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The more things change in the USA casino capitalism the more they stay the same

News Neoliberalism as a New Form of Corporatism Recommended Links Casino Capitalism COVID-19 Epidemic: The Media Narrative is mostly deceptive fearmongering, but the threat of recession is real Neoliberalism 101: 12 best articles on neoliberalism Rational Fools vs. Efficient Crooks: The efficient market hypothesis
The new dot-com Stock Market bubble Corruption of Regulators  Corruption at the SEC Unemployment Peak cheap Energy and Oil Price Slump Redistribution of wealth up as the essence of neoliberalism Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy
Stability is destabilizing: The idea of Minsky moment Secular Stagnation under Neoliberalism Numbers racket and "Potemkin numbers" GDP as a false measure of a country economic output How US measures inflation Core inflation as a Potyomkin Village of the real (headline) inflation NAIRU
Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime Neoliberal Attacks on Social Security Financial Sector Induced Systemic Instability of Economy USA-Russia Gas War Paper oil, Minsky financial instability hypothesis and casino capitalism Productivity Myths and Rising labor costs hypocrisy Fudged Employment Statistics: Birth-death adjustment scam
Inflation, Deflation and Confiscation Retirement scams Stock Market as a Ponzy scheme Financial Sector Induced Systemic Instability Neoclassical Pseudo Theories The Great Stagnation Investing in Vanguard Mutual Funds and ETFs
Vanguard Notes on 401K plans Notes on 100-your age investment strategy behavior in rigged markets Chasing a trade The Possibility Of No Mean Reversion Junk Bonds For 401K Investors Tax policies
John Kenneth Galbraith The Roads We Take Economics Bookshelf Who Rules America Financial Quotes    
Financial Humor Bulletin, 2008 Financial Humor Bulletin, 2009 Financial Humor Bulletin, 2010 Financial Humor Bulletin, 2011 Financial Humor Bulletin, 2012 Financial Humor Etc

“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

"Life is a school of probabilities."

Walter Bagehot

Neoliberal economics (aka casino capitalism) function from one crash to another. Risk is pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the economy periodically. The problem are not strictly economical or political. it is  ideological as in "greed is good" slogan.  Like a country which adopted a certain religion follows a certain path, the USA behaviour after adoption of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to death. The difference is that debt is used instead of booze.

Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look into the economic system making the whole system unstable. Any attempts to put some sand into the wheels in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (Savings and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into account that hypertrophied role of financial sector did not changes neither after dot-com crisis of 200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting the name of "Great Recession").

Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes" ;-):

This morning that meant a stream of thoughts triggered by Paul Krugman’s most recent op-ed, particularly this:

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but this page is accessed mostly during periods of economic uncertainty. At least this was the case during the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops to below 1K a month.

When will the next crash occur ?

There is no doubt that it will occur. But the question is whether the market in 2021 is ripe to the crash?  If the answer is yes, you better trip your stock holdings. Especially if you are over 60 and has sizable 401K savings.

Can the stock market go another 20-50% up. No double it can. But a more interesting question is: "Can it go down 50%?" from the current level.  The situation when some financial assets are grossly overvalued is called a bubble. Few understand that bubbles are not accident or the result of actions of "evil does" but a logical development of investing in financial  capitalism, which logically creates so called "Minsky moment".  See also  a book “Boom and Bust- A Global History of Financial Bubbles,” by William Quinn and John Turner of Queen’s University Belfast in Northern Ireland.  Rather than regarding overvalued assets as a bubble, the authors view them as a fire.  “Boom and Bust” looks closely at 300 years’ worth of market manias using the metaphor of “the fire triangle.” (oxygen, fuel and heat). Remove one factor, and you can prevent or put out a fire.

The key lesson of previous bubbles is that financial markets, however, can easily heat up fivefold or even 10-fold and then collapse at least 50% in a flash, burning millions of speculators and sometimes charring entire economies. Here is one review from Amazon:

Trey Shipp, 5.0 out of 5 stars The 3 elements you need for a bubble
Reviewed in the United States on December 26, 2020. Verified Purchase

Quinn and Turner prefer to use the analogy of a "fire" to describe speculative bubbles. A fire is "destructive, self-perpetuating and difficult to control once it begins." And just as a fire needs oxygen, fuel, and heat, a speculative bubble needs assets that are easy to trade (i.e., oxygen), plenty of money and credit (fuel), and speculation (heat). It also needs a spark, which usually comes from government action or new technology.

The authors describe how these key elements played out in 11 speculative booms since the 1700s:
• French Mississippi Bubble (1719 to 1720)
• British South Sea Bubble (1719 to 1720)
• British Emerging Market Mines Bubble (1824 to 1826)
• U.K. Railway Mania (1844 to1846)
• Australian Land Boom (1886 to 1893)
• The U.K. Bicycle Mania (1895 to 1898)
• U.S. Roaring Twenties (1920 to 1931)
• Japanese stock and real estate bubble (1985 to 1992)
• U.S. Dot-Com Bubble (1995 to 2001)
• U.S. and European Subprime Bubble (2003 to 2010)
• the 2007 and 2015 Chinese stock bubbles.

Some of the many interesting facts they uncover include:

• The word "bubble" originated from Shakespeare in the 'All the world's a stage' speech from his comedy "As You Like It." He uses 'bubble' to mean "fragile, empty or worthless, just like a soap bubble." Beginning in 1719, with the South Sea Bubble, writers like Daniel Defoe and Jonathan Swift used "bubble" to describe new companies that were worthless.

• Charles Mackay's 1841 book "Extraordinary Popular Delusions and the Madness of Crowds", which gives a vivid account of the foolish speculation during the South Sea Bubble, is mostly fiction: almost none of the anecdotes can be substantiated.

• In 2008 The Economist described the British Railway Mania as "arguably the greatest bubble in history."

• During the British Railway Mania of 1848, railway shares rose from constituting 23 percent of total stock market value to 71 percent. So many new speculators began buying railway stocks that 15 new stock exchanges opened in England during the mania to meet the demand. (Half of them shut down when the mania ended.)

• Fueling the railway bubble was the Bank of England's low discount rate. At 2.5 percent in 1844, it was the lowest it had ever been in the 150 years of the bank's history. Investors bought railway stocks to earn a higher yield.

• The Japanese government deliberately sparked the land and stock bubbles during the late 1980s to create a boom. Japan lowered interest rates, gave tax breaks to real estate developers, and allowed banks to accept land as collateral, which increased the amount of lending they could do, which was usually plowed back into more land and stocks.

• The authors believe that the Dot-com bubble during the late 1990s had many good economic benefits, despite the 8-month recession that followed it. The bubble directed a lot of money into innovative companies and motivated smart entrepreneurs to create new companies. It also supplied the capital needed to build internet communications, which have been so critical for our lives today.

• Between 2000 and 2008 in both Ireland and Spain, more than one new home was built for every new inhabitant in the country.

• In the U.K., the bank Northern Rock marketed "Together mortgages," which allowed individuals to borrow up to 125 percent of their home value, targeting borrowers who could not afford to buy a home or even furnish it.

• The Chinese stock market bubbles resembled the South Sea and Mississippi bubbles of 1720, where the bubbles were created deliberately to offload government debt onto stockholders.

The main lesson from the book is that while bubbles can be blurry during the heat and smoke of a speculative fire, we should look for three key elements: asset marketability, speculation, and leverage.

In proportion to market size—which weights giant tech stocks heavily—the companies in the S&P 500 recently traded at 21 times expected earnings over the next 12 months, according to Matarin Capital Management, an investment firm in New York. That’s about 24% higher than their average over the past quarter-century.  This can go higher (probably to mid 30th) or crash to Earth.


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[Jul 29, 2021] What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money

Inflation also might be coming via the devaluation of the dollar.
Notable quotes:
"... These articles are great at d ..."
"... There are no safe options. TIPS are indexed to the CPI. The CPI is "adjusted" by weighting, substitution, and hedonics to preserve the mirage of low inflation. We are being forced to either speculate in the market or watch our savings get swallowed by inflation. ..."
May 08, 2021 | www.moonofalabama.org
Zeb Long
These articles are great at describing the problem, but not so great at suggesting what investors ought to do to protect themselves.

TIPS are sometimes suggested, but if the govt is manipulating the reporting of inflation then TIPS aren't going to be much help. Gold and blue chip stocks... "diversify"? how about some articles that will explore strategies.

J James Robertson
There are no safe options. TIPS are indexed to the CPI. The CPI is "adjusted" by weighting, substitution, and hedonics to preserve the mirage of low inflation. We are being forced to either speculate in the market or watch our savings get swallowed by inflation.

[Jul 24, 2021] Higher Inflation Is Here to Stay for Years, Economists Forecast by Gwynn Guilford and Anthony DeBarros

Jul 11, 2021 | www.wsj.com

Strong economic rebound and lingering pandemic disruptions fuel inflation forecasts above 2% through 2023, survey finds. The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ's Jon Hilsenrath looks at what consumers can expect next.

Americans should brace themselves for several years of higher inflation than they've seen in decades, according to economists who expect the robust post-pandemic economic recovery to fuel brisk price increases for a while.

Economists surveyed this month by The Wall Street Journal raised their forecasts of how high inflation would go and for how long, compared with their previous expectations in April.

The respondents on average now expect a widely followed measure of inflation, which excludes volatile food and energy components, to be up 3.2% in the fourth quarter of 2021 from a year before. They forecast the annual rise to recede to slightly less than 2.3% a year in 2022 and 2023.

That would mean an average annual increase of 2.58% from 2021 through 2023, putting inflation at levels last seen in 1993.

"We're in a transitional phase right now," said Joel Naroff, chief economist at Naroff Economics LLC. "We are transitioning to a higher period of inflation and interest rates than we've had over the last 20 years."

[Jul 24, 2021] U.S. inflation is still climbing and now higher labor costs are adding to the pressure

Cost of energy is climbing and that will increase the level of inflation.
The position of dollar is weakening too and that might contribution to inflation pressures.
Jul 24, 2021 | www.msn.com

The yearly rate of inflation leaped to a 13-year high of 3.6% in April, using the Fed's preferred PCE price gauge. By another measure inflation hit a 28-year peak .

Inflation likely rose sharply again in May. Economists polled by Dow Jones and The Wall Street Journal predict the consumer price index rose 0.5% last month. The report comes out on Thursday. If so, that would push the yearly rate close to 5% from 4.2% in April.

Consumer prices have only risen that fast twice in the past 30 years, most recently in 2008 when the cost of a barrel of oil topped $150.

... ... ...

The central bank has stuck to its prediction that inflation will drop back toward 2% by next year. But many are beginning to wonder.

"The writing is on the wall: The Fed's temporary-inflation mantra is sounding more dated by the week," said senior economist Sal Guatieri of BMO Capital Markets.

[Jul 24, 2021] Woke Nasdaq's Boardroom Diversity Push

Neoliberal oligarchy fight against income redistribution by pushing perverted social justice smoke screen and in effect can turn the USA in South Africa. Money quote from comments: "If I read NASDAQ's proposal for Board representation in the Onion, I would have thought that even these jokesters have exceeded the creativity threshold of ridiculousness I thought was possible." and "What about the Mentally Ill? Do they get a seat? How about the Homeless?"
Three words about famele CEO and board room members: Elizabeth Holmes, Theranos. BTW what is unclear in NASDAQ bold critical race theory support is: Can we exchange one black member for two female members? Or not.
Also why stop at the boardrooms. Why not require the same in professional sport teams?
Jul 24, 2021 | www.wsj.com
Nasdaq has, in its own words, embraced "the social justice movement." The actual job of a stock exchange, however, is to ensure that trading is orderly and its listed companies follow standard governance rules. But doing that doesn't earn the applause of the political left. Progressive approval apparently means a lot to Nasdaq, which has officially proposed to its regulator -- the Securities and Exchange Commission, newly chaired by Gary Gensler -- to increase boardroom diversity through a "regulatory approach."

This proposal would require that Nasdaq-listed companies not only disclose the diversity characteristics of their existing boards, but also retain "at least one director who self-identifies as female," and "at least one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, two or more races or ethnicities, or as LGBTQ+."

Noncompliant firms must publicly "explain" -- in writing -- why they don't meet Nasdaq's quotas. Nasdaq has, in its own words, embraced "the social justice movement."

The actual job of a stock exchange, however, is to ensure that trading is orderly and its listed companies follow standard governance rules. But doing that doesn't earn the applause of the political left. Progressive approval apparently means a lot to Nasdaq, which has officially proposed to its regulator -- the Securities and Exchange Commission, newly chaired by Gary Gensler -- to increase boardroom diversity through a "regulatory approach."

[Jul 24, 2021] New variation of the old saying

Apr 07, 2021 | www.zerohedge.com

OldNewB

Give a man a gun and he can rob a bank.

Give a man a bank and he can rob the world.

[Jul 24, 2021] The Fed, BLS and al Capone: the Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports consumer inflation as honestly as Al Capone reported taxable income

Jul 24, 2021 | www.zerohedge.com

The Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports consumer inflation as honestly as Al Capone reported taxable income.

Vardaman 3 hours ago

"A basket of things no one actually buys, with prices we just pull out of our asses..."

Glock 1 hour ago

Yep, the BLS uses the CPI-W to literally avoid raising SS payments. The real rate of inflation for seniors is close to 10% as the things they spend most of their money on like medical care, medicine, food and utilities have gone through the roof

While the government claims they are entitled to 1.5% or less COLA's out of which comes a bigger deduction every year for Medicare. Scam artists.

[Jul 21, 2021] Bubbles, bubbles everywhere- Jeremy Grantham on the bust ahead

Jul 20, 2021 | www.msn.com

NEW YORK (Reuters) - In this manic era of meme stocks, cryptocurrencies and real-estate bidding wars, studying the history of financial markets might seem a little dry and old-fashioned.

Except to Jeremy Grantham.

The chairman of the board of famed asset managers GMO is a certified bubble-ologist, fascinated by how and why bubbles emerge. Grantham studies classic ones like 1929, but - now in his eighties - he has also lived through (and called) numerous modern booms and busts, including the dot-com wreckage in 2000, the bull market peak in 2008 and the bear market low in 2009.

In case you did not know where this is headed: He says we are in a bubble right now.

In January Grantham wrote an investor letter, "Waiting For the Last Dance," about an inflating bubble that "could well be the most important event of your investing lives."

Six months later, the stock market is starting to show some cracks. Grantham spoke with Reuters about this moment of market history.

Q: When your letter of warning came out, what was the response like?

A: I got a lot of pushback. Waves of Bitcoin freaks attacked me in every way possible. They said my ears were too big, and that I needed to be locked up in an old-folks home.

Q: So if we were already in a bubble then, where do things stand right now?

A: Bubbles are unbelievably easy to see; it's knowing when the bust will come that is trickier. You see it when the markets are on the front pages instead of the financial pages, when the news is full of stories of people getting cheated, when new coins are being created every month. The scale of these things is so much bigger than in 1929 or in 2000.

Q: What is your take on equity valuations now?

A: Looking at most measures, the market is more expensive than in 2000, which was more expensive than anything that preceded it.

My favorite metric is price-to-sales: What you find is that even the cheapest parts of the market are way more expensive than in 2000.

Q: What might bring an end to this bubble?

A: Markets peak when you are as happy as you can get, and a near-perfect economy is extrapolated into the indefinite future. But around the corner are lurking serious issues like interest rates, inflation, labor and commodity prices. All of those are beginning to look less optimistic than they did just a week or two ago.

Q: How long until a bust?

A: A bust might take a few more months, and, in fact, I hope it does, because it will give us the opportunity to warn more people. The probabilities are that this will go into the fall: The stimulus, the economic recovery, and vaccinations have all allowed this thing to go on a few months longer than I would have initially guessed.

What pricks the bubble could be a virus problem, it could be an inflation problem, or it could be the most important category of all, which is everything else that is unexpected. One of 20 different things that you haven't even thought of will come out of the woodwork, and you had no idea it was even there.

Q: What might a bust look like?

A: There will be an enormous negative wealth effect, broader than it has ever been, compared to any other previous bubble breaking. It's the first time we have bubbled in so many different areas "" interest rates, stocks, housing, non-energy commodities. On the way up, it gave us all a positive wealth effect, and on the way down it will retract, painfully.

Q: Are there any asset classes which are relatively attractive?

A: You could always own cash, or you could do what the institutions do, which is buy heavily into the asset classes that are least bad. The least overpriced are value stocks and emerging markets. Those are the two arbitrages. With value and emerging, you should make some positive return over the next 10 years.

Q: It is difficult to be bearish right now?

A: Not for me, because I don't have career risk anymore. But every big company has lots of risk: They facilitate a bubble until it bursts, and then they change their tune as fast as they can, and make money on the downside.

But this bubble is the real thing, and everyone can see it. It's as obvious as the nose on your face.

[Jul 20, 2021] Bubbles, bubbles everywhere- Jeremy Grantham on the bust ahead

Jul 20, 2021 | www.msn.com

NEW YORK (Reuters) - In this manic era of meme stocks, cryptocurrencies and real-estate bidding wars, studying the history of financial markets might seem a little dry and old-fashioned.

Except to Jeremy Grantham.

The chairman of the board of famed asset managers GMO is a certified bubble-ologist, fascinated by how and why bubbles emerge. Grantham studies classic ones like 1929, but - now in his eighties - he has also lived through (and called) numerous modern booms and busts, including the dot-com wreckage in 2000, the bull market peak in 2008 and the bear market low in 2009.

In case you did not know where this is headed: He says we are in a bubble right now.

In January Grantham wrote an investor letter, "Waiting For the Last Dance," about an inflating bubble that "could well be the most important event of your investing lives."

Six months later, the stock market is starting to show some cracks. Grantham spoke with Reuters about this moment of market history.

Q: When your letter of warning came out, what was the response like?

A: I got a lot of pushback. Waves of Bitcoin freaks attacked me in every way possible. They said my ears were too big, and that I needed to be locked up in an old-folks home.

Q: So if we were already in a bubble then, where do things stand right now?

A: Bubbles are unbelievably easy to see; it's knowing when the bust will come that is trickier. You see it when the markets are on the front pages instead of the financial pages, when the news is full of stories of people getting cheated, when new coins are being created every month. The scale of these things is so much bigger than in 1929 or in 2000.

Q: What is your take on equity valuations now?

A: Looking at most measures, the market is more expensive than in 2000, which was more expensive than anything that preceded it.

My favorite metric is price-to-sales: What you find is that even the cheapest parts of the market are way more expensive than in 2000.

Q: What might bring an end to this bubble?

A: Markets peak when you are as happy as you can get, and a near-perfect economy is extrapolated into the indefinite future. But around the corner are lurking serious issues like interest rates, inflation, labor and commodity prices. All of those are beginning to look less optimistic than they did just a week or two ago.

Q: How long until a bust?

A: A bust might take a few more months, and, in fact, I hope it does, because it will give us the opportunity to warn more people. The probabilities are that this will go into the fall: The stimulus, the economic recovery, and vaccinations have all allowed this thing to go on a few months longer than I would have initially guessed.

What pricks the bubble could be a virus problem, it could be an inflation problem, or it could be the most important category of all, which is everything else that is unexpected. One of 20 different things that you haven't even thought of will come out of the woodwork, and you had no idea it was even there.

Q: What might a bust look like?

A: There will be an enormous negative wealth effect, broader than it has ever been, compared to any other previous bubble breaking. It's the first time we have bubbled in so many different areas "" interest rates, stocks, housing, non-energy commodities. On the way up, it gave us all a positive wealth effect, and on the way down it will retract, painfully.

Q: Are there any asset classes which are relatively attractive?

A: You could always own cash, or you could do what the institutions do, which is buy heavily into the asset classes that are least bad. The least overpriced are value stocks and emerging markets. Those are the two arbitrages. With value and emerging, you should make some positive return over the next 10 years.

Q: It is difficult to be bearish right now?

A: Not for me, because I don't have career risk anymore. But every big company has lots of risk: They facilitate a bubble until it bursts, and then they change their tune as fast as they can, and make money on the downside.

But this bubble is the real thing, and everyone can see it. It's as obvious as the nose on your face.

[Jul 20, 2021] Higher Inflation Is Here to Stay for Years, Economists Forecast by Gwynn Guilford and Anthony DeBarros

Jul 11, 2021 | www.wsj.com

Strong economic rebound and lingering pandemic disruptions fuel inflation forecasts above 2% through 2023, survey finds. The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ's Jon Hilsenrath looks at what consumers can expect next.

Americans should brace themselves for several years of higher inflation than they've seen in decades, according to economists who expect the robust post-pandemic economic recovery to fuel brisk price increases for a while.

Economists surveyed this month by The Wall Street Journal raised their forecasts of how high inflation would go and for how long, compared with their previous expectations in April.

The respondents on average now expect a widely followed measure of inflation, which excludes volatile food and energy components, to be up 3.2% in the fourth quarter of 2021 from a year before. They forecast the annual rise to recede to slightly less than 2.3% a year in 2022 and 2023.

That would mean an average annual increase of 2.58% from 2021 through 2023, putting inflation at levels last seen in 1993.

"We're in a transitional phase right now," said Joel Naroff, chief economist at Naroff Economics LLC. "We are transitioning to a higher period of inflation and interest rates than we've had over the last 20 years."

[Jul 19, 2021] What was not mentioned

Jul 19, 2021 | www.zerohedge.com

Filosofur 7 hours ago

I find it very odd that ZH not even mentioning the 1000 point drop in dow today...wtf??

sbin 7 hours ago

1000 points is a good start.

Pareto 7 hours ago

its only 2%

[Jul 16, 2021] The Most-Overlooked Tax Breaks for Retirees by Rocky Mengle , Kevin McCormally

Jul 01, 2021 | www.kiplinger.com
Unfortunately, seniors often miss tax-saving opportunities that are available to them. Don't let that happen to you!

For new retirees, it's more important than ever to take full advantage of every tax break available. That's especially true if you're on a fixed income. After all, you have to stretch out your retirement savings to cover the rest of your life. But holding on to your money during retirement is easier said than done. That's why retirees really need to pay close attention to their tax situation.

Unfortunately, though, seniors often miss valuable tax-saving opportunities . In many cases, it's simply because they just don't know about them. Don't let that happen to you -- check out these often-overlooked tax breaks for retirees . You could save a bundle!

When you turn 65, the IRS offers you a gift in the form of a larger standard deduction . For example, a single 64-year-old taxpayer can claim a standard deduction of $12,550 on his or her 2021 tax return (it was $12,400 for 2020 returns). But a single 65-year-old taxpayer will get a $14,250 standard deduction in 2021 ($14,050 in 2020).

The extra $1,700 will make it more likely that you'll take the standard deduction rather than itemize. And, if you do claim the standard deduction, the additional amount will save you over $400 if you're in the 24% income tax bracket .

Couples in which one or both spouses are age 65 or older also get bigger standard deductions than younger taxpayers. If only one spouse is 65 or older, the extra amount for 2021 is $1,350 – $2,700 if both spouses are 65 or older. Be sure to take advantage of your age!

For new retirees, it's more important than ever to take full advantage of every tax break available. That's especially true if you're on a fixed income. After all, you have to stretch out your retirement savings to cover the rest of your life. But holding on to your money during retirement is easier said than done. That's why retirees really need to pay close attention to their tax situation.

Unfortunately, though, seniors often miss valuable tax-saving opportunities . In many cases, it's simply because they just don't know about them. Don't let that happen to you -- check out these often-overlooked tax breaks for retirees . You could save a bundle!

When you turn 65, the IRS offers you a gift in the form of a larger standard deduction . For example, a single 64-year-old taxpayer can claim a standard deduction of $12,550 on his or her 2021 tax return (it was $12,400 for 2020 returns). But a single 65-year-old taxpayer will get a $14,250 standard deduction in 2021 ($14,050 in 2020).

The extra $1,700 will make it more likely that you'll take the standard deduction rather than itemize. And, if you do claim the standard deduction, the additional amount will save you over $400 if you're in the 24% income tax bracket .

Couples in which one or both spouses are age 65 or older also get bigger standard deductions than younger taxpayers. If only one spouse is 65 or older, the extra amount for 2021 is $1,350 – $2,700 if both spouses are 65 or older. Be sure to take advantage of your age!

The rules are clear: To qualify for tax-free profit from the sale of a home, the home must be your principal residence and you must have owned and lived in it for at least two of the five years leading up to the sale. But there is a way to capture tax-free profit from the sale of a former vacation home.

Let's say you sell the family homestead and cash in on the break that makes up to $250,000 in profit tax-free ($500,000 if you're married and file jointly). You then move into a vacation home you've owned for 25 years. As long as you make that house your principal residence for at least two years, part of the profit on the sale will be tax-free.

Basically, the $250,000/$500,00 exclusion doesn't apply to any profit that is allocable to the time after 2008 that a home is not used as your principal residence. For example, assume you bought a vacation home in 2001, convert it to your principal residence in 2015 and sell it in 2021. The post-2008 vacation-home use is seven of the 20 years you owned the property. So, 35% (7 ÷ 20) of the profit would be taxable at capital gains rates; the other 65% would qualify for the $250,000/$500,000 exclusion.

[Jul 16, 2021] This one signal says a stock market correction may be on the way by Michael Brush

Notable quotes:
"... Here are the other ominous signs of froth in the IPO market. ..."
"... Tech leads the way: It dominates the IPO market again, just as in 1999. ..."
"... Frothy first-day gains: The average first-day pop for IPOs in the second quarter was 42% ..."
"... Historically high valuations ..."
"... Retail investors in the mix ..."
"... "I think it says more about general liquidity than it does about where the stock market is going next,"ť says Kevin Landis of the Firsthand Technology Opportunities TEFQX, -3.24% , referring to the IPO frenzy. "There is so much money sloshing around. The capital markets look like the rich guy from out of town who just got off the cruise ship, and we are all coming out of the woodwork to sell him stuff,"ť he says. ..."
"... "Things are going up simply because of liquidity, which means eventually there will be a top,"ť says Landis. "But not necessarily an impending top right around the corner."ť Landis is worth listening to because his fund outperforms his technology category by 9.6 percentage points annualized over the five years, according to Morningstar. ..."
"... Market calls are always a matter of what intelligence spies call "the mosaic."ť Each bit of information is a piece of an overall mosaic. While the IPO market froth is disturbing, you should consider this cautionary signal as just one among many. ..."
Jul 14, 2021 | www.marketwatch.com
A frothy market for initial public offerings suggests stocks are overvalued

Oatly, which produces oat milk products, went public in May. (Photo Illustration by Scott Olson/Getty Images)

I hear more money managers say it's starting to feel like 1999" the bubble year followed by an epic market crash.

They may be on to something.

The initial public offering (IPO) market now shows the froth that foreshadows big stock market corrections.

Consider these troubling signals from the IPO market.

1. Ominous volume: Second-quarter IPO proceeds were the biggest since" get this" the fourth quarter of 1999. The huge tech selloff that scarred a generation of investors started in March 2000 and then spread to the entire market.

Some details: A total of 115 IPOs raised $40.7 billion in the second quarter. That follows a busy first quarter when 100 IPOs raised $39.1 billion. Both quarters saw the largest amount of capital raised since the fourth quarter of 1999, when IPOs raised $46.5 billion. These numbers come from the IPO experts at Renaissance Capital, which manages the IPO exchange traded fund, Renaissance IPO ETF IPO, -3.43% .

Of course, adjusted for inflation, the 2021 numbers shrink relative to the fourth quarter of 1999. But this doesn't get us off the hook. The 2021 IPO figures, above, exclude the $12.2 billion and $87 billion raised by special purpose acquisition companies (SPACs) in the second and first quarters.

This spike in IPO volume is troubling for a simple reason. Investment bankers and companies know the most opportune time to sell stock is around market highs. They bring companies public at their convenience, not ours. This tells us they may be selling a top now.

Here are the other ominous signs of froth in the IPO market.

2. Tech leads the way: It dominates the IPO market again, just as in 1999. The tech sector raised the majority of second-quarter proceeds and posted its busiest quarter in at least two decades with 42 IPOs, says Renaissance Capital. This included the quarter's largest IPO, DiDi Global DIDI, +1.61% , the Chinese ride-hailing app. The large U.S.-based tech names were Applovin APP, -5.54% in app software, the robotics company UiPath PATH, -3.68% , and the payments platform Marqeta MQ, -4.93% .

3. We can expect more of the same: A robust IPO pipeline sets the stage for a booming third quarter, says Renaissance Capital. The IPO pipeline has over a hundred companies. Tech dominates.

4. Frothy first-day gains: The average first-day pop for IPOs in the second quarter was 42% . That's well above the range of 31%-37% for the prior four quarters.

5. Historically high valuations : Typically, tech companies have come public with enterprise-value-(EV)-to-sales ratios of around 10. Now many are coming public with EV/sales ratios in the 20-30 range or more, points out Avery Spears, an IPO analyst at Renaissance Capital. For example, the cybersecurity company SentinelOne S, -6.14% came public with an EV/sales ratio of 81, says Spears.

6. Retail investors in the mix : They're big participants in IPO trading" often driving IPOs up by crazy amounts in first-day trading. "In the second quarter there were a lot of small deals with low floats and absolutely insane trading, popping well over 100% and in one case over 1,000%,"ť says Spears. Pop Culture Group CPOP, -12.38% rose over 400% on its first day of trading, and E-Home Household Service EJH, -3.67% advanced 1,100%. "This demonstrates presence of retail investors in the market,"ť she says. Both names have since fallen.

Keep in mind that the 2000 selloff was not the only one foreshadowed by IPO froth. The selloffs during mid-2015 to early 2016 and the second half 2018 were both preceded by high-water marks for IPO deal volume.

IPO-froth pushback

"It's different this time"ť are maybe the most dangerous words in investing. But market experts say several factors suggest the robust IPO market isn't such a negative signal.

First, decent quality companies are coming public. "Because companies stay private longer, you are seeing far more mature companies coming public,"ť says Todd Skacan, equity capital markets manager at T. Rowe Price. These aren't like the speculative Internet companies of 1999. "It would be more of a signal of froth if more borderline companies were coming public like in the fourth quarter of 1999,"ť he says.

We saw some of this with the SPACs, says Skacan, but the SPAC craze has cooled off. Second-quarter SPAC issuance fell 79% compared to the first quarter, muted by "investor fatigue and regulatory scrutiny,"ť says a Renaissance Capital report on the IPO market. In the second quarter, 63 SPACs raised $12.2 billion, compared to the 298 SPACs that raised $87 billion in the first quarter.

Next, the type of company coming public might also calm fears. Alongside all the tech names, there are many industrial and consumer-facing companies" not the kinds of businesses that indicate froth. The latter category includes public national brands like Mister Car Wash MCW, -1.82% and Krispy Kreme DNUT, -2.16% , and the high-growth oat milk brand Oatly OTLY, -2.79% .

Third, IPOs are only floating 10%-15% of their overall value, and many post-IPO valuations are not that much higher than valuations implied by pre-IPO capital raises. That's different, compared to 1999. "It is not like they are selling a high number of shares at inflated prices,"ť says Skacan. This makes sense, because companies that are more mature when they do an IPO don't need as much money.

Liquidity flood

"I think it says more about general liquidity than it does about where the stock market is going next,"ť says Kevin Landis of the Firsthand Technology Opportunities TEFQX, -3.24% , referring to the IPO frenzy. "There is so much money sloshing around. The capital markets look like the rich guy from out of town who just got off the cruise ship, and we are all coming out of the woodwork to sell him stuff,"ť he says.

"Things are going up simply because of liquidity, which means eventually there will be a top,"ť says Landis. "But not necessarily an impending top right around the corner."ť Landis is worth listening to because his fund outperforms his technology category by 9.6 percentage points annualized over the five years, according to Morningstar.

The bottom line

Market calls are always a matter of what intelligence spies call "the mosaic."ť Each bit of information is a piece of an overall mosaic. While the IPO market froth is disturbing, you should consider this cautionary signal as just one among many.

Michael Brush is a columnist for MarketWatch. At the time of publication, he owned APP. Brush has suggested APP in his stock newsletter, Brush Up on Stocks . Follow him on Twitter @mbrushstocks,

[Jul 15, 2021] Investors, Don t Depend on Stocks and Bonds to Hedge Each Other

Jul 15, 2021 | www.bloomberg.com

There's nothing more beautiful to a professional investor than a negative correlation between stocks and bonds. When stocks have a bad month, bonds have a good month, and vice versa. Since their zigs and zags offset each other, the value of the combined portfolio is less volatile. The customers are pleased. And that's how it's been for most of the last two decades.

But for almost a year now, Bloomberg market reporters have been detecting anxiety from the pros that the era of negative correlation may be over or ending, replaced by an era of positive correlation in which stock and bond prices move together, amplifying volatility instead of dampening it. "Bonds Have Never Been So Useless as a Hedge to Stocks Since 1999," read the headline on one article this May.

Yet hope springs eternal. The headline on a July 7 article was, "Bonds Are Hinting They'll Hedge Stocks Again as Growth Bets Ease."

In the big picture and over long periods, it's obvious and necessary that stock and bond returns are positively correlated. After all, they're competing investments. Each generates a stream of income: dividends for (most) stocks, coupon payments for bonds. If stocks get very expensive, investors will shift money into bonds as a cheaper alternative until that rebalancing makes bonds more or less equally expensive. Likewise, when one of the two asset classes gets cheap it will tend to drag down the other.

When the pros talk about negative correlation they're referring to shorter periods""say, a month or two--over which stocks and bonds can indeed move in different directions. Lately two giant money managers have produced explanations for why stocks and bonds move apart or together. They're worth understanding even if your assets under management are in the thousands rather than billions or trillions.

Bridgewater Associates, the world's biggest hedge fund, based in Westport, Conn., says that how stocks and bonds play with each other has to do with economic conditions and policy. "There will naturally be times when they're negatively correlated and naturally be times when they're positively correlated, and those come from the underlying environment itself," senior portfolio strategist, Jeff Gardner says in an edited transcript of a recent in-house interview.

According to Gardner, inflation was the most important factor in the markets for decades""both when it rose in the 1960s and 1970s and when it fell in the 1980s and 1990s. Inflation affects stocks and bonds similarly, although it's worse for bonds with their fixed payments than for stocks. That's why correlation was positive during that long period.

For the past 20 years or so, inflation has been so low and steady that it's been a non-factor in the markets. So investors have paid more attention to economic growth prospects. Strong growth is great for stocks but doesn't do anything for bonds. That, says Gardner, is the main reason that stocks and bonds have moved in different directions.

PGIM Inc., the main asset management business of insurer Prudential Financial Inc., has $1.5 trillion under management. In a report issued in May, it puts numbers on the disappointment the pros feel when stocks and bonds start to move in sync. Let's say a portfolio is 60% stocks and 40% bonds and has a stock-bond correlation of -0.3, which is about average for the last 20 years. Volatility is around 7%. Now let's say the correlation goes to zero" not positive yet, but not negative anymore, either. To keep volatility from rising, the portfolio manager would have to reduce the allocation to stocks to around 52%, which would lower the portfolio's returns. If the stock-bond correlation reached a positive 0.3, then keeping volatility from rising would require reducing the stock allocation to only 40%, hitting returns even harder.

PGIM's list of factors that affect correlations is longer than Bridgewater's but consistent with it. The report by vice president Junying Shen and managing director Noah Weisberger says correlations between stocks and bonds tend to be negative when there's sustainable fiscal policy, independent and rules-based monetary policy, and shifts up or down in the demand side of the economy (consumption). The correlation is likely to be positive, they say, when there's unsustainable fiscal policy, discretionary monetary policy, monetary-fiscal policy coordination, and shifts in the supply side of the economy (output).

One last thought: It's a good idea to spread your money between stocks and bonds even if they don't hedge each other. The capital asset pricing model developed by William Sharpe in the 1960s says everyone should have the same portfolio, consisting of every asset available, and adjust their risk by how much they borrow. True, not everyone agrees. John Rekenthaler, a vice president for research at Morningstar Inc., wrote a fun article in 2017 about the different strategies of Sharpe and fellow Nobel laureate Harry Markowitz.

[Jul 15, 2021] If you think stocks and housing are in a bubble, check out bonds by Mark Hulbert

Images removed. See the original for the full version...
Notable quotes:
"... To shed light on this question, let's look at where both asset classes stand relative to their long-term trendlines. It's important to take a long-term perspective because commentators seem overly eager to detect bubbles everywhere they look these days. They (and we) need to be reminded that not every bull market is a bubble, and not every bear market represents the bursting of a bubble. ..."
Jul 15, 2021 | www.marketwatch.com

Which U.S. asset class is more likely in a bubble right now" stocks or housing? More than 80% of traders polled in a Charles Schwab survey say both.

To shed light on this question, let's look at where both asset classes stand relative to their long-term trendlines. It's important to take a long-term perspective because commentators seem overly eager to detect bubbles everywhere they look these days. They (and we) need to be reminded that not every bull market is a bubble, and not every bear market represents the bursting of a bubble.

Why are we so eager to detect bubbles? Will Goetzmann, a finance professor at Yale University, told me that he suspects it traces to the moral overtone that investors have when they declare something to be forming a bubble. When they do, he said, they're implying that those who lose big in that bear market will be getting what they deserve.

This column leaves moral judgments out of the equation. I instead am focusing on the most comprehensive data set of U.S. equity and housing returns that I know. This database, which extends back to the late 1800s, was compiled by Ã'scar Jordà of the Federal Reserve Bank of San Francisco, Katharina Knoll of Deutsche Bundesbank in Frankfurt, Dmitry Kuvshinov and Moritz Schularick, both of the University of Bonn, and Alan M. Taylor of the University of California Davis.

This database is unique in several ways. One big advantage is that it includes data for both stocks and housing; other databases extend further back in the case of the stock market but don't include housing. The database also takes rent into account when calculating housing's return. Some prior historical analyses of housing's return have focused only on price appreciation, which significantly underreports housing's performance.

The chart below plots the returns since 1890 of U.S. stocks and housing. Notice that equities and housing have each produced largely similar returns over the past 130 years . As recently as the late 1940s, housing was ahead of equities for cumulative performance since 1890. As recently as the late 1970s the two data series were nearly neck-and-neck. Notice further that housing's performance has been less volatile than the stock market's, especially since World War II.

For each asset class I calculated an exponential trendline that most closely fit the 130 years' worth of data. The bad news is that both stocks and housing currently are above their respective trendlines, so if you insist that both assets are in bubbles now you in fact could find some statistical support.

Of the two, the stock market is further ahead of its long-term trendline than is housing. So if you'd have to pick which of the two is more likely to decline significantly, you should choose stocks.

Bonds are vulnerable

I've not said anything about bonds, but they are even further ahead of their trendline than either stocks or housing. So from this long-term perspective they are even more vulnerable than stocks to a big decline.

[Jul 15, 2021] Many Jobs Lost During the Coronavirus Pandemic Just Aren't Coming Back by Lauren Weber

when the tax rates increase even more, it just encourages automation or DIY (bring your own sheets to avoid paying the cleaning fee), which just grinds down growth rather than accelerates it.
Notable quotes:
"... Applebee's is now using tablets to allow customers to pay at their tables without summoning a waiter. ..."
Jul 15, 2021 | www.wsj.com
Companies see automation and other labor-saving steps as a way to emerge from the health crisis with a permanently smaller workforce
PHOTO: JIM THOMPSON/ZUMA PRESS

... ... ...

Economic data show that companies have learned to do more with less over the last 16 months or so. Output nearly recovered to pre-pandemic levels in the first quarter of 2021 -- down just 0.5% from the end of 2019 -- even though U.S. workers put in 4.3% fewer hours than they did before the health crisis.

... ... ...

Raytheon Technologies Corp. RTX 0.08% , the biggest U.S. aerospace supplier by sales, laid off 21,000 employees and contractors in 2020 amid a drastic decline in air travel. Raytheon said in January that efforts to modernize its factories and back-office operations would boost profit margins and reduce the need to bring back all those jobs. The company said that most if not all of the 4,500 contract workers who were let go in 2020 wouldn't be called back.

... ... ..

Hilton Worldwide Holdings Inc. HLT -0.78% said last week that most of its U.S. properties are adopting "a flexible housekeeping policy," with daily service available upon request. "Full deep cleanings will be conducted prior to check-in and on every fifth day for extended stays," it said.

Daily housekeeping will still be free for those who request it... Unite Here, a union that represents hotel workers, published a report in June estimating that the end of daily room cleaning could result in an industrywide loss of up to 180,000 jobs...

... ... ...

Restaurants have become rapid adopters of technology during the pandemic as two forces -- labor shortages that are pushing wages higher and a desire to reduce close contact between customers and employees -- raise the return on such investments. ... Applebee's is now using tablets to allow customers to pay at their tables without summoning a waiter. The hand-held screens provide a hedge against labor inflation, said John Peyton, CEO of Applebee's parent Dine Brands Global Inc.

... ... ...

The U.S. tax code encourages investments in automation, particularly after the Trump administration's tax cuts, said Daron Acemoglu, an economist at the Massachusetts Institute of Technology who studies the impact of automation on workers. Firms pay around 25 cents in taxes for every dollar they pay workers, compared with 5 cents for every dollar spent on machines because companies can write off capital investments, he said.

... ... ...

-- Heather Haddon contributed to this article. D


DANIEL WEBER

A lot of employers were given Covid-aid to keep employees employed and paid in 2020. I assume somebody has addressed that obligation since it wasn't mentioned.

But, what happens to the unskilled workers whose jobs have been eliminated? Do Raytheon and Hilton just say "have a nice life on the streets"?

No, they will become our collective burdens.

I am all for technology and progress and better QA/QC and general performance. But the employers that benefit from this should use part of their gains in stock valuation to keep "our collective burdens" off our collective backs, rather than pay dividends and bonuses first.

Maybe reinvest in updated training for those laid off.

No great outcome comes free. BUT, as the article implies, the luxury of having already laid off the unskilled, likely leaves the employer holding all the cards.

And the wheel keeps turning...

Jeffery Allen
Question! Isn't this antithetical (reduction of employees) to the spirit and purpose of both monetary and fiscal programs, e.g., PPP loans (fiscal), capital markets funding facilities (monetary) established last year and current year? Employers are to retain employees. Gee, what a farce. Does anyone really care?
Philip Hilmes
Some of this makes sense and some would happen anyway without the pandemic. I don't need my room cleaned every day, but sometimes I want it. The wait staff in restaurants is another matter. Losing wait staff makes for a pretty bad experience. I hate having to order on my phone. I feel like I might as well be home ordering food through Grubhub or something. It's impersonal, more painful than telling someone, doesn't allow for you to be checked on if you need anything, doesn't provide information you don't get from a menu, etc. It really diminishes the value of going out to eat without wait staff.
al snow
OK I been reading all the comments I only have a WSJ access as the rate was a great deal.
Hotel/Motel started making the bed but not changing the sheets every day for many years I am fine as long as they offer trash take out and towel/paper every day
and do not forget to tip .
clive boulton
Recruiters re-post hard to fill job listings onto multiple job boards. I don't believe the reported job openings resemble are real. Divide by 3 at least.

[Jul 15, 2021] Apple, Amazon, ARKK, and other big names indicate a market correction is coming, strategist says. Here's why. - MarketWatch

Jul 15, 2021 | www.marketwatch.com

Stocks are near all-time highs, and though U.S. markets opened slightly lower on Thursday, it's much easier to find bulls than bears these days.

But a technical indicator showing itself in five high-profile stocks and two funds suggests that a market correction is coming, according to strategist Michael Kramer of Mott Capital Management , in our call of the day .

The relative strength index, or RSI, measures the speed and change of recent price movements and is one of the most renowned technical signals. It allows investors to evaluate whether a security is overbought or oversold -- i.e. overvalued or undervalued. A reading of 70 or above is considered overbought, while 30 and below is oversold.

A look back at 2018 is enough to tell investors why they should watch this indicator, according to Kramer, who noted on January 29, 2018 that high RSIs for some of the biggest names signalled that the stock market was ready to fall. "Things got really ugly after that through February 8," he said.

In those 10 days early in 2018, Dow industrials DJIA, +0.15% tumbled near 9%, the S&P 500 SPX, -0.33% plunged more than 10%, and the Nasdaq Composite COMP, -0.70% fell near 10%.

Now, "the same thing is emerging," Kramer said, "with the biggest stocks all reaching very overbought reading."

Apple AAPL, -0.45% , Amazon AMZN, -1.37% , Alphabet GOOGL, -0.96% , Nvidia NVDA, -4.41% , and Microsoft MSFT, -0.52% are showing overbought RSIs, as are Cathie Wood's ARK Innovation ETF ARKK, -1.50% and the QQQ QQQ, -0.70% fund tracking the Nasdaq 100.

By the end of Wednesday, Apple had an RSI of more than 80, with Amazon at 70, Microsoft at 76, and Google-owner Alphabet at 73 and showing a rising pattern, Kramer said. He noted that Nvidia's RSI was in the process of breaking a near-two month rise up to 83.

Ark Innovation ETF's RSI was sitting at 76, while the QQQ was above 75. "When the QQQ RSI gets this high, the outcomes are not good most of the time, including January 2018," Kramer said.

[Jul 14, 2021] Cryptos are a collectors item just like fine art.

Jul 13, 2021 | www.moonofalabama.org

jsanprox , Jul 12 2021 1:59 utc | 103

Cryptos are a collectors item just like fine art. While money has value based on the military jack boot of empire which insures its value only with its domination of most countries and the violent destruction of any attempt to set up a transparent real money system exchangable for gold (Libya). A painting by a hot painter is worth 900k because there are a handful of people who will pay that for it, they're interest in it keeps the value at a certain level. Same with Bitcoin, but that interest is spread out to millions of people. If they all decide its worthless than it is, but why would they? I think a lot of these evidence free claims of hacking and ransom wear are made to devalue the currency that the ransom is paid in, it could have easily been paid in dollars via the internet, as cryptos is basiclly just that: a stand in for the dollar being moved to an account that is a number. Cryptos in this way provide a window to real capitalism. This to me is natural human evolution toward anarchism and a system of exchange that is transparent and based on people working together instead of militaristic violence. You can exchange cryptos for gold, rubles and yaun, so saying that it exist only based on the dollars supremacy is wrong.


Hoarsewhisperer , Jul 12 2021 3:36 utc | 104

What I know about computers and Bitcoin would get lost in a thimble. However, what I've learnt about the US Govt over the years tells me that this problem wouldn't be happening if the USG hadn't dedicated itself to micro-managing, and dominating the www - for Top Secret (i.e. bullshit) reasons.

I was appalled when I learnt that the USG had made strong encryption ILLEGAL, and dumbfounded when I first heard about the PRISM 'co-operative' USG-mandated www surveillance program. Edward Snowden's NSA revellations confirmed that the USG has KILLED computer security for crappy, feeble-minded reasons.

It's more or less par for the course that the USG blames other entities for its own prying and mischief-making. Were it not for the USG placing LOW limits on computer security, we would all have access to Pretty Good Privacy and pro-active, timely means of detecting and defending and/or evading malware.

Stonebird , Jul 12 2021 8:31 utc | 107

Jörgen Hassler | Jul 12 2021 5:32 utc | 105

"They mostly never see the piece, it's kept in climate controlled storage."

This is standard practice. Using "Ports Franches" as in several Swiss towns including Geneva. Perfectly legal as they are not IN the country (for Tax purposes).

However, this is not really for "drug" cartels but just a way of transferring assets from one rich person to another. Many ownership deals are made inside the Port Franche itself, without the need to transport the work outside. There is a limitation on the time a work can be left inside the building, but I believe all that they have to do is drive more or less "round the block" and re-enter it. I'm a bit hazy about that detail, as I do not have a spare Rembrandt to verify this personally.

****

jsanprox | Jul 12 2021 1:59 utc | 103

A painting by a hot painter is worth 900k because there are a handful of people who will pay that for it, they're interest in it keeps the value at a certain level.

The primary dealers agree on a common price level for a stated painter. These paintings can even be used as collateral when borrowing money.
Other painters do not have a "guaranteed" price level but one based on auction values (ie. What the customer is willing to pay.)
The Primary dealers are a very small group who control all the big art fairs and which other dealers are allowed to sell or deal there -.
There are "rules" about "participation" (not sure about the terminology here), that various dealers will have made between themseves. ie. There is a split-up of profits following certain agreed parts. Woe unto a dealer that doesn't pay his part. (OK; personal note here, I once accidently fell foul of the "cartel" because a gallery owner with my works, had not paid "out" on a large sum that he had made on another artist he was representing. They decided to "get" him.)

****

Ransomware ; Why are people getting all hot and bothered about Corporations paying money in Bitcoin? Happens all the time.

Another Personal anecdote ; About five years ago I started recieving emails from unknown "people", Real first names, with an attachement. As normal, these go into trash without being opened (or into a folder I have, called "dodgy spam?) About 20 + of them. Next I recieved one email saying (in French) " I know your little secret, and if you don't want everyone else to know, pay (about €30) a "Small" sum into the following bitcoin account xxxxx."

In France you can " porter plainte" , ie, denounce and start a legal process against an "unknown person, or persons". This is to protect yourself, and is run by the Government/police. In my case, never having opened any of the "attachments", I don't know what they were, probably porn of some sort. IF they had been opened there would have been a suspicion that I was a "willling" victim. (The first question asked by the Gov. Site was "Have you paid them/it, and by how much". in my case - none)

******

Haven't heard anything since. BUT, Bitcoin was already being used for criminal purposes.

Nobody had to find a super-secret backdoor into my computer. Just buy a data base with working emails - Corporations use them all the time to send publicity. By looking at the address, and other more or less freely available information, they can target people, by location, age, etc.


vk , Jul 12 2021 15:47 utc | 113

@ Posted by: jsanprox | Jul 12 2021 1:59 utc | 103

But you only know a Picasso is worth a lot because you can calculate it in USD terms (ultimately: you can also calculate in any other fiat currency, but, since we live in the USD Standard, we only know a certain amount of fiat currency is worth if we can convert it to USDs). The USD is still the unit of accountancy and the means of payment even in the art market.

You can never pay your taxes or fill the tank of your car with a Picasso - you would have to sell it for USDs, and use these USDs to pay for everything you need. Sure, two megarich persons could exchange art between them as some kind of permute, but that doesn't constitute a societal unity (because billionares don't exist in a vacuum). It is a particularity of society, not society itself.

The same is true with crypto. And with gold. And with platinum. And with whatever else you want. It is a myth crypto is "fake" just because it is purely digital: the material specification of the thing doesn't matter for its status of money. Being digital is the lesser of crypto's problems. Crypto's main problem is the very economic foundations of its existence, which ensure it will never be money.

And no: subdividing crypto wouldn't solve it - they tried it with gold when capitalism lived through the Gold Standard (when it was on its death throes) and there's a limit to this. Even if the digital era allowed it, you would then simply have fiat money system with extra steps and double the brutality, because then the power to issue money would rest with few private individual hoarders of the crypto with no legal accountability and responsibility; it would be a dystopian "Pirates of the Caribbean" meets "Mad Max" scenario.

[Jul 09, 2021] Could Pfizer and Moderna Be in Trouble After the Latest COVID Vaccine Findings

So Motley Fool analysts advocate profiteering... Nice. there is some dark neoliberal humor in stating that the elimation of booster shots is bad..
Jul 09, 2021 | www.msn.com

Keith Speights: Some findings were recently published in Nature magazine that indicate that the Pfizer-BioNTech and the Moderna vaccines may provide protection for years.

Many investors are and were hoping for annual recurring revenue from these companies' vaccines. Brian, how troublesome is this latest data for the prospects for Pfizer, BioNTech, and Moderna?

Brian Orelli: There's a bit of an extrapolation going on here. The researchers looked at memory B cells, which tend to provide more long-term protection than, let's say, antibodies. They looked at those in the lymph nodes and found the cells were there as long as 15 weeks.

Typically, they'd mostly be gone by four to six weeks. So that's the basis of this claim that it could offer protection for years. If true, that will be a big blow obviously to vaccine makers, at least for Moderna and BioNTech.

Pfizer would be fine because it's so diversified. It's really hard to make an argument for the valuations of Moderna and BioNTech right now if these vaccines are one and done over a couple of years. They really need to have ongoing sales until they can get growth from other drugs in their pipelines.

Speights: Brian, when I first saw the story, I went to check out to see how the stocks were performing, and Moderna is up, BioNTech was barely changed, Pfizer barely changed. It seems to me that investors really aren't making much of this news. Do you think that's the right take at this point?

Orelli: I think it's still too early to be able to conclude that it's definitely going to work for years. The other issue is that we're looking at, will those B cells actually protect against the variants?

If they don't protect against the variants, then it doesn't really matter if you have B cells in your lymph nodes. If they're not going to protect against the variants then we're going to have to get a booster shot anyway.

Speights: Right. Obviously, if these vaccines provide immunity for multiple years, these companies aren't going to make nearly as much money as they expect and a lot of investors expect. So this is a big story to watch, but like you said, really, really early right now and too soon to maybe go drawing any conclusions at this point.

[Jul 08, 2021] Grocery Stores Are Masking Price Hikes Via Shrinkflation

Jul 08, 2021 | www.zerohedge.com

The continued decline in Treasury yields has prompted many short-sighted arm-chair analysts to declare that the Fed was right about inflationary pressures being "transitory". Of course, as Treasury Secretary Janet Yellen herself admitted, a little inflation is necessary for the economy to function long term - because without "controlled inflation," how else will policymakers inflate away the enormous debts of the US and other governments.

As policymakers prepare to explain to the investing public why inflation is a "good thing", a report published this week by left-leaning NPR highlighted a phenomenon that is manifesting in grocery stores and other retailers across the US: economists including Pippa Malmgren call it "shrinkflation". It happens when companies reduce the size or quantity of their products while charging the same price, or even more money.

As NPR points out, the preponderance of "shrinkflation" creates a problem for academics and purveyors of classical economic theory. "If consumers were the rational creatures depicted in classic economic theory, they would notice shrinkflation. They would keep their eyes on the price per Cocoa Puff and not fall for gimmicks in how companies package those Cocoa Puffs."

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However, research by behavioral economists has found that consumers are "much more gullible than classic theory predicts. They are more sensitive to changes in price than to changes in quantity." It's one of many well-documented ways that human reasoning differs from strict rationality (for a more comprehensive review of the limitations of human reasoning in the loosely defined world of behavioral economics, read Daniel Kahneman's "Thinking Fast and Slow").

Just a few months ago, we described shrinkflation as "the oldest trick in the retailer's book" with an explanation of how Costco was masking a 14% price hike by instead reducing the sheet count in its rolls of paper towels and toilet paper.

NPR's report started with the story of Edgar Dworsky, who monitors grocery store shelves for signs of "shrinkflation".

A couple of weeks ago, Edgar Dworsky walked into a Stop & Shop grocery store in Somerville, Mass., like a detective entering a murder scene.

He stepped into the cereal aisle, where he hoped to find the smoking gun. He scanned the shelves. Oh no, he thought. He was too late. The store had already replaced old General Mills cereal boxes -- such as Cheerios and Cocoa Puffs -- with newer ones. It was as though the suspect's fingerprints had been wiped clean.

Then Dworsky headed toward the back of the store. Sure enough, old boxes of Cocoa Puffs and Apple Cinnamon Cheerios were stacked at the end of one of the aisles. He grabbed an old box of Cocoa Puffs and put it side by side with the new one. Aha! The tip he had received was right on the money. General Mills had downsized the contents of its "family size" boxes from 19.3 ounces to 18.1 ounces.

Dworsky went to the checkout aisle, and both boxes -- gasp! -- were the same price. It was an open-and-shut case: General Mills is yet another perpetrator of "shrinkflation."

It's also being used for paper products, candy bars and other packaged goods.

Back in the day, Dworsky says, he remembers buying bigger candy bars and bigger rolls of toilet paper. The original Charmin roll of toilet paper, he says, had 650 sheets. Now you have to pay extra for "Mega Rolls" and "Super Mega Rolls" -- and even those have many fewer sheets than the original. To add insult to injury, Charmin recently shrank the size of their toilet sheets. Talk about a crappy deal.

Shrinkflation, or downsizing, is probably as old as mass consumerism. Over the years, Dworsky has documented the downsizing of everything from Doritos to baby shampoo to ranch dressing. "The downsizing tends to happen when manufacturers face some type of pricing pressure," he says. For example, if the price of gasoline or grain goes up.

The whole thing brings to mind a scene from the 2000s comedy classic "Zoolander".

[Jul 08, 2021] Who Goldman think it actually is?

Jul 08, 2021 | www.zerohedge.com


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duck_fur 9 hours ago

Note to Goldman: you're a bank. Stick to banky-stuff. Leave the fear **** and lies to the professionals in the .gov and MSM.

p3scobar 7 hours ago

Goldman is the government... sooo.....

espirit 9 hours ago

If Goldman can give medical advice, so can I.

A Lunatic 9 hours ago remove link

Turning off the TV will neutralize the Delta Variant.

rag_house 9 hours ago

Just like 'Climate Change' you know it's contrived when the bankers start doing 'science.'

liberty2day 9 hours ago

when did they not?

rag_house 8 hours ago

Bankers aren't scientists. They simply dream up fake things they want to convince people of and bribe people to try to make it seem real.

Enraged 9 hours ago remove link

Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion

The Goldman Sachs Group Inc. and Goldman Sachs (Malaysia) have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond deals for 1Malaysia Development Bhd. (1MDB), for which the bank earned hundreds of millions in fees.

https://www.justice.gov/opa/pr/goldman-sachs-charged-foreign-bribery-case-and-agrees-pay-over-29-billion

[Jul 08, 2021] Nothing to do...

Jul 08, 2021 | www.zerohedge.com


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HillaryOdor 5 hours ago remove link

bond prices have nothing to do with recovery [sic]

stock prices have nothing to do with growth, except growth of the money supply

Kreditanstalt 3 hours ago

"...the price of a beer or a McDonalds in 10-years time will be exactly the same as it is today. (Which it won't.)"

But the type who buy US government bonds don't care about the price of burgers. They only plan to flip the thing back to the next Greater Fool...or THE FED

[Jul 08, 2021] What's wrong with neoclassical economics?

Jul 08, 2021 | www.zerohedge.com

Sound of the Suburbs 2 hours ago remove link

You don't want to do what they did in the 1920s, and allow the banking system and the markets to become closely coupled.

Too late.

Most of today's problems could be seen in the 1920s.

What's wrong with neoclassical economics?

  1. It makes you think you are creating wealth by inflating asset prices
  2. Bank credit flows into inflating asset prices, debt rises faster than GDP and you eventually get a financial crisis.
  3. No one notices the private debt building up in the economy as neoclassical economics doesn't consider debt.

What is the fundamental flaw in the free market theory of neoclassical economics?

The University of Chicago worked that out in the 1930s after last time.

Banks can inflate asset prices with the money they create from bank loans.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.

"Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money."

https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons

Margin lending had inflated the US stock market to ridiculous levels.

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

Real estate lending was actually the biggest problem lending category leading to 1929.

The IMF re-visited the Chicago plan after 2008.

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Existing financial assets, e.g. real estate, stocks and other financial assets, are traded and bank credit is used to fund the transfers.

The money creation of bank credit inflates the price.

You end up with a ponzi scheme of inflated asset prices that will collapse and feed back into the financial system.

The money creation of unproductive bank lending made the economy "roar", but there was little real wealth creation going on.

They didn't have the GDP measure then, but we can still look at the data.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

At 18 mins.

1929 and 2008 stick out like sore thumbs.

When you have productive bank lending, debt and GDP rise together like the UK before 1980.

https://www.housepricecrash.co.uk/forum/uploads/monthly_2018_02/Screen-Shot-2017-04-21-at-13_53_09.png.e32e8fee4ffd68b566ed5235dc1266c2.png

We used to be the financial superpower and it looks like we knew what we were doing in the past.

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.

The use of neoclassical economics and the belief in free markets, made them think that inflated asset prices represented real wealth accumulation.

1929 – Wakey, wakey time

Why did it cause the US financial system to collapse in 1929?

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

What could possibly go wrong?

Bankers do need to ensure the money they lend out gets paid back to balance their books.

Banking requires prudent lending.

If someone can't repay a loan, they need to repossess that asset and sell it to recoup that money.

If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.

As the real estate and stock market collapsed the banks became insolvent as their assets didn't cover their liabilities.

They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get the money they lend out back again to balance their books.

The banks become insolvent and collapsed, along with the US economy.

When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.

Cont ......

Sound of the Suburbs 2 hours ago

That was the 1920s.

What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?

Japanese real estate.

They avoided a Great Depression by saving the banks.

They killed growth for the next 30 years by leaving the debt in place.

Japan could study the Great Depression to avoid this fate.

https://www.youtube.com/watch?v=8YTyJzmiHGk

What was the ponzi scheme of inflated asset prices that collapsed in 2008?

"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

We avoided a Great Depression by saving the banks.

We left Western economies struggling by leaving the debt in place, just like Japan.

It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this problem has made our economies so sluggish since 2008.

We, in turn, seem to have learnt something from Japan, as they did let asset prices crash.

The banking system and the markets are still closely coupled.

Any significant fall in asset prices will feed back into the banking system.

We are trapped, and the only way to keep things from collapsing is to keep pumping in more and more liquidity.

It's a choice

  1. Let the assets bubbles collapse, and watch this feed back into the financial system.
  2. Keep the whole thing afloat, but make things worse in the long run as the bubbles just get bigger and bigger.

We've gone for option two.

That's why the FED get so jittery when the markets start to fall.

During the coronavirus lockdowns there was no way the markets could be allowed to reflect what was going on in the real economy.

The banking system would go down.

Sound of the Suburbs 1 hour ago remove link

They learnt from the mistakes of the 1920s and put regulations in place to ensure this didn't happen again.

Financial stability arrived in the Keynesian era and was locked into the regulations of the time.

https://www.brettonwoodsproject.org/wp-content/uploads/2009/10/banking-crises.png

"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure 13.1 - The proportion of countries with banking crises, 1900-2008).

Neoclassical economics came back and so did the financial crises.

The neoliberals removed the regulations that created financial stability in the Keynesian era and put independent central banks in charge of financial stability.

Why does it go so wrong?

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and knew there was going to be a financial crisis.

Richard Vague has looked at the data for financial crises going back 200 years and found the cause was nearly always runaway bank lending.

We put central bankers in charge of financial stability, but they use an economics that ignores the main cause of financial crises, private debt.

Most of the problems are coming from private debt.

The technocrats use an economics that ignores private debt.

The poor old technocrats never really stood a chance.

[Jul 08, 2021] Bonds As An Investment Have A Very Ugly Side

Jul 08, 2021 | www.zerohedge.com

Let it Go 3 hours ago

Many people seem to have forgotten after their nearly four-decade run that bonds have a very ugly side that can yield great pain. Today's lower yields may be part of a greater conundrum created by the reality of too much freshly printed money floating around and people needing someplace to stash it. The article below delves into why interest rates may unexpectedly rise.
https://Bonds As An Investment Have A Very Ugly Side.html

besnook10 4 hours ago

the equity market is reflecting the rush to dollar assets as a function of economic uncertainty especially dedollarization while the low rates also reflect the lower demand for dollars because of dedollarization.

George Bayou 5 hours ago

Treasury rates are set by the fed and have absolutely nothing to do with reality anymore. The rates are set so that the government can sustain a higher debt ceiling, nothing more. Corporate bonds can be made artificially low because they don't have to compete against treasuries.

buzzsaw99 4 hours ago

i would argue that the s&p 500 is set by the fed and has absolutely nothing to do with reality anymore. i would further add that if the fed didn't meddle treasury rates would be even lower and the corporate spread would be huge.

bshirley1968 PREMIUM 4 hours ago

I would argue you are both right. The meddle when they have to. As long as the sheep run with their narrative, the "markets" usually go the way they want them to. But they will step in when there is a divergence.

George Bayou 4 hours ago remove link

I agree that the s&p is inflated due to fed injection and currency devaluation. I disagree about treasury rates, if the fed stopped buying treasuries then the market would not take up the slack unless the rates went higher.

The fed can't do this not only because the government couldn't afford paying higher rates, but the housing industry that they've inflated would get crushed as well.

[Jul 08, 2021] In Bonds There Is Truth - The Importance Of 1.34% - ZeroHedge

Jul 08, 2021 | www.zerohedge.com

Authored by Bill Blain via MorningPorridge.com,

"How many impossible things can you believe before breakfast?"

US 10-year bonds and US equity are in full rally mode. They show contradictory expectations for a stalled recovery and future strong growth! How can that be? Because the market is about what participants collectively think – and how markets think has been utterly changed by 12 years of monetary experimentation, repression, and distortion. We've got to change the way we think about markets.

That the reflation trade is fading fast? Falling bond yields = rising bond prices, and are a sign the market anticipates a slowdown and declining inflationary threat.

Yet, we still expect to see further equity upside? Falling dividend yields = rising equity prices, and are a sign the market anticipates strong growth and rising corporate profits.

In bonds there is truth. Bonds are about credit risk – getting repaid principal and interest. But not the US treasury market – which is why it is called the risk-free rate. The risk of holding a Treasury bond actually boils down to inflation risk. Whatever mad-eyed Libertarian preppers hiding in mountain lairs say, the US Government defaulting on debt is a 50 Sigma possibility – it aint going to happen.

But inflation will eat away the value of the bond today in terms of its purchasing power relative to its future purchasing power at maturity. The greater inflation, the less the bond is worth, and its price today should reflect that. Inflation could occur through rising prices, and declining confidence in currency which creates inflation as its FX value tumbles.

If you assume zero inflation – as the market clearly does when the 10-year risk free rate is 1.34% – then there is no downside risk holding Treasuries. You will happily collect $1.34 for each $100 invested semi-annually and the price of a beer or a McDonalds in 10-years time will be exactly the same as it is today. (Which it won't.)

Bonds have rallied strongly in recent weeks – clearly telling us the expectations of a strong global recovery have stalled. There is little upside to holding bonds. Just certainty. If the global economy does staggering well you won't get $2 back on your $100 investment. The only way you get more at maturity is if we see deflation – when the price of a beer is less in 10 years time than it is today.

Yet, we all know the world is a very uncertain place – its been illustrated by supply chain shifts and breaks, and rising trade hassle and protectionism. Inflation is not only likely – but nailed on. And that means any pension fund buying bonds today to pay your pension tomorrow – is going to fail unless they find other ways to generate returns.

It's the same problem if they buy equity. Long term, bonds outperform, but today we believe stocks are the only place to generate Alpha. If you want upside, then buy stocks. If the global economy rallies and grows, then profits rise and companies become more valuable yada, yada The downside? If the global economy stalls, companies make less money, the price falls or they collapse completely and you get nothing back.

How can the two markets be telling us such a contradictory story?

Distortion is a terrible thing. It affects minds and they way we think about markets.

And this is what I suddenly realised yesterday talking to my chums yesterday. We all noted the same thing – those of us of a certain age are watching younger, more nimble financial minds take over our business. That's normal. They have different perspectives and different reads on what's happening and No One Working In Global Finance Today Under the Age of 32 has ever known markets that were undistorted by QE!

Think about it a second – central bank policies holding interest rates artificially low and them standing ever-ready to support global markets from the consequences of induced bubble conditions – have been the dominant theme of market for 12 years now. A whole generation of very clever bankers and investment managers are maturing into senior positions across the global financial industry having known nothing else.

It amazes me in our own internal discussions how the divide between we few surviving old fogey's who remember free market currency crashes, bond market collapses and equity tumbles, and the younger financiers who can just accept the distortions caused by central banks to avoid these events, as a factor to include in their market expectations..

That's probably why anyone over 40 is such a bear and convinced the market is unsustainable, while the younger generation is far more accepting of distortion as a permanent market reality..

Remember when it comes to generating investment returns, it's not what you think, but what the market thinks that matters. It is just a voting machine

(And, by the way, the only way funds are going to make proper returns in these markets is probably to shift out of distorted financial assets (bonds and equity) and start buying real world assets linked to reality that's a story for tomorrow!)

* * *

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J J Pettigrew 5 hours ago (Edited)

In the past year the combined QE of the EU plus the Fed went from $8.3 Tr to $17.4 Tr. That is massive economic stimulus and rate suppression. It is estimated by the Fed that for each $ 1Tr of QE in the US, there is a 50 BP reduction from what would have been market interest rates. So, $4 trillion of QE by the Fed equals 200 BP of rate reduction. If inflation is running at 3%, and then there is 2% QE reduction, then real Fed Funds rates are around 500 BP negative. QE is completely distorting the bond market. That is driving a lot of the stock market growth

NoDebt 5 hours ago

Well, for sure, one thing UST rates are NOT is a proxy for inflation. Haven't been in a long time.

They are a proxy for where the Fed wants the rates to be. Nothing more. And that is mostly driven by the need to finance profligate federal government deficits. What the market won't buy at a given rate, the Fed will buy. But make no mistake, the rate will be what they want it to be. Simple as that.

buzzsaw99 5 hours ago

That the reflation trade is fading fast? Falling bond yields = rising bond prices, and are a sign the market anticipates a slowdown and declining inflationary threat...

ah, ********. there is no market.

Herdee 3 hours ago (Edited)

The numbers are 3.5% for the U.S. and 2.5% for Japan. Hit those numbers on interest rates and it's game over. Neither one of them at that point according to their tax revenues could even make a payment on the interest, let alone make a principle payment.

Adino 2 hours ago

Yeah, I'd love for someone to explain to me how $30 trillion + debt and over $130 trillion in unfunded liabilities gets paid off without hyperinflation.

Especially when the frn itself is the primary source of the debt.

bshirley1968 PREMIUM 4 hours ago

Sure, whatever Blain.

It's just time to throw bond traders a bone. Two weeks from now stawks will be once again pushing new records and we'll be talking about "rising interest" rates.

The narrative changes.......consistently.

How long ago were we hearing about the significance of 1.75% on the ten year......as stawks rallied to all time highs day after day? Now we are supposed to be scared because rates are falling......and telling us there is "risk" out there.

The ******** is thick.......and it's all ********.

Hal n back 4 hours ago

meanwhile, this week a 10.7 ounce bag of M&M's went up 11%.

90% hamburger meat is $4 a pound on sale.

eggs, which do fluctuate, are 1.49 a dozen for large (they were 88 cents not too long ago)

cereals are up in price or down in content.

A bagel is now a buck without the smear.

Too bad there is not an official true inflation rate. even when the govt does it by region, its not correct.

Actually too bad government is not held accountable. On a fair and even basis.

ChromeRobot 5 hours ago

Yeah there is no possible way that the "Japanofication" of US bonds and economy can occur. Our CB is much smarter than theirs. Lol, lol, lol.... The 10yr has appreciated 10% in a month! Who cares about the yield. Negative yields on German bunds. This guy kills me!

Heroic Couplet 5 hours ago

The libertarian magazine Reason yesterday had an interesting article about the 10 year Treasury and how student loan interest rates are tied to it. Now, if the 10 year goes down, are we going to see the 3% student loan interest rate and the 6% student loan interest rate go down? OF COURSE NOT.

gcjohns1971 1 hour ago

The US Defaulted in 1790 "Continentals" 1824 "He killed the Bank", the Civil War "Greenbacks", arguably the Panic of 1907, 1933 "Gold Confiscation", 1971 "Temporary suspension of Convertibility...Like the Pound Sterling in 1914!..

Kreditanstalt 3 hours ago

"...the price of a beer or a McDonalds in 10-years time will be exactly the same as it is today. (Which it won't.)"

But the type who buy US government bonds don't care about the price of burgers. They only plan to flip the thing back to the next Greater Fool...or THE FED

[Jul 04, 2021] The most bitterly funny story of the week is that a defector from North Korea thinks that even her homeland is 'not as nuts' as the indoctrination now forced on Western students

Jul 04, 2021 | www.zerohedge.com


As Peter Hitchens noted recently "the most bitterly funny story of the week is that a defector from North Korea thinks that even her homeland is 'not as nuts' as the indoctrination now forced on Western students."

One of Yeonmi Park's initial shocks upon starting classes at Colombia University was to be met with a frown after revealing to a staff member that she enjoyed reading Jane Austen. "Did you know," Ms. Park was sternly admonished, "that those writers had a colonial mind-set? They were racists and bigots and are subconsciously brainwashing you."

But after encountering the new requirement for the use of gender-neutral pronouns, Yeonmi concluded: "Even North Korea is not this nuts North Korea was pretty crazy, but not this crazy." Devastatingly honest, but not exactly a compliment to what once might have been the land of her dreams.

Sadly, Hitchens reports that her previous experience served Yeonmi well to adapt to her new situation: "She came to fear that making a fuss would affect her grades and her degree. Eventually, she learned to keep quiet, as people do when they try to live under intolerant regimes, and let the drivel wash over her."

Eastern European readers will unfailingly understand what it is that Hitchens meant to say.

