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Only A Few More QEs To Go Until Argentina
Because nothing says economic strength like nominal equity market gains...
A gentle reminder from the past...
Amid the euphoria... Kyle Bass provided a few minutes of sanity this morning in an interview with CNBC's Gary Kaminsky. Bass starts by reflecting on the ongoing (and escalating) money-printing (or balance sheet expansion as we noted here) as the driver of stock movements currently and would not be surprised to see them move higher still (given the ongoing printing expected).
However, he caveats that nominally bullish statement with a critical point, "Zimbabwe's stock market was the best performer this decade - but your entire portfolio now buys you 3 eggs" as purchasing power is crushed. Investors, he says, are "too focused on nominal prices" as the rate of growth of the monetary base is destroying true wealth. Bass is convinced that cost-push inflation is coming (as the velocity of money will move once psychology shifts) and investors must not take their eye off the insidious nature of underlying inflation - no matter what we are told by the government (as they will always lie when its critical). Own 'productive assets', finance them at low fixed rates (thank you Ben)...
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Just ask the Venezuelans...
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We are all Argentinians now...
Reap the rewards of this cluster %^&*. Then Ex Pat it to a normal 2nd tier country and live the good life. Any 2nd tier country not participating in this non sense is probably going to be a safe place.
What I want to see is the demographics of Gold ownership in Argentina. Even one OZT counts ! Many in Europe always carry a sovereign "just in case" to get out of town quickly, when the time comes.
And where might that country be that is not connected to this? North Korea and Somalia are autarkic and probably qualify.
Opinions age very fast nowadays.
They are not like a fine wine....
This is not nearly the strength in US equity "mark-its" I was expecting to see from BOJ fun-derp-mentals.
Fade it.
On Bizarro World, the chart looks Marvelous..
..
I enjoy Kyle's commentary, but I will be damned if I add debt to our profitable company. We have a positive cash flow situation, nearly 30% profit margin (including officer salaries), and almost zero debt (small mortgage on the building to be paid off in two years). No need to give banker's reign on our goose any more than we have to.
Smart.
If we go Argentina, I hope some Jose Elliotevez starts stalking us in the courts...
Yesterday's GPIF news was actually significant and not just a reprint of the Oct. 19th story. In prior articles the GPIF/BOJ plan was being considered but yesterday's news was of its official approval. A huge difference. Fed ceases QE (sort of) then Japan seamlessly picks up the baton.
if you are not invested in the stock market, you will wake up in 5 years and your bank savings will be worth 50% less than today.
2 years after that, your stawks will be worth 10% of what they once were...Reference Weimer...good luck!
I'm pretty sure panick will kick in the last 5 minutes before shit breaks lose and suddenly everybody will be a einstein about this crap when Disney Channel airs a docu about the comming implosion
Herding cattle to the nominal “stock” pens as gold tanks. Bring it down boyz I’m a buyer.
Hold Gold.
So.....
MADONNA FOR PRESIDENT!!!
So instead of saying "buy gold, sell stocks" for the last 5 years ZH should have been saying "sell gold, buy stocks".
If nominal wealth in paper money is your thing, then yes.
I suppose then that in your business that you mentioned previously your return is calculated in non-paper money, right?
When did ZH tell anyone here to sell stocks?
Actually, right now would be a good time to sell stawks and buy real gold.
ongoing (and escalating) money-printing (or balance sheet expansion as we noted here)
Please! use Balance Sheet Expansion, it sounds so healthy. Money Printing scares the minimally informed (target consumer) sheeple.
Could go up another 55% If there would be some way that the FED can get the US to default.
BTFD
I see nominal gains in stocks as more of a worry in Japanese equities than the US (for now). If QE4 begins in earnest then yeah.. Time to worry about the US markets.
But that's why monetary policy action is so insidious. It buries real supply/demand characteristics through nominal sleight of hand.
I got caught off guard. I thought the QE Stickpass, Manipulation would happen next week. I'd better lick my wounds before somebody else does.
Tell me, isn't the Sheriff supposed to be courageous, loyal, and above all honest? [/a few pesos moar]
<---- I am in bed and this is all a bad dream.
