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Michael Clark

Michael Clark
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  • Why The Correction Didn't Become A Crash [View article]
    I think he means that he thinks food-stamp recipients don't matter, since they don't buy stocks. And they don't qualify for ZIRP; and they don't trade on margin.
    Nov 2 02:42 PM | 1 Like Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    From MONEY WEEKS "Japanese Horror Stories":

    In their latest market commentary, Chris Andrew and Mustafa Zaidi of Clarmond Advisors remind us of the Japan of the 1930s. The finance minister at the time was Korekiyo Takahashi, a man who it seems is something of a hero to Ben Bernanke – in 2003, Bernanke referred to him as having “brilliantly rescued Japan from the Great Depression through reflationary policies in the early 1930s”.

    You’ll be wondering how he did this – given how tricky rescuing economies from deflationary pressures appears to be these days. Simple really, say the Clarmond lot. He took Japan off the gold standard (allowing the yen to float freely), outlawed the conversion of paper currency to gold, slashed interest rates to the bone, enacted massive government spending and made it legally possible for the Bank of Japan to buy and hang on to government bonds (hello QE). It worked.

    Equities boomed, the yen collapsed, exports soared and growth hit 6%. Then Takahashi started trying to get out. And it stopped working – his attempt to reverse some of the QE in 1935 resulted in a failed auction, something that told him the deficit spending had to come to an end. Unfortunately for him, most of the spending was going on warfare and the military didn’t much fancy any spending cuts.

    The result? An irritable group of young officers, keen not to see the flow of public cash to their cause diminished in any way, hacked the 82-year-old finance minister to death. The new finance minister saw sense and continued with the spending and the BOJ bond-buying programme. Today, Japan’s debt levels are among the highest in the world.

    The lesson here? It’s pretty obvious. Once you start a programme like this – however good your intentions in the first place – it is all but impossible to get out again. That’s true of fiscal policy – will it ever really be possible for a modern elected government to default on the welfare promises of past governments? And it is true of monetary policy too.

    How can all the bonds that have been bought in by central banks ever be sold again without causing horrific disruption in the form of fast rising interest rates? As Andrew and Zaidi say, Chairman Bernanke may one day wish he had “never invoked the spectre of Korekiyo Takahashi”.
    Nov 1 11:05 PM | Likes Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    The thing about demographics is that they can change in one generation. In fact, after a war, everyone has children, and the demographics problems vanishes, until it comes back around on the wheel. Demographics problems make war inevitable. And war makes demographics problems vanish, after the peace comes.

    The world is a circle; the world is not flat.
    Nov 1 10:49 PM | 1 Like Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    World War II -- you missed one. World War III seems to have already started. Do you get the new where you are, MI? Interpret the news, don't just consume it, like air.
    Nov 1 10:45 PM | 2 Likes Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    RNdog. Do I blame the younger generation? Really? Because the younger generation Japanese are hiding in their rooms, disgusted with the reality their parents have made? I don't blame them. No, I'm not critical of the younger generation. I'm afraid MY generation is going to invoke the WAR outlet, a a last desperate measure, and offer their children up to the blood-ritual god, Saturn. I don't understand how you judge from what I write that I am blaming the younger generation. Read what I write about Clinton, Greenspan, Robert Rubin, Larry Summers, Bernanke, etc. Obama? Obama was corrupted by Wall Street, as they all are.

    I blame my generation for blinding themselves to the truth of what they have done through 'good intentions'. I agree that Karma will come (I'm not sure how blind Karma is) and exact retribution....from all of us.
    Nov 1 08:48 PM | 2 Likes Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    Exactly. Otherwise known as 'last desperate measure suicide'.
    Nov 1 08:43 PM | Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    That's not the issue, Diaodochi. We all believe that those who take the risks deserve the reward IF their risks turns out to be well-perceived and well-placed. What some of us don't appreciate is risk-takers being rewarded when they succeed, and also when they fail. QE is rewarding risk-takers who failed. And the message in this is that the government will protect risk-takers so that they always succeed, even when they fail. Do you see the moral problem with this?
    Nov 1 08:35 PM | 1 Like Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    Not only that. Buying back shares can help to cover up declining sales also.
    Nov 1 06:05 PM | Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    "Getting rewarded for not taking any risk doesn't really make sense."

    Neither does getting PUNISHED for not taking any risk...


    Neither does it make sense to reward risk-takers with other investors' when they succeed, and then to reward risk-takers with taxpayer money when they fail -- unless you want to ensure that risk-takers always are rewarded, no matter what they do. Risk-takers only learn about the limits of risk-taking if they are allowed to fail when they fail. The FED's bailout policy does not allow this to happen.
    Nov 1 04:06 AM | 2 Likes Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    Thank you for the encouragement, MI. Do I have your vote?
    Nov 1 02:22 AM | 6 Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    Gregory Mannarino seems to agree with me.

    "The Federal Reserve minutes state explicitly that they fear an economic slowdown directly because of the dollar's recent strength against other currencies.

    The dollar's gains have been largely responsible for the deflationary period we are now in, and that DOES NOT bode well for an economy which is driven by 70% by consumer spending...."

    You are correct. The strong Dollar WILL drive down the price of oil and energy so much that this will become the harbinger of universal deflation, and break the back of the inflation the FED has been attempting to manage for too long now.

    The FED is between a rock and a hard place. A weak dollar, in fact, threatens the Dollar's position as King Currency. A stronger Dollar will drive investors out of anti-dollar investments, stocks, commodities, housing. Our trading partners want and think they need a strong dollar to drive down their own currencies in an attempt to recover from the serial recessions into which they have been plunged now for years. A weak dollar would drive them deeper into recession, they think.

