Saturday, January 4, 2014

IMF Warns of Western Debt Defaults

by Ambrose Evans-Pritchard at the UK Telegraph:

Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.
The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its “toolkit” for emerging market blow-ups.
“The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point,” said the paper, by Harvard professors Carmen Reinhart and Kenneth Rogoff.
The paper said policy elites in the West are still clinging to the illusion that rich countries are different from poorer regions and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering (“forbearance”).

More here. 

Friday, January 3, 2014

Bernanke's Swansong Sends Stocks Soaring

Fed doublespeak sends stocks soaring again! Don't these central bankers ever tire of their machinations and manipulations?

Wouldn't it have been much more accurate and truthful for him to say that he's no less committed to blowing bubbles? Bubbles Bernanke!

Stocks: Not So Certain Now!

Stocks Scream Right Out of the Starting Gate

Identify the Bubble!

LET'S PLAY A GAME! It's called Identify the Bubble!

In this chart just released by JP Morgan, which of these stock market bubbles is NOT considered by Wall St to be a bubble today?
Hint: It's the BIGGEST one!
Hint #2: It's the CURRENT one!

Interestingly, the last three stock market bubbles declined to similar levels around the level of 600 for the S&P 500. If the current stock market bubble declines to that level, it would be a 67% decline! Imagine such a decline of the stock market, and also all those savings and retirement accounts, amounting to a TWO-THIRDS loss. Imagine a 2/3rds decline! How many lives would be impacted? How many dreams will be destroyed?
 Note also the angle of incline of those olive-green lines. Which bubble manifests the most acute angle of incline?
Hint: It's the CURRENT one!

But the Fed and Wall St would excoriate you for calling it a bubble! How DARE you call it a BUBBLE! In her Senate confirmation hearing, "Calamity" Janet Yellen said she saw NO signs of the Fed having created "market imbalances". I'm just wondering: Is Yellen blind? Because I know a lot of people that aren't Wall St insiders or bankers that have NO difficulty identifying this market as a bubble! And if she has difficulty recognizing one, what does THAT say about her (in)competence as our new Fed Chair that is due to take office at the end of this month?

Bubble Mentality In Full Frontal Today

China's PMI data overnight was weak. This from Reuters:

But after an initial sell-off, traders in Europe, supported this morning by traders in the US, shrugged off that news and are now reflexively manifesting a "buy the dip" mentality and pushing the bubble back up again. It is noteworthy how short-term the bad news impacted the market, and how quickly it went back up.

In a maturing bubble, down days become more and more rare. Yesterday's "first day of the year" sell-off was just a one-day quirk. I expect the bubble to continue to build.

Thursday, January 2, 2014

Crude Oil Today's Biggest Mover

Crude oil dropped from $99 down to $95.50. They are blaming a build in crude oil inventories. This should make my gas bill happy! It may be time to fill up!

Bad Omen? First Down Day to Begin Year Since 2008

Gold, US Dollar Both Rally On First Trading Day of 2014

This is somewhat of a surprise! Both the US Dollar and gold are rallying. Gold was up $30 just a few minutes ago!
The US Dollar:

 Gold rallied too:

Stock Market Rout to Ring In 2014

The Santa Claus rally is over! Fund managers are selling stocks briskly this morning in order to lock in gains for 2013. Tuesday's "window dressing" rally was just for show! Dow was down about 150 points just a few minutes ago.

Tuesday, December 31, 2013

News Headlines for 12/31/2013

Chicago PMI disappoints

Consumer confidence leaps most in six months

Case Shiller Index suggests another housing bubble

Risk Is Rising, Even As Stock Hit New Records

"Risk is an ever-present characteristic of life; it cannot be eliminated, it can only be masked or hedged. We know this intuitively, yet we blithely accept official assurances that risk can be eliminated by the monetary machinations of the Federal Reserve, the Central Bank of China, the Bank of Japan and the European Central Bank. To confuse masking risk with the elimination of risk is the acme of hubris and the perfect setup for disaster." Tyler Durden at Zero Hedge

It appears that the original quote is from Charles Hugh Smith here:

When Risk Is Separated From Gain, The System Is Doomed

How Cliche! Stocks Hit New All-TIme Record High!

... for the kazillionth time this year!

But even a five-year-old can understand an overbought market:

The QE Taper... That Isn't!

Grant Williams wrote a brilliant piece, with a few excerpts here and a link to John Mauldin's website:
That Was the Weak That Worked

On the one hand, Bernanke would want to leave the Fed with the wind-down of his expansionist policy underway so that he would have the kind of plausible deniability that history has gradually been stripping away from Alan Greenspan. ("Hey, don't blame ME. We were exiting QE when I left office!") On the other hand, though, he wouldn't want to hand Janet Yellen an impossible situation.

The solution? Taper Lite
"All the goodness of the Taper with no bitter aftertaste!"

... and the markets, after the scares in May and June, LOVED it!!"

Or what I call it: The Taper ... that isn't!

Bernanke is trying to evade accountability for what's coming, while giving Yellen the green light to keep the monetary heroin going.
Later, after the market collapse again, he'll then deny all responsibility!

Just like Greenspan has done, including just within the last few weeks.

Then, after having KILLED free markets and capitalism, they'll declare that free markets and capitalism don't work. As if their endless state interventions were somehow some form of capitalism.

We will need to hold them accountable when that happens. What they have been doing is NOT capitalism nor free markets. It's progressivism. It's statism. It's fascism. They have the same roots.

