Fed Tightening Is Over: Markets Now Expect Cuts In 2019

By John Rubino – Re-Blogged From Dollar Collapse

People who assumed the Fed, along with the rest of the government, would cave the minute the financial markets got a little choppy turned out to be right. A couple of bad months and the “normalization” of both interest rates and the Fed’s balance sheet have stopped cold. Now the markets expect falling rates and (apparently) rising asset purchases. From today’s Wall Street Journal.

Debt Investors Embrace ‘Upside Down’ World After Fed Shift

Signs that the Federal Reserve may be done with its yearslong campaign to raise interest rates are sending ripples through fixed-income markets.

Continue reading

Advertisements

Currencies Threatened By A Credit Crisis

By Alasdair Macleod – Re-Blogged From Gold Money

In this article I draw attention to the similarities between the current economic situation and that of 1929, and the threat to today’s unbacked currencies. There is the coincidence of trade protectionism with the top of the credit cycle, and there are the inflationary events that preceded it. The principal difference today is in modern macroeconomic delusions, which hold that regulating inflation of money and credit is the solution to all ills. I conclude that economic salvation can only come from ditching today’s macroeconomic theories and by returning to monetary stability through credible gold exchange standards.

Introduction

There is an assumption in economic circles that when the general level of prices changes, it is always due to changes in supply and demand for goods and services. Prices change all the time, but without a change in the public’s preference for or against holding money and with all else being equal, the general level of prices simply cannot change. Changes in the general level of prices are due to changes in the purchasing power of the money, which stems from the public’s preferences for or against it and do not emanate from goods and services.

Continue reading

Retail Apocalypse and Carmageddon Continue to Pick up Speed

By David Haggith – Re-Blogged From Great Recession Blog

We now know that the Retail Apocalypse took another trip downhill during the all-important holiday season. December reports show retail sales declined more in one month than they have since … the Great Recession. Notice what a common refrain that comparison has become.

Retail Apocalypse snowballs downhill

Retail sales dropped 1.2% month-over-month in December, the largest drop since September 2009, according to data from the Census Bureau released Thursday. The dip was broadly unexpected – consensus estimates had foreseen a 0.1% increase in retail sales for the month, according to Bloomberg data. Excluding autos and gas, which can be volatile, core retail sales plunged 1.8%. “[The] fall in retail sales in December was every bit as bad as it looks,” Capital Economics’ Michael Pearce said bluntly. The weakness was broad-based.

Yahoo!

Continue reading

Avoid the Financial Circus

By Gary Christenson – Re-Blogged From The Deviant Investor

From Dr. Maya Shetreat, MD:

“Don’t blame a clown for acting like a clown. Ask yourself why you keep going to the circus.”

THE WALL STREET CIRCUS DISTRACTS PEOPLE.

Wall Street cheerleaders assure everyone stocks go up in the long term. Yes, they rise because the dollar is devalued every year, which they seldom discuss. Their cheerleaders avoid stating that corrections and crashes occur every five to ten years. Wall Street generates fees by encouraging individuals and pension funds to stay invested for the long term.

Continue reading

What They Don’t Want You To Know About Prices

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, in Part I of this essay, we discussed why a central planner cannot know the right interest rate. Central planner’s macroeconomic aggregate measures like GDP are blind to the problem of capital consumption, including especially capital consumption caused by the central plan itself. GDP has an intrinsic bias towards consumption, and makes no distinction between consumption of the yield on capital, and consumption of the capital per se…between selling the golden egg, and cooking the goose that lays golden eggs.

One could quibble with this and say that, well, really, the central planners should use a different metric. This is not satisfying. It demands the retort, “if there is a better metric than GDP, then why aren’t they using it now?” GDP is, itself, supposed to be that better metric! Nominal GDP targeting is the darling central plan proposal of the Right, supposedly better than consumer price index and unemployment (as Modern Monetary Theory is the darling of the Left).

Continue reading

Fed Chair Powell’s Rate Pause Won’t Save Stocks

By Michael Pento – Re-Blogged From Pento Portfolio Strategies

Jerome Powell threw Wall Street a lifeline recently when he decided to temporarily take a pause with the Fed’s rate hiking campaign. The Fed Head also indicated that the process of credit destruction, known as Quantitative Tightening, may soon be brought to an end.  This move towards donning a dovish plume caused the total value of equities to soar back to a level that is now 137% of GDP. For some context, that valuation is over 30 percentage points higher than it was at the start of Great Recession and over 90 percentage points greater than 1985. So, the salient question for investors is: will a slightly dovish FOMC be enough to support the massively overvalued market?

The S&P 500 is now trading at over 16x forward earnings. But the growth rate of that earnings will plunge from over 20% last year to a minus 0.8% in Q1 of this year, according to FACTSET. It might have made sense to pay 19x earnings back in 2018 because it was justified by a commensurate rate of earnings growth. But only a fool would pay 16x or 17x earnings if growth is actually negative?

Continue reading

Looking At Market Capitalization

By Mark J Lundeen – Re-Blogged From Gold Eagle

Another week of nothing much happening with the Dow Jones; since last Friday it has advanced by only 42.44 points.  What’s to make of that?  After the impressive advance that began after December 24th the market is taking a break.  Don’t be surprised should the coming weeks bring more of the same.

However I remain short-term bullish, expecting the Dow Jones to make additional BEV Zeros in the BEV chart below come this spring or summer.  These anticipated (but not guaranteed) new all-time highs will be the last hurrah of a monster bull market that began in August 1982.  Following them come the deluge; a deflationary bear market that will claw back most of the inflationary gains seen since Ronald Reagan was president.

Continue reading