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5 Things To Ponder: Interesting Stuff
Submitted by Lance Roberts of STA Wealth Management,
I had to laugh this morning when I read Eddy Elfenbein's commentary on the recent market correction:
"The vicious bear market that rocked Wall Street for a full two weeks has finally come to an end. Measuring from close to close, the S&P 500 plunged for a massive 3.94 loss between July 24 and August 7."
He is correct. As I discussed recently, there has been an ever DECREASING rate of corrective actions in the markets over the last couple of years as the Federal Reserve has been heavily engaged in accommodative monetary interventions. To wit:
"There is an interesting phenomenon occurring in the financial markets that absolutely, positively, will not last indefinitely – the 'Giant Shrinking Correction.' The chart below shows the S&P 500 (weekly closing data) since the beginning of 2009, with all relevant corrections identified in terms of percentage."
As a reminder, this kind of market action is neither normal or healthy longer term and has only seen near historical major market peaks. Of course, timing is everything.
With the current influx of liquidity coming to an end in October, combined with a plan to start to increasing interest rates in 2015, the Fed has clearly begun to signal the end of 5 years of ultra-accommodative policies. The question that remains to be answered is whether or not the economy is actually strong enough to be removed from "life support?"
This weekend's "Things To Ponder" is just a smattering of interesting articles cover a wide range of topics that I hope you will find interesting, informative and contemplative.
1) The Market Is Richly Valued - Should You Worry? by Jeremy Glaser via Morningstar
"It's one thing to say that the market is richly valued relative to historical standards. It's a completely different thing to say that this means stocks are going to decline over the next one year, three years, or even five years. As I mentioned, in 1996 and in 2002, the S&P 500 was valued at similar levels and went on to have a great run over the next five years until it ended in a crash. So even over a time period as long as five years, saying that the market is relatively richly valued relative to history doesn't tell you much about what stocks are actually going to do in the near term."
[Note: Time horizons are critically important.]
Read Also: The Fed Is Screwed by Michael Gayed via MinyanVille Pro
"This is a humongous problem for the Fed. If the marketplace does not believe inflation is coming, after trillions of dollars in stimulus, then what is it going to take for reflation to finally take hold? The fact that this is happening at the same time the Fed is going to be ending Quantitative Easing is, to put it mildly, somewhat disturbing and suggests that equities may be nearing a moment of truth as bonds scream that things are nowhere near as optimistic as all-time stock market highs would lead you to believe."
2) The Shiller P/E Weekend Reading List
There was a litany of articles out this past week in particular debating Shiller's CAPE P/E ratio. I have discussed this issue previously in "Is Shiller's CAPE Just B.S." and "Shiller's CAPE, A Better Method." (One important note is that looking back in history, about the time that mainstream analysts start trying to "debunk" the value of valuation, we are closer to historical market peaks than not.)
Below is a reading list of more arguments over Shiller's CAPE by Cullen Roche via Pragmatic Capitalist
- The Mystery of Lofty Stock Market Elevations – Robert Shiller
- The Stock Market’s Missing Ingredient – Barry Ritholtz
- An Old Friend: The Stock Market’s Shiller P/E – Cliff Asness
- on Bob Shiller and CAPE – Marginal Revolution
- Under What Circumstances Should You Worry That The Stock Market Is 'Too High'? - Brad Delong
- Shiller CAPE Market Valuation: Terrible For Market Timing, But Valuable For Long-Term Retirement Planning – Michael Kitces
- Fixing the Shiller Cape – Philosophical Economics
- More Thoughts on the CAPE and Valuations – Cullen Roche
3) Economists Warn Over Loss Of Important Economic Strength by Howard Schneider via Reuters
"The U.S. labor market has become steadily less dynamic since 1990, with workers seemingly locked into particular jobs and a more sluggish process of job creation and destruction in the private sector, according to research to be presented to global central bankers on Friday.
The research by two top labor economists portrayed the United States as potentially losing one of its notable economic strengths - the robust flow of workers between jobs, and the churn of employment as companies succeed and fail."
