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It's an awesome display of gravity if ever I've seen one.
September 26, 2013
Where Is the Panic Over Deflation?
But it's striking that the Fed's preferred price measure is declining at a time when the main conversation among policy makers is when and how to tighten monetary policy, rather than to make it more accommodative.
September 30, 2013
Warning - Deflation Will Take the Most by Surprise
The last thing on the minds of most people is deflation.
In my very humble opinion, ZIRP is going to be with us for what will seem to be an eternity, just like it was in Japan. It is also my very humble opinion that our stock market won't like much better than Japan's did. Not right away perhaps, but eventually.
This is not investment advice.
Source Data:
St. Louis Fed: CPI
St. Louis Fed: Nikkei Stock Average vs. Discount Rate for Japan
10 comments:
The Japanese stock market never approached the bubble high of 1989, while the US stock market exceeded the bubble high of 2000, at least nominally.
The Fed has pumped up a fresh new stock bubble, unless corporate profits remain at historical highs forever.
Mr Slippery,
I agree.
If you look close at the Japanese chart, they took their time pumping up their market. They spread the stimulus out.
In sharp contrast, the Fed went all in nearly immediately and stayed all in.
Bigger sugar rush! Faster pumping!
When the sugar rush eventually fades, then what?
My biggest concern for years is that we'd enter the next recession while still in ZIRP. That has not changed.
I firmly believe that the Fed's ZIRP has not put an end to all future recessions.
Mr. Slippery:
In Spring 2009, the AICPA changed the requirement for the FIRE economy, and what other kind of eCONomy do we have?, from valuing "assets" as mark to make-believe from the former wicked mark to market regime. Problem of corporate profits solved !!!.
My biggest concern for years is that we'd enter the next recession while still in ZIRP. That has not changed.
I'm almost certain we will enter the next recession while still in ZIRP. I don't think it matters though. It's certainly didn't matter much in Japan.
Zirp is here to stay for a good long while imo. QE is a meaningless sideshow.
Monetary operations are so simple a 5th grader could understand them. That said, the propagandists are forever misleading the masses.
I've concluded that misleading the masses is official policy too. Bernanke and the other Fed heads could put an end to the mis-understandings with one five minute speech or a simple e-pamphlet. But they won't!
Also, If the CPI accounted for actual housing prices, deflation would be a much more common word.
Ballooning Gov't "debt" seems inevitable too me.
I should add that I'm really, really, really, really worried that our Gov't is going to run out of thin air. Not!
mab,
I probably should have stated why entering a recession while in ZIRP is my biggest concern.
I'm not worried about how it will affect my bonds. I'm worried about how it will affect "risk on" investors when the impossible happens (we're repeatedly told that ZIRP all but guarantees growth).
Picture the following headline.
Fed Lowers Rate from 0.0% to 0.0% to Stimulate Economy Again
That's the kind of thing that might make the masses start to wonder if the masses have been misled.
I'm also terrified of what this might do to Jeremy Siegel's career of course. It's not just about me, lol. Sigh.
I'm not worried about how it will affect my bonds.
Nor should you be imho.
As for stocks, low rates provide support. And I see low rates for years to come.
Hussman sees, a 50% equities drop in the offing. That would put the S&P 500 dividend yield at ~ 4%. With the 10 year at 2.60% and heading lower, I think sideways is more likely (with some swings of course). Who can say for sure?
Picture the following headline:
In an effort to support our Ponzi economy, the Gov't continues to create more money by spending it into existence.
mab,
I think sideways is more likely (with some swings of course). Who can say for sure?
Sideways would create much pain for both the "sure thing" shorts and "sure thing" longs.
That's especially true for pension funds still assuming 7% or more returns.
mab,
"with some swings of course"
Drop below 1200 on the S&P 500 again and out come the gallows humor rubicon jokes again.
Just sayin'. D'oh!
Drop below 1200 on the S&P 500 again and out come the gallows humor rubicon jokes again.
I could see 1200! Who knows, maybe another trillion dollar fraud is lurking in the system.
Anyway, in my mind, based on bubble valuations the Nasdaq is a better comparison to the Nikkei than the S&P or Dow.
Low rates and Gov't deficit spending certainly provide support for risk assets and corporate profits. Hussman et al keep saying it's unsustainable, but I disagree at least from an operational standpoint. There's no shortage of thin air and inflation is low. Politically, sustainability is a different matter.
Either way, no stocks for me. Bonds have more fun!
mab,
I could see 1200! Who knows, maybe another trillion dollar fraud is lurking in the system.
Something like that could easily be lurking in the global derivatives market, much like a tiny needle lurks in a very large haystack. Right?
October 5, 2013
Not with a bang
But this week is still a big step towards a big goal: the emergence of a $630 trillion market into something like sunlight.
The future's so bright I gotta wear $630 trillion shades!
Jamie Dimon is "kind of confident" that we'll see growth. So, hey. That's something I guess!
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