"Errrr ... sorry to spoil the party, but a couple of things here:

Firstly, the reason the market spiked is that the Fed's Taper turned out to be a paltry $10 bn a month and not the "whopping" $20 bn a month that had been floated by various Fed mouthpieces back in May cough-cough-cough-hilsenrath-c ough." /Jon Hilsenrath, the Fed's "voice" at the Wall St Journal, who I refer to as Bernanke's whore./

from the article, quoting "Bernanke's whore", who released the Fed's "translation" (this is only a tiny quote, while Hilsenrath's entire explanation was much longer) just seconds after the Fed's statement. My, how fast he types!

"(WSJ): The Fed went to great lengths to send the message that interest rates are staying low even longer than the Fed indicated earlier. It said today that it will keep interest rates low "well past" the time when the unemployment rate reaches 6.5%."

As I said, the Taper... that isn't!

"Thirdly, they managed to communicate that this policy will be reversible at the drop of a hat should things start to look as though the vaunted "recovery" is nothing more than a mirage conjured by their actions."

"...the markets reacted just as you would expect, once they realized that they had faced down the Fed in the summer and forced them into a taper that is essentially a non-event."

Again, the taper... that isn't!
This so-called QE taper is worse than mere mistake. It's deception! It's PROPAGANDA!
I will next post a graph that shows what a farce -- a HOAX -- the Fed's QE taper really is! It's just more debt monetization, while calling it a return to normalcy. It's really a SCAM!

 Here's another view of:
The QE Taper... that isn't!

Does that really look like much of a wind-down to you? The Fed will still monetize $900 billion of new debt over the next year! Does that sound like the end of QE to you?

Me neither!

 It's looks like more of the SAME to me! It's a hoax -- a scam -- perpetrated by the Fed on a grand scale!
 another excerpt from the article:
"A look at the correlation of the S&P 500 to the Fed's balance sheet tells you just about all you need to know. Since 2009, the correlation has been an astonishing 89.7%. Why would anybody not just buy markets, given that they are going to go up based purely on the Fed's aggressive stimulus?"

"Bizarrely, by creating an environment that forces those with capital to seek out additional risk due to the paltry returns afforded by zero percent rates, the Federal Reserve has steered investors to seek out the least-risky place to invest their money, and that has been equities."

 Just posted another chart that shows that 89.7% correlation between the Fed's balance sheet and stocks.

The Fed has increased its balance sheet by 37% during 2013. Imagine that! In a single YEAR! Does that sound like free markets or capitalism to you?
THIS IS NOT A FREE MARKET! It's a PAY-OFF -- from the Fed!  
And it's actually even worse than the chart shows, because the Fed ANNOUNCES more debt monetization before it actually begins it. That's why markets take off even BEFORE the Fed actually begins the program, solely in anticipation of the new FREE MONEY heroin!
 It's the Fed's own version of "trickle-down economics". Push more and more money into the pockets of the already-wealthy, hoping it finds it way eventually into the pockets of those lower down on the economic scale. It hasn't so far! The rich just get richer instead!

Note that without endless QE, stocks would be only about 1/3 of their current price. 
more from the article:
"Equity prices USED TO BE a reflection of the strength of the underlying economy — after all, the component pieces of benchmark indices were functioning companies that existed in the real world where they need to manufacture something and sell it to a buyer in order to stay in business and make a profit...
"But under the surface and in the wider economy, the story is very different, indeed, as the mountain of cash on corporate balance sheets has led to an avalanche of buybacks, which has in turn boosted earnings and given the impression that things are roaring, when in fact the true story is a familiar one of an increase in debt." (emphasis mine)

more from the article:
"Assets less liabilities for corporations economy-wide are approximately where they were in the last quarter of 2004 or the first quarter of 2005. But stock prices are much higher in aggregate."

Do you understand that? Corporations aren't any stronger today. But stock prices are MUCH higher. Does that sound sustainable to you? Doesn't that sound like a description of a BUBBLE, rather than sound economic growth?

"This chart was bad at the end of 2012 — in bubble territory, for sure — which was a big part of why I didn't think we'd get through 2013. Well, we did — and now it's worse, because this is only updated through the end of September and of course the market has gone screaming higher in the last three months."

Did he use the word "bubble"? And that was a YEAR AGO! And he's says it's much worse NOW!

The news media was telling us this recently:
"(USA Today): Boosting optimism for the new year ahead, the government announced Friday that the economy in the third quarter grew at its fastest rate in nearly two years and much better than previously estimated...
""The consumer is back in the game," exulted Chris Rupkey, chief financial economist of Bank of Tokyo-Mitsubishi UFJ, in a client note Friday. "Is this economic growth fast enough to put America back to work? The answer is, yes. The wheels of the economy are turning fast enough to bring down the unemployment rate further."

But the reality from the GDP report cited in the media is this:
"...Meanwhile, over a third of the strength in the economy was down to private inventory buildup — the biggest such buildup since records began almost 70 years ago /He then shows another chart, which I won't post here/.
"So, despite equity markets making all-time highs in 2013 more often than Miley Cyrus gave offence, beneath the surface, the economy — which equities are supposed to reflect — didn't perform as well as the headlines would have you believe; and by far the biggest driving force behind the strength of the equity market was free money courtesy of QE."
 It's the Fed's own version of "trickle-down economics". Push more and more money into the pockets of the already-wealthy, hoping it finds it way eventually into the pockets of those lower down on the economic scale. It hasn't so far! The rich just get richer instead!

Monday, December 30, 2013

Volume Paper Thin At Year's End

This is not unusual for the end of the year. I'm not trading with volume so paltry. Trading signals are unreliable and risky!