[Jul 03, 2021] Opinion: The looming stagflationary debt crisis will deliver a one-two punch to markets and economies by Nouriel Roubini

Highly recommended!
Notable quotes:
"... For now, loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck. The warning signs are already apparent in today's high price-to-earnings ratios SPX , low equity risk premiums, inflated housing and tech assets COMP , and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector BTCUSD, , high-yield corporate debt , collateralized loan obligations, private equity, meme stocks AMC, and runaway retail day trading. ..."
"... But meanwhile, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic aging in advanced and emerging economies; immigration restrictions in advanced economies; the reshoring of manufacturing to high-cost regions; or the balkanization of global supply chains. ..."
"... More broadly, the Sino-American decoupling threatens to fragment the global economy at a time when climate change and the COVID-19 pandemic are pushing national governments toward deeper self-reliance. ..."
"... Making matters worse, central banks have effectively lost their independence, because they have been given little choice but to monetize massive fiscal deficits to forestall a debt crisis. With both public and private debts having soared, they are in a debt trap. Central banks will be damned if they do and damned if they don't, and many governments will be semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop of sovereigns and banks in the eurozone after the global financial crisis will be repeated world-wide ..."
"... When former Fed Chair Paul Volcker hiked rates to tackle inflation in 1980-82, the result was a severe double-dip recession in the United States and a debt crisis and lost decade for Latin America. But now that global debt ratios are almost three times higher than in the early 1970s, any anti-inflationary policy would lead to a depression, rather than a severe recession. The question is not if but when. ..."
Jun 30, 2021 | www.marketwatch.com

Roubini warns: After 'the Minsky Moment' crashes overheated speculative markets, 'the Volcker Moment' will will arrive to crash the debt-burdened global economy

( Project Syndicate ) -- In April, I warned that today's extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.

After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies' public-debt burdens.

The warning signs are already apparent in today's high price-to-earnings ratios, low equity risk premiums, inflated housing and tech assets, and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector, high-yield corporate debt, collateralized loan obligations, private equity, meme stocks, and runaway retail day trading.

Conversely, during the 2007-08 financial crisis, high debt ratios (private and public) caused a severe debt crisis -- as housing bubbles burst -- but the ensuing recession led to low inflation, if not outright deflation. Owing to the credit crunch, there was a macro shock to aggregate demand, whereas the risks today are on the supply side.

Worst of both worlds

We are thus left with the worst of both the stagflationary 1970s and the 2007-10 period. Debt ratios are much higher than in the 1970s, and a mix of loose economic policies and negative supply shocks threatens to fuel inflation rather than deflation, setting the stage for the mother of stagflationary debt crises over the next few years.

For now, loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck. The warning signs are already apparent in today's high price-to-earnings ratios SPX , low equity risk premiums, inflated housing and tech assets COMP , and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector BTCUSD, , high-yield corporate debt , collateralized loan obligations, private equity, meme stocks AMC, and runaway retail day trading.

But meanwhile, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic aging in advanced and emerging economies; immigration restrictions in advanced economies; the reshoring of manufacturing to high-cost regions; or the balkanization of global supply chains.

Recipe for macroeconomic disruption

More broadly, the Sino-American decoupling threatens to fragment the global economy at a time when climate change and the COVID-19 pandemic are pushing national governments toward deeper self-reliance. Add to this the impact on production of increasingly frequent cyberattacks on critical infrastructure and the social and political backlash against inequality, and the recipe for macroeconomic disruption is complete.

Making matters worse, central banks have effectively lost their independence, because they have been given little choice but to monetize massive fiscal deficits to forestall a debt crisis. With both public and private debts having soared, they are in a debt trap. Central banks will be damned if they do and damned if they don't, and many governments will be semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop of sovereigns and banks in the eurozone after the global financial crisis will be repeated world-wide

As inflation rises over the next few years, central banks will face a dilemma. If they start phasing out unconventional policies and raising policy rates to fight inflation, they will risk triggering a massive debt crisis and severe recession; but if they maintain a loose monetary policy, they will risk double-digit inflation -- and deep stagflation when the next negative supply shocks emerge.

But even in the second scenario, policy makers would not be able to prevent a debt crisis. While nominal government fixed-rate debt in advanced economies can be partly wiped out by unexpected inflation (as happened in the 1970s), emerging-market debts denominated in foreign currency would not be. Many of these governments would need to default and restructure their debts.

At the same time, private debts in advanced economies would become unsustainable (as they did after the global financial crisis), and their spreads relative to safer government bonds would spike, triggering a chain reaction of defaults. Highly leveraged corporations and their reckless shadow-bank creditors would be the first to fall, soon followed by indebted households and the banks that financed them.

The Volcker Moment

To be sure, real long-term borrowing costs may initially fall if inflation rises unexpectedly and central banks are still behind the curve. But, over time, these costs will be pushed up by three factors. First, higher public and private debts will widen sovereign and private interest-rate spreads. Second, rising inflation and deepening uncertainty will drive up inflation risk premiums. And, third, a rising misery index -- the sum of the inflation and unemployment rate -- eventually will demand a "Volcker Moment."

When former Fed Chair Paul Volcker hiked rates to tackle inflation in 1980-82, the result was a severe double-dip recession in the United States and a debt crisis and lost decade for Latin America. But now that global debt ratios are almost three times higher than in the early 1970s, any anti-inflationary policy would lead to a depression, rather than a severe recession. The question is not if but when.

Under these conditions, central banks will be damned if they do and damned if they don't, and many governments will be semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop of sovereigns and banks in the eurozone after the global financial crisis will be repeated world-wide, sucking in households, corporations, and shadow banks as well.

As matters stand, this slow-motion train wreck looks unavoidable. The Fed's recent pivot from an ultra-dovish to a mostly dovish stance changes nothing. The Fed has been in a debt trap at least since December 2018, when a stock- and credit-market crash forced it to reverse its policy tightening a full year before COVID-19 struck. With inflation rising and stagflationary shocks looming, it is now even more ensnared.

So, too, are the European Central Bank, the Bank of Japan, and the Bank of England. The stagflation of the 1970s will soon meet the debt crises of the post-2008 period. The question is not if but when.

Nouriel Roubini is CEO of Roubini Macro Associates and chief economist at Atlas Capital Team.

This commentary was published with permission of Project Syndicate -- The Looming Stagflationary Debt Crisis.

See also:

[Jul 03, 2021] U.S. Wins International Backing for Global Minimum Tax

Jul 02, 2021 | www.wsj.com

The U.S. has won international backing for a global minimum rate of tax as part of a wider overhaul of the rules for taxing international companies , a major step toward securing a final agreement on a key element of the Biden administration's domestic plans for revenue raising and spending.

Officials from 130 countries that met virtually agreed Thursday to the broad outlines of what would be the most sweeping change in international taxation in a century. Among them were all of the Group of 20 major economies, including China and India, which previously had reservations about the proposed overhaul.

Those governments now will seek to pass laws ensuring that companies headquartered in their countries pay a minimum tax rate of at least 15% in each of the nations in which they operate, reducing opportunities for tax avoidance .

[Jul 03, 2021] Another important aspect of the collapse of neoliberalism -- reaching the natural resources limits, especially fossil energy extraction limits by George Kaplan

Notable quotes:
"... The US seems to be especially vulnerable to issues caused by lack of precarity as it has such a poor welfare system, previously relying on infinite growth to smooth things over or a, now failing, religious faith to keep things in order; prolonged economic and political success that has led to a sense of entitlement and self-belief in the American way, a history of putting personal liberty above all else, which embraces competition rather than co-operation; and a world beating phobia of death well beyond when reproductive age has passed. ..."
"... The gig economy, middle class collapse, MAGA, BLM (and the police actions that prompted its rise), cancel culture, (un)reality TV's attraction, FOMO, the increase in low level strife, self-harming, on-line pornography addiction, the Oxycodone/Fentanyl epidemic etc. are all manifestations and/or causes of that precarity. Civil wars and major revolts (and almost any that succeed in their aims) tend to happen only when there is intra elite infighting rather than uprisings from below. The most likely catalyst for that at the moment is Trump, which may be a good sign given his ineffectualness, ineptitude and general repulsive lack of charisma; anyone even a bit more like a real human being could cause serious ructions. ..."
Jun 26, 2021 | peakoilbarrel.com
Off Topic Finish: Waiting for the Great Leap Forward

I have been reading "˜A More Contested World: Global Trends 2040' by The National Intelligence Council; slowly as there's a lot in it but also a lot missing. No mention of specific resource limits, no discussion of GM just general "˜technology' concerns concentrating on AI and of course, god forbid any mention of overpopulation. It is very US-centric "" in the good scenarios the world gets to a better place only through US leadership "" and humanist focused with no consideration of the rights of the earth in general, only the perpetuation of our civilisation and to that end all future scenarios are some variant of technology led, growth obsessed, centralised BAU (maybe not with full globalism but still based around hegemonic power structures at some level). It's a view from mainstream economists and politicians carrying all the normal drawbacks that those words imply: i.e. bad things happen when the world doesn't do as it's told to do by us, and if you don't agree with us about what constitutes "˜bad' then you're wrong about that too.

I think similar studies from more global or European NGOs and governmental departments (both from individual countries or the EU) tend to be more objective and those from the militaries (from anywhere in the west) tend to be more honestly subjective. See for example: The Adaptation Committee's Independent Assessment of UK Climate Risk , Decoupling debunked "" Evidence and arguments against green growth as a sole strategy for sustainability ; Reinforcing Environmental Dimensions of European Foreign and Security Policy ; Arctic Climate Change Update 2021: Key Trends And Impacts ; Our Future on Earth ; and The State of the Global Climate 2020 or, for military sources: Implications of Climate Change for the U.S. Army ; NATO is responding to new challenges posed by climate change ; Ministry of Defence Climate Change and Sustainability Strategic Approach ; and Armed Forces, Capabilities and Technologies in the 21st Century Environmental Dimensions of Security .

The rising wealth gap and other inequality issues are a common theme in these global risk studies. However, theories in some recent studies have proposed that it is not inequality itself that is the problem so much as a prolonged sense of precarity (a new word to me and, apparently, to MS spellchecker, but it is essentially identical to precariousness) of the non-elites that accompanies it.

This makes sense from an evolutionary standpoint, as parents desire a stable and resource abundant household in which their children can be expected to reach a reproductive age. This might be expected to come more from the female side, as they are tied to their offspring more than males, who are free to spread their sperm and move on. I have read reorts, possibly anecdotal only, that it will invariably be the woman that will be the party insisting on buying the largest house that can be attained, whether affordable or not. I'm all for gender equality and women's rights but some things are innate and equal-rights do not mean equal hormones, ambitions, impulses and behaviors.

From this viewpoint therefore, solving the wealth inequality issue is actually anathema to population reduction. For example the already low birth rate in Italy had a further step down caused by the increased precarity due to the economic impact of Covid-19, the government has responded by offering direct incentives for having children. The apparent short term aims are in direct opposition to the what is best long term, this is called a dilemma rather than a problem.

The US seems to be especially vulnerable to issues caused by lack of precarity as it has such a poor welfare system, previously relying on infinite growth to smooth things over or a, now failing, religious faith to keep things in order; prolonged economic and political success that has led to a sense of entitlement and self-belief in the American way, a history of putting personal liberty above all else, which embraces competition rather than co-operation; and a world beating phobia of death well beyond when reproductive age has passed.

The neologism for the growing proportion of people affected by precarity is the precariat. The always readable Tim Watkins has a new post that touches on some of theses issues, with a particular eye on the possibility (or not) of significant inflationary issues ( The Everything Death Spiral ).

The gig economy, middle class collapse, MAGA, BLM (and the police actions that prompted its rise), cancel culture, (un)reality TV's attraction, FOMO, the increase in low level strife, self-harming, on-line pornography addiction, the Oxycodone/Fentanyl epidemic etc. are all manifestations and/or causes of that precarity. Civil wars and major revolts (and almost any that succeed in their aims) tend to happen only when there is intra elite infighting rather than uprisings from below. The most likely catalyst for that at the moment is Trump, which may be a good sign given his ineffectualness, ineptitude and general repulsive lack of charisma; anyone even a bit more like a real human being could cause serious ructions.

IRON MIKE IGNORED 06/26/2021 at 4:54 pm

Great post George thank you. It is quite evident for the astute observer that western democracy has over the years turned more and more into an amalgam of kleptocracy, oligarchy and plutocracy.

How many countries have colonial Europe and U.S foreign policy destroyed in the name of "democracy" and "freedom" ?
I've lost count.

Plato famously is said to have said:
"If you do not take an interest in the affairs of your government, then you are doomed to live under the rule of fools."

In Platos book the republic, Socrates despises democracy as one of the worst forms of government. His criticism those many years ago still resonates till this day (in my opinion).

WIthout invoking logic, I feel the world is in uncharted waters and heading towards a precipice which no one will see coming.

You have a typo, I believe you mean oxycontin (oxycodone) epidemic. HICKORY IGNORED HOLE IN HEAD IGNORED 06/27/2021 at 1:12 pm

Hicks , not being based in USA ,my view maybe incorrect . The US is undergoing an identity crisis . Where in the world did we have this gender crisis , male "" female heck can't people see between their thighs ? Red-Blue . White Supremacy vs BLM . North vs South . Growing up in the 70's US entrepreneurship was my inspiration . My hero's were Ford, Sloan , Edison etc and what do we have today, Musk ? What changed that a society where work was an ethic has transformed into a system where everyone is looking for an opportunity to suck at the teat of the government . Amazing transformation for someone who has a reference point . Now I am going into the stupid zone . What changed was the net surplus energy available per capita to the US citizen . Once that flipped it was downhill all the way . I reserve the right to be incorrect in my assessment .

06/27/2021 at 10:45 am

Regarding the off-topic finish, I don't think most people realize how fragile is the glue holding the US together.
Fragmentation along tribal lines is the biggest theme in American culture.
If a minority collection of tribes succeeds in the attempts to reverse election results, even more than the Electoral College already does, the country will undergo a major restructuring (polite description) with no guarantees on a recognizable outcome.

[Jul 03, 2021] Larry Summers Sees 5% Inflation At The End Of 2021

Notable quotes:
"... This is not the first time Summers has predicted that the firehose of fiscal and monetary stimulus will unleash soaring inflation. While career economists at the White House and Fed - who have peasants doing their purchases for them - urge Americans to ignore the current hyperinflation episode, saying that the recent inflation surge will soon pass, Summers has been unique among his fellow Democrats in predicting that massive monetary and fiscal stimulus alongside the reopening of the economy would spark considerable price pressures. ..."
"... Asked how financial markets may behave in the rest of 2021, Summers said "there will probably be more turbulence" as traders react to faster inflation by pushing up bond yields. "We've got a lot of processing ahead of us in markets," he said. ..."
Jul 03, 2021 | www.zerohedge.com

It may not be quite hyperinflation - loosely defined as pricing rising at a double-digit clip or higher - but if former Treasury Secretary and erstwhile democrat Larry Summers is right, it will be halfway there in about six months.

One day after Bank of America warned that the coming "hyperinflation" will last at least 2 and as much as 4 years - whether or not one defines that as transitory depends on whether one has a Federal Reserve charge card to fund all purchases in the next 4 years - Larry Summers, who is this close from being excommunicated from the Democrat party, predicted inflation will be running "pretty close" to 5% at the end of this year and that bond yields will rise as a result over the rest of 2021.

Considering that consumer prices already jumped 5% in May from the previous year, his forecast is not much of a shock.

Speaking on Bloomberg TV, Summers said that "my guess is that at the end of the year inflation will, for this year, come out pretty close to 5%," adding that "it would surprise me if we had 5% inflation with no effect on inflation expectations." If he is right, the recent reversal in one-year inflation expectations which dipped from 4.6% to 4.2% according to the latest UMich consumer sentiment survey, is about to surge to new secular highs.

This is not the first time Summers has predicted that the firehose of fiscal and monetary stimulus will unleash soaring inflation. While career economists at the White House and Fed - who have peasants doing their purchases for them - urge Americans to ignore the current hyperinflation episode, saying that the recent inflation surge will soon pass, Summers has been unique among his fellow Democrats in predicting that massive monetary and fiscal stimulus alongside the reopening of the economy would spark considerable price pressures.

Asked how financial markets may behave in the rest of 2021, Summers said "there will probably be more turbulence" as traders react to faster inflation by pushing up bond yields. "We've got a lot of processing ahead of us in markets," he said.

Ironically, Summers - who now teaches at Harvard University whose president he was not too long ago when he hung out with his buddy Jeffrey Epstein...


Plus Size Model 5 hours ago (Edited)

Exactly!! Not only that, it's not just the FED that is contributing to inflation. We can also blame the SEC and the DOJ. I've never seen a Zero Hedge article blaming stock price appreciation or buybacks for causing inflation or increasing the money supply. The DOJ never enforces antitrust laws. The FBI never investigates money laundering from overseas that creates artificial real estate appreciation that inflates the money supply when people take out HELOC. There are other oversight bodies that, in a sane world, would not allow foreign investment in real estate. Bitcoin and others are a new tool that is being used to manipulate the money supply. It's comical how coins always go down when the little guys are holding the bag and go up when Coinbase executives want to cash out.

Another thing, this artificial chip shortage, punitive tariffs, and new tax laws are also adding to price increases.

Totally_Disillusioned 1 hour ago

Speculative investments have NEVER been included in the forumulation of CPI that determines inflation rate.

Revolution_starts_now 6 hours ago

Larry Summers is a tool.

gregga777 5 hours ago (Edited) remove link

Banksters in 2010's: We've got to revise how we calculate inflation again to conceal it from the Rubes.

Banksters in 2020: Ho Lee Fuk! Gun the QE engine! Pedal to the metal! Monetize all of the Federal government's debt! Keep those stonks zooming upwards!

Banksters in 2021: Ho Lee Fuk! The Rubes have caught onto our game! Gun the QE engine! Keep that pedal to the metal! Maybe the Rubes won't notice housing prices going up 20% per year?

Summer 2021: Ho Lee Fuk! They are noticing Inflation! We'd better revise how we calculate inflation again to conceal it from the Rubes.

[Jul 03, 2021] Housing Prices Are Going Up. Must They Crash by Kevin Erdmann

When and how another housing bubble will burst? This is the question.
The author forget that the current movement out of the cities into the suburb can lead to the collapse of prices in overpriced areas of big cities like NYC. Also the retain space collapse is evident even to untrained observers. So people moving out of big cities like NYC and cities devastated by riots need to sell their current condos and apartments. To whom?
Jun 29, 2021 | thebusinessnewsindia.com

There are many reports of homebuyers getting into bidding wars and many cities where home prices have appreciated by well more than 10% over the past year. This naturally leads to a concern about market volatility: Must what goes up come down ? Are we repeating the excesses of the early 2000s, when housing prices surged before the market crashed?

Some analysts argue that this time, it's even less likely that prices will fall. Inventories of new homes for sale are very low, and lending standards are much tighter than in 2005. This is true. In fact, the ground is even firmer than it seems.

New home inventories were very high before the Great Recession. Today, they are closer to the level that has been common for decades. The portion of inventory built and ready for move-in is especially low because of supply chain interruptions combined with a sudden boost of demand during the coronavirus pandemic. We shouldn't worry much about a crash when buyers are eagerly snapping up the available homes.

... ... ...

At the June 2006 Federal Reserve meeting, Ben Bernanke said, "It is a good thing that housing is cooling. If we could wave a magic wand and reinstate 2005, we wouldn't want to do that." It's notable that Jerome Powell, who today holds Bernanke's former position as Fed chair, isn't openly pining for a "cooler" housing market.

There is a common belief that before the Great Recession, homebuyers were taken in by the myth that home prices never go down, and they became complacent. Those buyers turned out to be wrong. Yet, even when a concerted effort to kill housing markets succeeded, we had to beat them into submission for three full years before prices relented. Home prices can go down, but we have to work very hard, together, for a long time, to make them fall.

If you are a buyer in a hot market where home prices are 30% higher than they were a year ago, you're getting a 30% worse deal than you could have had back then. Nothing can be done about that. That said, the main things to be concerned with are the factors federal policymakers are in control of. There is little reason to expect housing demand to collapse. If it does, it will require communal intention""federal monetary and credit policies meant to create or accept a sharp drop in demand. And even if federal officials intend for housing construction to collapse, history suggests that a market contraction would push new sales down deeply for an extended period of time before prices relent.

Guest commentaries like this one are written by authors outside the Barron's and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to [email protected] .

Kevin Erdmann is a visiting research fellow with the Mercatus Center at George Mason University and author of Shut Out: How A Housing Shortage Caused the Great Recession and Crippled Our Economy.

[Jul 02, 2021] Number Of US Truck Drivers Sidelined Due To Substance Abuse Violations Has Surpassed 60,000

Jul 02, 2021 | www.zerohedge.com

Lone_Star 7 hours ago

I don't see what's wrong with truck drivers being all hopped up on amphetamines, they were doing it to bomber pilots during WWII and beyond.

rockstone 7 hours ago

The whole idea is to keep a shipping network from resembling a bombing run.

fxrxexexdxoxmx3 PREMIUM 7 hours ago

Comment of the day

ParkAveSlasher 7 hours ago (Edited)

I would think a bombing run would be the most efficient thing a delivery and offload could resemble

[Jul 02, 2021] More Than 72 Million Americans Are Living Paycheck To Paycheck

The problem is that many people face long term unemployment without substantial emergency funds, which further complicates already difficult situation.
Notable quotes:
"... More than 2K adults to were interviewed to try and ascertain how long they could survive without income. It turns out that approximately 72.4MM employed Americans - 28.4% of the population - believe they wouldn't be able to last for more than a month without a payday. ..."
Jul 02, 2021 | www.zerohedge.com

Imagine you lost your job tomorrow. How long would you be able to sustain your current lifestyle? A week? A month? A year?

As we await Friday's labor market update, Finder has just published the results of a recent survey attempting to gauge the financial stability of the average American in the post-pandemic era.

More than 2K adults to were interviewed to try and ascertain how long they could survive without income. It turns out that approximately 72.4MM employed Americans - 28.4% of the population - believe they wouldn't be able to last for more than a month without a payday.

Another 24% said they expected to be able to live comfortably between two months and six months. That means an estimated 133.6MM working Americans (52.3% of the population) can live off their savings for six months or less before going broke.

On the other end of the spectrum, roughly 8.7MM employed Americans (or 3.4% of the population) say they don't need to rely on a rainy day fund since they have employment insurance which will compensate them should they lose their job.

Amusingly, men appear to be less effective savers than women. Some 32.4MM women (26.7% of American women) say their savings would stretch at most a month, compared to 40MM men (29.9% of American men) who admit to the same. Of those people, 9.7MM women (8% of American women) say their savings wouldn't even stretch a week, compared to 15.5MM men (11.6% of American men) who admit to the same.

A majority of employed Americans over the age of 18 say their savings would last six months at most. About 70.7MM men (52.8% of American men) and 62.8MM women (51.8% of American women) fear they'd be in dire straits within six months of losing their livelihood.

Unsurprisingly, younger people tend to have less of a savings buffer - but the gap between the generations isn't as wide as it probably should be.

While increasing one's income is perhaps the best route to building a more robust nest egg, Finder offered some suggestions for people looking to maximize their savings.

1. Create a budget and stick to it

Look at your monthly income against all of your monthly expenses. Add to them expenses you pay once or twice a year to avoid a surprise when they creep up. After you know where your money is going, you can allot specific amounts to different categories and effectively track your spending.

... ... ...

* * *

Source: Finder

[Jun 26, 2021] There Is No Labor Shortage, Only Labor Exploitation and burning desire not to spend money on training by Sonali Kolhatkar

Notable quotes:
"... Indeed, economists and analysts have gotten used to presenting facts from the perspective of private employers and their lobbyists. The American public is expected to sympathize more with the plight of wealthy business owners who can't find workers to fill their low-paid positions, instead of with unemployed workers who might be struggling to make ends meet. ..."
"... West Virginia's Republican Governor Jim Justice justified ending federal jobless benefits early in his state by lecturing his residents on how, "America is all about work. That's what has made this great country." Interestingly, Justice owns a resort that couldn't find enough low-wage workers to fill jobs. Notwithstanding a clear conflict of interest in cutting jobless benefits, the Republican politician is now enjoying the fruits of his own political actions as his resort reports greater ease in filling positions with desperate workers whose lifeline he cut off. ..."
Jun 12, 2021 | www.nakedcapitalism.com

For the past few months, Republicans have been waging a ferocious political battle to end federal unemployment benefits, based upon stated desires of saving the U.S. economy from a serious labor shortage. The logic, in the words of Republican politicians like Iowa Senator Joni Ernst, goes like this: "the government pays folks more to stay home than to go to work," and therefore, "[p]aying people not to work is not helpful." The conservative Wall Street Journal has been beating the drum for the same argument, saying recently that it was a " terrible blunder " to pay jobless benefits to unemployed workers.

If the hyperbolic claims are to be believed, one might imagine American workers are luxuriating in the largesse of taxpayer-funded payments, thumbing their noses at the earnest "job creators" who are taking far more seriously the importance of a post-pandemic economic growth spurt.

It is true that there are currently millions of jobs going unfilled. The U.S. Bureau of Labor Statistics just released statistics showing that there were 9.3 million job openings in April and that the percentage of layoffs decreased while resignations increased. Taking these statistics at face value, one could conclude this means there is a labor shortage.

But, as economist Heidi Shierholz explained in a New York Times op-ed , there is only a labor shortage if employers raise wages to match worker demands and subsequently still face a shortage of workers. Shierholz wrote, "When those measures [of raising wages] don't result in a substantial increase in workers, that's a labor shortage. Absent that dynamic, you can rest easy."

Remember the subprime mortgage housing crisis of 2008 when economists and pundits blamed low-income homeowners for wanting to purchase homes they could not afford? Perhaps this is the labor market's way of saying, if you can't afford higher salaries, you shouldn't expect to fill jobs.

Or, to use the logic of another accepted capitalist argument, employers could liken the job market to the surge pricing practices of ride-share companies like Uber and Lyft. After consumers complained about hiked-up prices for rides during rush hour, Uber explained , "With surge pricing, Uber rates increase to get more cars on the road and ensure reliability during the busiest times. When enough cars are on the road, prices go back down to normal levels." Applying this logic to the labor market, workers might be saying to employers: "When enough dollars are being offered in wages, the number of job openings will go back down to normal levels." In other words, workers are surge-pricing the cost of their labor.

But corporate elites are loudly complaining that the sky is falling -- not because of a real labor shortage, but because workers are less likely now to accept low-wage jobs. The U.S. Chamber of Commerce insists that "[t]he worker shortage is real," and that it has risen to the level of a "national economic emergency" that "poses an imminent threat to our fragile recovery and America's great resurgence." In the Chamber's worldview, workers, not corporate employers who refuse to pay better, are the main obstacle to the U.S.'s economic recovery.

Longtime labor organizer and senior scholar with the Institute for Policy Studies Bill Fletcher Jr. explained to me in an email interview that claims of a labor shortage are an exaggeration and that, actually, "we suffered a minor depression and not another great recession," as a result of the coronavirus pandemic. In Fletcher's view, "The so-called labor shortage needs to be understood as the result of tremendous employment reorganization, including the collapse of industries and companies."

Furthermore, according to Fletcher, the purveyors of the "labor shortage" myth are not accounting for "the collapse of daycare and the impact on women and families, and a continued fear associated with the pandemic."

He's right. As one analyst put it, "The rotten seed of America's disinvestment in child care has finally sprouted." Such factors have received little attention by the purveyors of the labor shortage myth -- perhaps because acknowledging real obstacles like care work requires thinking of workers as real human beings rather than cogs in a capitalist machine.

Indeed, economists and analysts have gotten used to presenting facts from the perspective of private employers and their lobbyists. The American public is expected to sympathize more with the plight of wealthy business owners who can't find workers to fill their low-paid positions, instead of with unemployed workers who might be struggling to make ends meet.

Already, jobless benefits were slashed to appallingly low levels after Republicans reduced a $600-a-week payment authorized by the CARES Act to a mere $300 a week , which works out to $7.50 an hour for full-time work. If companies cannot compete with this exceedingly paltry sum, their position is akin to a customer demanding to a car salesperson that they have the right to buy a vehicle for a below-market-value sticker price (again, capitalist logic is a worthwhile exercise to showcase the ludicrousness of how lawmakers and their corporate beneficiaries are responding to the state of the labor market).

Remarkably, although federal jobless benefits are funded through September 2021, more than two dozen Republican-run states are choosing to end them earlier. Not only will this impact the bottom line for millions of people struggling to make ends meet, but it will also undermine the stimulus impact that this federal aid has on the economies of states when jobless workers spend their federal dollars on necessities. Conservatives are essentially engaged in an ideological battle over government benefits, which, in their view, are always wrong unless they are going to the already privileged (remember the GOP's 2017 tax cuts for corporations and the wealthy?).

The GOP has thumbed its nose at federal benefits for residents before. In order to underscore their ideological opposition to the Affordable Care Act, recall how Republican governors eschewed billions of federal dollars to fund Medicaid expansion. These conservative ideologues chose to let their own voters suffer the consequences of turning down federal aid in service of their political opposition to Obamacare. And they're doing the same thing now.

At the same time as headlines are screaming about a catastrophic worker shortage that could undermine the economy, stories abound of how American billionaires paid peanuts in income taxes according to newly released documents, even as their wealth multiplied to extraordinary levels. The obscenely wealthy are spending their mountains of cash on luxury goods and fulfilling childish fantasies of space travel . The juxtaposition of such a phenomenon alongside the conservative claim that jobless benefits are too generous is evidence that we are indeed in a "national economic emergency" -- just not of the sort that the U.S. Chamber of Commerce wants us to believe.

West Virginia's Republican Governor Jim Justice justified ending federal jobless benefits early in his state by lecturing his residents on how, "America is all about work. That's what has made this great country." Interestingly, Justice owns a resort that couldn't find enough low-wage workers to fill jobs. Notwithstanding a clear conflict of interest in cutting jobless benefits, the Republican politician is now enjoying the fruits of his own political actions as his resort reports greater ease in filling positions with desperate workers whose lifeline he cut off.

When lawmakers earlier this year debated the Raise the Wage Act , which would have increased the federal minimum wage, Republicans wagged their fingers in warning, saying higher wages would put companies out of business. Opponents of that failed bill claimed that if forced to pay $15 an hour, employers would hire fewer people, close branches, or perhaps shut down altogether, which we were told would ultimately hurt workers.

Now, we are being told another story: that companies actually do need workers and won't simply reduce jobs, close branches, or shut down and that the government therefore needs to stop competing with their ultra-low wages to save the economy. The claim that businesses would no longer be profitable if they are forced to increase wages is undermined by one multibillion-dollar fact: corporations are raking in record-high profits and doling them out to shareholders and executives. They can indeed afford to offer greater pay, and when they do, it turns out there is no labor shortage .

American workers are at a critically important juncture at this moment. Corporate employers seem to be approaching a limit of how far they can push workers to accept poverty-level jobs. According to Fletcher, "This moment provides opportunities to raise wage demands, but it must be a moment where workers organize in order to sustain and pursue demands for improvements in their living and working conditions."

Sonali Kolhatkar is the founder, host and executive producer of "Rising Up With Sonali," a television and radio show that airs on Free Speech TV and Pacifica stations. She is a writing fellow for the Economy for All project at the Independent Media Institute. This article was produced by Economy for All , a project of the Independent Media Institute.

[Jun 26, 2021] Paul Tudor Jones Says Inflation risk isn't transitory and that Economic Orthodoxy Has Turned Upside Down

Jun 14, 2021 | finance.yahoo.com

Paul Tudor Jones said economic orthodoxy has been turned upside down with the Federal Reserve focused on unemployment even as inflation and financial stability are growing concerns.

Inflation risk isn't transitory, the hedge fund manager said in an interview on CNBC.

If the Fed says the U.S. economy is on the right path, "then I would go all in on the inflation trade, buy commodities, crypto and gold," he said. "If they course correct, you will get a taper tantrum and a sell off in fixed income and a correction in stocks.

[Jun 26, 2021] Exxon Prepares to Cull U.S. White-Collar Ranks by Up to 10%

Jun 22, 2021 | www.bloomberg.com


By Joe Carroll and Kevin Crowley
June 21, 2021, 3:30 PM EDT Updated on June 21, 2021, 4:00 PM EDT
Performance-improvement program will involve 5%-10% annually
Reviews are separate from sweeping job cuts disclosed in 2020

Exxon Mobil Corp. is preparing to reduce headcount at its U.S. offices by between 5% and 10% annually for the next three to five years by using its performance-evaluation system to suss out low performers, according to people familiar with the matter.

The cuts will target the lowest-rated employees relative to peers, and for that reason will not be characterized as layoffs, the people said, asking not to be identified because the information isn't public. While such workers are typically put on a so-called performance improvement plan, many are expected to eventually leave on their own. This year's evaluation is happening now but affected employees have not yet been notified, the people said.

"Our annual performance assessment process has been occurring over the last several months," Exxon spokesman Casey Norton said in an email. "Where employees are not contributing to their highest ability, they may need to participate in an improvement plan. This is an annual process which has been in place for many years, and it is meant to improve performance. This process is unrelated to workforce reduction plans."

The plan is separate from Exxon's announcement last year that it will cut 14,000 jobs worldwide by 2022, and it would extend reductions well beyond that original time frame. It's a tumultuous time for Exxon, which is still grappling with the fallout from last month's annual meeting, when shareholders rebuffed top management and replaced a quarter of the company's board over climate and financial concerns.

Exxon had 72,000 employees globally at the end of last year, of which 40% worked in the U.S., according to a company filing.

White-Collar Jobs

Several high-profile traders have also left in the last few weeks. While the performance-review process mostly applies to white-collar jobs in areas such as engineering, finance and project management, there's no suggestion the trading departures were related to the review program.

Exxon's other cost-cutting initiatives have included suspending bonuses and halting employee-contribution matches to 401k savings plans as the pandemic crushed demand for crude, saddling the company with a record annual loss.

International crude prices have surged 44% this year to almost $75 a barrel, improving Exxon's financial position markedly. Still, the supermajor has some way to go to pay down debts accumulated during 2020's market collapse. A smaller and more efficient workforce is key to further improvements.

Exxon achieved $3 billion of annual "structural cost reductions" in 2020 and will continue to make savings through 2023, Chief Executive Officer Darren Woods said at the annual meeting in May.

"We've got additional work to continue to take advantage of the new organization and find opportunities to reduce our costs," Woods said.

Exxon's shares rose 3.6% to $62.59 at the close in New York trading amid a broad rally in energy stocks on stronger oil prices.

[Jun 25, 2021] U.S. inflation likely to remain elevated for up to four years - BofA

Jun 25, 2021 | finance.yahoo.com

BofA expects U.S. inflation to remain elevated for two to four years, against a rising perception of it being transitory, and said that only a financial market crash would prevent central banks from tightening policy in the next six months.

It was "fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflations (are) deemed permanent", the investment bank's top strategist Michael Hartnett said in a note on Friday.

Thyagaraju Adinarayan
Fri, June 25, 2021, 5:24 AM
By Thyagaraju Adinarayan

LONDON (Reuters) - BofA expects U.S. inflation to remain elevated for two to four years, against a rising perception of it being transitory, and said that only a financial market crash would prevent central banks from tightening policy in the next six months.

It was "fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflations (are) deemed permanent", the investment bank's top strategist Michael Hartnett said in a note on Friday.

Hartnett thinks inflation will remain in the 2%-4% range over the next 2-4 years. U.S. inflation has averaged 3% in the past 100 years, 2% in the 2010s, and 1% in 2020, but it has been annualising at 8% so far in 2021, Bofa said in the note.

Global stocks were holding near record highs hours ahead of the reading of May core personal consumption expenditures index, an inflation gauge tracked closely by the Fed. The gauge is estimated to rise 3.4% year-on-year.

... In the week to Wednesday, investors pumped $7 billion into equities and $9.9 billion into bond funds, while pulling $53.5 billion from cash funds, BofA calculated, using EPFR data.

[Jun 25, 2021] Meme-based investing 'is a totally nihilistic parody of actual investing,' says Jeremy Grantham, who called 3 stock-market bu

Jun 25, 2021 | www.marketwatch.com

Meme-based investing 'is a totally nihilistic parody of actual investing,' says Jeremy Grantham, who called 3 stock-market bubbles Last Updated: June 24, 2021 at 7:18 p.m. ET First Published: June 24, 2021 at 3:16 p.m. ET By Mark DeCambre 18 'This is it guys, the biggest U.S. fantasy trip of all time,' says Grantham

Jeremy Grantham, founder of GMO, speaks in 2012 in Oxford, England GETTY IMAGES
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Listen to Article 3 minutes 00:00 / 03:10 1x

"'Meme' investing -- the idea that something is worth investing in, or rather gambling on, simply because it is funny -- has become commonplace. It's a totally nihilistic parody of actual investing. This is it guys, the biggest U.S. fantasy trip of all time."

That's Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., in a recent interview with Bloomberg News , lamenting the state of an investment world that has prominently featured the emergence of meme-linked trading in stocks like GameStop Corp. GME, -1.32% , AMC Entertainment Holdings AMC, -4.66% and BlackBerry Ltd. BB, -4.42% , among others.

Deep Dive: We put AMC, GameStop and other meme stocks' numbers to the test -- here's which ones came out on top

Plus: We put 6 more meme stocks' numbers to the test, and the differences are telling

Grantham noted that the meme cryptocurrency dogecoin DOGEUSD, -1.74% is "worth billions in the market and not even pretending to be [a] serious [investment]."

"Dogecoin was created as a joke to make fun of cryptocurrencies being worthless, and, not only has it taken off, but it's such a success that second-level joke cryptocurrencies making fun of dogecoin have gone to multibillion-dollar valuations," he said.

Indeed, AMC Entertainment is up over 2,500% in 2021 thus far; GameStop has gained over 1,000% in the year to date; dogecoin is up by about 5,000%, despite a precipitous drop; and BlackBerry shares are up over 90% so far this year.

NOW PLAYING: The Road to Regulating Crypto 00:01 03:05

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By comparison, traditional assets have seen more mundane returns. The Dow Jones Industrial Average DJIA, +0.69% is up a more than respectable 12% so far in 2021, while the S&P 500 SPX, +0.33% has returned over 13% in the year to date and the Nasdaq Composite COMP, -0.06% has made a powerful comeback in June to achieve a gain of nearly 12% in the first six months of the year.

Grantham views the social-media-driven meme-stock moves as concerning and indicative of bubbles percolating in financial markets that will ultimately need to be contended with.

Grantham is worth paying attention to due to his prescient calls over the years. He said that stocks were overvalued in 2000 and again in 2007, anticipating subsequent market downturns, the Wall Street Journal reports . Grantham also signaled that elements of the financial market had become unmoored from reality leading up to the 2008–09 financial crisis.

However, his bearishness thus far hasn't helped his core investment strategies, amid a relentless run-up in stocks, be they traditional or meme. The Nasdaq Composite has already put in back-to-back record closes this week and was aiming for a 17th record finish on Thursday, while the S&P 500 index was eyeing a record of its own.

What the News Means for You and You

[Jun 25, 2021] Near-term global bond market correction likely-strategists- Reuters poll

Jun 25, 2021 | finance.yahoo.com

A significant global bond market correction is likely in the next three months as central bankers eye the exit door from pandemic emergency policy, according to a Reuters poll of strategists who also forecast modestly higher yields in a year.

Financial markets were caught off guard by the Federal Reserve's surprisingly hawkish tone at its meeting last week, sparking a sell-off in equities and a safe-haven rush into Treasuries.

While Fed Chair Jerome Powell played down rising price pressures on Tuesday, just a day later two Fed officials said the recent bout of higher inflation could last longer than anticipated.

The MOVE index - a bond market volatility gauge - hit a two-month high on Monday, underscoring those mixed signals and uncertainty about the near-term.

In the June 17-24 poll, over 60% of fixed-income strategists, or 25 of 41, who answered an additional question said a significant sell-off in global bond markets was likely over the next three months.

... The U.S. 10-year Treasury yield was forecast to rise about 50 basis points to 2.0% by June 2022, from around 1.5% on Thursday.

... When asked how high would U.S. 10-year Treasury yields rise to over the next three months, the median of 30 analysts was 1.75%, with forecasts ranging between 1.5% and 2.0%.

... "Inflation is not all transitory. It is going to be a mix of sustainable and transitory," said Guneet Dhingra, head of U.S. interest rates strategy at Morgan Stanley.

[Jun 21, 2021] Do you remember when a trillion was a big number? Well, it still is especially if we are talking about possible stock market losses even with "accommodative" FED

Jun 21, 2021 | www.zerohedge.com

Traders are addicted to trading, much like murderers fixate on murdering. The traders noticed a slight change in the Fed's tone and sold anything tied to inflation. They whacked gold good. Then they went after the other commodities. When they were done there, they went after value stocks, before finishing the week by blasting a bunch of cyclical names.


25 play_arrow
ted41776 5 hours ago

the only kind of ism that has exist is sociopathism

they always end up at the top of any power pyramid and make the rules that apply to all others but not them

same as it always was and same as it always will be

NoDebt 4 hours ago

Traders are addicted to trading, much like murderers fixate on murdering

A line I wish I had come up with.

lambda PREMIUM 4 hours ago

This was already modeled and formalized: The Gambler Fallacy.

[Jun 21, 2021] Minneapolis Fed President Neel Kashkari Calls DOGE a Ponzi Scheme

Jun 21, 2021 | slashdot.org

(cointelegraph.com) 45 BeauHD on Monday June 21, 2021 @05:20PM from the not-dog-friendly dept. The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, took a jab at Dogecoin (DOGE) last week by referring to the memecoin as a Ponzi scheme , upping his rhetoric against cryptocurrencies. Cointelegraph reports: Kashkari's comments were in response to a LinkedIn poll by Paul Grewal, the chief legal officer and corporate secretary of Coinbase, who asked his connections about the proper way to pronounce "Doge." "The right pronunciation is pon-zi," Kashkari quipped.

This isn't the first time Kashkari has taken aim at cryptocurrencies. In February 2020, he said digital assets like Bitcoin (BTC) lack the basic tenants of a stable currency and praised the Securities and Exchange Commission for "cracking down" on initial coin offerings. Kashkari is not a member of this year's Federal Open Market Committee, the group responsible for setting United States monetary policy. The Minneapolis branch of the Fed will serve as an alternate FOMC member in 2022 before rotating back onto the committee as a voting member in 2023.

[Jun 20, 2021] Wishful Thinking in a World Without Yield by Jason Zweig

Jun 20, 2021 | www.wsj.com

June 18, 2021

... ... ...

In the face of prolonged low interest rates, all investors face three basic choices, says Mr. Skjervem, the consultant who formerly managed roughly $100 billion as chief investment officer of the Oregon State Treasury.

You can raise your existing holdings of traditional risky assets like stocks, even though no one thinks they're cheap.

You can add a bunch of new and exotic bets and hope they don't blow up on you.

Or you can grit your teeth and stay the course, through a period of what may be lackluster returns, until interest rates finally normalize.

"People are looking for the silver bullet, the magic wand, the get-out-of-jail-free card," says Mr. Skjervem. "There isn't one."

me title=

Write to Jason Zweig at [email protected]


John Smith

Jason Zweig always offers a breath of fresh air in the world of investment advice.

I like the cautionary tale he offers in re Fund "Trustees". Likely that many serve as decoys on the pond. Ignore that blind, look how comfortable the plastic ducks appear.

Stuart Young
There will be no solution to the yield problem until Powell and the Federal Reserve Bank stop having a fire sale on money and return interest rates to their normal levels. It certain that there is much resistance to do this from the administration due to the trillions of dollars they are borrowing and yes, these borrowed dollars are coming from the same Federal Reserve Bank that controls the interest rates for the nation.
John Zarwan
Two quick comments. 1, a pension system is different than an individual, as the pension system has a legal obligation to meet the payouts of its members. If my retirement nest egg doesn't provide, too bad for me, but my heirs aren't required to make up the shortfall. 2, it would have been nice if the article focused more on the purported subject rather than the shortcomings of a possibly corrupt pension plan.
BRIAN HILL
For those who say just have an S&P 500 index fund, the index had no return from 2000 to 2012 and other long periods like 1966 to 1982. And if you were withdrawing income during this period the sequence of return risk would be a disaster. You need multiple asset classes - not just large cap US stocks.
Richard Fishman
How easy it is for these pension trustees to make themselves popular with participants by raising earning assumptions and payouts when they have their big daddy the U.S. Pension Benefit Guarantee Corp. ready to raid the taxpayers pockets again and again. As usual, intelligent, conservative, fiscal management is a joke. What else is new?
Khyshang Lew
I do agree. It is time to lower expected rate of return.
Frank Walker
I wouldn't want to pour any water on all the great returns of the past 10 years but they came after a major crash in 2008. A Federal Reserve that dropped the interest rate to 1.5% on a 10 year bond. They have created a Stock, Bond, and Real Estate market bubble. How would your averages work out with a 50% correction?
Ralph Tibiletti

"People are looking for the silver bullet, the magic wand, the get-out-of-jail-free card," says Mr. Skjervem. "There isn't one."

All of these problems are caused by a dysfunctional federal government controlled by politicians from both parties whose only concern is getting elected and reelected. They accomplish their goal by redistributing wealth in the form of many different entitlement programs and by catering to the legislative needs of special interest groups.

Voting is not the solution because we only replace the existing set with a different set that will perform in the same way. We need a Solomon like individual who can solve the problem.

Y.C. Sung
Private equity is great for money managers; there's no transparency in the value of the investment. Unlike public market managers who have a scorecard on them every day, private equity managers have wide latitude in valuing their investments. They can avoid being fired for a long time.
Rachel Glyn
Not sure why it's different than a SPAC.
Ralph Tibiletti
"The challenge we all face as investors is that the collapse in interest rates makes achieving historical rates of return very difficult,"
As we all know this problem has been caused by the Fed's zero interest rate and money printing polices in support of the profligate spending and borrowing by both parties in the federal government.

Why is the Fed so interested in the interest rate that savers may receive but has no interest in the interest rate that lenders may charge like credit card companies? It does seem a bit unfair when lenders can borrow at near zero percent interest rates and then loan the money out at 16 percent plus. This smacks of inequality with which both the Fed and the federal government seem so terribly concerned.

James Winkle
The only magic bullet for a lot of people is to spend less.

[Jun 20, 2021] Facebook, Alphabet Keep Rising; Apple, Netflix Fade - WSJ

Jun 20, 2021 | www.wsj.com

Big tech stocks are going their own ways in 2021.

It is a far cry from last year, when the so-called FAANG stocks took a commanding role in a market driven by the coronavirus pandemic.

After the swift downturn of early 2020, shares of Facebook Inc., FB -2.04% Apple Inc., AAPL -1.01% Amazon.com Inc., AMZN -0.07% Netflix Inc. NFLX 0.49% and Google parent Alphabet Inc. GOOG -0.64% recovered more quickly than the broad stock market. Then they pushed higher, ultimately powering the S&P 500 to a 16% gain for 2020.

... ... ...

While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind the 11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7% and 7.4% for the year.

... ... ...

For much of 2020, a badly constricted economy pushed investors toward stocks -- like the FAANG names -- whose businesses were less affected and whose future growth became even more alluring with the drop in interest rates. The Russell 1000 Growth Index advanced 37% for the year, while the Russell 1000 Value Index eked out a 0.1% gain -- the largest annual performance gap between the two style benchmarks in FactSet data going back to 1979.

Big tech stocks were among the leaders of that rally. Apple shares climbed 81% in 2020 -- last August becoming the first U.S. public company to surpass $2 trillion in market value -- while Amazon rose 76% and Netflix gained 67%. Facebook added 33% for the year, and Alphabet 31%.

J

James Robertson

These companies are too big and too powerful. I hope for anti-trust legislation that cuts them down to size. The tech oligarchs have too much influence on what Americans think and do. They are a direct threat to our democracy. I hope more Americans will decide to support smaller companies (especially local stores), putting conviction ahead of convenience.
J Pate
Google and Amazon has no near peer competitors. Netflix and Apple do. My family got rid of Netflix last year and now have Hulu. There is a ton of free steaming sites also. We never missed Netflix.
Jay Urbain
"While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind the 11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7% and 7.4% for the year."

Time to take another look at AMZN and AAPL.

Jon Tannen
Gasp! So after breathtaking rises for Apple and Netflix stocks, they're merely flat these days? Not up 30% this month? Uh-oh! Sound the alarms! Someone please tell the writer that stocks are not a straight diagonal to the sky. [She's actually wrong about Apple's valuation being down this year, according to WSJ's very charts! The price is 130 now vs. 129 on Jan 4. But hey, she's obliged to come up with an article this week.]

This all reminds me of analyst Dan Niles coming on CNBC for years and proclaiming he's shorting Apple. Every few months: "I'm shorting Apple." "I'm shorting Apple." Again and again and again. The guy must be broke. [Of course, no one calls him out about it.]

Marshall Dillon
Amazon? Not for me. I have switched most of my online buying to Walmart and local stores. Amazon needs to get out of politics and stop suppressing free speech, much like the WSJ moderators.
SACHIN SHARMA
This entire article is misleading. Choosing 2020 as a base year to compare this group of stocks leaves out the important context of what happened the prior ten years, when FB and GOOGL underperformed vs APPL, NFLX, AMZN. A mean reversion within this group because money managers need to justify their existence could be the simple explanation. Also, how much of the Russel growth fund performance came from AMC and GME, those bell weather companies?

[Jun 18, 2021] Corporate elites are loudly complaining that the sky is falling -- not because of a real labor shortage, but because workers are less likely now to accept low-wage jobs

In IT corporate honchos shamelessly put more then a dozen of very specific skills into the position rescription and want a cog that hit that exactly. they are not interested in IQ, ability to learn and such things. that want already train person for the position to fill, so that have zero need to train this persn and they expect that he will work productively from the day one.
Jun 14, 2021 | www.nakedcapitalism.com

Hayek's Heelbiter , June 12, 2021 at 7:50 am

But corporate elites are loudly complaining that the sky is falling -- not because of a real labor shortage, but because workers are less likely now to accept low-wage jobs.

Duh. This is so blindingly obvious, but NC is the only place that seems to mention this fact.

Here in the UK, the outmigration of marginally paid workers from Eastern Europe and the resultant "labour shortage" triggered by Brexit has made it abundantly clear that Blair's change to open borders was not from any idealistic considerations but as a way of importing easily exploited labor.

Business leaders quoted in the the tsunami of hand-wringing MSM articles about the current catastrophe are offering such helpful solutions as allowing housekeepers to use pools and gyms in off hours, free meals to waiters, etc. Anything but a living wage.

Dr. R.k. Barkhi , June 12, 2021 at 5:57 pm

" I don't actually see any untruths to the GOP talking points. "
"" Workers are less likely to accept a job while receiving Gov't benefits" and "workers are less likely to accept low wage crappy jobs ".

Well,if u can survive on a $300/week program that ends after several weeks pass,bless u. No one else in America can. That's a $7.50 hr full time "summer job" with no pension or medical benefits that teenagers with no dependents,few bills n maintenance issues might be interested in; adults with adult responsibilities,no way. That so called RepubliCons, the "economics experts", can make such a fraudulent claim n anyone out of elementary school believes it has a quantum particle of reality or value is . well I'll just say a sad n unbelievable situation.

Now the rest of your comments are laudable.

Objective Ace , June 13, 2021 at 11:57 am

They get 300 dollars plus regular UI. They can also get Medicaid and CHIP, or if they are still making too much they are eligible for Obamacare exchange. Plus they're eligible for SNAP and housing vouchers

Equitable > Equal , June 13, 2021 at 4:38 am

There is one significant fallacy in this article: The author conflates Republican opposition to enhanced benefits with opposition to unemployment benefits overall.

I very much stand with labour over business on most (probably all) points, but the Republican argument is to end the enhanced benefits in most cases – Not to abolish unemployment assistance. They believe the role of government is to step in to help pay basic bills in the event of unemployment, but oppose the current higher level of benefit due to the market distortions it causes (Hence the appearance of the term 'labour shortage'.)

I agree that it basically forces mcdonalds et al to up their wages if they want to do business, which should be a positive for society, but I find it unlikely that the author could have unintentionally mistunderstood the argument on such a fundamental level, and all it does is try to drive a wedge further between each side of the argument.

Sierra , June 12, 2021 at 3:46 pm

Hayek,

Sonali Kohatkar is pro open borders and has the nerve to complain about wage arbitrage?
https://freespeech.org/stories/prop-287-immigration-ca/

Anyone that believes that workers supported their jobs being sent overseas is either demented or delusional or suffers from a mental hernia. The same goes for the common working stiffs supporting massive immigration to help drive down their ability to demand a livable wage.

American labor has been sold down the river by the International Labor Leaders, politicians and the oligarchy of US corporate CEO's.
======

Got a new hip recently. Do your P.T., take it easy, follow the warnings of what not to do until you heal and you should discover that decades feel like they are lifted off your shoulders.

Hayek's Heelbiter , June 13, 2021 at 12:16 pm

Sierra,
You've made a very interesting point that actually never occurred to me and one in which I never seen fully examined.
Exploiting labour and outsourcing it are two sides of the same coin with the same goal in mind, diverting revenue streams into the C-suite and rentier class.
Obviously you cannot outsource most of the workers in the hospitality industry or the non-virtual aspects of world's oldest profession, but a lot of the tech industry and the virtual aspects of the latter are very amenable to being shipped overseas.
Immigrants are extremely visible and an easy target, while outsourcing is essentially an impossible to contain concept that creates real world hardship.
Dear NC readers, do you know of any studies comparing and contrasting the economic impact of immigration and/or limiting it and outsourcing?

sierra , June 12, 2021 at 3:51 pm

Those hip words were meant for Yves of course

Fazal Majid , June 12, 2021 at 8:46 am

Indeed, economists and analysts have gotten used to presenting facts from the perspective of private employers and their lobbyists.

You are acting if economists and lobbyists are separate groups, as opposed to largely a subset thereof. Funny how a field entirely based on the study of incentives claims incentives don't distort their policy prescriptions, isn't it?

As for low-paid jobs, they are traditionally the last resort of immigrants and other marginalized populations, but the anti-immigration push that began under Obama, and enthusiastically continued by Trump and Biden, has perfectly predictable consequences.

One factor not mentioned is many free-riding businesses refuse to pay for training, then wonder why there are no trained workers to hire.

Now, there are definitely fields where there is a genuine and deliberate labor shortage. Usually white-collar credentialed professions like medical doctors and the AMA cartel.

Yves Smith , June 12, 2021 at 8:51 am

Economics is not based on incentives. That's behavioral economics. I hate to quote Larry Summers, but this is Summers on financial economics:

Ketchup economists reject out of hand much of this research on the ketchup market. They believe that the data used is based on almost meaningless accounting information and are quick to point out that concepts such as costs of production vary across firms and are not accurately measurable in any event. they believe that ketchup transactions prices are the only hard data worth studying. Nonetheless ketchup economists have an impressive research program, focusing on the scope for excess opportunities in the ketchup market. They have shown that two quart bottles of ketchup invariably sell for twice as much as one quart bottles of ketchup except for deviations traceable to transaction costs, and that one cannot get a bargain on ketchup by buying and combining ingredients once one takes account of transaction costs. Nor are there gains to be had from storing ketchup, or mixing together different quality ketchups and selling the resulting product. Indeed, most ketchup economists regard the efficiency of the ketchup market as the best established fact in empirical economics.

Howard Beale IV , June 12, 2021 at 9:22 am

Happy to see you back at a keyboard, and hoping your recovery is progressing well. I had the misfortune of spending two days in the hospitals while they got my blood chemistry strightened out. Here's the kicker; the hospitalist, who I saw 3 times, submitted a bill for a whopping $17,000. Just yesterday, the practice she works for submitted a bill that was one-tenth her charges for the work she did, yet her bill is still sitting waiting to be processed.

Yves Smith , June 12, 2021 at 9:53 am

OMG, how horrible. HSS is a small hospital for a big city like NYC, only 205 beds and 25 operating rooms. No emergency room. They are not owned by PE and so I don't think play outsourcing/markup games (they are very big on controlling quality, which you can't do if you have to go through middlemen for staffing). Some of the MDs do that their own practices within HSS but they are solo practitioners or small teams, which is not a model that you see much of anywhere outside NYC

Howard Beale IV , June 12, 2021 at 12:05 pm

The last time I was hospitalized, all the hospitalists were in the employ of the hospital, now they are in the employ of a nationwide hospitalist practice, which has all the smell of private equity around it. I'm really beginning to think that a third party focusted on healthcare might have a real shot at upsetting the political order – maybe it's time to drag out your skunk party for 2024.

Arizona Slim , June 12, 2021 at 1:22 pm

How are you feeling? We miss you around here.

tegnost , June 12, 2021 at 10:25 am

As for low-paid jobs, they are traditionally the last resort of immigrants and other marginalized populations, but the anti-immigration push that began under Obama, and enthusiastically continued by Trump and Biden, has perfectly predictable consequences.

Well I'm sorry you can't find easily exploitable labor, except I'm not immigrants face the same ridiculous costs, and weren't hispanic workers more heavily impacted by covid due to those marginal jobs (I'll switch your dynamic to low wage workers , and marginal jobs, thanks), so by your logic more should have been let in to die from these marginal jobs? but yeah we need more PMC except we don't
Now, there are definitely fields where there is a genuine and deliberate labor shortage. Usually white-collar credentialed professions like medical doctors and the AMA cartel."
Last I checked it was private equity, wall st and pharmaceutical companies and their lobbyists that drive up costs so labor needs to charge more.
Wake up and smell the coffee.

Bill Smith , June 12, 2021 at 9:24 am

How much of this is over specification on the part of employers in the ad for the job? We want the perfect candidate who can do the job better than we can with no training .

Yves Smith , June 12, 2021 at 9:48 am

OMG this is such a long-standing pet peeve! We've commented on this nonsense regularly. Companies took the position that they don't have to train and now they are eating their cooking.

Bill Smith , June 12, 2021 at 10:30 am

Exactly.

The mismatch between job openings and job applicants is not just about wages.

In fact, if companies were willing to take a chance on people who didn't exactly match the job requirements, the likely effect would be to raise the wages some of those that did not qualify under the over exacting job requirements. [And likely paying these new employees less than they had contemplated paying the perfect candidate.]

But that seems like someone making the hiring decision might, just possibly, be seen as taking a risk.

Howard Beale IV , June 12, 2021 at 2:55 pm

At my empolyer we know we can't find any colleges that teach mainframe skills, so we bring in graduates who are willing to learn those skills – we submit them to a 3-month bootcamp and then there's a long period of mentorship under a senior person to their group that has an opening. Since everybody and their dog are now moving headfirst into DevOps, where all the tooling is in somewhat less ancient software, they get exposed using those Eclipse/VScode-based tools and are able to come up to speed somewhat quicker. Still, no one in corporate America dares to bite the bullet and re-platform their core systems with few exceptions (SABRE) for fear of losing all the institutional knowledge that's in software, rather than wetware (humans).

Howard Beale IV , June 12, 2021 at 3:03 pm

Just think what is happening right now with everyone holding an Indian outsourcing contract. You don't have individual's cellphone numbers over in India, which would cost you an arm and a leg to call, never mind what's going on in their facilities.

Mike Elwin , June 13, 2021 at 2:27 pm

On the other hand, there's something to be said for employers not training their staffs. In the SF Bay Area computer industry, employees and independent contractors alike continually race to train themselves in the new technologies that seem to crop up like mushrooms after a rain. Many companies train their customers–and charge them for it–before they'll train their staffs. This is a principal reason there's a market for contractors. Training oneself in new technologies lays a base for opportunities that don't appear if you spend a decade in the same job (unless, like mainframe programming, your job is so old it's new). I suppose this is a beneficial side of capitalism?

Lambert Strether , June 13, 2021 at 2:37 pm

> continually race to train themselves in the new technologies that seem to crop up like mushrooms after a rain

And what, one might ask, do mushrooms grow best in .

Louis , June 12, 2021 at 10:38 am

I get that you want experience for mid to senior level jobs but the experience requirements for what are ostsensibly entry-level jobs have gotten absurd. The education requirements have also gotten out of hand in some cases.

That being said, a lot of the shortages are in low-wage, part-time jobs so the issue isn't necessarily ridiculous requirements, like you sometimes see for entry level white collar jobs, but wages that are too low and awful working conditions.

How many people want to be treated like dirt–be it by customers, management, or both–for not much more than minimum wage if they have other options?

A wage increase will help fill these jobs but there also needs to be a paradigm shift in how employees are treated–the customer is not always right and allowing them to treat employees in ways that would not be tolerated in other businesses, and certainly not in many white-collar workplaces is a huge part of the problem and why these jobs have long had high-turnover.

TomDority , June 12, 2021 at 9:51 am

It never ends – when it was about immigrant labor under George B junior – I think – the call was
-- - They do jobs that Americans won't -- or something to that effect.
It always bothered me that the sentence was never, in my mind, completed. It should have been said
-- They do jobs that Americans won't do at that pay level. --
The tax system, economic system and higher education departments have been perverted by the continuous bribery and endowments by the rentier class to our elected law makers and dept heads for decades –
The creditor, debtor relationships distorted for eons.
The toll takers have never, in history, been in any higher level of mastery than they are now.
It is not to throw out the constitution but, to throw out those who have perverted it.

Oh , June 12, 2021 at 12:23 pm

The construction industry knows how to exploit immigrant labor, documented as well as undocumented. I'm sure most peole born here refuse to work for the same wages.

chris , June 12, 2021 at 6:14 pm

The exploitation occurs on many levels. For small residential jobs, a lot of wage theft occurs. For larger jobs, a lot of safety regs get ignored. When you have a population that won't use the legal avenues available to other citizens to push back against abuse you can get a lot done :/

King , June 12, 2021 at 10:04 am

When I go looking for a job if a degree isn't required I am very unlikely to pursue it further. Same if the list of 'required' is overly detailed. I'm making assumptions in both of these cases (that might not be correct) about pay, benefits, work environment, etc. and what is actually going on with a job listing. Why? Chiefly my likelihood of actually getting a reasonable offer. I expect either being seen as overqualified in the first case or the job only being listed because of some requirement in the second.

I have to wonder if many places know how to hire. This is made much more difficult by years of poorly written (maybe deceptive) job postings. You probably know many of the phrases; flexible schedule, family ___, reliable transportation required, and so on. Its no surprise if puffery doesn't bring back the drones.

Noone from Nowheresville , June 12, 2021 at 10:07 am

If we're playing with statistics. How many of these posted job openings, how many interviews did the companies offer v. how many offers were made until the position was filled? If position remains open, has the company increased the base pay offer? guaranteed an increased min. number of weekly hours? offered bonuses or increased benefits? How many times has this same job opening using the original posting criteria been re-posted? Is this a real single job opening that the company plans to fill in real time or just a posting that they keep opening because they have high turnover? etc., etc., etc.

The real problem with this workers are lazy meme is that it is repeated and repeated all year long on the local news from the viewpoint of business. It has filtered down to local people. I hear them repeating what the local news said without giving it any critical thought. Even those who say that we need unions and believe themselves to be on the side of workers.

Ear wigs are good for businesses. Insidious for workers.

synoia , June 12, 2021 at 12:03 pm

In the UK, in the days of Labor Strive, before Neo-liberalism , there was always newspaper reports about "Labor Strife" and "bolshy workers." Never once did the press examine Management had behaved and caused the workers to become "bolshy" – a direct reaction to Management's attitudes and behavior, probably based on the worst attributes of the UK's class system.

Definition: A bolshy person often argues and makes difficulties.
Management get the workers (Their Attitudes) it deserves.
I recommend reading "The Toyota Way" to explore a very successful management style.

tegnost , June 12, 2021 at 10:40 am

This song is getting a probably getting more hits these days
Take this job and Shove It
https://www.youtube.com/watch?v=eIjEauGiRLo
But I hear lots of businesses will close to to no labor, so when they close they can go work for 7.25 an hour for one of their competitors who also needs laborors Solidarinosc!

tegnost , June 12, 2021 at 11:40 am

Geez this song is probably getting more hits these days due to no laborors? hmmm.it must mean something, like proof read your posts .,

Generalfeldmarschall von Hindenburg , June 12, 2021 at 10:43 am

If businesses are suffering, it's restaurants and small scale enterprise. The Covid response was tailored to the needs of economy of scale mega biz. They likely knew multitides of mom-n-pops would go away- and they have. But that's fine.

Susan the other , June 12, 2021 at 11:24 am

So if state governments can turn down federal unemployment supplements because they want labor to go back to work for unlivable wages this means the federal government can do nothing about it. When push comes to shove the question that must be settled is, Is it a human right to receive employment assistance until a job is found that pays a livable wage? (Not even a republican will actually say No). So then that puts all the stingy states on notice that there is a human rights issue here. States will have the choice to either let businesses shut down for lack of workers, or states can subsidize minimum wages and benefits. If states choose, in desperation, to subsidize minimum wages, then the states can apply to the feds to be compensated. The thing that is needed in the interim, between when the real standoff starts and ends, is a safety net for workers who are being blocked by the state from receiving unemployment benefits. I say call in the national guard. This is a human rights issue.

Dr. R.k. Barkhi , June 12, 2021 at 6:08 pm

Great point. Im appalled at the RepubliCon governers responses. And they call themselves Christians?

Imo Profitism (or Crapitalism if u pref2) is a Rights issue.

jim truti , June 12, 2021 at 11:45 am

The real exploitation happened when we allowed companies to delocalize, manufacture product in China and sell it here with no strings attached.
James Goldsmith seems like a prophet now, he was so absolutely right.

https://www.youtube.com/watch?v=wwmOkaKh3-s

eg , June 12, 2021 at 11:45 pm

He sure does

Tom , June 13, 2021 at 5:34 pm

Wow. The Clinton flack was insufferable. AND WRONG about pretty much everything. Goldsmith was brilliant. I wasn't paying enough attention at he time, but how many high profile people were making the arguments he was making?

Michael Hudson , June 12, 2021 at 12:23 pm

I'm surprised that nobody has taken the opportunity to comment on how this discussion shows how hypocritical Biden and the democrats were not to press for raising the minimum wage.
The pretense (which they must have coached the "Senate scholar" on) was that raising the minimum wage was not related to revenue (i.e., a revenue bill). But of course it is! Right now, paying below-poverty wages enabled Walmart and other employers to make the government pay part of their wage bill. Higher minimum wages would raise these government aid recipients out of the poverty range, saving public revenue.
That is so obvious that the failure of the Democrats to make the point shows that they really didn't want to raise wages after all.

Nikkikat , June 12, 2021 at 1:40 pm

I didn't expect much from Biden but he's even worse than I thought. Along with those bought senators hiding behind Joe Manchin. Depressing to think how much worse everything will become for working people here.

Lambert Strether , June 12, 2021 at 1:48 pm

> the Democrats to make the point shows that they really didn't want to raise wages after all.

Come on, man. They're "fighting for" it.

chris , June 12, 2021 at 6:41 pm

This all day long and twice on Sunday

When I think about how they're complaining about Manchin now when there was a serious primary challenge against him last year, and how the Democrat organization rallied around Manchin and not his challenger, it is disgusting to see Slate/The Guardian/NYT/other "Blue no matter who" mouth breathers write articles asking what can be done to salvage a progressive agenda from the curse of bipartisanship.

I had given up on national politics long before the 2020 election circus but this latest has confirmed my resolve. The destruction of the Democrat party can't come soon enough.

Noone from Nowheresville , June 12, 2021 at 5:25 pm

If I call them Hypocritics, when I never believed them in the first place, will they feel any shame at all? Or must I be part of their class for them to feel even the tiniest of niggles?

Perhaps they'll feel ashamed once they cut the check for the $600 they shorted us this winter. Or maybe that they are reneging on the extended unemployment benefits early or

One side makes you sleep on a bed of nails and swear allegiance.The other side generously offers to help you out, no strings attached, but you might bleed out from the thousands of tiny means-testing cuts. Each side want the lower tiers to face the gauntlet and prove one's worthiness, hoping to convince us that a black box algorithm is the same thing as a jury of peers.

Telee , June 12, 2021 at 9:30 pm

Exactly right! And keep in mind deluge of op-eds telling us that Biden is a transformational president! The same authors presented a deluge of op-eds telling us how Senator Sanders was to radical for the American people after he did well in early primaries. That the reforms he supported like Medicare for all, raising the minimum wage, lowering drug costs, help with daycare, doing something about climate change etc. were reforms that the people would never accept because the people value their freedom and don't want to live in a socialistic country.
It looks like none of the promises Biden made during the campaign will be implemented by President Biden. That why he is in the White House.

rowlf , June 12, 2021 at 12:38 pm

Would a lot of these positions be filled if the US had single payer healthcare or similar? Would workers accept low paying positions if they didn't have to lose so much of their pay to crappy health insurance?

Nikkikat , June 12, 2021 at 1:31 pm

At our local Petsmart they cut staff during the pandemic. They laid off all full time workers
And are only hiring back part time. I knew several of the laid off people and they are not coming back. Two of the people that worked full time have found other jobs one with slightly better pay the other with slightly better benefits. We are in California where rent is very high so another person we know decided to use this as a chance to relocate to another state where housing is less expensive. Our older neighbor retired, although vaccinated now, he decided it just wasn't safe and after the CDC told everyone to take off their mask off. He is glad he just decided to live on a little less money. I suspect there are a lot of reasons as Yves stated above for a lack of workers, but this "they are lazy" trope is capitalistic nonsense.

Petter , June 12, 2021 at 4:53 pm

This "they are lazy" trope has a long history. Yasha Levine wrote about it for the Exiled and it was reposted here at NC.
https://www.nakedcapitalism.com/2012/04/yasha-levine-recovered-economic-history-everyone-but-an-idiot-knows-that-the-lower-classes-must-be-kept-poor-or-they-will-never-be-industrious.html

Some highlights:
>> everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious.
-- Arthur Young; 1771
>>Even David Hume, that great humanist, hailed poverty and hunger as positive experiences for the lower classes, and even blamed the "poverty" of France on its good weather and fertile soil:
'Tis always observed, in years of scarcity, if it be not extreme, that the poor labour more, and really live better.

>>Poverty is therefore a most necessary and indispensable ingredient in society It is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.

athingtoconsider , June 12, 2021 at 1:38 pm

I'll just point out, per the Old Testament, that wage, debt and rent slavery were the exception, not the norm (as they are in the US) for citizens (Hebrews) in ancient Israel/Judah.

That's because the assets in ancient Israel/Judah were roughly equally owned by all citizens with provisions in the OT Law (eg. Leviticus 25, eg. Deuteronomy 15, eg. Deuteronomy 23:19-20) to keep it that way in the long run (but less than 50 years).

Contrast that to US where we have privileges for a private credit cartel, aka "the banks", and no limits to the concentration of land ownership and the roots of our problems are evident.

So begging for better jobs for citizens is, in the Biblical context, pathetically weak tea indeed.

Amateur Socialist , June 12, 2021 at 1:53 pm

On a personal note I had a great job interview Thursday at the local food co-op. This is my first in person interview since I was terminated without cause by IBM (after almost 24 years there in a server development job) almost a year ago. Despite applying for over 100 positions. I'm over 60 and haven't worked in a year so I admit I'm grateful to even get the chance.

I have another interview with them next week and hoping to start soon as a produce clerk making $13.50 an hour. If I can get on full time they offer a decent insurance plan including dental. The HR person acknowledged that I was "wildly overqualified" but encouraging. The possibility of getting health care is key; my IBM Cobra benefits will start costing me almost $1400/monthly for myself and my husband in September after the ARA subsidy expires.

I've adjusted my expectations to reinvent myself as a manual laborer after decades in fairly cushy corporate life. I've managed to keep my health and physical capacity so somewhat optimistic I can meet the job requirements that include lifting 50 lb boxes of produce. But we'll see.

athingtoconsider , June 12, 2021 at 2:52 pm

and haven't worked in a year Amateur Socialist

You mean you haven't had a job in a year since it's highly doubtful that you have not done any work in a year; eg. cooking, cleaning, shopping, car maintenance, gardening, chauffeuring, mowing the lawn, home maintenance and caring for others count as work.

We need to stop conflating work (good) with wage slavery as if the former necessarily requires the latter.

Amateur Socialist , June 12, 2021 at 3:57 pm

Okay sure. I haven't earned in a year. But it's still a problem I'm trying to sort out best as I can.

Since I still live in the US where earning is highly correlated with insurance coverage, and I still have about 5 years until we're both qualified for Medicare this may turn out to be a great thing that has happened.

And since I don't see a path out of wage slavery today I'll be happy to accept almost any offer from the food co-op. It's a union job with decent pay and benefits and may offer other opportunities in the future. They mostly buy and sell products that are locally made so that makes it easier too. The money we are all enslaving each other over is staying around here as much as possible. Okay.

Arizona Slim , June 12, 2021 at 4:32 pm

A former neighbor worked in our local food co-op and loved her job. At the co-op, she was a cashier. She also was a retired attorney.

Dr. R.k. Barkhi , June 12, 2021 at 6:25 pm

Good luck! Fyi i strongly suggest u look into taking your IBM pension asap as 1. It will minimally impact your taxes as u r now earning less n 2. How many more years do u think it will be there? ( I usually recommend most people take their social security at 62 for similar reasons but in your case I'd do your research b4 making any move like that. ) Take a blank state n Fed tax form n pencil in the new income n see what the results are.
Btw truly wonderful people are involved in food co-ops,enjoy!

