• Tag Archives Inflation
  • Housing Bubble 2.0: Making America More Unstable, Again

    With low inflation and continuing stagnation in median wages another housing bubble is just what the doctor ordered as a cure for the last financial crisis, caused in part by the rampant financial fraud associated with Housing Bubble 1.0.
    And it looks like we have yet another tech stock bubble well underway.
    Meanwhile the public is distracted by the corporate media’s endless coverage of clown car antics and foreign plots to pollute our precious bodily fluids.
    Well done, elites, well done.
    And no one could have seen it coming, again.

    This post was published at Jesses Crossroads Cafe on 26 JULY 2017.


  • Bill Blain: “Are We In A Bubble About To Burst, Or Are We Facing Massive Equity Upside?”

    Are We In A Bubble About To Burst, Or Are We Facing Massive Equity Upside?
    ‘A liberal is a conservative who has been arrested.’
    No surprises from the Fed last night. Unchanged rate talk and hints about reducing the balance sheet ‘relatively soon’. We can go figure what ‘relatively’ means when inflation picks up. The stock market soared and VIX tumbled to a record low. Was that a warning about complacency? Since the 2008 crisis we’ve been here many times before – worrying about signals the economy is strengthening when suddenly its dived weaker.
    But, those us with longer memories can recall when the US economy has turned dramatically stronger – and in 1994, (yes, I remember it well), when the Fed acted prematurely, spiked the recovery and triggered what we’d now call a massive Treasury market TanTrum. This time it feels very different. I suspect we are very much still on course towards normalisation – a new kind of new normal: low rates, low inflation and steady state low growth.
    Stuff to watch today: Dovish Fed boosts stocks (record Dow) and dollar crashes. Lots of corporate results to wonder and worry about! Stuff the think about: Deutsche Bank results show it’s taken yet another thumping – difficult to see how it plays catch up and regains market relevance when it’s still swinging the headcount axe. Where is the US economy when inflation remains so low? What are the risks to Europe of the low dollar?

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


  • Are We There Yet? Here Is Howard Marks’ “Bubble Checklist”

    As first reported yesterday, in his latest nearly-30 page memo, a distinctly less optimistic Howard Marks – hardly known for his extreme positions – “sounded the alarm” on markets by laying out a plethora of reasons why investors should be turning far more cautious on the risk, and summarizing his current view on the investing environment with the following 4 bullet points:
    The uncertainties are unusual in terms of number, scale and insolubility in areas including secular economic growth; the impact of central banks; interest rates and inflation; political dysfunction; geopolitical trouble spots; and the long-term impact of technology. In the vast majority of asset classes, prospective returns are just about the lowest they’ve ever been. Asset prices are high across the board. Almost nothing can be bought below its intrinsic value, and there are few bargains. In general the best we can do is look for things that are less over-priced than others. Pro-risk behavior is commonplace, as the majority of investors embrace increased risk as the route to the returns they want or need. Among the items on Marks’ of the items, the one we focused on yesterday, had to do with Marks recurring warnings on ETFs and passive investing. To be sure, he also covered pretty much everything else from equities, to the record low VIX, to FAANG stocks, to record tight credit spreads, to EM debt, to PE and even Bitcoin.

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


  • ‘Low Inflation’ In Not ‘Good’ – It’s Pure Propaganda

    Analysts who advocate a monetary policy that targets ‘low inflation’ are the equivalent of chickens in the barnyard rooting for Colonel Sanders to succeed. This idea that a low level of inflation being good for the economy is beyond moronic.
    The fiat currency money system era was accompanied by the erroneous notion that a general increase in the price of goods and services is ‘inflation.’ But technically this definition is wrong. ‘Inflation’ is the ‘decline in the purchasing power of currency.’ This decline occurs from actions that devalue a currency. Rising prices are the visible evidence of ongoing currency devaluation.
    Currency devaluation occurs when the rate of growth in a country’s money supply exceeds the rate of growth in real wealth output. Simply stated, it’s when the amount of money created exceeds the amount of ‘widgets’ created, where ‘widgets’ is the real wealth output of an economic system.

    This post was published at Investment Research Dynamics on July 26, 2017.