<---- I am going back to bed.
I went dove hunting in Argentina one time and got laid for US $65 ,that same nookie is probably $15 today
Zimbabwe's stock market kept going higher and higher. The Fed's crack house economics in action.
How will these blanks be filled in?
http://www.nowandfutures.com/us_weimar.html
A lot of tumult goes on when monetary policy spins out of control, including in the stock markets:
http://nowandfutures.com/weimar.html
According to Natixis FICC Research:
http://personal.crocodoc.com/SU8Hy8u
In reality, central banks control only the prices of the assets they buy directly
When a central bank buys an asset directly (often government bonds), it drives up the price of this asset, the demand for which increases.
But the prices of the other asset classes increase only if the economic agents that have sold the first assets to the central bank use the money received to buy these other asset classes.
This transmission of increases in asset prices to all asset classes is therefore unstable, since it depends on the behaviour of investors and savers. Since 2012, we have seen that central banks’ purchases first led asset sellers to buy risky assets (equities, corporate bonds), whose prices rose. But in the recent period, the rise in risk aversion has turned them away from risky assets, whose prices have fallen, and they have invested the money received from the central bank in risk-free assets.
There is therefore no stable monetary policy "risk channel"; the only asset prices that are controlled by central banks in the longer run are those of the assets that central banks buy directly. This could in the future push central banks to buy riskier assets if they want to change their prices in a stable manner.
Central banks’ asset purchases have a direct impact on the prices of these assets
When a central bank buys financial assets, it increases demand for these assets, which directly drives up their prices.
This occurred with purchases of Treasuries and ABS in the United States (Charts 1A and B) and with government bonds in the United Kingdom and Japan (Charts 2A and B), and with the announcement of covered bond purchases in the euro zone (Chart 3).
But the impact of the central bank’s asset purchases on other asset classes is uncertain
- The central bank buys assets (especially government bonds, Charts 1A, 2A and B above).
- It pays by creating money (Chart 4).
- The economic agents that sell assets to the central bank use this money to buy other assets. But they have a free choice: a quantitative easing policy will drive up the prices of the assets that economic agents choose to buy, not the prices of the others.
- We also saw from 2011-2012 until the spring of 2014:
• A tightening of credit spreads (Charts 5A and B, 6A and B);
• A rise in the stock market (Charts 7A and B, 8A and B).
- But investors’ risk aversion has risen since the spring of 2014, (Charts 9A and B): they no longer buy risky assets and the prices of these assets have corrected downwards, whereas long-term interest rates on risk-free government bonds have fallen sharply (Chart 3 above, Charts 10A and B).
Conclusion: The risk channel is not robust
The transmission of the rise in the prices of the assets the central bank buys directly to a rise in the prices of other assets is therefore unstable, since it depends on investors’ attitude and their risk aversion.
The "risk channel" is the mechanism through which the central bank’s monetary creation drives down risk premia.
We have seen that this mechanism is unstable: it functions only if economic agents use the money created by the central bank, in exchange for purchases of risk-free assets, to buy risky assets.
If their risk aversion rises, this mechanism disappears - and so does the risk channel. In that case, the only remaining possibility for the central bank is to buy risky assets directly if it wants to drive down their prices.
What is good for the goose is good for the gander. Governments claim to handle risk through central banking, planning, and economics. Let Government eat risk that they invented. It is good business for the government to clean up after itself IMHO. Self-correction and a proactive stance in business is not all that bad, frankly. Two mistakes don't make a right, but perhaps the gubberment needs to balance their misdeeds out a bit to make things work in their favour. Gubberment is not science, eh.
The problem with KB is that so many of his clients have lost money in his Japan Macro Opportunties Funds. Every fund, focused on JGBs and JPY, he has put together has been a capital exhuastive vechical on a several year cycle. Close to $100mm has been compltely exhuasted, he never seems to bring that up... But you know, KB has always done well, as he has gotten a free carry into the fund, and he loves those fees..... As long as he can still keep selling, he'll get a carry, and maybe hit a another home run.