MarketTrader

Financial Conditions Almost Back to Normal

Sure, $50 billion next year. The only problem is, all that revenue was created by using a computer to transfer stimulus dollars from the Federal Reserve to the bank. It's $50 billion not loaned to the first time home buyer or to the sound small business needing a loan to weather the storm. It's money that should be loaned to the people. However, the bank is sitting on it, and logging it on their income statement instead.


On Dec 07 08:22 PM LKofEnglish wrote:

> projected earnings at BofA are $50 billion next year. still not
> enough for the bears tho. how would you like to have them as your
> boss?

Financial Conditions Almost Back to Normal

"Normal"?? You must be kidding. Either you've completely bought into a bogus, half-ass index or you haven't stopped to put down the crack pipe yet. If we consider how the index is actually measured (i.e. money market spreads, bond market spreads, and equity market indicators), you can quickly realize why the index is suggesting things are "back to normal."

Take bond market spreads for instance. The reason spreads have returned to historical norms is because the Federal Reserve has dumped trillions of stimulus dollars in the financial system, specifically by lowering interest rates and buying U.S. government securities in the bond market. In a nutshell, the law of large numbers applies: increasing the number of trades in the bond market closely correlates with bond spreads returning to normal. But this is by far an accurate assessment of the financial market!

So why hasn't this money appeared on main street?? Simply put, consumer confidence is still in negative territory, and no one is willing to spend it. Consequently, the instant banks and individuals relax their recent lending and spending habits, the greenback will flood the marketplace, and we will see consumer prices skyrocket.

Tuesday FX View: Closing Ranks on the Dollar

I anticipate that strength in the pound is about as certain as strength in the greenback. The problem is, the Federal Reserve has printed money into existence without creating any real value. And now that the Asian economies are seeing a re-acceleration of economic growth, the countries that instituted weaker monetary policies will be left behind; on the other hand, the countries that chose to implement stimulus packages in connection with systematically raising interest rates or reigning in deficit spending, will have the capacity to keep up with the expansion in Asia. So far, neither the U.S. nor the U.K. have considered raising rates in the near term.

Policy aside, the problems in Japan stem from a decade of price deflation across the board, from consumer discretionary items to widgets at the very least. Consequently, any effort by the Bank of Japan to create inflation through stimulus measures will be dwarfed by ten long years of sliding prices.

Daily ETF Roundup: JJC and UNG Lead the Surge

Natural gas futures are at prices last seen in 2003 and then again in 2006. The point is, natural gas prices are at a long-term low. The only direction nat gas futures can go from here is up. Not only that, but with the Fed's weak dollar policy, prices for natural gas will continue to increase over the near-term as more and more dollar bills flood the financial system.

FCG: A Better Natural Gas ETF

You're absolutely right, MadScientist. FCG tracks more in step with the broader market than with the nearby natural gas futures contract price. If you want an ETF that correlates nicely with the futures price, try UNG. The correlation of UNG to NGZ9 or even NGZ10, is approximately 0.96, which means UNG tracks 96% of the time in step with NG futures price. Apparently, the author of this article wasn't paying attention.

On Jun 17 08:14 AM MadScientist wrote:

> I bought this one recently, and I must admit I am not overwhelmed.
> It is less influenced by the price of NG than it is by the overall
> market performance.
>
> Example: In the past week, NG has gone from roughly 3.75 to 4.30
> (an increase of 14%) while FCG has gone from 14.83 to 14.17 ( a decrease
> of 4.5%). Tracks the markets rather than the underlying commodity
> - if I want that, I'll buy SPY.

Should Bernie Madoff Be Given A Jail Sentence He Might Survive?

Does anybody else see how idiotic these investors were??

...I mean, aside from the elephant in the living room, who the hell invests their SAVINGS in a HEDGE FUND?! Savings are intended to stay in a savings account or bank CD and earn interest.

I basically think that if you're dumb enough to believe some "too good to be true" story or if you take your savings and invest it in a very risky asset class, whatever happens is your own fault. You're not completely blameless like some of these investors are trying to claim.

Economic Prospects Improving in Emerging Asia

I would say that estimates higher than 8% are pretty unlikely given that first quarter GDP coming out of China measured only a 6.1% rate of growth compared to 10.6% for the first quarter of 2008. Let's say China's growth rate in the second quarter is smaller than 6.1%, which would indicate a slowing growth rate, signaling a reversal.

Hummer: Too Dirty Even for the Chinese

"Too Dirty Even for the Chinese" ....haha that made my day

China Unlikely to Allow Its Currency to Appreciate Much

It's not that smaller account deficits are increasing demand for US output; it's quite the opposite story: With exceedingly large account deficits and a nearly 3.5 trillion dollar deficit, the devaluation of the US dollar is shifting production away from countries with an appreciating currency, like China.

