(Picture: Don't tell anybody, but we have a big, old-fashioned high school crush on - please don't tell - Bloomberg.) Look! Look over there (picture above). There she is. Aaaah, so beautiful... One day we'll be together... Bloomberg, time and time again, gets it. We are thoroughly impressed. So we want to take an excerpt from our new crush, Bloomberg, as another feather in our Global Desperation cap.)
Here is what Bloomberg had to say. Just listen to the sweet words about G-20 - I could listen to this all day:
"Underscoring the essential role of structural reforms, we emphasize that our fiscal strategies are equally important to support our common growth objectives," the group [G-20] said, in slightly modified language from its last communique, issued in April. Three months ago, the group didn't use the term "essential" for reform, nor the word "emphasize" for its fiscal policy. The April document also didn't refer to fiscal strategies being "equally" important.
Ahh, how beautiful, how eloquent, how... it's out, we LOVE BLOOMBERG. Bloomberg Terminal For President!
We'll Elazar that for you:
"The G-20 said their multi-year monetary stimulus drive is not cutting-it (official financial term) and now they've enhanced their language to newly emphasize the salient importance to add newer and newer ways to spend more and more money on an economy that isn't budging."
Because of this above Bloomberg (aaahh) excerpt we also had to add two words to our official Global Desperation Rating. We've upgraded our rating to "Absolute and Utter Global Desperation Rating." (We see Bloomberg's three G-20 words and raise it two Elazar words.)
Post-G-20: Now The World Is Official Rating "All-In" To Our Upgraded Sheer and Utter Global Desperation Call
Let's quickly review every corner of the globe to see EVERYBODY is now officially aboard.
We've reported that the Fed already blamed the government for not incentivizing enough births to drive the economy. (I didn't know that fell under fiscal policy.)
We've reported that Japan said they wanted to "speed up" their easing process. Speed up.
PM Abe said, "We want to be steadfast in accelerating our breakaway from deflation."(Guess where that quote is from -aaah... Bloomberg.)
Click to enlarge(Picture: Honda, above, is one of the beneficiaries of a sped-up JCB policy. We think that may be one of the JCB officials taking one of their new fiscal policies for a test ("joy") ride.)
We're reported that the ECB admitted that they happened to overlook that they may be buying too many bonds.
And now it's officially all-out gone global. Absolute and Utter Global Desperation Rating.
Now we have a G-20 meeting saying all that monetary stimulus isn't going to be enough. Now we need fiscal stimulus.
First let's look at all that monetary stimulus that they said is not going to be enough. Let's see how many human tax dollars have been unsuccessful to drive anything.
Here it is. Official amount? "Lots"
Source: Monetary Watch
How long have we been in this process. Now that we see it doesn't work we need even more and even more in new and different ways.
What famous University did all these smart CB operators go to, anyway? I think I am going to cancel my application.
We've already shown two reasons why it's all not working.
Frankly, we don't see much of anything working.
All of this every-corner-of-the-world in sheer and utter desperation confirms our thinking that there are one and maybe two main reasons why the world is not working.
- Repeal Glass Steagall (Elazar, you can't say that, it's un-American, c'mon already.)
We've shown this many times, but the globe is fighting an uphill battle (uphill battle rating).
This chart shows peaks and troughs of births. The dates on the chart were scientifically calculated by Elazar's proprietary formulas (births plus 50). 50-year-olds are peak spenders and earners. They have been decreasing as a proportion of the population since 2007 (what happened in 2008?). That means fewer peak earners and spenders.
The US, The EU, Japan and now the entire G-20 are throwing everything they can at this material problem called World War II.
Blame World War II And The Abolishment Of Then Fiscal Policies
Blame World War II, because when it was over, there must have been the correct accommodative fiscal incentives at the time to drive births. They must have repealed those birthing laws since then which is why the Fed is blaming congress for the birth rate.
That birth rate then is causing a slowdown today. We don't think there is anything you can do about it unless you take The Fortune Teller's Back To The Future Time Machine or The Terminator and go back and fix it.
Sheer, Utter, Absolute (3 new words now) Global Desperation Rating. You can see we are getting more bearish as we write this.
(You've just witnessed a first ever in the history of finance. That is a first ever in financial reporting. Nobody ever became more bearish live in a financial report. The rating at the top of the report and the bottom of the report are different.)
This is what savior mentality G-20, Japan, US, and ECB think they can fix. Ugh Rating.
(Elazar, c'mon, leave this one alone; it's way, way off.)
Sorry, Glass Steagall repeal. We love you, but we think it's time to go. Repeal the repeal.
The Glass Steagall repeal allowed brokers to merge with banks. Banks were allowed to borrow Fed funds. Now brokers through banks are allowed to borrow Fed funds. Banks and brokers do different things with money.
Glass Steagall was repealed in 1999. Look what happened to the amount of money that changed hands since then.
