How many more quarters of this Einsteinian insanity will it take for investors to realize the sell-side analysts' "forecasts" are worse than useless...?
One of the biggest lies in finance is this perpetual deception that inflation is good. Ben Bernanke, the current high priest of US monetary policy, recently remarked that it’s “important to prevent US inflation from falling too low.” Well of course, we wouldn’t want that, would we? Just imagine the chaos and devastation that would ensue if the cost of living actually remained… you know… the same. One shudders at the mere thought of price stability.
As we "forecast" this morning (and a month ago - if our extrapolation of the Fed's balance sheet is correct - i.e. no Taper - that the S&P 500 Fed L-A-B-I-A should be around 1800 by year-end), the Fed can be proud that they managed (remember it "costs" $3.25bn in POMO to create 1 S&P 500 point) to get the key US equity index - the S&P 500 - near the critical 1,800 level...
This objective report concisely summarizes important macro events over the past week. It is not geared to push an agenda. Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.
How could such a monetary disaster happen in a civilized and advanced society, leading to the total destruction of the currency? Many explanations have been put forward. It has been argued that, for instance, that reparation payments, chronic balance of payment deficits, and even the depreciation of the Papermark in the foreign exchange markets had actually caused the demise of the German currency. However, these explanations are not convincing. Looking at the world today - in which many economies have been using credit-produced paper monies for decades and where debt loads are overwhelmingly high, the current challenges are in a sense quite similar to those prevailing in the Weimar Republic more than 90 years ago. Now as then, a reform of the monetary order is badly needed; and the sooner the challenge of monetary reform is taken on, the smaller will be the costs of adjustment.
Would printing the cash to fund pensions for low-income retirees trigger inflation? It's more of an open question than we might imagine at first glance.
Despite Janet Yellen's commitment to continue supporting the economic recovery the transmission system of government interventions is clearly broken. As STA Wealth Management's Lance Roberts shows in the simple chart below, it has taken $35.17 of government intervention to generate $1 of economic growth over the past 5 years. More importantly, the rate of diminishing returns is increasing. In other words, it is taking consistently more dollars of intervention to create an incremental increase in economic growth.
The Republicans' "Keep Your Health Plan Act of 2013" bill has passed the House (as somewhat expected). However, what is more critical - as we noted previously - is that a large number of Democrats broke ranks and voted for the bill.
- *HOUSE VOTES 261-157 FOR REPUBLICAN BILL ON KEEPING HEALTH PLANS
- *THIRTY-NINE DEMOCRATS JOIN REPUBLICANS ON HEALTH-POLICY BILL
39 House Democrats voted in favor, shunning Obama's proclamation that he would veto the bill (which he described as "threatening the health care security of hard working, middle class families,") anyway if it came to his desk. It is unlikely to pass the Senate.
The Chicago Mercantile Exchange admits that in July it was hacked:
- *CME HAD CYBER INTRUSION IN JULY, SOME CUSTOMER INFO COMPROMISED
- *CME: SOME CUSTOMER INFO ON CME CLEARPORT PLATFORM COMPROMISED
- *CME GROUP NO EVIDENCE TRADES ON CME GLOBEX ADVERSELY IMPACTED
Algos # 0001 through #9999 now have their Vacuum Tube Security Number leaked
Starting from a simple loan (remember them), credit markets have evolved many innovations to cater to an increasing need for leverage (intrinsic firm leverage - levered loans to high-yield bond market; and extrinsic instrument leverage - securitizations and derivatives) for issuers, traders, and investors. However, as the following maze of the history of debt, NY Times shows these have led to many costly crises (and will do in the future...)
A rhetorical question that was apocryphal a mere year ago, has emerged as a very realistic option: is Barack Obama the second coming of Dubya? Policy initiatives aside, in this case we simply look at the plunging popularity ranking of both presidents in their second term as shown on the chart below.
Responding to his administration’s ongoing struggles with the launch of Obamacare, President Barack Obama announced a proposal today that would enable insurance companies to grant one-year extensions to the health plans of Americans who would otherwise face cancellation. Here are some of Obama’s other plans to fix the troubled rollout of his signature health care law...
According to the popular way of thinking, bubbles are an important cause of economic recessions. The main question posed by experts is how one knows when a bubble is forming. It is held that if the central bankers knew the answer to this question they might be able to prevent bubble formations and thus prevent recessions. Contrary to Shiller, in order to establish that a bubble is forming we don’t need to apply the same methodology employed by psychologists. What we require is the establishment of a correct definition of what bubbles are all about. Once it is done, one discovers that bubbles have nothing to do with some kind psychological malfunction of individuals – they are the result of loose monetary policies of the central bank.
UPDATE: 23 minutes later - Self-Help is revoked...
Well that didn't take long...
- *BATS OPTIONS DECLARES SELF-HELP AGAINST CBOE
- *CBOE: CT BC85 HAS BEEN SWITCHED TO ITS BACK-UP
But, as CNBC previously noted, we are getting used to these "broken markets" by now so it doesn't matter...