...but stocks leap higher also.
U Mich consumer confidence beat expectations significantly.
Friday, May 17, 2013
Thursday, May 16, 2013
see bubbles everywhere, and that is not to be dramatic and not to
suggest they will pop immediately. I just suggested in the bond market
with a bubble in treasuries and bubble in narrow credit spreads and
high-yield prices, that perhaps there is a significant distortion there.
Having said that, it suggests that as long as the FED and Bank of Japan
and other Central Banks keep writing checks and do not withdraw, then
the bubble can be supported as in blowing bubbles. They are blowing
bubbles. When that stops there will be repercussions...
And today from Bill Gross, on why QE is not working as intended, and why the Fed's channels are not only clogged but never worked as intended in the past four years:
"Does it mean it is a good thing that capitalism should thrive under this quantitative easing posture on the part of central banks that distorts markets and this court's capitalism and promotes a zombie corporations and lowers net interest margins and destroys business model? All of that is the negative aspects of quantitative easing. Can we live with? I do not think this will be with us for a long time."
Isn't it interesting that when a hedge fund manager said two days ago that he thought stocks looked good, the market exploded higher 125 points. But today, when billionaire investor, bond guru, and PIMCO CEO Bill Gross explicitly says that they are seeing "bubbles everywhere", and especially in stocks, he is ignored and the stock market is flat! This is a textbook case of a stock market bubble as explained in the book Why Stock Markets Crash, a very arcane book by Didier Sornette!
This chart shows on a single graph the direction of the stock market coupled with the direction of the economic indicators over the past few months. In finance parlance, we call this a "divergence". It's what happens when the real economy and stocks part ways. Eventually, one or the other must turn and recouple with the other. Any bets on which one it will be?
It's a pretty safe bet that eventually, the stock market will drop sharply to correlate with the economic data. That's what usually happens! But Wall St, with so much Fed money in its pockets, is betting than the economy will soon turn higher again, despite the horrific economic data. To them, the Fed's power is godlike in its effectiveness.
This chart is from Bloomberg News.
Wednesday, May 15, 2013
U.S. factories cut back sharply on production in April, as automakers
produced fewer cars and most other industries scaled back. The Federal
Reserve said Wednesday that manufacturing output dropped 0.4 percent in
April from March, the third drop in four months and the biggest since
The Empire Fed disappointed, the PPI missed expectations, and now, industrial production contracted, but stocks remain near all-time highs and are flat for the day. Insane market! Mirage market!
Stocks hold gains from yesterday's new all-time record high despite the following news today:
1) US industrial production contracted last month
2) Empire Fed index missed expectations, went negative for first time since January
3) US Capacity utilization declined in April
4) Producer Prices declined in April due to weak demand
5) France slides into recession
6) Euro now has the longest-running recession in history
7) Europe's GDP declines at sharpest pace since 2009
But Wall St insiders are oblivious to news, reality! They're having a Pollyanna Party!
This looks more bubble-like every day!
Tuesday, May 14, 2013
This from the Wall St Journal website today:
"Financial and energy stocks led a day of broad gains for the major U.S. benchmarks, following bullish remarks from a prominent hedge-fund manager."
If this is so, then the perception of risk on Wall St is now so low that a bubble is a certainty! The only thing that is going to stop this insanity is for the Fed to formally announce that it will end QE and its support of the stock market on date certain. Otherwise, this bubble is going to cause even more tears!
This is the stock market since March 1st.
Monday, May 13, 2013
There appears to be a change in the wind! Over the weekend, Jon Hilsenrath, in his article in the Wall St Journal, indicated that the Federal Reserve is going to begin to reduce its creation of money to purchase US government bonds. Both stocks and bonds are lower as a result. And this is taking place just as both the US and global economies are showing signs of renewed weakness.
I wonder if the Fed is doing this solely as a superficial way of talking the stock market down from the edge of the cliff, without any real substance, as was Alan Greenspan's "irrational exuberance" remark. Why the Fed would do this now doesn't make much sense, unless they realize that they are creating greater risk by causing investors to ignore all risk. This is going to be a very perilous high wire act at the most difficult moment of the last four years.