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  • You Only Live Thrice [View article]
    The Fed is currently like a boxer that threw a hard hook that partially connected, but then left his arm fully extended. Now, with the "stiff arm" they can produce small, weak jabs with a little shoulder motion, but nothing that's going to hurt the opponent. And they've left their face exposed.

    The Fed knows this. They know that with their "arm fully extended" with ZIRP, and a $4.5T balance sheet, if they don't reload and have something big in reserve when it's next needed that they're not going to be able to be effective. They HAVE to pull that arm back in and get ready for another big punch. They HAVE to get rates back up to 3 or 4% pronto so that they can drop them as the economy melts away at a -6% to -8% annual rate during the next recession as it did in 2007-2009.

    Unless they plan on using QE exclusively from now on to counter downturns - but what's that like - a boxer using headbutts and bearhugs to try to win a fight? Non conventional policy never works for long, because the opponent (banks, individuals, the business cycle) adapts.

    Of course now they're even talking about "Net GDP targeting" - essentially print until GDP appears to be what they want regardless of fundamentals - but that almost seems like resorting to ear biting - a fun show but then the bout is over and you've lost.

    What happens if the Fed is perceived to have lost against the business cycle? Do you think the Fed cares more about preserving their decades-old reputation of "power and control" or whether a few Johnny-come-latelies to the stock markets (anyone who's bought since late 2012) lose 25 or 30%?
    Jun 2, 2015. 02:24 PM | 5 Likes Like |Link to Comment
  • The 'New Economic Era' Is Coming Sooner Rather Than Later [View article]
    "If consumer confidence is up, homebuilders are happy, buyers are coming out of the woodwork, the market is not really over-valued, companies can't find enough workers-and we can't raise interest rates by a teeny-weensy, paltry fraction of a fraction??"

    Yes - seems strange doesn't it? Maybe all those "improving metrics" aren't quite so accurate? The Fed's actions over the last six years up to the present tell a much more honest tale than all the rosy "statistics". The Fed is keeping the economy on ZIRP life support because if it takes it off the economy will die.
    Jun 2, 2015. 01:04 PM | 2 Likes Like |Link to Comment
  • S&P 500 Response To The Pending Fed Rate Hike; Hint: It's Probably Positive [View article]
    How does the market do after the first rise after rates have been at zero for seven years and the Fed has quintupled their balance sheet by purchasing trillions in bonds?

    Do we have some historical data on that?
    May 31, 2015. 02:24 PM | 4 Likes Like |Link to Comment
  • Will Market Uncertainty Spook Investors? [View article]
    "At the same time, such contractions could stall the interest rate hike - expected in September - as economic improvement fails to meet the government's expectations."

    What do the government's expectations have to do with rate hikes in September?
    May 29, 2015. 01:51 PM | 1 Like Like |Link to Comment
  • Did Affordable Housing Policy Cause The Financial Crisis? [View article]
    From the horse's mouth...
    May 29, 2015. 01:32 PM | Likes Like |Link to Comment
  • China Stocks Drop 6.5% Yet The MSM Is Silent? [View article]
    I can imagine that if China had rallied 6.5% in one day the S&P would have seen at least +1.5% based on "the global rally", but a fall in China is almost ignored here.

    So what happens if China falls another 4 to 6% tonight? Will US markets respond at all?

    Regardless, tomorrow is the last day to "sell in May and go away". Of course SIMAGA is only seen to have been the right (or wrong) thing to do later in the year - July, Sept, or later. With the S&P idling over 2100 for almost the whole month so far, will a dip to 1900, 1800 or less in the next few months lead to a lot of angry "Why didn't I's..."?

    Speaking of Stockman, I can't wait to see what he has to say about Bullard's latest "GDP targeting" musings!
    May 28, 2015. 05:39 PM | 2 Likes Like |Link to Comment
  • GM passes on merger offer from Fiat Chrysler [View news story]
    Ford should make a play on Jeep. The Wrangler is an iconic vehicle that would sell well alongside Mustangs and F-150s, and Ford made Jeeps once back in the 1940's or so. The rest of the Jeep lineup is transitory at best - small FWD SUVs are a dime a dozen. The Grand Cherokee might have value as a higher-end Toyota Landcruiser competitor.

    I think that ultimately Fiat Chrysler will be liquidated, as it represents a weak player in a very over saturated global auto market. Fiat will probably become a ward of the Italian state, producing cheap cars for southern Europe and Africa. Dodge and Chrysler have exactly one thing going for them - the rapidly aging "300/Charger/Challenger" platform (based off a late 1990s Mercedes). No other Dodge/Chrysler product is best in class or even close.

    Ram trucks has value. I can see Hyundai or even Honda eventually expressing interest simply to round out their US portfolio. Or a Chinese company.