Eudora Welty , June 12, 2021 at 3:17 pm

Good luck! I will be thinking of you next week.

Sound of the Suburbs , June 12, 2021 at 2:52 pm

No one really questions the idea of maximising profit.
How do you maximise profit?
You minimise costs, including labour costs, i.e. wages.

Where did the idea of maximising profit comes from?
It certainly wasn't from Adam Smith.

"But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin." Adam Smith
Exactly the opposite of today's thinking, what does he mean?
When rates of profit are high, capitalism is cannibalising itself by:
1) Not engaging in long term investment for the future
2) Paying insufficient wages to maintain demand for its products and services
Today's problems with growth and demand.
Amazon didn't suck its profits out as dividends and look how big it's grown (not so good on the wages).

The benefits of the system can be passed upwards in dividends or downwards in wages.
Both actually detract from the money available for re-investment as Jeff Bezos knows only too well.
He didn't pay dividends, and paid really low wages, to maximise the amount that he could re-invest in Amazon and look how big it's grown.
The shareholders gains are made through the value of the shares.
Jeff Bezos hopes other people are paying high enough wages to buy lots of stuff from Amazon; his own workers don't have much purchasing power.

Where do the benefits of the system go?
Today, we pass as much as possible upwards in dividends.
In the Keynesian era they passed a lot more down in wages.

cnchal , June 12, 2021 at 10:34 pm

> Jeff Bezos hopes other people are paying high enough wages to buy lots of stuff from Amazon; his own workers don't have much purchasing power.

You are missing the tree in the forest. Jeff hopes other people will pay a high enough price for Amazon stawk. We already know Jeff doesn't give a shit about the stuff he sells, or the inhumane working conditions that go along with the low pay and short "career". I mean, not even the nastiest farmer would treat his mules like that, even if mules were easy and cheap to come by.

So far, Mr Market says beating workers, good.

Sound of the Suburbs , June 12, 2021 at 2:55 pm

We don't think people should get money when they are not working.
Are you sure?

What's the point in working?
Why bother?
It's just not worth all the effort when you can make money doing nothing.
In 1984, for the first time in American history, "unearned" income exceeded "earned" income.
They love easy money.

With a BTL portfolio, I can get the capital gains on a number of properties and extract the hard earned income of generation rent at the same time.
That sounds good.
What is there not to like?

We love easy money.

You've just got to sniff out the easy money.
All that hard work involved in setting up a company yourself, and building it up.
Why bother?
Asset strip firms other people have built up, that's easy money.

People do love easy money.

Sound of the Suburbs , June 12, 2021 at 3:45 pm

"West Virginia's Republican Governor Jim Justice justified ending federal jobless benefits early in his state by lecturing his residents on how, "America is all about work. That's what has made this great country."
Have you had a look around recently?

In 1984, for the first time in American history, "unearned" income exceeded "earned" income.
America is not about work at all.

athingtoconsider , June 12, 2021 at 5:44 pm

America is not about work at all. SoS

The US is largely about exploiting or being exploited with most of US doing both.

We should resent an economic system that requires we exploit others or be a pure victim ourselves.

That said and to face some truths we'd rather not, the Bible offers some comfort, eg:

Ecclesiastes 7:16
Do not be excessively righteous, and do not be overly wise. Why should you ruin yourself?

Ecclesiastes 5:8-9
If you see oppression of the poor and denial of justice and righteousness in the province, do not be shocked at the sight; for one official watches over another official, and there are higher officials over them. After all, a king who cultivates the field is beneficial to the land.

Nonetheless, we should support economic justice and recognize that most of us are net losers to an unjust economic system even though it offers some corrupt compensation* to divide and confuse us.

*eg positive yields and interest on the inherently risk-free debt of a monetary sovereign.

KLG , June 12, 2021 at 6:54 pm

Jim Justice made his money the old fashioned way, he inherited it:

From Wiki: James Conley Justice II (born April 27, 1951) is an American businessman and politician who has been serving as the 36th governor of West Virginia since 2017. With a net worth of around $1.2 billion, he is the wealthiest person in West Virginia. He inherited a coal mining business from his father and built a business empire with over 94 companies, including the Greenbrier, a luxury resort.

https://en.wikipedia.org/wiki/Jim_Justice

chris , June 12, 2021 at 6:31 pm

I wonder how much of this is also related to a change in the churn we assume existed pre-pandemic? For example, the most recent JOLTS survey results from April 2021 show the total number of separations hasn't really changed but the number of quits has increased.

So, one possible interpretation of that would be employers are less likely to fire people and those who think they have skills in demand are more interested in leaving for better opportunities now. That makes intuitive sense given what we've been through. If you had a good gig and it was stable through 2020 you had very little reason to leave it even if an offer was better with another company. That goes double if you were a caregiver or had children. Which of course is why many women who were affected by the challenges of balancing daycare and a career gave up.

This is also my experience lately. While it's only anecdotal evidence, we're having a hard time hiring mid career engineers. Doesn't seem like pay is the issue. We offer a ton of vacation, a separate pool of sick time, decent benefits, and wages in the six figures with a good bonus program. We're looking to hire 3 engineers. We can't even get people to apply. In 2019 we could be sure to see a steady supply of experienced candidates looking for new opportunities. Now? If you have an engineering position and your company is letting you work from home it seems you don't have a good reason to jump.

Buckeye , June 12, 2021 at 10:47 pm

Look no further than Cedar Point Amusement Park in Sandusky, Ohio. They had only half the staff they normally need at $10 an hour. So they double the wage to $20 an hour and filled every job in less than a week. The Conservaturds will never admit they are lying.

DWoolley , June 13, 2021 at 3:24 pm

As a small business owner providing professional services I am grateful for the comment section here.

I have called professional peers to get a behind the corporate PR perspective of their businesses. Although anecdotal, the overall trend in our industry is to accept the labor shortage and downsize. Most firms have a reliable backlog of work and will benefit from an infrastructure bill. Our firm has chosen to downsize and close vacant positions.

Remote work, although feasible, has employees thinking they are LeBron James, regardless of their skill set. Desperate employers are feeding their belief. Two years from now it will be interesting to see if these employees they fail forward. Company culture minimized employee turnover pre-covid. This culture has little meaning to an employee working in his daughter's playroom.

For context, in California, I believe the median income for licensees is approximately $110,000 with lower level technicians easily at $75k in the urban areas.

Lastly, the "paltry" $300 per week is in additional to the state unemployment checks and is not subject to taxes. As stated previously, $300 is equal to $7.50 per hour. Federal minimum wage is $7.25 and is adopted by many states minimum, for what it's worth.

Thanks again for the forum.

JBird4049 , June 13, 2021 at 6:32 pm

With respect, I do not see any there there in the comment. Adjusted for inflation the minimum wage at its height in 1968 at 1.60, would be just under $13 per hour today. However, even at $15 in California, it is inadequate.

Anyone making anything like the minimum wage would not be working from home, but would be working in some kind of customer service job, and would find paying for adequate food, clothing, and shelter very difficult. Not in getting any extras, but only in getting enough to survive. People, and their families, do need to eat.

If the response of not paying enough, and therefore not getting new hires, is to downsize, perhaps that is good. After all no business deserves to remain in business, especially if the business model depends on its workers being unable to survive.

Sue inSoCal , June 13, 2021 at 4:13 pm

I am also fed up with the "lazy worker" meme. Or rather, propaganda. People are literally exhausted working 2 or 3 lousy jobs and no real healthcare. Equally irritating to me is a misguided notion that we have some magically accessible generous safety net in the US. As though there aren't thousands and thousands on waiting lists for government subsidized housing. Section 8 vouchers? Good luck.

https://homesnow.org/short-history-of-public-housing-in-the-us-1930s-present/

We've ended "welfare as we [knew] it" (AFDC) thanks to Bill Clinton and then the screw was turned tightly by Junior Bush (no child care, but go to work.) The upshot was bad news for kids.

https://www.economist.com/democracy-in-america/2019/02/25/how-welfare-reform-has-had-a-negative-effect-on-the-children-of-single-mothers

Seems to me one of the few things left is the food stamp program, and I can't imagine how that's been reconfigured. Whomever gave that fantastic list of goodies people can get in the US with a mere snap of the fingers isn't in the real world, imho.

Ok! Yves, lovely to see you again, my friend! (Cue the Moody Blues ) Get well!

10 legged shadow , June 13, 2021 at 4:54 pm

Here is my story.
I am 56 years old, on dialysis and I was collecting SSI of 529 a month.
I was living with and taking care of my mother in her home because she had dementia.
She died in December and I had to start paying the bills. In March I inherited her IRA which I reported to SS. I was able to roll it over into my own IRA because I am disabled, due to the Trump tax law changes.
I reported the changes in a timely manner and because I couldn't afford to live here without a job, I took a part time job for 9 an hour.
So now, because I inherited my mother's IRA and have too much resources I no longer qualify for SSI and have been overpaid to the tune of almost 2 grand, which I am assuming I will have to pay back. I have no idea how that works either. Do they just grab money out of your account? Anyone who knows please tell me.

JBird4049 , June 13, 2021 at 11:35 pm

I would run, run, run to the nearest public assistance counselor or lawyer. In the San Francisco Bay Area, it is should not be too hard to find one. They saved me. There are also in California several state websites. There was a useful to me benefits planning site (It only covers nine states though).

The rules for SSI (Supplemental Security Income), SSDI (Social Security Disability Insurance), Social Security, Medi-Cal or Medicaid, and Medicare are each different. Each state has its own modifications as well, so that is fifty additional sets of modified rules especially for the medical benefits. If they are determined to claw back the money, how it is done might depend on the individual state. It is truly a maze of flycatchers and trapdoors out for you and your money.

The overworked benefits clerks often do not have the knowledge to deal with anything even slightly unusual and are not encourage or at least discouraged from finding out due to the never shrinking pile, not from anyone's malice. This means you could lose benefits because they did not know what they were doing or just by mistake. So, it is up to you to find those nonprofit counselors or the for profit lawyer to help you through the laws, rules, and whatever local regulations there are. Hopefully, you will not have to read through some of the official printed regulations like I did. If wasn't an experience paper pusher.. The average person would have been lost. Intelligence and competence has nothing to do with. Hell, neither does logic, I think.

In my case, when I inherited a retirement account, SSDI was not affected, because of how the original account was set up. However, SSDI is different from SSI although both have interesting and Byzantine requirements. I guess to make sure we are all "deserving" of any help.

So don't ask anonymous bozos like me on the internet and find those local counselors. If it is nonprofit, they will probably do it completely free. If needed, many lawyers, including tax lawyers, and CPAs will offer discounted help or will know where you can go.

Sound of the Suburbs , June 14, 2021 at 12:03 pm

What is the floor on wages?
Disposable income = wages – (taxes + the cost of living)
Set disposable income to zero.
Minimum wages = taxes + the cost of living
So, as we increase housing costs, we drive up wages.

The neoliberal solution.
Try and paper over the cracks with Payday loans.
This what we call a short term solution.

Someone has been tinkering with the economics and that's why we can't see the problem.
The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between "earned" and "unearned" income and they conflated "land" with "capital".
They took the focus off the cost of living that had been so important to the Classical Economists as this is where rentier activity in the economy shows up.
It's so well hidden no one even knows it's there and everyone trips up over the cost of living, even the Chinese.

Angus Deaton rediscovers the wheel that was lost by the early neoclassical economists.
"Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might" Angus Deaton, Nobel prize winner.
Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
This raises the costs of doing anything in the US, and drives off-shoring.

The Chinese learn the hard way.
Davos 2019 – The Chinese have now realised high housing costs eat into consumer spending and they wanted to increase internal consumption.
https://www.youtube.com/watch?v=MNBcIFu-_V0
They let real estate rip and have now realised why that wasn't a good idea.

The equation makes it so easy.
Disposable income = wages – (taxes + the cost of living)
The cost of living term goes up with increased housing costs.
The disposable income term goes down.
They didn't have the equation, they used neoclassical economics.
The Chinese had to learn the hard way and it took years, but they got there in the end.

They have let the cost of living rise and they want to increase internal consumption.
Disposable income = wages – (taxes + the cost of living)
It's a double whammy on wages.
China isn't as competitive as it used to be.
China has become more expensive and developed Eastern economies are off-shoring to places like Vietnam, Bangladesh and the Philippines.

[Jun 18, 2021] You Can't Create Permanent Inflation From Artificial Growth

Inflation for common people level means devaluation of the dollar. It can happen for reasons completely detached from money supply issues. For example shortage of commodities (especially oil) or diminishing of the world reserve currency status of the dollar (refusal of some countries to hold their currency reserves in dollars and switch to other currencies in mutual trade). Increase of military expenses (Pentagon budget is over trillion dollars now) also does not help (guns instead of butter policy)
Jun 18, 2021 | www.zerohedge.com

The reason that rates are discounting the current "economic growth" story is that artificial stimulus does not create sustainable organic economic activity.

"This is because bubble activities cannot stand on their own feet; they require support from increases in money supply that divert to them real savings from wealth generators. Also, note again that a major cause behind the possible decline in the pool of real savings is unprecedented increases in money supply and massive government spending. While the pool of real savings is still growing, the massive money supply increase is likely to be followed by an upward trend in the growth rate of the prices of goods and services. This could start early next year. Once the pool of real savings starts to decline, however -- because of massive monetary pumping and reckless fiscal policies -- various bubble activities are will plunge. This, in turn, is likely to result in a large decline in economic activity and in the money supply." – Mises Institute

As stimulus fades from the system, that decline in money supply is only one of several reasons that "deflation" will resurface.

Monetary & Fiscal Policy Is Deflationary

The Federal Reserve and the Government have failed to grasp that monetary and fiscal policy is "deflationary" when "debt" is required to fund it.

How do we know this? Monetary velocity tells the story.

What is "monetary velocity?"

"The velocity of money is important for measuring the rate at which money in circulation is used for purchasing goods and services. Velocity is useful in gauging the health and vitality of the economy. High money velocity is usually associated with a healthy, expanding economy. Low money velocity is usually associated with recessions and contractions. " – Investopedia

With each monetary policy intervention, the velocity of money has slowed along with the breadth and strength of economic activity.

While in theory, "printing money" should lead to increased economic activity and inflation, such has not been the case.

A better way to look at this is through the " veil of money" theory.

If money is a commodity, more of it should lead to less purchasing power, resulting in inflation. However, this theory began to fail as Governments attempted to adjust interest rates rather than maintain a gold standard.

Crossing The Rubicon

As shown, beginning in 2000, the "money supply" as a percentage of GDP has exploded higher. The "surge" in economic activity is due to "reopening" from an artificial "shutdown." Therefore, the growth is only returning to the long-term downtrend. As shown by the attendant trendlines, increasing the money supply has not led to either more sustainable economic growth rates or inflation. It has been quite the opposite.

However, it isn't just the expansion of the Fed's balance sheet that undermines the strength of the economy. For instance, it is also the ongoing suppression of interest rates to try and stimulate economic activity. In 2000, the Fed "crossed the Rubicon," whereby lowering interest rates did not stimulate economic activity. Therefore, the continued increase in the "debt burden" detracted from it.

Similarly, we can illustrate the last point by comparing monetary velocity to the deficit.

As a result, monetary velocity increases when the deficit reverses to a surplus. Such allows revenues to move into productive investments rather than debt service.

The problem for the Fed is the misunderstanding of the derivation of organic economic inflation

6-More Reasons Deflation Is A Bigger Threat

Previously, Mish Shedlock discussed Dr. Lacy Hunt's views on inflation, or rather why deflation remains a more significant threat.

To summarize, the long-term risk to current outlooks remains the "3-Ds:"

Conclusion

With this in mind, the debt problem remains a massive risk. If rates rise, the negative impact on an indebted economy quickly depresses activity. More importantly, the decline in monetary velocity shows deflation is a persistent threat.

Treasury&Risk clearly explained the reasoning :

"It is hard to overstate the degree to which psychology drives an economy's shift to deflation. When the prevailing economic mood in a nation changes from optimism to pessimism, participants change. Creditors, debtors, investors, producers, and consumers all change their primary orientation from expansion to conservation.

These behaviors reduce the velocity of money, which puts downward pressure on prices. Money velocity has already been slowing for years, a classic warning sign that deflation is impending. Now, thanks to the virus-related lockdowns, money velocity has begun to collapse. As widespread pessimism takes hold, expect it to fall even further."

There are no real options for the Federal Reserve unless they are willing to allow the system to reset painfully.

Unfortunately, we now have a decade of experience of watching monetary experiments only succeed in creating a massive "wealth gap."

Most telling is the current economists' inability to realize the problem is trying to "cure a debt problem with more debt."

In conclusion, the Keynesian view that "more money in people's pockets" will drive up consumer spending, with a boost to GDP being the result, has been wrong. It hasn't happened in 40 years.

Unfortunately, deflation remains the most significant threat as permanent growth doesn't come from an artificial stimulus.


bikepath999 2 hours ago

Title is 100% wrong! It's artificial growth (money printing) that is the inflation! Organic growth thru increased production can actually lead to deflation!

OldNewB 2 hours ago

Exactly. Inflation can be the reduction in the rate of deflation due to productivity increases.

bikepath999 2 hours ago

Transitory is just the new little catch phrase to have you chasing after your own tail rather than skinning alive a central banker or politician

dead hobo 2 hours ago (Edited)

Transitory was Janet Yellen's favorite word for years. It was her catch phrase like Bernanke's was 'The benefits outweigh the costs'. Total blather in both cases.

In both cases, it was muppet-speak for 'p*ss off'. But it sounded oh so intelligent and the media lapped it up.

About the above article ... Economics, as commonly applied by sales folk, teachers, experts, and pundits is theology, not science. One credibility trick is to quote an expert who quoted another expert. Like above. How can you argue against this depth?

Misesmissesme 2 hours ago (Edited)

They are somewhat correct on the technical definition of inflation. However, hyper-inflation does not care about any of that. It only needs a government willing to print and a populace that has lost faith in the currency. We know the gov and the Fed are game. It's just a matter of time until the masses lose faith in the dollar.

OldNewB 2 hours ago (Edited) remove link

Devaluing the fiat by printing to infinity has nothing to do with growth.

Printing IS inflation. Where it shows up is another matter.

Whether it results in higher prices is a function of behavior between buyers and sellers of assets, products and services.

-- ALIEN -- 2 hours ago (Edited) remove link

International Energy Agency said GLOBAL PEAK OIL PRODUCTION for all liquids happened in 2018.

NO economic growth is possible without growing the energy supply, so 2% predicted growth is BS,

unless other countries contract by 2+%.

Quia Possum 2 hours ago

We're beyond the point of pulling the rip cord.

Some ZH writer had an excellent analogy to a hot air balloon on fire. Up to a height X, you can jump off safely. Up to a height Y you can jump off and survive with some broken bones, but you're going to have to muster some courage to do that. But once you pass that height you're dead whether you jump or stay in the balloon all the way.

[Jun 18, 2021] 2Y Treasury Yields Are Exploding Higher, Yield Curve Collapse Crushes Banks - ZeroHedge

Jun 18, 2021 | www.zerohedge.com
Tesla's Milton 1 hour ago remove link

Marcus (Goldman's bank) pays 0.70% for an 18 month CD. It's not much but it's a lot better than a 2 yr. Treasury.

[Jun 14, 2021] Economist David Rosenberg says the Bond Market might have inflation right

The price of energy is growing. and that means inflation is accelerating, but it will probably take the form of stagflation...
Stagflation is characterized by slow economic growth and relatively high unemployment -- or economic stagnation -- which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can also be alternatively defined as a period of inflation combined with a decline in gross domestic product (GDP). See also Stagflation - Wikipedia
Stagflation led to the emergence of the Misery index . This index, which is the simple sum of the inflation rate and unemployment rate, served as a tool to show just how badly people were feeling when stagflation hit the economy.
Under neoclassic economic doctrine stagflation was long believed to be impossible. This pseudoscience demonstrated in the Phillips Curve portrayed macroeconomic policy as a trade-off between unemployment and inflation.
Jun 14, 2021 | www.zerohedge.com

I commented above on direction. I believe the bond market has the direction in June correct (falling yields).

That said, the "real yield" is nearly -5% (CPI minus the 3-Month Treasury Yield). This fosters speculation in assets.

We are in the midst of the third big bubble in just over 20 years.

Extrapolating Conditions

It's usually a big mistake to extrapolate current conditions far into the future. And that includes now.

Sure, there are huge wage pressures and the price of some commodities, especially lumber, went through the roof.

But where to from here is what's important.

Despite Wage Increases, Real Hourly Pay Is Losing to Inflation

On June 11, I commented Despite Wage Increases, Real Hourly Pay Is Losing to Inflation

I also noted Huge Upward Wage Pressures for Both Skilled and Unskilled Labor

But Lacy Hunt is holding pat as well.

He pinged me in response to Explaining the Shortage of Skilled Workers and Why It Will Get Worse with these thoughts.

Mish,

Excellent analysis. I would add one point as a result of your conclusion. Older populations with declining birth rates and slower population, depress household, business and public investment. The contracting effect on investment is highly deflationary and overwhelms the impact of inflation due to the smaller labor force. This condition is plainly evident in Japan and Europe. Moreover, this pattern will be increasingly apparent in the US .

The Transitory Boat

The transitory boat is a small one. Powell and Yellen have to say that no matter what they believe.

Rosenberg, Hunt, and I are in the small boat.

And if you want another reason to be in that boat with us, then think about what happens when asset bubbles burst. It won't be inflationary, that's for sure.

Meanwhile, "I just say buy the gold," Rosenberg said. "Gold has 1/5 of the volatility that bitcoin has."

For more on gold and real interest rates, please see my June 11 post Real Interest Rates Suggest It's a Good Time to Buy and Hold Gold

[Jun 14, 2021] World War II Was Transitory- - Putting Inflation In Context

Jun 14, 2021 | www.zerohedge.com

Via Global Macro Monitor,

Let us preface our inflation note with one of our favorite quotes:

"World War II was transitory"

– GMM

Inflation has eroded my purchasing power in my transitory life. Bring back the $.35 Big Mac, which was only about 20% of the minimum wage. Now? About 40-50%... Enough to spark a revolution?

[Jun 13, 2021] America's Fuel-Making Corridor Prepares for Hurricane Laura - WSJ

Jun 13, 2021 | www.wsj.com

By Rebecca Elliott and Collin Eaton Updated Aug. 26, 2020 4:11 pm ET

Refineries, petrochemical facilities and ports along the Gulf Coast were closing as Hurricane Laura barreled toward the Texas-Louisiana border.

The hurricane strengthened to a Category 4 storm Wednesday, with sustained winds of 140 miles an hour, according to an afternoon update from the National Hurricane Center. It is projected to unleash a storm surge as high as 20 feet along portions of the Louisiana coast with as much as 15 inches of rainfall.

...

[Jun 13, 2021] Inflation doesn't really matters for the US bond prices: the only thing that matters is the question: "How much bonds does the one market member with unlimited funds buy?".

Jun 13, 2021 | peakoilbarrel.com

EULENSPIEGEL IGNORED 06/11/2021 at 10:07 am

This isn't your history bond market.

Inflation doesn't really matters, what only matters is the one big question: "How much bonds does the one market member with unlimited funds buy?".

And the time the FED was able to rise more than .25% is in the rear mirror – when they hike now, inflation or not, all these zombie companies and zombie banks will fail and no lawyer in the world will be able to clean up the chaos after all these insolvency filings.

They have to talk the way out of this inflation. They have to talk until it stops, or longer. They can't hike. They can perhaps hike again when most of the debt is inflated away – a period with 10+% inflation and 1% bond interrest.

And yes, they can buy litterally any bond dumped onto the market – shown this in March last year when they stopped the corona crash in an action of one week.

I think most non-investment-banks are zombies at the moment, and more than 20% of all companies. They all will fail in less than 1 year when we would have realistic interrest rates. On the dirty end, this would mean 10%+ for all this junk out there – even mighty EXXON will be downgraded to B fast.

In old times the FED rates would be more than 5% now with these inflation numbers. Nobody can pay this these days.

And now in the USA – look for how much social justice and social security laws you'll get. The FED has to provide cover for all of them.

We in Europe will do this, too. New green deal, new CO2 taxes, better social security – the ECB already has said they will swallow everything dumped on the market.

So, oil 100$ the next years – but some kind of strange dollars buying less then they used to.

Just my 2 cents. REPLY HOLE IN HEAD IGNORED 06/12/2021 at 5:39 am

Eulen , your 2cents = 1 Dollar . Everything you say is correct . Weird is the only word for what is happening in the financial world . I was in my first year of college when Paul Volcker hiked interest rates into double digits so I have a benchmark to measure against . This is not going to end well . Take care . REPLY

[Jun 13, 2021] Dennis Gartman is still considered a commodities expert. He infamously said in 2016 that WTI would never be above $44 again in his lifetime. He is still alive last I knew

There are also Bagdad Bobs from IEA " "World oil supply is expected to grow at a faster rate in 2022, with the US driving gains of 1.6 million bpd from producers outside the OPEC alliance. "
Jun 13, 2021 | peakoilbarrel.com
SHALLOW SAND IGNORED 06/11/2021 at 3:58 pm

Dennis Gartman is still considered a commodities expert.

He infamously said in 2016 that WTI would never be above $44 again in his lifetime. He is still alive last I knew.

[Jun 12, 2021] Stockman Warns -Buckle Up!-, May's Soaring CPI Print Was No 'Transitory' Blip

All factors that Stokman sites does not exclude bond rate remaining withing this yea max-min band for the rest of the year. You never know how long Fed will continue to buy bonds to suppress the yield.
The last "dead chicken bounce" of 10 year bond caught many people unprepared and surprised.
Jun 12, 2021 | www.zerohedge.com

Authored by David Stockman via Contra Corner blog,

The Fed's destructive money-pumping has many victims, but chief among these is the Wall Street financial narrative itself.

It emits not a whiff about the patent absurdity of the Fed's monthly purchase of $120 billion of treasury and GSE debt under current circumstances; and treats with complete respect and seriousness the juvenile word game known as "thinking about thinking about tapering" by which the clowns in the Eccles Building fearfully attempt to placate the liquidity-intoxicated speculators on Wall Street.

So it's not surprising that today's 5.0% CPI reading was made inoperative within minutes after the BLS release by a chorus of financial pundits gumming about "base effects" and ridiculing outliers like soaring used car prices (up 29.7% YoY), which, of course, Bloomberg reporters never see the inside of anyway.

Then again, that's why we look at the two-year stacked CAGRs, which smooth the ups and downs of the worst lockdown months last spring; and also why we use the 16% trimmed mean CPI, which eliminates the highest 8% and lowest 8% of items in the overall CPI each month (both sets of deleted outliers are different each month).

In the present instance, therefore, off-setting the used car prices in the highest 8% of items during May is the -5.0% YoY drop in health insurance costs (if you believe that BLS whopper) and the -5.3% drop in sporting event prices, which, of course, have been largely zero since last April.

In any event, the 16% trimmed mean CPI for May was up by 4.7% annualized versus the April number and was higher by 2.62% on YoY basis.

Still, the more salient point is that on a two-year stacked basis the plain old CPI -- used car prices and all -- leaves not a scintilla of doubt: Consumer inflation is accelerating and rapidly.

During the last eight months the growth rate for the two year stack has risen from 1.48% to 2.55% per annum. And we don't recall a word in May 2019 about that year's reading being particularly deflationary. It was actually up 1.83% from May 2018.

Per Annum CPI Increase, Two-Year Stack:

Still, according to the Fed apologists there's nothing troubling about the above because the Fed is now only trying to hit its 2.00% inflation target "averaged over time".

Let's see. Here are the CPI growth rates going back to May 2014. It turns out you have to average back seven years before you have a shortfall from the 2.00% target!

CPI Increase per Annum To May 2021 From:

You get the scam. These mendacious fools will just keep averaging back in time until the get a number that's a tad under 2.00%, smack their lips loudly and then pronounce the current inflation to be "transitory".

And they will also toss out any inflation index that undercuts their MOAAR inflation mantra -- like all of the data reported above!

So we will say it again : The CPI is a highly imperfect general price measure owing to its one-sided treatment of quality (hedonic) improvements, wherein some reported prices are adjusted downward for improved product features like airbags and more powerful PCs, put few prices are adjusted upward for the junkie toys, towels, kitchenware, appliances and furniture that comes out of China.

But with the 8% highest and 8% lowest prices dropped out monthly to filter out the short-run noise, the 16% trimmed mean version of the CPI at least purports to be a fixed basket price index, not a variable weight deflator like the Fed's beloved PCE deflator.

In short, the 16% trimmed mean CPI puts paid to the "transitory" scam. Come hell or high water, this serviceable inflation measure has been rising at 2.00% per annum since the year 2000, and even more than that during the 1990s.

Thus, during the 112 months since the Fed formally adopted inflation targeting in January 2012, it has risen by 2.03% per annum and by 2.15% per annum since January 2000.

Equally significantly, there have been only a handful of times during the 256 monthly readings since January 2000 when the year-over-year measure dropped materially below 2.00%.

YoY Change, 16% Trimmed Mean CPI, 2000-2021

For want of doubt, here is the Fed's preferred short-ruler -- -the core PCE (personal consumption expenditure deflator less food and energy). And the Fed's case for its insane money-pumping essentially boils down to the dueling information covered by the red bars above and the purple bars below.

As it happens, the one-year change in the core PCE deflator is 3.1% and the stacked two-year gain is 1.99% per annum. That latter is apparently not close enough to 2.00% for government work, meaning that the Fed needs to get more years into its average.

Even then, you have to be trained in the medieval theology of counting angels on the head of a pin to ascertain the purported earth-shaking "shortfall" from target. Compared to April 2021, here are the multi-year CAGRs on an April-to-April basis:

That's right. For the five year-pairs shown above, the average CAGR for the core PCE deflator was 1.90%. It seems that "lowflation" amounts to that which you need a magnifying glass to ascertain -- 10 basis points of shortfall.

Of course, our monetary bean counters are not done "averaging", either. If you go back to January 2012 when the Fed officially adopted inflation targeting, the core PCE deflator is up by 1.69% per annum, and since January 2000 it has risen by 1.75% per annum.

So there you have it. For want of 25-31 basis points of annual inflation -- -averaging back to the beginning of the current century -- you have a camarilla of central bankers giving deer in the headlights an altogether new meaning. That is to say, they are apparently not even thinking about thinking about tapering their massive bond-buying fraud owing to the barely detectable differences between purple and red bars of these dueling charts.

As we said a few days back, would that they had applied the 25th Amendment to the Federal Reserve Board.

These sick puppies are in urgent need of palliative care.

YoY Change In Core PCE Deflator, 2000-2021

They are also in need of a dose of realism, and on that score there are three figures in the May CPI report which tell you all you need to know. To wit, compared to May 2020, durable goods prices were up by 10.3%, nondurables were higher by 7.4% and services less energy gained 2.9%.

In fact, in the recent history of these three figures lays a stinging refutation of the entire "lowflation" scam promulgated by the Fed money printers and their acolytes and shills on Wall Street and in Washington, too.

On this matter, the Donald was right, even if by accident or for the wrong reasons. What we are referring to, of course, is the "Shina" factor.

Beijing's form of state-controlled printing press capitalism has systematically drivendown the cost of manufactured goods and especially durables by, in effect, draining the rice paddies of China's great interior and herding its latent industrial work force into spanking new factories which paid wages less than meager. And CapEx costs were rock bottom, too, owing to $50 trillion of central bank-fueled domestic debt and the greatest cheap capital-driven malinvestment spree in human history.

The result was an intense, multi-decade long deflation of manufactured goods as the high labor costs embodied in US and European manufacturers were steadily squeezed out of global prices levels as production shifted to China and its East Asian supply chain.

That impact is patently obvious in the composition of the CPI among the three components which were flashing warning lights in today's inflation report.

Composition of CPI By Major Components, 2000-2021

In the first place, the core of domestic inflation lies in the 58.8% weight of the CPI consisting of mainly domestically supplied services. The 2.9% YoY gain reported for May for CPI services less energy was essentially par for the course.

That is, during the last 21 years (since January 2000) this component (black line) has risen by 2.71% per annum, and since January 2012 it has gained a similar 2.63% per annum.

Needless to say, if there is any part of the inflation rate that the Fed can most powerfully impact, it is domestically supplied services like health care, education, housing, entertainment, travel and foods services. So where's the "lowflation" in that part of the CPI basket?

Alas, we don't have lowflation in services at all, but a stubborn 2.6%-3.0% upward price drift in domestic service components which account for nearly three-fifths of the household budget.

By contrast, the durable goods component (brown line) accounts for 11.1% of the CPI, and it's been an anchor to the windward for more than two decades. As of May 2021, prices were still 8% below their January 2000 level.

The truth is, the alleged lowflation on the top line CPI has been heavily attributable to the deflationary durable goods sector, but, alas, that era is apparently over. The Chinese rice paddies have been drained on a one-time basis and its labor force is now actually shrinking, while the Donald's ill-timed tariff barriers have forced production to move to higher cost venues, albeit not necessary the USA of A.

Either way, the anchor to the windward is largely gone , meaning that rising durable goods prices going forward will no-longer weigh as heavily on the CPI.

It should be further noted that during the past two-decades nondurable prices have also held-down the CPI top line -- again in large part owing to the "Shina" factor and downward pressures from cheap apparel, footwear, home furnishings and the like.

During the past 21 years, the nondurables component (yellow line) of the CPI rose by 1.99% per annum, which is as close as you please to the target, but was also on anchor on the overall CPI top-line ( purple line) which increased by 2.19% per annum.

Alas, during the period since January 2012, nondurables rose by just 0.63% per annum owing to flat-lining energy and commodity prices, thereby pulling the overall CPI down to 1.80% per annum, where it too fell awry of the Fed's sacred 2.00% target.

But here's the thing. A smattering of surging nondurable goods prices in the May 2021 report are a stark reminder that the times they are a changin'.

On a YoY basis, these components suggest that "lowflation" in durables may have passed its sell-by date and that the 7.4% YoY gain in nondurables overall may be lifting, not suppressing, the CPI top-line going forward.

YoY Change In Major Nondurables Components:

In sum, the chart above captures the one-time history of the Fed's phony "lowflation" narrative -- an aberrant condition that is now fading fast. Sooner or latter they will run out of excuses and back inflation reports to average down. And that, in turn, means tapering of the Fed's great bond-buying fraud -- the lynch pin of the greatest bond and stock bubble in recorded history.

Do we think that will trigger the greatest financial asset value collapse in modern times?

Why, yes, we do! play_arrow


wareco 4 hours ago remove link

Seriously? David Stockman? This guy has been perpetually wrong for the last 4 years, at least. In June, 2017, he was calling for the S&P to fall to 1600. Never happened. In October 2019, he loudly proclaimed that everyone should get out of the "casino". S&P up 40% since then. He has as much credibility as that self-promoter, Harry Dent, who has been calling for gold to drop to $700 since 2012.

Sound of the Suburbs 8 hours ago (Edited) remove link

Stage one – The markets are rising.

Look at all that wealth we are creating.

Stage two – It's a bubble.

That wealth is going to disappear.

Stage three – Oh cor blimey! I remember now, this is what happened last time

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.

The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.

1929 – Wakey, wakey time

The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn't.

It didn't then, and it doesn't now.

Putting a new wrapper around old economics did fool global elites.

You'd have to get up pretty early in the morning to catch me out.

E5 9 hours ago

Not going to happen.

No one is buying.

No one is raising salaries.

Inflation is a stalled plane.

Everyone is waiting.

Self fulfilling prophecy. Mainstreet is waiting on their inheritance from dead Boomers. The only thing that will save America. Money being spent and Cuban Missile Crisis not happening under Boomers.

[Jun 12, 2021] Junk Bonds Are Dominating Even One of America's Safe Havens

Notable quotes:
"... The dynamics show how much the municipal-bond market has been swept up in the global push into higher yield assets as central banks worldwide hold interest rates low to stoke the economic recovery. ..."
"... That's fueled a surge in debt sales by corporations and governments battered by virus lockdowns. And for the state and local government debt market, it has revived the years-long rally in junk bonds that was only temporarily derailed by the coronavirus lockdowns. ..."
"... So far this year, government agencies across the U.S. have sold more than $6.5 billion of bonds that can only be marketed to institutional investors able to bear the risk, driving such issuance toward the biggest year on record, according to data compiled by Bloomberg. ..."
Jun 10, 2021 | finance.yahoo.com

The municipal junk-bond boom is roaring back.

With the economy rebounding swiftly from the pandemic, interest rates on high-yield state and local government securities have tumbled to the lowest in over two decades. Cash is pouring into mutual funds focused on the junk-rated debt so quickly that money managers are fighting to get in on new deals. And prices have rallied, driving high-yield bonds to their biggest run of outperformance since 2014.

The demand is so strong that a California agency sold 35-year bonds for the development of a senior-living community at a yield of 4.43%, about two-and-a-half percentage points less than bankers initially anticipated. The price went on to surge 8% in secondary trading.

"We couldn't think of a better time to come to market," said Sarkis Garabedian, an investment banker at Ziegler, the underwriter on the bonds. He said the firm hadn't seen such interest in a transaction for a new senior living campus since they started tracking the metrics in the 1980s. "We really hit the sweet spot here."

Recent bond sales have raised money for an ethanol production facility in North Dakota, a bevy of charter schools, and a youth-sports complex in Arizona. American Samoa, a junk-rated territory, is tapping the market for the first time since 2018. And the owner of a plant that recycles rice waste into fiberboard may sell more debt even though it has already been driven to default.

The dynamics show how much the municipal-bond market has been swept up in the global push into higher yield assets as central banks worldwide hold interest rates low to stoke the economic recovery.

That's fueled a surge in debt sales by corporations and governments battered by virus lockdowns. And for the state and local government debt market, it has revived the years-long rally in junk bonds that was only temporarily derailed by the coronavirus lockdowns.

So far this year, government agencies across the U.S. have sold more than $6.5 billion of bonds that can only be marketed to institutional investors able to bear the risk, driving such issuance toward the biggest year on record, according to data compiled by Bloomberg.

[Jun 12, 2021] Headline CPI is expected to jump 4.7% year-over-year

May CPI is expected at 8:30 a.m. ET Thursday. It is unclear to me why the 10-year Treasury yield fell below the key 1.5% Wednesday. Was it short-covering? if so what triggered it? If predictions are true it might jump up on Jun 10, 2021 because you can't have Headline CPI 4.7% and the 10-year Treasury yield 1.5%. That's the theatre of absurd.
Rent, owners' equivalent rent and medical care services collectively are 50% of the core CPI basket.
Notable quotes:
"... Headline CPI is expected to jump 4.7% year-over-year, the highest rate since sky high energy prices spiked inflation readings in the fall of 2008. ..."
"... "I am worried about rent and owners' equivalent rent because it should go up. It had decelerated," she said. Shelter is more than 30% of CPI , and rent costs have bottomed in some cities, Swonk added. "The issue is it could have longer legs and keep overall inflation measures buoyed more than people expect." ..."
Jun 09, 2021 | www.msn.com

...The consensus forecast for the core consumer price index, which excludes food and energy, is 3.5% on a year-over-year basis, according to Dow Jones. That's the fastest annual pace in 28 years.

Economists expect both core and headline CPI rose by 0.5% in May. Headline CPI is expected to jump 4.7% year-over-year, the highest rate since sky high energy prices spiked inflation readings in the fall of 2008.

... ... ...

"I am worried about rent and owners' equivalent rent because it should go up. It had decelerated," she said. Shelter is more than 30% of CPI , and rent costs have bottomed in some cities, Swonk added. "The issue is it could have longer legs and keep overall inflation measures buoyed more than people expect."

[Jun 12, 2021] Don't dismiss market bubbles" some leave lasting progress behind

Notable quotes:
"... As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing. ..."
"... My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others. ..."
"... By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public. ..."
"... The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path. ..."
"... It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive. ..."
Jun 06, 2021 | investornewsletter.net

As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing.

To some the entire US stock market looks bubbly given its dizzying run-up, but earnings growth has also been extraordinarily strong through the pandemic. Beneath the surface, however, sectors of the market from green tech to cryptocurrency show tell-tale bubble signs.

My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others.

By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public.

Each of these bubblets is captured in an index that rose in the last year by around 100 per cent, often much more, to a peak value between $500bn and $2.5tn. Day traders and other newbies rushed in, a common symptom of late stage market manias. Now these bubbles are faltering, as they so often do, in response to increases in long-term interest rates. What's next?

The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path.

For the median case, the bottom was found 70 per cent below the peak, and came just over two years after the peak. Except for the index of small-cap pandemic stocks, the other four bubble candidates have all experienced drops of at least 35 per cent, but also of no more than 50 per cent (in the case of ethereum). In other words, they are not likely to resume inflating any time soon, and they are still far from the typical bottom.

There is one new factor that could upset this historical pattern. Despite the rise in long-term interest rates, there is plenty of liquidity sloshing around the markets, with central banks committed to easy money as never before. The risks though are skewed to the downside.

It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive.

[Jun 12, 2021] There s a new LGBTQ-focused ETF

Notable quotes:
"... Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. ..."
"... LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S. for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in its prospectus , 25% of the index's weighting is derived from that survey data. ..."
Jun 06, 2021 | www.marketwatch.com

Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. Two previous efforts failed to attract enough assets.

The fund, LGBTQ + ESG100 ETF LGBT, , launched in late May, is a passively managed, large-cap index fund that holds the top 100 U.S. companies that most align with the LGBTQ community.

In 2019, two LGBTQ-focused ETFs were delisted: ALPS Workplace Equality Portfolio ETF and InsightShares LGBT Employment Equality ETFs. Like this new fund, both were mostly U.S. large-cap, passive index ETFs comprising companies that received high or perfect marks for workplace equality in the Human Rights Campaign Corporate Equality Index , a benchmark for corporate LGBTQ policies.

The first ETF stuck around for five years, but the second barely made it two years, even though it was launched with much fanfare by UBS. Neither gained many assets.

Bobby Blair, CEO and founder of LGBTQ Loyalty Holdings, which launched the fund with issuer ProcureAM, says community input on holdings makes this fund different.

LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S. for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in its prospectus , 25% of the index's weighting is derived from that survey data.

... the LGBTQ + ESG100 has an annual expense ratio of 0.75%.

[Jun 12, 2021] Tech giants and tax havens targeted by historic G7 deal by David Milliken and Kate Holton

Jun 05, 2021 | finance.yahoo.com

David Milliken and Kate Holton Sat, June 5, 2021, 4:01 AM

...Hundreds of billions of dollars could flow into the coffers of governments left cash-strapped by the COVID-19 pandemic after the Group of Seven (G7) advanced economies agreed to back a minimum global corporate tax rate of at least 15%.

Facebook said it expected it would have to pay more tax, in more countries, as a result of the deal, which comes after eight years of talks that gained fresh impetus in recent months after proposals from U.S. President Joe Biden's new administration.

"G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age," British finance minister Rishi Sunak said after chairing a two-day meeting in London.

The meeting, hosted at an ornate 19th-century mansion near Buckingham Palace in central London, was the first time finance ministers have met face-to-face since the start of the pandemic.

U.S. Treasury Secretary Janet Yellen said the "significant, unprecedented commitment" would end what she called a race to the bottom on global taxation. German finance minister Olaf Scholz said the deal was "bad news for tax havens around the world". Yellen also saw the G7 meeting as marking a return to multilateralism under Biden and a contrast to the approach of U.S. President Donald Trump, who alienated many U.S. allies. "What I've seen during my time at this G7 is deep collaboration and a desire to coordinate and address a much broader range of global problems," she said.

Ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can decided more easily whether to fund them, a key goal for Britain.

... ... ...

Key details remain to be negotiated over the coming months. Saturday's agreement says only "the largest and most profitable multinational enterprises" would be affected.

... ... ...

The G7 includes the United States, Japan, Germany, Britain, France, Italy and Canada.

[Jun 12, 2021] Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May by Jonnelle Marte and Ann Saphir

Jun 04, 2021 | finance.yahoo.com

... Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May, the highest ever and up 5% from January alone, according to Labor Department data released on Friday. Pay rose even faster for workers in non-manager roles, who saw earnings rise by 7.2% from January, far outpacing any other sector.

That higher pay could be a sign that companies are lifting wages as they seek to draw people back to work after more than a year at home. Some businesses are struggling to keep up with higher demand as more consumers, now fully vaccinated, get back to flying, staying in hotels and dining indoors. Job gains in leisure and hospitality this year have so far outpaced gains in other sectors.

But it is too soon to know whether the boost will be enough to help speed up hiring at a time when many workers are still facing other obstacles, including health concerns and having to care for children and other relatives.

"The fact of the matter is, the pandemic is still going on," said Daniel Zhao, a senior economist for Glassdoor. "The economy is running ahead of where we are from a public health situation."

Some 2.5 million people said they were prevented from looking for work in May because of the pandemic, according to the Labor Department.


... ... ...


Employment in leisure and hospitality is still in a deep hole when compared with pre-pandemic levels. The industry added 292,000 jobs in May, with about two-thirds of that hiring happening in restaurants and bars. But overall employment is still down 2.5 million jobs, or 15% from pre-pandemic levels, more than any other industry.

... ... ...

Some people who previously worked at hotels or restaurants moved on to other types of jobs during the pandemic, such as packaging goods at a warehouse, and it's too soon to know whether they will switch back as more of the economy reopens, said Zhao.

...About half of states are putting an early end to a $300 federal supplement to weekly unemployment benefits, winding them down as soon as June 12. The supplement expires nationwide on Sept. 6.

(Reporting by Jonnelle Marte and Ann Saphir; Editing by Chizu Nomiyama and Jonathan Oatis)

[Jun 12, 2021] Suze Orman thinks rising stock prices could be a problem for you" here's why

Jun 08, 2021 | finance.yahoo.com

"Over the past five years, the S&P 500 stock index has more than doubled. For the past 10 years, it has nearly quadrupled," says Orman. "If you have left your portfolios on autopilot, that could likely mean that you now own more stock than you intend to, or should."

Left to their own devices, your increasingly valuable stocks may have started to account for an even larger portion of your account

... ... ...

Orman cites a recent analysis from Fidelity Investments on the retirement plans the company handles. Fidelity estimates about 20% of savers own more stock than they'd recommend for someone of their age.


[Jun 12, 2021] Forget Activism- Chronic Underperformance Is Big Oil's Biggest Problem

Jun 06, 2021 | finance.yahoo.com

Whereas climate change issues are the presumptive reasons behind the latest wave of investor revolts at the oil and gas giants, lurking beneath the surface is a growing sense of apprehension about Big Oil's strategy and failure to generate adequate returns for shareholders in recent decades.

The naked truth is that Exxon and its cohorts have severely underperformed the broader market over the last two decades in terms of total returns to shareholders, implying the sector's woes are long-term and strategic rather than short-term and cyclical.

Chronic underperformance

XOM

Source: CNN Money

Big Oil's underperformance relative to the market is clearly evident whether you are looking at 2-year, 5-year, 10-year, or even 20-year timespans.

For instance, since 2015, Exxon shares have returned a -2.5% compound annual loss based on share prices and dividends, a far cry from the average annual gain of +14.4% by the S&P 500 over the timeframe.

Over the past two decades, Exxon's compound annual return has clocked in at +4.2%, still considerably lower than the broad market benchmark's return of +7.1%.

... ... ...

Exxon is hardly alone, with none of its peers, including Chevron, Royal Dutch Shell (NYSE:RDS.A), BP Inc. (NYSE:BP), and Total (NYSE:TOT) coming close to matching the returns by the broader share market over the past decade.

In fact, on an inflation-adjusted U.S. dollar basis, returns by Exxon, Shell, and BP have been negative over the past five years, a period which coincided with the biggest bull market in the history of the stock market.

The renewable energy conundrum

You cannot blame the oil majors for continuing to engage in a lot of hand-wringing at a time when investors are demanding they pump less oil and transition to cleaner energy.

For the oil majors, successfully transitioning to green energy companies is not going to be a walk in the park because these companies have to ride two horses.

That's the case because the majority are already battling dwindling cash flows which means they cannot afford to gamble with whatever little is left. Oil prices have been on a downtrend since 2014, a situation that has only worsened during the pandemic.

Oil and gas firms are still grappling with the best way to presently use dwindling cash flows; in effect, they are still weighing whether it's worthwhile to at least partially reinvent themselves as renewables businesses while also determining which low-carbon energy markets offer the most attractive future returns.

Most renewable ventures, like solar and wind projects, tend to churn out cash flows akin to annuities for several decades after initial up-front capital expenditure with generally low price risk as opposed to their current models with faster payback but high oil price risk. With the need to generate quick shareholder returns, some fossil fuel companies have actually been scaling back their clean energy investments.

Energy companies are also faced with another conundrum: Diminishing returns from their clean energy investments.

Related: ''We'll See $200 Oil": Russia & OPEC Ministers Blast IEA's Net Zero Plan

A paper published in Science Direct last August says that dramatic reductions in the cost of wind and solar have been leading to an even bigger reduction in revenue inflows leading to falling profits. This is particularly true for wind energy as later deployments of wind usually have lower market value than earlier ones due to wind energy revenue declining more rapidly than cost reductions. Solar is more resilient, with technological progress approximately balancing out the revenue degradation, which perhaps explains why solar stocks have gone ballistic.

Adding wind and solar to our grid tends to reduce electricity prices during peak generation times: Indeed, electricity prices in California can come down to zero during long sunny durations. This was not a problem for early deployments but is becoming a major concern as renewables increasingly play a bigger part in our electricity generation mix.

But, ultimately, Big Oil will have to take the plunge and engage in drastic internal restructuring and product cycle transitions even as activists like Engine No.1 promise to continue turning the screw. As Charlie Penner of Engine No.1 has told FT , the energy transition is happening faster than expected and has undermined Big Oil's assumptions about long-term demand for its oil.

By Alex Kimani for Oilprice.com

->


[Jun 12, 2021] Sidewalk Robots are Now Delivering Food in Miami

Notable quotes:
"... Florida Sun-Sentinel ..."
"... [A spokesperson says later in the article "there is always a remote and in-field team looking for the robot."] ..."
"... the Sun-Sentinel reports that "In about six months, at least 16 restaurants came on board making nearly 70,000 deliveries... ..."
Jun 06, 2021 | hardware.slashdot.org

18-inch tall robots on four wheels zipping across city sidewalks "stopped people in their tracks as they whipped out their camera phones," reports the Florida Sun-Sentinel .

"The bots' mission: To deliver restaurant meals cheaply and efficiently, another leap in the way food comes to our doors and our tables." The semiautonomous vehicles were engineered by Kiwibot, a company started in 2017 to game-change the food delivery landscape...

In May, Kiwibot sent a 10-robot fleet to Miami as part of a nationwide pilot program funded by the Knight Foundation. The program is driven to understand how residents and consumers will interact with this type of technology, especially as the trend of robot servers grows around the country.

And though Broward County is of interest to Kiwibot, Miami-Dade County officials jumped on board, agreeing to launch robots around neighborhoods such as Brickell, downtown Miami and several others, in the next couple of weeks...

"Our program is completely focused on the residents of Miami-Dade County and the way they interact with this new technology. Whether it's interacting directly or just sharing the space with the delivery bots,"

said Carlos Cruz-Casas, with the county's Department of Transportation...

Remote supervisors use real-time GPS tracking to monitor the robots. Four cameras are placed on the front, back and sides of the vehicle, which the supervisors can view on a computer screen. [A spokesperson says later in the article "there is always a remote and in-field team looking for the robot."] If crossing the street is necessary, the robot will need a person nearby to ensure there is no harm to cars or pedestrians. The plan is to allow deliveries up to a mile and a half away so robots can make it to their destinations in 30 minutes or less.

Earlier Kiwi tested its sidewalk-travelling robots around the University of California at Berkeley, where at least one of its robots burst into flames . But the Sun-Sentinel reports that "In about six months, at least 16 restaurants came on board making nearly 70,000 deliveries...

"Kiwibot now offers their robotic delivery services in other markets such as Los Angeles and Santa Monica by working with the Shopify app to connect businesses that want to employ their robots." But while delivery fees are normally $3, this new Knight Foundation grant "is making it possible for Miami-Dade County restaurants to sign on for free."

A video shows the reactions the sidewalk robots are getting from pedestrians on a sidewalk, a dog on a leash, and at least one potential restaurant customer looking forward to no longer having to tip human food-delivery workers.

... ... ...

[Jun 12, 2021] Get Ready for $178 Billion of Selling Ahead of the Capital-Gains Tax Hike. These Are the Stocks Most at Risk. - MarketWatch

Jun 07, 2021 | www.marketwatch.com

...Analysts at Goldman Sachs""in October""ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense""investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.

The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve's distributional financial account data , the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020""so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers or about 0.4% of the total.)

[Jun 12, 2021] Don't get too optimistic about a stock market rally" they've been fizzling out

Notable quotes:
"... As I argued three weeks ago, this sentiment pattern suggests that the market may remain in a fairly narrow range for the next several months. ..."
"... be on the lookout for when the market timers remain bullish in the face of declines, or bearish in the wake of rallies. That will indicate that a bigger decline or rally is in store. ..."
"... In the meantime, the market timers' behavior suggests both market rallies and declines will be subdued. That's good news to the extent you were worried that a major new bear market is about to begin, but bad news if you were hoping for a more sustained rally. ..."
Jun 04, 2021 | futurewealthdaily.com
This post was originally published on this site

... ... ...

This quick jumping onto and off of the bullish and bearish bandwagons has become the new normal, as you can see from the table below.

... ... ...

As I argued three weeks ago, this sentiment pattern suggests that the market may remain in a fairly narrow range for the next several months. The contrarian bet is that the market will finally break out of that trading range whenever the market timers stubbornly hold onto their sentiment beliefs in the face of the market moving in the opposite direction.

That is, be on the lookout for when the market timers remain bullish in the face of declines, or bearish in the wake of rallies. That will indicate that a bigger decline or rally is in store.

In the meantime, the market timers' behavior suggests both market rallies and declines will be subdued. That's good news to the extent you were worried that a major new bear market is about to begin, but bad news if you were hoping for a more sustained rally.

. .. ... ...

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected] .

[Jun 10, 2021] Mcjobs increases in May. Good jobs no so much. Labor-force participation dropped

Jun 10, 2021 | www.wsj.com

Job gains in May were led by leisure and hospitality, with the sector adding 292,000 jobs. Payrolls grew by 559,000 last month, the Labor Department reported Friday, up from a revised 278,000 in April, which marked a sharp drop from March's figure.

The labor recovery has slowed from earlier in the year -- in March, the economy added 785,000 jobs

... The labor-force participation rate, the share of adults working or looking for work, edged slightly lower in May to 61.6%, down from 63.3% in February 2020.

M

Michael Quick

Republicans, always eager to snatch the bread from the mouths of the poor, are blaming unemployment benefits for the reluctance of workers to return to jobs. In some red states, they already are snatching it.

But more men are returning to work than are women. Doesn't that prove that unemployment benefits are not holding back former workers?

I'll bet more women will return to work in September, after schools start up in-person classes.

William Lamb
Republican turn a blind on helping people, except themselves. They would rather have one being a slave and get pay less then nothing with little perks in making less then high quality item that will still have defects, even if we pride our workmanship that is suppose to equal to none. It would like being in 1950s, when there was not much world competition, when world economy was still recovering from WW2.

I guessed Republican want American to continue working by low paying wages so they can enrich themselves, and show that America can still produce things with slave wages.

johm moore
Most of the jobs are insufficient to support a reasonable quality of life. A job today is about like a half a job pre-NAFTA and the job export process in terms of the quality of life that it supports.
Bryson Marsh
If UI was holding back employment, then why are we adding so many low wage jobs? The missing jobs are in *middle income* sectors.
David Chait
I wouldn't call people returning to work "new" jobs, that just seems disingenuous.
rich ullsmith
Asset prices rise when the jobs report is lukewarm. Thank you, Federal Reserve. May I have another.
Sam Trotter
It should be made mandatory to publish the offered wage/rate. I see so many fake jobs posted on LinkedIn with no description of bill rate for contract positions or Base+Bonus for Full-Time roles. Too many mass scam messages.

[Jun 10, 2021] U.S. 10-Year Treasury Yield Slips Below 1.5%

In view of rising energy prices what those "other factors" might be? Does it mean that the USA are still in secular stagnation started in 2008?
The unemployment rate fell to 5.8% in May from 6.1% the prior month. U6 is still over 10% -- the depression level. See Table A-15. Alternative measures of labor underutilization
Jun 10, 2021 | www.wsj.com

Analysts said other factors are driving lower yields, including a weaker dollar, which has lifted demand for Treasurys from foreign investors. Foreign investors tend to hold more Treasurys when the dollar declines and reduces the costs of protecting against swings in currencies.

[Jun 10, 2021] Inflation Remains Hot, but Treasury Yields Still Aren't Moving. Here's Why

Jun 10, 2021 | financialgazette.co.uk

That is a counterintuitive response , because rising inflation erodes the value of Treasuries' payouts. And the data did indicate stronger inflation: Excluding volatile food and energy costs, prices rose 0.7% in May. That was the second-highest monthly increase in consumer prices since the early 1980s, behind April's 0.8% rise. Compared with last year, when the global economy was mired in a pandemic-driven slowdown, headline consumer prices rose at a 5% pace . (Excluding food and energy, they rose 3.8%.)

The market's moves could be muted because investors are betting that central bankers are going to stick with their view that most of the strength in consumer prices will pass after a potentially bumpy reopening period and keep policy easy.

... ... ...

... Most Fed watchers expect the central bank to start discussing a reduction of its bond purchases this summer or early fall.

That doesn't mean Treasuries have much room to rally more from here.

The Fed's meeting next week may be the first test. If central-bank officials talk about starting to remove accommodation earlier than expected, that could send yields higher. In fact, strategists from TD Securities decided to take a bearish view on the 10-year note on Thursday, after yields fell below 1.5% earlier this week. They argued that continued economic momentum and stronger inflation could lead central-bank officials to take a more upbeat tone on the economy than investors expect at their meeting on June 15 and 16.

[Jun 09, 2021] Nearly 4 million people quit their jobs in April

Jun 09, 2021 | www.marketwatch.com

The percentage of people quitting their jobs, meanwhile, also rose to a record 2.8% among private-sector workers. That's a full percentage point higher than a year ago, when the so-called quits rate fell to a seven-year low.

...A recent study by Bank of America, for example, found that job switchers earned an extra 13% in wages from their new positions. That's a big chunk of money.

...Normally people who quit their jobs are ineligible for unemployment benefits, but they can get an exemption in many states for health, safety or child-care reasons.

About half of the states, all led by Republican governors, plan to stop giving out the federal benefit by early July to push people back into the labor force. Economists will be watching closely to see how many people go back to work.

[Jun 09, 2021] No inflation fears here -- ARK's Wood says portfolio should triple in five years

Jun 09, 2021 | finance.yahoo.com

Wood, who became the face of the outsized rally in technology stocks such as Zoom Video Communications Inc and electric vehicle maker Tesla Inc during the coronavirus pandemic last year, said that falling lumber and copper prices signal that the market is "beginning to see signs that the risks are overblown" from inflation.

...Wood, whose ARK Innovation ETF was the top-performing actively managed U.S. equity fund tracked by Morningstar last year, has seen her performance stagnate along with the slowdown in growth stocks. Her flagship fund is down nearly 28% from its early February high.

[Jun 07, 2021] How Inflation Eats Away at Your Retirement Income

A short-term period of slightly higher inflation wouldn't be memorable, but an extended run of inflation above 3% can be problematic. Social Security Is Your Best Inflation Hedge; you need to maximize it.
Social Security checks represent about a third of income for all retirees. Among elderly recipients, those checks represent half of their retirement income for married couples and 70% for singles.
A primary residence, if you own a house and it is fully paid off, also gave some minimal inflation protection.
Another factor is that once people actually get into retirement, , their spending generally decreases so much that they're spending less overall, even accounting for inflation.
Jun 07, 2021 | www.investopedia.com
​ While seniors can't directly affect the inflation rate, there are ways to minimize the shadow it casts over their retirement.

Reducing housing costs, for instance, is a step in the right direction. Trading in a larger home for a smaller one, even if the mortgage is paid off, reduces the monthly outflow for property taxes, utilities, homeowners insurance, and maintenance.

Another smart move is adding investments to your portfolio that are likely to increase in value as inflation rises.

A real estate investment trust (REIT) or energy sector stocks, for example, are better positioned to see their value grow in tandem with the inflation rate.

[Jun 07, 2021] Have Stocks Already Priced In The Economic Boom? by Lance Roberts

Jun 07, 2021 | www.zerohedge.com

Authored by Lance Roberts via RealInvestmentAdvice.com,

The media is buzzing with claims of an "Economic Boom" in 2021. While the economy will most certainly grow in 2021, the question is how much is already "baked in?"

"The economy has entered a period of supercharged growth. Instead of fizzling, it could potentially remain stronger than it was during the pre-pandemic era into 2023.

Economists now expect the second quarter to grow at a pace of 10%, and they expect growth for 2021 to be north of 6.5%. In the past decade, only a few quarters gross domestic product growing at even 3%."

The premise is that strong "pent up" demand will sustain the economic recovery over the next few years.

However, since market lows in 2020, the market surge has not only recouped all of those losses but has rocketed to all-time highs on expectations of surging earnings growth.

The question: How much has gotten priced in?

A Return To Normalcy

Just recently, Liz Ann Sonders wrote a piece for Advisor Perspectives. To wit:

"Vaccines and herd immunity continue to bring COVID cases down, and the economic reopening continues to kick into a higher gear. Such is what the data is starting to show. Across economic metrics, from the gross domestic product ( GDP ) to retail sales and job growth, boom conditions are evident ."

She is correct in her statement. However, there is a difference between an "economic boom" and a "recovery." As shown in the chart of GDP growth below, the U.S. has already experienced a very sharp "economic recovery" from the recessionary lows. (I have included estimates for the rest of 2020, which shows a return to trend growth.)

The following chart shows the economic recovery against the massive dumps of liquidity pumped into the economy. (Estimates run through the end of 2021 using economist's assumptions.)

Can't Recoup Losses

Certain areas of the economy, like airlines, hotels, and cruise ships, have yet to recover to pre-pandemic levels. However, those industries only make up a relatively small amount of overall economic activity. Furthermore, these industries will continue to struggle for some time as individuals will not take "two vacations" this year since they missed last year. That activity is now forever lost.

Yes, the economy will recover most likely to pre-pandemic levels this year due to stimulus injections, but as discussed previously , what then?

"The biggest problem with more stimulus is the increase in the debt required to fund it. There is no historical precedent, anywhere globally, that shows increased debt levels lead to more robust economic growth rates or prosperity. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the change in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare."

Just as it is with investing, getting "back to even" is not the same thing as "organic growth."

The Second Derivative

What is shown above is the "second derivative" effect of growth.

"In calculus, the second derivative , or the second-order derivative , of a function f is the derivative of the derivative of f." – Wikipedia.

In English, the "second derivative" measures how the rate of change of a quantity is itself changing. Since we measure GDP growth on an annual rate of change basis, the larger the economy grows, the lower the rate of change will be. Here is a simplistic example go GDP growth:

In year 1, GDP = $1. In the second year, GDP grows to $2. The annual rate of change is 100%. However, in year 3, even though the economy grows to $3, the annual rate of change falls to just 50%.

Given the long-term historical correlation between economic growth, corporate earnings, and annualized returns, the reversion to trend growth has implications for investors. As Liz notes:

"Using three broad ranges for GDP growth historically, the lowest range (when the economy is barely growing or in recession) is accompanied by the highest annualized stock market performance. GDP is only slightly back into positive territory on an annualized basis. However, the strong growth expected in the second quarter will push GDP into the highest zone. At that level, stocks have historically posted a negative annualized return."

The reason is that once economic growth reaches higher levels, stocks have climbed to levels incorporating those expectations. In other words, when things are as "good as they can get," stocks begin to reprice for slower future growth rates.

That is the phase we are at currently.

How Much Pent Up Demand Is There Anyway

The main driver of the expected recovery from a "recessionary" low stems from the question of how much "pent up" demand currently exists?

If we look at durable goods as an example, such would suggest that much of the demand for long-lasting products got pulled forward by consumers over the last 12-months.

Of course, if we broaden that measure to retails sales which make up ~40% of the personal consumption expenditures (PCE) index , we see much the same.

Given PCE, which comprises nearly 70% of GDP, has already recovered much of pandemic-related decline, how much "pent up" demand remains.

However, wage growth outside of personal transfer payments (i.e., stimulus) hasn't recovered. It is impossible to sustain higher rates of economic growth without wage growth.

Importantly, as we saw in January and February following the $900 billion stimulus bill passage, there was a short-lived surge of activity. However, once individuals spent the money, activity quickly faded. We saw the same with retail sales in April following the American Rescue Plan, which sent out $1400 checks.

After the $1400 checks get spent, what will be the driver for continued consumption at previous rates? Further, given the impact of a larger economy (as it recovers), the rate of change will decline markedly in the months to come.

Earnings Growth Inflection

"Earnings growth has a high correlation to stock market performance, but with time lags that are less well-understood. We are about halfway through the first quarter S&P 500 earnings season and so far, the results are exceptionally strong." – Liz Ann Sonders

That is correct, and given the high correlation between earnings and market returns, we come back to the same question. Has the advance in the market accounted for the rebound in earnings? More importantly, what happens when that growth reverses?

"Relative to last year's second-quarter plunge of nearly -31% year-over-year, expectations are that S&P 500 earnings will be up more than 46% in this year's first quarter. The second quarter will boast a whopping 60% increase. Such should be the inflection point in terms of the year-over-year growth rate." – Liz Ann Sonders

The problem is the S&P rose to levels that earnings growth will have difficulty supporting, particularly as the stimulus fades from the system. As with economic growth, the 2nd derivative of earnings growth is now a headwind for the markets.

Such is also the problem of "pulling forward sales."

Conclusion

Notably, the outsized growth of the market reflects repetitive interventions into the financial markets by the Fed. Those interventions detached financial asset growth from their long-term correlation to GDP growth, where corporate revenue comes from. Historically, when the S&P 500 becomes separated from economic growth, a reversion occurred.

Currently, analysts are expecting earnings to surge well above economic growth rates. However, the flaw in the analysis is the assumption earnings growth will continue its current trend.

While there will be an economic recovery to pre-pandemic levels, a recovery is very different from an expansion.

As Liz concludes:

"Optimism is extremely elevated. Such is certainly justified by stock market behavior over the past year and recent economic releases. But some curbing of enthusiasm may be warranted given the history of the stock market as an uncanny 'sniffer-outer' of economic inflection points."

As she goes on to point out, this is not a time for FOMO-driven investment decision-making. The reality is that the supports that drove the economic recovery will not support an ongoing economic expansion. One is self-sustaining organic growth from productive activity, and the other is not.

The risk of disappointment is high. And so are the costs of being "wilfully blind" to the dangers.

[Jun 07, 2021] Yes, inflation is rising but no individual equity sector, including the energy sector, offers significant protection against high and rising inflation

Jun 07, 2021 | finance.yahoo.com

Yes, inflation is rising, and retirees must now consider repositioning not just their short-term safe-haven investments (we'll talk more about that in part two) but their entire portfolio as well (which we'll focus on here). Well that, conveniently enough, is the subject (and title) of a paper soon to be published in the Journal of Portfolio Management that was co-authored by Campbell Harvey, a professor at Duke University, and several of his colleagues affiliated with Man Group. What more, Harvey and his co-authors found that no individual equity sector, including the energy sector, offers significant protection against high and rising inflation.

... here's what Harvey and his co-authors discovered after researching eight periods of inflation dating back to 1925: Neither equities nor bonds performed well in real terms during the inflationary periods studied. Real being the nominal rate of return minus the rate of inflation.

... ... ...

TIPS

"Treasury Inflation-Protected Securities (TIPS) are robust when inflation rises, giving them the benefit of generating similar real returns in inflationary and noninflationary regimes, both of which are positive," the authors wrote.

In fact, TIPS had a 2% annualized real return during the most recent five periods of inflation.

But what looks promising in a research paper might not work in reality given the current yield on TIPS (0.872% as of June 2, 2021). The low yield means that TIPS are a "really super expensive" inflation hedge going forward, said Harvey.

"It means that you're going to get a negative return in noninflationary periods," he said. "So yes, they provide the protection, but they're an expensive way to get that protection."

Commodities

"Traded commodities" have historically performed best during high and rising inflation. In fact, traded commodities have a "perfect track record" of generating positive real returns during the eight U.S. periods studied, averaging an annualized 14% real return.

Now investors might not be able to trade commodities in the same manner as institutional investors using futures, but they can invest in ETFs that invest in a broad basket of commodities, said Harvey.

Other assets

Residential real estate on average holds its value during inflationary times, though not nearly as well as commodities. Collectibles such as art (7%), wine (5%) and stamps (9%) have strong real returns during inflationary periods, as well.

And while some suggest adding bitcoin to a diversified portfolio as an inflation protection asset, caution is warranted given that bitcoin is untested with only eight years of quality data -- over a period that lacks a single inflationary period, the authors wrote. "It's not just untested," said Harvey. "It's too volatile."

Gold is also too volatile as a reliable hedge against inflation. Harvey noted, for instance, that the performance of gold since 1975 is largely driven by a single year, 1979, when gold dramatically appreciated in value. "And that makes the average look really good," he said.

Read: Gold- it's not just for crazies

Dynamic strategies

Harvey also said his number one dynamic strategy for inflationary times is changing the sector exposures in your portfolio. With this strategy, you would allocate a greater portion of your assets to sectors that have historically performed well during inflationary periods, such as medical equipment, and less if anything at all to sectors that have performed poorly during inflationary periods, such as consumer durables and retail. "You can naturally rebalance your portfolio to be a little more defensive," he said. "And that can be done by any investor."

Harvey and his co-authors also found active equity factors generally hold their own during inflation surges with "quality stocks" having a small positive real return and "value stocks" having a small negative return.

Dynamic strategies are "active" strategies that involve monthly rebalancing of portfolios, according to Harvey. In contrast, passive strategies require minimal or no rebalancing; for example, holding an S&P 500 index fund.

Active equity factor investing uses frequent rebalancing to take bets that deviate from the investment weights implied by a passive market portfolio. These bets seek to produce returns over and above the passive market portfolio, said Harvey.

In Harvey's study, quality is defined as a combination of profitability, growth and safety and value is defined with traditional metrics such as the book-to-price ratio.

Is now the time to reposition your portfolio?

According to Harvey, inflation surging from 2% to more than 5% is bad for stocks and bonds. We're not there yet; the current rate of inflation is 4.2%. But we are getting close to the "red zone" and now would be a good time to "rethink the posturing of your portfolio," Harvey said. "So even if it doesn't occur, it doesn't matter. If the risk is high enough, you take some actions, you're basically buying some insurance."

And being proactive is the key. "So, at least right now, it's better to have the discussion now than when it's too late; when we're already in the surge and the asset prices have already dropped," said Harvey.

Remember too that what you hedge is "unexpected" inflation, Harvey said. "What you really are concerned with is unexpected inflation or a surprise in inflation. We call it an economic shock."

But not a transitory shock. That won't have any effect on asset prices. "You need to consider long-term inflation," he said.

And that place to look for that is in the break-even inflation (BEI) rate reflected in TIPS and nominal Treasurys. The BEI is the weighted average of inflation expectations over the life of the bond. And changes in the BEI have the advantage of reflecting changes in long-term or permanent inflation expectations. Presently the BEI is 2.44%. "Anything that is a long-term measure of inflation is going to have the maximum reflection in the asset prices," he said.

As for the current inflationary environment, Harvey said it's a mix of transitory and not-so transitory elements. Lumber prices are up but likely not permanently. The rising prices of other goods and services, however, may not be transitory. "It's obviously difficult to dissect this," he said. "But it's really important for people that are running a portfolio draw that distinction."

[Jun 07, 2021] Will hot US inflation data unsettle markets-

Jun 05, 2021 | finance.yahoo.com

FT reporters

US government bonds rallied on Friday following a weaker-than-expected reading on American job growth for the month of May. But a key report on consumer price inflation will provide a fresh test for investors. Consumer prices rose at its fastest pace in more a decade in the 12 months to April, but analysts project that it has picked up even more since then, raising fears that the economy is overheating. Economists surveyed by Bloomberg expect the year on year inflation rate to have jumped to 4.7 per cent in May in figures to be released by the Department of Labor on Thursday, compared with 4.2 per cent in April.

[Jun 07, 2021] Commodity Price Surges Add to Inflation Fears

Jun 07, 2021 | www.wsj.com

It looks like this surge is suitable, especially in energy... That spells troubles for the US economy which is based on cheap energy.

Higher prices for commodities are flowing through to more companies and consumers, making it harder for central bankers to ignore them

...The world hasn't seen such across-the-board commodity-price increases since the beginning of the global financial crisis, and before that, the 1970s. Lumber, iron ore and copper have hit records . Corn, soybeans and wheat have jumped to their highest levels in eight years . Oil recently reached a two-year high .

