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Biderman: "Welcome To The First Global Recession Created By Central Bankers"
Tensions in the global stock markets appear to have calmed. In sharp contrast stands the real economic development. Even in the US there are more and more signs of an accentuated weakness (outlier jobs data aside). "Things are crazy," says Charles Biderman summing up this bizarre situation. "We’re seeing the impact of the global slowdown on the US and that’s going to continue" adds the TrimTabs founder, and, in contrast to the mainstream view on Wall Street, he doesn’t think that the Fed is going to raise interest rates (and is more likely to start a new stimulus program). "Ultimately there will be a major correction," he warns and any new stimulus will merely serve the drug-addicted market.
Chjristoph Gisiger, of Finanz und Wirtschaft, interviews TrimTabs' Charles Biderman...
Mr. Biderman, the US economy is sending mixed signals. How concerning is this situation?
The global slump is impacting the US economy more significantly than people realize. Our real-time data on the economy is declining and wage growth is the lowest it’s been all year. The TrimTrabs Macroeconomic Index for the US peaked in January and has weakened recently. It was up every year since 2011 but now it’s down year to date.
Is it even thinkable that the US will fall into recession?
It’s obvious that we’re in a significant slowdown. According to the technical definition, a recession is two quarters with negative growth in a row. So will the economy grow below zero? Could be. But anyway: What’s the big difference between minus 0,1% or plus 0,1% growth given how lagged the data is from the quarterly GDP numbers?
What does this mean for the Federal Reserve and its intention to raise interest rates?
Very few people would even consider this possible. But what I really think is going to happen is that the next Fed move is not going to be a hike. The next Fed move will be another form of easing. They’re not going to call it Quantitative Easing or QE, since QE has a bad reputation by now. So they’ll call it something else. I don’t know what they are going to do exactly. But it’s not going to be a tightening. As the global economy goes into a recession and the US follows, the Fed is going to do something.
For more than a year, the Fed is trying to prepare the financial markets for a rate hike. What would that do to the credibility of the central bankers if they back off now and actually take a U-turn?
Who says they have any credibility? The real problem is that the people who run the central banks are either economists or bankers.
If you look at the record of global economists, they’ve been consistently wrong on the market and on the economy. At least in the United States, 95% of the economists surveyed have said at the start of each of the last five years that interest rates are going to end the year higher. Although they have been wrong each year, people keep listening to them. And when it comes to bankers, consider this: I went to Harvard Business school. The top students there went to firms like McKinsey, Boston Consulting or to the top Hedge Funds. So where did the graduates go who couldn’t get the top jobs? They went to the banks. So what you end up with is people just as greedy but not as smart.
The Fed already blinked at the September meeting. Why are they so hesitant to make a move?
]If the economy continues to slow down going into an election year, the Fed will be under tremendous pressure to do something. They will not let the economy and the stock market slump. That’s why I think there will be further easing.
Why are today’s stock markets so heavily focused on monetary policy?
A simple way to look at market valuations is earnings divided by interest rates or cash flow divided by interest rates. So even if you raise interest rates only a quarter of a point that lowers the value of stocks. Also, once the Fed starts raising, it keeps raising. That decreases the attractiveness of flow trades into the stock market because now you can earn some money on your other assets. Right now, if you’re a corporation, your cash earns nothing. So you might as well use some of it to reduce your share count or to do a takeover. Both have been essential drivers of the bull market.
When it comes to the real economy, cheap central bank money seems not to be that beneficial.
Governments are creating headwinds for growth. So the best thing central banks can do to promote growth is to cut interest rates to zero or even lower. That can work for a little while. But now it’s creating a global recession because of all the excess capacities. Even if it doesn’t cost to build a new plant or drill new wells, when demand dries up you’re not making a profit. So even if interest rates are at zero you’re still losing money and you have debt on top of it. That’s why I say: Welcome to the first global recession created by central banks.'
What should investors do in this environment?
All there is in a market is transactions: In the stock market, shares are sold for money. So if you track the number of shares outstanding and the amount of money available to buy shares, you should have a good sense of the market. And then you also have to understand that in every market the house has always an edge – or else the market wouldn’t exist.
