If there is any one strikingly obvious feature of the U.S. economy in the past 15 years, it's the serial asset bubbles, one after another. So who benefits from serial bubbles? The financial sector and the central government...
"When things are going well people become greedy and enthusiastic, and when times are troubled, people become fearful and reticent. That’s just the wrong thing to do. Another mistake that people often make is that they compare themselves with others who are making more money than they are and conclude that they should emulate the others’ actions ... after they’ve worked. This is the source of the herd behaviour that so often gets them into trouble... As long as human nature is part of the investment environment, which it always will be, we’ll experience bubbles and crashes.... People talk about the wisdom of the free market – of the invisible hand – but there’s no free market in money today. Interest rates are not natural. They are where they are because the governments have set them at that level. Free markets optimise the allocation of resources in the long run, and administered markets distort the allocation of resources. This is not a good thing..." - Howard Marks
One of the most published academics on gold in the world is Dr Brian Lucey of Trinity College Dublin (TCD) and he and another academic who has frequently covered the gold market, Dr Constantin Gurdgiev have just this week had an excellent research paper on gold published.
They have researched the gold market, along with Dr Cetin Ciner of the University of North Carolina and their paper, ‘Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates’ finds that gold is a hedge against US dollar and British pound risk due to “its monetary asset role.”
The world of Industrial Design is often useful to assess everything from the Federal Reserve's current monetary policy to equity market structure (particularly timely given today's total SNAFU) to the timeless debate over the real value of gold. As ConvergEx's Nick Colas reminds, good design is innovative, useful, aesthetically pleasing, honest and durable, whether those attributes relate to a new electronic gadget or any 'Product' in the world of high finance or economics. Examples of "Good design" include stocks, bonds, and options – all simple, durable constructs. "Bad design" would be the Fed’s "Taper" and current equity market structure.
More of the same downward drift this overnight trading session, with early Asian outflows coupled with a fresh record low in the Indian currency, driven in part by reports the Fukushima leak severity had been raised from Level 1 to Level 3, which however subsequently reversed following a weakening in the JPY and pushed the Nikkei from a steep early drop to a modest green close. China was unchanged even as Fan Jianping, chief economist at the State Information Center, said that a new reasonable range for China’s growth is 7%-9%, Xinhua said and ongoing liquidity additions by the PBOC. In Europe, newsflow was dominated early on by a Suddeutsche report that the third Greek bailout would be likely financed in part by EU budget as the reality that nothing is fixed in Europe slowly returns and fears that the latent and non-existent OMT will eventually have to be used. US futures have seen a modest risk off bias in part driven by concerns what today's key event, the FOMC minutes due out at 2 pm, would reveal (if anything new). Also on deck are Existing home sales at 10:00 am which expect a slight pick up to 5.15 million from a 5.08 million prior print. Moments ago the latest weekly MBA Mortgage Applications number came out and, to nobody surprise, it posted the last weekly decline, dropping another 4.6% with conventional refis dropping for the 10th consecutive week.
"While many of you have asked what our plans are for this holding, as with our other investments, we do not disclose in advance what we intend to do in the future for obvious reasons. After our failed proxy contest at Target, we held our investment for more than 19 months until the price rose to a level where we found better uses for capital. We may choose to exit J.C. Penney after more or less time depending on developments at the Company, the stock price, and the availability of other investment opportunities." - Bill Ackman, August 20
The Fed’s Confession: We Can Avoid A Crash At The End Of QE If Everybody Believes That Everybody Believes In A Mirage....Submitted by testosteronepit on 08/14/2013 11:33 -0500
With impeccable timing.
- JPMorgan Nears Settlement With SEC on London Whale Loss (BBG)
- Without even a wristslap: Iksil to face no U.S. charges in 'Whale' probe (Reuters)
- China’s Credit Expansion Slows as Li Curbs Shadow Banking (BBG)
- China slowdown shows signs of abating (FT), even as...
- Australia central bank Lowers Growth Outlook as Economy Transitions From Mining (BBG)
- SAC Business Plan Goes to Judge, Plan Would Allow Firm to Maintain Business Operations but Restrict Its Ability to Move Assets (WSJ)
- Another buyer of Herbalife? - Norway’s oil fund plans to turn active (FT)
- Mark Carney plays down scepticism over interest rate policy (FT)
- Orders Evaporate for Celebrity Perfumes (WSJ)
The most financially savvy country and western crooner in America, Merle Hazard, returns with the must-watch release of a new economics chart-topper: "The Great Unwind." As Warren Buffett previously noted, "all over the world, everybody that manages money is waiting to catch the signal that the Fed will reverse course," and this two-minutes of country-music magnificence should concentrate the mind as "we've never had the degree of disgorgement that might be called for down the line, and who knows how it'll play out."
This 4 year Bull market has been registering new all-time highs on a nearly daily basis. Days like today’s 57 basis point drop in the S&P 500 are being mocked as a correction or large sell off for the current environment. It appears that after so many years of the “Great Rotation” being hyped, the public has (to an extent) been trained to take their Bond fund proceeds and roll them into equity ETFs. While it is unlikely that baby boomer money will come back to equities and sustain the rotation, there is money flowing in. While we are no fans of the bond market, we are still stunned that there are people selling “safe” assets and rolling the proceeds into “risky” assets at all-time highs. There are three cornerstones to our current view that risk far outweighs opportunity...
Many high profile investors, economists and companies got burned during China's recent woes. We look at the errors they made and what you can learn from them.
With euphoria returning to equity markets, it's worth remembering that stocks are unlikely to make you really rich. We have some ideas what might though.
Danger and opportunity arrive hand in hand.
- ICE's NYSE to determine the rate used by key competitor CME: NYSE Euronext to Take Over Libor (WSJ)
- Japan slams China over maritime disputes (FT)
- The Twinkie Returns, With Less Baggage (WSJ)
- Pentagon Workers From Pennsylvania to Ghana Hit by Cuts (BBG)
- Why Prostitutes Aren't Enough to Deprive the World of Eliot Spitzer (BBG)
- Groups gather in Turkish protest park after night of clashes (Reuters)
- Apartment Rents Rise, But the Pace Is Slowing (WSJ)
- Asiana Seen Saving Millions With Tactic to Bar U.S. Suits (BBG)
- Bin Laden's life on the run revealed by Pakistani inquiry (Reuters)
- Fracking Firms Face New Crop of Competitors (WSJ)
As the escalation in violence between members of the pro-Mursi Muslim Brotherhood and the military-backed victors of this week's coup gets worse with at least 6 dead now according to Al Arabiya, the US Secretary of State is busy...
a) Getting debriefed and preparing for a diplomatic statement
b) In the air between point A and point B promoting US domestic and foreign interests abroad
c) Informing Warren Buffett about the aphrodisiac benefits of ketchup
d) Spending a (second consecutive) exhausting afternoon on his sailboat.
And the correct answer is...