At current metal prices, Rio Tinto PLC, BHP Group Ltd. , Anglo American PLC and Glencore PLC could this year generate a combined $140 billion in earnings before interest, taxes, depreciation and amortization, according to Royal Bank of Canada. That compares with $44 billion in 2015, when metals prices were at or near lows.

However, in Russia, a commodity exporter, surging commodity prices also are driving up inflation. While Russia's international reserves hit $600.9 billion in May, the highest ever, its central bank increased its benchmark interest rate by 0.5 percentage point to 5% in April. It said it would consider further increases, citing "pro-inflationary risks generated by price movements in global commodity markets."

"We think that the inflation pressure in Russia is not transitory, not temporary," Russia's central-bank governor Elvira Nabiullina told CNBC in a recent interview.

...Nicolas Peter, chief financial officer of BMW AG , said in May that it expects an impact of 500 million euros, equivalent to about $608 million, from prices for raw materials. Increased steel prices have added about $515 to the cost of an average U.S. light vehicle, according to Calum MacRae, an auto analyst at GlobalData.

[Jun 07, 2021] When it comes to inflation, the Fed must consider inequality

Jun 07, 2021 | finance.yahoo.com

Like most central banks, the US Federal Reserve has been forced to ask why more than a decade of ultra-loose monetary policy has had such lacklustre economic results.

The Fed's data are misleading because they assume the US is the middle-class nation it has ceased to be.

Until it uses data that reflect the nation as it is, the Fed will no more get America back to shared prosperity than someone using a map of New Amsterdam will find the pond in Central Park.

[Jun 07, 2021] Yellen says higher interest rates would be 'a plus' for policy makers

Only if they can control it... And that is not given.
Jun 07, 2021 | www.msn.com

Speaking with Bloomberg News following a G-7 finance ministers' meeting in London, Yellen said it's OK if President Joe Biden's $4 trillion spending plans trigger inflation and higher rates.

"If we ended up with a slightly higher interest-rate environment it would actually be a plus for society's point of view and the Fed's point of view," she told Bloomberg.

"We've been fighting inflation that's too low and interest rates that are too low now for a decade," she said. "We want them to go back to" a normal environment, "and if this helps a little bit to alleviate things then that's not a bad thing -- that's a good thing."

The Fed has said it won't start to scale back its $120 billion-a-month asset purchases until the economy had made "substantial further progress" toward the Fed's goals of full employment and stable long-run 2% inflation.

While indicators of inflation have been rising , bond yields have been subdued, leaving many experts skeptical that a "taper tantrum" in in the cards whenever the Fed starts paring back its purchases.

[Jun 07, 2021] heard on Bloomberg radio yesterday that the Reddit investors are beginning to pour into oil and grains. So, worried about volatility.

Jun 07, 2021 | peakoilbarrel.com

SHALLOW SAND IGNORED 06/05/2021 at 9:49 am

Biden Admin proposing elimination of IDC expensing and percentage depletion, among other tax preferences.

Elimination of IDC expensing will affect US shale.

Percentage depletion only affects small producers. We can make it without percentage depletion. Will just result in us paying more income tax. But lower 48 onshore conventional production in US is below 2 million barrels per day and slowly falling. Hopefully we will be permitted to continue to produce oil for the many uses of it besides light transport.

As long as Biden doesn't try to sell these as "Big Oil Tax breaks" I'm not going to complain.

I think elimination of these tax preference items will lower US production, which will increase oil prices. US is historically the only major producer that has desired low oil prices. That is because we are still a net importer of crude oil.

Now that Trump is gone, it appears US also is not too concerned about oil prices.

What a turnaround from this time, last year. We had just reactivated our wells at the end of May, 2020, after oil had went negative on April 20.

Yesterday WTI closed around $69.50.

President Biden could turn out to be very good for small conventional lower 48 onshore producers. He just needs to recognize that our oil is still needed, and will still be needed for decades.

I will keep beating my drum. Stripper well oil is small footprint. Existing source. Very low methane emissions from upstream operations. Employs the highest number of persons per BO. Employs largely rural populace. Owned by small business. Family owned. Pays a lot in local taxes. Is very low decline. Predictable. Uses the smallest amount of materials, such as plastics and steel. I can go on, but won't.

Stripper well doesn't need "tax breaks" either, if it is afforded a strong, stable oil price. In my view, $60-70 WTI won't kill the consumer.

But, I heard on Bloomberg radio yesterday that the Reddit investors are beginning to pour into oil and grains. So, worried about volatility.

Only about 1/5-1/6 of voters in the very rural counties (25K or less in population) votes for Biden. Yet his policies appear to be a boon for those populations.

Here's to $5+ corn, $14+ soybeans, $6+ wheat, $6+ milo and $65+ WTI! Keeping prices there would really solidify a part of the US that is really struggling.

I suspect I might be the only person still posting here that lives in an oil and grain producing region. There just aren't many of us left.

Labor will be our huge problem. Maybe strong and stable commodity prices could bring some people back, or keep some of our young people here?

Thank goodness for the people from Mexico and Central America. Without them, rural USA would be in really big trouble. SHALLOW SAND IGNORED 06/05/2021 at 10:48 am

Dennis.

I will add, if rural is in big trouble, I believe the entire USA is in big trouble.

I have never seen the labor shortages that I am seeing today in my community.

I know there are many efforts to radically change how our country's food supply is produced. But, like energy transition, those will take decades.

It is not attractive to most to live in rural locations. Very, very difficult psychological and emotional transition for those that try to move from urban/suburban to rural. I have seen it first hand. We cannot keep doctors for that reason, for example. There are almost no attorneys here under the age of 60. Management of our factories has mostly been moved, because it can be due to technology, and because management doesn't want to live here.

Most in the factories here are being hired in at $16-19 per hour, and will be over $20 soon after. Most work at least 10 hours of overtime a week.

But we have a very high percentage of young adults in the rural areas struggling with hard drug dependency. Meth is the big one, and it is easier for a 20 year old to get meth than to get a beer in most rural areas.

Our country needs to do so much better across the board on hard drug dependency. One of the many reasons being to fill all of these job openings. Of course, there are more important ones than that.

I bet if hard drug dependency was completely eliminated, over 90% of child abuse and neglect court cases would also be wiped out. That is the most important reason we need to do better.

[Jun 07, 2021] There s a new LGBTQ-focused ETF

Jun 06, 2021 | www.marketwatch.com

Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. Two previous efforts failed to attract enough assets.

The fund, LGBTQ + ESG100 ETF LGBT, +0.91% , launched in late May, is a passively managed, large-cap index fund that holds the top 100 U.S. companies that most align with the LGBTQ community.

In 2019, two LGBTQ-focused ETFs were delisted: ALPS Workplace Equality Portfolio ETF and InsightShares LGBT Employment Equality ETFs. Like this new fund, both were mostly U.S. large-cap, passive index ETFs comprising companies that received high or perfect marks for workplace equality in the Human Rights Campaign Corporate Equality Index , a benchmark for corporate LGBTQ policies.

The first ETF stuck around for five years, but the second barely made it two years, even though it was launched with much fanfare by UBS. Neither gained many assets.

Bobby Blair, CEO and founder of LGBTQ Loyalty Holdings, which launched the fund with issuer ProcureAM, says community input on holdings makes this fund different.

LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S. for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in its prospectus , 25% of the index's weighting is derived from that survey data.

... the LGBTQ + ESG100 has an annual expense ratio of 0.75%.

[Jun 07, 2021] As bubbles peak, they combine objective signs of excess prices rising much faster than earnings can justify with subjective signs of mania, such as frenzied trading and excessive leveraging

Jun 06, 2021 | investornewsletter.net

As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing. To some the entire US stock market looks bubbly given its dizzying run-up, but earnings growth has also been extraordinarily strong through the pandemic. Beneath the surface, however, sectors of the market from green tech to cryptocurrency show tell-tale bubble signs.

My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others.

By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public.

Each of these bubblets is captured in an index that rose in the last year by around 100 per cent, often much more, to a peak value between $500bn and $2.5tn. Day traders and other newbies rushed in, a common symptom of late stage market manias. Now these bubbles are faltering, as they so often do, in response to increases in long-term interest rates. What's next?

The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path.

For the median case, the bottom was found 70 per cent below the peak, and came just over two years after the peak. Except for the index of small-cap pandemic stocks, the other four bubble candidates have all experienced drops of at least 35 per cent, but also of no more than 50 per cent (in the case of ethereum). In other words, they are not likely to resume inflating any time soon, and they are still far from the typical bottom.

There is one new factor that could upset this historical pattern. Despite the rise in long-term interest rates, there is plenty of liquidity sloshing around the markets, with central banks committed to easy money as never before. The risks though are skewed to the downside.

It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive.

[Jun 07, 2021] Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May by Jonnelle Marte and Ann Saphir

Jun 04, 2021 | finance.yahoo.com

... Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May, the highest ever and up 5% from January alone, according to Labor Department data released on Friday. Pay rose even faster for workers in non-manager roles, who saw earnings rise by 7.2% from January, far outpacing any other sector.

That higher pay could be a sign that companies are lifting wages as they seek to draw people back to work after more than a year at home. Some businesses are struggling to keep up with higher demand as more consumers, now fully vaccinated, get back to flying, staying in hotels and dining indoors. Job gains in leisure and hospitality this year have so far outpaced gains in other sectors.

But it is too soon to know whether the boost will be enough to help speed up hiring at a time when many workers are still facing other obstacles, including health concerns and having to care for children and other relatives.

"The fact of the matter is, the pandemic is still going on," said Daniel Zhao, a senior economist for Glassdoor. "The economy is running ahead of where we are from a public health situation."

Some 2.5 million people said they were prevented from looking for work in May because of the pandemic, according to the Labor Department.


... ... ...


Employment in leisure and hospitality is still in a deep hole when compared with pre-pandemic levels. The industry added 292,000 jobs in May, with about two-thirds of that hiring happening in restaurants and bars. But overall employment is still down 2.5 million jobs, or 15% from pre-pandemic levels, more than any other industry.

... ... ...

Some people who previously worked at hotels or restaurants moved on to other types of jobs during the pandemic, such as packaging goods at a warehouse, and it's too soon to know whether they will switch back as more of the economy reopens, said Zhao.

...About half of states are putting an early end to a $300 federal supplement to weekly unemployment benefits, winding them down as soon as June 12. The supplement expires nationwide on Sept. 6.

(Reporting by Jonnelle Marte and Ann Saphir; Editing by Chizu Nomiyama and Jonathan Oatis)

[Jun 07, 2021] Sidewalk Robots are Now Delivering Food in Miami

Notable quotes:
"... Florida Sun-Sentinel ..."
"... [A spokesperson says later in the article "there is always a remote and in-field team looking for the robot."] ..."
"... the Sun-Sentinel reports that "In about six months, at least 16 restaurants came on board making nearly 70,000 deliveries... ..."
Jun 07, 2021 | hardware.slashdot.org

18-inch tall robots on four wheels zipping across city sidewalks "stopped people in their tracks as they whipped out their camera phones," reports the Florida Sun-Sentinel .

"The bots' mission: To deliver restaurant meals cheaply and efficiently, another leap in the way food comes to our doors and our tables." The semiautonomous vehicles were engineered by Kiwibot, a company started in 2017 to game-change the food delivery landscape...

In May, Kiwibot sent a 10-robot fleet to Miami as part of a nationwide pilot program funded by the Knight Foundation. The program is driven to understand how residents and consumers will interact with this type of technology, especially as the trend of robot servers grows around the country.

And though Broward County is of interest to Kiwibot, Miami-Dade County officials jumped on board, agreeing to launch robots around neighborhoods such as Brickell, downtown Miami and several others, in the next couple of weeks...

"Our program is completely focused on the residents of Miami-Dade County and the way they interact with this new technology. Whether it's interacting directly or just sharing the space with the delivery bots,"

said Carlos Cruz-Casas, with the county's Department of Transportation...

Remote supervisors use real-time GPS tracking to monitor the robots. Four cameras are placed on the front, back and sides of the vehicle, which the supervisors can view on a computer screen. [A spokesperson says later in the article "there is always a remote and in-field team looking for the robot."] If crossing the street is necessary, the robot will need a person nearby to ensure there is no harm to cars or pedestrians. The plan is to allow deliveries up to a mile and a half away so robots can make it to their destinations in 30 minutes or less.

Earlier Kiwi tested its sidewalk-travelling robots around the University of California at Berkeley, where at least one of its robots burst into flames . But the Sun-Sentinel reports that "In about six months, at least 16 restaurants came on board making nearly 70,000 deliveries...

"Kiwibot now offers their robotic delivery services in other markets such as Los Angeles and Santa Monica by working with the Shopify app to connect businesses that want to employ their robots." But while delivery fees are normally $3, this new Knight Foundation grant "is making it possible for Miami-Dade County restaurants to sign on for free."

A video shows the reactions the sidewalk robots are getting from pedestrians on a sidewalk, a dog on a leash, and at least one potential restaurant customer looking forward to no longer having to tip human food-delivery workers.

... ... ...

[Jun 07, 2021] Forget Activism- Chronic Underperformance Is Big Oil's Biggest Problem

Jun 06, 2021 | finance.yahoo.com

Whereas climate change issues are the presumptive reasons behind the latest wave of investor revolts at the oil and gas giants, lurking beneath the surface is a growing sense of apprehension about Big Oil's strategy and failure to generate adequate returns for shareholders in recent decades.

The naked truth is that Exxon and its cohorts have severely underperformed the broader market over the last two decades in terms of total returns to shareholders, implying the sector's woes are long-term and strategic rather than short-term and cyclical.

Chronic underperformance

XOM

Source: CNN Money

Big Oil's underperformance relative to the market is clearly evident whether you are looking at 2-year, 5-year, 10-year, or even 20-year timespans.

For instance, since 2015, Exxon shares have returned a -2.5% compound annual loss based on share prices and dividends, a far cry from the average annual gain of +14.4% by the S&P 500 over the timeframe.

Over the past two decades, Exxon's compound annual return has clocked in at +4.2%, still considerably lower than the broad market benchmark's return of +7.1%.

... ... ...

Exxon is hardly alone, with none of its peers, including Chevron, Royal Dutch Shell (NYSE:RDS.A), BP Inc. (NYSE:BP), and Total (NYSE:TOT) coming close to matching the returns by the broader share market over the past decade.

In fact, on an inflation-adjusted U.S. dollar basis, returns by Exxon, Shell, and BP have been negative over the past five years, a period which coincided with the biggest bull market in the history of the stock market.

The renewable energy conundrum

You cannot blame the oil majors for continuing to engage in a lot of hand-wringing at a time when investors are demanding they pump less oil and transition to cleaner energy.

For the oil majors, successfully transitioning to green energy companies is not going to be a walk in the park because these companies have to ride two horses.

That's the case because the majority are already battling dwindling cash flows which means they cannot afford to gamble with whatever little is left. Oil prices have been on a downtrend since 2014, a situation that has only worsened during the pandemic.

Oil and gas firms are still grappling with the best way to presently use dwindling cash flows; in effect, they are still weighing whether it's worthwhile to at least partially reinvent themselves as renewables businesses while also determining which low-carbon energy markets offer the most attractive future returns.

Most renewable ventures, like solar and wind projects, tend to churn out cash flows akin to annuities for several decades after initial up-front capital expenditure with generally low price risk as opposed to their current models with faster payback but high oil price risk. With the need to generate quick shareholder returns, some fossil fuel companies have actually been scaling back their clean energy investments.

Energy companies are also faced with another conundrum: Diminishing returns from their clean energy investments.

Related: ''We'll See $200 Oil": Russia & OPEC Ministers Blast IEA's Net Zero Plan

A paper published in Science Direct last August says that dramatic reductions in the cost of wind and solar have been leading to an even bigger reduction in revenue inflows leading to falling profits. This is particularly true for wind energy as later deployments of wind usually have lower market value than earlier ones due to wind energy revenue declining more rapidly than cost reductions. Solar is more resilient, with technological progress approximately balancing out the revenue degradation, which perhaps explains why solar stocks have gone ballistic.

Adding wind and solar to our grid tends to reduce electricity prices during peak generation times: Indeed, electricity prices in California can come down to zero during long sunny durations. This was not a problem for early deployments but is becoming a major concern as renewables increasingly play a bigger part in our electricity generation mix.

But, ultimately, Big Oil will have to take the plunge and engage in drastic internal restructuring and product cycle transitions even as activists like Engine No.1 promise to continue turning the screw. As Charlie Penner of Engine No.1 has told FT , the energy transition is happening faster than expected and has undermined Big Oil's assumptions about long-term demand for its oil.

By Alex Kimani for Oilprice.com

->


[Jun 07, 2021] Get Ready for $178 Billion of Selling Ahead of the Capital-Gains Tax Hike. These Are the Stocks Most at Risk. - MarketWatch

Jun 07, 2021 | www.marketwatch.com

...Analysts at Goldman Sachs""in October""ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense""investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.

The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve's distributional financial account data , the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020""so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers or about 0.4% of the total.)

[Jun 07, 2021] Don't get too optimistic about a stock market rally" they've been fizzling out

Jun 04, 2021 | futurewealthdaily.com
This post was originally published on this site

... ... ...

This quick jumping onto and off of the bullish and bearish bandwagons has become the new normal, as you can see from the table below.

... ... ...

As I argued three weeks ago, this sentiment pattern suggests that the market may remain in a fairly narrow range for the next several months. The contrarian bet is that the market will finally break out of that trading range whenever the market timers stubbornly hold onto their sentiment beliefs in the face of the market moving in the opposite direction. That is, be on the lookout for when the market timers remain bullish in the face of declines, or bearish in the wake of rallies. That will indicate that a bigger decline or rally is in store.

In the meantime, the market timers' behavior suggests both market rallies and declines will be subdued. That's good news to the extent you were worried that a major new bear market is about to begin, but bad news if you were hoping for a more sustained rally.

. .. ... ...

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected] . Continue Reading

[Jun 06, 2021] Rethinking Unemployment- From Adam Smith to Marx -Reserve Army of the Unemployed- to the Neoliberal War on Full Employment -

Jun 06, 2021 | www.nakedcapitalism.com

Rethinking Unemployment: From Adam Smith to Marx "Reserve Army of the Unemployed" to the Neoliberal War on Full Employment Posted on June 5, 2021 by Yves Smith

Yves here. This post gives a useful, high level view of how the basis for unemployment has changed over time, including under Covid.

By Lynn Parramore, Senior Research Analyst, Institute for New Economic Thinking. Originally published at t he Institute for New Economic Thinking website

Canadian economist Mario Seccareccia, recipient of this year's John Kenneth Galbraith Prize in Economics, says it's time to reconsider the idea of full employment. He spoke to Lynn Parramore of the Institute for New Economic Thinking about why 2021 offers a rare opportunity to rebalance the economy in favor of Main Street.

Once upon a time – not so long ago, really – unemployment was not a thing.

In agricultural societies, even capitalistic ones, most people worked on the land. A smaller number worked in villages and towns – shoemakers and carpenters and so on. Some might go back and forth from the countryside to the town, depending on the availability of work. If your work in town building houses dried up, you might come back to the country for the harvest.

Economist Mario Seccareccia, who loves history, notes that before the Industrial Revolution, it was unthinkable that someone ready and able to work had no job to do.

Questions: If unemployment was once unknown, why do we accept it now?

Where did unemployment come from?

In those pre-Industrial Revolution times, there were paupers, mostly people who could not work for some reason such as a disability. These were deemed deserving of charity. A small number of paupers were considered deviants and treated harshly, perhaps made to labor in public work-houses under vile conditions.

Seccareccia notes that early classical economists like Adam Smith and David Ricardo recognized that able-bodied people could experience temporary joblessness, but not the long-term variety. The word "unemployment" only became widely used in the nineteenth century. As cities grew and manufacturing took off, people living in cities and towns grew apart. Movement between the two places grew less fluid. The agricultural sector of the economy was shrinking.

At first, if you lost your factory job, you could still probably pick up something in the countryside to tide you over. But if you had grown up in the city, as more and more people did, you might not know how to do rural work. By the late nineteenth century, most city dwellers could no longer count on falling back on agricultural work during hard times.

Karl Marx noted that England's enclosure movement, which gained momentum as early as the seventeenth century, had made things hard for agricultural workers as wealthy landowners grabbed up the rights to common lands that workers had traditionally been allowed to use and were a vital part of their sustenance. Uprooting peasants from the land and traditional ways of life, Marx observed, created an "industrial reserve army" – basically a whole bunch of people wanting to work but unable to find a job during times when industrialists held back investment or when machines took over certain jobs.

Marx saw that this new kind of unemployment was a feature of capitalism, not a bug. Still, a lot of mainstream bourgeois economists thought that the market would somehow sort things out and eventually provide enough job openings to prevent mass unemployment.

It didn't turn out that way. Exhibit A: The Great Depression.

Especially after World War I, many later economists, most notably John Maynard Keynes, warned that high rates of unemployment were getting to be the norm in the twentieth century. Keynes predicted that a lot of people would go on being jobless unless the government did something. This was very bad for society.

Keynes emphasized that full employment was never going to just happen on its own. Mainstream economists thought that if wages fell enough, full employment would eventually prevail. Keynes disputed that. As wages fell, demand contracted even further, leading to even less business investment and so forth in a never-ending cycle. No, capitalism, with its business cycles led to involuntary unemployment, according to Keynes.

Seccareccia observes that economist Michał Kalecki agreed that the government could make policies to help more people stay employed at a decent wage, but there was just one problem: wealthy capitalists weren't going to have it. They would oppose state-supported systems to hold demand up so that fear of unemployment checked workers' demands for better pay and improved work conditions.

For a while, after World War II, the capitalists were on the defense. The Great Depression and the Communist threat got western countries spooked enough to go along with Keynes's argument that governments should try to encourage employment by doing things like creating big projects for people to work on. Safety nets were created to keep folks from falling into poverty. The goal of full employment gained popularity and many more workers joined unions.

Capitalists v. Full Employment

Economists have bandied about various definitions of what full employment ought to look like, explains Seccareccia: "A well-known definition came from William Beveridge, who said that what you wanted was as many jobs open as people looking for them – or even more jobs because every person can't take every type of job."

In the mid-twentieth century, with the economy doing well, neoclassical economists like Milton Friedman started to push back against the idea of full employment. He discouraged the use of fiscal and monetary policy to support employment, arguing that attempts to push down unemployment beyond what he insisted was its "natural" rate in the economy would simply lead to inflation.

In the 1960s, some of what Friedman warned about did actually happen. Employment was low and prices started to go up mildly, particularly during the Vietnam War era. However, the biggest boost to the credibility of Milton Friedman came with the OPEC cartel oil-price hikes of the 1970s that pushed the inflation rate to double-digit levels while simultaneously pushing up unemployment. So, in the '70s, western countries started backing off from encouraging full employment and maintaining strong safety nets. Proponents of the new neoliberal framework were in favor of cutting safety nets, shedding government jobs, and leaving it to the market to decide how much unemployment there would be. They said that it had to be this way to keep inflation from rising, even though the cause of that high inflation of the '70s had nothing to do with high public spending and excessive money creation that Friedman and his friends talked about.

Seccareccia points to proof that the neoclassical logic didn't hold up. In the two decades before the Global Financial Crisis of 2007-8, the rate of unemployment went down, but inflation didn't go up. That proved that the neoclassical economists were wrong. But unfortunately, policymakers didn't really digest this before the Great Recession hit. So, they bungled the response badly by putting the brake on public spending too quickly because of fears of excessive budget deficits and potentially higher future inflation that never materialized. They kept insisting that the employment level would return to that "natural" state Friedman had talked about if they just left things to the market.

"But it didn't work out that way," says Seccareccia. "Unemployment skyrocketed and it took a decade to return to pre-crisis levels.

Which brings us to the COVID-19 crisis.

A Crisis Is a Terrible Thing to Waste

Seccareccia says that we have to understand the difference between the current situation and the Global Financial Crisis. This time, it really is different.

"The earlier crisis started in the financial sector and spread to the real economy," he explains. "But in 2020, when the Coronavirus emerged, the financial and industrial sectors got hammered at the same time." This meant that people in both sectors stopped spending. Households couldn't spend even if they wanted to because traveling, dining out, and other activities were off-limits. Businesses cut investment as uncertainty loomed and exports declined due to restrictions at borders. Unless you were Home Depot or an e-commerce company, you couldn't sell anything.

The COVID-19 crisis also saw workers pulled out of activities thought to be too high risk for spreading the virus. Across the country, non-essential workers were sent home and told to stay there. Most, especially in sectors like leisure and hospitality, can't do their work from home . A lot of these people lost their wages, and because most of them were low-wage to begin with, they could least afford the hit. Many were only able to maintain their incomes through government unemployment insurance. Businesses, meanwhile, were kept afloat with subsidies.

Seccareccia notes that unemployment had an interesting twist in the pandemic because it was both the problem and the initial cure for the health crisis. Unemployment kept the virus from circulating. It saved lives.

Fast-forward to late spring, 2021. As America and other western countries seek to put the pandemic behind them, the economy is opening back up. Employers are wanting to hire, and they are even competing with each other for workers. But many job seekers are waiting to go back to work. There are a lot of reasons why: caregiving for kids is still a huge burden, and people are still worried about getting sick. Transit routes have been disrupted making it harder for people to get to work. It's also possible that some workers may be resisting jobs on offer which come with low pay and inadequate benefits.

Employers have started complaining they can't find workers and blame the social safety net as the problem. Some employers, like those in the hospitality industry, are offering higher pay to lure workers back.

Just as Kalecki predicted, the wealthy capitalists are getting uneasy. The Chamber of Commerce, for example, has pushed the U.S. to stop expanded unemployment insurance benefits so that people will be forced to return to low-wage jobs. Some Republican-dominated states have jumped on board with this idea. Economist Larry Summers, for his part, is warning about inflation and telling the Federal Reserve to raise interest rates so that wages don't go up. He complains that when he walks outside, all he sees are people eager to fill job vacancies . It's unclear where he was living when he said that, or which people he is talking about.

Others argue that expanded unemployment insurance isn't the problem, but the crappy jobs on offer. Seccareccia believes that it's a good thing if employers raise their wages, even if that means a little bit of inflation.

Rising inequality, he emphasizes, is unsustainable in a healthy society, and it's about time ordinary people had a little power to improve their lot. "When employers are worried about people quitting," he says, "that's when you know you're getting close to full employment. And in a capitalist society, it's an extremely rare situation when the number of quits begins to exceed the number of new hires as an economy nears the peak of a business cycle."

In Seccareccia's view, "there's a balancing act between workers 'fearing the sack' and employers 'fearing the quit.'" He observes that capitalists are very good at making sure that the former situation is more common, and they've been spectacularly successful in the last 40 years. "This is why you have flat wages and runaway inequality," says Seccareccia. "Productivity goes up but the workers don't share in it." Profits pile up at the top.

Right now, inflation has been creeping up in some areas. In a couple of sectors, like used cars, it's rising a lot. The question is, beyond a couple of unique cases, what will happen to inflation overall? And will be temporary? A lot of economists think that inflation will be short-lived and will not get very high, so it's nothing to get excited about. Some economists, like Antonella Palumbo, think the worry about inflation is overdone . She notes that with unemployment still high and vast numbers of people who formerly worked but are still out of the labor force, the ranks of the famous reserve army of unemployed are still huge. As the economy restarts, all kinds of short-run bottlenecks are cropping up, but that reserve army is not going anywhere fast and will continue to limit wage increases.

Seccareccia points out that wealthy capitalists trying to stop workers from getting paid better and conservatives complaining about laziness fail to mention that meanwhile, the stock market is soaring, making the rich richer. Plus, the housing market is booming because the more affluent people lucky enough to have kept their jobs over the pandemic now have extra money saved to spend on big-ticket items. "Is it really fair," he asks, "to complain about a few hundred dollars a week received by those at the bottom of the economic ladder? Especially how much the economy is already titled in favor of the haves?"

So, what exactly should the government do about unemployment? Should it do anything at all? For Seccareccia's part, he thinks this is a perfect time to reconsider the idea of full employment, which has been so long abandoned by policymakers in favor of some "natural" unemployment rate. "Policymakers need to understand why COVID may offer a chance not seen since the end of WWII," he says. "We could actually make the economy fairer for ordinary people."


Alice X , June 5, 2021 at 6:02 am

The 1943 Michal Kalecki piece can be found here:

https://mronline.org/2010/05/22/political-aspects-of-full-employment/

EarlyGray , June 5, 2021 at 6:07 am

> So, what exactly should the government do about unemployment?

My favoured solution, and that of other readers of this blog, I suspect, is the Job Guarantee as promoted by MMT.
Because a well designed job guarantee would provide a floor on wages and benefits, the private sector would be forced to match it at the very least. But as has been pointed out on this blog many times before, Kalecki's point that full employment would remove employers ability to effectively threaten workers with the sack, means that it will be very difficult politically to see it implemented.

Mikel , June 5, 2021 at 9:47 am

Still building "houses" with floors only?

I think a definition of "enough" is needed.

Amateur Socialist , June 5, 2021 at 8:07 am

Next week I start my 2nd year of pandemic triggered unemployment after I was terminated without cause. On June 26th my extended UI benefits will be halted by TX Governor Greg Abbot. Okay.

In a year of applying for new positions I have managed to get exactly 1 phone interview after a 40 year career in technology development, ending up with almost 24 years at IBM. In my last year with them I received both a performance bonus and a salary hike. But I'm now over 60 and have been unemployed longer than 3 months so that's probably fairly typical experience. Okay.

The path to full employment is probably going to require the creation of new opportunities in a still contracting economic system. It's not impossible if you're focused on the goal. Here's my shortlist of policy initiatives that could dramatically and quickly grow the number of available jobs, particularly for the under employed younger people who are paying off student loans.

Dramatically increase social security and medicare eligibility/benefits to convince older workers to leave the workforce.
Expand paid family leave and vacation policies to align with other industrialized nations in order to require businesses to hire to cover needed absences.
Drop the number of hours that define full time work to allow more workers to get full benefits.

Yeah, I'd like to be considered for another good paying job in a still viable industry. I spent decades developing skills that are still relevant and valuable. But I'm old and I'm expensive because I have expectations based on my own employment history that 40 years of neoliberal policies have rendered obsolete. Okay.

I'm close enough to retirement and lucky enough in my ability to save and plan that this won't wreck us. I try to imagine my pandemic inspired involuntary retirement as an opportunity to become a labor rights activist. It helps.

Rolf , June 5, 2021 at 9:23 am

My situation is virtually the same, although in academia as research scientist at major US university, with last 6 years as invited scientist at German research institute. Returned to US to the nightmare of Trump at 63, but fully (and naively) intending to continue working. I've lost count of how many job applications I've tendered, with only one interview in two years, then COVID. Now resigned to the fact that work for me from here on out will be different. I continue to write papers with colleagues at university to maintain a reputation in my field. Now recognize that people take one look at my CV, and think: "Old! Expensive!" -- but the truth is I would be willing to work for little just to stay active in a field applying expertise I've spent decades acquiring. I've since met many, many seniors in the same boat: trained professionals with lots of experience who still want to work (and, in my case, need at least some income).

But at least I had a career. I can't imagine the hopelessness of people 35-40 years my junior, with huge debt from college, grad school, and unable to find a decent job.

Something must change. The situation as it exists is unsustainable. One bright light seems to be increasing recognition of the way the economy actually functions, the role of public spending, and the real limits to growth, prosperity.

Amateur Socialist , June 5, 2021 at 9:40 am

Appreciate your commiseration Rolf. I expect there is an army of people like us who are in this situation or about to be.

Fwiw (maybe not much), I'm actively trying to get hired full time at the food coop near my house. The workers there are represented by a union and get full insurance benefits including dental with a 40 hour work week. The Vt minimum wage of $11.75/hr doesn't matter as much as those insurance benefits do; we're still in that 5 year gap between age 60 and age 65 where you are on your own if you need healthcare.

And I've pretty much decided to laugh off Beaux Jivin's campaign promise to drop the medicare eligibility age to 60 etc. It's abandoned along with many other campaign promises. Okay.

Rolf , June 5, 2021 at 12:18 pm

Thanks, A/S, for your kind words. Yes, benefits are key. I really am increasingly worried that Biden, and the Democratic Party in general, don't seem the grasp the fact that the GOP is absolutely committed to recovering control of Congress and the White House by *any* means necessary. Biden in particular seems to entertain the notion that he can bring the right wing to his way of thinking by conciliation, negotiation, compromise, and good performance. But the GOP is not interested in Dem's performance or compromise -- McConnell has made this quite clear. So Dems have an opportunity to make significant history, a true course correction, but only this once. To pursue "bipartisanship" with a party that has no interest in compromise is hugely naïve -- I can't imagine Biden is that foolish, except that he did begin his campaign with the promise that "nothing would fundamentally change".

The food coop gig sounds like a good, sound shot -- all the best to you.

Left in Wisconsin , June 5, 2021 at 1:32 pm

Fellow army member, age 61. Lucky to have health care via spouse but definitely not enough wealth to retire. Two interviews in last two years, both in retrospect clearly designed to fill out an interview field when preferred (much younger) hire had already been identified. The canard about atrophied skills might apply in the occasional instance but IMO is just more bullsh1t in defense of existing social order.

Dem obliviousness to the reality all around us is truly horrifying. I used to argue that the big sort would result in fenced "progressive" enclaves in which all parties – those inside and those outside – would be thrilled to not have to interact with each other. But it's clear to me now that progressives don't need physical separation to avoid seeing what they don't want to; they are completely able to not see the world right in front of them.

Rod , June 5, 2021 at 10:52 am

I spent decades developing skills that are still relevant and valuable .

Well, you agree. And I agree with you, though I don't know you.
But Obviously the 'Market' does not.
Whose right here, and why?? is the issue.

Amateur Socialist , June 5, 2021 at 12:29 pm

I guess I should include this post script regarding my IBM termination:

After I'd been unemployed for about 90 days I was contacted by a recruiter working on behalf of IBM and my former managers. They were looking for people with exactly my skills and experience to come back to work at IBM as temporary contractors. I agreed to a short phone interview to learn more about the opportunity.

Once the recruiter verified my experience and contacts at IBM, I managed to confirm that they expected to bring me back on at about 80% of my former salary. With no benefits and zero job security. I laughed out loud at this acknowledgment of their duplicity but agreed to let myself be considered and provided a resume. Never heard back which is probably okay.

Carla , June 5, 2021 at 8:29 pm

Amateur Socialist, Rolf and Left in Wisconsin -- I take my hat off to all of you. Work left both my partner and me a number of years ago, and we quickly learned that we had aged out of the market and were useless to society as we thought of it. Fortunately, we relatively quickly became eligible for Medicare, which even in its steadily diminishing state was (and is) a significant help.

Good luck to all of you, and A/S, please let us know the outcome of your pursuit of the job with benefits at your local Food Co-op.

Objective Ace , June 5, 2021 at 5:39 pm

I think your experience demonstrates the problem with defining full Employment as, "anyone who wants a job has one". Using this definition, the simple way to get the economy to FE then is to just make all the jobs so terrible and low paying that no one wants them. You dont need a job, and you dont want just any old crappy job. You want one similiar to your old one, If that doesnt exist anymore, one would reasonably say you dont want a job, since what you want doesn't exist, hence we're at full employment

All of this is to say, we shouldnt necessarily just encourage the government to get us to FE. Capitalists by themselves are quite capable of getting us there, as I'd argue they did in the 19th century. Its government interventions like minimum wage and basic safety protocols that keep us from reaching FE since that's what makes people actually want a job

Rod , June 5, 2021 at 9:08 am

Interesting overview.

it was unthinkable that someone ready and able to work had no job to do.

I think there is a conflation of the language terms bandied about–work-v-jobs-v-employment are all couched in the concept of a Consumption Based Economy. I am tired of this.

weeding the garden is work–unless I'm paying you then it becomes a job. In both instances, however, you are employed in the endeavor. This is grooming behavior using language, imo, and needs to stop.

I think this muddle is a componant of the current 'Jobs Discussion".

Covid has rattled generations coming out of Displacements following the very unequal GFC, and an undefined(maybe) examination of Meaning and Place within the current state of the world and the Economy that has been chosen to fulfill the needs of that Economy (Societal and Personal). More Intuitive than cognitive to many.

Selling Plastic bric-a-brac for the Man, to make the rent in an endless cycle, may have lost its cache' subconsciously, to the 'common man' in this time of apparent Climate Crises et al.

There is still plenty to do, and little time for Idleness( itself a "reward' promoted as a 'something' by the Consumptive Economy).

Rod , June 5, 2021 at 9:19 am

There is still plenty to do , like this(and all it encompasses)

Hero rat that sniffed out over 70 landmines retires The Hill

Mikel , June 5, 2021 at 9:41 am

"Proponents of the new neoliberal framework were in favor of cutting safety nets, shedding government jobs, and leaving it to the market to decide how much unemployment there would be. They said that it had to be this way to keep inflation from rising,"

"The market" – that's the first con people have to get over. There is.no "the market" like there it is something like nature.
It's system of intentional, changeable human decisions backed by beliefs and emotions of all kinds now matter how many theories or quantifications occur. And a corporate beuracracy is still a beuracracy.

And actually this neoliberal thinking of letting some imaginary entity "the market" "decide" (we should be lughing at this silliness!) to keep people unemployed to avoid "inflation" only makes sense if it actually meant to signify "avoid inflation of the population."

Phil in KC , June 5, 2021 at 9:44 am

The modern police force is a consequence of idle and unemployed city dwellers. Idled workers don't just sit down and die from malnutrition. Instead, they roam around looking for food, or opportunities that would lead to procuring food. Hungry, impoverished mobs are never a good idea: Ask Czar Nicholas, Kaiser Wilhelm, or the French aristocrats of the 1780's (rather, interrogate their ghosts) how idle, hungry crowds furthered their reigns. For all that, look to the unrest of the 1930's in the US.

Given this reality–that unemployed and starving people refuse to sit down and die peacefully–what will happen as automation starts to rob routine jobs? Already we are seeing robots prowling the Walmart aisles, driverless vehicles delivering pizzas, and self-checkout lines in big box stores. We who work are losing the war on unemployment, which leads to a question: Who is the winner?

Almost as an afterthought, one wonders how much in contributions to Social Security and Medicare have been lost because of automation. Robots don't pay taxes.

Jesper , June 5, 2021 at 10:21 am

Maybe Keynes had an idea what to do?
https://www.openculture.com/2020/06/when-john-maynard-keynes-predicted-a-15-hour-workweek-in-a-hundred-years-time-1930.html

After the achievement of the 40-hour workweek, paid vacations, and other labor concessions, many influential figures believed that egalitarian access to leisure would only increase in the 20th century. Among them was economist John Maynard Keynes, who forecast in 1930 that labor-saving technologies might lead to a 15-hour workweek when his grandchildren came of age. Indeed, he titles his essay, "Economic Possibility for our Grandchildren."

The benefits of labour-saving technologies have mostly been taken as money instead of time and by doing so the capitalist class kept power thereby leading to them getting the lions-share of the benefits of the labour-saving techologies.
The political class could, and still can, side with people and decide that labour-saving technologies is to be taken out as reduced amount of hours spent working for someone else. As is the politcal class have bought the 'lump of labour'-fallacy-fallcy hook, line and sinker so what we see is increased pension-age etc

Vicotria H , June 5, 2021 at 10:31 am

I tried out retirement for a few months. I'm 62 and got SS and a very small pension. It's not enough so I went back – temping. The jobs I can get as a paralegal/admin person don't pay a lot but there seem to be quite a few of them based on companies that are merging or have merged and have a huge mess to clean up. So they hire you for a few months to slog through chaos and fix it. Then on to the next one. I'll keep doing this until I can move to a cheaper part of the U.S. Remote helps in that if I don't have a Zoom interview they can't tell how old I am. I feel for everyone who can't even get tedious work. If my SS was higher I would stop working. If my salary had matched that of the male co-workers that had the exact same job as me, my pension would be higher. Retiring in America for many people is part nomadic as you have to move out of your area to survive after you leave your regular job, or it gets rid of you and the other part is being extremely frugal. Woohoo what a life after over 40 years of helping companies make money.

Rod , June 5, 2021 at 11:00 am

If my SS was higher I would stop working

Is this a complete and true statement, or a shortcut to meaning something else?
No criticism, just looking for the clarity.

Victoria H , June 5, 2021 at 11:20 am

Yes a totally true statement. For it to be higher I would have had to wait until almost 67 to take it. It will go up a tad from my additional employment – maybe. Anyway it's a mostly a set amount. I make as a temp in 2 weeks (take home) what I get in SS once per month. If I make over about $19k annually while taking the SS, the US gov will begin to reduce the SS payment.

John Zelnicker , June 5, 2021 at 1:22 pm

@Victoria H
June 5, 2021 at 11:20 am
-- -- -

Social Security takes the highest 40 quarters (10 years) of your earnings to calculate your benefit. If your current work results in higher numbers than are being used currently, the higher numbers will be used and your benefit will increase.

Victoria H , June 5, 2021 at 11:40 am

I tried to reply to your question – yes it is a true statement. What I wrote additionally may have been moderated out for some reason so I won't repeat it. It only mentioned dollar amounts and the US gov so maybe that was bad – not sure!

Rod , June 5, 2021 at 2:06 pm

Victoria H
and I thank you for that.
But I think you, and I will 'work' until we die–

What does work mean?
noun. exertion or effort directed to produce or accomplish something; labor; toil. productive or operative activity. employment, as in some form of industry, especially as a means of earning one's livelihood: to look for work. the result of exertion, labor, or activity; a deed or performance.

Work | Definition of Work at Dictionary.comhttps://www.dictionary.com › browse › work

I am personally familiar with what you are going through and My wife is there right now.

I waited till full retirement at 66 to collect–not being able to leave 2k on the table(diff btwn 62 and 66 for me). I cannot describe the amount of effort and gyration I needed to extend to achieve that– which may explain why I am the only one in my 'Friend Circle' to actually accomplish it.

Trigger Warning

I thought the coup de grace was when I had to sign up for–and Pay For, with cash, Quarterly–Medicare without a SS check to have it automatically deducted from. Because of my birthday I needed to pony up about 5 months worth of premiums(but i had 3 months to save up for the next Q pymt). I doubt you've ever been curbed at the end of a physical altercation, but that is what it felt like to me. Best think about all that.
Good news–do your own taxes for your enlightenment and you will see that the SS Income Worksheet provides a path to structuring your Income to counter-balance additional Income.
Discalimer–I am in no way an Acc'tant or Tax Man or even giving Advice. I am a Carpenter–but Written Instructions are Written Instructions and Numbers are Numbers and I made a paid living following both–so it's understandable enough to give you some options to ponder.

And to Rolf/AmSoc and all the others -- IMNSHO(the first ever time I have used this phrase) the most dispiriting element about 'Retirement' in America is the Stranding of So Many Valuable Assets embodied in the Retired when the world desperatly needs "All Hands On Deck" to resist the Man Made Extinction looming.

Rolf , June 5, 2021 at 3:22 pm

the most dispiriting element about 'Retirement' in America is the Stranding of So Many Valuable Assets embodied in the Retired when the world desperately needs "All Hands On Deck" to resist the Man Made Extinction looming.

These are true words, Rod. I think catastrophic changes (no hyperbole) lie ahead, for which there is little precedent. Many make absurdly blithe assumptions, thinking they won't be affected, or that wealth will insulate them. This is arrogant folly, and we will need everyone to row in the same direction.

Carla , June 5, 2021 at 9:32 pm

The man who owns the Heating and Air Conditioning company I have been using for the last decade lives in the neighborhood and is 88 years old. After his brother had health problems, and the young nephew he employed left for greener pastures,he now does pretty much all the work himself, and let me tell you, he knows his stuff. I know I should have a back-up in mind, just in case, but so far, haven't found anyone else I can trust.

Dr. R.k. Barkhi , June 5, 2021 at 5:49 pm

Well said. I took retirement at 62 for several reasons,number 1 being i didn't believe it would be around long enough to pay me back.

"All hands on deck" is imo exactly what is needed,but the mostly planned divisiveness (fake right vs fake left aka RepubliCons vs Dumbocrats) will help ensure that never occurs,to someone's benefit.

redleg , June 5, 2021 at 12:20 pm

Just think how many people would quit working, or enter self-employment, if they weren't dependent on employer providedmedical insurance. I don't know the answer/estimate; it would have to be a large number, enough to significantly raise wages across the board.

Amateur Socialist , June 5, 2021 at 11:29 am

Retiring in America for many people is part nomadic

This observation made me remember a critical scene from the excellent oscar winner last year, Nomadland . Frances McDormand's character meets a friend who explains why she took to the road: "Five hundred forty dollars a month from Social Security. After working non stop for over 40 years. How am I supposed to live on that".

I'm paraphrasing possibly badly from memory; it's a very short scene that isn't really pursued farther in the script. But I do remember thinking "Aha! This is the root cause of all this misery and despair "

We moved to southern Vermont from Texas just prior to the pandemic believing we had relocated to a cheaper part of the US as you also mentioned. But Vermont's strong public health track record during the pandemic has unleashed a huge real estate boom here so who knows We may end up priced out of Vermont eventually too.

Rolf , June 5, 2021 at 12:29 pm

Real estate is still relatively cheap in Texas (at least around Houston), with the caveat that Republicans don't always keep the power on or the water pressure up in the middle of winter.

Amateur Socialist , June 5, 2021 at 12:34 pm

Unfortunately our place was in the Austin exurb of Bastrop. Which is now part of the Austin insane real estate boom. And yes Houston can be cheap but only if you don't mind living near a refinery. Or in the path of many future hurricanes. Hard pass.

Pelham , June 5, 2021 at 11:11 am

I keep seeing references to "flat wages." While it's technically true, I suspect it's enormously deceptive.

Yes, we have flat wages. But the cost of necessities that add little or no value to people's lives but which they're FORCED to pay for have shot up far, far beyond the pace of inflation. Think medical care, housing and education, to name just three, all of which are somehow ignored or slighted in official inflation stats.

Susan the other , June 5, 2021 at 11:54 am

Right now the best transition is for the government to regulate capitalism in the direction the future (sustainability) dictates. The problem with regulating capitalism is that most capitalists think it is already too regulated; taxes are too high, etc. They are on the edge of revolution themselves. And regulated capitalism is almost an oxymoron to most Americans. It's just business as usual to a European because they have better social spending and blablablah. The statistic I remember is that the EU spends about 45% of its revenue on social stuff; the US spends a little less than 35%. The problem, as I see it, is this: If we in the US do not achieve adequate social spending we create the perfect breeding ground for exploitation of the environment. People will be desperate for a job – any job. Which will not only cause worse CO2 problems, it will poison off, or starve off, many many species now living on the edge. We will further pollute the oceans and waterways. And we will not only stick with our sick and poisonous agricultural practices, we will exponentiate them – precluding all efforts to fix these unsustainable things. Capitalism as we have known it must change. So, even the great idea of capitalism must adapt to reality. Somebody please tell Larry. At this point "inflation" is an absolutely meaningless word. It would be a very good thing if we followed Eisenhower's advice to LBJ and began to create social structures that are fair to all of society – to the capitalists whose current mandate of voracious profiteering is clearly unsustainable, as well as to "labor" – as we see it evolving – and now, most importantly, we must include the rights of the planet itself and all of our fellow travelers. We won't last very long if we kill them all off and trash the Earth. The race to the bottom that all privateering capitalism eventually creates is the most absurd thing in the history of civilization.

Rod , June 5, 2021 at 2:12 pm

Always with the Big Picture and the Clear Eyes.
Thanks

Carla , June 5, 2021 at 9:35 pm

Indeed.

redleg , June 5, 2021 at 12:13 pm

A good start would be breaking up all of the ubiquitous monopolies/monopsonies/cartels, that have taken over every sector of the economy, from food processing to entertainment to banking to manufacturing to politics to (ad infinitum/nauseum).

John Zelnicker , June 5, 2021 at 1:27 pm

I went to Firehouse Subs yesterday there was a whiteboard inside on a table, facing into the restaurant, that said they were hiring and offered starting pay of $9.00 for crew members and $12.00 for shift managers.

Just inside the door, facing out, was a whiteboard offering starting pay of $11.00 for crew members and $14.00 for shift managers. Seems like they're getting the message.

As an aside, I'd like to give props to Firehouse Subs for using pressed paper clam boxes and paper bags.

LawnDart , June 5, 2021 at 6:47 pm

The average mortgage payment in USA is $1158mo.

Using the 28/36 rule, how much should employers be paying hourly if their employees are valued enough to be able to afford a home?

[Jun 06, 2021] Morgan Stanley: earnings revisions will not be able to offset that de-rating, leaving the overall market vulnerable to a 10-15 % correction over the next 6 months.

Jun 06, 2021 | www.zerohedge.com

For the past several months, Morgan Stanley's fundamental analysts have been turning increasingly bearish on stocks, with the pessimistic sentiment plateauing earlier this week when chief equity strategist Michael Wilson said that there is far too much optimism in the market, and that while earnings are slowly rising, forward PE multiples are far too high and are set to slide, with "the de-rating about 75% to go or an approximate 15% decline in P/Es from here." As a result, in Wilson's view - which is rapidly emerging as the most bearish on Wall Street - " earnings revisions will not be able to offset that de-rating, leaving the overall market vulnerable to a 10-15 % correction over the next 6 months."

It now appears that Morgan Stanley's fundamental bearishness has spilled over into the bank's technical analyst team and as the bank's chief Euro equity Strategist Matthew Garman writes, for only the fifth time in over 30 years, each of Morgan Stanley's five market timing indicators are giving a sell signal at the same time.

Not only that, but the bank's Combined Market Timing Indicator - which has been in sell territory since March - just hit a new all time high of 1.19, surpassing the previous record high seen in June-2007, right around the time of the first great quant crash and before the market collapsed.

According to Garman, the only time equities have risen after a "Full House" Sell Signal was in Feb 17, shortly after the Shanghai Accord kicked in to prevent a global recession. The other previous occasions where there was a "Full House" Sell Signal were Mar-90, May-92, Jun-07. According to MS, "in the 6M post the initial Full House Sell Signal, MSCI Europe has fallen on average 6% ."

So with every in house risk indicator screaming sell, does that mean that Morgan Stanley will have the balls to tell its clients to sell? Why of course not, because in this market where stuff like the AMC, GameStop and Bed Bath squeezes force analysts to admit they no longer have any idea what's going on...

... Morgan Stanley is keeping the hope and assuming that the current period will be similar to 2017 - the only other time when a massive sell signal did not result in a market plunge.

Back in 2017, we remained constructive despite the signal given i) strong EPS growth, ii) an early cycle environment, iii) EU inflows, iv) low sentiment and v) a rise in M&A. Sentiment metrics may look more elevated than in 2017, but many of those factors remain in place today. While we see a trickier risk-reward for equities globally, we maintain our view that there is a compelling case for Europe to outperform global peers.

Yet even Morgan Stanley is forced to admit that while Defensives may just scrape by after a record sell signal, cyclicals are about to be hammered. The next chart shows the relative performance of Cyclicals versus Defensives after a Full House Sell Signal on. As MS notes, "perhaps unsurprisingly, given the poor performance at the market level, Cyclicals have struggled. In the 6M post the four initial Full House Sell Signals, Cyclicals have underperformed Defensives on average 12%, and this drops to -15% looking at any day
when the MTIs have all said sell at the same time."

This was true even in 2017 when equity markets rose: "we previously cited similarities with the 2017 Full House Sell Signal as reasons to not get overly cautious on equity markets in aggregate at this moment in time. After the February-2017 Full House Sell Signal, MSCI Europe continued to rise pretty consistently through the rest of the year. However, despite strong performance from the market in aggregate, the performance of Cyclicals versus Defensives was much poorer. Between February and June 2017 Cyclicals underperformed Defensives by 6%."

It's not just the bank's sell signal that is prompting concerns about the future returns of cyclicals: Borrowing a page from our own warnings (see " China's Credit Impulse Just Turned Negative, Unleashing Global Deflationary Shockwave "), Morgan Stanley looks at "a number of China data points which are giving warning signs" first and foremost the collapse in China's credit impulse, to wit:

While credit tightening has been front-loaded in 1H21, as outlined here, our economists remain constructive on China's growth recovery. Having said that, a number of Chinese data points do suggest the Cyclical bounce looks overextended. China's credit impulse has just turned negative, and historically this has provided a lead indicator for the year-on-year performance of European Cyclicals (Exhibit 5). Similarly, the relative performance of Cyclicals versus Defensives has closely tracked moves in Chinese 10Y bond yields, which are now at their lowest levels since September 2020, standing in sharp contrast to the performance of Cyclicals.

Putting it all together, readers have to ask themselves if what is coming will be an analog of the one and only episode on history when the market did not plunge after all Morgan Stanley market timing indicators hit a sell (and were at an all time high), or will this case be similar to Mar-90, May-92, Jun-07 when the outcome was anything but a happy ending.

[Jun 06, 2021] Eurozone Inflation Above Target Sooner Than The ECB Expected

The USA is not immune. Energy price will drive inflation here too. So the decline of 10 years bond rate might a trap.
Jun 02, 2021 | www.wsj.com

The annual rate of inflation in the eurozone rose in May to hit the European Central Bank's target for the first time since late 2018, as energy prices surged in response to a strengthening recovery in the global economy.


[Jun 06, 2021] GOM is the major factor in the USA oil prodcution comeback , not "shale plays " that are supposedly should be the last hurrah of oil production in the USA

Notable quotes:
"... LTO drilling locations are diminishing faster and faster. Look for massive consolidation as E&P companies can only grow through M&A. ..."
"... The energy transition will be painful and longer than anticipated. Criminalization of an industry that embodies national security and that gives the "haves" a competitive advantage in favor of hopes and prayers is folly and irresponsible. ..."
"... A few years ago I heard Chinese venture capitalist speak at the Aspen Institute. He claimed that democracy is not a form of government but instead a religion. He gave the example that in Nigeria, the US is concerned about human rights while the Chinese could care less who dies in Nigeria as long as they can get the oil. He also stated that the Chinese only care about how they can feed, shelter, move, and run their economy and human rights are not remotely introduced into their paradigm. Something to think about. ..."
Jun 01, 2021 | peakoilbarrel.com

HOLE IN HEAD IGNORED 05/30/2021 at 1:40 pm

Ovi, great work as usual .My POV is that it is GOM that is the major factor in the comeback , not "shale plays " that are supposedly going to be the saviors of Industrial civilisation . Confirms my argument ( and of many others )that shale is all juiced out . Better to lower expectations from LTO for the future . REPLY OVI IGNORED HOLE IN HEAD IGNORED 05/30/2021 at 1:40 pm

Ovi, great work as usual .My POV is that it is GOM that is the major factor in the comeback , not "shale plays " that are supposedly going to be the saviors of Industrial civilisation . Confirms my argument ( and of many others )that shale is all juiced out . Better to lower expectations from LTO for the future . REPLY OVI IGNORED 05/30/2021 at 5:00 pm

Thanks HH

I know the general opinion seems to be that the shale plays are finished. Looking at the data that is in the post doesn't confirm, at this time, that shale is overblown. Let's look at the two states at the top of the post, Texas and NM and the onshore L48 first chart.

Looking at the Texas increase from January to March one gets 4,745 – 4,661 = 84 kb/d or 42 kb/d/mth.
Looking at NM from November to March, one gets 1,155 – 1,112 = 43 or 11 kb/d/mth.
The total being 53 kb/d/mth.

Looking at the total onshore L48 increase from January to March, one gets 8,861 – 8,814 = 47 or a net of 23.5 kb/d/mth. So within the onshore lower 48 there is 30 kb/d/mth of decline.

I would not bet much on my two month or four month analysis, but I think we will need to monitor what is happening in Texas and NM for another six months to get a better idea of what is happening in the Permian. The price of oil will be the determining/critical factor.

05/30/2021 at 5:00 pm

Thanks HH

I know the general opinion seems to be that the shale plays are finished. Looking at the data that is in the post doesn't confirm, at this time, that shale is overblown. Let's look at the two states at the top of the post, Texas and NM and the onshore L48 first chart.

The total being 53 kb/d/mth.

Looking at the total onshore L48 increase from January to March, one gets 8,861 – 8,814 = 47 or a net of 23.5 kb/d/mth. So within the onshore lower 48 there is 30 kb/d/mth of decline.

I would not bet much on my two month or four month analysis, but I think we will need to monitor what is happening in Texas and NM for another six months to get a better idea of what is happening in the Permian. The price of oil will be the determining/critical factor.

LTO SURVIVOR IGNORED 05/31/2021 at 12:39 am

LTO drilling locations are diminishing faster and faster. Look for massive consolidation as E&P companies can only grow through M&A. Many companies have drilling inventories of less than four years. The LTO revolution is over as we knew it and the number of E&P companies will shrink dramatically. There will be minimal growth and much less than 75kbd per month.

The energy transition will be painful and longer than anticipated. Criminalization of an industry that embodies national security and that gives the "haves" a competitive advantage in favor of hopes and prayers is folly and irresponsible.

China will bury us as they try to capture as much of the hydrocarbon as they can knowing that energy equals power.

A few years ago I heard Chinese venture capitalist speak at the Aspen Institute. He claimed that democracy is not a form of government but instead a religion. He gave the example that in Nigeria, the US is concerned about human rights while the Chinese could care less who dies in Nigeria as long as they can get the oil. He also stated that the Chinese only care about how they can feed, shelter, move, and run their economy and human rights are not remotely introduced into their paradigm. Something to think about.

[Jun 06, 2021] Are rising prices and inflation going to hurt your investments- Here's how to protect your nest egg-

Jun 02, 2021 | finance.yahoo.com

Investments in real estate, commodities and gold can help offset higher inflation, wealth manager say.

Real estate, for instance, can gain value amid inflation, while property owners can increase rent on tenants. Real estate investment trusts have also offered attractive returns in prior periods of rising inflation.

Commodities historically do well when the U.S. dollar is weak, and higher inflation tends to push the greenback lower.

"Inflation is inevitable, especially with the amount of money the government is spending," says Patrick Healey, founder and president of Caliber Financial Partners, a financial planning firm. "From a financial standpoint, you do need to have some hedges in your portfolio."

...Materials and energy companies stand to benefit from higher commodities prices, while higher interest rates tend to help financial stocks with higher profit margins.


[Jun 06, 2021] Yes, It's Still the Economy, Stupid by Karl Rove

An interesting question how stock market casino will volve. Will the Ponzi collase or will run for a couple more years.
Jun 02, 2021 | www.wsj.com

the OMB expects slower growth in the long run. It projects gross domestic product growth running slightly over 2% on average annually between fiscal 2022 and 2031, while the nonpartisan Congressional Budget Office pegs growth at less than 2% on average over the same window. Either growth rate is anemic, making more "broadly shared prosperity" unlikely as well.

...

It may be that raising federal spending turns out to be a winning formula for Democrats in 2022. Then again, it may not. Especially since Mr. Biden would hike taxes high enough to eat up more GDP than in any 10-year period in American history, according to the American Action Forum's Gordon Gray. The spending binge would also increase the nation's public debt to 117% of GDP""greater than the previous record GDP percentage that Washington clocked in the year after World War II.

Recent polling suggests the Democrats' approach may not help them in the midterms.

... Democrats may be counting on Republicans to emphasize "culture war" issues rather than deliver a focused, principled attack on the president's orgy of spending and tax increases. This isn't to suggest issues like defunding the police, critical race theory and border security are unimportant. But in 2022, as in most years, the economy will likely be the real congressional battleground. The sooner Republicans recognize that, the better.

Mr. Rove helped organize the political-action committee American Crossroads and is author of "The Triumph of William McKinley" (Simon & Schuster, 2015).

M

Maria Stepanova

I don't believe policies matter any more. In 2020, democrats secured a permanent upper hand for themselves which is mail-in ballots.
Kenneth Johnson
WSJ headline---"Yes, It's Still The Economy, Stew ped"

If....by the summer of 2022....inflation is 4%+....we're in a recession....and unemployment is 6%+....the Democrats will lose the midterms....I hope.

If none of those things is true....they may 'dodge a bullet'.
Any other opinions?

Ron Hoelscher
They have lost the culture war and do not seem to realize it.

As far as spending, when an economy evolves to have very few people controlling the 90% of the economy then the governing party must resort to handouts to the 90% to stay in power.

I think the Romans called it "bread and circuses." Trump was the circus, now people want some bread.

[Jun 03, 2021] Will the stock bubble continue to inflate

Jun 03, 2021 | peakoilbarrel.com

HHH IGNORED HOLE IN HEAD IGNORED 05/31/2021 at 2:16 pm

Ovi, refer Iranian oilfields . I have always said that Iran is producing and selling all the oil it wants to sell or can sell . The regime has outlived 10 US administrations and 6 US presidents inspite of sanctions . They are having to sell at a discount but at the end of the day the oil flows . Just some road bumps and a zig zag route . I doubt they have a lot of spare capacity .If and when the sanctions are lifted all what is " unofficial " will become " official " . As to OPEC or OPEC+ that they are close to capacity viewpoint is more prevailing by the day .

05/31/2021 at 12:58 pm

Current around of stimulus has run it's coarse. I look for jobs numbers and inflation numbers to soften over next few months. Which means more QE and lower interest rates for longer. Higher stock prices.

But for the real economy. We pulled 5 years worth of GDP forward. Unless governments are prepared to spend even more on a monthly and yearly basis going forward than they did since March 2020 until now. And put more money into the hands of average people. We roll over first then fall off a cliff economically. Private banks just aren't going to create the money via loan creation in volume needed to offset or match what the government has done over past year. So without further massive stimulus we get massive credit contraction.

With the debt burden not just public debt but private debt hanging over the economy we likely never return to pre-pandemic levels of Global GDP

Price action for oil is still bullish but that can change in a hurry when jobs and inflation data turn soft. HOLE IN HEAD IGNORED 05/31/2021 at 2:00 pm

HHH, " With the debt burden not just public debt but private debt hanging over the economy we likely never return to pre-pandemic levels of Global GDP " . Been parroting this from a long time but few want to admit that
the BAU is over . Life is(was) a party and all parties must end .

[Jun 03, 2021] Bitcoin is a -farce- - Amundi CIO

Jun 03, 2021 | finance.yahoo.com

Thu, June 3, 2021, 7:18 AM AMUN.PA +0.21%

LONDON (Reuters) - Cryptocurrencies such as bitcoin are a "farce" and a symptom of bubbles forming in financial markets, Amundi chief investment officer Pascal Blanque said on Thursday.

Bitcoin, trading at around $39,364, fell 35% last month after China doubled down on efforts to prevent speculative and financial risks by cracking down on mining and trading of the largest cryptocurrency.

Speaking at a news conference, Blanque described the crypto currency as a "farce," adding that it was a symptom of the bubbles forming in markets.

[Jun 01, 2021] Four hedges to shield your finances from inflation - BNN Bloomberg

Jun 01, 2021 | www.bnnbloomberg.ca

May 27, 2021

Four hedges to shield your finances from inflation

By Dale Jackson

https://imasdk.googleapis.com/js/core/bridge3.462.0_en.html#goog_37473322 Portfolio manager sees opportunity in rising dividend stocks

Columnist image Dale Jackson

Personal Finance Columnist, Payback Time

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If you buy food or gas like everyone else, you already have a profound understanding of how inflation can consume your budget.

The latest official inflation tally showed a jaw-dropping 3.4 per cent increase in the cost of living in April compared with a year earlier.

That's not to say runaway inflation is inevitable. The Bank of Canada has vowed to use its monetary bag of tricks to keep it under control. Also, if you draw income from a defined benefit pension (DB), Canada Pension Plan (CPP) or Old Age Security (OAS), benefits are automatically tied to inflation.

Canadians who invest through a defined contribution pension (DC), or through a self-directed registered retirement savings plan (RRSP) or tax-free savings account aren't so lucky. But there are steps you can take in your investment portfolio to hedge against a rapid increase in the cost of living. The objective of a hedge is to add protection without sacrificing return potential. Here are four ways to put that protection in your portfolio.

1. Commodity equities

Equity markets generally advance with inflation (to a point), so it's good to stay invested and diversified across sector and geographic lines. But some equities actually contribute more to - and benefit more from - inflation. Commodities like crude oil, lumber, grain and metals have taken the lead. That means bigger profits for commodity producers.

You can invest in specific commodities on the futures market through exchange-traded funds (ETFs), or purchase shares in commodity-producing companies directly or through ETFs and mutual funds.

2. Real estate

Real estate is another equity asset class already contributing to - and benefitting from - inflation. Home owners are reaping rewards from soaring residential real estate prices but there are many ways to diversify real estate holdings into other real estate subsectors through real estate investment trusts. REITs are companies that own and operate residential, commercial and industrial real estate that generate income from rents and capital gains through price appreciation.

3. Short-term fixed income

Proper portfolio diversification includes safe fixed income, such as government bonds. Dedicating a significant portion to fixed income in a portfolio will cushion it from volatility on the equity side. How much of your portfolio should be dedicated to fixed income depends on your tolerance for risk and how soon you need the cash.

It's hard to make that argument right now when yields are near rock-bottom lows, so it's best to bite the bullet for now and keep your fixed income in short-term maturities to take advantage of higher yields if inflation pushes interest rates up. A typical one-year guaranteed investment certificate (GIC), for example, pays about one per cent (well below the current inflation rate).

You can also hedge fixed income with inflation-adjusted products such as annuities or real return bonds, but the added cost of that protection could eat into overall returns if inflation does not become a problem.

4. Fixed-rate mortgage

Variable-rate mortgages are now available at about one per cent. While it might be tempting for homeowners to borrow money for (close to) nothing, a rapid rise in mortgage rates could translate into hundreds of dollars added to a monthly household budget or tens of thousands of dollars over the course of the mortgage.

Five-year fixed rates are available at two per cent. That means you will pay two per cent no matter what inflation does to mortgage rates in the next five years.

If you aren't already locked in, think about locking in now.

[Jun 01, 2021] ARK Invest Stocks To Buy And Watch- 6 Stocks That Cathie Wood's ARK ETFs Own; Zoom Slides Before Earnings

Reminds me of Trading Places.
Jun 01, 2021 | finance.yahoo.com

Theo the Cat 19 April, 2021 Ark is gonna turn into Titanic.

[Jun 01, 2021] ARK Invest Stocks To Buy And Watch- 6 Stocks That Cathie Wood's ARK ETFs Own; Zoom Slides Before Earnings

Skepticism grows, judging from Yahoo comments below.
Jun 01, 2021 | finance.yahoo.com

Scorpion 16 April, 2021 I am not surprised either that ARK bought COIN. She is a gambler not an investor. Most of her investment is in overvalued, overhyped stocks they can't just keep going up.
Lou 18 May, 2021 Until recently she was loaded up with Tesla - as much as 10% of the ARKK portfolio - which accounted for a good part of its stellar performance (note that she had TSLA in some of the other ARK funds. Not sure any of these other choices are going to give her ETFs the ride TSLA gave them. Reply 2 Rene 7 May, 2021 Any one that invest in Bitcoin ,dogecoin, Coin etc, must have his brain fall of pot or must have so much money like the Tesla Ceo, that they can gamble for ever in a Casino, with that kind of money, i too will invest in Tin air, and artificial money because Y cannot invest money sufficient to go broke in 10 life times. that is very easy I don't need to expect any return in my investment.
Theo the Cat 19 May, 2021 I would never buy ARKK's stocks, but I am definitely watching and eating popcorn. Alex 27 April, 2021 ARK is losing steam. People start to realize ARK can't survive in a bear market
Theo the Cat 19 April, 2021 Ark is gonna turn into Titanic.
Rock 25 May, 2021 no one cares what ARK invests in... unless you want to lose money Reply 2 Cybercraig 25 April, 2021 I may end up selling ARK.G for a loss to balance next year's taxes. Yech! Reply 5 4 Mighty Lion 19 May, 2021 Why is the reporting about ARK so sexist? Every single article I've ever seen starts "Cathie Wood's ARK ETFs ... (such and such) ..." If it was managed by a man, they would just say "ARK ETFs ... (etc). Reply 2 FlorinS 4 hours ago How can we trust Cathie Wood ? Only few days ago she predicted that Bitcoin may reach $500,000.

[Jun 01, 2021] California's Controversial Math Overhaul Focuses on Equity; computer science is next

May 31, 2021 | news.slashdot.org

Money quote from comments: "When news of this proposed standard came out, I read the actual standard because I wanted to see if it really was that bad. Things were reported like, "Saying an answer is 'wrong' is racist. There is no right and wrong in math, just shades of truth." These kinds of things are worrisome. So I read a good chunk of the proposal, and I couldn't find anything like that. Instead, I found their point was that anyone has the capability of learning math, and so we should be teaching it to everyone. If people aren't learning it, then that's a problem with our teaching methods.

Not sure Google and Apple will be happy. Clearly programming languages are racists as almost all of them were created by white guys and they disproportionally punish poor coders...

A plan to reimagine math instruction for 6 million California students has become ensnared in equity and fairness issues -- with critics saying proposed guidelines will hold back gifted students and supporters saying it will, over time, give all kindergartners through 12th-graders a better chance to excel. From a report: The proposed new guidelines aim to accelerate achievement while making mathematical understanding more accessible and valuable to as many students as possible, including those shut out from high-level math in the past because they had been "tracked" in lower level classes. The guidelines call on educators generally to keep all students in the same courses until their junior year in high school, when they can choose advanced subjects, including calculus, statistics and other forms of data science.

Although still a draft, the Mathematics Framework achieved a milestone Wednesday, earning approval from the state's Instructional Quality Commission. The members of that body moved the framework along, approving numerous recommendations that a writing team is expected to incorporate. The commission told writers to remove a document that had become a point of contention for critics. It described its goals as calling out systemic racism in mathematics, while helping educators create more inclusive, successful classrooms. Critics said it needlessly injected race into the study of math. The state Board of Education is scheduled to have the final say in November.

2+2=5 if we say it is ( Score: 4 , Insightful) by Anonymous Coward on Monday May 31, 2021 @03:06PM ( #61440248 )

People learn at different rates. Lowest common denominator serves no one. Reply to This
Re:2+2=5 if we say it is ( Score: 2 ) by PPH ( 736903 ) on Monday May 31, 2021 @03:28PM ( #61440308 )

And War is Peace, Freedom is Slavery, Ignorance is Strength.

Report to Room 101 for remedial math. Reply to This Re:I can't believe this white supremacy ( Score: 5 , Informative) by phantomfive ( 622387 ) on Monday May 31, 2021 @03:41PM ( #61440352 ) Journal

When news of this proposed standard came out, I read the actual standard because I wanted to see if it really was that bad. Things were reported like, "Saying an answer is 'wrong' is racist. There is no right and wrong in math, just shades of truth." These kinds of things are worrisome.

So I read a good chunk of the proposal, and I couldn't find anything like that. Instead, I found their point was that anyone has the capability of learning math, and so we should be teaching it to everyone. If people aren't learning it, then that's a problem with our teaching methods.

I also found that instead of getting rid of calculus, they are suggesting that you learn calculus as a Junior or Senior in high school. This seems fine to me.

The only thing I wish they'd put more emphasis on is statistics, because if you don't understand statistics, the modern world is a very confusing place. Reply to This Parent Share Flag as Inappropriate Re:

Does the curriculum for grades 1-10 have the appropriate foundational education for kids in grades 11-12 to actually succeed in a calculus class? Because if not, then the notion that any significant portion of juniors and seniors will be able take a calculus class is just a fantasy. Re:

That is the goal, but I am not enough of an expert to know whether they reached their goal or not. Re:

Reading (mostly skimming) through chapter 8 (about grades 9-12), a couple things stick out:

First off, they define three different possible "pathways" for grades 9-10, which seems completely in opposition to goal of a "common ninth- and tenth- grade experience." It sounds like they envision that some high schools will only provide a single pathway while others will provide multiple ones -- but it seems incredibly obvious that that's going to put students on different tracks.

I did not dig into what was inclu In Australia, the course hasn't changed ...

in 40 years since I did it. (I have been helping my kids.)

Which is a problem, because the world has changed with the advent of computers.

So they work on quite difficult symbolic integrations. But absolutely nothing on numerical methods (and getting the rounding errors correct) which is far more useful in the modern world.

For non-specialist students, there is almost nothing on how to really build a spreadsheet model. That again is a far more useful skill than any calculus or more advanced algebra.

And then Re: I can't believe this white supremacy I doubt they could get AP Calculus to work. It's going to have to be an easier version of pre Calculus. Because of how they schedule the classes today, some kids take summer courses so that they can get the prerequisites in time. Keeping everyone at the same slow pace is painful for the stronger students. I'm wondering if they are having trouble finding teachers who are qualified to teach math. Kumon The ones whose parents can send them to Kumon or Russian Math after school, will have the capacity. Those who cant even if they were smart enough for the accelerated program under current system wont. With any law follow the money- see who will make money from this. Re:I can't believe this white supremacy ( Score: 4 , Insightful) by CrappySnackPlane ( 7852536 ) on Monday May 31, 2021 @04:14PM ( #61440460 )

Which planet did you go to school on?

