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Weekly Commentary: China Initiating a Global Bear Market?

Weekly Commentary: China Initiating a Global Bear Market?

Chair Yellen is widely lauded for her accomplishments at the Federal Reserve. For the most part, her four-year term at the helm of the Fed boils down to four (likely soon to be five) little rate hikes over 24 months. Most lavishing praise upon Janet Yellen believe she calibrated “tightenings” adeptly and successfully. Yet financial conditions have obviously remained much too loose for far too long. This predicament was conspicuous in the markets this week. A test of a North Korean ICBM that could reach the entire U.S. modestly pressured equities for about five minutes – then back to the races.
Bubble Dynamics are in full force. The Dow gained 674 points this week. The Banks were up 5.8%, the Broker/Dealers gained 4.5% and the Transports jumped 5.9%. The Semiconductors were hit 5.6%.  Bitcoin traded as high (US spot) as $11,434 and as low as $9,009 in wild Wednesday trading. Curiously, the VIX traded up 15% to 11.43.

It used to be that markets would fret the Fed falling “behind the curve,” fearing central bankers would be compelled to employ more aggressive tightening measures. Not these days. Any fear of central bank-imposed tightening is long gone. There is little fear of anything.

I recall writing similar comments back with the Bush tax cuts: “I’m as much for lower taxes as anyone. Yet I question the end results when tax cuts exacerbate late-stage Bubble excess.” And I seriously question the merits of aggressively slashing corporate tax rates when the federal government is $20 TN in debt. One of these days the bond market is going to wake up and impose some much need fiscal discipline. In a different era, the Treasury market would be forcing some realism upon Washington politicians (and central bankers).

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