smallbusiness.yahoo.com/advisor/recovery-americans-food-stamps-ou...
"As of March of this year, 47.7 million Americans are now on some form of food stamps. Between 2000 and 2012, the number of Americans resorting to food stamps increased more than 171%. In 2000, there were just 17.1 million Americans on food stamps. (Source: U.S. Department of Agriculture, June 7, 2013.)"
When they pull the rug out on most americans who get by only on a govt stipend check, then hell will really break lose.
"Europe will continue to be a major drag on the world" interesting concept, this one. sounds like "you see, we produce world quality products in unlimited quantities at low price and we'd be all stinking rich if those damn continental europeans would just cease to exist". I have already met Americans who where whistling rhymes on this theme, including "why don't you just print/devalue, dammit? my stock portfolio would soar" (which rhymes with moar)
at least Mark softens the thing by his view: "America is not good, Europe is far worse and China is a box that lacks any clarity at all"
I dont know if you lot follow Football over there, but aparantly Wayne Rooney from 'Manchester United, Glazer Inc', could be on his way to Barcelona in the summer.
It seems no one told them hes out for six months, if thats the case, as monkeys are quarantiend for that length of time before being allowed entry.
They could be selling him for £25 Million quid, wonder how much in derivatives they could wangle out of that deal? 10-1? 25-1? 100-1? Then dont forget they can bundle him in with Ronaldo, Messi etc and cross sell him while us lot could re-hypothocate that by millions. Could be deal of the century if we only get the thieving, lying, fucking criminal swines involved from the City of London.
Fuck me, at this rate I could solve the national debt with a fucking pig-skin kicking monkey, of course, I do it for the sake of humanity, not for personal gain of course.
:-)
Love the Rooney joke, love it!
A few mates of mine must spend all day either making them up Herd, or sending them on.
I thought one was worth sharing as 'Shrek' is a national pass-time piss take here.
Boom boom, what what old boy.
Much like Obama, I think the Fed will say something and do the opposite. Announce an impending taper while ramping up the printing and Presto! Look at the numbers. The economic recovery has legs! What a farce. Go ahead and implode already, so we can all get to work on a real recovery.
All this is words. They have not and will not stop lying and printing.
The Fed will want to start turning it down with zero fanfare and then point after the fact to it like the sequestration and triumphantly exclaim "See, told you there'd be no effect"....at which point the market will be able to take off it's Fed training wheels....yeah right.
Due to the gross manipulation of all statistics, the Fed probably subscribes to Shadowstats, if they don't, they (more likely) employ a bunch of people to create John's same numbers which are their old numbers; sigh ... using bogus numbers to determine policy is the ultimate stupidity.
"With the spigot about to be turned down there will be a marked effect on earnings and profits in American corporations as borrowing costs rise and as all of the gains that could be taken were utilized from our very low interest rate environment."
First off we don't know if the spigot will be turned down at all. We have to wait and see.
Second, I think corporations did enough refinancing and borrowing at the low rates to last them quite a while. So I don't think their earnings will be impacted by higher rates for some time.