Here on Earth, here's how "everyone learns calculus in 11th grade" works:

The entire class has to stop and wait for the kids who are genuinely overwhelmed - be it because they're smart-but-poor-and-hungry or, you know, because they're just fucking dumb , both types exist, it doesn't matter - to catch up, because the teacher's job rests on whether 79% or 80% of their students score a passing grade on the statewide achiev^H^H^H^H^H^H (whoops, can't have achievements, that's ableist) "performance" tests. The teacher, being a rational creature who understands how to make sure their family's bread remains buttered, spends the bulk of their time helping along little Jethro and Barbie.

The bright kids are left bored out of their minds, and the "solution" presented by these absolute shitstains is to suggest the bright kids do after-school activities if they want to actually learn. Like, that's great for the 1% who genuinely love math the way some kids love music or acting or sports, but what about the 25% or so who are really gifted at math and would like to do more with it, but aren't so passionate about it that they want to give up more of their precious dwindling free time to pursue it? What about the 50% who aren't necessarily great at math but could certainly learn a lot more if the class wasn't being stopped every two minutes to re-re-remind little Goobclot that "x" was actually a number, not just a letter?

Look, I absolutely agree that it's bad to write kids off as dumb. But Harrison Bergeron is not included in the "Utopian Literature of the 20th Century" curriculum for a reason. There's a flipside, and none of these "one size fits all" proposals does anything to convince me that the proponents have actually seriously considered the other side of the coin. Reply to This Parent Share Flag Re:I can't believe this white supremacy ( Score: 2 ) by systemd-anonymousd ( 6652324 ) on Monday May 31, 2021 @06:26PM ( #61440894 )

My local school district is removing all AP math courses because they believe a disparity in race in the students represents racism, and/or they just don't want to have to look at the situation. I know the precursors to this sort of racist policy when I see it, and documents that espouse a trifecta of equity, inclusivity, and diversity are fully intended to pull crabs back down into the boiling bucket. Re:final countdown ( Score: 2 ) by gweihir ( 88907 ) on Monday May 31, 2021 @05:31PM ( #61440734 )

Next step is mandatory lobotomies for smarter kids or something like it. Because they obviously violate the dumber ones by setting an example the dumber ones can never hope to reach. See also "Harrison Bergeron" by Kurt Vonnegut. Reply to This Parent Share

[May 31, 2021] For the first four months of this year, the seasonally-adjusted consumer-price index is rising at an annualized rate of 6.2%. Without the seasonal adjustments, it is rising at 7.8%.

May 31, 2021 | www.wsj.com

"The consumer-price index rose at a remarkable 4.2%," says your editorial, "Powell Gets His Inflation Wish" (May 13). Remarkable, yes, but our current inflation problem is far worse than that 4.2%, which is bad enough. The real issue is what is happening in 2021. We need to realize that for the first four months of this year, the seasonally-adjusted consumer-price index is rising at an annual rate of 6.2%. Without the seasonal adjustments, it is rising at 7.8%. Meanwhile, house prices are inflating at 12%.

We are paying the inevitable price for the Federal Reserve's monetization of government debt and mortgages. As for whether this is "transitory," we may paraphrase J.M. Keynes: In the long run, everything is transitory. But now it is high time for the Fed to begin reducing its debt purchases, and to stop buying mortgages.

[May 31, 2021] How to Know When Inflation Is Here to Stay

Skill shortages, wage pressures and "hawseholes flash with cash" is is a pretty questionable consideration (mostly neoliberal mythology). It is typical for WSJ not to touch controversial topics connected with the deterioration of global neoliberal empire centered in Washington and rampant money printing by Fed, which increases the level of debt to Japanese's level. They also are buying bonds to keep rate under check which is kind of counterfeiting money.
So we should expect US stock market to emulate Japanese's stock market. Under neoliberalism there can be no wage pressures as war of labor was won by financial oligarchy which institutes neo-feudal regime of wage slavery. One of the key methods is import of foreign workers to undermine wages in the USA. And neoliberalism is a trap, creating "Welcome to the hotel California" situation.
Automation and robotization puts further pressure on workers in the USA, especially low skill jobs (in some restaurants waiters are replaced by robots). In many large grocery shots, Wall Mart, etc automatic cashiers machines now are common. That increase theft but saving on casheer job partially compensate for that. In back office cash and check counting is also automated using machines.
The key issue here might be the status of dollar as world reserve currency... That allows the USA to export inflation. If dollar dominance will be shaken inflation chickens will come to roost.
May 31, 2021 | www.wsj.com

Inflation is here already, and in the long run there is a lot of upward pressure on prices. But between now and then lies a big question for investors and the economy: Is the Federal Reserve right to think that the price rises we're seeing now are temporary and will abate by next year?

Some at the Fed are already having vague doubts, starting to talk about when to discuss removing some of their extraordinary stimulus even as they continue to push the idea that inflation is likely to fall back of its own accord.

... ... ..

Inflation expectations can become self-fulfilling, and are watched closely by the Fed. One-year consumer inflation expectations reached 4.6% in May, according to the University of Michigan survey, the highest since the China commodity boom of 2011.


Jeffrey P

It is important to not underestimate market sentiment and expectations in such matters because sometimes in economics, the expectation can be strong enough to become a self-fulfilling prediction even when other indicators recede or normally wouldn't be a driver.
Jeffrey Whyatt
I wonder how COLAs in wages, pensions, social security, etc. will impact inflation when these kick in. Think most occur automatically on a given contractual date. Might add fuel to the fire.
BRANDON JAMES
Just look at the prices for all the things they exclude from the CPI and other indices of inflation.
stephen rollins
How do you tell when the Treasury Sec. and Fed Chair are lying about inflation? When you open your eyes in the morning and the Sun rises in the East.
RICHARD TANKSLEY
It seems wise not to overlook the upcoming problems that we might have with China which which have the potential to create even more inflation. Lots of tensions are still around and frankly we should seriously dent US imports from there over the Wuhan virus.
BRUCE MONTGOMERY
Economists are good at dissecting the past, but terrible at forecasting the future.
ROBERT BAILEY
They predicted 12 out of the last 3 recessions
stephen rollins
Yes, and non economists do even worse. Look at the Japanese stock market. About 37K in 1990, cratered, and still only at 28 today. Thats over 30 years, folks.
RODNEY EVERSON
Definition of a "Positive Carry Trade": Borrowing money at an interest rate and investing it at a higher rate to earn the difference.

Banks do this with deposits, for example, borrowing money from savers and investing it in higher-yielding loans.

Bond traders typically do it by purchasing longer maturities at, say, three percent and financing them in the repo market at a rate now close to zero.

The main risk to such a trade is that the higher-yielding investment loses value while holding it. The bank loan goes bad, or the long bond falls in value while holding it.

Today the Federal Reserve is running the largest positive carry trade in history, borrowing trillions of dollars from the banking system and paying them 1/10 of one percent on the loans while using the money to buy trillions of bonds and mortgages for its portfolio.

If they raise short rates today, the banks will want more than 1/10 of a percent while, simultaneously, bond prices will crater. Anyone see a conflict here?

RODNEY EVERSON
There seems to be universal agreement that inflation is underway today. The disagreement is three-part: 1) It will be transitory and we will return to low levels; 2) It will not be transitory and we are facing steadily rising prices for the foreseeable future; 3) Not only will it not be transitory, but it will begin to escalate rapidly with the Fed proving unable or even unwilling to control it, resulting in a hyperinflation.

The bond market is clearly betting on scenario #1, as is the Fed.

And yet the government is spending like the proverbial drunken sailor and the Fed has now abandoned the banking system's fractional reserve mechanism that Volcker employed to bring the 1970's inflation back under control. The result, to my mind, is that the U.S. Government's finances now closely approximate those of Venezuela and Zimbabwe in the recent past while the Fed has relinquished the tools that would ordinarily be used to yield a different result than those countries experienced.

C Cook
Economics and politics.

The story describes reality well. Economics is just fuzzy theory now, neither I nor 99% of America can sort it out. MMT... Print money forever and it doesn't matter?

Politics is clear. History has shown that new administrations lose the House at the first mid-term. If that happens next year, the entire woke/green/leftist agenda goes down in flames. Pelosi is back to being a pedestrian member of the House.

To avoid history, DNC will attempt to spend our grandchildren's future to buy every vote available. Free everything, all the time. No need to work, study, or even get out of bed before noon. Infrastructure is code for pay off Unions to get workers to vote, shake down companies who want construction contracts to donate to DNC.

Equity market is watching. Bond market is watching. Likely, they realize that the only reality is the massive damage to the US which will result from the DNC wanting to keep Nancy happy.

James Cornelio
Unexplored in this article is the issue of what CAN the Fed do if there is unacceptable inflationary pressures. To think that it could reduce its $100+ billion monthly purchases in debt let alone raise interest rates by any serious amount is to forget that we are a nation awash in debt and that any move by the Fed to do either would result in a 'taper tantrum' the likes of which will cause all previous tantrums to look like nothing more than naughty child's play.
William Mackey
The poster child for inflation has to be in the retail housing market. Fixer Uppers that went begging for a buyer two years ago are the subject of bidding wars today. Biden is pouring trillions into an emergency that is not there.
DANIEL PETROSINI
The Fed is now just another political entity. They are justifying the ridiculous increase in money supply with the 'temporary' argument. It is critical to note, they have always been late. This will not end well.
jennifer raineri
So right. And everyone is just whistling through the graveyard.
Ivaylo Ivanov
One possibility is that households spend some of their savings but continue to save more than before in case of future trouble, while higher prices make people think twice about splashing out.
When people see prices rising across the board they spend and hoard, they don't save, especially when savings accounts interest rates are 0%.
CHING CHANG TSAI
In my opinion, anyone with common sense knows that inflation is here. Everything is more expensive than before with a significant difference that draws buyer's attention. Even my home value appreciates about 20% more than the value in 2020, estimated by the local government. Thanks to my senior age that helped me to limit the raise to 10%. I protested in vain due to local taxing authority had hard data on hand to dispute my protest.

I accept the reality except that FED said this inflation is "transitory." I can hardly wait till next year to see my home value will depreciate back to my 2020 property value. I hope FED will not "lie" on this subject.

David Weisz
I accept the reality except that FED said this inflation is "transitory."

The Fed description is accurate... it's just whether the transition is to lower inflation or to runaway inflation.

[May 31, 2021] Flywire Hits $3.5 Billion Valuation After First Day Of Trading As Fintech IPO Frenzy Continues

May 31, 2021 | www.forbes.com

Shares of Flywire, a company that helps organizations accept foreign-currency payments, debuted on the Nasdaq on Wednesday at $34 apiece, up from their $24 IPO price. They rose about 4% on their first day of trading, giving the Boston-based fintech a roughly $3.5 billion valuation by day's end. As a private company, Flywire was last valued at $1 billion after a round of funding in early 2020, according to a PitchBook estimate.

Founded in 2009 under the name peerTransfer by Spanish serial entrepreneur Iker Marcaide, Flywire originally aimed to make it easier for international students to pay U.S. tuition without incurring foreign currency fees that could range from 3% to 5%. Flywire has since expanded its services, enabling some 2,250 clients including universities, hospitals, travel providers and businesses to accept payments in more than 130 currencies. It acquired Palo Alto healthcare payments startup Simplee in February 2020. Despite the turmoil of last year, Flywire processed $7.5 billion in payment volume and signed up 400 new customers while retaining 97% of existing customers.

[May 31, 2021] Harding cash during inflation

May 31, 2021 | www.wsj.com

R


RODNEY EVERSON

Mr. Dale, that's not entirely accurate. Obviously, the value of the cash deteriorates as inflation progresses, but once inflation is underway interest rates, particularly short-term rates, typically escalate. Often in the past, the short rate has gone well above the inflation rate and people holding money market funds do quite well, ending up earning more than the inflation rate and able to take advantage of depressed prices in bonds and even stocks later on.

But if we get a hyperinflation, (and to be fair you did specify "runaway inflation") which isn't out of the question given the Fed's actions, short term rates won't likely reach the level required to make cash a good alternative. At that point, real assets, possibly some stocks, or holding cash denominated in another currency become the only reasonable protection from your savings losing significant value. Cryptocurrencies could also pan out, although there's a huge risk that they do not, and that's despite what inflation does.

C Cook
You cannot eat gold and crypto is a house of cards. Short term, only cash holds up, and even then inflation eats it away slowly.

Longer term, I believe only place to hide is the mega-cap global franchise stocks. They can dodge government policies and can move assets to where they live better.

jennifer raineri
How can inflation progress if everything crashes? I believe the horrible mess we've gotten into is going to produce horrific results. The financial crisis was the result of deregulation. What's next will be global and will be due to the sheer stupidity of the reaction to Covid. Throw politics in there too.

[May 31, 2021] Yes inflation is transitionary. Thos only question is transitionary to what level?

Highly recommended!
As for whether this is "transitory," we may paraphrase J.M. Keynes: In the long run, everything is transitory.
May 31, 2021 | www.wsj.com
D

David Weisz

I accept the reality except that FED said this inflation is "transitory."

The Fed description is accurate... it's just whether the transition is to lower inflation or to runaway inflation.

Jim McCreary
The biggest single factor that will drive long-term inflation is the absence of downward price pressure from new Chinese market entrants. Cutthroat pricing from China is the ONLY reason the West has been able to get away with Money-Printing Gone Wild for the past 20 years without triggering runaway inflation.

There are no new Chinese entrants because the Chinese are now all in in the world economy. The existing Chinese competitors are seeing their costs go UP, not down, because they have fully employed the Chinese population, and have to pay up in order to get and keep workers.

So, without any more downward price pressure from China, this latest round of Money-Printing Gone Wild is showing up as price inflation, and will continue to do so.

Batten down the hatches! Stagflation and then runaway inflation are coming!

[May 30, 2021] Everything Bubble: issuance of new CLOs is on pace to easily exceed 2018's record.

May 30, 2021 | www.zerohedge.com
Lordflin 2 hours ago (Edited) remove link

This has worked out so well in the past I cannot see what could possibly go wrong...

At least the people involved in these transactions are honest, trustworthy folks...

We have built a world upon such a foundation folks... I guess we should all be grateful for the coming war...

And I must be off my meds again...

ebworthen 2 hours ago

Oh yeah, those little beasties.

Mortgage Backed Securities, Credit Default Swaps, Collateralized Loan Obligations.

4X levered ETF's, mortgage/rent +50% of monthly income, HELOC's, 10% inflation.

What could go wrong?

[May 30, 2021] CLOs Join The Everything Bubble - ZeroHedge

May 30, 2021 | www.zerohedge.com

CLOs Join The Everything Bubble BY TYLER DURDEN SUNDAY, MAY 30, 2021 - 01:00 PM

Authored by John Rubino via DollarCollapse.com,

The "Everything Bubble" has jumped from hyperbole to literal truth in just a couple of years, as more and more assets enter "crazy expensive/extremely reckless" territory. The latest addition to the list is collateralized loan obligations (CLOs), which are created when a bank lends money to a less-than-creditworthy company and then bundles that loan with a bunch of similar loans into bonds for sale to yield-starved pension funds and bond funds.

There's a legitimate place in the market for this kind of security, as long as everyone understands the risks. But in financial bubbles, banks' insatiable hunger for fees combines with bond buyers' desperate need for income to cloud everyone's judgment. Lending standards slip, bond quality declines, credit rating agencies look the other way to keep the deals flowing, and buyers keep buying because they have no choice.

Record year

So far this year, issuance of new CLOs is on pace to easily exceed 2018's record.

Part of this surge is, like so much else, catch-up from last year's nationwide lockdown. But most is just your typical out-of-control financing fueled by way too much new currency being dumped into the banking system.

So how can bonds made up of below-investment-grade paper be investment grade? Through the magic of securitization. As the Wall Street Journal recently quoted CitiGroup:

Because CLOs' loan holdings are diversified, the bonds can achieve higher credit ratings than the underlying loans, making them popular among institutions restricted to investment-grade debt, such as banks and insurers.

Meanwhile, the combination of a recovering economy and lots of lenders willing to finance pretty much anything is improving the prospects of financially challenged companies. Fewer of them are defaulting, which increases the confidence of the people buying CLO bonds. Moody's Investors Service now expects the trailing 12-month default rate on CLOs to fall to 3.9% by the year-end, from 7.5% in March. And a growing number of firms are now being reviewed by rating agencies to have their CLOs upgraded.

Meanwhile, spreads relative to risk-free paper are shrinking:

Sounds promising, right? And, alas, also familiar. Here's how CDOs, the previous bubble's version of CLOs, worked just before the bottom fell out in 2008:

https://www.youtube.com/embed/3hG4X5iTK8M

Perpetual motion machine

Once they really get going, asset-backed securities like CDOs and CLOs take on a kind of perpetual-motion-machine vibe in which easy money begets even easier money. To the extremely credulous, such a system looks capable of spinning right along forever. Unfortunately, this perception tends to become widespread just as some crucial cog in the machine is about to break.

Which cog will it be? Candidates abound. Interest rates might rise, stocks might tank, the government might realize its policies are stoking instability and try to "taper." Some crazy geopolitical thing might happen (DO NOT look closely at Palestine, Ukraine, or Taiwan). It doesn't matter which breaks first, as long as one eventually does.

Then the perpetual motion machine shifts into reverse, with rising defaults causing lower CLO bond ratings causing mass sales by panicked institutions. And so on, until whoever had the guts to short this market cashes out with epic gains. 11,429 31 NEVER


Detective Miller 2 hours ago

When there's nothing left there's always war.

Misesmissesme 2 hours ago

The institutions buying these instruments have no risk. They know they'll be bailed out because they're too big to fail. Risk is all on the little guy who'll have to pay for the bailouts.

NotApplicable PREMIUM 36 minutes ago

Powell and his magic checkbook.

Justus D. Barnes 2 hours ago (Edited)

Which war? Biblical or one of the escalating hot spots?

What if the Fed fought inflation my lowering the cost of electricity? Instead of subsidies just increase the supply? They are printing billions why not see to it that we double our energy production with nuclear power plants? If the cost of electricity was halved that would instantly boost everyone's disposable income while making our manufacturing more competitive.

Angelo Misterioso 56 minutes ago remove link

This is about the 5's derivation of this concept - going all the way back through, CDO Squared, CRE CDO's, CDO's and CBO's before that... the hi grade CDO's were 200 to 1 levered...

just pure greed by the street and the regulators were the C students in math class...

radical-extremist 1 hour ago

When homeowners in Stockton California began to discover the magical mystery of Adjustable Rate Mortgages and couldn't afford to pay another $600 a month for their "dream home" - the bottom began to fall out.

When unprofitable ghost companies, of which there are thousands, start defaulting on their cheap loans - that's the sign. Which companies, where? No one's sure.

el_buffer 2 hours ago

I need to get my money out of this country before they rape me for yet another friggin bailout.

Tanner798 1 hour ago

Keep in mind: most of the leveraged loans these CLOs are made up of are all floating rate. If the Fed increases interest rates to combat inflation, the companies borrowing from leveraged loans will no longer be able to afford their interest payments. The only reason why the default rate is so low is due to the originators rolling these companies into larger leveraged loans so they don't default. Rating agencies look the other way and deteriorate the covanents to allow this to happen.

Ajax_USB_Port_Repair_Service_ 1 hour ago

Which state pension funds fare buying CLO's? My guess is the blue states.

Interesting Times In The UK 52 minutes ago

The Big Short is an excellent film, just as pertinent today ... as it was 13 years ago.

Can't wait to watch the sequel ..

Portal 2 hours ago

Rampant speculation always precedes a collapse.

ThanksIwillHaveAnother 41 minutes ago (Edited)

I love how Wall Street constantly invents new words. In this case these are Junk Bonds.

[May 30, 2021] Calm before storm: some level of temporary stability in bond markets despite inflation fears

May 30, 2021 | finance.yahoo.com

Michael Mackenzie Fri, May 28, 2021, 8:00 PM

Calm has descended across one of the most influential markets for all investors: government bonds. Investors fearing a rolling interest rate shock unfolding in 2021 with the potential for puncturing high-flying equities, housing and highly indebted economies have been breathing easier of late.

Courtesy of central banks' sustained presence in bond markets, this year's rise in market borrowing costs has not triggered a bigger shock, At least for now.

[May 30, 2021] Andrew Yang: The War on Normal People The Truth About America s Disappearing Jobs and Why Universal Basic Income Is Our Future

Looks like this guys somewhat understands the problems with neoliberalism, but still is captured by neoliberal ideology.
Notable quotes:
"... That all seems awfully quaint today. Pensions disappeared for private-sector employees years ago. Most community banks were gobbled up by one of the mega-banks in the 1990s -- today five banks control 50 percent of the commercial banking industry, which itself mushroomed to the point where finance enjoys about 25 percent of all corporate profits. Union membership fell by 50 percent. ..."
"... Ninety-four percent of the jobs created between 2005 and 2015 were temp or contractor jobs without benefits; people working multiple gigs to make ends meet is increasingly the norm. Real wages have been flat or even declining. The chances that an American born in 1990 will earn more than their parents are down to 50 percent; for Americans born in 1940 the same figure was 92 percent. ..."
"... Thanks to Milton Friedman, Jack Welch, and other corporate titans, the goals of large companies began to change in the 1970s and early 1980s. The notion they espoused -- that a company exists only to maximize its share price -- became gospel in business schools and boardrooms around the country. Companies were pushed to adopt shareholder value as their sole measuring stick. ..."
"... Simultaneously, the major banks grew and evolved as Depression-era regulations separating consumer lending and investment banking were abolished. Financial deregulation started under Ronald Reagan in 1980 and culminated in the Financial Services Modernization Act of 1999 under Bill Clinton that really set the banks loose. The securities industry grew 500 percent as a share of GDP between 1980 and the 2000s while ordinary bank deposits shrank from 70 percent to 50 percent. Financial products multiplied as even Main Street companies were driven to pursue financial engineering to manage their affairs. GE, my dad's old company and once a beacon of manufacturing, became the fifth biggest financial institution in the country by 2007. ..."
Apr 27, 2019 | www.amazon.com

The logic of the meritocracy is leading us to ruin, because we arc collectively primed to ignore the voices of the millions getting pushed into economic distress by the grinding wheels of automation and innovation. We figure they're complaining or suffering because they're losers.

We need to break free of this logic of the marketplace before it's too late.

[Neoliberalism] had decimated the economies and cultures of these regions and were set to do the same to many others.

In response, American lives and families are falling apart. Ram- pant financial stress is the new normal. We are in the third or fourth inning of the greatest economic shift in the history of mankind, and no one seems to be talking about it or doing anything in response.

The Great Displacement didn't arrive overnight. It has been building for decades as the economy and labor market changed in response to improving technology, financialization, changing corporate norms, and globalization. In the 1970s, when my parents worked at GE and Blue Cross Blue Shield in upstate New York, their companies provided generous pensions and expected them to stay for decades. Community banks were boring businesses that lent money to local companies for a modest return. Over 20 percent of workers were unionized. Some economic problems existed -- growth was uneven and infla- tion periodically high. But income inequality was low, jobs provided benefits, and Main Street businesses were the drivers of the economy. There were only three television networks, and in my house we watched them on a TV with an antenna that we fiddled with to make the picture clearer.

That all seems awfully quaint today. Pensions disappeared for private-sector employees years ago. Most community banks were gobbled up by one of the mega-banks in the 1990s -- today five banks control 50 percent of the commercial banking industry, which itself mushroomed to the point where finance enjoys about 25 percent of all corporate profits. Union membership fell by 50 percent.

Ninety-four percent of the jobs created between 2005 and 2015 were temp or contractor jobs without benefits; people working multiple gigs to make ends meet is increasingly the norm. Real wages have been flat or even declining. The chances that an American born in 1990 will earn more than their parents are down to 50 percent; for Americans born in 1940 the same figure was 92 percent.

Thanks to Milton Friedman, Jack Welch, and other corporate titans, the goals of large companies began to change in the 1970s and early 1980s. The notion they espoused -- that a company exists only to maximize its share price -- became gospel in business schools and boardrooms around the country. Companies were pushed to adopt shareholder value as their sole measuring stick.

Hostile takeovers, shareholder lawsuits, and later activist hedge funds served as prompts to ensure that managers were committed to profitability at all costs. On the flip side, CF.Os were granted stock options for the first time that wedded their individual gain to the company's share price. The ratio of CF.O to worker pay rose from 20 to 1 in 1965 to 271 to 1 in 2016. Benefits were streamlined and reduced and the relationship between company and employee weakened to become more transactional.

Simultaneously, the major banks grew and evolved as Depression-era regulations separating consumer lending and investment banking were abolished. Financial deregulation started under Ronald Reagan in 1980 and culminated in the Financial Services Modernization Act of 1999 under Bill Clinton that really set the banks loose. The securities industry grew 500 percent as a share of GDP between 1980 and the 2000s while ordinary bank deposits shrank from 70 percent to 50 percent. Financial products multiplied as even Main Street companies were driven to pursue financial engineering to manage their affairs. GE, my dad's old company and once a beacon of manufacturing, became the fifth biggest financial institution in the country by 2007.

Nolia Nessa , April 5, 2018

profound and urgent work of social criticism

It's hard to be in the year 2018 and not hear about the endless studies alarming the general public about coming labor automation. But what Yang provides in this book is two key things: automation has already been ravaging the country which has led to the great political polarization of today, and second, an actual vision into what happens when people lose jobs, and it definitely is a lightning strike of "oh crap"

I found this book relatively impressive and frightening. Yang, a former lawyer, entrepreneur, and non-profit leader, writes showing with inarguable data that when companies automate work and use new software, communities die, drug use increases, suicide increases, and crime skyrockets. The new jobs created go to big cities, the surviving talent leaves, and the remaining people lose hope and descend into madness. (as a student of psychology, this is not surprising)

He starts by painting the picture of the average American and how fragile they are economically. He deconstructs the labor predictions and how technology is going to ravage it. He discusses the future of work. He explains what has happened in technology and why it's suddenly a huge threat. He shows what this means: economic inequality rises, the people have less power, the voice of democracy is diminished, no one owns stocks, people get poorer etc. He shows that talent is leaving small towns, money is concentrating to big cities faster. He shows what happens when those other cities die (bad things), and then how the people react when they have no income (really bad things). He shows how retraining doesn't work and college is failing us. We don't invest in vocational skills, and our youth is underemployed pushed into freelance work making minimal pay. He shows how no one trusts the institutions anymore.

Then he discusses solutions with a focus on Universal Basic Income. I was a skeptic of the idea until I read this book. You literally walk away with this burning desire to prevent a Mad Max esque civil war, and its hard to argue with him. We don't have much time and our bloated micromanaged welfare programs cannot sustain.

[May 30, 2021] The Twilight of Equality: Neoliberalism, Cultural Politics, and the Attack on Democracy by Lisa Duggan

This is a very short book, almost an essay -- 136 pages. It was published in October 2004, four years before financial crisis of 2008, which put the first nail in the coffin of neoliberalism. It addresses the cultural politics of neo-liberalism ("the Great Deception")
Notable quotes:
"... By now, we've all heard about the shocking redistribution of wealth that's occurred during the last thirty years, and particularly during the last decade. But economic changes like this don't occur in a vacuum; they're always linked to politics. ..."
"... Ultimately, The Twilight of Equality? not only reveals how the highly successful rhetorical maneuvers of neoliberalism have functioned ..."
"... The titles of her four chapters--Downsizing Democracy, The Incredible Shrinking Public, Equality, Inc., Love AND Money--summarize her argument. ..."
"... Her target is neoliberalism, which she sees as a broadly controlling corporate agenda which seeks world domination, privatization of governmental decision-making, and marginalization of unions, low-income people, racial and sexual minorities while presenting to the public a benign and inclusive facade. ..."
"... Neo-liberalism seeks to upwardly distribute money, power, and status, she writes, while progressive movements seek to downwardly distribute money, power, and status. The unity of the downwardly distribution advocates should match the unity of the upwardly distribution advocates in order to be effective, she writes. ..."
"... "There is nothing stable or inevitable in the alliances supporting neoliberal agendas in the U.S. and globally," she writes. "The alliances linking neoliberal global economics, and conservative and right-wing domestic politics, and the culture wars are provisional--and fading...." ..."
"... For example, she discusses neoliberal attempts to be "multicultural," but points out that economic resources are constantly redistributed upward. Neoliberal politics, she argues, has only reinforced and increased the divide between economic and social political issues. ..."
"... Because neoliberal politicians wish to save neoliberalism by reforming it, she argues that proposing alternate visions and ideas have been blocked. ..."
Jun 14, 2019 | www.amazon.com

By now, we've all heard about the shocking redistribution of wealth that's occurred during the last thirty years, and particularly during the last decade. But economic changes like this don't occur in a vacuum; they're always linked to politics.

The Twilight of Equality? searches out these links through an analysis of the politics of the 1990s, the decade when neoliberalism-free market economics-became gospel.

After a brilliant historical examination of how racial and gender inequities were woven into the very theoretical underpinnings of the neoliberal model of the state, Duggan shows how these inequities play out today. In a series of political case studies, Duggan reveals how neoliberal goals have been pursued, demonstrating that progressive arguments that separate identity politics and economic policy, cultural politics and affairs of state, can only fail.

Ultimately, The Twilight of Equality? not only reveals how the highly successful rhetorical maneuvers of neoliberalism have functioned but, more importantly, it shows a way to revitalize and unify progressive politics in the U.S. today.

Mona Cohen 5.0 out of 5 stars A Critique of Neoliberalism and the Divided Resistance to It July 3, 2006

Lisa Duggan is intensely interested in American politics, and has found political life in the United States to have been "such a wild ride, offering moments of of dizzying hope along with long stretches of political depression." She is grateful for "many ideas about political depression, and how to survive it," and she has written a excellent short book that helps make sense of many widely divergent political trends.

Her book is well-summarized by its concluding paragraph, which I am breaking up into additional paragraphs for greater clarity:

"Now at this moment of danger and opportunity, the progressive left is mobilizing against neoliberalism and possible new or continuing wars.

"These mobilizations might become sites for factional struggles over the disciplining of troops, in the name of unity at a time of crisis and necessity. But such efforts will fail; the troops will not be disciplined, and the disciplinarians will be left to their bitterness.

"Or, we might find ways of think, speaking, writing and acting that are engaged and curious about "other people's" struggles for social justice, that are respectfully affiliative and dialogic rather than pedagogical, that that look for the hopeful spots to expand upon, and that revel in the pleasure of political life.

"For it is pleasure AND collective caretaking, love AND the egalitarian circulation of money--allied to clear and hard-headed political analysis offered generously--that will create the space for a progressive politics that might both imagine and create...something worth living for."

The titles of her four chapters--Downsizing Democracy, The Incredible Shrinking Public, Equality, Inc., Love AND Money--summarize her argument.

She expected upon her high school graduation in 1972, she writes, that "active and expanding social movements seemed capable of ameliorating conditions of injustice and inequality, poverty, war and imperialism....I had no idea I was not perched at a great beginning, but rather at a denouement, as the possibilities for progressive social change encountered daunting historical setbacks beginning in 1972...."

Her target is neoliberalism, which she sees as a broadly controlling corporate agenda which seeks world domination, privatization of governmental decision-making, and marginalization of unions, low-income people, racial and sexual minorities while presenting to the public a benign and inclusive facade.

Neo-liberalism seeks to upwardly distribute money, power, and status, she writes, while progressive movements seek to downwardly distribute money, power, and status. The unity of the downwardly distribution advocates should match the unity of the upwardly distribution advocates in order to be effective, she writes.

Her belief is that all groups threatened by the neoliberal paradigm should unite against it, but such unity is threatened by endless differences of perspectives. By minutely analyzing many of the differences, and expanding understanding of diverse perspectives, she tries to remove them as obstacles towards people and organizations working together to achieve both unique and common aims.

This is good book for those interested in the history and current significance of numerous progressive ideological arguments. It is a good book for organizers of umbrella organizations and elected officials who work with diverse social movements. By articulating points of difference, the author depersonalizes them and aids in overcoming them.

Those who are interested in electoral strategies, however, will be disappointed. The interrelationship between neoliberalism as a governing ideology and neoliberalism as a political strategy is not discussed here. It is my view that greater and more focused and inclusive political organizing has the potential to win over a good number of the those who see support of neoliberalism's policy initiatives as a base-broadening tactic more than as a sacred cause.

"There is nothing stable or inevitable in the alliances supporting neoliberal agendas in the U.S. and globally," she writes. "The alliances linking neoliberal global economics, and conservative and right-wing domestic politics, and the culture wars are provisional--and fading...."

Reading this book adds to one's understanding of labels, and political and intellectual distinctions. It has too much jargon for my taste, but not so much as to be impenetrable. It is an excellent summarization and synthesis of the goals, ideologies, and histories of numerous social movements, both famous and obscure.

S. Baker 5.0 out of 5 stars Summary/Review of Twilight of Equality November 27, 2007

Duggan articulately connects social and economic issues to each other, arguing that neoliberal politics have divided the two when in actuality, they cannot be separated from one another.

In the introduction, Duggan argues that politics have become neoliberal - while politics operate under the guise of promoting social change or social stability, in reality, she argues, politicians have failed to make the connection between economic and social/cultural issues. She uses historical background to prove the claim that economic and social issues can be separated from each other is false.

For example, she discusses neoliberal attempts to be "multicultural," but points out that economic resources are constantly redistributed upward. Neoliberal politics, she argues, has only reinforced and increased the divide between economic and social political issues.

After the introduction, Duggan focuses on a specific topic in each chapter: downsizing democracy, the incredible shrinking public, equality, and love and money. In the first chapter (downsizing democracy), she argues that through violent imperial assertion in the Middle East, budget cuts in social services, and disillusionments in political divides, "capitalists could actually bring down capitalism" (p. 2).

Because neoliberal politicians wish to save neoliberalism by reforming it, she argues that proposing alternate visions and ideas have been blocked. Duggan provides historical background that help the reader connect early nineteenth century U.S. legislation (regarding voting rights and slavery) to perpetuated institutional prejudices.

[May 29, 2021] Issuance of Bundles of Risky Loans Jumps to 16-Year High

May 29, 2021 | www.wsj.com

CLOs have become a $760 billion market, accounting for 70% of new leveraged loan purchases last year, according to Citi.

... Just six nonfinancial, junk-rated companies defaulted during the first quarter of this year, according to Moody's Investors Service -- the lowest level since 2018. The ratings agency expects the trailing 12-month default rate to fall to 3.9% by the end of December, from 7.5% in March.

... The combination has analysts and investors expecting a banner year for CLO issuance. Bank of America projects sales to total around $360 billion this year, including refinancings, while Citibank expects around $290 billion. Both figures would surpass 2018's all-time high.

... Critics say CLOs allow companies to borrow more than they can support, exposing investors to losses in a downturn. A wave of leveraged loan downgrades hit CLO managers last year , causing some portfolios to surpass limits on low-rated holdings or breach collateral tests.

... Some CLO tranches haven't traded consistently, wrote KKR analysts in a recent note, a sign that there could be some fragility lurking underneath the market's surface.

"Despite the high volume of activity, we do not believe that liquidity across the [CLO] market has been uniform and as robust as it may seem," they wrote.

[May 29, 2021] Peter Schiff -- Inflation Crashes The Party

The read question is when this will happen. So far this year the yield of 10 year bond fluctuate in a rather narrow band. It does not steadily increases...
May 28, 2021 | www.zerohedge.com

The latest clue that trouble is brewing has come from the sudden and dramatic arrival of inflation. On May 12, it was revealed that the Consumer Price Index (CPI) had risen 4.2% year-over-year , the fastest pace since 2008.

Some tried to downplay concern by pointing out that the gains resulted from the "base effect" of comparing current prices with the artificially depressed "Covid lockdown" prices of March and April of last year. But that ignores the more alarming trend of near-term price acceleration.

According to the Bureau of Labor Statistics, in every month this year, the month-over-month change in prices has been greater than the change in the previous month.

In April prices jumped .8% from March, versus an expected gain of just .2%. Clearly, if this trend continues, or even fails to dramatically reverse, we could be looking at inflation well north of 5 or 6 percent for the calendar year. That would create a big problem.

Despite Federal Reserve officials' recent assurances that the inflation problem is "transitory," many investors are concluding that the central bank will have to deal with this problem by tightening monetary policy far sooner than had been expected. This would make sense if the Fed cared about restraining inflation or, more importantly, had the power to do anything to stop it. In truth, we are sailing into these waters with little ability to alter speed or course, and we will be wholly at the mercy of the waves we have spent a generation creating.

[May 29, 2021] Inflation Takes Its Cut - WSJ

May 28, 2021 | www.wsj.com

The Commerce Department on Friday reported that consumer spending rose 0.5% in April from a month earlier, which, coming after March's government stimulus-check-fueled surge, was impressive. The gain was driven by a 1.1% increase in spending on services""an indication of how, with Covid-19 cases dropping and vaccination rates rising , consumers are shifting their behavior. Spending on goods actually declined, with the weakness concentrated in spending on nondurable goods such as groceries and cleaning products.

But a closer look at April's overall gain indicates it was mainly driven by price increases. By the Commerce Department's measure, which is the Federal Reserve's preferred gauge of inflation, consumer prices rose 0.6% in April from March, putting them 3.6% above their year-earlier level. As a result, real, or inflation-adjusted spending declined. Core prices, which exclude the often volatile food and energy categories to better capture inflation's underlying trend, were up 0.7% from March, and 3.1% on the year. The Fed's inflation goal is 2%, though it has said it will tolerate higher readings than that for some time.

[May 29, 2021] Peter Schiff- Inflation Crashes The Party - ZeroHedge

May 28, 2021 | www.zerohedge.com

The latest clue that trouble is brewing has come from the sudden and dramatic arrival of inflation. On May 12, it was revealed that the Consumer Price Index (CPI) had risen 4.2% year-over-year , the fastest pace since 2008.

Some tried to downplay concern by pointing out that the gains resulted from the "base effect" of comparing current prices with the artificially depressed "Covid lockdown" prices of March and April of last year. But that ignores the more alarming trend of near-term price acceleration.

According to the Bureau of Labor Statistics, in every month this year, the month-over-month change in prices has been greater than the change in the previous month.

In April prices jumped .8% from March, versus an expected gain of just .2%. Clearly, if this trend continues, or even fails to dramatically reverse, we could be looking at inflation well north of 5 or 6 percent for the calendar year. That would create a big problem.

Despite Federal Reserve officials' recent assurances that the inflation problem is "transitory," many investors are concluding that the central bank will have to deal with this problem by tightening monetary policy far sooner than had been expected. This would make sense if the Fed cared about restraining inflation or, more importantly, had the power to do anything to stop it. In truth, we are sailing into these waters with little ability to alter speed or course, and we will be wholly at the mercy of the waves we have spent a generation creating.

[May 29, 2021] Money Market Funds See Massive Inflows As Investors Turn Defensive

May 28, 2021 | www.zerohedge.com

According to BofA's latest Flows Show, this week's EPFR data revealed a broad defensive retrenchment, culminating with the largest inflow to cash since Apr'20 & largest inflow to gold in 16 weeks ($2.6bn); and while broad inflows to equities continue ($512bn YTD) & largest inflow to Europe since Feb'18 ($2.8bn); we just experienced the largest 3-week outflow from tech since Mar'19 ($1.5bn) as well as the largest outflow from banks since Jun'20 ($0.6bn).

Refinitiv confirms this, reporting this morning that "global money market funds saw huge inflows" amounting to no less than $53.2 billion, the highest in four weeks, in the week ended May 26 amid caution that quickening inflation could alter the direction of U.S. monetary policy and shake up asset markets.

Despite the massive flows into the safety of money market, Refinitiv also finds that global equity funds attracted solid inflows of $8.84 billion, a 46% increase over the previous week, as stocks rallied somewhat after U.S. Federal Reserve officials reaffirmed a dovish monetary policy stance: U.S. equity funds received $2.87 billion, while European equity funds and Asian equity funds obtained $2.47 billion and $1 billion, respectively.

Where the EPFR and Refinitiv data diverge is when it comes to tech. Contrary to the EPFR observation, Refinitiv reports that tech funds attracted inflows worth $546 million after three straight weeks of outflows, while financial sector funds faced their first outflow in 16 weeks, hit by a decline in bond yields.


y_arrow
Pausebreak 6 hours ago

"Refinitiv's analysis of 23,865 emerging-market funds showed equity funds had net outflows worth $463 million, while bond funds had inflows worth $420 million after outflows in the previous week."

Not even a material impact to the stock market.

[May 29, 2021] VFSTX 10.97 -0.01 -0.09% - Vanguard Short-Term Investment-Grade Fund Investor Shares

So VFSTX is no longer high grade bond fund...
May 18, 2021 | finance.yahoo.com
Mary Beth 11 months ago Vanguard eliminated the 30% limitation on investments in non-investment grade bonds today . Any indication of how far they will go to increase returns?

[May 28, 2021] What Commodities Prices Are Saying About Inflation by Ryan Dezember, Joe Wallace and Andrew Barnett

May 20, 2021 | www.wsj.com

Prices for the building blocks of the economy have surged over the past year. Oil, copper, corn and gasoline futures all cost about twice what they did a year ago, when much of the world was locked down to fight the spread of the deadly coronavirus. Lumber has more than tripled.

... ... ...

N

Nidge M

Not sure its adding anything which hasn't been said already but to look at the same thing in a different way:
2, or if you look at it 'sideways' 3, main interwoven factors drive inflation:
Access to money to spend - That can be wage/earnings increases or access to cheap debt. That ups demand & prices follow.
Devaluation of the currency - Pushes up raw material imports & prices follow.

What curbs inflation?:
High taxation
High interest rates
High unemployment

And if anyone can point to any Western Democracy currently willing to implement any one, never mind all three, of those controls a lot of folk will probably be pretty surprised.

Michael Matus
Commodities prices are not the problem. They are high now because of a short-term surge in demand and supply chain issues. All should be worked out by this time next year.

The long-term structural problem could be wages. If inflation shows up in wages through wage increases through a multitude of industries then there will be a problem,....... a major one.

Having all these people on the Dole from the government didn't help things Joe!

But like all Presidents that came after HW Bush all you care about is getting re-elected. Doling out is a great way even if its at the cost of the country.

The FED as been intervening in the markets for so long that they have no tools left for the next crisis.

The FED painted themselves into a corner and the Stimulus that was not needed left them no Escape.

Michael Brown
"Having all these people on the Dole from the government didn't help things Joe!"

What about raising the minimum wage, and Joe commanding that all workers for federal contractors be paid $15 per hour or more? You think that could be inflationary?

Michael Matus
I would have to agree with yoiu Michael. I should have mentioned that, thank you for reminding me. However, the main problem with all the sources trhat I have out on the street and their are mnay. Is WAGE growth. As far as a national mimum wage there is none. Altough there probably will be now. Most states pay as high or higher than what the Federal Government was proposing.

90% of government contractors make at least $15.00 an hour anyway. The VAST majority of the problem is enhanced unemployment insurance. The 3 month averge of wage groth ending in March was 3.4%. If it hits > 4.0% that will be bad.

Michael Brown
Excellent points, Michael. The list of government actions instigating inflation would be long indeed.
Michael Matus
Unfortunately, Michael, I would have to Wholeheartedly agree with you, Have a Good Weekend!
JOSEPH MICHAEL
Serious, severe inflationary problems are here, they are just starting, and they are going to get much worse.
Brian Kearns
eh.
best to give corporations a large tax cut

so the can buy back stock

Bill Hestir
I will interested to see if new car prices, lumber prices, new home prices, gasoline prices, and food prices will ever go back down to pre-pandemic levels.

If not, with all the new anti-business taxes and reluctance of out-of-work laborers to go back to work, how will businesses not be forced to raise their wages and increase the price of their products even higher than they are today?

At what point, therefore, will the Fed end their "inflation is transitory" farce and raise interest rates?

Deirdre Hood
Food prices, regardless of when inflation ends, will not go down/return to 'normal'.

Supply lines are squeezed (NO ONE can hire reliable transport drivers), low supply of workers, plus factor in a bad year for wheat, and it turns into the perfect storm for commercial bakers.

Judy Neuwirth
Inflation is just getting started. Cho Bi-Den's hyper-regulated economy is only three months old and already it's 1976 all over again!
Jim Chapman
Now Judy, it's just "transitory" inflation as per Yellen, Powell and Buyden. You really must stick with the narrative, and remember, Adam Smith's scurrilous "Invisible Hand" is a ultra-right wing conservative myth. So we are not supposed to believe our lying eyes.

[May 28, 2021] The US Is Not Ready For An All-Electric Future - ZeroHedge

May 20, 2021 | www.zerohedge.com

The U.S. is woefully unprepared to handle "the electrification of everything," as Amy Myers Jaffe, a research professor at Tufts University's Fletcher School, describes the drive to electrify transportation and buildings and parts of industry in The Wall Street Journal .

Increased electrification in all sectors will need huge investments in the electric grid, in battery storage to back up renewable power generation, in charging points for EVs, and in technologies such as green hydrogen to help those technologies to reach maturity and cost efficiency enough to start replacing fossil fuels.

[May 28, 2021] Understanding Volatility Measurements

May 15, 2021 | www.investopedia.com

Understanding Volatility Measurements

By JAMES CHEN Updated Mar 12, 2020 TABLE OF CONTENTS

When considering a fund's volatility, an investor may find it difficult to decide which fund will provide the optimal risk-reward combination. Many websites provide various volatility measures for mutual funds free of charge; however, it can be hard to know not only what the figures mean but also how to analyze them.

https://637ee757112ba46fe0c09f00b0574098.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Furthermore, the relationship between these figures is not always obvious. Read on to learn about the four most common volatility measures and how they are applied in the type of risk analysis based on modern portfolio theory.

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KEY TAKEAWAYS Optimal Portfolio Theory and Mutual Funds

One examination of the relationship between portfolio returns and risk is the efficient frontier , a curve that is a part of the modern portfolio theory. The curve forms from a graph plotting return and risk indicated by volatility, which is represented by the standard deviation . According to the modern portfolio theory, funds lying on the curve are yielding the maximum return possible, given the amount of volatility.

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As standard deviation increases, so does the return. Once expected returns of a portfolio reach a certain level, an investor must take on a large amount of volatility for a small increase in return. Obviously, portfolios with a risk/return relationship plotted far below the curve are not optimal since the investor is taking on a large amount of instability for a small return. To determine if the proposed fund has an optimal return for the amount of volatility acquired, an investor needs to do an analysis of the fund's standard deviation.

Modern portfolio theory and volatility are not the only means investors use to analyze the risk caused by many different factors in the market. And things like risk tolerance and investment strategy affect how an investor views his or her exposure to risk. Here are four other measures.

https://637ee757112ba46fe0c09f00b0574098.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html 1. Standard Deviation

As with many statistical measures, the calculation for standard deviation can be intimidating, but because the number is extremely useful for those who know how to use it, there are many free mutual fund screening services that provide the standard deviations of funds.

https://637ee757112ba46fe0c09f00b0574098.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

The standard deviation essentially reports a fund's volatility, which indicates the tendency of the returns to rise or fall drastically in a short period of time. A volatile security is also considered a higher risk because its performance may change quickly in either direction at any moment. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return .

A fund with a consistent four-year return of 3%, for example, would have a mean, or average, of 3%. The standard deviation for this fund would then be zero because the fund's return in any given year does not differ from its four-year mean of 3%. On the other hand, a fund that in each of the last four years returned -5%, 17%, 2%, and 30% would have a mean return of 11%. This fund would also exhibit a high standard deviation because each year, the return of the fund differs from the mean return. This fund is, therefore, riskier because it fluctuates widely between negative and positive returns within a short period.

Remember, because volatility is only one indicator of the risk affecting a security, a stable past performance of a fund is not necessarily a guarantee of future stability. Since unforeseen market factors can influence the volatility, a fund with a standard deviation close or equal to zero this year may behave differently the following year.

To determine how well a fund is maximizing the return received for its volatility, you can compare the fund to another with a similar investment strategy and similar returns. The fund with the lower standard deviation would be more optimal because it is maximizing the return received for the amount of risk acquired. Consider the following graph:

With the S&P 500 Fund B, the investor would be acquiring a larger amount of volatility risk than necessary to achieve the same returns as Fund A. Fund A would provide the investor with the optimal risk/return relationship.

2. Beta

While standard deviation determines the volatility of a fund according to the disparity of its returns over a period of time, beta , another useful statistical measure, compares the volatility (or risk) of a fund to its index or benchmark . A fund with a beta very close to one means the fund's performance closely matches the index or benchmark. A beta greater than one indicates greater volatility than the overall market, and a beta less than one indicates less volatility than the benchmark.

If, for example, a fund has a beta of 1.05 in relation to the S&P 500, the fund has been moving 5% more than the index. Therefore, if the S&P 500 increased by 15%, the fund would be expected to increase by 15.75%. On the other hand, a fund with a beta of 2.4 would be expected to move 2.4 times more than its corresponding index. So if the S&P 500 moved 10%, the fund would be expected to rise 24%, and if the S&P 500 declined 10%, the fund would be expected to lose 24%.

Investors expecting the market to be bullish may choose funds exhibiting high betas, which increase investors' chances of beating the market. If an investor expects the market to be bearish in the near future, the funds with betas less than one are a good choice because they would be expected to decline less in value than the index. For example, if a fund had a beta of 0.5, and the S&P 500 declined by 6%, the fund would be expected to decline only 3%.

Beta by itself is limited and can be skewed due to factors other than the market risk affecting the fund's volatility.

3. R-Squared

The R-squared of a fund shows investors if the beta of a mutual fund is measured against an appropriate benchmark. Measuring the correlation of a fund's movements to that of an index , R-squared describes the level of association between the fund's volatility and market risk, or, more specifically, the degree to which a fund's volatility is a result of the day-to-day fluctuations experienced by the overall market.

R-squared values range between 0 and 100, where 0 represents the least correlation, and 100 represents full correlation. If a fund's beta has an R-squared value close to 100, the beta of the fund should be trusted. On the other hand, an R-squared value close to 0 indicates the beta is not particularly useful because the fund is being compared against an inappropriate benchmark.

If, for example, a bond fund was judged against the S&P 500, the R-squared value would be very low. A bond index such as the Bloomberg Barclays US Aggregate Bond Index would be a much more appropriate benchmark for a bond fund so that the resulting R-squared value would be higher. Obviously, the risks apparent in the stock market are different than those associated with the bond market . Therefore, if the beta for a bond were calculated using a stock index, the beta would not be trustworthy.

An inappropriate benchmark will skew more than just beta. Alpha is calculated using beta, so if the R-squared value of a fund is low, it is also wise not to trust the figure given for alpha. We'll go through an example in the next section.

4. Alpha

Up to this point, we have learned how to examine figures measuring risk posed by volatility, but how do we measure the extra return rewarded to you for taking on the risk posed by factors other than market volatility? Enter alpha, which measures how much if any of this extra risk helped the fund outperform its corresponding benchmark. Using beta, alpha's computation compares the fund's performance to that of the benchmark's risk-adjusted returns and establishes if the fund outperformed the market, given the same amount of risk.

For example, if a fund has an alpha of one, it means that the fund outperformed the benchmark by 1%. Negative alphas are bad in that they indicate the fund underperformed for the amount of extra, fund-specific risk the fund's investors undertook.

The Bottom Line

This explanation of these four statistical measures provides you with the basic knowledge for using them to apply the premise of the optimal portfolio theory, which uses volatility to establish risk and offers a guideline for determining how much of a fund's volatility carries a higher potential for return. These figures can be difficult to understand, so if you use them, it is important to know what they mean.

These calculations only work within one type of risk analysis . If you are deciding on buying mutual funds, it is important to be aware of factors other than volatility that affect and indicate the risk posed by mutual funds.

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[May 28, 2021] Inflation Forces Investors to Scramble for Solutions - WSJ

May 24, 2021 | www.wsj.com

The price of the benchmark 10-year Treasury inflation-protected security logged its biggest one-day decline in a month. Shares of real-estate investment trusts slid the most since January. Commodities were generally flat but dropped the following day.

The three asset classes have vacillated since, but their initial moves showed the unexpected ways that markets can behave when inflation is rising, especially when many are already expensive by historical measures.

This week, investors will gain greater insight into the inflation picture when the Commerce Department updates the Federal Reserve's preferred inflation gauge, the personal-consumption-expenditures price index. They will also track earnings from the likes of Dollar General Corp. , Costco Wholesale Corp. and Salesforce.com Inc.

The stakes are high for investors. Inflation dents the value of traditional government and corporate bonds because it reduces the purchasing power of their fixed interest payments. But it can also hurt stocks, analysts say, by pushing up interest rates and increasing input costs for companies.

From early 1973 through last December, stocks have delivered positive inflation-adjusted returns in 90% of rolling 12-month periods that occurred when inflation""as measured by the consumer-price index""was below 3% and rising, according to research by Sean Markowicz, a strategist at Schroders, the U.K. asset-management firm. But that fell to only 48% of the periods when inflation was above 3% and rising.

A recent report from the Labor Department showed that the consumer-price index jumped 4.2% in April from a year earlier, up from 2.6% in March. Even excluding volatile food and energy prices, it was up 3% from a year earlier, blowing past analysts' expectations for a 2.3% gain.

Analysts say that there are plenty of reasons why inflation won't be able to maintain that pace for long. The latest year-over-year numbers were inflated by comparisons to deeply depressed prices from the early days of the pandemic. They were also supported by supply bottlenecks that many view as fixable and robust consumer demand that could dissipate once households have spent government stimulus checks.

... ... ...

By comparison, the S&P GSCI Commodity Total Return Index delivered positive inflation-adjusted returns in 83% of the high and rising inflation periods. "Commodities are a source of input costs for companies and they're also a key component of the inflation index, which by definition you're trying to hedge," said Mr. Markowicz.

At the same time, commodities are among the most volatile of all asset classes and can be influenced by an array of idiosyncratic factors.

T

Tracy Harris

Charles Goodhart, the economist from the Bank of England, has just written an important book arguing that worldwide demographic changes are going to result in a couple of decades of high inflation. See Charles Goodhart, The Great Democratic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival. Maybe the Journal could find someone to review it. Maybe Ms. Yellen should read it.

(Douglas Levene)

Bruce Fegley
This article is naive, if not ridiculous, for several reasons. I name a few.

1st - the stock market is the best hedge against inflation over a long time period - years, not daily, weekly, or quarterly. Especially with dividend reinvesting and with an automatic buying plan like the DRIP plans offered by many companies at no or very low cost.

2nd - Individuals can buy US government I-series savings bonds at NO COST directly from the US Treasury, and while they do not completely hedge against inflation, they offer good interest rates that beat bank interest and are completely insured.

3rd - Toyota and perhaps other car companies offer notes with higher interest than banks but not FDIC insured. About 1.5% now.

One does not have to blow money away on bitcoin or hold gold, which is taxed as a collectible and has assay fees on the front and back ends of any buy/sell transaction unless one is buying coins which have a markup to begin with.

Theo Walker
Started buying I-bonds this month. The rates are great! Easily the best safe investment right now.
Bryson Marsh
... why would you buy TIPS? The spread is a farce after all.
PHILIP NICHOLAS
Inflation is always sticky . In other words all the prices do not go down . Wages that are increased , usually stay . Companies sense a new level they can pass on to consumers . And the Government damage to energy prices will influence prices .
Bryson Marsh
Memory costs, data plans, and televisions are all examples that clearly demonstrate secular price declines despite periodic increases.
Charles D
"Inflation Forces Investors to Scramble for Solutions"
Hundreds of millions of Americans are going to suffer as the Federal Government inflates the national debt away over the next 10 to 15 years. Investors will figure it out, but the little guy will get crushed once again. Oh well, we get the government we deserve.
A Eichler
CME futures contracts ...

OIL - NAT GAS - PROPYLENE - COPPER - LUMBER - STEEL - SOYBEAN - 2 yr. and 5 yr. T-Note

They are all substantially down, one year from now; except Copper and financials which are flat.

What does that say about the economy & inflation in one year?

Paul Smith
I am under the impression that the Social Security COLA is based on a September to September comparison of the CPI-U. That is to say, for example, September 2020 CPI-U vs. September 2021 CPI-U. Is this not correct?

We have had inflation over over the past decade or so. As measured by the CPI-U, it has hovered around 2 percent. Not a big deal to the Fed's economists. Cumulatively, however, it adds up.

I have been retired for 16 years. Inflation has eroded the purchasing power of my fixed pension by 25.5. Mercifully, I have other resources to make up the loss, but for people on a fixed pension, so-called mild inflation can wreck it over time.

James Webb
Paul, one of the lower estimates for 2022:

"The Kiplinger Letter is forecasting that the annual cost-of-living adjustment for Social Security benefits for 2022 will be 4.5%, the biggest jump since 2008, when benefits rose 5.8%. That would also be higher than the 3% adjustment The Kiplinger Letter predicted earlier this year."

From SocialSecurity dot gov:

"To determine the COLA, the average CPI-W for the third calendar quarter of the most recent year a COLA was determined is compared to the average CPI-W for the third calendar quarter of the current year. The resulting percentage increase, if any, represents the percentage that will be used to increase Social Security benefits beginning for December of the current year. "

So the predicted 4.5-4.7% increase for 2022 will take effect December 31 this year.

Of course the calculation is not completed yet....

James Robertson
The Fed's inflation calculations have become increasingly "fuzzy" since the Boskin Commission in 1995. The CPI ignores housing, food, and energy. Healthcare gets weighted at 3 percent, though it accounts for 18 percent of expenditures. "Hedonic quality adjustment" is another knob the Fed turns to "control" inflation. Inflation calculated by comparing the price of a basket of goods this year to a basket of goods last year runs quite a bit higher than the CPI; even higher if you include food, shelter, and energy in that basket.
James Webb
What's in the CPI?

-Food and Beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
-Housing (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
-Clothes (men's shirts and sweaters, women's dresses, jewelry)
-Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance)
-Medical Care (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
-Recreation (televisions, toys, pets and pet products, sports equipment, admissions)
-Education and Communication (college tuition, postage, telephone services, computer software and accessories)
-Other Goods and Services (tobacco and smoking products, haircuts and other personal services, funeral expenses)

Tim Adams
The core CPI which the Fed uses excludes food and energy. The Consumer price index which is used for things like social security adjustments does not. These very similar but different uses of the same acronym just adds to the confusion.

[May 28, 2021] More signs that the fast recovery in the US economy is not quite so fast.

May 17, 2021 | www.moonofalabama.org

vk , May 16 2021 22:27 utc | 76

It's also starting to hurt the American economy:

More signs that the fast recovery in the US economy is not quite so fast.

Industrial production rose 0.7% in April over the previous month, less than expected, partly because manufacturing output growth slowed as auto companies struggled to get parts for new cars.
While industrial production was up 16.5 percent from its level in April 2020 (the trough of the pandemic), it was still 2.7 percent below its pre-pandemic (February 2020) level. Capacity utilization for the industrial sector rose to 74.9 percent, but some 4.7 percentage points below its long-run (1972–2020) average.
Retail sales also stalled in April and, excluding food and fuel, sales fell 1.5%.

Taiwan is now becoming an obstacle to the American Empire's own imperial agenda.

For now, the solution being found is to force Samsung (South Korea) to build a chip factory in the USA. But South Korea can only pay for others' sins up to a point. There will come a time the USA will have to choose which one to lose: the entire Korean Peninsula or Taiwan. My bet is they'll throw Taiwan under the bus long before South Korea even starts to crack.

[May 28, 2021] Inflation Debate Hits Emerging Markets

Notable quotes:
"... there's a growing sense that the forces behind the recovery will eventually feed through to higher prices if left unchecked. One harbinger could be the rally in commodities, with a key index of raw materials this month jumping to a five-year high. ..."
"... "If the stimulus continues, at some point it will become inflationary," said Sanjiv Bhatia, the chief investment officer at Pembroke Emerging Markets in London. "At some point, we believe it will become a problem." ..."
May 09, 2021 | finance.yahoo.com

The prospect of tighter monetary conditions in emerging markets still hasn't changed the overall calculus for many investors, with behemoths including Pacific Investment Management Co. and BlackRock Inc. focusing on the growth story instead. Developing-nation inflation remains near a record low, with the economic rebound making assets look "increasingly interesting," according to Dan Ivascyn, Pimco's group chief investment officer in Newport Beach, California.

Yet there's a growing sense that the forces behind the recovery will eventually feed through to higher prices if left unchecked. One harbinger could be the rally in commodities, with a key index of raw materials this month jumping to a five-year high.

"If the stimulus continues, at some point it will become inflationary," said Sanjiv Bhatia, the chief investment officer at Pembroke Emerging Markets in London. "At some point, we believe it will become a problem."

For now, assurances from the Federal Reserve that inflation in the U.S. is unlikely to get out of control have supported the bulls. The Fed appears in no rush to raise interest rates, a move that would siphon capital out of emerging economies currently enjoying the windfall from U.S. stimulus.

That major central banks currently view inflation as transitory should boost developing-nation currencies as a whole, according to Henrik Gullberg, a London-based macro strategist at Coex Partners Ltd.

MSCI Inc.'s emerging-market currency index has climbed to a record high, while the benchmark equity gauge just posted its biggest two-day rally in almost two weeks amid a rally in energy and technology shares. On Friday, risk assets got further support when U.S. job growth data significantly undershot forecasts.

"On the one hand, the valuations of growth stocks look meaningfully less demanding after recent underperformance coupled with earnings upgrades," said Kate Moore, the head of thematic strategy at BlackRock in New York. "On the other, rising inflationary pressures from the broad economic restart and low inventories should be supportive of cyclicals and commodity producers."

[May 28, 2021] Into The Swarm #2: The Greatest Trick Wall Street Ever Pulled

May 22, 2021 | www.zerohedge.com

Submitted by Romain of The Swarm Blog ,

Down The Market Hole

The French version of Michael Lewis' book The Big Short is intitled Le casse du siècle , which literally means the "heist of the century." This idea is interesting, as going short can be regarded as finding the weak points of the financial system and hacking into it.

However, that game is not easy.

Firstly, because "there is a difference between knowing the path and walking the path," as Morpheus said to Neo. Indeed, even if many people seem to understand problems and to see the answers, most of them will never dare to act. It is true for investors aware of heavy speculation on capital markets, but also for so-called political leaders noting that the trajectory of public debt is unsustainable. Many know what is going wrong, but how many of them will try to do something about it?

The second difficulty is that the greatest trick Wall Street ever pulled was convincing the world that an asset would never go down. Which means that even if one is willing to take a stand against the financial system, there is still a high probability that he or she will ake the wrong bet because of that misperception of risk.

There are a lot of things that can be learnt from past crises, and especially from the events of 2007-2008. Today, most people in finance (apart from TikTok investors?) know that investors like Dr Michael Burry or Steve Eisman made huge profits thanks to credit default swaps on mortgage-backed securities or on collateralized debt obligations. But does it mean that such a trade could easily be replicated?

The answer is "no" as going short on housing securitized debt before 2007 required to agree to keep paying a premium while waiting for an event that never happened before. In fact, everyone laughed at CDS buyers, as betting against the US residential market was seen as the stupidest thing ever. In other words, it is not something that the average Joe would do, and people should bear in mind that Burry even had to prevent Scion Capital's investors from taking their money back as his scenario was regarded as pure madness.

The second problem was that investors willing to short the housing bubble had to properly identify the source of hidden risks in the system. This problem could be summarized by what I call "the Hubler paradox" (see The Great Wall and the Big Short ).

Howie Hubler was a trader at Morgan Stanley, famous for making the second largest trading loss in history. And it was all the more ironical as his analysis on RMBS securities was 90% right. As he realized that many households would default on their mortgage everywhere in the country, he decided to short risky BB tranches of CDOs while buying AAA tranches which were supposed to be "risk-free."

The problem is that financial crises occur because risk was underestimated. Said differently, they occur because of excessive concentration on assets bearing hidden risks. That is what happened with AAA securities of RMBS or CDOs. The fact that many people suddenly realized that those tranches were riskier than previously thought put the whole system in a corner, with too many persons willing the leave the room at the same time using a small exit door. The outcome was a massive spike of credit default swaps.

Meanwhile, part of the risk of BB tranches was already priced in. That does not mean that their valuation did not drop after 2007, but the overall impact was less severe than for so-called AAA securities.

Note that the mortgage delinquency rate peak was around 10% in 2009, meaning that most loans were not affected by payment issues. Somehow the crisis may have never happened if upper tranches had been rated AA instead of AAA.

How can we explain such a collective failure? We do know the answer thanks to decades of academic research: herding behavior and positive feedback loops leading to severe imbalances on capital markets, such as over concentration and increasing short volatility positions.

To summarize, opportunistic players had better focus on hidden sources of risks rather than obvious sources of risks. Betting against obvious sources of risks can be profitable, but assets embedding hidden sources of risks offer the best risk-to-return profile (i.e. the most convex behavior).

Red Queens Narratives

A simple look at social media shows you that today almost everyone is able to identify sources of risk in the system. And some people are even willing to bet against things like Tesla, Peloton, ARK, bitcoin, dogecoin or whatsoever. Those are probably smart moves. But they are also obvious sources of risk. They are at best the BB tranches of current capital markets. So, what is the equivalent of AAA tranches?

I already answered that question in a previous post (see To Be Passive Is to Let Others Decide for You ). Today, I believe that the biggest risk is the excessive concentration on US equities, and especially on exchange-traded funds tracking large cap indices.

For the past years, most fund managers have increased their exposure to the S&P 500 or to the Nasdaq, mainly by being overweight on mega caps like Apple, Microsoft, Amazon, Alphabet or Facebook. Worse, many participants have gone passive, buying tons of shares of large cap ETFs such as SPY or QQQ.

In 2021, Apple or Amazon are regarded as risk-free names. Indeed, everyone knows that those companies are unlikely to go bankrupt anytime soon. And since everyone loves them, then what could possibly go wrong? Well, that is precisely what the story of securitized debt obligations taught us. Once again, "the greatest trick the devil ever pulled was convincing the world he didn't exist."

During the mid-2000's, most households did not default on their mortgage. However, some defaults occur and one of the biggest crises ever occurred because most investors thought that AAA tranches were risk-free.

Even if FAANGs are unlikely to fail, misperception of risk is tricky and dangerous. Valuations are so stretched that there is no margin safety in case of serious bad news. Besides, what will happen if everyone suddenly realizes that the time has come to reduce the exposure to US mega caps? Will the market be able to absorb selling flows from ETFs and active fund whatever their size?

Of course, people will answer that such a scenario is highly unlikely. That there will always be a bid if people start to sell. To address that objection, I have already mentioned that interesting Twitter thread on the absence of liquidity in the market when people start to panic (see @FadingRallies ).

However, anyone willing to short SPY or QQQ must be ready to pay premium and/or to face margin calls as long as it takes before something ugly occurs. And yes, it may seem crazy. But somehow, such trade could be worth it.

Betting on a 25% drop of Apple's shares before July 16th would cost you a premium of 0.25% of the share price. Meanwhile, the same bet on Tesla would cost 1.58% of the share price. Despite that difference, most people would prefer to go short on Tesla rather than on Apple. Probably, because there are obviously more fundamental reasons to bet against Tesla. And perhaps also because investment professionals are fed up with Elon Musk while being indifferent to Tim Cook. But we must never forget that "it's not personal, it's strictly business." What is more, obvious risks lead to more expensive protections, and thus less convexity (i.e. suboptimal strategies).

This entire post is not an investment recommendation. But it is interesting to bear in mind that most people naturally underestimate the occurrence of extreme events. From a statistical perspective, participants believe in Gaussian distributions, while asset prices are distributed following power-tailed functions. The subprime crisis was an event that was supposed to happen once in the universe lifetime according to securitization specialists, while it only took a few years before the whole thing blew up.

Therefore, everyone is free to believe that US large caps will never crash. After all, this is what it takes for a new "heist of the century," or at least of the past fifteen years. Once you realize that, it will probably be too late to act.

Remember what Verbal Kint added about the devil at the end of The Usual Suspects ?

"And like that"¦ He's gone."

[May 28, 2021] Treasury yields to rise in the second half of the year, pushed higher by rises in yields on inflation-protected Treasurys

Notable quotes:
"... Mark Carbana, U.S. rates strategist at Bank of America, still expects U.S. rates to rise further especially if there is a strong reading for the Fed's preferred measure of inflation, personal consumption expenditures, due out next Friday. ..."
"... He expects Treasury yields to rise in the second half of the year ..."
May 21, 2021 | www.wsj.com

Originally from Government Bond Yields Fall as Investors Grapple With Muddied Economic Picture by By Paul J. Davies

In the U.S., inflation readings have been strong and the minutes of the last Fed meeting released Wednesday showed there had been some discussion about slowing bond purchases -- also known as taper talk.

... Mark Carbana, U.S. rates strategist at Bank of America, still expects U.S. rates to rise further especially if there is a strong reading for the Fed's preferred measure of inflation, personal consumption expenditures, due out next Friday. "Uncertainty around inflation is the highest it has been in decades," he said, particularly around whether recent high readings are temporary or due to changes in the underlying economy. He expects Treasury yields to rise in the second half of the year , pushed higher by rises in yields on inflation-protected Treasurys as the Fed starts to talk more seriously about tapering its bond purchases.

Write to Paul J. Davies at [email protected]

[May 28, 2021] Despite Initial Claims Drop, Almost 16 Million Americans Remain On Government Dole

For April 2021 the official Current Unadjusted U-6 unemployment rate was 9.9% down from 10.9% in March, and 11.6% in February, January was 12.0%. It was also 11.6% October "" December 2020. But It was 18.3% in June, 20.7% in May, and 22.4% in April. It is still well above the 8.9% of March 2020 when unemployment rates started jumping drastically due to massive shutdowns due to the Coronavirus.
May 27, 2021 | www.zerohedge.com

Initial Jobless Claims tumbled (positively) to their lowest since the pandemic lockdowns began, adding just 406k Americans last week (well below the 425k expected). This is still double the pre-pandemic norms

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Truthtellers 11 hours ago (Edited) remove link

Companies laid off an additional 400K people last week and they actually think we are dumb enough to believe there is a labor shortage? That line of crap is obviously just a ploy to get employee's to accept lower salaries.

I'll believe there is a labor shortage after 16 million jobs have been added and the weekly initial claims number is zero.

Until then, I guess if you have a "labor shortage" you better get that pay up.

AJAX-2 13 hours ago (Edited)

Another 400K+ applying for 1st time unemployment benefits and yet they piss on my leg, tell me it's raining, while proclaiming there is a labor shortage. Bu!!****.

PerilouseTimes 9 hours ago

Close to a million people a week were signing up for unemployment for a year and unemployment has been extended. Wouldn't that mean at least 40 million Americans are on unemployment not to mention all the people on welfare and disability? I think the number is closer to 100 million Americans on the government dole and that doesn't count all the worthless government jobs out there.

Normal 12 hours ago remove link

I'm on unemployment except California seems to have quit paying people on unemployment. I tried every-which-way to contact them but there is no way in hell to get through to a live person. I went and typed in how to speak with a real person at the EDD, and hundreds of people have posted that they haven't been paid in 12 weeks. I spoke with their Cal-Jobs representative and she said that many people haven't been paid since March of last year. I think they are forcing the so-called unemployed to their Cal-Jobs site by not paying them.

ay_arrow
NEOSERF 13 hours ago

Worst month during the GFC appears to be about 650K...we are only 50% below that....with 21 states preparing to end the extension, things will be fantastic in these numbers shortly if not the real world...waiting for all the cold/flu season coughing and cold weather in November...

[May 28, 2021] How transitory is transitory inflation?

May 27, 2021 | www.zerohedge.com

As the credit strategist continues, "while it is easy to blame transitory factors, these were surely all known about before the last several data prints and could have been factored into forecasts. That they weren't suggests that the transitory forces are more powerful than economists imagined or that there is more widespread inflation than they previously believed. "

To be sure, all such "˜surprise' indices always mean revert so the inflation one will as well. However as Reid concludes, "the fact that we're seeing an overwhelming positive beat on US inflation surprises in recent times must surely reduce the confidence to some degree of those expecting it to be transitory. "

[May 28, 2021] DoJ Launches Criminal Investigation Into Archegos Blowup - ZeroHedge

May 27, 2021 | www.zerohedge.com

Archegos' prime brokers initially attempted to try and avoid a market panic by coordinating their sales of the massive blocks of shares their had accumulated on behalf of Archegos via a complicated series of swap arrangements. But when Goldman Sachs and Morgan Stanley broke ranks and opted to be the first out the door, Credit Suisse, which had the biggest exposure to Archegos, was ultimately left with more than half of the $10 billion+ in losses that banks were stuck with (while Hwang reportedly lost his entire 11-figure fortune).

Right now, it's not exactly clear what laws prosecutors suspect Archegos and the prime brokers of breaking.

While authorities haven't accused Archegos or its banks of breaking any laws in their dealings, the episode has drawn public criticism from regulators, as well as some inquiries behind the scenes from watchdogs around the world. The implosion shows Wall Street has grown too complacent about potential threats building up in the economy, Michael Hsu, the new acting chief of the Office of the Comptroller of the Currency, said last week.

