This is stunning! Wall St sent stocks skyrocketing today because BOJ's Kuroda decided to try negative interest rates. More experimental monetary policy! Remember Mr. Bernanke's "unprecedented measures"? That's an admission that they are using us all as their economic experimental guinea pigs! Unproven economic policy without accountability! Eventually, one of them will bring a calamity!
Dr. Mark Skousen, who has a Ph.D. in economics, and has been named as one of the world's leading economists, said the following on January 21st:
“Gross output (GO), the new measure of U. S. economic
activity published by the Bureau of Economic Analysis, slowed
significantly in the 3rd quarter of 2015. And the Skousen B2B Index
actually fell slightly in real terms in the 3rdquarter. Both data
suggest the possibility of a mild recession developing in 2016...
"In nominal terms, the adjusted GO growth rate declined from
6.3% in Q2 to 2.3% in Q3. In the same period GDP fell from 6.0% to 2.7%,
illustrating the higher degree of volatility of GO compared to GDP (see
chart below). The higher volatility indicates that GO might be a
better indicator of economic activity than GDP, since GO includes
economic activity that GDP leaves out.”
Here's his own headline:
"The risk-reward for equities is deteriorating. There is increasing risk that elevated volatility starts incurring enough technical damage to market psychology and spills over, negatively impacting investor, consumer and business sentiment, resulting in a lack of risk taking, and eventually creating a negative feedback loop into the real economy. Going forward we see equity risk remaining asymmetric to the downside given:And on that news, the Dow is UP nearly 300 points today! Go figure!
- rising risk of US earnings recession,
- diverging central bank policies and a Fed that is trying to tighten causing USD to strengthen,
- US manufacturing sector already in recession territory and non-manufacturing sector continuing to decelerate,
- deteriorating macroeconomic backdrop with China posing a significant risk to global markets,
- credit spreads widening and high yield approaching recession levels,
- late cycle dynamics,
- continued elevated volatility likely to impact sentiment—VIX has been averaging ~20 for the last 6 months"
I loved this today:
"With respect to the market as a whole, I’ve periodically observed that
market crashes typically only emerge after the market first loses
something on the order of 14%, rebounds from its initial loss,
and then breaks that prior support. That support level remains about
the 1820-1850 area on the S&P 500. After selling down to that level
last week, the market staged a nearly obligatory dip-buying advance,
aided by a parade of central bankers brandishing their large but
ineffectual bazookas at the World Economic Forum in Davos."
Based upon historically reliable data, Dr. Hussman suggests that a recession is now the most likely outcome. Look out below! Dow closed down 209 points, with the S&P just about 20 points from the previous support level that represents the crash point.
These headlines are all just from today. This is one of the most recessionary news days I've seen in ten years!
I have always said that if inflating asset prices via loose monetary policy were the route to economic prosperity, Argentina would be the richest country in the world by now ?and it is not! The Fed's pursuit of negligently loose monetary policies since 2009 is a misguided attempt to boost economic growth via asset price inflation and we will now reap the whirlwind (the ECB, Bank of Japan and the Bank of England are all just as bad). One of the main problems has been the overconfidence with which the Fed pursues their objective. Yet in the run-up to the 2008 Global Financial Crisis they demonstrated their lack of understanding of the disastrous impact of excessively low Fed Funds. Even in retrospect they remain in denial - as evidenced by Bernanke?s recent book. Why can?t these incompetents understand that they are, once again, the midwife to yet another global unfolding economic crisis? But unlike 2007, this time around the US and Europe sit on the precipice of outright deflation.
I believe the Fed and its promiscuous fraternity of central banks have created the conditions for another debacle every bit as large as the 2008 Global Financial Crisis. I believe the events we now see unfolding will drive us back into global recession.Valuation booms are followed inevitably by busts. But the key point is that these valuation bear markets take the Shiller PE back down to 7x or below.Since valuations peaked at the most obscene level ever in 2000, we have only seen two recessions and at the nadir of the last one, in March 2009, the Shiller PE bottomed at 13.3x, way above the typical sub-7x bottom. In valuation terms the bear market was not completed in 2009 and indeed after only two recessions there was no reason to expect it to have been completed.If I am right and we have just seen a cyclical bull market within a secular bear market, then the next recession will spell real trouble for investors ill-prepared for equity valuations to fall to new lows. To bottom on a Shiller PE of 7x would see the S&P falling to around 550. I will repeat that: If I am right, the S&P would fall to 550, a 75% decline from the recent 2100 peak.
Boy! It's a good thing stocks are up today! This economic news would have told us we are in a recession otherwise!