    John Rubino writes this week: " FOMC’s fear of a strong dollar drives greenback lower.

    NEW YORK (MarketWatch) — The U.S. dollar turned lower against rivals Wednesday afternoon after the FOMC released minutes from its September meeting, revealing that members raised concerns that a one-two punch of a strong dollar and stagnant growth abroad could impede U.S. growth.

    The closely followed central bank minutes also showed that several Fed officials wanted to remove language indicating that short-term interest rates would likely remain low “for a considerable time,” but held off in part because of concern that the market would misinterpret it as a policy shift.

    Really bad news for Europe and Japan
    Check out the stock market’s volatility since the dollar has been rising. In normal times 200 point moves on the Dow are pretty notable. But they’ve happened in four of the past six sessions:

    Stock volatility Oct 2014

    One explanation for this surge in volatility is that the dollar is spiking at a time when stocks are priced for perfection, producing Fear (that an appreciating currency will price US exports out of world markets and make domestic debts harder to manage) to contend with the Greed generated by a long bull market.

    The Fed understands the risk posed by a surging dollar and is using it as an excuse to do what it wants to do in any event: continue to hold interest rates at artificially low levels and keep the helicopter money flowing.

    US equity markets loved this reprieve, of course. But now the question becomes: If too-strong currencies helped to push Europe and Japan back into recession, and weaker currencies (versus the dollar) were those economies’ main hope for avoiding an ugly deflationary crash, then what does the Fed’s desire to keep a lid on the dollar mean? The answer isn’t pretty. If the dollar goes down from here that’s the same thing as saying the yen and euro go up. And if those currencies rise, Japan and Europe are toast.

    So this story has just begun, and the next chapter is likely to involve some seriously desperate/experimental actions from the European Central Bank and Bank of Japan. "

    This desperate action we saw yesterday from the Bank of Japan. It is likely this is just the begining of desperate, even insane actions.

    Michael Pento writes:

    "But here is the catch--the Fed thinks it can escape its huge marketing campaign that involved years of market manipulation with impunity. But, it has made an egregious miscalculation.

    Wall Street has completely bought into the fantasy that the Fed can end its $3.5 trillion dollar QE programs and also normalize interest rates after having them near zero percent for over six years without hurting GDP growth or having a negative effect on equity market prices.

    However, one of the unintended consequences from normalizing interest rates is the effect on the U.S. dollar. The dollar is already rapidly rising as the Fed winds down QE3; just imagine how high it would rise if interest rates were to rise here in America.

    Beginning in early 2009, asset prices in the U.S. increased in tandem with that of the developed world, as most global central banks depreciated the intrinsic value of their currencies in concert. However, we now see the dollar rise and asset prices in the U.S. begin to fall (S&P Case-Shiller Home Price Index now down two months in a row) as the Fed winds down its latest $1.7 trillion dollar QE program and sets the table for a lift off from a zero percent Fed Funds rate in the first half of 2015. In fact, the dollar index has already increased from 79 in May, to over 82.6, which is a 52 week high.

    The real estate market is starting to factor in the end of QE and the rise of the dollar, but equity prices seem to be still in a state of denial. The Fed's Ice bucket challenge seems to have frozen investors' brains into believing the exit from QE will be a smooth one for equities and the FX market.

    While it is true that a strong and stable currency is the cornerstone of a healthy economy, it is also true that the journey from a massively manipulated currency to one that is subject to free-market forces is never a smooth ride. The Fed cannot tighten monetary policy unilaterally without causing massive disruptions in currency valuations.

    The BOJ continues to monetize 7 Trillion yen per month of Japanese assets and the ECB is expected to begin its own substantial QE program very soon. If the U.S. attempts to raise rates while the developed world is printing money to keep rates low, the dollar will skyrocket against our major trading partners.

    A surging dollar will crush commodity, real estate and equity prices, as it causes the reporting earnings of U.S. based multi-national corporations to plunge.

    This is just one example of the volatile and disruptive ramifications associated with the normalization of interest rates; many of which appear to be out of the Fed's risk calculations. In a very short time from now asset prices should undergo a sharp correction in an amount north of 20 percent because of the end of QE and the tremendous volatility in the U.S. dollar."
    Oct 31 11:39 PM | 4 Likes Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    Only a stronger dollar will save us from the madness. This instablog discusses that:

    The strong dollar will put an end to asset inflation. That does not mean it will be easy, because it will lead to a world hating the US. And it will probably lead to world war.
    Oct 31 08:42 PM | 2 Likes Like |Link to Comment
  • The Experiment That Will Blow Up The World [View article]
    The total reset is world war. That is where Japan is going now, remilitarizing, to die with dignity in a kind of Hari-Kari on the new worthless generation that is hiding in the parents' house and won't leave their room.
    Oct 31 08:42 PM | 6 Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    Sadly, James, I don't think the debt slaves will ever rise, unless they lose their cars and IPhones. And the FED wants to make sure that doesn't happen, because the FED wants the debt slaves even MORE endebted.

    I think this IS a moral issue. This is something we don't like to talk about in America, the 'land of the pragmatists'. (Some say pragnatism is the Devil's advice.)

    What could derail the advance of stocks in the next two years? I worked up an instablog to try to anser this. Quite simply the only thing that could derail the plans of the FED -- and which now seems quite likely -- is a rally in the US Dollar.

    Here is the instablog that describes this possible event, with pictures:
    Oct 31 08:39 PM | 4 Likes Like |Link to Comment
  • Why The Correction Didn't Become A Crash [View article]
    It's not really QE, it's CorporateCare. SAD.
    Oct 31 07:13 PM | 1 Like Like |Link to Comment