But the DoJ isn't the only agency poking around: Investigations are ongoing across the globe.

The Securities and Exchange Commission launched a preliminary investigation into Hwang in March, a person familiar with the matter said at the time. The agency has since explored how to increase transparency for the types of derivative bets that sank the firm.

And in the U.K., the Prudential Regulation Authority has been asking firms including Credit Suisse, Nomura and UBS Group AG to hand over information related to their lending to Archegos, people familiar with the matter have said.

While investigators will undoubtedly focus on what happened, some believe that the real concerns lie in current vulnerabilities in the world of equity finance. The team at Risky Finance recently calculated that some $3 trillion in hidden Archegos-style exposure is out there in the market, just waiting to explode if stocks sell off.

...

It should serve as a warning. 14 years ago, obscure corners of banking businesses became hotbeds of regulatory arbitrage, speculation and leverage. The contagion of US subprime brought the financial system to its knees. Now, after years of low or negative interest rates, equity finance may have become a similar hotbed.


[May 28, 2021] Stocks could drop 20% when Fed fights inflation: hedge fund founder

May 25, 2021 | finance.yahoo.com

Inflation fears already roiled the market this week with the Nasdaq falling nearly 2%, but one hedge fund founder is sounding the alarm over a potential 20% collapse that could be sparked by the Federal Reserve signaling an end to accommodative pandemic-era monetary policy later this year.

Satori Fund founder Dan Niles recently told Yahoo Finance that this week's hotter-than-anticipated inflation data coupled with other central banks around the world already coming off their easy money policies will likely corner the Fed into tapering its accommodative policies sooner than expected.

"If you've got food prices, energy prices, shelter prices moving up as rapidly as they are, the Fed's not going to have any choice," he said, predicting that the Fed could signal the beginning of a move to wind down its monthly $120 billion a month pace of asset purchases by this summer. "They can say what they want, but this reminds me to some degree of them saying back in 2007 that the subprime crisis was well contained. Obviously it wasn't."

[May 28, 2021] American Lysenkism in academis: These lowlife parasites sit on their asses and talk shi*. They produce nothing and make a living by spreading nonsense.

May 23, 2021 | www.unz.com

Priss Factor , says: Website May 21, 2021 at 4:44 am GMT • 2.9 days ago

I can understand the frustrations and rage of certain folks.

If you're a worker on an oil rig, a truck driver, a policeman, or some such jobs, there's bound to be moments when you're angry as hell. So, even though such people say crazy things once a while, I can understand where they're coming from. They need to blow off steam.

But the professor class? These lowlife parasites sit on their asses and talk shi*. They produce nothing and make a living by spreading nonsense. And yet, they act like they are soooooooooo angry with the way of the world. If they really care about the world, why hide in their academic enclaves?
Academia needs a cultural revolution, a real kind, not the bogus 'woke' kind made up of teachers' pets.

[May 28, 2021] Bond Traders See a Path to 2% Yields Lurking in US

Can it be wage driven inflation, when there is mass unemployment of the scale that we observer. That's a stupid idea. Commodites driven inflation is possible as oil if probably past its peak, but for now production continued at plato level and cars are getting slightly more economical, espcially passenger car, where hybrids reached 40 miles er gallon.
Notable quotes:
"... The prospect of a rebound to 2% yields on the world's benchmark bond is alive and well. ..."
May 09, 2021 | finance.yahoo.com

The prospect of a rebound to 2% yields on the world's benchmark bond is alive and well.

Treasury-market bears found a deeper message within Friday's weak employment report that's emboldened a view that inflationary pressures are on the rise, and could boost rates to levels not seen since 2019. For Mark Holman at TwentyFour Asset Management, the sub-par April labor reading indicated companies will need to lift wages to entice people back into the labor force; he's expecting a break of 2% on the 10-year this year.

That level has come to symbolize a return to pre-pandemic normalcy in both markets and the economy. The wild ride in markets on Friday suggests Holman likely has company in his views. Ten-year yields initially plunged to a more than two-month low of 1.46%, then reversed to end the day at 1.58%. Meanwhile, a key market proxy of inflation expectations surged to a level last seen in 2013.

[May 28, 2021] Warren Tears Into Fed on Credit Suisse Oversight Before Archegos

May 26, 2021 | finance.yahoo.com

(Bloomberg) -- Senator Elizabeth Warren ripped the Federal Reserve for its oversight of Credit Suisse Group AG in the run-up to Archegos Capital Management's implosion, arguing the regulator badly blundered when it freed the bank from heightened monitoring.

Warren pointed out at a Tuesday Senate hearing that the Fed knew Credit Suisse had problems estimating its potential trading losses because the agency had flagged the Swiss bank over that issue in its 2019 stress tests. She questioned why Credit Suisse, under the watch of Fed Vice Chairman for Supervision Randal Quarles, was among foreign banks released last year from oversight by the Large Institution Supervision Coordinating Committee, which keeps tabs on lenders that pose the greatest risk to the U.S. financial system.

"So you now agree that you made the wrong decision to weaken supervision?" the Massachusetts Democrat asked Quarles, who was testifying before the Senate Banking Committee.

"We did not weaken supervision," he responded, saying the shrinking U.S. footprint of Credit Suisse and other foreign banks prompted the Fed's decision. Quarles further argued that the billions of dollars in losses that Credit Suisse suffered in relation to Archegos -- trader Bill Hwang's family office -- weren't a result of faulty Fed oversight.

"The losses you are referring to didn't occur in the United States," he said.

Warren scoffed at the idea that missteps involving overseas lenders don't lead to U.S. consequences. She reminded Quarles his term as vice chairman ends in five months, and said, "our financial system will be safer when you are gone."

[May 28, 2021] The American Consumer Is Not Happy - ZeroHedge

May 17, 2021 | www.zerohedge.com

The American Consumer Is Not Happy BY TYLER DURDEN MONDAY, MAY 17, 2021 - 05:00 AM

Authored by Daniel Lacalle,

The University of Michigan consumer confidence index fell to 82.8 in May, from 88.3 in April. More importantly, the current conditions index slumped to 90.8, from 97.2 and the expectations index declined to 77.6, from 82.7.

Hard data also questions the strength of the recovery. April retail sales were flat, with clothing down 5.1%, general merchandise store sales fell 4.9%, leisure & sporting goods down 3.6% with food & drink services up just by 3%.

United States industrial production was also almost flat in April, rising just 0.4% month-on-month in April pushed by a 4% slump in motor vehicle production. You may think this is not that bad until you see that industrial capacity utilization came at 74.7% in April, significantly below the pre-pandemic levels.

Employment also questions the "strong recovery" thesis. Non-farm employment is still down 8.2 million, or 5.4 percent, from pre-pandemic level yet gross domestic product is likely to how a full recovery in the second quarter.

These figures are important because they come after trillions of dollars of so-called stimulus and the entire thesis of the V-shaped recovery comes from a view that consumption is going to soar. Reality shows otherwise. In fact, reality shows that retail sales showed an artificial bump due to the wrongly called stimulus checks only to return to stagnation.

The rise in inflation further questions the idea of a consumption boom, certainly for the middle class. Why? If we look at the 4.2% rise in consumer price index in April includes a 25% increase in energy, a 12% increase in utility prices, a 5.6% increase in transportation services, a 2.2% in medical services etc. As consumers perceive a higher rise in prices, especially in those essential goods and services that we purchase every day, consumption decisions become more prudent and propensity to save rises. This is something that we have seen in numerous countries. In Japan, years of "official" messages about the risk of deflation clashed with citizens' perception of cost of living, and tendency to save increased, rightly so. Citizens are not stupid, and you can tell them that there is no inflation or that it is transitory, but they feel the rise in cost of living and react accordingly.

Two things should concern us. First, the weakness of the recovery in the middle of the largest fiscal and monetary stimulus seen in decades, and second, the short and diminishing effect of these programs. A two trillion stimulus package creates a very short-term impact that lasts less than five months.


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Onthebeach6 1 hour ago

Stolen election, Marxist takeover, BLM burning, looting and murdering, defund the police, cancel culture, corrupt MSM and big tech, Critical race theory tearing down western civilisation and the constitution torn up.

What a time to be alive!

Stimulus is mainly theft by the elites but it has a secondary purpose to keep the consumer passive until the regime has consolidated its position.

Consumers should be a lot more than just unhappy.

Lordflin 1 hour ago remove link

So called stimulus is just a payoff to cronies and special interest... with a token toss of a few coins out the window to the people as the curtained carriage barrels past and on down the road...

lambda PREMIUM 34 minutes ago

I have seen this happening before my eyes in Africa about 20 years ago. Some rich "elect" with heavily armed guards was throwing coins from a truck and the villagers were busy collecting them off the mud while chanting "long live" for the guy.

HorseBuggy 1 hour ago

Before the pandemic a lot of people slaved away for pay that barely covered their basic needs.

All of a sudden they are not going to the slave work, they are getting better money than when they were slaving and being abused and now you are telling them go back to slave away or else!

It could be very depressing for a lot of people and to make matters a lot worse, a lot of people became very political in everything and workplaces are full of tension.

Helg Saracen 10 minutes ago

The situation is similar not only in the United States. Now in developed countries it is almost everywhere something like this. It's just that Americans are still surprised by this (unlike the rest, not "special"). An old friend of mine had a small restaurant chain. Due to the hysteria around the covids, he is now virtually bankrupt (not yet bankrupt, but close to it). And he is not alone in such a situation. He had to fire most of the workers, waiters. No profit, no jobs. There are no new and old jobs - people simply have no money for a normal existence. Everything is very simple.

[May 28, 2021] No More Easy Money for speculators? It's too early to tell

May beyes, but may there is will the Last Hurrah move up...
Even if the S&P 500 stays flat for the rest of 2021, this year would mark its third consecutive year of double-digit gains. The index has only one such three-year period since the dot-com bubble burst in 2000.
May 26, 2021 | finance.yahoo.com

This week, LPL Research analyst Jeff Buchbinder said investors should expect stock market gains to slow significantly in the second half of 2021 as inflationary pressures and rising interest rates weigh on investor sentiment.

[May 28, 2021] Redditors Aim to 'Free Science' From For-Profit Publishers

May 25, 2021 | yro.slashdot.org

A group of Redditors came together in a bid to archive over 85 million scientific papers from the website Sci-Hub and make an open-source library that cannot be taken down. Interesting Engineering reports:

Over the last decade or so, Sci-Hub, often referred to as "The Pirate Bay of Science," has been giving free access to a huge database of scientific papers that would otherwise be locked behind a paywall.

Unsurprisingly, the website has been the target of multiple lawsuits, as well as an investigation from the United States Department of Justice. The site's Twitter account was also recently suspended under Twitter's counterfeit policy, and its founder, Alexandra Elbakyan, reported that the FBI gained access to her Apple accounts .

Now, Redditors from a subreddit called DataHoarder, which is aimed at archiving knowledge in the digital space, have come together to try to save the numerous papers available on the website. In a post on May 13 , the moderators of r/DataHoarder, stated that "it's time we sent Elsevier and the USDOJ a clearer message about the fate of Sci-Hub and open science.

We are the library, we do not get silenced, we do not shut down our computers, and we are many." This will be no easy task. Sci-Hub is home to over 85 million papers, totaling a staggering 77TB of data . The group of Redditors is currently recruiting for its archiving efforts and its stated goal is to have approximately 8,500 individuals torrenting the papers in order to download the entire library. Once that task is complete, the Redditors aim to release all of the downloaded data via a new "uncensorable" open-source website.

[May 28, 2021] Cheating at School Is Easier Than Ever and It s Rampant

Notable quotes:
"... "Consider hiring me to do your assignment,"ť reads a bid from one auction site. "I work fast, pay close attention to the instructions, and deliver a plagiarism-free paper."ť ..."
"... ... For the final exam, Mr. Johnson, a course coordinator, said he used a computer program that generated a unique set of questions for each student. Those questions quickly showed up on a for-profit homework website that helped him to identify who posted them. ..."
"... About 200 students were caught cheating -- one-fourth of the class. Overall, cases of academic dishonesty more than doubled in the 2019-20 academic year at NC State, with the biggest uptick as students made the transition to online learning, according to the school. ..."
"... Surprised that the use of apps like Photomath and mathway weren't mentioned. Students can just take a photo of a math problem, specify the directions and copy the steps. ..."
"... I've taugh at the high school and college level. I recently taught engineering at a NC high school. Within a couple months of Zoom teaching, I realized that cheating was rampant. I had numerous blatant examples of straight copy-and-paste cheating. ..."
"... The colleges have been cheating students for decades selling worthless programs and false information to students at exorbitant rates. So who is surprised that the students learned to cheat themselves. ..."
"... What the article needs to cover is the enormous amount of cheating done on SATs, GREs, LSATs, etc. to get into prestigious universities -- especially by prospective students who'll be here on an F1 visa. ..."
"... Such cheating is legendary among some cultures but the PC crowd won't want to hear about that, will they. We need their electronics and their widgets and such best not to rock that boat. P ..."
May 12, 2021 | www.wsj.com

A year of remote learning has spurred an eruption of cheating among students, from grade school to college. With many students isolated at home over the past year""and with a mass of online services at their disposal""academic dishonesty has never been so easy.

Websites that allow students to submit questions for expert answers have gained millions of new users over the past year. A newer breed of site allows students to put up their own classwork for auction.

"Consider hiring me to do your assignment,"ť reads a bid from one auction site. "I work fast, pay close attention to the instructions, and deliver a plagiarism-free paper."ť

... For the final exam, Mr. Johnson, a course coordinator, said he used a computer program that generated a unique set of questions for each student. Those questions quickly showed up on a for-profit homework website that helped him to identify who posted them.

About 200 students were caught cheating""one-fourth of the class. Overall, cases of academic dishonesty more than doubled in the 2019-20 academic year at NC State, with the biggest uptick as students made the transition to online learning, according to the school.

Texas A&M University had a 50% increase in cheating allegations in the fall from a year earlier, with one incident involving 193 students self-reporting academic misconduct to receive lighter punishment after faculty members caught on, a university official said. The University of Pennsylvania saw cheating case investigations grow 71% in the 2019-20 academic year, school data shows.

Dozens of cadets at the U.S. Military Academy at West Point were caught cheating on an online calculus exam last year, sharing answers with each other from home. The school said in April it was ending a policy that protected cadets who admitted honor code violations from being kicked out.

... ... ...

In February, auction website homeworkforyou.com featured one student post looking for someone willing to do weekly school assignments, exams and a project for a business class at York College in Queens, N.Y., over a two-month span. The winning bidder would also need to pose as the student and respond to classmates in a group assignment. The student specified that an "A"ť was the desired outcome, and that the "willing to pay"ť fee was $465.

By the next day, 29 bids had come in. The average was $479.41.

... Other popular websites that students use to get help""by submitting a question for an expert to quickly answer, or by searching a database of previous answers""include Chegg and Brainly, which said they have seen a big increase in users during the pandemic.

Mr. Piwnik said world-wide users grew to 350 million monthly in 2020, from about 200 million in 2019. The basic service is free, while a $24 annual subscription is ad-free and gives access to premium features.

Chegg, a publicly held company based in Santa Clara, Calif., prides itself on a willingness to help institutions determine the identities of those who cheat. It allows educators to report copyright information found on the site. The company saw total net revenue of $644.3 million in 2020, a 57% increase year over year. Subscribers hit a record 6.6 million, up 67%.


Cheating at School Is Easier Than Ever""and It's Rampant - WSJ

A year of remote learning has spurred an eruption of cheating among students, from grade school to college. With many students isolated at home over the past year and with a mass of online services at their disposal academic dishonesty has never been so easy.

Websites that allow students to submit questions for expert answers have gained millions of new users over the past year. A newer breed of site allows students to put up their own classwork for auction.

"Consider hiring me to do your assignment,"ť reads a bid from one auction site. "I work fast, pay close attention to the instructions, and deliver a plagiarism-free paper."ť

... For the final exam, Mr. Johnson, a course coordinator, said he used a computer program that generated a unique set of questions for each student. Those questions quickly showed up on a for-profit homework website that helped him to identify who posted them.

About 200 students were caught cheating -- one-fourth of the class. Overall, cases of academic dishonesty more than doubled in the 2019-20 academic year at NC State, with the biggest uptick as students made the transition to online learning, according to the school.

Texas A&M University had a 50% increase in cheating allegations in the fall from a year earlier, with one incident involving 193 students self-reporting academic misconduct to receive lighter punishment after faculty members caught on, a university official said. The University of Pennsylvania saw cheating case investigations grow 71% in the 2019-20 academic year, school data shows.

Dozens of cadets at the U.S. Military Academy at West Point were caught cheating on an online calculus exam last year, sharing answers with each other from home. The school said in April it was ending a policy that protected cadets who admitted honor code violations from being kicked out.

... ... ...

In February, auction website homeworkforyou.com featured one student post looking for someone willing to do weekly school assignments, exams and a project for a business class at York College in Queens, N.Y., over a two-month span. The winning bidder would also need to pose as the student and respond to classmates in a group assignment. The student specified that an "A"ť was the desired outcome, and that the "willing to pay"ť fee was $465.

By the next day, 29 bids had come in. The average was $479.41.

... Other popular websites that students use to get help "by submitting a question for an expert to quickly answer, or by searching a database of previous answers" include Chegg and Brainly, which said they have seen a big increase in users during the pandemic.

Mr. Piwnik said world-wide users grew to 350 million monthly in 2020, from about 200 million in 2019. The basic service is free, while a $24 annual subscription is ad-free and gives access to premium features.

Chegg, a publicly held company based in Santa Clara, Calif., prides itself on a willingness to help institutions determine the identities of those who cheat. It allows educators to report copyright information found on the site. The company saw total net revenue of $644.3 million in 2020, a 57% increase year over year. Subscribers hit a record 6.6 million, up 67%.

C C Cook SUBSCRIBER 13 minutes ago
Colleges administrators and professors ban speakers with opinions that differ from their narratives, pull books they don't like and can claim to be 'racist', and hire based solely on ethnic background.

But. the are SHOCKED when student cheat the system.

S 18 minutes ago

Surprised that the use of apps like Photomath and mathway weren't mentioned. Students can just take a photo of a math problem, specify the directions and copy the steps.

Unfortunately for the students, the apps will solve problems in peculiar ways that stand out to the teacher. I've never had so many students cheat of quizzes or tests. With most of them fully virtual even still, or home often because of hybrid, it's almost impossible to get fairly produced student work. E

SUBSCRIBER 40 minutes ago

Lazy, lazy test makers. Write new questions (and please check them through a simple search first to make sure the answer isn't readily available), timed testing, and assume the test takers all have full access to the internet. Stop assuming the test taking conditions haven't changed. They have.

SUBSCRIBER 44 minutes ago

Back in the 1980's when I went to College there was a big uproar over Cliff Notes. Students copying word for word... But it was known you could buy test questions, hire note takers for class, buy essays. The Frat boys had a well developed system! J

SUBSCRIBER 1 hour ago (Edited)

The cheating isn't limited to students.

Look at how our Congressional representatives behave in office!

Look at how career bureaucrats behave!

is it any wonder that cheating is so rampant? honesty and integrity are for suckers.

why worry about your conscience? there is no Deity, there is no higher moral law. All ethics are relative. As long as I get ahead, what's the big deal?

There's no afterlife anyway, so what do I have to worry about? G

SUBSCRIBER 1 hour ago

Maybe they're studying to be our future national-level political leaders. G

SUBSCRIBER 1 hour ago

Call me old-fashioned, naive or worse but I always saw homework or studying for an exam as the mental counterpart to physical exercise.

Sure, you can cheat.

But you cheat yourself in the long term when you don't develop the intellectual "muscles" that you need to compete and succeed in adult life.

And you or your parents paid good money to get that degree and you bypassed four or more years of earning potential by attending school.

Sounds like a pretty poor tradeoff to me. B

SUBSCRIBER 1 hour ago (Edited)

I've taugh at the high school and college level. I recently taught engineering at a NC high school. Within a couple months of Zoom teaching, I realized that cheating was rampant. I had numerous blatant examples of straight copy-and-paste cheating.

I confronted each student and most of them either played dumb, or denied it. I separately showed them each the website and documents they stole from and told them this was their one and only freebie. A few parents confronted me but after showing them the evidence they either dropped it or confronted their own child. A few parents thanked me for holding their kid accountable, but most just complained or dropped it altogether.

After a couple more months of it continuing, and not getting enough support from the administrators, I quit, without yet having secured a new job. I'll say this, it's worse than you think, and your child likely does it too, or knows of those who do. It's become acceptable to them bc of pressure to get into college. M

SUBSCRIBER 1 hour ago

It is not new. Twenty-five years ago, my wife, a ranked academic, was given a paper supposedly written by one of her students. She recognized it because she typed it after I wrote it ten years before.

When she confronted the student he admitted to buying it from a paper mill. Apparently the prof I wrote it for sold his "collection" on retirement. Sadly, even then, the student got little more than a slap on the wrist once outed.

SUBSCRIBER 1 hour ago

The colleges have been cheating students for decades selling worthless programs and false information to students at exorbitant rates. So who is surprised that the students learned to cheat themselves. M

SUBSCRIBER 1 hour ago

This is just a manifestation of the bankruptcy of our education system. Let's face it, for most students from kindergarteners to PhD post grads, it is not about gaining knowledge, learning how to think or even mastering skills. It is about checking blocks to build a resume. What does a diploma really mean? A checked block.

The system has known and participated in this for decades. What does it really matter how that block got checked?

SUBSCRIBER 1 hour ago

What the article needs to cover is the enormous amount of cheating done on SATs, GREs, LSATs, etc. to get into prestigious universities -- especially by prospective students who'll be here on an F1 visa.

Such cheating is legendary among some cultures but the PC crowd won't want to hear about that, will they. We need their electronics and their widgets and such best not to rock that boat. P

SUBSCRIBER 1 hour ago

I'm a lecturer at a Canadian university and am quite troubled by the use of textbook publisher's test banks in exam prep. Students easily find the keys on line. Some students have stopped attending class. They know what will be on the exam. Of course they learn nothing. Admin, faculty and students love the easy inflated grades. Academic wheels turn but there is no learning. It's not a student problem, it's a bone lazy faculty problem. I write my own exams but many refuse. E

SUBSCRIBER 1 hour ago

Wonderful. Just what I want. Doctors, lawyers, accountants, engineers, urban planners, nurses, mechanics, dentists, and other professionals who need to cheat to graduate.

SUBSCRIBER 1 hour ago

Hey you forgot another sizable group that will provide US with 'professionals' of questionable quality the AA crowd that gets placed into universities based upon what?

[May 28, 2021] Dedollarization is a serious threat to the US neoliberal empire

May 23, 2021 | www.moonofalabama.org

Max , May 23 2021 15:45 utc | 7

How can one ignore all the noise in the media to focus on the crux of the situation, implications, and the future outcomes?

One can only understand the impact of events better and envision the future by exploring plausible scenarios and identifying signals which over time will enable one to size up the probabilities of outcomes.

INTERNATIONAL -- MONETARY IMPERIALISM

Geopolitical relationships are frosty & flammable. All the narratives can be summed up into a few SCENARIOS:

The probabilities of these scenarios will be defined by the following SIGNALS:

Any new scenarios & signals? What probabilities would one assign to various scenarios? What will be the construct of scenarios and signals at the national level?

The Dollar Empire likes to initiate a conflict during Olympics when they are held in its adversaries:

  1. 2008, Georgia conflict
  2. 2014, Ukraine conflict
  3. 2022, ?

[May 28, 2021] The Fed Is Playing With Fire, by Christian Broda and Stanley Druckenmiller

Notable quotes:
"... With its narrow focus on inflation expectations, the Fed seems to be fighting the last battle. Just because the Fed hasn't faced big trade-offs in recent decades doesn't mean trade-offs aren't coming or that they no longer exist. ..."
"... The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of putting the brakes on a booming economy in 2022. ..."
May 11, 2021 | www.wsj.com

Clinging to an emergency policy after the emergency has passed, Chairman Powell courts asset bubbles.

...With its narrow focus on inflation expectations, the Fed seems to be fighting the last battle. Just because the Fed hasn't faced big trade-offs in recent decades doesn't mean trade-offs aren't coming or that they no longer exist.

Chairman Jerome Powell needs to recognize the likelihood of future political pressures on the Fed and stop enabling fiscal and market excesses.

The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of putting the brakes on a booming economy in 2022.

Mr. Broda is a partner at Duquesne Family Office LLC, where Mr. Druckenmiller is chairman and CEO.

[May 26, 2021] U.S. stocks are demonstrating most of the characteristics of a bubble, but don't sell yet, says strategist

Of course, you need to wait until all banks and hedge managers sell ;-)
May 26, 2021 | finance.yahoo.com
Steve Goldstein

U.S. stocks are looking bubbly but it isn't time to sell, argues this fund manager's strategist.

[May 26, 2021] U.S. stocks are demonstrating most of the characteristics of a bubble, but don't sell yet, says strategist

May 26, 2021 | www.marketwatch.com

... .,. ,,,

Stefan Hofrichter, head of global economics and strategy at German fund management giant Allianz Global Investors, put together a 10-point checklist for bubbles that he says was inspired by Charles Kindleberger, the author of the 1978 classic, "Manias, Panics, and Crashes." In the table below, you can see what that list is, as well as the color-coded rating he assigned to them.

At the end of April, the S&P 500 SPX, 0.20% traded at a cyclically adjusted price-earnings ratio of 37, a level not seen since the dot-com bubble of 1998, and the Nasdaq Composite COMP, 0.59% was at an even more-staggering 55. (European, Japanese and Asian equities, by contrast, are trading at or below their long-term valuation multiples.) And he doesn't agree that the valuations are justified by low bond yields. "Low real yields have historically typically implied rather low multiples, since low yields point to a slow-growth environment and a higher risk of recession," says Hofrichter. "Monetary policy over the decades has lifted investors' risk appetite to extremes, powering the run-up in equities," he says.

Also on the bubble list is that multiple asset classes are overvalued, noting that the term premium for longer-dated sovereign bonds remains around 100 basis points below the long-term average. Another sign of bubbles is that they tend to occur alongside the perception of a new era, which clearly is the case now with artificial intelligence. Ultra-easy monetary policy, the advent of new financial instruments like special-purpose acquisition companies and cryptocurrencies, and what he calls "overtrading" -- exponential price movements and signs of above-average risk taking -- also are illustrative of bubbles.

So with all these bubble signs, isn't it a time to sell? "History has shown that bubbles only burst once central banks start to hike rates or take other steps to rein in their 'easy money' policies." Until the Fed starts tapering its bond purchases, "we think there is a reasonable chance that U.S. equities will continue bubbling up further. As a result, we stay nervously 'risk on' for now, gravitating towards risk assets. And we have a bias for value stocks, which are trading at a multidecade discount to growth stocks," he says.

Subtle shift at the Fed

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Tim Duy, chief U.S. economist at SGH Macro Advisors, analyzed the wave of comments from Federal Reserve officials, including Vice Chair Richard Clarida. "Notice how slowly the Fed is moving in the tapering direction, mixing in talking about tapering with policy still being in a good place and not seeing substantial progress 'just yet.' This is by design. It's enough that if you are watching for it and you know what to look for, you see the subtle shift but not enough to be any kind of game-changer," he said. Duy expects the formal pivot toward tapering to be announced at the Jackson Hole, Wyo. conference in August, with the actual reductions starting in the first quarter of 2022, or possibly the final quarter of 2021.

Fed Vice Chair for Supervision Randal Quarles has two speeches, the first on insurance regulation and the second on the economic outlook.

The chief executives of Wall Street banks -- including Bank of America BAC, 0.37% , Goldman Sachs GS, 1.01% and JPMorgan Chase JPM, 0.35% -- will testify in front of the Senate Banking Committee on the topic of oversight.

Read : Big bank CEOs to be grilled on diversity and woke capitalism.

What the News Means for You and Your Money Understand how today's business practices, market dynamics, tax policies and more impact you with real-time news and analysis from MarketWatch. SUBSCRIBE NOW: 50% OFF 1 YEAR MarketWatch on Multiple devices

Amazon AMZN, 0.48% struck a deal to buy studio MGM for $8.45 billion, with Amazon saying the purchase rationale was the "treasure trove of IP in the deep catalog that we plan to reimagine."

Dick's Sporting Goods DKS, 14.98% jumped 8% after hiking its earnings outlook. Zscaler ZS, 12.18% rose 11%, after the cybersecurity company's quarterly results and higher full-year outlook breezed past Wall Street expectations. Retailer Nordstrom JWN, -5.54% fell 5%, after reporting a wider loss than forecast.

After the close, graphics chip maker Nvidia NVDA, 0.24% , database software maker Snowflake SNOW, 2.21% and identity management company Okta OKTA, 1.07% release their latest numbers.

Bitcoin reclaims $40,000 level

U.S. stock futures ES00, 0.16% NQ00, 0.30% rose, with the yield on the 10-year Treasury TMUBMUSD10Y, 1.578% at 1.56%.

Bitcoin BTCUSD, 3.15% , the volatile cryptocurrency, rose over 7% to reclaim the $40,000 level.

Random reads

How parking requirements ruin cities.

A new reality-television series will offer the chance to become an astronaut .

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Read Next Inflation 'surprises' are 'almost off the chart' as data runs hotter than expected

Federal Reserve officials seem to be having some success in calming investor fears over inflation --- a chart from Deutsche Bank illustrates why that was a tall task. More On MarketWatch

About the Author Steve Goldstein

Steven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.

[May 24, 2021] Avoiding losses is more important than taking a lot of risk in overvalued markets to eek out the last few points of return

May 24, 2021 | finance.yahoo.com

Robert Armstrong Sun, May 23, 2021, 8:00 PM JPM PRK 0.00%

Grantham thinks we are in a big, multi-asset market bubble and there is going to be a monstrous crash. Grantham lays out his overvaluation argument in a video I made with him in February. There are two issues I wish I had pushed him harder on then: the difficulty of getting out of the market without missing years of gains, and why, if he has mastered the art of identifying and dodging bubbles, the equity funds at GMO (the asset manager he founded more than 40 years ago, where he still serves as a strategist) have not beaten their benchmarks convincingly. Zola.22 A popover with more user information 34 MINUTES AGO if you try to time the market, you must be skillful or lucky at least two times -- when you exit, and when you re-enter. The risk of missing out on the early bull runs is also very great, so that you might miss out on the best part of the gains.

As for me, I am sticking with my game plan, which has two guiding principles: (1) "it is better to buy a wonderful company at fair prices, than a fair company at wonderful prices" (Buffet); and (2) invest in stocks only what will not cost you sleep at nights during times of market turbulence, but keep that much invested at all times (the Economist). A popover with more user information 42 MINUTES AGO Wasn't the whole point of QE to (1) increase bank reserves, thereby encouraging banks to make loans; and (2) reduce interest rates, thereby encouraging borrowers to take loans to fund profitable investments and private consumption?

Before the pandemic, isn't it true that banks that received QE reserves largely did not use them to support increased lending? If so, pre-pandemic QE would have meant the following outcomes: banks' balance sheets remained almost the same (they swapped securities for reserves); central banks had larger balance sheets (they have acquired more assets and issued more bank reserves); and no one else became any the richer or poorer. What effects did this scenario have?

In this round of QE, however, I understand that US banks have made additional loans because of their QE reserves, and also the Fed has purchased securities from non-bank sellers. That must mean that the Fed has a larger balance sheet (more securities, more bank reserves issued, and less funds because of purchases from non-bank sellers); banks have larger balance sheets (more reserves, more loans owed to them, and more deposits owed to depositors); their borrowers have loans that they can use to invest or consume and corresponding obligations; and non-bank sellers have bank deposits that they can use to invest. This round of QE has thus increased M2 (more deposits owed or used by non-bank sellers and borrowers) and bank debt owed by borrowers. A popover with more user information 2 HOURS AGO (Edited) Grantham's claim that you could have pulled out of the market in 1928 is very misleading. To make money you would have had to remain in cash for a DECADE. Many folks lost their shirt by 'correctly' anticipating the initial crash, but then jumped back into a bear market that went even further south.

(From JK Galbraith's history of the 1929 crash, which is an astonishingly entertaining read and perhaps highly timely) A popover with more user information 4 HOURS AGO (Edited) QE is a market-distorting mechanism, used by Central Banks to "manage" interest rates (straightforward) and Money Supply (harder).

Managing Money Supply is difficult because of the number of variables that impact how much new money is created when the Central Bank buys govt. debt securities and issues reserves in exchange.

If the govt. debt securities are purchased from a lending bank, creating more reserves that can be used to make loans, the crucial question is whether the bank will actually increase its credit portfolio, or whether it is more concerned about maintaining its reserve ratio? If it does increase lending, then which sectors of the economy will it lend to - consumer, manufacturing, technology, real estate or financial (i.e. hedge funds)? Is there demand for new loans? The limitations on QE through lending banks were laid bare in the 2010 - 2016 timeframe, when European banks were more focused on repairing their balance sheets and reserve ratios, than extending new credit.

By contrast, when a Central Bank purchases govt. debt securities from a non-bank holder, there is a dual-impact that causes the substitution of govt. securities in favor of other asset classes. First, the reduction in yields makes other asset classes more attractive and second, the shrinking pool of govt. debt securities forces re-allocation of capital into other asset classes. Which of these two variables has a greater impact is hard to say, as it depends on the asset re-allocation decisions of tens of thousands of portfolio managers, working within the framework of investment parameters for hundreds of thousands of investment funds.

Ultimately, the asset re-alloction away from govt. debt securities will inflate the value of asset classes all the way down the risk spectrum, creating a bubble of value inflation in each successive risk-asset class until a new equilibrium is established. This triggers the so-called "wealth effect", where investors borrow against, or liquidate, unexpected investment gains, creating an increase in aggregate demand.

QE's impact on Money Supply is (relatively) easy to understand, but devilishly hard to quantify. A popover with more user information 5 HOURS AGO Risk adjusted returns. How many individuals are invested in bonds? Not very many because there is essentially no return. This means there is a very high concentration in the riskiest assets.
Also Mr. Armstrong individual investors have finite lives. If I am 70 and we experience a market that has no return for 12 years (1999-2011) and there is a 20-40% drawdown within that and I do not have any surplus income to reinvest in the market as it goes down should I just always stay 100% invested. Money managers have to take all of this into consideration and determine their allocations accordingly. Arm chair quarterbacking is quite easy. A dialog showing a permalink to the comment Report Joeyjoejoe A popover with more user information 4 HOURS AGO (Edited) In reply to Opinionated You are wrong on bonds. Bonds have been great risk adjusted payers.

If you bought 30yr treasuries in 2000, you made almost 8% per annum for 2 decades with zero risk.

Not bad. The S&P would only be slightly better.
A dialog showing a permalink to the comment Report ALOM A popover with more user information 4 HOURS AGO In reply to Joeyjoejoe The riskless return on 30 years bought in 2000 is 6,5 %, not 8 %.
Recommend Reply Share
A popover with more user information 5 HOURS AGO The nature of the goal you are pursuing is critical to how you assess Grantham's arguments. If your goal is to beat the performance of a benchmark index over a give period of time, then you very likely reject them.

However, if you seek to achieve long-term accumulation or (even more so), decumulation goals, then you are likely to agree with Grantham's fundamental point that avoiding losses is more important than taking a lot of risk in overvalued markets to eek out the last few points of return.

The math is clear: You start with 100. The market loses 25%, and you are at 75. To return to 100 you need a return of 33%. dingo-x A popover with more user information 5 HOURS AGO I like the article and it makes sense. Problem is that you could find someone with Jeremy's view (but not commanding the same respect, I agree) each year for the past 10 years. I know people who have yet to enter the market since 2009 and have yet to buy a house, waiting for the dip. And they kind of missed the dip last year with equities and it didn't quite amount to a dip with house prices. A popover with more user information 5 HOURS AGO Someone correct me if I'm wrong but

QE = money printing. Shouldn't take fancy empirical studies or mathematical models to figure out that money printing depresses the value of cash and inflates the value of assets relative to cash.

I'm also very skeptical of the claim that QE puts too much money in "public" hands. What is meant by the public? Sure, there were government handouts and unemployment benefits, that I would consider public. But there were also equally if not larger massive government bailouts to large multinational corporations and legislative pork to bureaucratic government entities. I don't really consider those "public". Recommend 1 Reply Share A dialog showing a permalink to the comment Report Kaze iron big drum A popover with more user information 6 HOURS AGO So in other words, QE does cause inflation, but because the money only lands in the hands of the rich, it is just assets the rich hold that have seen inflation?
Recommend 4 Reply Share A dialog showing a permalink to the comment Report Student of ideas A popover with more user information 6 HOURS AGO On QE it matters whether the bonds are purchased from banks or from non banks. If they were on the balance sheet of JPM and are not replaced then there is no effect on broad money measures like M2. JPM has simply exchanged a long maturity asset (bonds) for a short maturity asset (reserves at the Fed). Both are government liabilities. If Pimco sells bonds to the Fed it gets a new deposit at JPM which JPM balances by making a new reserve at the Fed. M2 is the sum of cash and bank deposits so it has risen. Monetarist theory suggests that Pimco may use that deposit to buy something else, driving up asset prices. In the first case JPM may not do anything else. Recommend 3 Reply Share A dialog showing a permalink to the comment Report Anders K A popover with more user information 6 HOURS AGO QE certainly leads to a "hot potato" effect, but you can't just talk about "the public". QE cash ends up with asset managers, but not households. So the inflation it leads to is with financial asset prices, not goods and services. The BoE has written papers in the past about the linkage of the former to the latter (a "wealth effect") but I think they've retreated from that now.
Recommend 3 Reply Share A dialog showing a permalink to the comment Report up_trader A popover with more user information 6 HOURS AGO In reply to Anders K The majority of money at Asset Managers belongs eventually to households though. Either the PM at the AM will have to rebalance the portfolio - by buying more other bonds (bidding up th prices) or the client can withdraw some cash and spend it on goods. A popover with more user information 7 HOURS AGO (Edited) Over the past 15 months thought I was a financial genius, until I realized that everything has gone up. I guess its better to be lucky rather than smart.

On the other hand I am worried. Common sense tells me that the higher the market goes, the bigger the eventual crash that will be. But there appears to be a disconnect between Fed (and other Central Banks) outlook and the high levels of both the real estate and stock markets.

In that respect I agree with Larry Summers. There is too much money sloshing around in the system and the Fed and other Central Banks should tap the breaks. You only need to look at the ridiculous prices that Real Estate and Stocks have achieved to realize that the market is telegraphing two possible scenarios: either the economy is going to grow at an an astounding rate going forward, or there's a good possibility that inflation will be a big problem in the not to distant future.

I don't know which will happen (I suspect the latter) but sooner or later the market is going to turn from euphoria to hysteria.
Recommend 2 Reply Share A dialog showing a permalink to the comment Report James Peach A popover with more user information 4 HOURS AGO In reply to ldkt You forgot one other possibility; that the market is pricing in low inflation, secular stagnation, and persistently low discount rates. The reason why the CAPE index is high relative to "historic averages" does not need to be to do with euphoria, hysteria or bubbles and could instead be everything to do with fundamentals. These fundamentals may turn out to be wrong, but I think it would be wrong to call this a bubble even in retrospect.
Recommend 4 Reply Share A dialog showing a permalink to the comment Report Mr Pensive A popover with more user information 1 HOUR AGO In reply to James Peach Maybe "the market" doesn't folollow an economic logic but individual investors just rely on gut feeling?
Retail investors just join the party,thinking stocks can only go up. Most asset managers I talk to just tell me that debt is so high that CBs cannot raise policy rates ever again. Should long-term rates (=market rates) rise regardless, then CBs would control the yield curve. With interest rates on bonds thus capped at negative real rates,equities markets might never fall again.

Sure consumer inflation might rise at some point, possibly even to compensate for the vagaries of the printing press. But the not so independent central bankers may still prefer letting inflation rip over bringing about a colossal recession.

Maybe that's why asset prices will keep rising. Recommend Reply Share A dialog showing a permalink to the comment Report Moneybags A popover with more user information 7 HOURS AGO The market is in a funny place as long as dividends are exceeding bond yields (before buybacks) That said, owning real assets in a time of excessive money printing and rising inflation is a better place than following a purist's inclination to sell up and own cash.
The whole talk about bubbles should be addressed to the Fed in the first instance. Recommend 1 Reply Share A dialog showing a permalink to the comment Report timlshort A popover with more user information 7 HOURS AGO On QE, isn't it the case that Pimco's clients only have cash to the extent that the Treasuries were purchased from Pimco and not from the Fed? And wouldn't that not be the case as much if there had been significant new issuance from the Fed? And has there not in fact been such significant new issuance?

I thought the whole point of QE is that it is "sterilised" in this way so as not to spike CPI. Which would certainly appear to have worked. Which then leads on to: if the above is the correct explanation of QE, why has CPI been flat on its back until v recently? Recommend Reply Share A dialog showing a permalink to the comment Report duvinrouge A popover with more user information 7 HOURS AGO The difficulty in identify bubbles is because economists today make no distinction between values & prices.

The classical economists like Ricardo had a labour theory of value to explain prices.
Individual commodities were assumed to have a natural price based upon their actual labour time, direct & indirect, that went into their production. Market prices driven by supply & demand oscillated around these natural prices.
But Ricardo accepted Say's Law & rejected the general glut theory supported by the likes of Malthus, who greatly influenced Keynes.
For Ricardo there could only be over & under production at commodity/industry level.
The general glut theorists understood that the circulation of capital could be disrupted; that supply did not automatically create its own demand.
Ricardo understood there were problems with his labour theory of value though.
It meant that there couldn't be an exchange of equivalents for profits to be made; workers must be paid less than the value they created (hence the Ricardian socialist school).
It also couldn't explain why the price of fine wine aged in oak would sell at a higher price than wine that hadn't been matured.

The LTV had to be corrected or rejected.
The neo-classicals embraced marginalism & prices are supposedly explained by prices.
Problem is there's no way to identify bubbles.

Rather awkwardly for the capitalists Marx solved the problem with the classical LTV.
He explained that as well as commodities having labour values based upon their concrete labour time, the tendency for the rate of profit to equalise gives commodities 'prices of production'.
That only in aggregate do market prices equal aggregate prices of production which equal their labour value equivalents, & that this is only across the business cycle.
It will only be by chance that a commodity sells for its labour value equivalent, supply & demand market prices will oscillate around their 'prices of production'.
They go to market to see how much of society's finite labour time they can claim.
None of this explains asset price bubbles though, but it provides the foundation.

By accepting the role of the market in forming 'natural prices' that are not tied to an individual commodity's labour time, we can see that a credit system, by separating the act of purchase from paying, permits leverage, & so aggregate market prices inflating above their value equivalent.
A credit/debt fuelled asset price bubble.

Historically the credit system could only leverage so far as the value of the national currency was tied to a fixed weight of gold (which takes a set amount of labour time to produce).
Too much token or credit money resulted in gold flight.
Central banks had to intervene to maintain the value of their money, & so pop the bubbles.

Since 1971 they haven't had to do this.
Rather they have been complicit in their creation & now do all they can to stop them deflating.
In otherwords, they continue to push market prices above their values.
The big question is how long they can deny the law of value?
Recommend 4 Reply Share A dialog showing a permalink to the comment Report plutus A popover with more user information 3 HOURS AGO In reply to duvinrouge It's plagiarism if you don't cite your source: The Value of Everything: Making and Taking in the Global Economy
Book by Mariana Mazzucato
Recommend 1 Reply Share A dialog showing a permalink to the comment Report Trutheludes A popover with more user information 8 HOURS AGO (Edited) On Jeremy Grantham

Often successful genius is a flash in the pan.

Intelligence is a function of times; times pass, and it joins mediocrity. Jeremy Grantham has had his day and should call it a day.

Success is random but passes on as planned intelligence. Spectacular failures too happen in spite of intelligent planning – funds run by Nobel Laureates failed, for example.

In fact, most great men in history were geniuses and failed eventually.

Truth is, myriad forces at work are just too formidable for human intelligence to comprehend and control.

Remain humble and aim small. You will be successful. Buy index ETFs, don't quit; markets might fall but will rise again. And when you will look back years later, you will see a rising trajectory, albeit broken at several places.

.

On QE

"In Pimco's clients' balance sheet, a deposit of $100 is substituted for the Treasuries -- with which they can buy riskier assets."

But was not that $100 already there, with which they bought Treasuries in the first place? They bought Treasuries and then sold them; they paid $100 and got them back. Where is the new money – except for small buying/selling profit?

So, I am sorry QE does not add to money with the public. Fed has only bought Treasuries in a circuitous way and monetized the government deficits by proxy.

Fed buying Treasuries lowers the rates, which might not happen because investors would demand higher yields. Fed's acceptance of paltry yields pushes the interest rates down.


Recommend Reply Share A dialog showing a permalink to the comment Report Trutheludes A popover with more user information 7 HOURS AGO In reply to Trutheludes PS. By the way Robert, I read reviews of Mandelbrot's The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward. It is a very formidable and humbling book. It is on my buy list. Thanks for recommending it.
Recommend Reply Share A dialog showing a permalink to the comment Report James Peach A popover with more user information 4 HOURS AGO In reply to Trutheludes A bank making a profit does not lead to new money, except where it distributes retained earnings to shareholders in the form of new deposits.

On your point about QE, I think you're right, the new deposits were already created when the bank bought the treasuries, which predates the FED's QE operation. But the second question is: would the bank have purchased these USTs if it did not anticipate a QE operation. If the answer to that question is no, then you can make a reasonable argument that the QE operation did lead to an increase in broad money/M2.
Recommend Reply Share A dialog showing a permalink to the comment Report Enter the Winter A popover with more user information 3 HOURS AGO In reply to James Peach Without clear specification of counterfactuals, none of this talk about whether a particular operation "does" or "does not" "create money" means anything to me at all. Recommend Reply Share A dialog showing a permalink to the comment Report high rate tax payer A popover with more user information 8 HOURS AGO selling out and then repurchasing also has transactional costs which are not insignificant once you count in capital gains tax on the gains. Recommend Reply Share A dialog showing a permalink to the comment Report Danmalin A popover with more user information 8 HOURS AGO What is the purpose of QE?
According to the ECB website it is 'to put downward pressure on the term structure of interest rates'.
The BoE website states that 'the aim of QE is simple: by creating this 'new' money, we aim to boost spending and investment in the economy'.
Recommend 6 Reply Share A dialog showing a permalink to the comment Report FKN A popover with more user information 8 HOURS AGO There is almost no industry with as much transparency on performance and comparability than asset management. There is also no industry with as much evidence of LACK of skill in delivering performance that exceeds benchmarks:

https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2020.pdf

Yet the industry thrives and practitioners make vast fortunes in the process of destroying value.

GMO is a case in point. The performance on the US equity factsheet that you highlight shows that the portfolio has underperformed 9 out of the last 10 years.

The benchmark free allocation fund that you highlight has returned 4.2% (!) per year over the last years and is basically a macro hedge fund with 17% in equity long/short strategies, 43% in "alternative" strategies and its largest position is 20% EM; i.e. it is not representative of an asset allocation fund at all. Their Global Asset Allocation Strategy has underperformed 9 out of the last years with the only annual period of outperformance being in 2011.

Yet year in, year out Jeremy Grantham and many like him, get to expound their views as if they are gurus to be listened to and emulated and cash their multi-million dollar paychecks.

Every investor should thank their lucky stars for John Bogle and Vanguard for changing the whole nature of the business by not only educating and offering investors the passive alternative but in the process lowering active fees across the industry.

I think journalists who give active managers, selling unrealisable dreams, the forum, do their readers a huge disservice.
Recommend 3 Reply Share A dialog showing a permalink to the comment Report French canard A popover with more user information 5 HOURS AGO In reply to FKN Maybe the real treasure was the fees they collected on the way.
Recommend 2 Reply Share A dialog showing a permalink to the comment Report A thought... A popover with more user information 8 HOURS AGO Dr Lacy Hunt is ex deputy chair of the Texas Fed and an expert on Federal Reserve policy. He has written extensively on the difference between QE and "true MMT" ( which is effectively helicopter money) which in turn requires making Fed reserves legal tender and that in turn requires a change to the Fed Reserve Act.

His argument, explained in detail midway through the Q1 2020 quarterly report, appears to conflict with the "QE puts money in the public's pockets " argument the FT appears to be making?

I would welcome your comment on Hunt's line of reasoning? Clearly M2 has indeed increased dramatically but has been offset by falling velocity.

https://hoisington.com/pdf/HIM2021Q1NP.pdf
Recommend 2 Reply Share A dialog showing a permalink to the comment Report Occam A popover with more user information 8 HOURS AGO (Edited)


It isn't, however, difficult to identify a badly overpriced market. It is extremely easy in retrospect and it is easy in real time. If you graph them, they look like Himalayan peaks coming out of the plateau.
if I look at the first chart I see an unmistakable himalayan peak emerging in 2014. Yet selling out in 2014 and sitting at the sidelines for now 7 years and counting wasn't the best move. Case in point: it's not that easy to time the market.
Recommend 3 Reply Share A dialog showing a permalink to the comment Report Danmalin A popover with more user information 8 HOURS AGO RE QE: shocking, in a way, that it is unclear how a policy avidly pursued by the major Central Banks actually works, or indeed is supposed to work. It is not sold as a policy designed to bid up existing assets but Central Banks can't determine what assets the private sector chooses to buy. or force them to invest in the creation of new assets.
On the Money supply it is more useful to look at the asset side of the Balance sheet. In the EA we can see that most of the growth in bank assets is via the purchase of Government bonds,while the growth in spending to the private sector has been modest and is slowing. So QE is not monetary financing but pretty close to it as its main function is to help reduce the cost of servicing Govt debt.
Recommend 1 Reply Share A dialog showing a permalink to the comment Report Datcreamcheese A popover with more user information 8 HOURS AGO (Edited) Reflecting on the prior two cycles for what's to come is a losing strategy (especially mean reversion). Study the 1950s and the Bretton Woods Accord - shifting monetary policy frameworks will break down a lot of correlations from the prior cycles.

As for QE: the treasury is auctioning debt almost daily..bid to cover ratios on 42-week bills consistently exceed 3. The Fed is literally buying treasury securities at their theoretical peak. This isn't QE anymore - this is debt monetization. Treasury is using these funds to pump the "lower end" of the income distribution in the form of direct deposits, enhanced unemployment and tax breaks.

Is this inflationary? Not yet. Household savings are incredibly high. The supply side is the problem. But what did anyone expect to happen when decoupling from China?

What happens to the DXY when the FED stops its asset purchases? Historically - higher yields equals higher dollar. Will this hold given the extraordinary debasement? Recommend 2 Reply Share A dialog showing a permalink to the comment Report Candidate A popover with more user information 8 HOURS AGO QE was intended to work bottom down from Central Banks, Banks, Corporations and finally end up in consumer's hands.

If central banks bought bonds from commercial banks, funds available for lending increased for the latter.

Now, commercial banks lent to corporations with the intention to increase capital spending in an easy financial conditions environment.

Subsequently corporations drove the funds to buybacks and dividends therefore inflating stock prices.
Recommend 1 Reply Share A dialog showing a permalink to the comment Report JM2845 A popover with more user information 9 HOURS AGO If you're going to use this logic to promote sloshiness, you need to consider what happens when the treasury issues bills or bonds. A second after JPM sells treasuries to the Fed, 2 seconds after it bought them from Pimco, it buys $100 worth of treasury bills issued by the US treasury. If you apply this framework, you should look at all operations that change banking sector liquidity, not just the parts that suit your argument. Recommend Reply Share A dialog showing a permalink to the comment Report ArioMike A popover with more user information 9 HOURS AGO Delighted you keep talking to Jeremy, Robert.

I don't like whiskey (or whisky), and my bed is one I cannot hide under. But over December and January in my largest retirement fund, where I have SAA discretion (I view it as strategic risk allocation, rather than asset) I sold lots of equity and am now over 50% cash and linkers. It can be done.

I have never done/supported TAA over my investment career, and view my decision as an asset owner one, not an investment manager one.

Which leads me to offer an answer to the two issues you wish you had pressed him on. It has historically been good practice for asset owner clients to mandate close to zero cash in a mandate. Most managers are rubbish at market timing (see my TAA comment above), and it is foolish to give them rope to hang the client's portfolio with. And it is hard for asset owners to have the skills (and organisational flexibility) to tilt towards (say) value when they think "value risk" vs "growth risk" is underpriced.

Very few investment managers are incented to make the big calls we are talking about. The asset owners with the necessary time horizon are the only ones who can do it. (Or they need to identify the skill of the few JGs that exist and appoint them for long enough to harvest the fruits of those skills). And in fact these guys are not investment managers (who manage portfolios), rather they are strategic risk managers.

Happy to elaborate offline, Robert. Quite a few of your FT colleagues know who I am...

PS The world is in a BNPL Ponzi scheme, debt is the politician's friend, and there are few guardrails there. Central banks are probably fighting the last war (inflation), and not rearming to prevent the next one (correlated, big, risk crystallizations). Think Archegos and friends...The best global Risk Mitigation effort is the Paris Agreement, and implementation there is not exactly in high gear. Recommend 4 Reply Share A dialog showing a permalink to the comment Report Marc A popover with more user information 9 HOURS AGO In reply to ArioMike I tend to agree with Jeremy as well but my move has been more along the lines of 15% cash and "safe" stocks. So, for example, I would be curious to know why you wouldn't think that a name say like Nestle, which gives you a 2.5% dividend yield in a country with negative rates wouldn't"t be more appealing than holding cash? Even during the GFC, when it had a run of 50% in the previous 2 years to its peak, it only went down c20% and was back near its previous peak within 2 years. It also feels like this time around, with no visibility on yields anywhere already being programmed into the medium term, a turn to these kind of value stocks with sustainable dividends will be more immediate and that these types of stocks may suffer even less than after the GFC.
Recommend 2 Reply Share A dialog showing a permalink to the comment Report Incedo A popover with more user information 8 HOURS AGO In reply to Marc I have a similar strategy, in that I have created a cash pool which is sufficiently large to cover my outgoings over the next 5 years, though I am reluctant to invest in a single dividend yielding stock. Warren Buffet provides a strong rationale for why an index is preferable to single stocks ( https://www.cnbc.com/2020/05/22/warren-buffett-most-people-shouldnt-pick-single-stocks.html ).
Recommend Reply Share A dialog showing a permalink to the comment Report memento_mori A popover with more user information 4 HOURS AGO In reply to Incedo Why does Buffet himself holds individual stocks rather than indexes ? Recommend 2 Reply Share A dialog showing a permalink to the comment Report READ MORE OF THIS CONVERSATION > F2020 A popover with more user information 8 HOURS AGO In reply to ArioMike You are prudent and of course also technically correct. Also, agree it is a giant ponzi scheme.

However, curious to know your thoughts as to why you believe the Fed would allow the S&P to fall by a large margin (say >20%), triggering contagions?
Recommend Reply Share A dialog showing a permalink to the comment Report Reading Panda A popover with more user information 8 HOURS AGO In reply to ArioMike I have found much comfort in your comment as I thought that I am so dumb for holding 70% in cash, no literally, cash. And the point about getting "shot", well, I made an email and told them I will underperform but their capital is safe. Recommend Reply Share

[May 24, 2021] The Fed Has Lost Control -- John Williams Warns Of Hyperinflation In 2022

I agree that Fed might lose the control: much depends on the continuation of the status of the dollar as the main reserve currency. If this position continue to weaken all beta are off.
May 24, 2021 | www.zerohedge.com

What would happen to the financial system if the Fed stopped printing massive amounts of money for stimulus and debt service? Williams explains,

" You could see financial implosion by preventing liquidity being put into the system. The system needs liquidity (freshly created dollars) to function. Without that liquidity, you would see more of an economic implosion than you have already seen. In fact, I will contend that the headline pandemic numbers have actually been a lot worse than they have been reporting. It also means we are not recovering quite as quickly. The Fed needs to keep the banking system afloat. They want to keep the economy afloat. All that requires a tremendous influx of liquidity in these difficult times."

So, is the choice inflation or implosion? Williams says, "That's the choice, and I think we are going to have a combination of both of them. .."

" I think we are eventually headed into a hyperinflationary economic collapse. It's not that we haven't been in an economic collapse already, we are coming back some now. . . . The Fed has been creating money at a pace that has never been seen before. You are basically up 75% (in money creation) year over year. This is unprecedented. Normally, it might be up 1% or 2% year over year. The exploding money supply will lead to inflation. I am not saying we are going to get to 75% inflation -- yet, but you are getting up to the 4% or 5% range, and you are soon going to be seeing 10% range year over year. . . . The Fed has lost control of inflation. "

And remember, when the Fed has to admit the official inflation rate is 10%, John Williams says, "When they have to admit the inflation rate is 10%, my number is going to be up to around 15% or higher. My number rides on top of their number."

Right now, the Shadowstat.com inflation rate is above 11%. That's if it were calculated the way it was before 1980 when the government started using accounting gimmicks to make inflation look less than it really is. The Shadowstats.com number cuts out all the accounting gimmicks and is the true inflation rate that most Americans are seeing right now, not the "official" 4.25% recently reported.

Williams says the best way to fight the inflation that is already here is to buy tangible assets. Williams says,

"Canned food is a tangible asset, and you can use it for barter if you have to. . . . Physical gold and silver is the best way to protect your buying power over time."

Gold may be a bit expensive for most, but silver is still relatively cheap. Williams says, "Everything is going to go up in price."

When will the worst inflation be hitting America? Williams predicts,

"I am looking down the road, and in early 2022, I am looking for something close to a hyperinflationary circumstance and effectively a collapsed economy."

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with John Williams, founder of ShadowStats.com.


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Nikki Alexis 7 minutes ago

John Williams warning about hyperinflation is like Peter Schitt telling me stocks are going to crash. It's coming, it's coming! Boy crying wolf.

Cautiously Pessimistic 59 minutes ago

Accounting Gimmicks. Election Gimmicks. Gender Gimmicks. Science Gimmicks. Rule of Law Gimmicks.

America has become one big fun house of gimmicks.

Time for a RESET.

NoDebt 54 minutes ago remove link

Yeah, the Reset Gimmick. Where they fundamentally transform themselves into a permanent position of power. Never mind that they'll kill millions to achieve it.

Samual Vimes 47 minutes ago (Edited)

What about gutting primary dealers by buying T bills directly ?

https://www.zerohedge.com/economics/fed-prepares-go-direct-liquidity

[May 24, 2021] Taibbi- Con Of The Week - Greensill Capital

May 24, 2021 | www.zerohedge.com

pndr4495 2 days ago (Edited)

Doyle Lonnegan to Johnny "Hooker" Kelly in the movie The Sting: "Your boss is quite the card player Mr. Kelly. How does he do it?"

Kelly to Lonnegan: "He cheats."

philipat 2 days ago

It's appropriate that the entirely useless ex-PM Cameron got taken by this guy and tried to use his influence to access free money for him from The Treasury as an "advisor"..He didn't get any.

Cameron couldn't even do corruption properly!!

[May 24, 2021] -The Fed Has Lost Control- - John Williams Warns Of Hyperinflation In 2022

May 24, 2021 | www.zerohedge.com

messystateofaffairs 48 minutes ago

The Fed never had control, just s bunch of shysters running a long term hybrid ponzi scheme.

Lordflin 54 minutes ago (Edited)

The Fed is losing control...

I suppose that is true... as the function has been to drain the people's wealth into the coffers of the few...

The Real Satoshi 29 minutes ago remove link

Sad that Greg Hunter got kicked off youtube.

gregga777 12 minutes ago (Edited)

He is in great company, though. Anyone who offends the Marxist narratives (Politically Correct, Multicultural, Affirmative Action, Diversity, Feminist, LGBTQQ, etc.) gets kicked off YouTube.

pmc 36 minutes ago (Edited) remove link

...As Kissinger said "The illegal we do immediately; the unconstitutional takes a little longer."

https://thenewamerican.com/kissinger-the-illegal-we-do-immediately-the-unconstitutional-takes-a-little-longer/

[May 20, 2021] These energy stocks are expected by Wall Street to rise up to 37% over the next year

May 20, 2021 | finance.yahoo.com

A growing economy has helped lift oil prices 31% this year.

Jesse Felder was cited in MarketWatch's Call of the Day for his opinion that energy is the neglected sector of the stock market even though it has been outperforming other sectors since last fall. (You can read Felder's entire posting here .)

He pointed out that energy stocks make up a smaller percentage of the S&P 500 SPX, 1.31% than they did 20 years ago. Looking at numbers provided by FactSet, it appears Felder expressed this phenomenon mildly. As of the close on May 19, the S&P 500 energy sector made up 2.85% of the index's market capitalization, down from 6.95% 20 years earlier.

The collapse in crude oil prices from the summer of 2014 through February 2016 was enough to push some energy companies out of the S&P 500 -- their market values had declined too much to remain in the benchmark large-cap index. And the worst point of the COVID-19 crisis for financial markets even led to forward-month oil futures contracts falling below zero in April 2020. (The price of West Texas crude oil per continuous forward contract CL00, -1.93% was up 31% for 2021 to $63.35 on May 19, according to FactSet.)

The S&P 500 now includes only 23 energy stocks. Our look at the sector will be broadened to the 63 energy companies in the S&P Composite 1500 Index SP1500, 1.19% , which is made up of the S&P 500, the S&P 400 Mid Cap Index MID, 0.52% and the S&P Small Cap 600 Index SML, 0.25% .

Here's how the 11 sectors of the S&P 1500 have performed this year through May 19 and also since the end of 2019 and since the end of 2015:

S&P COMPOSITE 1500 SECTOR PRICE CHANGE - 2021 PRICE CHANGE FROM END OF 2019 PRICE CHANGE FROM END OF 2015
Energy 37.3% -13.9% -15.5%
Financials 25.6% 20.1% 89.6%
Materials 20.1% 40.5% 101.4%
Industrials 15.7% 26.9% 92.4%
Real Estate 14.0% 5.5% 31.8%
Communication Services 11.6% 36.0% 64.5%
Health Care 8.1% 21.7% 76.5%
Consumer Discretionary 5.6% 39.1% 116.6%
Consumer Staples 4.4% 12.7% 40.6%
Utilities 4.2% -0.2% 50.5%
Information Technology 2.9% 45.8% 222.8%
S&P Composite 1500 10.2% 27.6% 100.7%

[May 18, 2021] Us elite factions is a nuanced and complex structure, not monolithic.

May 18, 2021 | www.moonofalabama.org

Max , May 17 2021 19:15 utc | 37

Trump represented a FACTION of the establishment. Which one? He did their bidding and in the process alienated other factions. The other factions worked together to get him replaced. There are factions within neocons, neoliberals and establishment. It is a nuanced and complex structure, not monolithic. It is misleading to state, "he publicly broke away from the American oligarchy's class interests".

Trump's biggest MISTAKE was that he didn't build a good sounding board of advisors. He surrounded himself with his family members and believed his orders will be implemented like a corporate president. Jared Kushner is a Bilderberg. So Trump was connected to the global syndicate and part of the swamp.

The unipolar order ended in 2014/15 and the multipolar order is establishing. The U$A or NATO can't launch a foreign war like they did in Libya. Russia and China have warned the Financial Empire and defined the redlines. This is the reason behind Trump not launching a new major foreign war. Will Biden launch a new war? However, Trump did launch hybrid wars in Venezuela, Bolivia, Belarus,... Trump didn't break from FOREIGN adventures.

During Trump's term:
– How many bombs were dropped?
– How much new DEBT was created?
– How much did the money supply increase by?
– What happened to the trade deficit?

[May 18, 2021] U.S. Bank Stocks Shine as Investors Bet on an Economic Recovery - WSJ

May 18, 2021 | www.wsj.com

P

U.S. Bank Stocks Shine as Investors Bet on an Economic Recovery - WSJ

P Paul Korna
The account of the 3 months of the Biden team is this: bad employment numbers, retail spending flattening, inflation galloping in many sectors, a border crisis, rockets and explosions in the Middle East, and, above all else, a week of shocking gas shortages all over the Eastern seaboard. So really, this poor performance can only be better. But could it have been worse? hardly. They bungled everything they touched, and did not touch that needs to be addressed. Namely, lockdowns, masks, distancing: scores of published scientific studies informs that these are completely futile. They should be lifted. And the Fauci-CDC-SAGE (UK) - official pro-pseudoscience cabal should be fired everywhere. Real science and undistorted statistics should inform people, so they understands that they were duped for a year by the media controlled by Democrats-liberals. Even the WSJ infects people with numerous, ill-written articles on Covid, which is a shame from this medium.

[May 18, 2021] Making predictions is tough, especially when making them about the future of stock market

May 18, 2021 | www.zerohedge.com

ay_arrow


Jimmie McGill 2 hours ago

The market is getting wobbly. The high flyers (Tesla, Bitcoin, Lumber) are down Bigly, the VIX is increasing, Tech is weak, commoditires are showing signs of weakness while PMs are showing strength. Every day that exit door looks a little smaller.

Silenus 2 hours ago (Edited)

The stock markets have kept reaching all time highs even though economic activity is well below where it was in 2019. There is large-scale unemployment, supply chain problems, worker unrest etc. In other words, there is no reason that stock markets should be at all time highs.

The only reason for these valuations is hopium combined with easy money policy, i.e. speculation.

A crash is definitely possible, and if not a crash, then long-term, grinding stagnation.

Weihan 2 hours ago remove link

Optimism, pessimism, schmepticism. WHO CARES?! None of this matters because there are NO markets! There is only central bank manipulation and corruption. Whatever outcome they want, they will get.

Rentier88 2 hours ago (Edited)

"Peak Wall Street Optimism Is Now Behind Us: It's All Downhill From Here"

Never underestimate all the stupid people who speculate (since it isn't investing) these days, robinhood fools come to mind.

CthulhuNoLivesMatter 4 hours ago (Edited) remove link

You are supposed to invest in things you understand and have confidence in.

Where should I invest my money according to the ZH posters?

drjd 4 hours ago

Yourself.

CthulhuNoLivesMatter 3 hours ago

I'm working on myself right now. Doing intermittent fasting. Also been doing some self work involving applying stoic philosophy to my life.

only person i can control is me

[May 18, 2021] Why the bull market in stocks won't be over until these 3 S P 500 sectors sing

A few more month can be just two or three...
May 18, 2021 | finance.yahoo.com
Mark Hulbert Tue, May 18, 2021, 11:46 AM EDT

If anything, the relative performance of the U.S. stock market's various style and sectors suggests the bull market will stay alive and well for at least a few more months. This cheery forecast is at odds with the widespread opinion that value stocks' relative strength is an early warning signal of market weakness.

[May 18, 2021] Who Bought the $4.7 Trillion of Treasury Securities Added Since March 2020 to the Incredibly Spiking US National Debt-

May 18, 2021 | wolfstreet.com

Who Bought the $4.7 Trillion of Treasury Securities Added Since March 2020 to the Incredibly Spiking US National Debt? by Wolf Richter • May 17, 2021 • 119 Comments The Fed did. Nearly everyone did. Even China nibbled again. Here's who holds that monstrous $28.1 trillion US National Debt. By Wolf Richter for WOLF STREET .

The US national debt has been decades in the making, was then further fired up when the tax cuts took effect in 2018 during the Good Times. But starting in March 2020, it became the Incredibly Spiking US National Debt. Since that moment 15 months ago, it spiked by $4.7 trillion, to $28.14 trillion, amounting to 128% of GDP in current dollars:

But who bought this $4.7 trillion in new debt?

We can piece this together through the first quarter in terms of the categories of holders: Foreign buyers as per the Treasury International Capital data, released this afternoon by the Treasury Department; the purchases by the Fed as per its weekly balance sheet; the purchases by the US banks as per the Federal Reserve Board of Governors bank balance-sheet data; and the purchases by US government entities, such as US government pension funds, as per the Treasury Department's data on Treasury securities.

Foreign creditors of the US.

Japan , the largest foreign creditor of the US, dumped $18 billion of US Treasuries in March, reducing its stash to $1.24 trillion. Since March 2020, its holdings dropped by $32 billion.

https://664e3285974f21e0f93cbda833cec3c8.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

China had been gradually reducing its holdings over the past few years, but then late last year started adding to them again. In March, its holdings ticked down for the first time in months, by $4 billion, bringing its holdings to $1.1 trillion. Since March 2020, it added $9 billion:

But Japan's and China's importance as creditors to the US has been diminishing because the US debt has ballooned. In March, their combined share (green line) fell to 8.3%, the lowest in many years:

All foreign holders combined dumped $70 billion in Treasury securities in March, bringing their holdings to $7.028 trillion (blue line, left scale). But this was still up by $79 billion from March 2020.

These foreign holders include foreign central banks, foreign government entities, and foreign private-sector entities such as companies, banks, bond funds, and individuals. Despite the increase of their holdings since March 2020, their share of the Incredibly Spiking US National Debt fell to 25.0%, the lowest since 2007 (red line, right scale):

After Japan & China, the 10 biggest foreign holders include tax havens where US corporations have mailbox entities where some of their Treasury holdings are registered. But Germany and Mexico, with which the US has massive trade deficits, are in 17th and 24th place. The percentages indicate the change from March 2020. Note the percentage increase of India's holdings:

US government funds hit record, but share of total debt drops further.

US government pension funds for federal civilian employees, pension funds for the US military, the US Social Security Trust Fund , and other federal government funds bought on net $5 billion of Treasury securities in Q1 and $98 billion since March 2020, bringing their holdings to a record of $6.11 trillion (blue line, left scale).

But that increase was outrun by the Incredibly Spiking US National Debt, and their share of total US debt dropped to 21.8%, the lowest since dirt was young, and down from a share of 45% in 2008 (red line, right scale):

Federal Reserve goes hog-wild: monetization of the US debt.

The Fed bought on net $243 billion of Treasury securities in Q1 and $2.44 trillion since it began the bailouts of the financial markets in March 2020. Over this period through March 31, it has more than doubled its holdings of Treasuries to $4.94 trillion (blue line, left scale). It now holds a record of 17.6% of the Incredibly Spiking US National Debt (red line, right scale):

US Banks pile them up.

US commercial banks bought on net $28 billion in Treasury securities in Q1 and $267 billion since March 2020, bringing the total to a record $1.24 trillion, according to Federal Reserve data on bank balance sheets. They now hold 4.4% of the Incredibly Spiking US National Debt:

Other US entities & individuals

So far, we covered the net purchases by all foreign-registered holders, by the Fed, by US government funds, and by US banks. What's unaccounted for: US individuals and institutions other than the Fed, the banks, and the government. These include bond funds, private-sector, state, and municipal pension funds, insurers, US corporations, hedge funds (they use Treasuries in complex leveraged trades), private equity firms that need to park billions in "dry powder," etc.

These US entities hold the remainder of Incredibly Spiking US National Debt. Their holdings surged by $149 billion in Q4 and by $2.35 trillion since March 2020, to a record $8.76 trillion (blue line, left scale). This raised their share of the total debt to 31.2% (red line, right scale), making these US individuals and institutions combined the largest holder of that monstrous mountain of debt:

The Incredibly Spiking US National Debt and who holds it, all in one monstrous pile:

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[May 18, 2021] Former WaMu CEO sees a housing bubble forming because the Fed is 'hooked' on low interest rates

May 18, 2021 | finance.yahoo.com

'Everybody wants to have asset prices forever going up and the cost of financing to be next to nothing,' Kerry Killinger says.

Like many other banks, Washington Mutual rode the wave of low-interest rates to grow its mortgage business during the housing boom of the early 2000s. During Kerry Killinger's time as CEO, WaMu grew to have more than $300 billion in assets.

But when the subprime bubble burst, the bank's fortunes quickly turned. In September 2008, at the height of the financial crisis, Killinger was forced out by the company's board, and ultimately the bank was seized by federal regulators. It still stands as the largest bank failure in U.S. history.

In their new book, "Nothing Is Too Big to Fail: How the Last Financial Crisis Informs Today," Kerry Killinger and his wife Linda, who previously served as the vice chair of the Federal Home Loan Bank of Des Moines, explore WaMu's failure, the government's response to the last crisis and where there is growing risk in today's econom

... In the book, the Killingers raise concerns about asset bubbles they believe are forming in a wide range of asset classes, including stocks, art and luxury items -- and housing. MarketWatch spoke with Kerry and Linda Killinger about the book, the Federal Reserve and how to avoid another global financial crisis like the 2008 meltdown.

...

Linda Killinger: I wanted to write a book about this because it was such an unusual, crazy experience. Back in the '80s I was a partner in an international accounting firm, and the regulators would call me in to do plans for banks that were failing in that time. I noticed that the regulators would do everything they could to help a bank get liquidity, or to help save a bank that had not been consumed in crime or problems. But in this crisis of 2008, it just seemed like nobody wanted to help community banks. In fact, they just did the opposite. They really went after them. I thought it was important to write about the difference and how important it is to help community banks in a crisis like this.