Instead of money turning over 2.2x it is only turning over 1.4X. (Velocity is measured GDP divided by money supply). Money is swishing around less because brokers don't flow it to the economy like banks.
Brokers flow that capital to clients which benefits the stock market.
The larger size banks can borrow more from the Fed and have higher capital levels. Those capital levels are used for less economic drivers ever since 1999.
What's all the super powers crying about?
Here's global GDP. This is why we need pedal-to-the-metal monetary policy. And now that it didn't work that's why we need a new flush of global pedal-to-the-medal coordinated fiscal stimulus.
Here is Tradeconomics by major country (below). Not so so bad, right?
This is the annual GDP growth rate by percent.
Deserving of all-out pedal-to-the-metal economics?
Those numbers are not so bad, are they?
Look up at the GDP chart and see how today compares to 2008. It's much better and more consistent, wouldn't you say?
2008 deserved pedal-to-the-metal financing. Maybe. But now? Something is wrong.
What we would say is maybe it does. If not for all this pre-historic record amounts of money printing would the world even be at 2%? That IS a very scary thought, and one reason we are getting more bearish (as we write this).
That's what the US is starting to say. The US no longer thinks it's time any more for sheer-utter-absolute-all-out-pedal-to-the-medal easing.
Jack Lew, US Finance Minister Treasury Secretary, just said, "I don't think this is a moment that calls for the kind of coordinated action that occurred during the Great Recession in 2008 and 2009" (Bloomberg... ahh)
Sorry, Mr. Lew, the G-20, ECB, JCB and every crevice of governing body found anywhere in the world seem to disagree with you.
But, and a big but, we think Mr. Lew's comments could be a telltale sign for the upcoming Fed meeting.
Hmm, What did the US Finance Minister say? He said we "don't think" this is a time for coordinated action.
Very very interesting.
What does coordinated mean? Let's all do it together, right?
Hmm if the world is easing and the US is not coordinating, what does that tell you about the US.
Let's solve for US.
World Easing + X = Global all out sheer utter out of hand coordination.
We know one thing X does not = US.
Hey, Elazar, that's something, isn't there a Fed meeting coming up, maybe that tells us something.
Hey, good point.
We think we have another indicator that the Fed is not easing. Let's see what they might do at the Wednesday meeting now that we have one more piece of the pie (puzzle).
The Fed on Wednesday could
- Ease with the world: no
- Talk about easing: no
- Tighten: maybe
- Talk about tightening: Definitely.
We've written that the Fed has boldly said that they plan on talking about tightening. This is more proof. Ok, it's not all out tightening but talking about it is a step closer. (See our Boy Who Cried Wolf Rating)
Why more bearish Elazar? The money is going to go into bonds which will drive equities.
We are sorry to say this and it is something we have not heard ANYBODY talk about. (Not that we listen to anybody) But at some point soon we expect.....
(Cringe) Capital allocation shifts.
While everybody decides to jump into the hot potato trade (official term) of capital appreciation sub-zero yielding bonds, we think money will come out of equities especially since global growth isn't cutting it. Growth means a lack of earnings meaning a lack of support and a huge quantity of risk.
What could also happen is...
(Cringe) Rates actually jump on inflation or credit which can happen at any moment. Inflation is building and credit is deteriorating. Maybe it's Italy at 18% NPLS or Deutsche Bank or some other land-mine with EU stress tests this week.
Elazar, it could never happen, because everyone is expecting it. Ok.
Everybody knows because everybody has Facebook (NASDAQ:FB) so of course everybody knows. Facebook does not mean that traditional economics and markets don't function normally.
If any of our Cringe Rating events occur, the everybody-in Rating is going to get (official rating) "smoked."
All-out, sheer, utter, absolute, pre-historic, "his prices are insane", no way, no how, monetary, fiscal, birth formation, kitchen sink, pedal to the medal, nothing works, Global Desperation play financing is ... everybody... not working. Excellent - who got it right? If you did, without cheating, and let us know, you know what you get? A coveted Elazar desperation call like 1.
The global easing story isn't working.
We think we can blame post-World War II fiscal policy for a lax-birth policy which drove the slowdown of the 50-year-olds today.
We need the Fortune Teller's Back To The Future time machine to go back and fix it, otherwise, we are worried that nothing may work, until 2018 when births-plus-50 bottoms and 2023 where it bottoms longer-term.
Please be safe. We remain bearish.
If you want Elazar's analysis on Seeking Alpha, scroll to the top of the article and hit "Follow." Elazar also writes real-time pieces as news is reported. If you want to be among the first updated check the box for "Real-time alerts on this author" under "Follow."
Disclaimer: All investments have many risks and can lose principal in the short and long term. This article is for information purposes only. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Chaim Siegel, Elazar Advisors, LLC, bestideas, their related parties, and its authors harmless.
Disclosure: I am/we are short S&P 500.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.