Read Also: Median Household Incomes 5 Years After The Great Recession by Doug Short via Advisor Perspectives
4) Fed Optimism Will Give Way To Economic Meltdown by John Crudele via New York Post
"Even if Yellen and Draghi say exactly the opposite, Wall Street — which is like an industrial-size clothes dryer on the high setting — will spin whatever words come out of the mouths of the world’s two most important bankers into the magical phrase, 'Low interest rates will last forever.'
Stocks prices will rise. Investors will be delighted. Members of the media won’t look very deeply into the matter as they head off for another glorious summer weekend.
And because of our inattention, the financial markets will become even more dangerous."
Read Also: If QE Is Ending Because Of Success, Here Are Simple Questions by Guy Haselmann of Scotiabank via ZeroHedge
- "If QE is ending because it was so successful, then why is aggressive forward guidance necessary?
- If QE worked so well, then why will Yellen likely need to mention ‘the elevated number of part time workers’, ‘under-utilization of labor resources’ or ‘room for improvement in the labor market’?
- In regard to its inflation mandate, there is no evidence that QE has had any impact other than causing asset price inflation.
- Shouldn’t the lack of success at achieving the desired results in the US and Japan have curtailed such hasty Pavlovian responses?"
5) Is Oil Price Sending A Message? via Jeffrey Snider via Alhambra Partners
"I think oil prices might actually have overstated the spring “forward” this year – perhaps owing more to the geopolitics end of it than optimism about the perpetual and perpetually elusive recovery. In any case, the recent drop in oil prices is potentially indicative of, with these other correlations in mind, not just an end to the spring “bounce” but something perhaps more destabilizing economically. With WTI now within earshot of the winter low point, there is at least some scale to that idea as we look for further observation for the rest of the third quarter and beyond. Given the performance of credit markets as well, there is more than a good deal of pessimism about economic prospects however the conclave at Jackson Hole and the pyramid of economists that parrot it stand."
Read Also: Is The Fed Too Hawkish?by Ron Isana via CNBC
Please continue sending all the thoughtful comments and commentary to me via email or on Twitter.
“One time the police stopped me for speeding, and they said, ‘don’t you know the speed limit is 55 miles an hour?’ I said, ‘Yeah, I know, but I wasn’t gonna be out that long’”. – Steven Wright
Have a great weekend.
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QE 5 will make asset prices go to infiniti.... we are all going to be Rich! Sarc
Sadly, that is the only way that the U.S. government can default (which it must do) on its debt without declaring an official default. Simply devalue the debt with QE infinity, of course devaluing everyone's money as well.
QE will be back...
Why do you think they want to save the US government or the Fed for that matter? If they want to unite the world under one technocratic (enlightened) government then they need to eliminate the regional distictions.
The US government and the Fed have to be completely discredited (good job so far Clinton-Bush-Obama and Greenspan-Bernanke-Yellin). The people have to be desperate ...
... and then they provide the solution to end everyone's pain (one way or another).
It would be interesting to watch if it was not for the fact that this, like everything else, is to keep us occupied and not looking for the truth.
As a computer programmer I feel it is my duty to correct the improper use of HTML tags on this web site.
The sarcastic tag, like all tags begins a string of text with the
<sarc>
tag followed at the end of the text with the ending tag:
</sarc>
EXAMPLE:
The phrase "Obama is slimy little crap hound with a mind that's about as sharp as a wet donut"
Should be written as such:
<sarc>"Obama is a splendid fellow, who has saved the world"</sarc>
In the future, please endeavor to use the correct syntax.
The canary
"dead canarys' are tasty, from what I've seen. Roll them in flour and fry 'em all light and golden brown. Have a beer. /s lol s/
U 'ave far 2 muc tm on ur hands
makes sense to me; all an agenda
however, they'll want to save the fed & the us gvt until everything is in place to provide that solution.
blue beam, world war 3, 911 coming out with a scape goat ...?
i'd expect a trigger
Based on what i saw at the Mall today the Economy is at Maximum Speed... Goddamn Where they Giving shit away or what?
I have been noticing the exact same kind of activity ... new cars everywhere, Mc Mansions, eaterys full, etc. Seems to be money everywhere I look.
ur trapped in a Sims construct, reboot asap
The Hooters girl contest was at the mall today...