  • JULY 26/DOVISH FED WITH ‘LACK OF INFLATION’ SENDS GOLD AND SILVER SOARING AFTER COMEX CLOSES/NORTH KOREA WILL LAUNCH ANOTHER ICBM MAYBE BY TONIGHT/USA PASSES LEGISLATION ORCHESTRATING MORE SANCTI…

    GOLD: $1249.85 DOWN $2.55
    Silver: $16.46 DOWN 9 cent(s)
    Closing access prices:
    Gold $1260.75
    silver: $16.67
    SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
    SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
    SHANGHAI FIRST GOLD FIX: $1254.41 DOLLARS PER OZ
    NY PRICE OF GOLD AT EXACT SAME TIME: $1248.40
    PREMIUM FIRST FIX: $6.01
    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    SECOND SHANGHAI GOLD FIX: $1252.10
    NY GOLD PRICE AT THE EXACT SAME TIME: $1245.65
    Premium of Shanghai 2nd fix/NY:$6.45
    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    LONDON FIRST GOLD FIX: 5:30 am est $1245.40
    NY PRICING AT THE EXACT SAME TIME: $1246.50 ???
    LONDON SECOND GOLD FIX 10 AM: $1248.10
    NY PRICING AT THE EXACT SAME TIME. $1248.15
    For comex gold:
    JULY/
    NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 14 NOTICE(S) FOR 1400 OZ.
    TOTAL NOTICES SO FAR: 171 FOR 17100 OZ (.5318 TONNES)
    For silver:
    JULY
    21 NOTICES FILED TODAY FOR
    105,000 OZ/
    Total number of notices filed so far this month: 3170 for 15,850,000 oz
    XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
    WE HAVE NOW ENTERED OPTIONS EXPIRY WEEK:
    COMEX OPTIONS EXPIRY: TONIGHT JULY 26.2017
    LONDON BASED OPTIONS EXPIRY: JULY 31.2017 AT 11AM OR SO.
    (OTC/LBMA CONTRACTS)

    This post was published at Harvey Organ Blog on July 26, 2017.


  • Outside the Box Hoisington Quarterly Review and Outlook, Second Quarter 2017

    I have often written about the Fed’s abysmal track record in managing the economy. In today’s Outside the Box, Lacy Hunt and Van Hoisington of Hoisington Investment Management give us an in-depth tutorial on the reasons for the Fed’s consistently poor record.
    They start by considering the Fed’s ‘dual mandate,’ which sets ‘the goals of maximum employment, stable prices and moderate long-term interest rates.’ (And yes, that is actually three goals, not two.) But a problem arises, the authors note, ‘because considerable time elapses between the implementation of the monetary actions designed to follow the mandate and when the impact of those actions take effect on broader business conditions.’ The time lag can easily be three years or longer, with the result that policy changes often end up being pro- rather than countercyclical. To make matters even worse, ‘the economic risks from adherence to this dual mandate are now much greater than historically due to the economy’s extreme over-indebtedness, poor demographics and a fragile global economy.’
    In the real world, the dual mandate can break down. Now, the Fed is tightening over concerns about wage pressure from a low level of unemployment, yet inflation has run consistently below the Fed’s 2% target for the past year or more. Enter the Phillips curve.

    This post was published at Mauldin Economics on JULY 26, 2017.


  • Is The Fed Poised To Ignite A Violent Dollar Rally?

    As ther world waits with bated breath for Janet Yellen’s statement this afternoon – whiche is uniformly expected to be a nothing-burger, some are wondering if the recent flip-floppery by Yellen, Draghi (and even Kuroda with his ‘actual’ tapering while lowering inflation expectations) does not leave today open to another modst shift back in The Fed’s ‘hawkishness’. As Bloomberg’s macro strategist warns, this sets the market up for a surprise and as he warns: “Dollar risks are starting to seem skewed all one way: toward an immediate rally.”
    There’s extremely bearish positioning, that’s failed to adapt to changing circumstances, into event risk that’s structured to surprise in the opposite direction. That’s an explosive mix.
    When something seems so obvious, your immediate instinct should be to ask, “what’s the catch?” My problem is that this time, I just can’t see one.