The point is, manufacturing and production occur in countries where the currency is of less value, not more. This is one of the reasons why there is virtually ZERO manufacturing left in the United States, and its been like that for the last 25 years, at least. The real problem is that the majority of people don't realize that recession and, ultimately, the devaluation of the currency brings manufacturing back. Why? For the simple reason that wealthy nations like to exploit poorer nations in order to manufacture their products so that they can make a profit.

...fairly simple human behavior actually.

A Return to the Gold Standard? Forget About It!

I bet your mind will change come the end of 2010 and we will have been in recession for three years, which by definition is an economic depression.


On Jun 19 03:48 PM Xyrus wrote:

> Anyone who talks of commodity backed currencies and stability is
> either an idiot or ignorant.
>
> Even when gold and silver were the primary currencies, recessions
> and depressions occurred and were often quite long and painful. The
> Great Depression still managed occurred, despite being on gold standards.
> The recession/depression of the late 19th century still occurred.
> Britain faced more than one financial crisis throughout it's long
> history despite being on a "gold standard" for most of it. The Roman
> Empire still managed to suffer a terminal financial collapse despite
> using gold and silver.
>
> There is nothing magical about at commodity backed currency. It is
> just as prone to financial disaster, and in some cases can make them
> more pronounced.
>
> There is also nothing inherently valuable about gold or silver. They're
> just metals. You might as well have a currency based on quartz or
> lead. The only value in those metals is what people agree to, which
> is the same principle as fiat currency. The only difference between
> gold and a fiat currency in this regard is that it's harder to manufacture
> gold (mining vs. printing).
>
> Any money is just a convenient standardized way of expressing value,
> not value itself. Whether its metal or paper makes no difference,
> except when it comes to financial policy (in which case it's easier
> to deal with paper).
>
> ~X~

A Return to the Gold Standard? Forget About It!

The word fiat does NOT mean "by decree." It only means that a government has issued paper and that paper is "legal tender." As for a store of value, if a currency has no store of value, it is by definition not a currency and completely and utterly worthless.

Is the U.S. Dollar at Risk of Being Replaced?

Looks like we've got ourselves a genuine little Einstein. =P


On Jun 03 12:25 PM Bjarne Jensen wrote:

> So what happens when that loaf of bread costs $100 but wages didn't
> go up? Let me guess; hungry citizens!

Is the U.S. Dollar at Risk of Being Replaced?

I agree with poorboy...except...

This time, surging bond yields and a slumping dollar aren't an indication of a second financial crisis, but a resumption of the first. Take rising bond yields, for instance. Yields are rising because our foreign creditors are beginning to realize that they might not get all the money back they foolishly loaned us. Thus, a spike in bond yields, will ultimately lead to higher interest rates for US debt abroad. Which leads me to a slumping dollar.

Sad really. The dollar is weakening because of the principle that money is subject to the same supply-demand relationship that effects goods and services. The weakening dollar is the result of trillions of dollars being poured into the system by the Federal government to ease ailing banks, automakers, and the American taxpayer. As money supply increases, purchasing power decreases. But let's say you have a debt of $100 to repay. Prior to a decline in purchasing power, $100 would be a lot of money for a poor college student. After a decline in purchasing power, that same $100 won't buy you a loaf of bread, but it sure will eliminate the debt amount you owed prior to the decline.

Finally, if we consider inflation at its very worst, prices will generally rise. Do you honestly think prices on Wall Street are rising because news is good? Think again.

Busting the Myth of Global Market 'Decoupling'

The United States has been spending borrowed Dollars for years, by asking foreign creditors for money in exchange for US government bonds. The US no longer has the infrastructure to sustain its own consumption, let alone the world's consumption. Case in point: Things are no longer "Made in the USA" or "Made in America" ---In terms of infrastructure, the market has shifted to Asia and other regions that have maintained their infrastructures, while the US was letting theirs decay. Decoupling will probably not occur; however, we run an unusually high risk of creating an inflationary bull market. It will be during this time, that the numerous government bonds issued to finance our revolving debt will be called in and those dollar bills will come home to rule the roost.

In short, just because the US dollar is the world's reserve currency, doesn't mean it's invincible to inflation (or devaluation).

Why Did Peter Schiff Think the U.S. Dollar Would Collapse?

oak tree growing in road?? More like tiny room...elephant in the corner.


On Jan 30 05:01 AM Idahoj1 wrote:

> Would have to lean towards Schiff's general logic on this.
> Hoping he's totally wrong... as I am sure you are also...
> But nobody named Mish ever warned about this oak tree growing in
> the road.
> Okay I didn't check, please post examples if I am wrong.