What do you mean by that?
In the stock market, the house are the companies. They started markets to raise money. So they know more than investors by definition. And if companies are shrinking their share count with buybacks or cash-takeovers I want to be buying too. On the other hand, if companies are growing their share count, I want to be selling as well.
So what are you observing right now with respect to supply and demand?
Our data shows that buybacks are still growing. Recently they have slumped somewhat but they are still much higher than share sales.
And what’s going on with regard to cash-takeovers? It looks like that 2015 will set a new record for mergers & acquisitions.
A big cash takeover boom is typically what happens when companies cannot grow internally. So how do you keep growing if demand for your product is not growing? You buy a competitor, you cut costs and you add to profits. You can always cut overhead if you buy a competitor. And you have zero interest rates, so you can buy your competitors to keep growing. But that’s not real growth. Also, this is what happens on the top of the cycle when the economy is turning weak.
Why are you so pessimistic when it comes to the economic outlook?
It’s not rosy and the main problem why sustainable economic growth is not possible is all the headwinds to growth. From the United States to Europe and Japan: Everywhere you have hostile tax policies, regulations and a lot of anti-competitiveness from existing businesses. Ontologically speaking, growth occurs when something new happens. But in the United States for example, the ratio between companies dying and starting is now on the negative side for the first time ever.
So what does all that mean for the stock market outlook?
I don’t disagree at all with anybody who says the market’s overvalued and we’re way ahead of ourselves. So ultimately there will be a major correction. But that could be years from now. Even since the Fed ended QE, the market is still up a little bit. The reason for that is that the share count keeps going down. And as long as the share count keeps dropping, I expect the stock market to keep modestly rising. And when the Fed, instead of raising interest rates, announces some form of more easing next year that’s going to pop the market again.
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Really Rip van Winkle? The first global recession created by Central Bankers? Really?
Take the walk money and get out of the casino. Hug your kids and spouses tell them that you love them.
More precious than making a few extra FRNS at the risk of loosing much needed already earned cash.
First global recession caused by central bankers huh?
Well, I guess the Great Depression was a 'depression' not a recession. But if the recessions of the dotcom bubble bursting and 2008 weren't caused by the fucking fed, then who was the one manipulating interest rates below market rate to 'create demand'
I thought that creating global recessions/depressions was in the Central Banker Charter.
This is obvious, no? Blood in the street is not creed of Bankster class for financial opportunity!?
What are Trim Tabs? Diet Pills? Pussy handles?
It's boat related. You're no divingengineer.
Bar Crusher Boating Basics - Trim Tab ...
How to properly trim your boat for fuel economy and comfort - YouTube
I wouldn't call the Great Depression a truly global event.
Gotta say it: WTF, Chuck?
The cognitive dissonance is powerful in this one.
But in the United States for example, the ratio between companies dying and starting is now on the negative side for the first time ever.
What about the unicorns? They're all over SanFran?
One flew out my ass just a few minutes ago.
The first???
How about all of them since central bankers got their claws into the money supply?
Its a good thing the markets no longer care about recessions.
actually we are entering the second great depression caused by bankers
When economically the known world goes tits up you might even get a new dark age.
actually we are *in* the second great depression caused by bankers
fixed it for you.
Alot of sectors have already corrected quite a bit except for the heavily Fed-manipulated housing market [which is also supported by massive flood of money laundering into the country] and several areas of the stawk market.
These two will face some serious correction ... in time. Nothing stays juggled in mid-air indefinitely. Gravity inevitably wins.
And it so goes without saying that if gravity inevitably wins, then everyone else suffers losses. So then what is the point of everyone loosing? Since one mans ending is another mans beginning, the laws of Providence would provide the means of at least one person winning in order that some others might have the chance to win also. And if enough of those others did win, then they could enable even furthure winning people, perhaps enough to create a surplus of winners so much so that gravity might even lose it's grip on society, and then tomorrow would be full winners vs todays fullness of loosers.