Kerry Killinger: My focus was more on public policy -- about being sure we learned all the lessons we possibly can. I've become very concerned that some of the policies currently being adopted by the Federal Reserve and the regulators in government may be leading us to a new financial crisis.

'Some of the policies currently being adopted by the Federal Reserve and the regulators in government may be leading us to a new financial crisis.'

-- Kerry Killinger

MW : In your book, you explain that you see another bubble forming in residential real-estate -- just one of the many asset bubbles you warn about. What do you believe caused the last housing bubble that led to the Great Recession and how does it compare to what's going on now?

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Kerry Killinger: We've lived through a lot of housing cycles in our careers, and including the big bubble that that was created in the early 2000s. The housing bubble was primarily caused in the early 2000s by the Fed keeping the fed funds rate below the rate of inflation for several years. They did that in 2000 through 2003, and that lowered mortgage payments so low and led to housing prices increasing because housing affordability was good with very low mortgage payments. That caused housing prices to rise much more quickly than the rate of inflation.

From 2000 to 2006 nationally housing prices rose about 83%. Over that same period, the rate of inflation was up about 20%. So a huge increase faster than the rate of inflation, and over the long run, housing prices ought to rise at about the rate of inflation, which was about 2% a year or so. Clearly it was a speculative period where prices were rising too quickly, and speculators and investors increasingly jumped on board.

To help fuel it, underwriting standards were reduced by Fannie and Freddie, the FHA, VA, Wall Street, bank portfolio lenders, and all that. Then on top of that we had this growth of subprime lending. Keeping rates so low for so long was the most important driving force in my opinion.

[Today] the similarities are that the Fed has pursued this policy of ultra-low interest rates with the fed funds rates. Increasingly, the Fed is keeping mortgage rates at an artificially low level for 30-year fixed rates by purchasing assets in their own portfolio, including mortgage-backed securities and an increasing array of guarantees that the Fed has done as part of its policies to fight an economic downturn.

Those actions have led to what I'm calling ultra-low mortgage payments, and that naturally led to a surge in housing prices. Since 2015 housing prices nationally were up about 36% -- more than three times the rate of inflation over that period.

Another similarity is we're seeing speculators and investors jumping in. This go-around it's large entities wanting to buy tracts of homes to use as rental housing. So the non-owner-occupied part of the market, which is the investor side, has gone up from 31.9% to 34.4% in the past year. We're getting a repeat of speculation coming in at this stage with investors coming in in a major way.

Now, subprime lending is not the same factor it was the last go-around fortunately, but we do know that there's an increasing amount of subprime lending going on by the FHA, VA and some of the government enterprises. On the good news side, I think underwriting standards have remained better, much better, than they were in the last go-around. But my caution is underwriting standards are all based on housing prices that are, I believe, inflated because of these ultra-low-interest mortgage rates.

MW: You wrote about how, in your view, the Fed's response last time around exacerbated the financial crisis. And just now, you spoke about how the Fed is contributing to the rise in home prices. So what role do you think the Fed should play in addressing the bubble that you argue is forming now?

Kerry Killinger: This go around I think the Fed has learned that it needs to provide plenty of liquidity to keep from having a crisis. My concern is I think the Fed has gotten hooked on these expansive policies of ultra-low interest rates, asset guarantees, asset purchases and flooding the system with liquidity for a long period of time. And those policies are very appropriate for helping get an economy out of a recession in order to get things stabilized, but their use over extended periods of time always leads to an escalation in inflation and the creation of asset bubbles.

'The Fed has gotten hooked on these expansive policies of ultra-low interest rates, asset guarantees, asset purchases and flooding the system with liquidity for a long period of time.'

-- Kerry Killinger

They are caught in a conundrum now. The policies that were appropriate to help get us beyond COVID-19 -- the longer they keep using those same policies, I think they just keep inflating these bubbles. And it will be very difficult to manage them down in an orderly manner. All assets go through these kinds of ups and downs -- the key is how do we manage them in a way that doesn't cause immediate implosion, like they did in 2008? The longer they allow these bubbles to keep growing, the bigger challenge they're going to have at some point in the future.

MW: You're both strong proponents of community banks and have argued that they should play an important role in the mortgage industry. But following the Great Recession, many banks have reduced or eliminated their mortgage businesses, citing the steep cost of regulation, and non-bank mortgage companies have risen up to fill that void. Should the federal government make it easier for community banks to lend mortgages, and how should it go about doing so?

Linda Killinger: Well, it depends. I think, if it looks like a bank, it smells like a bank and does mortgages like a bank, it should be regulated like a bank. Unless there's some incredible service that they provide that banks don't provide -- otherwise, they're doing the same thing as community banks but they're not being regulated.

The problem with that is things are going pretty well right now because they're selling mostly to Fannie and Freddie. Fannie and Freddie's guidelines are pretty good right now, but at any point in time [non-banks] could couple up with unregulated hedge funds or other entities from Wall Street and start securitizing loans themselves, lowering standards and trying to attract more people.

Especially if the Congress and the new president want to have more affordable housing, it depends on what they do when they want to push for more. There needs to be more affordable housing, but it shouldn't be handled in the way that it was last time. Last time they had Fannie Mae in the 90s saying well 33% of your loan should be [low- and middle-income (LMI)] loans, and by 2008 it was 60% should be LMI. So there's a tremendous pressure on Fannie and Freddie from Congress and the other regulators to really crank out more LMI lending. We really have to be careful about how we do that in the future. Community banks should be involved because they know how to do it right.

MW: When the COVID-19 pandemic began, federal lawmakers and regulators were quick to roll out forbearance options to homeowners who suddenly lost income as a result of the economic shock. A year later, many homeowners are still not making their monthly mortgage payments and are in forbearance. With the foreclosure moratorium still in place, homeowners aren't yet at risk of losing their homes, but that possibility lingers. What should we be doing right now to stave off another foreclosure crisis?

Linda Killinger: During the crisis in 2007, when it started to collapse, Kerry put together a $3 billion fund [at WaMu] to help subprime borrowers stay in their homes. He lowered the payments, and he lowered the amount that was owed, so it was manageable and they could stay in their home. I think that's a responsibility of banks to do that. It's going to be hard when the forbearance goes away -- unless banks and organizations are willing to really write down the principal or lower the payments just to help people a little bit more.

Kerry Killinger: Over the long run you are far better off to do everything you can to keep somebody in a home, if they can possibly afford it. And the last route you want to have to go through is foreclosure, because the costs are painful for everybody involved. We always used to try to do anything possible to keep people into the homes as long as we possibly can, and I think that is a very positive thing what the government and everyone did when COVID hit. Some of those solutions are very appropriate for the short term when you've got a crisis going on, but I think over time they need to be brought back to a more normal environment in which you will always have a small percentage of homes that will have to go through foreclosure. They were just the wrong home for the wrong people at the wrong time.

People don't even think about that anymore, but home prices will fall again in some markets for some reason. Given the rapid escalation we have seen in the last five years, especially in the last 12 months, these are unsustainable price increases that will be subject to some kind of correction when interest rates start to return to more normal levels. Probably one of the more controversial things I'll say here is if you assume that we're going to have about a 2% inflation rate and a GDP growing over the long term at about 2% to 2.5%, then mortgage interest rates on 30-year fixed-rate mortgages should be more in the 4.5% to 5% range.

MW: Do you think consumers are willing to stomach mortgage rates at that level, after so many years in which mortgage rates have remained so low?

Kerry Killinger: Look, all of us want to have the good times roll. Everybody wants to have asset prices forever going up and the cost of financing to be next to nothing. That's something that a lot of people wish for. We're just putting the warnings out that seldom do things go up forever. Right now you have borrowing costs substantially below the rate of inflation and way below historic norms, and that's unlikely to last forever.

I don't know if it's a matter of whether the consumers like it or not, but equilibrium would be closer to 4.5% to 5% on long-term mortgages. I just put out there that if that happens, for whatever reason, the affordability of housing will become much more stressed and mortgage payments will grow. That will have a tendency to put downward pressure on home prices. I don't think we're likely to repeat the problems that hit in 2008 because I think the Fed is smart enough now not to pull liquidity to a point that causes a downward spiral. But you could certainly see a period over several years of some downward pressure on prices as affordability becomes more difficult because of rising monthly mortgage payments.

'Right now you have borrowing costs substantially below the rate of inflation and way below historic norms, and that's unlikely to last forever.'

-- Kerry Killinger

MW: What else about the market and the economy right now is a source of concern to you?

Kerry Killinger: I do think that the economy is both stabilized and now back into a strong growth mode, and I think we're going to see very strong economic activity for the balance of this year and into next year. Inflation is picking up and will be higher than what many think at this point. Businesses are telling me that they are having more price increases today than they have had in the last decade. So I think the concern about inflation is real.

And these growing asset bubbles just continue to escalate to the point to where the assets are selling well above reasonable estimates of intrinsic value. That always presents a certain amount of risk. And finally, we're seeing more and more speculative products and speculators in the market -- not necessarily just in housing.

Look at certain parts of the stock market DJIA, -0.36% SPX, -0.40% . Look at bitcoin BTCUSD, -4.31% . Look at SPACs. Look at NFTs. I can just go through a litany of assets that have risen in price very, very dramatically. Whenever you have a combination of rapidly rising price and increasing speculative activity, you have to raise the red flags. Are bubbles being created here?

Linda Killinger: Yes, and are pension plans buying some of those bubble products?

Kerry Killinger: A fair bit of that build-up of buyers for those single-family homes are pension plans doing it directly to have that asset category. Because with the Fed keeping interest rates artificially low, they can't afford to put into riskless assets like Treasury securities. They have to keep searching out yields. One of them is increasingly into residential real estate.

[May 17, 2021] Stocks could drop 20% when Fed fights inflation- hedge fund founder

May 17, 2021 | finance.yahoo.com

Guzman

May 17, 2021

Inflation fears already roiled the market this week with the Nasdaq falling nearly 2%, but one hedge fund founder is sounding the alarm over a potential 20% collapse that could be sparked by the Federal Reserve signaling an end to accommodative pandemic-era monetary policy later this year.

Satori Fund founder Dan Niles recently told Yahoo Finance that this week's hotter-than-anticipated inflation data coupled with other central banks around the world already coming off their easy money policies will likely corner the Fed into tapering its accommodative policies sooner than expected.

"If you've got food prices, energy prices, shelter prices moving up as rapidly as they are, the Fed's not going to have any choice," he said, predicting that the Fed could signal the beginning of a move to wind down its monthly $120 billion a month pace of asset purchases by this summer. "They can say what they want, but this reminds me to some degree of them saying back in 2007 that the subprime crisis was well contained. Obviously it wasn't."

For their part, Fed officials have remained adamant that a rise in inflation is to be expected as a transitory reality of the economy reopening from the pandemic lockdown. The latest print from the Bureau of Labor Statistics out this week , however, may have spooked investors when it showed consumer prices for the month of April rose at their fastest annual pace since 2008. That inflation metric, which is different than the Fed's preferred Personal Consumption Expenditures (PCE) index , jumped to a 4.2% rise over the last 12 months. The Fed has already signaled it would be comfortable staying accommodative even if inflation in the recovery shoots past 2% as measured by its preferred metric.

[May 16, 2021] Morgan Stanley- This Is The Biggest Threat To The Red-Hot Global Recovery - ZeroHedge

May 16, 2021 | www.zerohedge.com

In the US, this translates to a growth environment where GDP will be 3pp above its pre-COVID-19 path by end-2022 and underlying core PCE inflation (adjusted for base effects) rises above 2%Y from March 2022. The Fed, which is now aiming for inflation averaging 2%Y and maximum employment, should remain accommodative. Our chief US economist Ellen Zentner expects the Fed to signal its intention to taper asset purchases at the September FOMC meeting, to announce it in March 2022 and to start tapering from April 2022 . On our forecasts, rate hikes begin in 3Q23, after inflation remains at or above 2%Y for some time and the labour market reaches maximum employment.

What are the risks to this story? Most obvious is the emergence of new COVID-19 variants that resist vaccines. However, I have argued that the biggest threat to this cycle is an overshoot in US core PCE inflation beyond the Fed's implicit 2.5%Y threshold – a serious concern, in my view, which could emerge from mid-2022 onwards .


Portal 4 hours ago

LMFAO!!!

You sent manufacturing and industry to China.

There is no "red hot recovery.". Just a long descent into fascism and communist poverty.

Newpuritan 4 hours ago

The "red hot recovery." they are hoping for is replacing all efficient energy production with inefficient "green" energy. The costs will be astronomical but are hoped to offset the Boomer generation retirement period.

Iskiab 2 hours ago (Edited)

Yea, all these forecasting models are garbage. They're all based on a faulty assumption that trends continue so the growth we see now will continue, plus things will revert back to the trend line. Junk in, junk out.

A more realistic assessment would be there was a bump from reopening, but costs have increased. It will be impossible to get back to the old growth trend line, and expect the low growth of the last 20 years to continue from hereon out. The stimulus will help a bit but not much, most of the stimulus was misallocated.

JH2020 3 hours ago (Edited)

It's the sycophants of the Wall Street/government confidence game, dropping words that, hopefully, lead to buying securities, not selling, though, perversely, any negative truths result in the assumption there will be a new flood of free money, from the Fed, driving margin debt even more vertical, such that one needs a second page for the chart, or a more drastic log scale. (In this economy so red hot interests rates need to be kept near zero, for the remainder of the century, and near daily reassurance the Fed will accommodate anything and everything, whatsoever, anytime a sector gets some heartburn, or a red candlestick gets too large.)

Red hot = FOMO bait.

The "red not" verbiage is comical, reminds me of Hollywood sycophants, that write reviews of some pretend person, some degenerate nobody, "In an unparalleled display of performing brilliance, in this worthy sequel to A Couple Hours of Brains Splattered All Over the Wall, and which only proves his sheer genius, the way he flared his nostrils, while driving in the chase scene, that went two times around the entire city perimeter, in the ongoing lanes...".

ebworthen 4 hours ago

"Red hot global recovery"? ROFLMAO!

That isn't recovery, it is money printing, inflation, and rabid speculation.

hugin-o-munin 4 hours ago (Edited)

Who do these people think they can fool?

This was about the dumbest article by a bank in a long while. Pushing a contrarian lie too hard reveals it quicker than keeping quiet. Someone should remind Morgan Stanley of this age old truth. Real inflation is destroying the USD right now. Ignoring it and pretending otherwise will only accelerate the fall into hyper inflation.

J J Pettigrew 3 hours ago

A little inflation is good for you.

What's a little? 2.5%? For ten years....a flat chart of 2.5% each year... .looks like nothing happened....just 28% off the value of the dollar...thats all.

Sound of the Suburbs 2 hours ago

How does anything really work?

I don't know, I use neoclassical economics.

Everyone tries to kill growth by making the same mistakes as Japan.

Japan led the way and everyone followed.

At 25.30 mins you can see the super imposed private debt-to-GDP ratios.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

What Japan does in the 1980s; the US, the UK and Euro-zone do leading up to 2008 and China has done more recently.

The PBoC saw the financial crisis coming unlike the BoJ, ECB, BoE and the FED.

Oh dear, we did what you did in Japan.

Now we've had a financial crisis and are facing a Great Depression just like you.

Japan could study the Great Depression to avoid this fate.

(The US had done the same thing in the 1920s (see graph above), it always seems to happen with neoclassical economics)

https://www.youtube.com/watch?v=8YTyJzmiHGk

How did Japan avoid a Great Depression?

They saved the banks

How did Japan kill growth and inflation for the next thirty years?

They left the debt in place and the repayments on that debt killed growth and inflation (Japanification)

The Chinese did see the financial crisis coming, but they have reached the end of the line on the debt fuelled growth model of globalisation.

They just need to find out how an economy really works.

As if anyone has got the slightest idea what they are doing.

How does anything really work?

I don't know, I use neoclassical economics.

Sound of the Suburbs 2 hours ago

Everyone tries to kill growth by making the same mistakes as Japan.

European policymakers were successful.

What does Japanification look like?

https://tradingeconomics.com/japan/gdp

(Set scale to max. to get the full picture)

The EU economy hasn't been going anywhere since 2008.

https://tradingeconomics.com/european-union/gdp

(Set scale to max. to get the full picture)

It's Japanification

The UK economy has hasn't been going anywhere since 2008.

https://tradingeconomics.com/united-kingdom/gdp

(Set scale to max. to get the full picture)

It's Japanification

Well done, you dimwits.

How does anything really work?

I don't know, I use neoclassical economics.

Sound of the Suburbs 2 hours ago

Why did they think private debt wouldn't be a problem after 2008?

Probably the same reason they didn't notice it building up before 2008.

The economics of globalisation has always had an Achilles' heel.

The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn't look at debt, neoclassical economics.

Not considering private debt is the Achilles' heel of neoclassical economics.

That explains it.

"We cannot solve our problems with the same thinking we used when we created them." Albert Einstein.

Who do you think you are?

This is what we are going to do, whether you like it or not.

He must be one of those populists.

Einstein was right of course, but you know what neoliberals are like.

Anyone that doesn't go along with their ideas must be a populist.

Sound of the Suburbs 2 hours ago (Edited) remove link

Not considering private debt is the Achilles' heel of neoclassical economics.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

At 18 mins.

1929 and 2008 stick out like sore thumbs.

No one realised the problems that were building up in the economy as they used an economics that doesn't look at debt, neoclassical economics.

Einstein's definition of madness "Doing the same thing again and again and expecting to get a different result"

Einstein was right again.

He was a clever bloke.

[May 13, 2021] Investors brace for test of nerves as inflation worries mount

Weak analysis. The fundamental factor is the price for energy, not some trivia like used cars and trucks. Teh second dot com bubble will deflate but it is unclear when and whether this is a crash or gradual deplation of worthless junk stocks which enjoyed "profitless" IPOs.
With rising energy prices it is more difficult to keep interpreting high CPI numbers as temporary. But like in the past the USA will fight the rise in energy prices tools and nail. With the full power of their global neoliberal empire.
May 13, 2021 | www.ft.com

... prices for used cars and trucks jumped 10 per cent in April alone, accounting for a large slice of the gains in the overall index.

"It looks like Wall Street is climbing the wall of worry," said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham. "The bears are constantly looking for signs that the world is going to end. They come up with all the potential excuses. The reality is that the only question that matters is whether the reopening is going OK or not.

... Notably, while 10-year US yields did rise on Wednesday after the inflation data release, they did not hit new highs.

[May 13, 2021] Inflation Doesn't Have to Mean High Interest Rates - WSJ

May 13, 2021 | www.wsj.com

Inflation is back. The U.S. consumer-price index surged to a 13-year high of 4.2% in April, official data showed Wednesday. The eurozone's figure is a weaker 1.6%, but still a two-year high. The global bond market isn't panicking yet. The pandemic led many distressed companies to slash prices in 2020. Investors always knew that, as the economy reopened, some year-over-year increases would be huge.

The prices of most products haven't changed much . CPI gyrations are mostly down to a few items particularly affected by lockdowns and travel restrictions, such as airfares and restaurant prices, as well as commodities. Excluding food and energy, U.S. inflation in April was just 3%.

... Over the past few decades, for example, CPI figures have mostly been the results of a concatenation of "temporary" trends in different sectors -- the costs of education and healthcare rose nonstop, while the prices of many goods continuously fell. It was different in the 1970s, when an idiosyncratic squeeze in the supply of oil fueled an inflationary spiral that pushed all costs up.

[May 13, 2021] Investors Double Down on Stocks, Pushing Margin Debt to Record

This was in December 2020 but the same was true in March of 2020. Now chicken might come to roost
Dec 29, 2020 | www.wsj.com

Investors Double Down on Stocks, Pushing Margin Debt to Record : Chasing bigger gains, some have exposed themselves to potentially devastating losses through riskier plays, such as concentrated positions and trading options.

[May 12, 2021] Stock market and the issue of finite resources

May 12, 2021 | www.moonofalabama.org

Paul , May 12 2021 22:35 utc | 67

In my youth I worked as a very junior financial reporter and I have a continuing interest. While markets are crashing around the world there is a commodities boom, particularly in copper and critical minerals needed for green energy like cobalt, manganese, tin and rare earths.

China was an exporter but is now the worlds biggest importer. These resources are actually finite.

https://www.theage.com.au/business/markets/commodity-boom-adds-to-confusion-about-the-outlook-for-inflation-20210512-p57r6v.html

The markets are agog at the price of iron ore. While the US wastes trillions of borrowed money and blood in the desert sands of the Middle East on behalf of the bandit state, China builds and produces goods for export.

The US has lost the trade war, but no one ever wins a trade war. It's the last man standing. Uncle Shmuel is looking punch drunk. While the tribal cabal running the US is drunk with power.

Because the US has gone bankrupt and owes China the national debt the elite cabal seem hell bent on war with China as an exit to the financial quagmire they have created.

[May 12, 2021] What is the nature of current round of inflation in the USA; after all wages are stagnant

May 12, 2021 | www.moonofalabama.org

paulmeli , May 12 2021 18:50 utc | 21

"Inflation" in the US is mostly profit-taking and speculation (scalping)

[May 12, 2021] The Most Hyped Corners Of The Stock Market Come Unglued - ZeroHedge

May 12, 2021 | www.zerohedge.com

Authored by Wolf Richter via WolfStreet.com,

Once upon a time last year, there was the EV startup hype-boom that found its way to the SPAC hype-boom, and the two combined and generated miraculously swift and spectacular results; and their collapse has been equally swift and spectacular.

And they're joined by the IPO hype-boom stocks, including the spectacularly hyped highflyers that got shot down, such as Zoom (-49% from peak), Coinbase (-29%), or Airbnb (-35%), and they're in turn joined by the ARK Innovation ETF (-34%). This whole thing has come unglued.

The EV SPAC boom-and-bust is reflected in the WOLF STREET EV SPAC Index, which has collapsed by 57% since its peak on February 17. The index tracks seven EV-related companies that have gone public via a merger with a SPAC: Nikola, QuantumScape (batteries for EVs), Canoo, Lordstown Motors, Romeo Power (batteries for EVs), XL Fleet (EV drive systems for fleets), and Lucid Motors. Since February 17, these seven stocks combined have shed $35 billion in value, which they should have never had in the first place. Easy come, easy go, except when it's your money (data via YCharts ):

[May 12, 2021] Cathie Wood's ARK Wasn't Built for a Flood - WSJ

May 12, 2021 | www.wsj.com

...Ms. Wood's "disruptive innovation" jargon may be somewhat novel. What her investors are experiencing isn't. Fund managers like Gerald Tsai in the 1960s who rode Polaroid and Xerox to stardom or various dot-com visionaries in the late 1990s wound up doing poorly for clients who discovered them after they became hotshots. The culprit is unrealistic expectations and reversion to the mean for the bubbly sectors that got them there. Analyst Meb Faber points out that not one of the five Morningstar "fund managers of the decade" through 2010 even managed to beat the market in the next 10 years. The best of the bunch, Bruce Berkowitz's Fairholme Fund, became the worst.

Star managers can be dangerous to your wealth.

Write to Spencer Jakab at [email protected]

[May 11, 2021] 11 Plunging Stocks Are Badly Burning Cathie Wood's ARK Invest

May 11, 2021 | finance.yahoo.com

Cathie Wood's ARK Invest is still red-hot, but now in the opposite way: It's getting burned by many collapsing stocks including some in the S&P 500.

[May 11, 2021] Jim Grant- The Fed Can't Control Inflation

May 11, 2021 | www.zerohedge.com

...As Peter Schiff put it, CPI is a lie . Grant used the evolution of the toothbrush into its electric form as an example. How do you measure the clear quality improvements in the toothbrush? The government uses hedonics to measure these changes, but as Grant pointed out, this is "inexact and not really a science."

Grant believes that the economy can only tolerate 2.5% real rates. If that is breached, he thinks the Fed will have to resort to yield-curve control. If it does actually try to shrink its balance sheet and sell bonds, it will drive bond yields even higher. Fed bond-buying is the only thing propping up the bond market right now.

In fact, the Fed is propping up the entire economy. There is a sense that the Fed will always step in and save the markets. As a result, we have bubbles everywhere, from the stock market, to real estate, to cryptocurrency.

"These are strange and oppressive markers of financial markets that have lost moorings of valuation," Grant said.

I think the astounding complacency toward, or indifference of, the evident excesses in our monetary and fiscal affairs I think the lack of concern about those things is perhaps the most striking inflationary augur I know of."

Meanwhile, the Fed continues to create money. M1 annual growth is 350%; M2 is growing at approximately 28%.

"Never before have we had monetary peacetime growth this fast," Grant said.

"Tell me who cares."

Grant said central bankers like Powell are guilty of hubris. They suffer from the delusion that they can actually control everything. Grant called the Fed "un-self-aware."

Despite Jay Powell's credentials, he knows nothing about the past and believes he knows everything about the future."

Grant talked about gold , saying it is an investment in "monetary disorder."

To me, gold isn't a hedge against monetary disorder. It's an investment in monetary disorder, which is what we have. We have floating-rate currencies. We have manipulated exchange rates. We have manipulated interest rates. When the cycle turns, people will want gold and silver, and they will want something tangible ."

[May 11, 2021] If Everyone Sees It, Is It Still A Bubble

May 11, 2021 | www.zerohedge.com

Authored by Lance Roberts via RealInvestmentAdvice.com,

"If everyone sees it, is it still a bubble?" That was a great question I got over the weekend. As a "contrarian" investor, it is usually when "everyone" is talking about an event; it doesn't happen.

As Mark Hulbert noted recently , "everyone" is worrying about a "bubble" in the stock market. To wit:

"To appreciate how widespread current concern about a bubble is, consider the accompanying chart of data from Google Trends. It plots the relative frequency of Google searches based on the term 'stock market bubble.' Notice that this frequency has recently jumped to a far-higher level than at any other point over the last five years."

What Is A Bubble?

"My confidence is rising quite rapidly that this is, in fact, becoming the fourth 'real McCoy' bubble of my investment career. The great bubbles can go on a long time and inflict a lot of pain, but at least I think we know now that we're in one." – Jeremy Grantham

What is the definition of a bubble? According to Investopedia:

"A bubble is a market cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. Typically, what creates a bubble is a surge in asset prices driven by exuberant market behavior. During a bubble, assets typically trade at a price that greatly exceeds the asset's intrinsic value. Rather, the price does not align with the fundamentals of the asset. "

This definition is suitable for our discussion; there are three components of a "bubble." The first two, price and valuation, are readily dismissed during the inflation phase. Jeremy Grantham once produced the following chart of 40-years of price bubbles in the markets. During the inflation phase, each was readily dismissed under the guise "this time is different."

We are interested in the "third" component of "bubbles," which is investor psychology.

A Bubble In Psychology

As Howard Marks previously noted:

"It's the swings of psychology that get people into the biggest trouble. Especially since investors' emotions invariably swing in the wrong direction at the wrong time. When things are going well people become greedy and enthusiastic. When times are troubled, people become fearful and reticent. That's just the wrong thing to do. It's important to control fear and greed."

Currently, it's difficult for investors to become any more enthusiastic about market returns. ( The RIAPro Fear/Greed Index compiles measures of equity allocation and market sentiment. The index level is not a component of the measure that runs from 0 to 100. The current reading is 99.9, which is a historical record.)

Such is an interesting juxtaposition. On the one hand, there is a rising recognition of a "bubble," but investors are unwilling to reduce "equity risk" for "fear of missing out or F.O.M.O." Such was a point noted explicitly by Mark:

"Rather than responding by taking some chips off the table, however, many began freely admitting a bubble formed. They no longer tried to justify higher prices on fundamentals. Rather, they justified it instead in terms of the market's momentum. Prices should keep going up as FOMO seduces more investors to jump on the bandwagon."

In other words, investors have fully adopted the "Greater Fool Theory."

Okay, Boomer!

I know. The discussion of "valuations" is an old-fashioned idea relegated to investors of an older era. Such was evident in the pushback on Charlie Munger's comments about Bitcoin recently:

" While Munger has never been a bitcoin advocate, his dislike crystalized into something close to hatred. Looking back over the past 52 weeks, the reason for Munger's anger becomes apparent with Berkshire rising only 50.5% against bitcoin's more than 500% gain." – Coindesk

In 1999, when Buffett spoke out against "Dot.com" stocks, he got dismissed with a similar ire of "investing with Warren Buffett is like driving 'Dad's old Pontiac.'"

Today, young investors are not interested in the "pearls of wisdom" from experienced investors. Today, they are "out of touch," with the market's "new reality."

"The big benefit of TikTok is it allows users to dole out and obtain information in short, easily digestible video bites, also called TikToks. And that can make unfamiliar, complex topics, such as personal finance and investing, more palatable to a younger audience.

That advice runs the gamut, from general information about home buying or retirement savings to specific stock picks and investment ideas. Rob Shields, a 22-year-old, self-taught options trader who has more than 163,000 followers on TikTok, posts TikToks under the username stock_genius on topics such as popular stocks to watch, how to find good stocks, and basic trading strategies." – WSJ:

Of course, the problem with information doled out by 22-year olds is they were 10-year olds during the last "bear market." Given the lack of experience of investing during such a market, as opposed to Warren Buffett who has survived several, is the eventual destruction of capital.

Plenty Of Analogies

"There is no shortage of current analogies, of course. Take Dogecoin, created as a joke with no fundamental value. As a recent Wall Street Journal article outlined , the Dogecoin 'serves no purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.'

Yet investors flock to it, for no other apparent reason than its sharp rise. Billy Markus, the co-creator of dogecoin, said to the Wall Street Journal, 'This is absurd. I haven't seen anything like it. It's one of those things that once it starts going up, it might keep going up.'" – Mark Hulbert

That exuberance shows up with professionals as well. As of the end of April, the National Association Of Investment Managers asset allocation was 103%.

As Dana Lyons noted previously:

" Regardless of the investment acumen of any group (we think it is very high among NAAIM members), once the collective investment opinion or posture becomes too one-sided, it can be an indication that some market action may be necessary to correct such consensus. "

Give Me More

Of course, margin debt, which is the epitome of " speculative appetite," soared in recent months.

As stated, "bubbles are about psychology," which the annual rate of change of leverage shows.

Another form of leverage that doesn't show up in margin debt is ETF's structured to multiply market returns. These funds have seen record inflows in recent months.

With margin debt reaching levels not seen since the peak of the last cyclical bull market cycle, it should raise some concerns about sustainability. It is NOT the level of leverage that is the problem as leverage increases buying power as markets are rising. The unwinding of this leverage is critically dangerous in the market as the acceleration of "margin calls" leads to a vicious downward spiral.

Importantly, this chart does not mean that a massive market correction is imminent. I t does suggest that leverage, and speculative risk-taking, are likely much further advanced than currently recognized.

Pushing Extremes

Prices are ultimately affected by physics. Moving averages, trend lines, etc., all exert a gravitational pull on prices in both the short and long term. Like a rubber band, when prices get stretched too far in one direction, they have always eventually "reverted to the mean" in the most brutal of manners.

The chart below shows the long-term chart of the S&P 500 broken down by several measures: 2 and 3-standard deviations, valuations, relative strength, and deviations from the 3-year moving average. It is worth noting that both standard deviations and distance from the 3-year moving average are at a record.

During the last 120-years, overvaluation and extreme deviations NEVER got resolved by markets going sideways.

The only missing ingredient for such a correction currently is simply a catalyst to put "fear" into an overly complacent marketplace. Anything from economic disruption, a credit-related crisis, or an unexpected exogenous shock could start the "panic for the exits."

Conclusion

There is more than adequate evidence a "bubble" exists in markets once again. However, as Mark noted in his commentary:

'I have no idea whether the stock market is actually forming a bubble that's about to break. But I do know that many bulls are fooling themselves when they think a bubble can't happen when there is such widespread concern. In fact, one of the distinguishing characteristics of a bubble is just that."

However, he concludes with the most important statement:

"It's important for all of us to be aware of this bubble psychology, but especially if you're a retiree or a near-retiree. That's because, in that case, your investment horizon is far shorter than for those who are younger. Therefore, you are less able to recover from the deflation of a market bubble."

Read that statement again.

Millennials are quick to dismiss the "Boomers" in the financial markets today for "not getting it."

No, we get it. We have just been around long enough to know how these things eventually end.

[May 11, 2021] Consumers Expect Surging Inflation to Crush the Purchasing Power of their Labor- Fed's Survey - Wolf Street

May 11, 2021 | wolfstreet.com

Consumers are picking up on the rise of inflation, and the Fed, which has been trying to heat up inflation, is pleased. The Fed watches "inflation expectations" carefully. The minutes from the March FOMC meeting mention "inflation expectations" 12 times.

The New York Fed's Survey of Consumer Expectations for April, released today, showed that median inflation expectations for one year from now rose to 3.4%, matching the prior highs in 2013 (the surveys began in June 2013).

But wait the median earnings growth expectations 12 months from now was only 2.1%, and remains near the low end of the spectrum, a sign that consumers are grappling with consumer price inflation outrunning earnings growth. The whoppers were in the major specific categories.

[May 10, 2021] The Feds history of jawboning and deceiving the market players, except large banks

History repeats and the repetition is coming with some minor variations.
Notable quotes:
"... "Corporate bond rates have been rising steadily since May. Yellen is not doing what Greenspan did in 2004." ..."
"... There isn't much of a difference between signaling tighter money to a market that is skeptical of Fed forecasts and actually tightening. ..."
"... While at 5.0 percent, the unemployment rate is not extraordinarily high, most other measures of the labor market are near recession levels. The percentage of the workforce that is involuntarily working part-time is near the highs reached following the 2001 recession. The average and median duration of unemployment spells are also near recession highs. And the percentage of workers who feel confident enough to quit their jobs without another job lined up remains near the low points reached in 2002. ..."
"... While wage growth has edged up somewhat in recent months by some measures, it is still well below a rate that is consistent with the Fed's inflation target. Hourly wages have risen at a 2.7 percent rate over the last year. If there is just 1.5 percent productivity growth, this would be consistent with a rate of inflation of 1.2 percent. ..."
"... One positive point in today's action is the Fed's commitment in its statement to allow future rate hikes to be guided by the data, rather than locking in a path towards "normalization" as was effectively done in 2004. ..."
Dec 17, 2015 | economistsview.typepad.com
Peter K. -> RC AKA Darryl, Ron... December 17, 2015 at 10:12 AM
"Corporate bond rates have been rising steadily since May. Yellen is not doing what Greenspan did in 2004."

There isn't much of a difference between signaling tighter money to a market that is skeptical of Fed forecasts and actually tightening.

http://cepr.net/press-center/press-releases/statement-on-fed-and-interest-rates

Washington, D.C.- Dean Baker, economist and a co-director of the Center for Economic and Policy Research (CEPR) issued the following statement in response to the Federal Reserve's decision regarding interest rates:

"The Fed's decision to raise interest rates today is an unfortunate move in the wrong direction. In setting interest rate policy the Fed must decide whether the economy is at risk of having too few or too many jobs, with the latter being determined by the extent to which its current rate of job creation may lead to inflation. It is difficult to see how the evidence would lead the Fed to conclude that the greater risk at the moment is too many jobs.

"While at 5.0 percent, the unemployment rate is not extraordinarily high, most other measures of the labor market are near recession levels. The percentage of the workforce that is involuntarily working part-time is near the highs reached following the 2001 recession. The average and median duration of unemployment spells are also near recession highs. And the percentage of workers who feel confident enough to quit their jobs without another job lined up remains near the low points reached in 2002.

"If we look at employment rates rather than unemployment, the percentage of prime-age workers (ages 25-54) with jobs is still down by almost three full percentage points from the pre-recession peak and by more than four full percentage points from the peak hit in 2000. This does not look like a strong labor market.

"On the other side, there is virtually no basis for concerns about the risk of inflation in the current data. The most recent data show that the core personal consumption expenditure deflator targeted by the Fed increased at just a 1.2 percent annual rate over the last three months, down slightly from the 1.3 percent rate over the last year. This means that the Fed should be concerned about being below its inflation target, not above it.

"While wage growth has edged up somewhat in recent months by some measures, it is still well below a rate that is consistent with the Fed's inflation target. Hourly wages have risen at a 2.7 percent rate over the last year. If there is just 1.5 percent productivity growth, this would be consistent with a rate of inflation of 1.2 percent.

"Furthermore, it is important to recognize that workers took a large hit to their wages in the downturn, with a shift of more than four percentage points of national income from wages to profits. In principle, workers can restore their share of national income (the equivalent of an 8 percent wage gain), but the Fed would have to be prepared to allow wage growth to substantially outpace prices for a period of time. If the Fed acts to prevent workers from getting this bargaining power, it will effectively lock in place this upward redistribution. Needless to say, workers at the middle and bottom of the wage distribution can expect to see the biggest hit in this scenario.

"One positive point in today's action is the Fed's commitment in its statement to allow future rate hikes to be guided by the data, rather than locking in a path towards "normalization" as was effectively done in 2004. If it is the case that the economy is not strong enough to justify rate hikes, then the hike today may be the last one for some period of time. It will be important for the Fed to carefully assess the data as it makes its decision on interest rates at future meetings.

"Recent economic data suggest that today's move was a mistake. Hopefully the Fed will not compound this mistake with more unwarranted rate hikes in the future."

RC AKA Darryl, Ron said in reply to Peter K....

I like Dean Baker. Unlike the Fed, Dean Baker is a class warrior on the side of the wage class. He makes the point about the path to normalization being critical that I have been discussing for quite a while. Let's hope this Fed knows better than Greenspan/Bernanke in 2004-2006. THANKS!

likbez said in reply to RC AKA Darryl, Ron...

Very true !

pgl said in reply to RC AKA Darryl, Ron...

"Longer-term bond rates barely moved, showing that there was very little news." This interest rate rose from 4.45% to 5.46% already. So the damage was already done:

https://research.stlouisfed.org/fred2/series/BAA

RC AKA Darryl, Ron said in reply to pgl...

"... This interest rate rose from 4.45% to 5.46% already..."

Exactly! Corporate bond rates have been rising steadily since May. Yellen is not doing what Greenspan did in 2004. Yellen's Fed waited until the bond rate lifted off on its own (and maybe with some help from policy communications) before they raised the FFR.

So far, there is no sign of their making a fatal error. They are not fighting class warfare for wage class either, but they seem intent on not screwing the pooch in the way that Greenspan and Bernanke did. No double dip thank you and hold the nuts.

[May 10, 2021] How many times can a declared "expert" be wrong before they are not an expert anymore!

Notable quotes:
"... Ask an economist. Wrong more than 50% of the time and still fully employed. When was the last time an economist got fired for being wrong? ..."
Apr 15, 2021 | www.zerohedge.com
lwilland1012 1 hour ago

How many times can a declared "expert" be wrong before they are not an expert anymore!

INTJ Economist 1 hour ago

Ask an economist. Wrong more than 50% of the time and still fully employed. When was the last time an economist got fired for being wrong?

[May 10, 2021] Many layers of leverage stacked on top of each other increase the probability of dollar collapse

Notable quotes:
"... "It's just unbelievable that central banks are actively encouraging this." ..."
"... Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared ..."
"... reminds me of an abusive husband telling his beaten wife, "See what you made me do!" ..."
"... Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5% ..."
"... That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent. ..."
"... I have invested carefully but we will all lose much or most of our savings. ..."
"... It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again. ..."
Apr 26, 2021 | wolfstreet.com

YuShan Apr 18, 2021 at 3:13 am

Exactly. It is way more scary than even Wolf's charts suggest because there are so many layers of leverage stacked on top of each other.

People taking out margin debt on stock portfolios that they bought by re-mortgaging their bubbled houses to buy stocks with record corporate debt, collaterised (if at all) with bubble assets, at record valuations driven itself by leverage etc etc

It's just unbelievable that central banks are actively encouraging this.

historicus Apr 18, 2021 at 5:06 am

"It's just unbelievable that central banks are actively encouraging this."

Indeed. It's QUITE believable that the politicians love the free money and would never be bold enough to say .

"Hey Fed. Your mandates say you are to FIGHT inflation (stable prices) NOT PROMOTE inflation."

Moosy Apr 17, 2021 at 6:13 pm

The amount of margin debt is not a WTF amount if you use the prices-double each 11 year rule of thumb.

This 11 year period is strikingly accurate if you take the price of the New York Times since 1900 (I have a booklet with frontpages of each year and discovered this when looking at the selling prices). Having said that, the current 800B is the same as the previous inflation corrected peaks of 2009 and around 1999.

So yes, Wolf is 100% correct with the prediction on what is coming. It is just not a WTF amount but a history-repeats-itself moment

ru82 Apr 17, 2021 at 11:45 pm

Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared

cas127 Apr 18, 2021 at 5:06 am

"normalize to inflationary, maybe not as bad as originally it appeared"

I know what you mean, but then the (major) problem is that the inflation itself shouldn't be viewed as "normal". Kinda reminds me of a gvt program defending doubled budget over 8 yrs because of "inflation" when in point of fact it is likely that G printing/policy has *created* the inflation in the first place (to help fund the program now pointing at inflation).

Also, reminds me of an abusive husband telling his beaten wife, "See what you made me do!"

Old School Apr 19, 2021 at 6:08 am

Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5%

K Apr 17, 2021 at 9:10 pm

That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent.

It is unfortunate that it may happen at the worst possible time, when we face an adversary worse and more powerful than the Soviet Union or Nazi Germany ever was. I have invested carefully but we will all lose much or most of our savings.

It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again.

I do not like to even think how many Americans will wind up. Remember the saying "There but for the grace of god, go I." Many of us will be saying that a lot in the coming years if we are very fortunate.

[May 10, 2021] Expecting crash "really soon" and Generalized Anxiety Disorder (GAD)

May 10, 2021 | www.moonofalabama.org

Jörgen Hassler , May 5 2021 16:19 utc | 40

"Generalized Anxiety Disorder (GAD) is characterized by persistent and excessive worry about a number of different things. People with GAD may anticipate disaster and may be overly concerned [...]. Individuals with GAD find it difficult to control their worry. They may worry more than seems warranted about actual events or may expect the worst even when there is no apparent reason for concern."

Seems like the perfect profile for an [CIA] operative. ;)

[May 09, 2021] CPI Is A Lie! We can't trust CPI to tell us the truth about inflation by Peter Schiff

Highly recommended!
Notable quotes:
"... The CPI is calculated by analyzing the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.) ..."
"... The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were "sweeping." ..."
"... In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this "issue." ..."
"... As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government can basically create an index that outputs whatever it wants. ..."
"... Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation." ..."
"... They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really trying to do is get the go-ahead to produce more inflation, which is printing money." ..."
"... And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price, or substituting lower quality ingredients, or requiring consumers to assemble items themselves. ..."
"... They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where the quality is diminished." ..."
"... The bottom line is we can't trust CPI to tell us the truth about inflation. ..."
May 04, 2021 | www.zerohedge.com

Via SchiffGold.com,

We've been talking a lot about the specter of inflation. Despite the Fed's assurances not to worry because any price increases we're seeing are transitory, some people are indeed worried. A former JP Morgan managing director warned about inflation and echoed Peter Schiff's view that the central bank is powerless to fight it.

And we're seeing rising prices all over the place, from the grocery store to the gas station. Even the government numbers flash warning signs . But as Peter Schiff explains in this clip from an interview with Jay Martin, it's probably even worse than we realize because the government cooks the numbers when it calculates CPI.

The monthly rises in CPI through the first quarter show an upward trend. The CPI in January was up 0.3%. It was up 0.4% in February. And now it's up 0.6% in March. That totals a 1.013% increase in Q1 alone. The question is does this really reflect the truth about inflation? Peter doesn't think it does.

The government always makes changes to their methods of measuring things, whether it's GDP, or inflation, or unemployment. And they always tweak the numbers to produce a better result as a report card. "

https://www.youtube.com/embed/lnPrsBzIZsw

Imagine if students in a school had the ability to change the metrics by which they were graded or the methodology the teacher used to calculate their grades.

Would it surprise anybody that all of a sudden they started getting more As and Bs and fewer Cs and Ds? The government always wants to make the good stuff better, like economic growth, and the bad stuff better, like unemployment or inflation. So, they want to find ways to make those numbers little and the good numbers big."

The CPI is calculated by analyzing the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.)

The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were "sweeping."

According to the BLS, periodic changes to the CPI calculation are necessary because "consumers change their preferences or new products and services emerge. During these occasions, the Bureau reexamines the CPI item structure, which is the classification scheme of the CPI market basket. The item structure is a central feature of the CPI program and many CPI processes depend on it."

In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this "issue."

As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government can basically create an index that outputs whatever it wants.

I think this period of "Oh wow! We have low inflation!' It's not a coincidence that it followed this major revision into how we calculate it."

Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation."

They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really trying to do is get the go-ahead to produce more inflation, which is printing money."

Peter said the CPI will never reveal the true extent of rising prices.

And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price, or substituting lower quality ingredients, or requiring consumers to assemble items themselves.

They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where the quality is diminished."

The bottom line is we can't trust CPI to tell us the truth about inflation.

[May 09, 2021] 4 surprising stocks Goldman Sachs thinks could triumph over inflation by Brian Sozzi

Notable quotes:
"... "In a highly inflationary environment, we like the auto parts space with its unique ability to pass-through higher costs to customers given the non-discretionary nature of the category," says Goldman Sachs analyst Kate McShane. "For instance, in 2019, telegraphed prices increases to offset cost pressures arising from tariffs provided an incremental benefit to same-store sales growth and most auto parts retailers cited between 150-300 basis points of tariff-related inflation." ..."
May 05, 2021 | finance.yahoo.com

If you are seeking stocks that could perform well during the inflationary environment the U.S. looks to be headed into as it recovers from the depths of the COVID-19 pandemic , Goldman Sachs suggests parking some money in auto parts retailers.

Yes, auto parts retailers.

The investment thesis is pretty straightforward. With mobility across the country picking up (see chart below) as people get vaccinated, cars will likely need more maintenance. That leaves auto parts retailers such as O'Reilly ( ORLY ), Genuine Parts Company ( GPC ), AutoZone ( AZO ) and Advance Auto Parts ( AAP ) in the enviable position of being able to pass inflation in everything from tires to car wax on to consumers and then post strong profits.

"In a highly inflationary environment, we like the auto parts space with its unique ability to pass-through higher costs to customers given the non-discretionary nature of the category," says Goldman Sachs analyst Kate McShane. "For instance, in 2019, telegraphed prices increases to offset cost pressures arising from tariffs provided an incremental benefit to same-store sales growth and most auto parts retailers cited between 150-300 basis points of tariff-related inflation."

McShane rounds out her bullish thesis on auto parts retailers by noting the main sector plays sport price-to-earnings multiples below historical averages. Of the four aforementioned auto parts retailers, AutoZone has the lowest forward price-to-earnings multiple of 18.7 times, according to Yahoo Finance Plus data .

Mobility is back on the move higher as people get vaccinated for COVID-19.

As for which name McShane is most bullish on, that award goes to Advance Auto Parts in the wake of a recent analyst day. McShane made the rare Wall Street move of upgrading her rating on Advance Auto Parts to Buy from Sell.

"Our double tier upgrade " from Sell to Buy " is predicated upon

McShane says.

[May 09, 2021] Inflation Risk Intensifies With Supply Shortages Multiplying

May 09, 2021 | finance.yahoo.com

Signs of inflation are picking up, with a mounting number of consumer-facing companies warning in recent days that supply shortages and logistical logjams may force them to raise prices.

Tight inventories of materials as varied as semiconductors, steel, lumber and cotton are showing up in survey data, with manufacturers in Europe and the U.S. this week flagging record backlogs and higher input prices as they scramble to replenish stockpiles and keep up with accelerating consumer demand.

As commodities become increasingly expensive, whether faster inflation proves transitory -- or not -- is the biggest question for policy makers and markets. Rising prices and the potential for a response from central banks topped the list of concerns for money managers surveyed by Bank of America Corp.

Many economists and central bankers, from the Federal Reserve on down, maintain that price gains are temporary and will be curbed by forces such as virus worries and unemployment. Investors remain skeptical, with businesses including Nestle SA and Colgate-Palmolive Co. already announcing they’ll need to raise prices.

U.S. Treasury Secretary Janet Yellen, a former Fed chair, entered the debate on Tuesday when she ruffled markets with the observation that rates will likely rise as government spending ramps up. She later clarified she was neither predicting nor recommending an increase.

The Bloomberg Commodity Spot Index, which tracks 23 raw materials, has risen to its highest level in almost a decade. That has pushed a gauge of global manufacturing output prices to its highest point since 2009, and U.S. producer prices to levels not seen since 2008, according to data from JPMorgan Chase & Co. and IHS Markit. JPMorgan analysts also estimate non-food and energy import prices in the biggest economies rose almost 4% in the first quarter, the most in three years.

“Risk clearly leans to the upside in the current environment,†said John Mothersole, pricing and purchasing research director at IHS Markit. “The surge in commodity prices over the past year now guarantees higher goods-price inflation this summer.â€

[May 09, 2021] The Dynamics Behind America's Ugly Amount Of Empty Office Space

May 09, 2021 | www.zerohedge.com

The epicenters of work-from-home show the biggest drops in office occupancy rates, according to Kastle’s “Back to Work Barometer†at the end of April: in San Francisco, the occupancy rate was at 14.8% of the pre-Pandemic level, in New York City at 16.2%, and in San Jose at 18.0%.

... ... ...

A survey by Accenture of 400 North American financial-services companies found that 80% of the executives would like for workers to spend four or five days in the office post-Pandemic. Many of them think that working at home makes training younger employees more difficult and is hurting company culture.

But employees are looking for flexibility, now that they have proven that they can be productive at home.

“You’ve seen the senior executives sitting in their office and there’s nobody behind them,†Laurie McGraw, head of Accenture’s capital markets industry team in North America, told Bloomberg . “And then you see the entry-level folks starved for in-person interaction because they need to be coached on a more regular basis. And then there’s the vast middle that’s content to be home.â€

The work-from-home year 2020 generated record profits for banks, proving that work-from-home can be managed, and many employees question the need to commute every day. According to Rob Dicks, Accenture’s talent and organization head for capital markets, employees are likely to push back against a full-time return.

Despite whatever executives would like, the reality of the cost-cutting aspects of working from home has already set in. According to Accenture’s survey, of the same executives:

Financial firms have been all over the place with their plans.

Goldman Sachs, in an internal memo seen by Bloomberg , told its US employees that they should be prepared to report to the office by June 14, according to an internal memo seen by Bloomberg.

Vanguard Group, which employs about 17,300 people, is planning a hybrid model for most of its staff, with many employees able to work from home on Mondays and Fridays.

Bridgewater Associates is going for the hybrid model as well and will allow their employees to work from home at least part of the time.

Deutsche Bank, which employs about 8,000 people in the US, is planning to let its staff work from home for up to three days a week. Separately, the bank had said that it wanted to reduce its office foot print to cut costs.

Deutsche Bank is offering “flexibility†as an inducement for hiring and retention. A survey had found that 90% of its employees wanted the opportunity to work from home at least part of the time after the Pandemic. Office space will be reconfigured to accommodate the hybrid model.

JPMorgan Chase told its employees in a memo to report back to the office by early July on a “consistent rotational schedule†that would allow staff some flexibility.


[May 09, 2021] Kolanovic Warns Most Money Managers at Risk of Inflation Shock

May 09, 2021 | finance.yahoo.com

Money managers who’ve spent the bulk of their careers profiting from deflationary trends need to quickly switch gears or risk an “inflation shock†to their portfolios, warns JPMorgan Chase & Co. chief global markets strategist Marko Kolanovic.

“Many of today’s investment managers have never experienced a rise in yields, commodities, value stocks, or inflation in any meaningful way,†Kolanovic wrote in a report Wednesday. “A significant shift of allocations towards growth, ESG and low volatility styles over the past decade, all of which have negative correlation to inflation, left most portfolios vulnerable.â€

After staging a powerful rally since November amid vaccine rollouts and government stimulus, bets tied to inflation -- rising Treasury yields, cyclical stocks and small-caps, to name a few -- have taken pause in recent weeks. While that has sparked debate over how long the trend will persist, Kolanovic urged clients to adjust to the new regime amid the reopening of the global economy.

“Given the still high unemployment, and a decade of inflation undershoot, central banks will likely tolerate higher inflation and see it as temporary,†he wrote. “The question that matters the most is if asset managers will make a significant change in allocations to express an increased probability of a more persistent inflation.â€

The way Kolanovic sees it, as data continue to point to higher prices of goods and services, investors will be forced to shift from low-volatility plays to value stocks, while increasing allocations to direct inflation hedges such as commodities. That trend is likely to persist in the second half of the year, he wrote.

Based on JPMorgan’s data, professional investors have yet to fully embrace the reflation trade. Take equities, for instance. Both computer-driven traders and hedge funds now hold stocks at levels below historical averages.

“Portfolio managers likely will not take chances and will reposition portfolios,†Kolanovic wrote. “The interplay of low market liquidity, systematic and macro/fundamental flows, the sheer size of financial assets that need to be rotated or hedges for inflation put on, may cause outsized impact on inflationary and reflationary themes over the next year.â€

Story

[May 08, 2021] What's Behind the WTF Spike in Used-Vehicle Prices- My Gut Says, it Can't Last. But if it Lasts, It's Scary-Crazy Inflation -

May 08, 2021 | wolfstreet.com

And if it doesn't last after the stimmies are gone, dealers will sit on massively overpriced collateral, which could get messy.
By Wolf Richter for WOLF STREET .

This has been going on for months: Used-vehicle prices spiking from jaw-dropper to jaw-dropper, and just when I thought prices couldn't possibly spike further, they do.

Prices of used vehicles that were sold at auctions around the US in April spiked by 8.3% from March, by 20% year-to-date, by 54% from April 2020, and by 40% from April 2019, according to the Used Vehicle Value Index released today by Manheim, the largest auto auction operator in the US and a unit of Cox Automotive. All heck has broken loose in the used vehicle market:

The price spike has now completely blown by the prior record spike over the 13-month period through September 2009, which included the cash-for-clunkers program that removed a whole generation of serviceable older vehicles from the market.


makruger May 8, 2021 at 1:31 am

Curiously, the St. Louis Fed says used car prices have been pretty much flat for the last 25 years. While the last year of data shows a notable jump in prices, it's apparently been bludgeoned a little with some old fashioned hedonic quality adjustments.

Wolf Richter May 8, 2021 at 8:55 am

makruger,

I'll help you out since I've been covering this for years. So here is the correct link that explains it all, new vehicle CPI and used vehicle CPI (which is what you cited), plus "hedonic quality adjustments."

https://wolfstreet.com/2021/04/13/yup-dollars-purchasing-power-dropped-to-record-low-again-but-more-sharply-and-its-worse-than-cpi-shows/

And some relevant charts from that article:

Reply
Scott May 8, 2021 at 1:34 am

I can see how the supply for these auctions will be tight for some time given that business travel and the resulting car rental usage is way down. In addition, I would expect a lot of corporate car purchasing is down considerably as many sales reps have worked remotely which stalled corporate car purchasing schedules.

[May 08, 2021] Inflation Is More of a Threat Than the Fed Says - WSJ

May 08, 2021 | www.wsj.com

Naples, Fla.

Messrs. Levy and Bordo allude to the sharp drop in the velocity of M2 after the 2007-09 crisis. The actual decline is startling. In the first quarter of 2007 M2 velocity was 1.99, by the first quarter of 2020 it had fallen almost continually to 1.38. In other words, the money stock went from turning over twice a year to under 1.4 times a year. This is the primary reason for the very low inflation over the period.

me title=

Because of the Covid lockdowns, M2 fell even further to 1.13 by the fourth quarter of 2020. As the authors point out, conditions are much different today than in 2007-20 because of boosted bank reserves, households with substantial savings ready to spend and commercial banks in good shape and eager to lend. Unless an economy-wide lockdown occurs, these are very good reasons to believe the velocity of money will increase significantly, just as the 27% surge in M2 since the outbreak of the pandemic works its way through the economy.

This is a prescription for major inflation, perhaps 4%-5% in the next two years. When people say "no way," I remind them that in the early 1980s hardly anyone believed that interest rates would ever return to 1950s levels. While many individuals prefer to trend forecast, never underestimate how inflation (and interest rates) can swing back and forth in ways that amaze.

Em. Prof. Stephen Happel

Arizona State University

Tempe, Ariz.

Messrs. Levy and Bordo might have made an equally compelling case about the Fed being in total denial about the more troubling risk: that its policies have been contributing to a global asset-price and credit-market bubble.

By maintaining ultralow interest rates and by continuing to expand its balance by $120 billion a month, even when the economy could soon be overheating and U.S. equity valuations are close to their all-time highs, the Fed risks further inflating the asset-price bubble. By so doing, it is heightening the chances of a hard economic landing when the Fed is eventually forced to slam on the monetary-policy brakes to meet its inflation objective.

Desmond Lachman

American Enterprise Institute

Washington

Why did the money supply hardly budge in 2008, whereas now it's steadily increasing? The answer is that during the financial crisis the Fed conducted a radical experiment: It paid banks not to lend. By design, quantitative easing shored up banks' balance sheets while interest on excess reserves prevented the newly created money from circulating.

In March 2020, the Fed slashed interest on excess reserves from 1.60% to 0.10%. The benefits of sitting on funds is much smaller, which is why lending has increased.

me title=

Messrs. Levy and Bordo emphasize structural factors in the U.S. economy, such as housing and trade. These matter, but not nearly so much as policy. Inflationary pressures will continue if the Fed's asset purchases increase the broader money supply. But this depends on whether the Fed raises interest on excess reserves to prepandemic levels.

For better or worse, interest on excess reserves is now a crucial policy tool. We can't understand inflation without it.

Assoc. Prof. Alexander William Salter

Texas Tech University

Lubbock, Texas

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the May 5, 2021, print edition as 'Inflation Is More of a Threat Than Fed Says.'

[May 08, 2021] Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII

May 08, 2021 | www.wsj.com

SUBSCRIBER 3 hours ago Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)
Like thumb_up 5 Reply Share link Report D


Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII

SUBSCRIBER 3 hours ago
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII SUBSCRIBER 3 hours ago
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.

The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.

Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.

(Cont.)

[May 08, 2021] President Biden and Secretary Yellen said this week there is no significant inflation

May 08, 2021 | www.wsj.com

President Biden and Secretary Yellen said this week there is no significant inflation

Carlos Lumpuy
President Biden and Secretary Yellen said this week there is no significant inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 . Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high.
President Biden and Secretary Yellen said this week there is no significant inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the weather.
Figures are from Yahoo Finance
President Biden and Secretary Yellen said this week there is no significant inflation Carlos Lumpuy
President Biden and Secretary Yellen said this week there is no significant inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 . Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high.
President Biden and Secretary Yellen said this week there is no significant inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the weather.
Figures are from Yahoo Finance

[May 08, 2021] In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles

May 08, 2021 | www.wsj.com

J John Smith

Not only is this not true, the evidence shows that bubbles are called in advance. In 1999, the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles,

And on, and on, etc., etc.

[May 08, 2021] Dogecoin is now valued at more than Ford

May 08, 2021 | www.wsj.com

R Robert A

Dogecoin is now valued at more than Ford.
Economics?
Lunacy is more like it.
This is just more proof that the dollars are becoming more worthless.
Whistling past the graveyard.

[May 08, 2021] There is no alternative to the thrust-lifting energy jet fuel provides

May 08, 2021 | www.wsj.com

There is no alternative to the thrust-lifting energy jet fuel provides Carlos Lumpuy

⏤But Yellen said yesterday:
"I don't think there is going to be an inflationary problem.
Biden has proposed further substantial spending packages we would love to be enacted into law."

There is no alternative to the thrust-lifting energy jet fuel provides.
Daily demand is about 6 million barrels a day, a third in the USA.
Price rise is nearing a third in just the last three months.
There is no stopping an airline's largest revenue, the cargo jet planes carry; passengers above are incidental.

[May 08, 2021] he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.

May 08, 2021 | www.wsj.com

SUBSCRIBER 3 hours ago Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. Like thumb_up 3 Reply Share link Report D


he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago

Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.

[May 08, 2021] It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

May 08, 2021 | www.wsj.com

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J

It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V

[May 08, 2021] What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money by Greg Ip

Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 08, 2021 | www.wsj.com
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C


What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip

Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.

[May 08, 2021] Rising Bond Yields Threaten Financial Market Stability

The Fed Bankers lie every day to prevent panic and the lemmings believe it all.
May 08, 2021 | www.zerohedge.com

The 10-year US Treasury yield fell to only 0.48% in March 2020, when deflationary fears were mounting. The S&P 500 index had fallen by 32% in just five weeks as China's covid crisis was followed by the prospect of other jurisdictions going into pandemic lockdowns. Commodity prices were collapsing. The Fed then did what it always does in these conditions. It cut interest rates to the minimum possible (zero this time) and it flooded markets with money ($120bn in QE every month) along with some other market fixes to cap corporate bond yields from rising to reflect lending risks.

Fuelling it all is the expansion of base money by central banks. The St Louis Fed's FRED chart below showing the Fed's monetary base illustrates the point and is a proxy for the global picture, because the dollar is the reserve currency and the pricing medium for all commodities.

From the beginning of March 2020, which was the month the Fed announced virtually unlimited monetary expansion, base money has grown by 69%. It is this rapid growth in central bank money which is undoubtedly behind rising commodity prices, or put more accurately, is why the purchasing power of the dollar in international markets is falling.

When the outlook for the purchasing power of a fiat currency falls, all holders expect compensation in the form of higher interest rates. Partly, it is due to time preference -- the fact that an owner of the currency has parted with the use of it for a period of time. And partly it is due to the expectation that when returned, the currency will buy less than it does today. Official forecasts of the CPI state that the dollar's purchasing power will probably sink to 97.5 cents on the dollar, then the yield on the ten-year UST should be at least 2.56% (2.5%/0.97), otherwise new buyers face immediate losses. The official expectation that the rise in the rate of price inflation will be temporary is immaterial to an investment decision today, because the yield can be expected to evolve over time in the light of events.

This is before adding something to the yield for time preference (admittedly minimal in a freely traded bond), plus something for currency risk relative to an investor's base currency and plus something for creditor risk. Stripped of these other considerations, on the basis of expected inflation alone a current yield of 1.61 appears to be far too low, and a yield target of at minimum of 2.5% appears more appropriate.

ay_arrow

FinsterF 14 hours ago

Will increase??? Inflation is already much higher than 2% or whatever the latest government figures imply. Price inflation first shows up in real time data like stock and commodity prices. It only later shows up in broad consumer prices. Not to mention that year over year data already average six months late.

And this on top of tricks like homeowners equivalent rent and hedonic adjustments. So official inflation stats both systematically understate and lag actual inflation.

HorseBuggy 19 hours ago

As long as you print money you could keep this market going higher and higher regardless of any reality.

philipat 14 hours ago

As much as I enjoy reading Alasdair's work, he's wrong about Bond Yields because there IS NO RECOVERY. The latest BLS jobs report started to indicate that despite all the "stimulus" the underlying economy is very weak, and that isn't due to the excuse of Covid. From the data, the global economy started turning down in 4Q2108. This became more obvious in 3Q2019 with the REPO crisis. All before Covid.

The Bond markets almost always get it right and, as of now, Bond yields are falling as also are Eurodollar Futures, suggesting that for once Powell is right, any inflation is indeed transitory.

The good news for Alasdair is that for the last 3 years, Gold has been a precise mirror image of Bond REAL yields so as Real Yields now fall further negative again, Gold should respond to the upside - as already being seen.

Sound of the Suburbs 13 hours ago

Why is neoclassical economics so dangerous to the financial system?

We never did learn as much as we should have done from 1929.

Neoclassical economics produces ponzi schemes of inflated prices.

When they collapse it feeds back into the financial system.

Neoclassical economics still has its 1920's problems.

What's wrong with neoclassical economics?

  1. It makes you think you are creating wealth by inflating asset prices
  2. Bank credit flows into inflating asset prices, debt rises faster than GDP and you eventually get a financial crisis.
  3. No one notices the private debt building up in the economy as neoclassical economics doesn't consider debt.

What is the fundamental flaw in the free market theory of neoclassical economics?

The University of Chicago worked that out in the 1930s after last time.

Banks can inflate asset prices with the money they create from bank loans.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.

"Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money."

https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons

Margin lending had inflated the US stock market to ridiculous levels.

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

Real estate lending was actually the biggest problem lending category leading to 1929.

The IMF re-visited the Chicago plan after 2008.

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Existing financial assets, e.g. real estate, stocks and other financial assets, are traded and bank credit is used to fund the transfers. This inflates the price.

You end up with a ponzi scheme of inflated asset prices that will collapse and feed back into the financial system.

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.

The use of neoclassical economics and the belief in free markets, made them think that inflated asset prices represented real wealth.

1929 – Wakey, wakey time

Why did it cause the US financial system to collapse in 1929?

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

What could possibly go wrong?

Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into serious trouble.

Banking requires prudent lending.

If someone can't repay a loan, they need to repossess that asset and sell it to recoup that money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.

As the real estate and stock market collapsed the banks became insolvent as their assets didn't cover their liabilities.

They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most of the money they lend out back again to balance their books.

The banks become insolvent and collapsed, along with the US economy.

When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.

What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?

Japanese real estate.

They avoided a Great Depression by saving the banks.

They killed growth for the next 30 years by leaving the debt in place.

https://www.youtube.com/watch?v=8YTyJzmiHGk

What was the ponzi scheme of inflated asset prices that collapsed in 2008?

"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

They avoided a Great Depression by saving the banks.

They left Western economies struggling by leaving the debt in place, just like Japan.

It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this problem has made our economies so sluggish since 2008.

The last lamb to the slaughter, India

They had created a ponzi scheme of inflated asset prices in real estate, but it collapsed.

https://www.wsj.com/articles/indias-ghost-towns-saddle-middle-class-with-debtand-broken-dreams-11579189678

Now they need to recapitalize their banks.

Their financial system is in a bad way, recovery isn't going to be easy.

Sound of the Suburbs 13 hours ago (Edited)

They did work out what went wrong the last time they used neoclassical economics.

They put regulations in place to ensure financial stability.

Financial stability arrived in the Keynesian era and was locked into the regulations of the time.

https://www.brettonwoodsproject.org/wp-content/uploads/2009/10/banking-crises.png

"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure 13.1 - The proportion of countries with banking crises, 1900-2008).

Neoclassical economics came back and so did the financial crises.

The neoliberals removed the regulations that created financial stability in the Keynesian era and put independent central banks in charge of financial stability.

Why does it go so wrong?

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and knew there was going to be a financial crisis.

Richard Vague has looked at the data for financial crises going back 200 years and found the cause was nearly always runaway bank lending.

We put central bankers in charge of financial stability, but they use an economics that ignores the main cause of financial crises, private debt.

Most of the problems are coming from private debt.

The technocrats use an economics that ignores private debt.

The poor old technocrats don't really stand a chance.

In 2008 the Queen visited the revered economists of the LSE and said "If these things were so large, how come everyone missed it?"

It's that neoclassical economics they use Ma'am, it doesn't consider private debt.

Here it is Ma'am, look it's obvious.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

At 18 mins.

Let's get our experts in neoclassical economics to have a look.

"It was a black swan"

Not considering private debt is the Achilles' heel of neoclassical economics.

It is a black swan to them.

That's the problem.

[May 07, 2021] U.S. job growth disappoints in challenge to economic recovery - BNN Bloomberg

May 07, 2021 | www.bnnbloomberg.ca

6h ago

U.S. job growth disappoints in challenge to economic recovery

Olivia Rockeman , Bloomberg News

https://imasdk.googleapis.com/js/core/bridge3.455.0_en.html#goog_688272017 U.S. jobs data in April disappoints

U.S. job growth significantly undershot forecasts in April, suggesting that difficulty attracting workers is slowing momentum in the labor market and challenging the economic recovery.

Payrolls rose 266,000 from a month earlier, according to a Labor Department report Friday that represented one of the largest downside misses on record. Economists in a Bloomberg survey projected a 1 million hiring surge in April.

The unemployment rate edged up to 6.1 per cent, though the labor-force participation rate also increased.

... The disappointing payrolls print leaves overall employment more than 8 million short of its pre-pandemic level and is consistent with recent comments from company officials highlighting challenges in filling open positions.

... While job gains accelerated in leisure and hospitality, employment at temporary-help agencies and transportation and warehousing declined sharply.

...

Labor force participation, a measure of the percentage of Americans either working or looking for work, rose to 61.7 per cent in April from 61.5 per cent, likely supported by increased vaccinations that helped fuel the reopenings of many retail establishments, restaurants and leisure-facing businesses.

Average weekly hours increased to match the highest in records dating back to 2006. The gain in the workweek, increased pay and the improvement in hiring helped boost aggregate weekly payrolls 1.2 per cent in April after a 1.3 per cent gain a month earlier.

Workforce participation for men age 25 to 54 increased last month, while edging lower for women.

[May 07, 2021] Goldman, Pimco Detect Irrational Inflation Mania in Bonds

May 07, 2021 | finance.yahoo.com

Goldman Sachs Group Inc. and bond titan Pacific Investment Management Co. have a simple message for Treasuries traders fretting over inflation: Relax.

The firms estimate that bond traders who are pricing in annual inflation approaching 3% over the next handful of years are overstating the pressures bubbling up as the U.S. economy rebounds from the pandemic.

...the overshoot could be as large as 0.2-to-0.3 percentage point. That gap makes a difference with key market proxies of inflation expectations for the coming few years surging this week to the highest in more than a decade. The 10-year measure, perhaps the most closely followed, eclipsed 2.5% Friday for the first time since 2013, even after unexpectedly weak U.S. jobs data.

There's at least one market metric that backs up the view that the pressures, which have been building for months, aren't about to get out of hand and may even prove temporary. A swaps instrument that reflects the annual inflation rate for the second half of the next decade has been relatively stable in recent months.

...The Federal Reserve has been hammering home that it sees any spike in price pressures as likely short-lived, and that it's willing to let inflation run above target for a period as the economy revives.

... ... ...

... Inflation worries have been mounting against a backdrop of soaring commodities prices -- copper, for example, set a record high Friday. It's all happening as lawmakers in Washington debate another massive fiscal-stimulus package.

...

Korapaty calls the outlook for inflation "benign." His view is that the market is overly optimistic with its inflation assumptions, with the greatest mismatch to be found on the three- and five-year horizon. At roughly 2.75% and 2.7%, respectively, those rates are around 20 to 30 basis points higher than they should be, in his estimate.

... ... ...

...Treasury Secretary Janet Yellen stirred markets by saying interest rates will likely rise as government spending swells and the economy achieves faster growth. She walked back the remarks hours later.

... "Because we think front-end rates are pricing in a more aggressive Fed path than we believe, we do like shorter-dated nominal bonds, and think there's value there," she said.

[May 07, 2021] Crooks are selling to fools

finance.yahoo.com

...retail investors have been net buyers of stocks for 10 straight weeks, hedge funds have been sellers, client data from BofA Global Research showed, with the four-week average of net sales of equities by hedge funds hitting their highest levels since the firm began tracking the data in 2008.

[May 07, 2021] Consumer Credit Explodes Higher As Americans Rediscover Their Love For Credit Cards

May 07, 2021 | www.zerohedge.com

Just yesterday, we showed that only a few quarters after banks effectively shut down, refusing to give out C&I, credit card or auto loans and mortgages to virtually anyone as a result of record Draconian credit standards, credit standards saw a complete U-turn and as of April, lending standards for credit cards and autos were the loosest on record.

This was not lost on US consumers who after suffering through a miserable 12 months in which they dutifully repaid their credit card debt like total idiots who acted responsibly (instead of doing what US corporations are doing and loading up on even more debt to ensure they all get bailed out during the next crisis), in March aggregate consumer credit surged by $25.8BN, smashing expectations for the 2nd month in a row ( as a reminder February was the biggest beat on record ) and barely slowing down from last month's massive $26.1BN increase.

... non-revolving credit - i.e., student and auto loans - continued its relentless ramp higher, increasing by $19.4BN in March, the most since June of 2020...


Just a Little Froth in the Market 10 minutes ago

"Americans are once again highly confident about the future, and are spending far beyond their means, as they always tend to do."

Ah no, they are using credit cards because they have no real money. Asinine article.

Archimedes bathwater PREMIUM 7 minutes ago

If Americans use their credit cards for the same stuff as last year, but everything costs 20% more, is that also called an explosion in consumer credit? MOAR WINNING??!

nsurf9 8 minutes ago (Edited) remove link

Well, the average revolving credit card rate is only 16%.

brian91145 12 minutes ago

lol so no one is working and everyone is using credit cards? Sounds like a great economy!

[May 07, 2021] From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath

finance.yahoo.com

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C


From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath

Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.

[May 05, 2021] FED Powell on tough question: Not sure what the exact nature of that question is

May 05, 2021 | www.zerohedge.com

ReadyForHillary 1 hour ago

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

HA HA HA HA! HA HA HA HA HA HA HA HA!

[May 05, 2021] Mark Blyth " An Inflated Fear of Inflation ?

May 01, 2021 | www.nakedcapitalism.com

Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The Hamptons are not a defensible position"? Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The Hamptons are not a defensible position"? Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. By Paul Jay.

