• Tag Archives Deflation
  • Does the Mainstream Have the Definition of Recession All Wrong?

    Pundits and government officials keep telling us the economy is strong. Everything is great. After all, GDP is growing.
    But a lot of people recognize things aren’t all that great. Some prominent economic analysts have said a major crash is looming. Nobel Prize winning economist Robert Shiller called stock market valuations ‘concerning’ and hinted that markets could be set up for a crash. Several other notable economists have recently expressed concern about surging stock markets, particularly in the US. Marc Faber has predicted ‘massive’ asset price deflation – possibly of a drop of as much as 40% in stock market value. Billionaire investor Paul Singer recently said the financial system is not sound. And former Ronald Reagan budget director David Stockman said we should get ready of ‘fiscal chaos.’
    So, how is it that some see a meltdown on the horizon while most of the mainstream sees nothing but unicorns and roses? If the economy is growing, how can anybody things recession is right around the corner?
    Well, what if the mainstream doesn’t understand a recession?
    In the following article originally published at the Mises Wire, Frank Shostak explains why the standard ‘two consecutive quarters of negative GDP’ is not a good definition for recession.

    This post was published at Schiffgold on JULY 24, 2014.

  • Last Chance for the Dollar to Rally

    I think we need to focus on what is happening to the dollar. The intermediate cycle is now 63 weeks long. Clearly that isn’t normal. I’ve maintained for several years that the end game was going to play out in the currency markets. There has to be consequences to printing trillions and trillions of currency units , and leaving interest rates at 0 for 8 years. I don’t think the consequences are going to be deflation. I think the end game will be inflation, just like it was in the 70’s, and just like it was in 2007 and 2008.
    It’s taken a while to manifest as other countries have jumped into the game and turned on their printing presses as well, so the collapse in the currency I’ve been looking for has taken quite a while to unfold. The first leg down ended in 2008.
    The dollar rally out of the 2014 3 YCL has fooled everyone into thinking the dollar is strong and the euro is going to collapse. So everyone is now on the wrong side of the market. That’s pretty much how every bear market starts with everyone on the wrong side of the boat.

    This post was published at GoldSeek on Sunday, 23 July 2017.

  • David Rosenberg: “This Is The Single Most Important Thing For The Market Over The Next Decade”

    Several years ago, Gluskin Sheff’s superstar economist (previously at Merrill), David Rosenberg (in)famously flipped from bear to bull, predicting what amounts to a victory for the Fed: a jump in (wage) inflation, a burst in economic growth, and an overall selloff in that most deflation-dependent asset, the US Treasury. None of those happened, and while we (gently) mocked Rosie’s transformation at the time, recently Rosenberg himself admitted that our skepticism was accurate, when he reverted to his bearish bias over the past year, predicting that deflation would end up winning after all.
    Today, in his latest market musings chartpack, we present the key reasons why Rosenberg has never been more convinced that all those calling for an end to the secular bond bull market, are wrong and why despite the Fed’s best intentions to create the impression that the global economy is stabilizing, what is about to be unleashed on the global economy is at least 5 years of accelerating deflationary pressures.
    As the main catalysts for his gloomy outlook, Rosenberg lists the obvious ones, debt and deflation, but by far the most important factor that prompted Rosenberg to revert to the “dark side”, the one about which Rosie says “nothing is more important than this if you are looking at what will fundamentally influence the financial markets for the next decade-plus”… is demographics.
    “The first of the boomers turned 70 this past year, that 80 million proverbial pig-in-the-python in North America, and 1.5 million will be doing so each year for the next fifteen years.”
    That fact, Rosenberg believes, will be the single most important driver of returns over the next decade.
    Below, he explains why those seeking to understand market moves and inflationary forces over the coming ten years, should first and foremost focus on demographics. Everything else will follow.

    This post was published at Zero Hedge on Jul 22, 2017.