    This post was published at Zero Hedge on Jul 26, 2017.


  • Beware The Ides Of October…

    – Mark Twain (maybe)
    We have been speaking a lot about how the liquidity in the market today is different than in the past. The chart below reflects this better than anything we have seen.

    The monetary base in the U. S. has exceeded M1, the most narrow definiton of money, since the financial crisis. The monetary base consists of money in circulation and reserves held at the Fed (see definition below).
    The M1 money multiplier is still less than one, which reflects that for every dollar created by the Fed – an increase in the monetary base – results in a less than one dollar increase in the money supply (M1). Credit and deposit creation of commercial banks is thus still impaired, though improving and its repairment may be one reason why the Fed is a bit nervous and in tightening mode.
    A rapid turnaround and improvement in the money multiplier, which may be also be reflected in improving bank net interest margins and growing balance sheets, could act as an early indicator of potential inflationary pressures and a flag that the massive amount of high powered money in the financial system is being converted to credit based money.

    This post was published at Zero Hedge on Jul 26, 2017.


  • Why Surging UK Household Debt Will Cause The Next Crisis

    – Easy credit offered by UK banks is endangering ‘everyone else in the economy’
    – UK banks are ‘dicing with the spiral of complacency’ again
    – Bank of England official believes household debt is good in moderation
    – Household debt now equals 135% of household income
    – Now costs half of average income to raise a child
    – Real incomes not keeping up with real inflation
    – 41% of those in debt are in full-time work
    – 1.537 trillion owed by the end of May 2017
    ***
    Editor: Mark O’Byrne
    Why UK household debt will cause the next crisis
    ‘Household debt is good in moderation,’ Alex Brazier, executive director of financial stability at the Bank of England (BoE), told financial risk specialists earlier this week. But, it ‘can be dangerous in excess.’
    The problem with ‘in moderation’ is that no-one knows what a moderate measure of something is until they have had too much of it. Sub prime borrowers in the U. S. and property buyers in Ireland and the UK did not know they would contribute to a global debt crisis. Central bankers in Germany in the early 1920s and more recently in Zimbabwe never thought they were doing something that would be as detrimental as it ultimately was.

    This post was published at Gold Core on July 26, 2017.


  • The Two Charts That Dictate the Future of the Economy

    If you study these charts closely, you can only conclude that the US economy is doomed to secular stagnation and never-ending recession.
    The stock market, bond yields and statistical measures of the economy can be gamed, manipulated and massaged by authorities, but the real economy cannot. This is espcially true for the core drivers of the economy, real (adjusted for inflation) household income and real disposable household income, i.e. the real income remaining after debt service (interest and principal), rent, healthcare co-payments and insurance and other essential living expenses.
    If you want to predict the future of the U. S. economy, look at real household income. If real income is stagnant or declining, households cannot afford to take on more debt or pay for additional consumption.
    The Masters of the Economy have replaced the income lost to inflation and economic stagnation with debt for the past 17 years. They’ve managed to do so by lowering interest rates (and thus lowering interest payments), enabling households to borrow more (and thus buy more) with the same monthly debt payments.
    But this financial shuck and jive eventually runs out of rope: eventually, the rising cost of living soaks up so much of the household income that the household can not legitimately afford additional debt, even at near-zero interest rates.
    For this reason, real household income will dictate the future of the economy. If household incomes continue stagnating or declining, widespread advances in prosperity are impossible.

    This post was published at Charles Hugh Smith on Tuesday, July 25, 2017.


  • Why Robots Will Win the Coming Trade Wars

    The first step to surviving a war is knowing which side you are on. But in a trade war, that’s not always easy.
    Suppose the US imposed tariffs on steel imported from the European Union. Prices on goods made with that steel would probably rise, but this would affect you only to the extent you rely on those particular goods.
    When the EU responded by slapping tariffs on items ‘Made in USA,’ it would hurt you only if your livelihood depended on those export revenues.
    Of course, we may be headed toward a wider trade war, which could cause more general price inflation, hurting everyone in some way – though I think it will be more targeted at first.
    But one group is sure to win in a trade war because demand for their services will skyrocket.
    Who are these lucky people?
    They aren’t people at all. They’re robots.
    Trade Talks Fizzle
    If you monitor trade and logistics news like I do, the signs are everywhere. Last week, US and Chinese negotiators met in Washington to cap the 100-day dialogue that Presidents Trump and Xi promised at their April summit.
    It didn’t go well, apparently.