Moral of story: Prepare today, for tomorrow it shall be too late.
Pretty fucking difficult to speak the truth in an environment so toxic/polluted by deceit and sickening hubris.
shit on them regardless
Montagu Norman and Benjamin Strong created the first great depression
Student Debt Default Swaps?
Auto Loan Backed Securities?
Anything but pay savers a return on Treasuries!
Actually agree with the sentiment tightening will be the wrong choice and more stimulation.
Wwas hoping for it before Xmas so everybody on the 1st January will have had a wonderful Xmas with yet more liquidity. If they leave it until the new year all those junk figures may make them react but it will be again the FED following the market not leading it.
Is " correction" the polite way of saying " destruction" ?
Because to be quite frank I can't see how the world can take any sort of decent correction without wholesale destruction.
Tue, 01/05/2010 - 18:07 | 183440 trav777''Credit.Must.Grow.
There is no other way.
Fractional BS and synthetic debt allowed them to run this thing almost a decade after it would have already collapsed on its own. It's tried to already 3 times in the past 10 years...hasn't anyone noticed?
The real economy ran out of steam and the synthetic one took over the baton of credit growth. And they piled leverage atop leverage, constructing CDOs even of tranches of other CDOs. Yeah, supersenior tranches of CDOs composed of equity tranches of other CDOs, synthetic CDOs based upon the payment streams from CDSs, themselves tranched, and then squared up again, with leverage built right into the instrument.
Again, rice...chessboard. You have to double the shit each square, that's the rule. So $40T in credit outstanding must become $80T, then $160T, then $320T''
http://www.zerohedge.com/article/pimco-sees-uk-rating-downgrade-probabil...
The same Biderman who proclaimed FaceBook as a $1000 stock just before he dumped his?
This guy is part of the problem.
The hike is baked in.
They punt.
Either way...It's all diseased.
Human beings (collectively) are like sick cows.
Sick birds.
Sick Deer.
Sick fish.
Sick.
" The next Fed move will be another form of easing. They’re not going to call it Quantitative Easing or QE, since QE has a bad reputation by now. So they’ll call it something else."
$400 for anal sodomy Alex....
QD: Quantitative Discharge.
NQD: Negligent Quantitative Discharge
QP = Quantitative printing. No bonds to buy required. Be simpatico...maybe we give it to you.
I would not be surprised in the slightest to see the next move on Dec. 16 to see the Feds go Negative .25%.
I would laught myself silly if they went +0.50% however.
But am expecting a whole lot of this again:
https://www.youtube.com/watch?v=MmFfTJlIvhQ
Keep it simple.
Debt is being used to give the illusion of a functional economy.
WE ARE FUCKED. Sooner or later!
WE - do you mean Russia?
The only way to play the market right now, is to NOT play the Indexes. They have sentimental/political/illusionary value at this point.
While the author is 100% correct in their analysis, what they fail to point out is that not every company has the ability to reduce their share count by doing buybacks. These are the companies that are going to suffer.
Stop trading the AAPL, GOOGL etc and start looking for individual stocks that have a low stash of cash.
All together now...WELCOME BACK BIDERMAN!
we all missed you...Right?
Ok, so what's going to happen is that corporate bond rates are going to rise independently from government bond rates. Government bond rates will flatten again, and raising debt will become impossible on the corporate front, because rates will rise, making debt too expensive. Corporate risk will probably surge as well.
The end of the housing bubble was when mortgage rates exceeded long term bond rates, where all the players assumed mortgage rates were really tied to long term yields.
Even though mortgage rates rose quite spectacularly, people could not fathom why gubmnt bond rates declined.
Just keep buying Chinese products that keep getting cheaper and cheaper.It makes America's Corporations rich and puts everybody out of work.The Federal Government needs and wants the extra debt ceiling on a continual basis in order to bankrupt Social Security and all other social benefits to Americans in order to keep up the world domination plan.Full steam ahead for the NEOCONS in Washington.WW3 or bust.