  • Nobody told the euro that Mario Draghi was dovish

    If Mario Draghi was trying to talk down the euro, it didn’t go so well.
    The European Central Bank president attempted to strike as dovish a stance as was possible given the circumstances in his news conference Thursday. He emphasized the lack of a pickup in underlying inflation, insisted the Governing Council won’t really think about tapering until the fall, and banged away on how the central bank could actually ramp up its quantitative easing program, should conditions deteriorate.
    The performance was seemingly a disappointment to anyone looking for reassurance when the ECB will lay out what it plans to do with its quantitative easing program in 2018. The ECB is committed to continuing it program of 60 billion a month in bond purchases through the end of the year, ‘or beyond.’
    But euro bulls didn’t appear to care. The shared currency EUR/USD, -0.0086% jumped during the news conference and then extended gains, topping $1.16 versus the dollar and trading at its highest level since August 2015.
    The news conference performance was in contrast to a speech in Portugal late last month that got investors primed for a QE wind-down. At that conference, Draghi’s emphasis on how reflationary pressures were replacing deflationary pressures was the trigger.

    This post was published at Market Watch

  • Albert Edwards: Only One “Aberration” Is Preventing A “Petrifying Bear Market”

    One month after he shared his preview of the endgame of this current centrally-planned economic regime (expect no happy ending there, as “citizens will soon turn their rage towards Central Bankers.”) Albert Edwards is out with a new note asking whether “H2 2017 will undo the trend of lower inflation, bond yields and the dollar?” and – if the answer is no – he cautions that “investors might give some thought to the fact that we are now just one recession away from Japanese-style outright deflation!”
    The creator of the “deflationary ice-age” concept starts off by noting that equities have risen to new all-time highs as weak US inflation data have reduced expectations of further Fed rate hikes. This has driven both bond yields and the dollar lower and in turn EM and commodity prices higher. But, Edwards warns, the trend might easily reverse as the second half of this year progresses.
    “This might dampen the impact of recent compelling evidence that core CPI and wage inflation seem destined to remain curiously weak throughout the remainder of this cycle.”
    But as the SocGen strategist concedes, a far bigger question is how the recent equity highs sit with our Ice Age thesis – is it dead or just sleeping?”

    This post was published at Zero Hedge on Jul 20, 2017.

  • People Buy Payments (Or Why Rates Can’t Rise)

    Debt drives rates lower….not higher. Debt is deflationary. See chart below and read this: pic.twitter.com/tM2a5BrIiO
    — Lance Roberts (@LanceRoberts) July 14, 2017

    This past week, the lovely, and talented, Danielle DiMartino-Booth and I shared a discussion on the ongoing debate of why ‘Rates Must Rise.’
    For the last several years, I have produced a litany of commentary (see this, this and this) on why rates WILL not rise anytime soon, they CAN’T rise because of the relationship between debt and economic activity.
    Most of the arguments behind the ‘rates must rise’ scenario are based solely on the premise that since ‘rates are so low,’ they must now go up. This theory certainly applies to the stock market which is driven as much by human emotion, as fundamentals. However, rates are an entirely different animal.
    Let me explain my position using housing as an example. Housing is something everyone can understand and relate to, but the same premise applies to everything bought on credit.

    This post was published at Zero Hedge on Jul 17, 2017.

  • How High Can the Euro Go on this Reaction – 116 or 125-128?

    This upcoming seminar in Frankfurt Germany will deal with both the short-term and long-term. This has been the Year from Political Hell, and it will not end until after the German elections. With the ECB finally throwing in the towel admitting (but certainly not publicly) that nearly 10 years of low to negative interest rates has utterly failed to reverse the deflation. Now with the expectation of higher interest rates, the optimism is returning on schedule in Europe as virtually 99% are touting that deflation is over and let the good times roll.
    Of course, the greatest error with currency is the general public view it as a share price. They assume that the higher the Euro the stronger the economy becomes. Yet historically, the exact opposite is always true because currency is the medium of exchange which sits on the opposite side of the scale with tangible assets. Deflation is when assets decline because the currency rises in purchasing power.

    This post was published at Armstrong Economics on Jul 16, 2017.

