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Wednesday, November 6. 2013

A bizarro equity market indeed

I have missed meaningful paper gains in the past year by being out of equities. I must be a lousy gambler. I steer clear of casinos. Zero Hedge explains what I have been seeing this year: The worse the economic numbers are, the higher the markets go. That's because lousy real numbers make the Fed afraid of quitting QE (which they should have done more than a year ago) and want to print money like crazy.


Good economic numbers could cause a crash. 


It's a virtual market, a fantasy market, a bubble, a hot air balloon. Will it end someday? Will somebody be there to buy your stuff when you decide to dump it?  Chart Of The Day: Bernanke Has Officially Created The Bizarro Market.


Buy low, sell high is my gambling rule of thumb. 


Posted by The News Junkie in Hot News & Misc. Short Subjects, Our Essays at 19:15 | Comments (7) | Trackbacks (0)

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Have you seen this? St Louis Fed documents the massive expansion of the money supply since Obama took office.

>400% increase so far.

No country that has ever done this has avoided hyperinflation followed by economic collapse and civil disorder.

Also note that, despite 10% or so market corrections happening about once a decade since forever, no previous administration ever chose to respond with massive, deliberate, currency devaluation. The chart is fairly smooth all the way up to Obama.

Behold the Chart of Doom:

http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS
#1 Aarradin on 2013-11-07 03:53 (Reply)
Agreed. But we're avoiding it because no reserve currency has ever done this before - so we've managed to export inflation to smaller nations who rely on the dollar.

rhhardin is probably right, the yields remain better than a bank account, and are (in real terms) quite high.

With regard to bob sykes' reference to avoiding deflation, here's my POV - if economists think SOME inflation is good, what's wrong with SOME deflation? I'm not talking about hyper-versions. Just a little. -1.0% deflation isn't horrible, when you consider that the data behind CPI is highly questionable at this point, perhaps deflation is a good thing?

Deflation is more beneficial to the poor than inflation. Prices come closer to the budgetary constraints they exist within. It's much more democratic than inflation, which tends to benefit only the asset-holding classes.
#1.1 Bulldog on 2013-11-07 09:25 (Reply)
My theory is that the market is held up by the dividend yield being higher than the 0% you can get elsewhere.
#2 rhhardin (Link) on 2013-11-07 06:52 (Reply)
Well, if the market is a bubble and there has been massive monetary inflation, then the only recourse is gold and guns and a country home at least 50 miles from a city. You also have to do this in secret.

As to monetary devaluation, what is important is the relative values of currencies. All countries are pump-priming, so the relative values are not changing.

On the other hand, there are some who think QE is merely preventing deflation. They point out that some components of the money supply, notably private debt, are falling. This is being offset by increases in public debt.
#3 bob sykes on 2013-11-07 07:59 (Reply)
There has been massive credit creation and that leads to inflation as the credit is added to the economic system. But if credit is being destroyed, and there has been a hell of a lot of that in the mortgage , commodity, and equity markets, then adding credit to replace bad credit doesn't seem to affect inflation that much. But beware when interest rates bottom and are on the way back up. There is a Kondratieff long wave of about 55-65 years that likely bottomed this past year. As rates increase, government programs are done as interest will finally replace all other spending. That is not a positive outlook for anyone much less a progressive.
#4 indyjonesouthere on 2013-11-07 10:31 (Reply)
The massive printing of money and the super massive national debt are each individually a recipe for economic collapse and civil disorder. Together they may well create the worst economic disaster in history making the great depression seem like a Sunday picnic. We're avoiding it only because we are in the early stages, well, that and the fact we are hiding it. Does anyone really believe the unemployment rate is 7%? Would 50 million people on food stamps and 100 million on some form of welfare be "manageable" is we weren't printing a trillion a year and borrowing $1.5 trillion a year? These are the food lines of the great depression kept at home in a marijuana smoke cloud by borrowing and printing enough money to keep them fed and medicated. What happens when the music stops?
#5 GoneWithTheWind on 2013-11-07 10:54 (Reply)
It surprises me that so few people have made the connection between NSA spying and the financial markets. It simply defies belief that these people, who have wantonly spied on just about everybody in the world, have not sucked up massive amounts of highly confidential and priviledged inside information to fatten their own wallets.

Just one more group manipulating the stock and financial markets to the disadvantage of investors.

The current US financial market is, by a wide margin, the biggest scam in the history of the world.
#6 GaryS on 2013-11-07 11:58 (Reply)

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