Whats a mall ?
it's a consumer thing, need more mass consumption
A waste of time and money.
http://hedgeaccording.ly/2014/08/feds-lockhart-strength-of-the-economy-n...
There is no sense in calling a brief downtown in the stock market a correction. The idea that dropping 4% can allow 10% to the upside just because the market went down for a few days is absurd.
Nothing in real business follows the actions of the stock market. The daily fluctuations in commodities make it impossible to plan. The only people who care about the daliy price moves are the ones whose compensation is tied to it.
If your compensation is tied to the performance of the stock market, of course you are going to only do things that will increase thw value of your stock. Take that away and the economy will right itself.
Time for a 80% tax on capital gains. Right now it is the only way. If the parasite class can learn to behave itself then maybe we could look into lowering the tax rate, but only if the safeguards taken away over the past 30 years are put back in place.
"Time for a 80% tax on capital gains."
Just have the government formally take over all businesses instead. Similar result...
Hey Tylers...
New type of ads block the title of top post.
This is the first time I have ever had any ad that blocked content. I'm on a Mac and the problem persists even with Ad Blocker and switching from Safari to Firefox.
There are different companies in each ad and with different browsers.
I hope this is glitch because I can't even expand the post to read it. The ad goes from left to right and blocks out the title.
Thanks
2nd your bug report. Had to click on one of the "comments" links to even get access to the article.
Ditto.Had to click the commoents link to see the article.
Forward (over the cliff)!
Ditto
Yep, same thing here, and I'm on a PC running Windows 7 and IE 11.
dump IE asap
Same here, I'm running adblock but it's still messing with the formatting, and I'm running on linux, so it looks like it's affecting everyone.
I had the same problem.
HP i7, vista, firefox, adblock, flashblock. No prob, no ads
Crash-o-matic...
The federal debt can not survive interest rates above roughly zero.
all deviations from the mean are becoming smaller. Look at gold. In one year +/- 120, in 6 mos +/- 60, in 30 days +/- 30.....It appears everything is closing in on some sacred position in the financial galaxy at which point all trading will halt and all will be well...or it will explode...haven't taken the research that far yet.....
Let's call it the Big Bang Theory
A FeatherFall from the past heavier than Duty
http://andreswhy.blogspot.com/2009_03_01_archive.html
72 months 0 interest financing on all new Ford models.
Economy fixed!
Ponder ye, how the neocon/ziopath press will blame Assad for the rise of the US/Saudi/Israeli funded and armed and supported proxy terror group that's been trying to depose him...
http://www.nytimes.com/2014/08/23/world/middleeast/assad-supporters-weig...
http://online.wsj.com/articles/assad-policies-aided-rise-of-islamic-stat...
Got controlled media?
Interest rates are climbing from 0.0015% to 0.015% next year! I'm all in...
5 things to ponder:
1. Whats it like to suck the cocks of the people who are going to kill you afterward, instead of letting your parents live, like we did?
THINK
White Race!
We race humans.
Hands,knife,garrot,rope,knuckles,
feet,
axe,sword,club,hammer,rocks,
poison,
star,dirt,
spear,
crossbow,
bow,
family,
fraternity,
gang,cult,legal system,
gun,
rifle,
cannon,
bomb,
telco/computer
Don't use more than you need. Don't use lethal force: demonstrate it. Missing is much more effective and convincing, and demonstrates more skill. Its much better than killing the help, dude. Phunnn!
I wrote my assembly woman. She wrote back, describing her commie mommy plans for my labor. I moved.
I wrote my congressman. He wrote back, implying that if I give him money he'll work for me & I'll profit. Now I get solicitations from every wannabe congressional whore, everywhere.
I wrote my senators. One wrote back, empathetic. The other sent the FBI. I'm moving, to give my hundred thousand a year tax burden to somebody who isn't a backstabbing, thieving traitor.
I wrote Obama. So much of the response letters were *redacted*, as in blacked out, that I have no idea what he said. I'm sure he didn't know. If he reads this, he will. But I'm pretty sure he knows by now. Maybe this is why he went to TV, only to find it just as owned as we all know it is.
Do the Right Thing.