  • Are Real Home Prices Rising Or Falling Where You Live: Here’s How To Find Out

    As we’ve noted time and time again, the fact that average national housing prices appear to have recovered from the peak of the housing bubble masks the uneven nature of America’s economic recovery: While certain popular coastal markets have seen prices recover, much of the south and Midwest have struggled with stagnation or even home-price deflation.
    Now, a new tabulation of home-price data by Harvard University’s Joint Center for Housing Studies provides a granular look at the unevenness of the recovery from county to county. A quick glance at the map reveals how home-prices – a worthy proxy for wealth inequality – have risen dramatically along the coasts, while
    The data show that home prices increased by 40 percent or more in 153 metros (16 percent), including twelve metros where home prices doubled. And in nearly 300 markets, prices increased – but more modestly – by less than 20 percent. Meanwhile, real prices declined in about 280 metros. In another 200 markets, prices increased by 20-to-39 percent.

    This post was published at Zero Hedge on Jul 9, 2017.

  • BofA: “Massive Market Inflection Point Coming This Summer: Will Lead To Fall Crash”

    One week after BofA’s Michael Hartnett became the latest strategist to admit the truth, when in his Flow Show report from last week he said that “central banks have exacerbated inequality via Wall St inflation & Main St deflation” and now that they are hoping to quickly and painlessly undo their error, there are “two ways to cure inequality…you can make the poor richer…or you can make the rich poorer…” concluding that the “Fed/ECB are now tightening to make Wall St poorer” because it is “no longer politically acceptable to stoke Wall St bubble”, he has followed up with a note in which he looks at the vast change in the market landscape over the past year.
    As he says, one year ago, July 11th, 2016, 30-year Treasury yield hit all-time low (2.14%), and Swiss government could have issued a 50-year bond at a negative yield (Chart 2 shows 10- year Swiss yield back to 1900).

    This post was published at Zero Hedge on Jul 7, 2017.

  • Market Report: Speculators chicken out

    Gold and silver continued to drift lower this week, with gold falling $20 from last Friday’s close to $1220 in early European trade this morning (Friday), and silver by 75c to $15.87. At this level, silver has lost almost all the gains of 2017, though prices bottomed last December.
    The fall in prices has continued after the end of the half year, when the bullion banks have had a history of suppressing prices to window-dress their books. Doubtless a reason will be concocted to justify this price action, and favourite must be the deflationary effects of the Fed running off its mega-balance sheet. But this is to misread the current fragility of the system. We can state categorically that the US and global economies are simply debt junkies, needing increasing amounts of debt, or they die. Does anyone seriously think that the Fed and the other central banks will let this happen?

    This post was published at GoldMoney on July 07, 2017.

  • Fade the Great Rotation into Europe

    This is a syndicated repost courtesy of theinstitutionalriskanalyst. To view original, click here. Reposted with permission.
    News last week that European Central Bank chief Mario Draghi was considering an end to the ECB’s extraordinary purchases of securities quickly let some air out of the Great Rotation into EU stocks. Sure the euro surged against a weakening dollar, but Europe’s mountain of bad debt remains unresolved – even after the election of Emmanuel Macron to the French presidency. Yet hope springs eternal in some quarters after Draghi’s claim of a successful ‘reflation.’
    ‘All the signs now point to a strengthening and broadening recovery in the euro area,’ Draghi told the ECB’s annual conference. ‘Deflationary forces have been replaced by reflationary ones,’ the former head of the Bank of Italy declared. Draghi’s bull call on inflation provides optimism for relief on excessive levels of bad debt, albeit in a context where the EU’s rules on resolving dead banks remain entirely subjective.
    The July 4 approval of the latest state-supported rescue for Banca Monte dei Paschi di Siena (Montepaschi) illustrates the deflationary challenges still facing Europe. As part of the overhaul, Reuters reports, Montepaschi ‘will transfer 26.1 billion euros to a privately funded special vehicle on market terms, with the operation partially funded by Italian bank rescue fund Atlante II.’ The bank will receive 5 billion euros in new public equity funds for its third bailout in a decade.

    This post was published at Wall Street Examiner on July 4, 2017.