    This post was published at Mauldin Economics on JULY 25, 2017.


  • BoJ Keeps Rates Unchanged, Postpones 2% Inflation Deadline

    The Bank of Japan kept its monetary stimulus program unchanged even as it pushed back the projected timing for reaching 2 percent inflation for a sixth time.
    The downgraded price outlook will raise more questions about the sustainability of the BOJ’s stimulus at time when other major central banks are turning toward normalizing their monetary policy. The European Central Bank, which is said to examine options for winding down quantitative easing, concludes its own governing council meeting later on Thursday.
    By again delaying the timing for hitting its price goal, the BOJ acknowledged the need to continue easing for at least several more years, probably beyond 2020 because of a sales-tax increase scheduled for late 2019, said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official.
    “Going forward, there will be even more attention on the sustainability of the stimulus from market participants and lawmakers,” Shirawaka said.
    BOJ Governor Haruhiko Kuroda said it was regrettable the central bank needed to push back its inflation goal again, saying it hadn’t intentionally made its forecasts too optimistic. He noted that central banks in the U.S. and Europe had also overestimated inflation.

    This post was published at bloomberg


  • A Shocking Thing Happened To College Tuitions In 2016…

    The staggering inflation rates of college tuition over the past couple of decades has been a frequent topic for us. As the Wall Street Journal notes today, the cost of educating our snowflakes has soared since the early 90’s and outstripped overall inflation by nearly 4x. It seems that the liberal indoctrination of an entire generation is very expensive business.
    U. S. college tuition is growing at the slowest pace in decades, following a nearly 400% rise over the past three decades that fueled middle class anxieties and a surge in student debt.
    Tuition at college and graduate school – after scholarships and grants are factored in – rose 1.9% in the year through June, broadly in line with overall inflation, Labor Department figures show. By contrast from 1990 through last year, tuition grew an average 6% a year, more than double the rate of inflation. In that time, the average annual cost for a four-year private college, including living expenses, rose 161% to about $27,500, according to the College Board.
    Some schools are offering more discounts and cutting prices.

    This post was published at Zero Hedge on Jul 24, 2017.


  • IMF Sharply Lowers US Growth Forecasts As Hopes For Fiscal Boost Fade

    Bullish traders who insist that US economic fundamentals remain rock-solid despite tepid growth, inflation and other signs the postelection ‘Trump bump’ in consumer confidence is already beginning to fade should take a look at the International Monetary Fund’s latest batch of quarterly forecasts for global growth.
    The fund left its all-world forecasts for 2017 and 2018 unchanged from its previous quarterly update, which was released in April: It anticipates 3.5% and 3.6% growth, respectively.
    However, those numbers mask a sharp decline in the fund’s forecasts for US growth, which have been lowered sharply to reflect expectations that President Donald Trump’s promised fiscal expansion package likely won’t arrive until next year, according to a report published by the IMF. In an update that shouldn’t surprise anyone who’s been following US macro data since the start of the year, the fund revised its forecasts for 2017 and 2018 down 0.2% to 2.1% and 0.4% to 2.1%. It continues to expect the US economy to expand by 1.6% in 2016.
    The fund said its decision to lower US growth forecasts reflects in part the weak growth experienced during the first quarter. But what it calls the ‘major factor’ behind the revision, especially for 2018, is the assumption that ‘fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of U. S. fiscal policy changes. Market expectations of fiscal stimulus have also receded.’

    This post was published at Zero Hedge on Jul 24, 2017.


