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2019: Zombie Markets Before The Fall
I haven’t really written about finance since April of this year, and given recent fluctuations in what people persist in calling the markets, maybe it’s time. Then again, nothing has changed since that article in April entitled This Is Not A Market. I was right then, and I still am.
[..] markets need price discovery as much as price discovery needs markets. They are two sides of the same coin. Markets are the mechanism that makes price discovery possible, and vice versa. Functioning markets, that is. Given the interdependence between the two, we must conclude that when there is no price discovery, there are no functioning markets. And a market that doesn’t function is not a market at all.
[..] we must wonder why everyone in the financial world, and the media, is still talking about ‘the markets’ (stocks, bonds et al) as if they still existed. Is it because they think there still is price discovery? Or do they think that even without price discovery, you can still have functioning markets? Or is their idea that a market is still a market even if it doesn’t function?
But perhaps that is confusing, and confusion in and of itself doesn’t lead to better understanding. So maybe I should call what there is out there today ‘zombie markets’. It doesn’t really make much difference. What murdered functioning markets is intervention by central banks, in alleged attempts to save those same markets. Cue your favorite horror movie.
Now Jerome Powell and the Fed he inherited are apparently trying to undo the misery Greenspan, Bernanke and Yellen before him wrought upon the economic system, and people, cue Trump, get into fights about that one. All the while still handing the Fed, the ECB, the BoJ, much more power than they should ever have been granted.
…click on the above link to read the rest of the article…
Bubbles and Zombies
Bubbles and Zombies
They say nobody rings a bell at the top of the market. But whether this is the top or not, two prominent market observers and historians, Robert Shiller and Edward Chancellor, are expressing concern.
First, Shiller warns readers not to take big increases in earnings too seriously because earnings are volatile.
Everyone knows that stock prices have risen dramatically since 2009. A $100 investment in the S&P 500 in 2009 has grown to nearly $400 at the end of August 2018. But Shiller reminds us that earnings have grown dramatically too. In fact, “real quarterly S&P 500 reported earnings per share rose 3.8-fold over essentially the same period, from the first quarter of 2009 to the second quarter of 2018,” according to Shiller. Prices, in fact grew a bit more slowly than earnings since the end of the crisis.
So should we think stocks are reasonably priced since earnings have grown at the same pace as prices? Not so fast, Shiller says. Earnings, the difference between two other data sets — revenues and expenses, are volatile, and cyclical. Rapid rises in earning are often followed by a return to long term trends or subpar levels. Such episodes have occurred more than a dozen times in U.S. stock market history.
Earnings can grow dramatically from things like “panicky demand” for U.S. goods from Europeans at the beginning of World War I. This led to political calls for “wealth conscription” or a heavy taxation on war-related profits. At that time stock prices didn’t follow profit advances as investors seemed to realize those gains would be short-lived.
In the “Roaring ‘20s,” however, emergence from a “war to end all wars” and a spirit of freedom and individual fulfillment spurred stock prices by Shiller’s lights. And this, of course, led to a crash at the end of the decade.
…click on the above link to read the rest of the article…
The S&P Is A Bloated Corpse
Fan Ho In Paris 1953
Update: I never did this before, but now I think I must: change the title of an article. “Minsky and Volatility” isn’t nearly as good as “The S&P Is A Bloated Corpse”. Simple, really. The URL will be the same as before
According to Hyman Minsky, economic stability is not only inevitably followed by instability, it inevitably creates it. Complacent humans being what they are. If he’s right, and would anyone dare doubt it, we’re in for that mushroom cloud on the financial horizon. We know that because market volatility, as measured for instance by the VIX, the Chicago Board Options Exchange (CBOE)’s volatility index, is scraping the depths of the Mariana trench.
Two separate articles at Zero Hedge this weekend, one by NorthmanTrader.com and one by LPLResearch.com, address the issue: it is time to be afraid and wake up. And that is not just true for investors or traders, it’s true for ‘everyone out there’ perhaps even more. Central bank policies, QE and ultra low rates, have distorted the financial system to such an extent -ostensibly in an attempt to save it- that the depressed, compressed volatility these policies have created can only come back to life with a vengeance.