    The next five to ten years will see the US auto market begin a steady and probably irreversible fall in annual sales - I think the projected 17.2M of this year will be the top - never exceeding the all time high of over 18M in 2006. A gradual fall back to 14M, then 12M, then under 10M per year should be expected if current trends continue. Cars last longer, are becoming "appliances", and the "car culture" has very few adherents under the age of 30 or so anymore.
    May 25, 2015. 03:28 PM | Likes Like |Link to Comment
  • Breakouts Or Fakeouts? [View article]
    I read that article the day it was published. It's the one where despite seemingly making a "bearish" analysis the author still concludes:

    "The big picture may seem to have an "easy bearish bias" to it. It is not that easy. On one hand, this type of market is vulnerable; thus, the large cash positions we currently are holding. On the other hand, a market with this profile can also rally back toward the recent highs, even under a longer-term bearish scenario, which is why (a) we still have some equity exposure, and (b) have not made large bearish bets of any kind."

    Now how is it that if the "weight of the evidence" was pointing to bearishness that the conclusion above was reached? Clearly the evidence was either not really there, or was more likely simply ignored because it went against an overall bullish bias.

    If we ever do have a multi-month market slump such as Sept 2000 - Mar 2001, or Oct 2007 - Mar 2008 then I'll definitely see if the "evidence" has actually caused the author to finally express a truly bearish opinion. Until then these useful and well written articles are always viewed with the "thumb on the scale" in mind.
    May 19, 2015. 07:17 PM | Likes Like |Link to Comment
  • Breakouts Or Fakeouts? [View article]
    When the market is falling over a period of a week or two Mr. Ciovacco tends not to even submit articles, hence preventing us from ever seeing him "weigh the evidence" when the trends do not look bullish.
    May 19, 2015. 04:49 PM | Likes Like |Link to Comment
  • Schäuble Warns Of 'Sudden' Greek Default [View article]
    The government of Iceland defaulted on sovereign debt? I thought it was simply the private banks of Iceland that were insolvent. Big difference.
    May 10, 2015. 05:11 PM | Likes Like |Link to Comment
  • China cuts interest rates again [View news story]
    Another desperate, panicky move. If the Shanghai and HK markets don't pop to all-time highs this week then what? What happens when 500 million "investors" decide to bail all at once?
    May 10, 2015. 05:07 PM | 1 Like Like |Link to Comment
  • The Economic Recovery That Can't Get Any Respect [View article]
    The fact that it's still called a "recovery" six years after the recession supposedly ended just shows how tenuous it is. A real recovery turns into an "Economic Expansion" as soon as the prior peak GDP is exceeded. This one, for some reason, still needs to be sold as "recovery" - probably so that the Fed can continue the crisis-response panic policies of ZIRP and QE. Take those away and the "recovery" ends, and everyone knows it. There will NEVER be a proper "expansion" during this cycle - just the next recession.
    May 9, 2015. 05:28 PM | 6 Likes Like |Link to Comment
  • Janet Yellen, A Bear Late And A 'Dollar' Short [View article]
    "In other words, the economy never did get its asset price boost from what surely is shaping up much like a bubble, but now the bubble remains with the economy in much worse shape than what was expected to absorb that downside."

    I think this observation is key to understanding how the whole thing "went wrong". The plan had to have been for the Fed and Wall Street to inflate the stock market to a ridiculous level (compared to the fundamentals), wait for the "inevitable" Main street economic response, then let the market deflate a little as Wall Street sold their cheaply purchased shares from 2009-2010 to the Main Street bagholders in 2012-2013 for twice the price or better.

    All the retail shmucks and 401k zombies would have lost 20, 30, even 40% on their holdings, but they "wouldn't have minded" because unemployment would be under 5% and they'd be getting 5% raises at work. Besides, you're supposed to average down anyway, right?

    Instead, Wall Street was unable to unload the S&P at 1400-1500 to Main Street (who still did not have any real money to spare), and the Fed couldn't think of anything else to do so they "Twisted" and "QE3'd" and now with the S&P at 2100 they can't even allow a 3% drop to 2050 or it will spiral and that 1400-1500 will rush up far too quickly.

    It's all gravy to Wall Street now - they'll dump it all to whoever's buying - even at S&P "1332" they've doubled their money since 2009. But now 1332 is a 35%+ drop from the top - a brutal "bear market" that CNBC and the rest will frantically trumpet like it's Armageddon. The sound of millions of wallets and purses slamming shut across the US as people "hunker down" due to this "market meltdown" will be the death knell to any recovery that the Fed has hoped for, and we'll be back in recession before Bullard can drop another QE4 teaser.
    May 7, 2015. 03:35 PM | 1 Like Like |Link to Comment
  • Time To Stop Buying The Dips [View article]
    Gas prices are up 60% from their early February low.
    May 7, 2015. 02:16 PM | Likes Like |Link to Comment
  • Expect Chaos If The Fed Moves Quickly [View article]
    "Think about it. If you got in 5 years ago, you've done extremely well. If you got in 2 years ago, you've done really well. If you got in 1 year ago, you've done well. And if you got in on day 1 of 2015, you're off to a good start. (Up 2.4% to be specific.)"

    You've only "done well" if you sell and convert paper profits to real profits. You have to sell your stocks at a higher price than you bought them to actually make money. Actually sell them - not hold. The market has been hovering within a couple percent of all-time highs for six months now. The profits are there for the taking if you sell now.
    May 5, 2015. 02:15 PM | 1 Like Like |Link to Comment