"People who cannot get top jobs go to banks...they are not smart". Is this news ? Yet delusional kids are still piling up for this Hollywood of Finance that grind down since 2008. Amazing that so many young talents still cling on to their horse and buggy fantasy rides into sunsets with the arrival of the steam engine. They are pushing snake oils to preys who still need fixes but their bosses are not releasing the credits for purchases. Go get some lives.
We're getting to an interesting point, where people are pressuring the Fed to either hike or come clean that they're in over the heads.
They've been a twilight zone for a long while now where they get to have their cake and eat it too.
But now it's time to put up or shutup, there is no recovery until we see normalised interest rates and a balanced budget (or something close to). Until then, the victory laps taken by Krugman and Bernanke are woefully premature.
So come December, Fed, what you gonna do?
Does he mean this week?
The first one?
Really?
I do not think that word means what you think it means.
Does he mean this week?
The first one?
Really?
I do not think that word means what you think it means.
Mr biederman is always saying stuff won't last and he is right but most of the honest anylsts are right. That is the problem the way stuff should happen never seems to come about. It is all like a scripted play but we don't know how it will end. For sure. We think we know but I could see gold at $750 and the dollar soaring because a default caused a run and assets don't sell for shit. What then.
It wasn’t that long ago we thought the economy was demand driven and the US consumer was the engine of the global economy.
Then along came new ideas about supply side economics and trickle down, which our policy makers are following with such limited success.
Let’s follow the old ideas and look at the global consumer.
1) The once wealthy Western consumer has had all their high paying jobs off-shored. As a stop gap solution they were allowed to carry on consuming through debt. They are now maxed out on debt.
2) Japanese consumers have been living in a stagnant economy for decades.
3) Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day. Western demand slumped in 2008 and the debt fuelled stop gap has now come to an end.
4) The Middle Eastern consumers are now too busy fighting each other to think about consuming anything and are just concerned with saying alive.
5) South American and African consumers are busy struggling with economies that are disintegrating fast.
Ah, I see the problem.
"Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day."
What has gone right over the heads of a lot of people, wages in the East have risen 10% year on year for the last 10 years, while those in the west have been suppressed. Via the TPP-TTIP-CETA, those nations become the new 'slaves'!
http://asia.nikkei.com/magazine/20150514-Asia-s-wage-inflation/On-the-Co...
"Wages in China have doubled in the past five years, clearly outpacing the increase in productivity. "
Nice interview with Mr. B without his normal level of ranting about the "Bernanke" and now "Yellen" put. He was pretty smart to capitalize on "Float Shrink" and identify it as the main paradigm shift in stock market "Funnymentals" (my word, not his). The classic "Fundamentals" as I learned them seem to be extinct at this time.
I think his words on positive free cash flow generating companies as the ones to sort and focus on are wise. They are the companies that can continue to fund share buybacks and the ones that the Banksters will continue to fund with debt. The unprofitable companies (think *cough* fracksters *cough*) are the ones selling *everything* to make the monthly payments on their present debt, and can't play the all-important buy-back game (float shrink).
Any reflective ZH'ers can review more about Mr. B on YouTube - where his historical video record (around 400 vids) can be browsed...
https://www.youtube.com/user/TrimTabs
and he had an interesting reflection on his former mentor Abelson here - I always loved to read the latter's pieces at the library in Barrons:
https://www.youtube.com/watch?v=jq29Nvm3DEs
Yes his note here; "in contrast to the mainstream view on Wall Street, he doesn’t think that the Fed is going to raise interest rates (and is more likely to start a new stimulus program)."
Our good friend Max Keiser has been informing us for years now, "you can't taper a Ponzi scheme"!
A rate rise will burst all their bubbles and where would the US get the extra $180bn a year just to 'service' her debt @ just 1% rise?
Go to the article link. Biderman recommends a buy for Apple, Facebook and Amazon at the very end. After all the gloom this guy recommends those? What a clown. Why would ZH cut that part out?
stock buybacks are just a function of the cheap money.
an exongenous shock may change all that. cant hasve QE for ever. Just ask the Weimar Republic, it all ended there when they shot t and killed the german fed chairman...... but they said it was a heart attack