Feel free to picture zombies and/or loss of heartbeat as much as you want; it’s all true. Financial markets haven’t been functioning for years, and there have been no investors either, only gamblers and profiteers, as savers and pensioners have been drawn and quartered. Central bankers have eradicated price discovery, nobody knows what anything is really worth anymore, be it stocks, bonds, housing, gold, bitcoin, you name it.
…click on the above link to read the rest of the article…
“One Big Shock Away from a Global Downturn…”
“One Big Shock Away from a Global Downturn…”
Zombies vs. Cronies
DUBLIN – Most elections these days are contests between cronies and zombies. The left favors the zombies. The right favors the cronies.
In yesterday’s presidential elections in Argentina the zombies lost. It’s time for the cronies to take over.
New Argentine president Mauricio Macri – the era of the Kirchner dynasty is over.
Photo via diarioz.com.ar
More on that tomorrow …
Big Shock
The financial news continues to confound and confuse investors. The Fed is telling one story. The world economy is telling another.
The Fed is talking about increasing the federal funds rate – eventually getting rates back to “normal” – because the U.S. economy is so healthy. Meanwhile, the world heads toward deflation.
Says Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management:
“We are now just one big shock away from a global downturn, and the next one seems most likely to originate in China, where heavy debt, excessive investment, and population decline are combining to undermine growth…”
But it looks to us as though the global downturn is already here. First, the Baltic Dry Index is at a record low.
The Baltic has been hung out to dry – click to enlarge.
Here’s Bloomberg with the full story:
“The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes.
The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985.”
And falling shipping costs aren’t the only sign of global deflation…
In October, construction and mining equipment maker Caterpillar posted another month of falling sales – making it 35 in a row.
…click on the above link to read the rest of the article…
Zombies Are Us: The Walking Dead in the American Police State « The Burning Platform
Zombies Are Us: The Walking Dead in the American Police State « The Burning Platform.
Fear is a primitive impulse, brainless as hunger, and because the aim of horror fiction is the production of the deepest kinds of fears, the genre tends to reinforce some remarkably uncivilized ideas about self-protection. In the current crop of zombie stories, the prevailing value for the beleaguered survivors is a sort of siege mentality, a vigilance so constant and unremitting that it’s indistinguishable from the purest paranoia.— Terrence Rafferty, New York Times
Fear and paranoia have become hallmarks of the modern American experience, impacting how we as a nation view the world around us, how we as citizens view each other, and most of all how our government views us.
Nowhere is this epidemic of fear and paranoia more aptly mirrored than in the culture’s fascination with zombies, exacerbated by the hit television series The Walking Dead, in which a small group of Americans attempt to survive in a zombie-ridden, post-apocalyptic world where they’re not only fighting off flesh-eating ghouls but cannibalistic humans.
Zombies have experienced such a surge in popularity in recent years that you don’t have to look very far anymore to find them lurking around every corner: wreaking havoc in movie blockbusters such as World War Z, running for their lives in 5K charity races, battling corsets in Pride and Prejudice and Zombies, and even putting government agents through their paces in mock military drills arranged by the Dept. of Defense (DOD) and the Center for Disease Control (CDC).
…click on the above link to read the rest of the article…
EITHER YOU’RE THE BUTCHER OR YOU’RE THE CATTLE « The Burning Platform
EITHER YOU’RE THE BUTCHER OR YOU’RE THE CATTLE « The Burning Platform.
I know many people have no interest in watching the boob tube because 99% of the programming is either mindless drivel or government sanctioned propaganda. It’s the 1% that reflects the deeper themes and moods engulfing our society. Television shows like Breaking Bad, Game of Thrones, and The Walking Dead reflect the darkening mood of this intensifying Fourth Turning. I wrote one of my more pessimistic articles called Welcome to Terminus in April regarding the season four finale of the Walking Dead series. I essentially argued we are approaching the end of the line and the world is going to get real nasty.
In the six short months since I wrote that depressing article, we’ve seen men beheaded on Youtube videos by terrorists no one had ever heard of at the beginning of this year. Somehow a ragtag band of 30,000 Muslim terrorists, using American military equipment supplied to fight Assad in Syria and taken from the Iraqi Army when they turned tail and ran away, have been able to defeat 600,000 Iraqi and Kurd fighters with air support from the vaunted U.S. Air Force. Syria, Iraq, Libya, and Afghanistan descend into never ending religious based warfare. We’ve even had passenger planes mysteriously disappear in Asia with no trace.
…click on the above link for the rest of the article…