  • ECRI: “All Signs Point to a Cyclical Slowdown in Inflation”

    Today’s release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 144.8, up from the previous week. Year-over-year the four-week moving average of the indicator is now at 4.99%, down from 5.12% last week. The WLI Growth indicator is now at 2.6, up from the previous week.
    “All Signs Point to a Cyclical Slowdown in Inflation”
    ECRI’s most recent headline article states that their US Future Inflation Guage indicator is signaling a downturn in inflation. They claim that using the Phillips curve does not give a full picture of cyclical upturns and downturns. Rather than use the Phillips curve or extrapolate inflation data, ECRI says their Future Inflation Guage is a better indicator and has correctly anticipated the late 1990s growth without inflation and last year’s reflation trade.

    This post was published at FinancialSense on 07/24/2017.


  • SWOT Analysis: Silver In the Spotlight

    Strengths
    The best performing precious metal for the week was silver, up 3.34 percent as investors loaded up on ETFs that purchase the physical metal, perhaps speculating that silver would outperform gold if the latter rallied. Gold traders and analysts remained bullish this week, for the fifth week, as the European Central Bank keeps its stimulus going, reports Bloomberg. In addition, as the dollar slumps amid an investigation into President Trump, gold heads for the first back-to-back weekly advance since early June, another Bloomberg article reads. Gold bulls are keeping their faith in the metal, reports Bloomberg, as the equity rally pares the yellow metal’s gains. Gold bulls have pointed to slow inflation and Fed concerns that asset prices look ‘somewhat rich.’ Similarly, a Bank of America Merrill Lynch survey shows fund managers are growing hesitant to buy U. S. equities. Jason Mayer of Sprott Asset Management says that the non-stop bull market has led to a lot of complacency where managers aren’t hedging. ‘Once that tide turns, that could prove to be bullish for gold and precious metals,’ Mayer said. After President Trump’s economic revitalization agenda once again faltered, the U. S. dollar fell to an 11-month low this week, reports Bloomberg. Opposition to Trump’s health-care reform bill, along with European shares dropping amid earnings disappointments, sent gold to its highest level this month.

    This post was published at SilverSeek on July 24, 2017.


  • Venezuelans Are Now Paying 1000 Times More For US Dollars Than They Did In 2010

    The hyperinflationary-hell in Venezuela’s currency is deepening as a crippling dollar shortage and a threat of oil sanctions (amid President Maduro’s attempts to rewrite the constition to maintain his grip on power) take their toll on the economy.
    Venezuela’s Latin American neighbors urged President Nicolas Maduro to refrain from actions that might exacerbate the country’s political crisis in a disappointment to some regional governments that favored more direct and forceful criticism. As Bloomberg reports, Mercosur, South America’s largest trade bloc, called on ‘the government and the opposition not to carry out any initiative that could divide further Venezuelan society or aggravate institutional conflicts,’ in a joint statement issued at the end of a summit in Mendoza, Argentina. Member countries Brazil, Argentina, Uruguay and Paraguay were joined by Chile, Colombia, Guyana and Mexico in signing the statement.
    International condemnation of the Maduro government’s plan to rewrite the country’s constitution to maintain its hold on power is gathering pace after the U. S. said it would impose sanctions on Venezuelan officials if Maduro goes ahead.
    As we noted earlier in the week, The Trump administration is mulling over sanctions against senior Venezuelan government officials, and additional measures could include sanctions against the country’s oil industry, such as halting imports into the U. S., according to senior Washington officials who spoke to media.

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


  • 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.


  • David Stockman Warns The Market’s “Chuck Prince Moment” Has Arrived… “Only More Dangerous”

    On July 10, 2007 former Citigroup CEO Chuck Prince famously said what might be termed the ‘speculator’s creed’ for the current era of Bubble Finance. Prince was then canned within four months but as of that day his minions were still slamming the’buy’ key good and hard:
    ‘When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,’ he said in an interview with the FT in Japan.
    We are at that moment again. Only this time the danger of a thundering crash is far greater. That’s because the current blow-off top comes after nine years of even more central bank policy than Greenspan’s credit and housing bubble.
    The Fed and its crew of traveling central banks around the world have gutted honest price discovery entirely. They have turned global financial markets into outright gambling dens of unchecked speculation.
    Central bank policies of massive quantitative easing (QE) and zero interest rates (ZIRP) have been sugar-coated in rhetoric about ‘stimulus’, ‘accommodation’ and guiding economies toward optimal levels of inflation and full-employment.

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