Our take on Stockman’s article “The Fed has backed itself into a corner”
Chris Temple and Jay Taylor weigh in on the topic of the Fed and where the economies around the world stand.
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It is no wonder Gary is climbing a wall of worry….I mean mountain climbing…in Mexico.
It seems like the market has ground to a halt. I can’t buy or sell anything. I got kicked out of YINN and DUST this week. DUST and NUGT have netted me a 6% return this year. They are now in a dance that never presents a buy signal. Same with RUSL and RUSS. They have netted me 2% and they have both just gone flat. Most of the MACDs on my watch list look like two pieces of rope twisted around each other laying flat. Is this because of the Fed meeting next week?
Have you tried switching it off and on again? 😉
funny.
Canada, Australia and the UK all have enormous house price bubbles still. In places like London and Sydney even people earning quite fabulous salaries can no longer afford to buy a house or even a flat.
Just wanted to point out that there are still some other bubbles out there apart from conventional equities.
Presumanly, in any deflationary event the house prices will crash also… Or will the super rich merely buy up even more property?
Presumanly = Presumably.
The world needs a thorough cleansing. It’s just like Jesus to give us a bubble bath.
I think the world needs an enema first WAYNE.
Absolutely…and not organic mineralized soothing water, or even coffee, but high-strength Drano.
It’s a deep burn…..
Pope soap on a rope?
That would probably depend on what your idea of what a deflation is Bob. If you subscribe to the idea that debt clearing is the hallmark of a period of deflation as excesses of the good times are eliminated and balance is restored in credit markets then housing will suffer. What I mean is that during a period of credit expansion borrowing is pretty easy and as more lending brings more dollars into existence that tends to push prices of assets up. The reverse happens on the down slope with restricted credit and / or higher interest rates. As the economy tightens unemployment rises and the defaults and bankruptcies begin. At the household level it is simple factors such as loss of employment and reduced earnings that bring the crisis for some individuals. But when enough of them cannot pay then the problem migrates up the chain to landlords, services and the retail level. Eventually the credit granters themselves can become impaired if the economy really deteriorates. The final installments are when municipalities, counties, states and even countries fail to meet all their obligations. But that all seems a long way off right now. Sure there are problems but in general there are very few real crisis out there other than a handful of companies on the critical list along with the Greece’s and Argentina’s of the world. So I suppose we know that problems are coming but the time frames we use to assess when those problems will manifest always seems so short. On this site we have been talking about a credit crisis for years but it has not really arrived yet. At least not in the way most thought. Where real estate is concerned prices are almost always sticky to the downside. So even an obvious bubble can take many years to resolve itself. Even then, the overbought and overpriced conditions can be worked off with merely the passage of time if inflation enters the equation so there is never a bust of huge proportions in that situation. we seem to be in that kind of an environment. I don’t know that I would hold my breathe waiting for housing to either crash or soar higher at this stage because at this point it is a slow motion correction primarily dictate by demographics and Cenrtal Bank policy.
I am going to need to go and make a coffee before reading this Birdman 🙂
I think I will do the same.
Still not buying deflation argument. It will never happen unless it is very short term. Short term deflation isn’t really deflation it is noise. I am in hyper inflation camp as strong as ever. That being said, my investment portfolio benefits under every scenario.
Stockman has been WRONG for over a decade!
Yep. Him and the Schiffs of the world telling us what should be instead of what it. The reality is world’s largest military and nuclear arsenal + the official reserve currency under bretton woods + an unlimited printing press + collusion with the other CBs = the Fed can do whatever it wants in order to benefit its shareholders.
Should be “what is” not what it.
Yes, before the internet most people were dumb, they just went along just to get along, but now with the internet people are waking up and are now aware of their BULL, even nations are fed up with our schemes, and this is what they are afraid of! Pay close attention to how fast black swans are surrounding us and how other nations and super powers around the world are now lining up against us!
The BIG difference between The Fed and everyone else is this: The U.S. is THE world’s reserve currency and emerging market debt – being priced in Dollars – will be the issue that brings The House down.
Mark my words…
Either that, or a big enough oil company going bust that takes someone else too big with them…and starts the dominoes falling
Chris you imply a bank…??