  • Questions

    We often have discussions in the office that consist primarily of asking questions. Sometimes they are questions we don’t think people are asking enough, sometimes questions we are sick of hearing and most often questions which we can’t answer. Not questions that only we can’t answer but rather ones that no one can answer based on real facts. I find these discussions very helpful and thought it might be interesting to expand the conversation and include our readers. It’ll usually just be stream of consciousness on my part, whatever comes to mind, but sometimes we’ll try a theme. So, this is the first edition of what I hope becomes a regular feature called Questions.
    Why did the US yield curve steepen after Draghi’s comments last week? Draghi said that ‘deflationary forces’ are being replaced by reflationary ones and bonds sold off worldwide. The yield curve in the US steepened along with those in Europe. The 10 year yield has risen 20 basis points in five trading days so nominal growth expectations rose after his comments. Real growth expectations rose too as TIPS sold off. So either investors believe that Draghi knows something they don’t or that ending QE – which is what this implies – is positive for growth. With central bankers’ credibility in the toilet I’m left wondering if all the world’s QE has actually been counterproductive.

    This post was published at Wall Street Examiner on July 3, 2017.

  • Banks Begin To Mutiny Against The Fed: “If We Are Right, Central Banks Will Be Wrong”

    It has been a trying time for the world’s central bankers, who for decades have been used to the “high finance” community’s adulation, derived from the deliverance of policy wrapped in so much opacity, gibberish and contradictions, that neither the central bankers, nor the markets, had any idea what was going on (see the Greenspan tenure), or dared to admit it was all meaningless drivel, resulting in phases during which the market was on “autopilot” and culminating with a bubble and subsequent crash, “rescued” by an even greater asset bubble and even greater crash, etc.
    However, after generations of largely uncontested and unquestioned monetary policy where only the occasional “tinfoil” fringe blog dared to say that central banker emperors are not only naked and clueless but are also the cause of the world’s biggest problems, more and more voices are emerging to both challenge the prevailing monetary religious dogma, as well as daring to do something unprecedented: tell the truth.
    One example was Bank of America’s chief strategist, Michael Harnett, who on Friday confirmed what we had been saying for years, that “central banks have exacerbated inequality via Wall St inflation & Main St deflation” and that the Fed failed in its mission to make the poor richer, instead its destructive policies have made the top 1% wealthier beyond its wildest dreams, and have been directly responsible for such political outcomes as “Brexit” and “Trump.”

    This post was published at Zero Hedge on Jul 1, 2017.

  • When “Whatever It Takes” Ends

    Via Global Macro Monitor,
    On Tuesday, June 27th, Super Mario said this,
    ‘Deflationary forces have been replaced by reflationary ones.’ – Mario Draghi
    And here is how global 10-year bond yields reacted,
    The German 10-year Bund yield increased 77 percent – OK, from a low base – and bonds across the world from Canada to Australia to the United States were tattooed.
    Change In Fundamentals?
    Absolutely not!
    Bond yields haven’t been trading on economic fundamentals for several years due to central bank financial represssion via quantitative easing (QE), ZIRP and NIRP. We have been pounding the table on this point,
    Lot’s of hand wringing these days about the flattening yield curve. We still maintain our position that the signal from the bond market is significantly distorted due to the global central bank intervention (QE) into the bond markets. See here and here.
    Most of what is happening with the U. S. yield curve is technical. – Global Macro Monitor, June 22, 2017

    This post was published at Zero Hedge on Jun 30, 2017.

  • Bank of America’s Forecast Of When The Fed Will Crash The Market

    Earlier today we reported that Bank of America’s chief strategist Michael Harnett made two stunning (if perfectly obvious) revelations for a person, who stands to potentially lose his job if he dares to publicize the truth, which is precisely what he did when he said that i) “central banks have exacerbated inequality via Wall St inflation & Main St deflation” and ii) it is “no longer politically acceptable to stoke Wall St bubble; two ways to cure inequality… you can make the poor richer…or you can make the rich poorer…they have failed to boost wage expectations, inflation expectation, ‘animal spirits’ on Main St… so Fed/ECB now tightening to make Wall St poorer”
    Some further observations from Harnett’s note “No market for Rich Men”:
    Tightening by Fed, rhetorical tightening by ECB has succeeded in raising bond yields, volatility, reducing tech stocks (CCMP, QNET, SOX all at 1-month lows); flow data had indicated tech very overbought (Chart 2 – flows into tech annualizing 22% AUM YTD)…

    This post was published at Zero Hedge on Jun 30, 2017.

