“Q1 Stock Market Outlook: We’re Gonna Need a Bigger Slide”

Submitted by FFWiley
If 2018 rings in a bear market, it could look something like the Kennedy Slide of 1962.
That was my conclusion in ‘Riding the Slide,’ published in early September, where I showed that the Kennedy Slide was unique among bear markets of the last eighty years. It was the only bear that wasn’t obviously provoked by rising inflation, tightening monetary policy, deteriorating credit markets or, less commonly, world war or depression.
Moreover, market conditions leading up to the Slide should be familiar – they’re not too far from market conditions since Donald Trump won the 2016 presidential election. In the first year after Kennedy’s election, as in the first year after Trump’s election, inflation seemed under control, interest rates were low, credit spreads were tight, and the economy was growing. And, in both cases, the stock market was booming.

This post was published at Zero Hedge on Sat, 12/30/2017 –.

The Dreaded ‘Flattening Yield Curve’ Meets QE Unwind

During prior incidents of an ‘inverted’ yield curve, the Fed had no tools to get the market to push up long-term yields. Today it has one: the QE Unwind.
The price of three-month Treasury securities fell and the yield – which moves in the opposite direction – rose, ending the year at 1.39%, after having spiked to 1.47% on December 26, the highest since September 12, 2008. This is in the upper half of the Fed’s new target range for the federal funds rate (1.25% to 1.50%). Back in October 2015, the yield was still at 0%:

This post was published at Wolf Street by Wolf Richter ‘ Dec 30, 2017.

The Myth of Insufficient Demand

Following the ideas of Keynes and Friedman, most mainstream economists associate economic growth with increases in the demand for goods and services.
Both Keynes and Friedman felt that The Great Depression of the 1930’s was due to an insufficiency of aggregate demand and thus the way to fix the problem is to boost aggregate demand.
For Keynes, this was achieved by having the federal government borrow more money and spend it when the private sector would not. Friedman advocated that the Federal Reserve pump more money to revive demand.
There is never such a thing as insufficient demand as such, however. An individual’s demand is constrained by his ability to produce goods. The more goods that an individual can produce the more goods he can demand, and thus acquire.
Note that the production of one individual enables him to pay for the production of the other individual. (The more goods an individual produces the more of other goods he can secure for himself. An individual’s demand therefore is constrained by his production of goods).
Note again demand cannot stand by itself and be independent – it is limited by production. Hence, what drives the economy is not demand as such but the production of goods and services.
In this sense, producers and not consumers are the engine of economic growth. Obviously, if he wants to succeed then a producer must produce goods and services in line with what other producers require.
According to James Mill,

This post was published at Ludwig von Mises Institute on Dec 29, 2017.

Ron Paul Warns America’s “On The Verge Of Something Like 1989’s Soviet System Collapse”

Ron Paul does not believe the U. S. will break into separate countries, like the Soviet Union did, but expects changes in the U. S. monetary policy, as well as the crumbling of the country’s “overseas empire.”
The godfather of the Tea Party movement and perhaps the most prominent right-leaning libertarian in America, Ron Paul, believes the economic boom the United States experienced under President Trump could be a ‘bit of an illusion.’
Mr. Paul sees inequality, inflation, and debt as real threats that could potentially cause a turmoil.
‘the country’s feeling a lot better, but it’s all on borrowed money’ and that ‘the whole system’s an illusion’ built on corporate, personal, and governmental debt.
‘It’s a bubble economy in many many different ways and it’s going to come unglued,’
In a recent interview with the Washington Examiner, Paul said,
‘We’re on the verge of something like what happened in ’89 when the Soviet system just collapsed. I’m just hoping our system comes apart as gracefully as the Soviet system.

This post was published at Zero Hedge on Fri, 12/29/2017 –.