That’s what I’m thinking. A major financial institution or multiple institutions that have too much exposure to over-financing the Oil Patch may cause quite the capitulation.
Some of the crazy things going on in base metals mining though has certainly got people’s attention the last 2 weeks.
Glencore Plans Bigger Debt Reduction as Commodity Prices Slide
Jesse Riseborough
And Freeport has now cut its dividend while getting set to close mines. The stock was up on the news. At least for now.
Could well be
Yep, I think the banks are at enormous risk from a base metal miner or an oil company going bust – Glencore, Anglo American, Teck Resources, whoever. Might even end up with a snowball affect of one miner taking down another taking down several banks.
I think it was Gary or Chris who mentioned that when Glencore’s shares plunged a few weeks back that there was a big injection of liquidity into the markets?
I don’t think they can allow Glencore to go bust as it would cause an earthquake for the banks.
Re: Stockman’s anger
Anyone who is not irate and disgusted with our rulers is simply clueless.
Agreed. The problem is until the corner McDonalds shuts down, most Americans won’t give a rats a$$.
spanky…Correct.
In the future new paradigm, there will be a McTony’s Irish Pub on every corner.
Yes selling real beer & whisky without any salt , sugar , chemicals or GMO additives.
Here in the UK the Mc Dirt ads state made with 100% beef…Yes & that means the Whole cow including all the crap , dead animal feed stuff & drugs….Uck just thinking what goes into there meals wants me to want to puke.
So true. Wonder why I don’t frequent the place!
Agreed. There was a book Fast Food Nation that first really grossed me out.
Irish, I’m all for selling real beer & whisky without any salt, sugar, chemicals or GMO additives…… I’ll frequent your empire of McTony’s Irish Pubs often to make sure they keep up the high standards.
I think that the Fed and the other central banks have been right in the middle of the sweetest of sweet spots in the last couple of years.
They have had massive asset inflation and commodity deflation.
The commodity deflation is killing resource producing nations especially the ones that are developing nations and their workforces (their peoples).
It’s a bit like the re-institution of the slave trade since these people are not getting a fair price for the resources they produce. Greenspan once warned of ‘inflationary instability’ and maybe this is what he meant. Who knows; who cares what he meant? He is the architect.
It is so difficult to understand why asset prices continue to appreciate while commodities continue to crash. If the commodities crash is due to lack of demand, the world economy must be in dire straits.
To Cory: a hyper-deflation would send prices back to something like 1971 levels. Dow to 700, gold to $35? A packet of crisps i nthe UK to 2.5 pence? I don’t see that as likely. Some prices might collapse though.
The sweet spot for the Fed that I mentioned gave them the chance to raise rates over the past 3 years or so but they didn’t. They should have done it before the US dollar started to rally in mid-2014.
Perhaps the sweet spot has come partly because of the depression in Europe and the movement of capital to countries like the USA and UK from the European Union as well as the emrgence of Quantitative Easing in the EU and also the continuation of QE in Japan. Now, perhaps the China crash is bring even more capital to the USA, adding a little bit too much juice to this strong US dollar trend, so the USD index is rallying to a level that could damage US industries and the stock market.
Anyway, what is the flip side of the sweet spot? The flip side is commodities inflation and asset deflation. Next time that happens, the Fed is really screwed – because they will not be able to stop commodity and retail price inflation without completely destroying the asset markets. Nothing except direct intervention in most markets will be able to keep the game going. Maybe we are there already.
It’s diffult to see whether the US stock market will crash after this big breakout of the past 2 years or go into an even bigger bubble for the time being as Gary Savage has postulated. All I know is that some other world stock markets have had smaller breakouts and others have been firmly rejected at the 2000 or 2007 highs (like the UK markets: FTSE100 for instance).
Bob Hoye says long rates are going up anyway as well as junk bond yields and the Fed is a usually few months behind the market so watching the Fed is a waste of time.
Bob: “Watching what the policy makers are saying is a lot of fun and from time to time you get wonderful ironies.”
4 December 2015:
http://talkdigitalnetwork.com/2015/12/big-hit-to-bond-markets/
I’m worried now 🙂