  • “The Fed Is Preparing To Make The Rich Poorer”: BofA

    Remember when – for years and years after the grand, global QE experiment started – any suggestion that central bankers are the primary cause behind global wealth inequality, and thus directly responsible for such political outcomes as Brexit and Trump – was branded as a conspiracy theory by bloggers living in their parents’ basement? We do, because we were accused over and over of just that (our position on the Fed and other central banks should be familiar to all by now).
    Well, as of this morning, none other than the chief investment strategist at BofA, Michael Hartnett, is a basement dwelling, tinfoil hatter because in his latest Flow Show report, writes that “central banks have exacerbated inequality via Wall St inflation & Main St deflation.”

    Of course we knew that, you knew that, and pretty much everyone else knew that, but those whose jobs depended on not admitting it, kept their mouths shut terrified of pointing out that the central banking emperor is not only naked, but an idiot. Well, the seal has been broken, and even the biggest cowards from within the financial establishment, most of whom can be found on financial twitter for some inexplicable reason, can speak up now.

    This post was published at Zero Hedge on Jun 30, 2017.

  • Nobel Prize Economists Calls High Stock Market Values ‘Concerning’

    During a recent interview on CNBC’s Power Lunch, Nobel Prize winning economist Robert Shiller called stock market valuations ‘concerning’ and hinted that markets could be set up for a crash.
    Several other notable economists have recently expressed concern about surging stock markets, particularly in the US. Marc Faber has predicted ‘massive’ asset price deflation – possibly of drop of as much as 40% in stock market value. Billionaire investor Paul Singer recently said the financial system is not sound. And former Ronald Reagan budget director David Stockman said we should get ready of ‘fiscal chaos.’ Now Shiller has weighed in, pointing out that market valuations are at ‘unusual highs’ and noting that if history is any indication, it could foreshadow an upcoming crash.

    Shiller and fellow economist John Campbell developed the cyclically adjusted price-earnings ratio (CAPE).

    This post was published at Schiffgold on JUNE 30, 2017.

  • More Gloom from Dr. Doom: Marc Faber Predicts ‘Massive’ Asset Price Deflation (Videos)

    In April, Marc Faber called the US economy terminally sick and predicted a 20 to 40% crash in the stock market. In a recent interview on CNBC’s Trading Nations, ‘Dr. Doom’ reiterated that US stock markets are overvalued and that there will eventually be a ‘massive’ deflation in asset prices.
    Ironically, Faber’s comments came the same day the NASDAQ set its latest intraday record high of 6,341.70. Faber points out that when you break it all down, only a few stocks are really driving the rise. In fact many of these stocks such as Facebook, Netflix, Google, and Apple weren’t even in the index in 2000. He reiterated this point during a Fox News interview.

    This post was published at Schiffgold on JUNE 28, 2017.

  • Where Is Today’s “Rack” Trade?

    Ever have a pairs (spread) trade where both sides were moving against you? Ouch! Been there, don’t want to do that. Well, this is what we call the rack trade (Kudos to Doug Skrypek for coining the term).
    You can usually find these rack trades where the fast money is way offside. Where is that today, you ask? Long 10-year T-Notes and short crude oil.
    Recall earlier this year, the fast money had record shorts in the T-Note at 2.60 percent and record longs in crude oil and $50-55 bbl.. Betting against that crowd would have made you a lot of money.
    Notes and bonds are down today, which we would attribute to Mario Draghi’s comments that deflation is dead and QE is on its way out the door in Europe.

    This post was published at Zero Hedge on Jun 27, 2017.