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Paul Jay
And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about? And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about?
Mark Blyth
I hope that it is, but I'm going to go with Larry on this one. He says it's about one third chance that it's going to do this. I'd probably give it about one in ten, so it's not impossible.

So, let's unpack why we're going to see this. Can you generate inflation? Yeah. I mean, dead easy. Imagine your Turkey. Why not be a kind of Turkish pseudo dictator?

Why not fire the head of your central bank in an economy that's basically dependent on other people valuing your assets and giving you money through capital flows? And then why don't you fire the central bank head and put in charge your brother-in-law? I think it was his brother-in-law. And then insist that low interest rates cure inflation. And then watch as the value of your currency, the lira collapses, which means all the stuff you import is massively expensive, which means that people will pay more, and the general level of all prices will go up, which is an inflation. So, can you generate an inflation in the modern world? Sure, yeah. Easy. Just be an idiot, right? Now, does this apply to the United States? No. That's where it gets entirely different. So, a couple of things to think about (first). So, you mentioned that huge number of 20 trillion dollars. Well, that's more or less about two thirds of what we threw into the global economy after the global financial crisis, and inflation singularly failed to show up. All those people in 2010 screaming about inflation and China dumping bonds and all that. Totally wrong. Completely wrong. No central bank that's got a brass nameplate worth a damn has managed to hit its inflation target of two percent in over a decade. All that would imply that there is a huge amount of what we call "˜slack' in the economy. (Also) think about the fact that we've had, since the 1990s, across the OECD, by any measure, full employment. That is to say, most people who want a job can actually find one, and at the same time, despite that, there has been almost no price pressure coming from wages, pushing on into prices, to push up inflation. So rather than the so-called vertical Phillips curve, which most of modern macro is based upon, whereby there's a kind of speed bump for the economy, and if the government spends money, it can't push this curve out, all it can do is push it up in terms of prices. What we seem to actually have is one whereby you can have a constant level of inflation, which is very low, and any amount of unemployment you want from 2 percent to 12 percent, depending on where you look and in which time-period.

All of which suggests that at least for big developed, open, globalized economies, where you've destroyed trade unions, busted up national product cartels, globally integrated your markets, and added 600 million people to the global labor supply, you just can't generate inflation very easily. Now, we're running, depending on how much actually passes, a two to five trillion-dollar experiment on which theory of inflation is right. This one, or is it this one? That's basically what we're doing just now. Larry's given it one in three that it's his one. I'd give it one in ten his one's right. Now, if I may just go on just for a seconds longer. This is where the politics of this gets interesting. Most people don't understand what inflation is. You get all this stuff talked by economists and central bankers about inflation and expectations and all that, but you go out and survey people and they have no idea what the damn thing is. Think about the fact that most people talk about house price inflation.

There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation. So, what's going to happen coming out of Covid is there will be a big pickup in spending, a pickup in employment. I think it's (going to be) less than people expect because the people with the money are not going to go out and spend it because they have all they want already. There are only so many Sub-Zero fridges you can buy. Meanwhile, the bottom 60 percent of the income distribution are too busy paying back debt from the past year to go on a spending spree, but there definitely will be a pickup. Now, does that mean that there's going to be what we used to call bottlenecks? Yeah, because basically firms run down inventory because they're in the middle of a bloody recession. Does it mean that there are going to be supply chain problems? Yes, we see this with computer chips. So, what's going to happen is that computer chips are going to go up in price.

So, lots of individual things are going to go up in price, and what's going to happen is people are going to go "there's the inflation, there's that terrible inflation," and it's not. It's just basically short-term factors that will dissipate after 18 months. That is my bet. For Larry to be right what would have to be true?

That we would have to have the institutions, agreements, labor markets and product markets of the 1970s. We don't.

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So, I just don't actually see what the generator of inflation would be. We are not Turkey dependent on capital imports for our survival with a currency that's falling off a cliff. That is entirely different. That import mechanism, which is the way that most countries these days get a bit of inflation. That simply doesn't apply in the U.S. So, with my money on it, if I had to bet, it's one in 10 Larry's right, rather one in 3.

Paul Jay
The other point he raises, and we talked a little bit about this in a previous interview, but let's revisit it, is that the size of the American debt, even if it isn't inflationary at some point, creates some kind of crisis of confidence in the dollar being the reserve currency of the world, and so this big infrastructure spending is a problem because of that. That's part of, I believe, one of his arguments. The other point he raises, and we talked a little bit about this in a previous interview, but let's revisit it, is that the size of the American debt, even if it isn't inflationary at some point, creates some kind of crisis of confidence in the dollar being the reserve currency of the world, and so this big infrastructure spending is a problem because of that. That's part of, I believe, one of his arguments.
Mark Blyth
The way political economists look at the financial plumbing, I think, is different to the way that macro economists do. We see it rather differently. The first thing is, what's your alternative to the dollar unless you're basically going to go all-in on gold or bitcoin? And good luck with those. If we go into a crushing recession and our bond market collapses, don't think that Europe's going to be a safe haven given that they've got half the US growth rate. And we could talk about what Europe's got going on post-pandemic because it's not that good. So what's your alternative (to the Dollar)? Buy yen? No, not really. You're going to buy Chinese assets? Well, good luck, and given the way that their country is being run at the moment, if you ever want to take your capital out. I'm not sure that's going to work for you, even if you could. So you're kind of stuck with it. Mechanically there's another problem. All of the countries that make surpluses in the world make surpluses because we run deficits. One has to balance the other. So, when you're a Chinese firm selling to the United States, which is probably an American firm in China with Chinese subcontractors selling to the United States, what happens is they get paid in dollars. When they receive those dollars in China, they don't let them into the domestic banking system. They sterilize them and they turn them into the local currency, which is why China has all these (dollar) reserves. That's their national savings. Would you like to burn your reserves in a giant pile? Well, one way to do that would be to dump American debt, which would be equivalent to burning your national savings. If you're a firm, what do you do? Well, you basically have to use dollars for your invoicing. You have to use dollars for your purchasing, and you keep accumulating dollars, which you hand back to your central bank, which then hands you the domestic currency. The central bank then has a problem because it's got a liability " (foreign) cash rather than an asset. So, what's the easiest asset to buy? Buy another 10-year Treasury bill, rinse and repeat, rinse and repeat. So, if we were to actually have that type of crisis of confidence, the people who would actually suffer would be the Germans and the Chinese, because their export-driven models only makes sense in terms of the deficits that we run. Think of it as kind of monetarily assured destruction because the plumbing works this way. I just don't see how you can have that crisis of confidence because you've got nowhere else to take your confidence.
Paul Jay
If I understand it correctly, the majority of American government debt is held by Americans, so it's actually really the wealth is still inside the United States. I saw a number, this was done three or four years ago, maybe, but I think it was Brookings Institute, that assets after liabilities in private hands in the United States is something like 98 trillion dollars. So I don't get where this crisis of confidence is going to come any time soon. If I understand it correctly, the majority of American government debt is held by Americans, so it's actually really the wealth is still inside the United States. I saw a number, this was done three or four years ago, maybe, but I think it was Brookings Institute, that assets after liabilities in private hands in the United States is something like 98 trillion dollars. So I don't get where this crisis of confidence is going to come any time soon.
Mark Blyth
Basically, if your economy grows faster (than the rest of the world because you are) the technological leader, your stock markets grows faster than the others. If you're an international investor, you want access to that. (That ends) only if there were actual real deep economic problems (for the US), like, for example, China invents fusion energy and gives it free to the world. That would definitely screw up Texas. But short of that, it's hard to see exactly what would be these game-changers that would result in this. And of course, this is where the Bitcoin people come in. It's all about crypto, and nobody has any faith in the dollar, and all this sort of stuff. Well, I don't see why we have faith in something (like that instead . I think it was just last week. There wasn't much reporting on this, I don't know if you caught this, but there were some twenty-nine-year-old dude ran a crypto exchange. I can't remember where it was. Maybe somewhere like Turkey. But basically he had two billion in crypto and he just walked off with the cash. You don't walk off with the Fed, but you could walk off with a crypto exchange. So until those problems are basically sorted out, the notion that we can all jump into a digital currency, which at the end of the day, to buy anything, you need to turn back into a physical currency because you don't buy your coffee with crypto, we're back to that (old) problem. How do you get out of the dollar? That structural feature is incredibly important.
Paul Jay
So there's some critique of the Biden infrastructure plan and some of the other stimulus, coming from the left, because, one, the left more or less agrees with what you said about inflation, and the critique is that it's actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them actually seem quite in support of the Biden plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg Radio. So there's some critique of the Biden infrastructure plan and some of the other stimulus, coming from the left, because, one, the left more or less agrees with what you said about inflation, and the critique is that it's actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them actually seem quite in support of the Biden plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg Radio.
Mark Blyth
You don't even hear a lot of screaming about corporate taxes, which is fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business audience recently about this, and I kind of did an informal survey and I said, "why are you guys not up in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a lot of firms that we think are great firms are just really good at tax optimization? What if those profits are really just contingent on that? That would be really nice to know this because then we could stop investing in them and invest in better stuff that actually does things." You don't even hear a lot of screaming about corporate taxes, which is fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business audience recently about this, and I kind of did an informal survey and I said, "why are you guys not up in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a lot of firms that we think are great firms are just really good at tax optimization? What if those profits are really just contingent on that? That would be really nice to know this because then we could stop investing in them and invest in better stuff that actually does things."
Paul Jay
And pick up the pieces of what's left of them for a penny if they have to go down. And pick up the pieces of what's left of them for a penny if they have to go down.
Mark Blyth
Absolutely. Just one thought that we'll circle back, to the left does not think it's big enough, etc. Well, yes, of course they wouldn't, and this is one of those things whereby you kind of have to check yourself. I give the inflation problem a one in ten. But what I'm really dispassionately trying to do is to look at this as just a problem. My political preferences lie on the side of "˜the state should do more.' They lie on the side of "˜I think we should have higher real wages.' They lay on the side that says that "˜populism is something that can be fixed if the bottom 60 percent actually had some kind of growth.' So, therefore, I like programs that do that. Psychologically, I am predisposed therefore to discount inflation. I'm totally discounting that because that's my priors and I'm really deeply trying to check this. In this debate, it's always worth bearing in mind, no one's doing that. The Republicans and the right are absolutely going to be hell bent on inflation, not because they necessarily really believe in (inevitable) inflation, (but) because it's a useful way to stop things happening. And then for the left to turn around and say, well, it isn't big enough, (is because you might as well play double or quits because, you know, you've got Biden and that's the best that's going to get. So there's a way in which when we really are trying to figure out these things, we kind of have to check our partisan preferences because they basically multiply the errors in our thinking, I think.
Paul Jay
Now, earlier you said that one of the main factors why inflation is structurally low now, I don't know if you said exactly those words. Now, earlier you said that one of the main factors why inflation is structurally low now, I don't know if you said exactly those words.
Mark Blyth
I would say that yes. I would say that yes.
Paul Jay
Is the weakness of the unions, the weakness of workers in virtually all countries, but particularly in the U.S., because it matters so much. That organizing of workers is just, they're so unable to raise their wages over decades of essentially wages that barely keep up with inflation and don't grow in any way, certainly not in any relationship to the way productivity has grown. So we as progressives, well, we want workers to get better organized. We want stronger unions. We want higher wages, but we want it without inflation. Is the weakness of the unions, the weakness of workers in virtually all countries, but particularly in the U.S., because it matters so much. That organizing of workers is just, they're so unable to raise their wages over decades of essentially wages that barely keep up with inflation and don't grow in any way, certainly not in any relationship to the way productivity has grown. So we as progressives, well, we want workers to get better organized. We want stronger unions. We want higher wages, but we want it without inflation.
Mark Blyth
And it's a question of how much room you have to do that. I mean, essentially, if you quintuple the money supply, eventually prices will have to rise"¦but that depends upon the velocity of money which has actually been collapsing. So maybe you'd have to do it 10 times. There's interesting research out of London, which I saw a couple of weeks ago, that basically says you really can't correlate inflation with increases in the money supply. It's just not true. It's not the money that's doing it. It's the expectations. That then begs the question, well, who's actually paying attention if we all don't really understand what inflation is? So I tend to think of this as basically a kind of a physical process. It's very easy to understand if your currency goes down by 50 percent and you're heavily dependent on imports. You're import (prices) go up. All the prices in the shops are going to go up. That's a mechanism that I can clearly identify that will generate rising prices. If you have big unions, if you have kind of cartel-like vertically integrated firms that control the national market, if you have COLA contracts. If you have labor able to do what we used to call leapfrogging wage claims against other unions, if this is all institutionally and legally protected, I can see how that generates inflation, that is a mechanism I can point to. That doesn't exist just now. Let's unpack this for a minute. The sort of fundamental theoretical assumption on this is based is some kind of "˜marginal productivity theory of wages.' In a perfectly free market with free exchange, in which we don't live, what would happen is you would hire me up to the point that my marginal product is basically paying off for you, and once it produces zero profits, that's kind of where my wages end. I'm paid up to the point that my marginal product is useful to the firm. This is not really a useful way of thinking about it because if you're the employer and I'm the worker, and I walk up to you and say, hey, my marginal productivity is seven, so how about you pay me seven bucks? You just say, shut up or I'll fire you and get someone else. Now, the way that we used to deal with this was a kind of "˜higher than your outside option,' on wages. The way we used to think about this was "why would you pay somebody ten bucks at McDonald's?" Because then you might actually get them to and flip the burgers because they're outside option is probably seven bucks, and if you pay them seven bucks, they just won't show up. So we used to have to pay workers a bit more. So that was, in a sense, (workers) claiming (a bit of the surplus) from productivity. But now what we've done, Suresh Naidu the economist was talking about this the other day, is we have all these technologies for surveilling workers (instead of paying them more). So now what we can do is take that difference between seven and ten and just pocket it because we can actually pay workers at your outside option, because I monitor everything you do, and if you don't do exactly what I say I'll fire you, and get somebody else for seven bucks. So all the mechanisms for the sharing of sharing productivity, unions, technology, now lies in the hands of employers. It's all going against labor. So (as a result) we have this fiction that somehow when the economy grows, our productivity goes up, and workers share in that. Again, what's the mechanism? Once you take out unions and once you weaponize the ability of employers to extract surplus through mechanisms like technology, franchising, all the rest of it, then it just tilts the playing field so much that we just don't see any increase in wages. (Now) let's bring this back to inflation. Unless you see systematic (and sustained) increases in the real wage that increases costs for firms to the point that they need to push on prices, I just don't see the mechanism for generating inflation. It just isn't there. And we've underpaid the bottom 60 percent of the U.S. labor market so long it would take a hell of a lot of wage inflation to get there, with or without unions.
Paul Jay
Yeah, what's that number, that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't causing raging inflation. Yeah, what's that number, that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't causing raging inflation.
Mark Blyth
And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm off, the order of magnitude is there, that transfers, because of tax and regulatory changes, from the 90th percentile of the distribution to the 10 percentile, totalled something in the order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down. So when you consider that as a mechanism of extraction, why are worrying about inflation (from wages)? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm off, the order of magnitude is there, that transfers, because of tax and regulatory changes, from the 90th percentile of the distribution to the 10 percentile, totalled something in the order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down. So when you consider that as a mechanism of extraction, why are worrying about inflation (from wages)? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here?

cocomaan , , May 1, 2021 at 7:24 am

Great piece. He put to words something I've thought about but couldn't articulate: if wages are stagnant, how could you possibly get broad based inflation?

There is no upward pressure on labor costs anywhere in the economy. The pressures are all downward.

You would need government spending in the order of magnitudes to drive up wages. Or release from a lot of debt, like student loan forgiveness or what have you.

Left in Wisconsin , , May 1, 2021 at 2:06 pm

I'm not sure you need wage growth to get inflation. As Blyth notes, most of the time inflation is a currency or a monetary issue. In the 70s, it was initially an oil thing " and oil flows through a lot of products " and then really went crazy only when Volker started raising interest rates. I don't think there is an episode of "wage-push" inflation in history. (The union cost-of-living clauses don't "cause" inflation, they only adjust for past inflation. If unions can cause wage-push inflation, someone needs to explain how they did this in the late 70s, when they were much less powerful and unemployment was substantially higher, than in the 1950s.) One could argue that expansive fiscal policy might drive inflation but, even then, the mechanism is through price increases, not wage increases. You do need consumption but that can always come from the wealthy and further debt immiseration of the rest of us.

Adam Eran , , May 1, 2021 at 2:51 pm

Blythe is one of those guys who is *almost* correct. For example he declares that expectations drive inflation. What about genuine shortages? The most recent U.S. big inflation stemmed from OPEC withholding oil"a shortage we answered by increasing the price ($1.75/bbl in 1971 -> $42/bbl in 1982). In Germany, the hyperinflation was driven by the French invading the Ruhr, something roughly like shutting down Ohio in the U.S. A shortage of goods resulted. Inflation! In Zimbabwe, the Rhodesian (white) farmers left, and the natives who took over their farms were not producing enough food. A shortage of food, requiring imports, resulted. Inflation!

I guess you could say people in Zimbabwe "expected" food"¦but that's not standard English.

JFYI, Blythe is not a fan of MMT. He calls it "annoying." Yep, that's his well-reasoned argument about how to think about it.

As a *political* economist, he may have a point in saying MMT is a difficult political sell, but otherwise, I'd say the guy is clueless about it.

CH , , May 1, 2021 at 9:13 am

Inflation isn't caused by the amount of money in the economy but by the amount of *spending*.

Like the other commenter, I've wondered this too"if wages have been stagnant for a generation, then how are we going to get inflation? By what mechanism? It seems like almost all of the new money just adds a few zeros to the end of the bank account balances of the already rich (or else disappears offshore).

Still, you just cannot people to understand this because of houses, health care and education. One might even argue that inflated house and education prices are helping keep inflation down. If more and more of our meager income is going to pay for these fixed expenditures, then there's no money left over to pay increased prices for goods and services. So there's no room to increase the prices of those things. As Michael Hudson would point out, it's all sucked away for debt service, meaning a lot of the "money printing" is just subsidizing Wall Street.

But if you pay attention to the internet, for years there have been conspiracy theories all across the political spectrum that we were really in hyperinflation and the government just secretly "cooked the books" and manipulated the statistics to convince us all it wasn't happening. Of course, these conspiracy theories all pointed to the cost of housing, medicine and education as "proof" of this theory (three things which, ironically, didn't go up spectacularly during the Great Inflation of the 1970's). Or else they'd point to gas prices, but that strategy lost it's potency after 2012. Or else they'd complain that their peanut butter was secretly getting smaller, hiding the inflation (shrinkflation is real, or course, but it's not a vast conspiracy to hide price increases from the public).

I'm convinced that this was the ground zero for the kind of anti-government conspiratorial thinking that's taken over our politics today. These ideas was heavy promoted by libertarians like Ron Paul starting in the nineties, helped by tracts like "The Creature from Jekyll Island," which argued that the Fed itself was one big conspiracy. I've seen plenty of people across the political spectrum"including on the far Left"take all of this stuff as gospel.

So if the government is secretly hiding inflation and the Fed itself is a grand conspiracy to convince us that paper is money (rather than "real" money, aka gold), then is it that hard to believe they're manipulating Covid statistics and plotting to control us all by forcing us all to wear masks and get vaccinated? In my view, it all started with inflation paranoia.

Blyth explains why housing inflation isn't really a sign of hyperinflation. But the average "man on the street" just doesn't get it. To Joe Sixpack, not counting some of the things he has to pay for is cheating. So are "substitutions" like ground beef when steak gets too pricey, or a Honda Civic for a Toyota Camry, for example. The complexity of counting inflation is totally lost on them, making them vulnerable to conspiratorial thinking. Since Biden was elected, the ZOMG HyPeRiNfLaTiOn!!&%! articles are ubiquitous.

Does anyone have a good way of explaining this to ordinary (i.e. non-economically literate) people? I'd love to hear it! Thanks.

TomDority , , May 1, 2021 at 9:41 am

"There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation."
Maybe I am totally off but, I would say"¦. By your definition, inflation does not exist in the economic terminology as inflation only exists if generally all prices go up and a singularity of soaring house prices and education and healthcare do not constitute an inflation because the number of things inflating do not meet some unknown number of items needed for a general rise in all prices to create an inflation.
What I read you to say is that if Labor prices go up " that could lead to inflation " but if house prices go up (as they have) that is not inflation.
Hypothetically " if labor prices do not go up and the "˜nessesities of living' prices go up (Housing and Med) " would you not have an inflation in the cost of living? " I am convinced that economists and market experts try to claim that the economy and markets are seperate and distinct from humans as a science " and that Political science has nothing to do with what they present. Yet, humans are the only species to have formed the markets and money we all participate and, the only species, therefore, to have an exclusive asset ownership, indifferent to any other species " IE " if you can't pay you can't play and have no say.
I submit that one or a few asset price increases that are combined with labor price stasis(the actual money outlayed for those asset price increased products not moving up) " especially one that is a basic to living (shelter) and not mobile (like money) is inflation " Land prices going up will generally increase the prices of all products created thereon.

Chris , , May 1, 2021 at 9:55 am

Exactly my interpretation.

The "transitory" "food inflation" (but it's not inflation since TVs went down!) is no issue. Just eat 2 years from now or a TV instead.

Objective Ace , , May 1, 2021 at 10:23 am

I think there's two things going on here. There's different inflation indicators, and asset prices are by definition never a part of inflation

The main indicator of CPI has so many different things in it that the inflation of any one item is going to have little effect on it. But you can look up BEA's detailed GDP deflator to see inflation for more specific things like housing expenses (rent) or transportation.

So back to real estate/land: real estate and land are like the stock market. They aren't subject to inflation. They are subject to appreciation. There is somewhat of a feedback effect for sure though: Increased real estate prices can drive up inflation. Rent for sure gets driven up, but also any other good that's built domestically if the owners of capital need to pay more to rent their factories/farms etc.

As noted in the article though, capitalists can simply move their production overseas so there's a limit to how much US land appreciation can filter into inflation. Its definitely happening with rent as housing can't be outsourced. But rent is only one part of overall inflation

jsn , , May 1, 2021 at 10:23 am

The point he was making is that the price change in housing is the result of a policy restructuring of the market: no new public housing and financial deregulation.

The price of food is similarly a response to policy changes: industry consolidation and resulting price setting to juice financial profits.

The point is distinguishing between political forces and market forces. The former is socially/politically determined while the latter has to do with material realities within a more or less static market structure.

This is a distinction essential to making good policy but useless from a cost of living perspective.

Starry Gordon , , May 1, 2021 at 11:26 am

One could prevent crossover for awhile, but eventually certain policies are going to affect certain markets. The policy of giving the rich money drives up asset prices, real estate is a kind of asset, eventually rising real estate costs affect the market the proles enter when they have to buy or rent real estate.

If state institutions tell them there is no inflation, the proles learn that the state institutions lie because they know better from direct experience. Once that gap develops, it's as with personal relationships: when trust is broken, it is very hard to replace. Once belief in state institutions is lost, significant political effects ensue. Often they are rather unpleasant.

jsn , , May 1, 2021 at 1:06 pm

Yes. Discussing complexity in a low trust society makes definitions of terms within a discussion necessary.

The same words are used in different contexts to mean different things making a true statement in one place a lie in another.

Skip Intro , , May 1, 2021 at 2:22 pm

Blyth pointed to the lack of systemic drivers of price increases, and how the traditional ones have disappeared. I think one that he missed, that results in a disconnect with the evidence of price increases across multiple sectors, is the neoliberal infestation. Rent-sucking intermediaries have imposed themselves into growing swaths of the mechanisms of survival, hollowed out productive capacity, and crapified artifacts to the extent that their value is irredeemably reduced. This is a systemic cause for reduced buying power, i.e. inflation, but it is not a result of monetary or fiscal policy, but political and ideological power.

cnchal , , May 1, 2021 at 3:23 pm

> . . . The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other.

That is a total load of baloney. The eighties were a time when the Conservative government came up with the foreign investor program and it was people from Hong Kong getting out before the British hand over to China in 1997.

I was there, trying to save for a house and for every buck saved the houses went up twenty. I finally pulled the plug in 89 when someone subdivided a one car garage from their house and sold it for a small fortune. The stories of Hong Kongers coming up to people raking their yard and offering cash well above supposed market rates and the homeowner dropping their rakes and handing over the keys were legendary.

It's still that way except now they come from mainland China, CCP members laundering their loot.

Any government that makes domestic labor compete with foreign richies for housing is mendacious.

When a Canadian drug dealer "saves up" a million to buy a house and the RCMP get wind of it, they lose the house. When a foreigner show up at the border with a million, it's all clean.

Robert Hahl , , May 1, 2021 at 9:49 am

Many people who talk about avoiding inflation are speaking euphemistically about preventing wage growth, and only that; dog whistles, clearly heard by the intended audience. Yet they are rarely confronted directly on this point. Instead we hear that they don't understand what the word inflation means, and Mark seems to be saying these euphamists (eupahmites?) needn't be so concerned because wages will not go up anyway. If so, what we are talking about here is merely helping workers stay afloat without making any fundamental changes. Well, both sides can agree to that as usual. Guess I'm just worn out by this kind of thing.

Basil Pesto , , May 1, 2021 at 10:02 am

this is only related insofar as Mark Blyth is a treat, and I shared it last week, but icymi, an excellent interview with him on the European Super League debacle last week , which really was a huge story.

The Rev Kev , , May 1, 2021 at 10:28 am

The thing that I like about Mark Blyth is how he cuts to the chase and does not waffle. Must be his upbringing in Scotland I would say. The revelation that the US minimum wage should be about $25-30 is just mind-boggling in itself. But in that talk he unintentionally put a value on how much is at stake in making a fairer economic system and it works out to be about $34 trillion. That is how much has been stolen by the upper percentile and why workers have gone from having a job, car, family & annual vacation to crushing student debt, a job at an Amazon fulfillment center and a second job being an Uber driver while living out of car.

Skip Intro , , May 1, 2021 at 1:24 pm

That $25-30 wage was keeping up with inflation , if it were keeping up with productivity it would be, IIRC, nearly twice that. It is interesting to see a dollar figure put on the amount you can reap after a generation or two of growing a middle class, by impoverishing it.

cnchal , , May 1, 2021 at 3:41 pm

This is key.

But now what we've done, Suresh Naidu the economist was talking about this the other day, is we have all these technologies for surveilling workers (instead of paying them more) . So now what we can do is take that difference between seven and ten and just pocket it because we can actually pay workers at your outside option, because I monitor everything you do, and if you don't do exactly what I say I'll fire you, and get somebody else for seven bucks.

Praise be the STEM workers. Without them where would the criminal corporate class be?

Every time I listen to the news (without barfing) the story is, we need moar STEM workers, and I ask myself, what do they do for a living?

howard in nyc , , May 1, 2021 at 10:37 am

Blyth is a bass guitar player! The things you learn about people.

eg , , May 1, 2021 at 11:32 am

I think he also plays guitar and drums, in addition to the bass guitar.

Mikel , , May 1, 2021 at 2:02 pm

If that kind of tidbit excites you:
Before going into economics, Alan Greenspan was a sax and clarinet player who played with the likes of Stan Getz and Quincy Jones.

Go figure"¦.

The Rev Kev , , May 1, 2021 at 7:42 pm

Mark Blyth has a remarkable history as well as, well, I will let you read this article about him-

https://www.jhunewsletter.com/article/2006/10/things-ive-learned-prof-mark-blyth-26651

As a tidbit, he has released five or six albums when younger and is into gourmet Indian cuisine.

HotFlash , , May 1, 2021 at 9:04 pm

And Michael Hudson studied piano and conducting . Do failed musicians gravitate to economics? Perhaps for the same reason as my bank manager, a failed bass player (honors graduate from Classy Cdn U in double bass), they see the handwriting on the wall. He told me his epiphany came when he and his band-mates were trying to make cup-o-noodles with tap water in a room over the pub in Thunder Bay where they were playing.

Tex , , May 1, 2021 at 10:39 am

The mental gymnastics to get to "everything needed to survive costs more but wages have not gone up in decades so therefore its all transitory and inflation does not exist" must be painful. How high does the price for cat food have to get before we stop eating?

freebird , , May 1, 2021 at 10:11 pm

Thank you. Most things I buy or am forced to pay for are rising in price. The economists may enjoy the article, but here in Topeka, it's not flying.

KLG , , May 1, 2021 at 10:49 am

Yes! "The Hamptons are not a defensible position" ranks right up there with "It is easier to imagine the end of the world than the end of (neoliberal) capitalism" by Mark Fisher (and F. Jameson?).

Jeff W , , May 1, 2021 at 5:03 pm

"The Hamptons are not a defensible position"

From Mark Blyth's 2016 interview with AthensLive here .

Return of the Bride of Joe Biden , , May 1, 2021 at 12:12 pm

Does anybody here have knowledge of how much hedonic adjustments influence our official measures of inflation?

chuck roast , , May 1, 2021 at 12:30 pm

Very good, Mark. This leads to the next Q. How do we maintain aggregate demand? The rich guys increasingly Hoover everything up and pay no taxes. So, there is no T. Is the only way to get cash and avoid deflation deficit spending by the G? There is no I worth a damn. (X-M) is a total drain on everything since it's all M in the US and no X. The deficits will have to go out of sight in the future.

You say that there is no velocity of money. Is this because the more money pored into the economy by the G, the more money the rich guys steal? So, there is a general collapse in C. Maybe the work around for the rich guy theft is a $2,000 (sorry, $1,400) check every now and then to the great unwashed. The poors can circulate it a couple of times before the rich guys steal it. Seems like the macro-economists have a lot of "˜splainin' to do. Oh, right, they are busy right now measuring the output gap.

eg , , May 1, 2021 at 2:17 pm

Can someone please define the variables in this comment?

T
G
X
M
C

Also, is there an equation that goes with them?

chuck roast , , May 1, 2021 at 3:29 pm

GNP = Consumption + Investment + Government + (Exports " Imports)

I'd like to see Mark go into a discussion on the velocity of money. I remember the old timey Keynesians lecturing about it, and that's all I remember. I'm guessing that it's related to the marginal propensity to consume.

Ed S. , , May 1, 2021 at 4:35 pm

Chuck,

I may be getting a bit out over my skis, but the St. Louis Fed calculates the velocity of money ( https://fred.stlouisfed.org/series/M2V ). It is defined as

The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.

So as velocity slows, fewer transactions happen. Based on the linked chart, the peak velocity was 2.2 in mid-1997. In Q1 2021, it was 1.12. By my understanding, although the money supply continues to increase, the money isn't flowing through the economy in the way it was over the last 30 years (or even 10 years ago).

It's beyond my level of understanding to say with any certainty as to why the slowdown in velocity has occurred, but I speculate it's directly related to the ever-growing inequality in the US economy and the ongoing rentier-ism that Dr. Hudson discusses. [simplistically, if Jeff Bezos has $1.3 billion more on Monday than on Friday, that money will flow virtually nowhere. If each of Amazon's employees equally shared that $1.3 billion (about $1,000 each), the preponderance of the money would flow into the economy in short order].

I've always speculated that money velocity is one of the key indicators of the stagnant economy since 2008. It certainly has coincided with the dramatic increase in wealth in the top fraction (not the 1% but the 0.001%) of the US population.

flora , , May 1, 2021 at 1:03 pm

Thanks for this post. Blyth is always good at explaining in a way I can understand.

Mikel , , May 1, 2021 at 1:04 pm

What Blythe has laid out is not a tale about inflation or money, but a tale about power.

If money goes to the non-elite, you get inflation. If it goes to the elite, you don't get inflation.
If you are a country with little control of your resources (not lack of resources, but control) and/or loans (think IMF)/debt (think war reparations) that give people with little interest in whether you live or die control over your countries' finances, you can be prone to inflation or even hyperinflation.

Yeah, I figured out a long time ago that none of this is any "natural economic law" because there is no such thing as "nature" in economics. Inflation is all about political decisions and perceptions.

And I saw this on YouTube a couple of days ago"¦and I still can't think of anything around me that hasn't gone up on price.

politicaleconomist , , May 1, 2021 at 2:37 pm

This is a good response to Summers. But I have a quibble and a concern.
My quibble is that he offers no theory of inflation except implicitly aggregate supply exceeding aggregate demand and there is nothing but hand-waving regarding what he is referring to that he feels has a one chance in ten of happening versus Summers one in three. A second part of this quibble is: what does it mean for inflation to "come roaring back." I assume it means more than just a short-term adjustment to a shot of government spending and gifting. I believe if he thought this through he would have to conclude that without changes in the current structure of the global economy there is no way for this to happen. That really is the case he has made. With labor beaten down not only in the US but worldwide inflation will not come roaring back, period. That is unless there is a chance either that a labor renewal is a near-term possibility. I doubt he believes this. Or does he believe there is another way for inflation to roar back? If so, what is that way, what is the theory behind it?

A more fundamental concern is the part where he relies on marginal productivity theory when discussing employment and exploitation. Conceptually that far from Marx's fundamental distinction between labor and labor power.

Wukchumni , , May 1, 2021 at 2:45 pm

Hyperinflation doesn't seem to be possible in this age of digital money no matter how much you conjure up because nobody notices the extreme amount of monies around all of the sudden as the average joe isn't in the know.

Used houses are always appreciating in value, but none dare call it inflationary, more of a desired outcome in income advancement if you own a domicile.

There were no shortages of anything in the aftermath of the GFC, and now for want of a semiconductor, a car sale was lost. Everything got way too complex, and we'll be paying the price for that.

I think the inflation to come won't be caused by a lack of faith in a given country's money, but the products and services it enabled us to purchase.

Mikel , , May 1, 2021 at 3:47 pm

""¦and now for want of a semiconductor, a car sale was lost"¦."
Sometimes car sales are lost because the price of cars has gone up (new and used)"¦just don't call it inflation"¦

I'm going to let some more time pass, but stimulus or not, we went from all economic problems being laid at the feet of Covid to now moving on to "shortages" everywhere"¦

Just enought to make you go"¦hmmmm"¦.unti more time passes.

Ed S. , , May 1, 2021 at 8:34 pm

Used houses always appreciate " or is it that they appreciate due to a combination of inflation in income over time and the dramatic decrease in interest rates over the last 20 years?

A very quick back of the envelope calc (literally " and all number are approximate):

In June 2000, median US income was $40,500; 30 yr mortgage rate was 8.25%. 28% of monthly income = $945. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $125,000.

In June 2005, median US income was $44,000; 30 yr mortgage rate was 5.5%. 28% of monthly income = $1026. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $180,000.

In June 2010, median US income was $49,500; 30 yr mortgage rate was 4.69%. 28% of monthly income = $1155. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $225,000.

In June 2015, median US income was $53,600; 30 yr mortgage rate was 4.00%. 28% of monthly income = $1250. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $260,000.

Finally, In June 2020, median US income was $63,000; 30 yr mortgage rate was 3.25%. 28% of monthly income = $1470. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $340,000.

And for fun, if you went to 40% of income in 2020 (payment only), a $2100 monthly payment will cover nearly a $500,000 mortgage in 2020.

For the vast majority of home buyers, the price isn't the main consideration " it's how much will it cost per month. So a small increase in median income (roughly 2% per year) combined with dramatically lower interest rates can drive a HUGE increase in a mortgage " and ultimately the price that can be paid for a house.

Michael Ismoe , , May 1, 2021 at 3:24 pm

I find it amazing that when you give poor people money, it creates inflation. If you give rich people money, it creates jobs (LOL. Sure it does.).

As long as billionaires pay as little as possible, the world is fine.

Tom Bradford , , May 1, 2021 at 3:49 pm

Can't say I really understand this sort of thing but saying rocketing house-prices is "˜a singularity' rather than "˜house-price inflation' has to me echoes of the Bourbon's "Bread too expensive? Let them eat cake." And Versailles wasn't a defensive position either.

In my version of economics-for-the-under-tens you get inflation in two situations. First is where enough folk have enough cash in their pockets for producers/manufacturers/retailers to hike their prices without hitting their sales too much and secondly where there's a shortage of stuff people want and/or need which leads to a bidding war. However I'd agree with Blyth that neither condition exists now or seems likely to arise for a while, making a "˜spike' in inflation unlikely.

ArvidMartensen , , May 1, 2021 at 4:17 pm

I am a non-economist, and so my thoughts below may be wrong. However, here goes.
I would say we have had inflation. Roaring inflation. For the past 20 years of so.

Inflation in wages and ordinary costs of living? No, wages have been stagnant. Health care has led the charge in cost of living increases, but most other living expense increases have been low.

Inflation in asset prices? We have had massive inflation in the costs of residential housing where I live.
20 years ago I could buy a 5 br, 3 bath home on a decent block in a good area close to everything for $270,000 dollars. Sure it needed some renovation, but still"¦. Now to buy that home it would cost me around $1,250,000. So that home has gone up in value by 500%. Man, that is inflation.

As I understand it, asset inflation is not counted by governments in the GDP or CPI. It appears that those who have most of the assets don't want this to be counted, by the very fact that they control the politicians who control what is counted, and asset inflation isn't counted in the economic data that the politicians rely upon to prove how prudent they are.

So if you want a day to day example of where all this free money is going, look at housing. And also have a quick look at the insane increases in the worth of billionaires. They love all this government spending which magically? seems to end up, via asset purchase and asset price inflation, in their pockets.

cnchal , , May 1, 2021 at 7:02 pm

That home has gone up in price by 500%

Price is what one pays, value is what one gets. That house is roughly the same, so the value has not changed, but the price has gone up by a factor of 5

Same with stawks. One share of Amazon stawk is $3,467.42 as of yesterday.

What is its value? If Bezos can work his tools ever harder, monitor them down to the nanosecond and wring ever moar productivity out of them before throwing them in the tool dumpster behind every Amazon warehouse, the value proposition is that someone else will believe the stawk price should be even higher, at which point one can sell it at greater price for a profit.

Susan the other , , May 1, 2021 at 5:07 pm

What is inflation? Good question. I'd say inflation is fear of monetary devaluation. Not devaluation, just the fear of it. We'll never overcome this unease if we always deal in numbers. Dollars, digits, whatever. We need to deal in commodities " let's call just about everything we live with and use a "commodity". Including unpaid family help/care; and the more obvious things like transportation. If we simply took a summary of all the necessary things we need to live decent lives " but not translated into dollars because dollars have no sense " and then provided these necessities via some government agency so that they were not "inflated" in the process and thereby provided a stable society, then government could MMT this very easily. Our current approach is so audaciously stupid it will never make sense let alone balance any balance sheets. That's a feature, not a bug because it's the best way to steal a profit. The best way to stop demand inflation or some fake scarcity or whatever is to provide the necessary availability. That's where uncle Joe is gonna run headlong into a brick wall. He has spent his entire life doing the exact opposite.

William Neil , , May 1, 2021 at 6:59 pm

The figure for the upward transfer of wealth from the Rand Study was $50 trillion between 1975-2018. It was adjusted up by the authors from $47 trillion to bring it up to 2020 trends.

Here are the authors explaining what they found and their methodology: https://time.com/5888024/50-trillion-income-inequality-america/

Now the interesting thing to me is this " look at the date of the publication in Time magazine: Sept. 14, 2020, so right in the heart of campaign fever, and it never came up in the debates, in the press"¦I didn't hear about it until Blyth made one of his appearances on Jay's show with Rana Foroohar. Long after the election.

VietnamVet , , May 1, 2021 at 9:47 pm

As long as 80% of Americans are head over heels in debt and 52% of 18-to-29-year-olds are currently living with their parents, there never will be the wage inflation of the 1970s. A majority of the people arrested for the Capitol riot had a history of financial trouble. The elite blue zones in Washington State and Oregon that prospered from globalism are seeing a spike in coronavirus cases. North American neoliberal governments have failed dismally. It is intentional in order to exploit more wealth for the rich from the natural resources and workers. If the mRNA vaccines do not control coronavirus variants, and a workable national public health system is not implemented; succession and chaos will bring on Zimbabwe type inflation.

There is a reason why Portland Oregon has been a center of unrest for the past year. The Elite just do not want to see it. How can Janet Yellen deal with this? She can't. She is an Insider. She was paid 7.2 million dollars in speaker and seminar fees in the last two years not to.

[May 05, 2021] Do Moving Average Strategies Really Work by Paul Allen

Notable quotes:
"... Despite the fact that most moving-average-crossover signals provide some form of maximum loss reduction in comparison to a buy-and-hold strategy, their ability to outperform the underlying market is limited. Furthermore, the recent underperformance of such crossover signals since 2009 is a typical phenomenon rather than a temporarily one. This is because a negative crossover signal does not necessarily predict significant and longer-lasting downturns, or bear markets. Nevertheless, if investors are more focused on maximum draw-down reduction, such crossover signals are worth looking at, though they should definitely not be the sole source of information. ..."
Aug 19, 2014 | www.advisorperspectives.com

[May 05, 2021] The Fed Finally Gets Some Tough Questions... And Fails To Answer Them by Robert Aro

May 05, 2021 | www.zerohedge.com

Authored by Robert Aro via The Mises Institute,

Last Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not always get simple answers. When speaking to the media after the latest Federal Open Market Committee ( FOMC ) meeting, some difficult questions were asked. So much so, Powell had to repeat one question to himself, asking:

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the number of treasuries it buys, and when the economy would function "without having that support from the monetary side."

Powell found ways to avoid answering the idea of a nation which stands without central bank supports, but he did refer to various "tests" the Fed will do in order to make decisions like shrinking the balance sheet, explaining:

we've articulated our test for that, as you know, and that is just we'll continue asset purchases at this pace until we see substantial further progress.

He went on to say that prior to making any decisions, such as buying fewer treasuries, they will give the public a lot of notice beforehand.

There was also a question related to the Fed's influence in the housing market:

the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per month in mortgage related assets. Why is that, and are those purchases playing a role at all in pushing up prices?

Despite amassing nearly $2.2 trillion of mortgage-backed securities (MBS), Powell defended the central bank on the grounds that:

I mean, we started buying MBS because the mortgage-backed security market was really experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path is from that. It's not meant to provide direct assistance to the housing market.

To be clear, the "severe dysfunction" occurred over a decade ago, when the Fed entered the MBS market. As for the public knowing the exit path or not providing assistance to the housing market, both ideas are highly debatable, to say the least.

But even more puzzling is when Powell says that during the current COVID crisis:

We bought MBS, too. Again, not intention to send help to the housing market, which was really not a problem this time at all.

Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the Chair, there were no problems in the market. He concludes that purchases will go to zero over time, but the "time is not yet."

The final question asked was in regards to market intervention:

if you get out of the markets, there aren't enough buyers for all of the Treasury debt? And so, rates would have to go way up. Bottom line question is what do we get for $120 billion a month that we couldn't get for less?

Powell never explained what exactly "we get for $120 billion" a month, but assured us the Fed was looking to reach its goals, and this was part of its plan. However, he did comment on purchases, saying:

But if we bought less, you know, no. I mean, I think the effect is proportional to the amount we buy And we articulated the, you know, the test for withdrawing that accommodation. And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go ahead as, you know, we've done this before.

Between various tests to determine policy, vague responses, and a general avoidance of answering questions directly, not much was offered other than providing perpetual liquidity injections under accommodative monetary conditions. It was refreshing to see the mainstream media ask more questions about the plan ahead; we can only hope the mainstream economic community will do the same.

[May 05, 2021] Rabo -- Who's Really In The Driver's Seat

May 05, 2021 | www.zerohedge.com

Janet Yellen caused market ructions when she noted in public that: "It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economy."

Firstly, because rates aren't the Treasury Secretary's job to comment on - EVER. Yes, there is the same need for endless hockey-stick-projection optimism on growth, the same silken spiel, and the same one-size-fits-all Panglossian policy prescriptions (of various vintages: Slash taxes! Raise taxes!) in both roles: but there is a separation of powers between the two.

Secondly, because that very same Panglossian policy from the Fed has got global markets to the point where the mere idea of small increase in US rates is going to bring a whole lot of precariously-levered objects tumbling down. It's a good job that interest rates never, ever, ever have to go up again then, isn't?

Naturally, Yellen immediately had to walk back these comments when qualifying that rate increases " are not something that I am predicting or recommending ." So just what was the correct verb then? Speculating? Hypothesizing? Imagining? Dreaming? Deluding?

For now, markets can happily seize on all of the usual Fed-driven speculative hypotheticals to imagine, dream, and delude themselves to greater wealth as usual . US couples everywhere can keep fantasizing that they too can one day get a billionaire divorce. Yet it's not as if Yellen doesn't have just *a little* bit of experience in this rate field thing. It's not as if she might not end up thinking a certain way on autopilot in the new job, and saying the quiet part out loud – is it?

Of course, the question of who is driving applies to the Fed itself . Yellen added: "If anyone appreciates the independence of the Federal Reserve I think that person is me." Yet unlike the BOE, for example, the Fed allows US banks a major role (if not "ownership") in its 12 regional Reserve Banks, alongside balancing presidential appointees. So it a fusion body, and even if it is independent of the Treasury, that is hardly true of all influence: the reason for having 12 regional Reserve Banks was originally to water down that of Wall Street. Yet how is that working out, and where are the union/labour representatives, for example? That's a structural issue the US press doesn't talk about much even as much of it obsesses about power structures everywhere else; but, sadly, anti-Semitic conspiracy theorists more than compensate, because that's their defined role.

Meanwhile, we all know the Powell Fed is still firmly in pedal-to-the-metal mode . Yellen just agreed to stay in the back seat in that regard, even if her proposed fiscal policy is the equivalent of winding down the window and sticking her head out of it, like a dog having a good time, which should see any caring central bank driver reduce speed accordingly.

The question remains, however, as to exactly what is driving the massive surge in commodity prices we are still seeing all round us? Headlines yesterday were that corn hit USD7 a bushel, the highest since 2013. Today Bloomberg reports "Raw materials surging across tighter markets and recovery; Consumer prices rising as manufacturers pass on higher costs." Once upon a time, central banks used to do something when headlines like this were seen. So why no need to brake? Because this is all transitory, as Powell and Yellen, at the second attempt, just underlined.

But how so? Is it Covid-19 related? We already hear that semiconductor supply will be pinched for years. Or perhaps it is all just happening "because markets", as seems to be the general consensus? Or, just maybe, the Fed, and other major central banks, are also playing a role via their pedal-to-the-metal liquidity? Another key driver is Wall Street realising commodities are an inflation hedge too – even as that creates the inflation they are trying to avoid. (Don't worry: they still get to eat. Others might not though.) Another is China's voracious commodity appetite. (Don't worry: they still get to eat. Others might not though.) One thing we can be sure of. Prices seem to be moving significantly higher, and not just due to the expected base effects.

Ironically, the only way in which Powell --and Yellen-- can be sanguine about this is in the knowledge that even if prices go up, US wages almost certainly won't. Yes, at the moment we are anecdotally seeing US labour shortages as millions of previously low-paid workers prefer to live off of their last stimulus cheque rather than report for the daily drudgery. But have you heard any anecdotes of wages going up as a result – or rather of businesses closing down, or automating? As has been repeated here many times, are the structures *really* being put in place to support sustained higher wages? If not, it's just higher prices - and so lower real wages.

I am not sure that the 12 regional Reserve Banks and those in DC are aware of what that will feel like to Joe Public. More so if their logical response is to keep monetary stimulus high, and so pushing real wages even lower. If mishandled, this could easily drive us off a cliff. As such, who is really in the driver's seat?


3 play_arrow

Cloud9.5 3 hours ago (Edited)

Who is running the show? The front is the CIA. Who is behind it? A collection of oligarchs.

Brill 3 hours ago

No mention of Rothschild?

No mention of Rockefeller?

Joe Bribem 2 hours ago

The biggest cockroaches are never mentioned.

Lordflin 3 hours ago remove link

Geopolitics are in the driver's seat...

The economy is along for the ride...

radical-extremist 2 hours ago

If Antifa had any brains (which they don't), they'd be marching and rioting against the CIA and the Fed - not the Proud Boys, ICE and local police stations. They're fighting to tear down the SYSTEM, and they don't even know what or where the SYSTEM really is.

PAsucks 2 hours ago

"I am not sure that the 12 regional Reserve Banks and those in DC are aware of what that will feel like to Joe Public." It's called a lack of empathy, an important trait of sociopaths. Federal Reserve is an arm of .gov - a criminal organization.

Apollo Capricornus Maximus 2 hours ago

The unelected Council of Foreign Relations kleptocratic oligarchy is in charge of the kinetic and psychological manipulation of Western finances and zeitgeist. The Federal Reserve, CIA, National Security state, MSM, Congress all report and obey this criminal cabal of whom every member should be hung by the American people.

[May 05, 2021] The Fed Finally Gets Some Tough Questions... And Fails To Answer Them

May 05, 2021 | www.zerohedge.com

Authored by Robert Aro via The Mises Institute,

Last Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not always get simple answers. When speaking to the media after the latest Federal Open Market Committee ( FOMC ) meeting, some difficult questions were asked. So much so, Powell had to repeat one question to himself, asking:

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the number of treasuries it buys, and when the economy would function "without having that support from the monetary side."

Powell found ways to avoid answering the idea of a nation which stands without central bank supports, but he did refer to various "tests" the Fed will do in order to make decisions like shrinking the balance sheet, explaining:

we've articulated our test for that, as you know, and that is just we'll continue asset purchases at this pace until we see substantial further progress.

He went on to say that prior to making any decisions, such as buying fewer treasuries, they will give the public a lot of notice beforehand.

There was also a question related to the Fed's influence in the housing market:

the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per month in mortgage related assets. Why is that, and are those purchases playing a role at all in pushing up prices?

Despite amassing nearly $2.2 trillion of mortgage-backed securities (MBS), Powell defended the central bank on the grounds that:

I mean, we started buying MBS because the mortgage-backed security market was really experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path is from that. It's not meant to provide direct assistance to the housing market.

To be clear, the "severe dysfunction" occurred over a decade ago, when the Fed entered the MBS market. As for the public knowing the exit path or not providing assistance to the housing market, both ideas are highly debatable, to say the least.

But even more puzzling is when Powell says that during the current COVID crisis:

We bought MBS, too. Again, not intention to send help to the housing market, which was really not a problem this time at all.

Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the Chair, there were no problems in the market. He concludes that purchases will go to zero over time, but the "time is not yet."

The final question asked was in regards to market intervention:

if you get out of the markets, there aren't enough buyers for all of the Treasury debt? And so, rates would have to go way up. Bottom line question is what do we get for $120 billion a month that we couldn't get for less?

Powell never explained what exactly "we get for $120 billion" a month, but assured us the Fed was looking to reach its goals, and this was part of its plan. However, he did comment on purchases, saying:

But if we bought less, you know, no. I mean, I think the effect is proportional to the amount we buy And we articulated the, you know, the test for withdrawing that accommodation. And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go ahead as, you know, we've done this before.

Between various tests to determine policy, vague responses, and a general avoidance of answering questions directly, not much was offered other than providing perpetual liquidity injections under accommodative monetary conditions. It was refreshing to see the mainstream media ask more questions about the plan ahead; we can only hope the mainstream economic community will do the same.


ReadyForHillary 1 hour ago

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

HA HA HA HA!

HA HA HA HA HA HA HA HA!

CovidBannedTard 1 hour ago

C'mon man!!!

Lordflin 1 hour ago

The entire point to the Fed is to fail to answer tough questions...

no cents at all 1 hour ago

Or doublespeak. The fed probably has a talented linguistics department at their employ

Paul Bunyan 1 hour ago (Edited)

What they have always said is moronic. Yet the world is full of morons, so the people can't see through the lies.

Miniminer1 1 hour ago

Not a confidence builder

SDShack 1 hour ago (Edited)

Good god, how many 'you know' responses did Powell have? Sounds like some brain dead zoomer...'it's like, you know, complicated, and like, you know, we are working on it.' A complete 'Emperor has no clothes' moment. And these are supposed to be the smartest people on the planet. Clueless or just evil liars. Or both.

mtl4 53 minutes ago

I'll take both for $1000 Alex

Ajax_USB_Port_Repair_Service_ 1 hour ago

The Fed intervenes everyday, all day, because they have to. There is no market without the Fed.

CovidBannedTard 1 hour ago

You know!!!....The Thing!!!

C'mon Man!!

Paul Bunyan 1 hour ago (Edited)

The game is almost over. The dollar has 1-2 years left before a complete monetary reset. Make sure you get out soon. You won't want to make last minute decisions.

JOHNLGALT. 1 hour ago

My last minute decision is:

1). Do I buy Ounces?

2). Do I buy Kilograms? 🦍🦍🚀🚀🚀😂🤣😎.

Emmet Fitz-Hume 1 hour ago

Powell, Greenspan, et al are just word-salad machines

BorisTheBlade 1 hour ago

True, though it's just money .

LeeBoy 44 minutes ago

He was not asked this.

Why should seniors and retirees be sacrificed with ZIRP in order to advance the interests of the US Treasury and Corporate borrowers?

I would call it elder abuse. He should be required to address this question. Let's have the Press do their job

Ben A Drill 41 minutes ago

Why should anyone gamble with their hard earned money to keep up with inflation?

AhabQuixote 50 minutes ago

This is a ponzi scheme in plain sight. It is as if Bernie Madoff told his clients that his firm is a scam but a scam is the only way the system can function. It will all be fixed at some point in the future when pigs fly.

nuerocaster 29 minutes ago

You may think that the Mises Institute and Rabo Bank are idiots. But think how hard it is to present all this as managerial error and make stupendous wealth transference and money laundering sound like oopsie.

archipusz 1 hour ago

Why even ask.

They are going to print. Congress wants them to print. All the elite benefit from the printing.

It is not going to stop.

JOHNLGALT. 1 hour ago

WE will stop them!!

We are a community that loves Silver, Period. 72.4k. Silverbacks. 2.2k. Online now Created 29 Jan 2021.

Go SILVERBACKS 🦍🦍🦍🦍.

This is a movement to bring the 🐍🐍🐍BANK$TER$🐍🐍🐍DOWN.

https://www.reddit.com/r/Wallstreetsilver/

Backhandslicer 23 minutes ago

Biden the moron dictator doesn't like to answer questions either

ChromeRobot 47 minutes ago

Basically, if you haven't figured it after 108 years, these clowns don't have the slightest clue what they're doing or worse....do.

Revolution_starts_now 1 hour ago

Do you prefer GITMO or SuperMax?

Ajax_USB_Port_Repair_Service_ 17 minutes ago

I'll take GITMO. Nonsmoking, non-vaccinated, section please.

CrabbyR 1 hour ago (Edited)

Politicians and banker's first language is bafflegab

Misesmissesme 1 hour ago (Edited)

Answers? We ain't got no answers! We don't need no answers! I don't have to give you any steenking answers!

Backhandslicer 23 minutes ago

Life support? They have created a monster and the monster is ravaging the country side

Backhandslicer 25 minutes ago

Powell is thinking I'm a currency printing machine and all the chicks dig me I shouldn't have to answer any questions

Backhandslicer 35 minutes ago

Powell sounds like the absent minded janitor

Backhandslicer 36 minutes ago (Edited)

Eliminate the central bank and use only metals as money with paper currency withdrawable for any of the metals at any bank or credit union

CosmoJoe 35 minutes ago

Seriously? I haven't carried cash in years. I don't want to. I don't want to carry a bunch of gold and silver around in a little money sack. It isn't the f&cking middle ages.

zorrosgato 31 minutes ago

A paper currency backed by gold would work fine enough.

MASTER OF UNIVERSE 18 minutes ago

Would cement bricks painted gold work well enough if we never allowed anybody to test gold samples to verify authenticity?

That's what Fort Knox is, right?

MOU

Backhandslicer 26 minutes ago

Does a 100 dollar bill in your pocket give you a rash?

CosmoJoe 19 minutes ago

I wouldn't know, I don't carry $100 in my pocket.

permanent victim 55 minutes ago

The fed will be all powerful till the world abandons the dollar. Until then they will print shamelessly

Ben A Drill 48 minutes ago

Understand the free masons and you will see how much evil is in the world.

Realism 1 hour ago

The list of paid liars keeps growing

VWAndy 1 hour ago

Why shouldnt they be hung from lamp posts is a valid question too.

Rainman 1 hour ago

By now we all know the bankster-owned Fed and the US Treasury are one and the same entity.

Old Hickory twitches in his grave...

dlfield 1 hour ago

A: Why never, because then I would be out of a job.

sarret PREMIUM 1 hour ago

Here's a difficult question Powell. Do you identify more with a disabled penguin or a gay orangutan? Get it wrong and you will be cancelled ya numpty.

JohnnyCrypto 19 seconds ago

Yeah, MadeofTheta was right!

It's over!

ClamJammer 2 minutes ago

Learned everything he knew about not answering questions from Pompeo........we lie, we steal, we cheat.........

permanent victim 10 minutes ago

As long as the markets are up I am doing what I am getting paid to do

cowdiddly 14 minutes ago

Ummm....errrr... Questions? We don't need no stinking questions.

IDESofMARCH 16 minutes ago remove link

FED policy picks and chooses which busines fails and which makes all the money.

FED kills Ma and Pa Bus DEAD, Wall Mart, HD, Chain Restaurants and Dollar Stores all having a good time raising prices.

[May 05, 2021] Flip flop: Yellen Says She Isn't Predicting Higher Interest Rates

Treasury as a PR operation ;-) Trying to stem inflating by talking it down.
May 05, 2021 | www.wsj.com
Treasury Secretary walks backs comments she made earlier suggesting that rates might rise

Treasury Secretary Janet Yellen said Tuesday she is neither predicting nor recommending that the Federal Reserve raise interest rates as a result of President Biden's spending plans, walking back her comments earlier in the day that rates might need to rise to keep the economy from overheating.

"I don't think there's going to be an inflationary problem, but if there is, the Fed can be counted on to address it," Ms. Yellen, a former Fed chairwoman, said Tuesday at The Wall Street Journal's CEO Council Summit.

Ms. Yellen suggested earlier Tuesday that the central bank might have to raise rates to keep the economy from overheating, if the Biden administration's roughly $4 trillion spending plans are enacted.

[May 05, 2021] Banks in Archegos Aftermath Tighten Credit Lines, Scrutinize Swaps

May 05, 2021 | www.wsj.com

Banks including Goldman Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated positions, including those that attempt to increase their returns by borrowing a significant amount of money, fund managers said. Some are running stress tests to see where they could have shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk departments are reviewing clients with portfolios that are far more diversified than Archegos's.

Several banks are starting to rework agreements with a number of clients to change the terms of equities total-return swaps, said prime-brokerage executives and advisers to funds. Total-return swaps are derivative contracts that helped Archegos anonymously amass huge positions across multiple lenders, without the knowledge of those lenders and with little money upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.

Swaps give their holders exposure to the profits and losses of the securities underlying the agreements but not ownership. In the case of Archegos, for example, the family office had swap agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held the shares.

As things stand now, some margin requirements are fixed. Going forward, some clients will be regularly required to post additional collateral based on the changing market value of their portfolios or factors such as increases in volatility or concentration. Many swaps agreements already have such a margin requirement, though some larger clients with more negotiating power don't.

Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on negotiating their trading relationships with dealers, said she has seen several banks recently move to look at a client's cash and swaps positions together when determining the collateral required.

The change comes with trade-offs, she said.

me title=

For dealers, "it gives them more control from a risk-management perspective -- but clients lose a lot of control and transparency about the margin they have to post," Ms. Schubert said. She added that fund managers who lived through the failure of Lehman Brothers, which tied up some funds' assets for years, remain wary about posting more than a minimal amount of margin.

Several banks, including Morgan Stanley, have spoken with clients about fully or partly terminating swaps, said people briefed on the conversations. Such moves could help lower the lenders' exposure to swaps and in instances reduce the leverage a fund is using.

J

Banks in Archegos Aftermath Tighten Credit Lines, Scrutinize Swaps

Banks including Goldman Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated positions, including those that attempt to increase their returns by borrowing a significant amount of money, fund managers said. Some are running stress tests to see where they could have shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk departments are reviewing clients with portfolios that are far more diversified than Archegos's.

Several banks are starting to rework agreements with a number of clients to change the terms of equities total-return swaps, said prime-brokerage executives and advisers to funds. Total-return swaps are derivative contracts that helped Archegos anonymously amass huge positions across multiple lenders, without the knowledge of those lenders and with little money upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.

Swaps give their holders exposure to the profits and losses of the securities underlying the agreements but not ownership. In the case of Archegos, for example, the family office had swap agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held the shares.

As things stand now, some margin requirements are fixed. Going forward, some clients will be regularly required to post additional collateral based on the changing market value of their portfolios or factors such as increases in volatility or concentration. Many swaps agreements already have such a margin requirement, though some larger clients with more negotiating power don't.

Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on negotiating their trading relationships with dealers, said she has seen several banks recently move to look at a client's cash and swaps positions together when determining the collateral required.

The change comes with trade-offs, she said.

me title=

For dealers, "it gives them more control from a risk-management perspective -- but clients lose a lot of control and transparency about the margin they have to post," Ms. Schubert said. She added that fund managers who lived through the failure of Lehman Brothers, which tied up some funds' assets for years, remain wary about posting more than a minimal amount of margin.

Several banks, including Morgan Stanley, have spoken with clients about fully or partly terminating swaps, said people briefed on the conversations. Such moves could help lower the lenders' exposure to swaps and in instances reduce the leverage a fund is using.

J John Reilly
Are we suppose to believe that Credit Suisse, Morgan Stanley, Goldman Sachs, et al, were really blindly investing billions with a family office? Is it really true that the head of the office had had his brokerage license taken away by the SEC and only recently restored by the Trump administration?

Goldman Sachs apparently knew enough to pull their money out in time.
The real issue is whether investment bankers were taking advantage of the less stringent regulation of a family office in order to manipulate the markets. Manipulation like the creation of short squeezes on target stocks. Is that even legal?

Banks in Archegos Aftermath Tighten Credit Lines, Scrutinize Swaps

Banks including Goldman Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated positions, including those that attempt to increase their returns by borrowing a significant amount of money, fund managers said. Some are running stress tests to see where they could have shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk departments are reviewing clients with portfolios that are far more diversified than Archegos's.

Several banks are starting to rework agreements with a number of clients to change the terms of equities total-return swaps, said prime-brokerage executives and advisers to funds. Total-return swaps are derivative contracts that helped Archegos anonymously amass huge positions across multiple lenders, without the knowledge of those lenders and with little money upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.

Swaps give their holders exposure to the profits and losses of the securities underlying the agreements but not ownership. In the case of Archegos, for example, the family office had swap agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held the shares.

As things stand now, some margin requirements are fixed. Going forward, some clients will be regularly required to post additional collateral based on the changing market value of their portfolios or factors such as increases in volatility or concentration. Many swaps agreements already have such a margin requirement, though some larger clients with more negotiating power don't.

Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on negotiating their trading relationships with dealers, said she has seen several banks recently move to look at a client's cash and swaps positions together when determining the collateral required.

The change comes with trade-offs, she said.

me title=

For dealers, "it gives them more control from a risk-management perspective -- but clients lose a lot of control and transparency about the margin they have to post," Ms. Schubert said. She added that fund managers who lived through the failure of Lehman Brothers, which tied up some funds' assets for years, remain wary about posting more than a minimal amount of margin.

Several banks, including Morgan Stanley, have spoken with clients about fully or partly terminating swaps, said people briefed on the conversations. Such moves could help lower the lenders' exposure to swaps and in instances reduce the leverage a fund is using.

J John Reilly
Are we suppose to believe that Credit Suisse, Morgan Stanley, Goldman Sachs, et al, were really blindly investing billions with a family office? Is it really true that the head of the office had had his brokerage license taken away by the SEC and only recently restored by the Trump administration?

Goldman Sachs apparently knew enough to pull their money out in time.
The real issue is whether investment bankers were taking advantage of the less stringent regulation of a family office in order to manipulate the markets. Manipulation like the creation of short squeezes on target stocks. Is that even legal?

[May 04, 2021] Why the stock market might give back its April gains

It's almost impossible to predict the direction of the ten year note in the short or long term.
May 04, 2021 | finance.yahoo.com

big institutions are currently selling into strength.

2) May and June (especially the second half of June) tend to be challenging months for the market. After the first week of May, approximately 80% of S&P 500 companies will have reported their earnings. The news cycle will then shift away from fundamentals to politics, interest rates, and any geopolitical concerns. Speaking of interest rates, as the economy slowly gets back to normal, it wouldn't surprise me to see the 10-year yield return to its levels from January 2020 (around 1.8%-2.0%). If this happens, it will lead to further compression in the multiples of growth stocks.

3) The IRS deadline for filing tax returns was extended this year to May 17. We will likely see tax selling prior to this because 2020 was a strong year for the markets, and many people will have capital gains taxes to pay by this date. On a related note, the new administration seems determined to raise taxes, specifically capital gains taxes. I don't believe they will get any of these new proposals approved, but the continuous headlines could keep some pressure on the market over the near-term.

4) The S&P 500 ( ^GSPC ) historically averages a 10% return per year. So far this year, it is up over 11%. It wouldn't be unreasonable to see a normal correction or some technical digestion before heading higher later in the year. Also, since 1980, the average intra-year correction is -14.3%.

5) A few sentiment measures are showing high levels of bullishness. For example, the latest NAAIM Exposure Index , which measures exposure by active investment managers, is at its highest level in over two months. Any minor pullback would shake out some of this excess bullishness, as investors are still quick to rush out the door when the market starts to drop.


Art 14 hours ago The major fundamental issue now is the soon-to-be-obvious inflation triggered by the six trillion dollar man and the always wrong federal reserve policies. Ultimately, fundamentals decide stock market valuations. Reply 13 2 Allen 1 day ago If Apple's earnings couldn't lift the market then nothing will. Look the market is near or at all time highs and valuations are stretched to say the least. The easy money has already been made the current risk reward is to the downside. The market is way overdue for at least a 10-20% correction which would be healthy. "As they say... stairs up elevator down." Reply 7 1 EmEs 1334 14 hours ago Several things wrong with the article. First, some Biden taxes will pass, because budget reconciliation process works for taxing and spending. Not clear whether they will be retroactive or when they will take effect, but I'd say next year. People with gains might be induced to sell this year to take advantage of disappearing low cap gains rates - and selling puts downward pressure on the market. Very little about that, here. Very little here about fundamentals, like stretched P/E or CAPE ratios. Very little here about the tremendous amount of money in the system from the Fed and from the fiscal stimulus bills that are pushing the market higher, both because of more money chasing assets and because of expectations that the economy will launch into hyper-drive because of the stimulus. Instead, this guy just thinks that prices return to a mean of 10% per year - many years it is more and many it is less, so that is no measure at all. Infantile analysis. But he could be right about the run-up running out of steam. It certainly would be nice if the froth was skimmed off because I'd like a buying opportunity and buying any stocks at these prices is pretty crazy. I'd by TAIL. Reply 4 DoublinDown 1 day ago Think you nailed it. Quality growth stocks selling off after great ER's points to weakness underneath. This doesn't bode well for the overall market in the near term.

[May 03, 2021] Bullying Epidemic - Facts, Statistics and Prevention

May 03, 2021 | www.educationcorner.com

by Becton Loveless

Bullying is an epidemic. It is rampant, widespread, pervasive and the effects can be catastrophic. It occurs in our communities, in our schools – and sadly – even in our homes. Bullying statistics are staggering, scary and merit serious consideration and immediate action. Consider the following:

Facts and Statistics

2 National Center for Education Statistics and Bureau of Justice Statistics

Types of Bullying

When most people think about bullying they envision some kind of physical intimidation. However, bullying can take on many forms which are just as emotionally and psychologically damaging as physical intimidation and harassment. There are four general forms of bullying. These include:

https://e591c5ed6f38711a3115f71a47fa9434.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Where Does Bullying Occur?

The majority of bullying occurs at school, outside on school grounds during recess or after school, and on the school bus – or anywhere else students interact unsupervised. Bullying may also occur at home between siblings or in the community where kids congregate. Cyberbullying takes place online and via digital communication devices.

me title=

According to one statistically significant study, middle school age students experienced bullying on school grounds in the following locations:*

https://e591c5ed6f38711a3115f71a47fa9434.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

* Bradshaw, C.P. (2007). Bullying and peer victimization at school: Perceptual differences between students and school staff. 36(3), 361-382.

Anti-bullying Laws and Policies

Currently, there aren't any Federal anti-bullying laws. However, state and local lawmakers have taken steps to prevent bullying and protect the physical, emotional and psychological well being of children. To date, 49 states have passed anti-bullying legislation. When bullying moves into the category of harassment, it then becomes a violation of Federal law. Criminal code as it relates to bullying by minors varies from state to state. The map below shows the states that have established anti-bullying laws, anti-bullying policies, and both anti-bullying laws and policies.

[May 03, 2021] Risk aversion can go from zero to 200 faster than overconfident punters believe possible.

May 03, 2021 | www.zerohedge.com

The current market melt-up is taken as nearly risk-free because the Fed has our back , i.e. the Federal Reserve will intervene long before any market decline does any damage.

It's assumed the Fed or its proxies, i.e. the Plunge Protection Team, will be the buyer in any freefall sell-off: no matter how many punters are selling, the PPT will keep buying with its presumably unlimited billions.

If this looks risk-free, ask who else will be "buying the dip" in a freefall? Former Fed Chair Alan Greenspan answered this question in his post-2008 crash essay Never Saw It Coming: Why the Financial Crisis Took Economists By Surprise (Dec. 2013 Foreign Affairs ):

"They (financial firms) failed to recognize that market liquidity is largely a function of the degree of investors' risk aversion, the most dominant animal spirit that drives financial markets. But when fear-induced market retrenchment set in, that liquidity disappeared overnight, as buyers pulled back. In fact, in many markets, at the height of the crisis of 2008, bids virtually disappeared."

For the uninitiated, bids are the price offered to buyers of stocks and ETFs and the ask is the price offered to sellers. When bids virtually disappear , this means buyers have vanished: everyone willing to buy on the way down (known as catching the falling knife ) has already bought and been crushed with losses, and so there's nobody left (and no trading bots, either) to buy.

When buyers vanish, the market goes bidless , meaning when you enter your "sell" order at a specific price (limit order), there's nobody willing to buy your shares at the current price. The shares remains yours all the way down.

If you decide to just get out at any price and place a market order (sell at whatever the bid is offered), your $100 per share stock might sell for $5 a share. This is known as a flash crash , and astute punters have observed that these are becoming more common.

When markets go bidless, the predictable order flow of low-volume days goes out the window. On a typical low volume day (and all days are low volume recently), the spread between bid and ask is modest in heavily traded issues and sellers can be confident their sell order will execute in a few seconds. In a freefall sell-off, sell orders pile up and the bid plummets to levels that were considered "impossible" in low-volume days.

What Greenspan didn't discuss is the trading bots that do most of the trading have been programmed to be risk averse . In a real sell-off, why catch the falling knife by hitting the bid on the way down? That's a guaranteed way to either lose money or ending up a bagholder .

Humans have a default setting for risk aversion: it's called panic. Once the euphoric comnfidence that the Fed will never allow the market to fall by more than a few percentage points is broken, it's not replaced by rational risk assessment; it's replaced by full-blown just-get-me-out panic.

The Plunge Protection Team works just fine on low-volume days, but it fails when a tsunami of selling washes away the bid. Though few seemed to notice, massive selling volume begets more selling as the bots' risk aversion kicks in.

Ironically, the mass migration of retail punters into the market has introduced a heightened potential for panic selling. The wild swings in Gamestock (GME) earlier in the year were a sneak preview of what can happen as panicked newbies enter market sell orders.

Euphoric punters forget that many of the players are leveraged, meaning that they're using borrowed money (margin debt) to buy more stocks. Should the market drop instead of rebounding, their account will fall below minimum requirements and they will have to add cash or sell stocks. When buy the dip fails, those with margin calls add to the selling.

Other limits can manifest in cryptocurrency trading. When most trades are buys, few notice the fine print on exchange sell orders in crypto wallets and exchanges. Prices may be guaranteed for a limited time (for example, 10 minutes), and there may not be an option for limit orders. If the order doesn't execute before the time limit expires, then the order to sell executes at whatever bid is offered.

There's also no guarantee that your sell order will execute in a timely manner. A reader recently sent me a screenshot of an exchange of a top 100 (by market cap) cryptocurrency for Bitcoin that took almost 2 hours to execute. (The reader passed on using the Lightning Network after reading the disclosures.)

Exchanges may limit the number of coins per exchange. In other words, the implicit assumption that punters can unload their entire position at the current bid may prove unfounded in heavy sell volume days.

The point here is bottlenecks can emerge in heavy sell volume days that traders did not anticipate. The possibility that markets, brokerage platforms and exchanges could break and simply cease to function isn't on anyone's radar, despite various bits of evidence that a breakdown isn't as farfetched as punters currently assume.

Ten minutes is more than enough time for supreme, euphoric confidence to crumble into panic , and trading bots can pull their buy orders in 10 milliseconds.

This is why the big players distribute their shares to overly confident retail punters over many weeks. Big players know there is no way they can dump their entire position without crushing the bid, so they sell in bits and pieces all the way up the euphoric melt-up.

The issue isn't just the price you get when you sell--it's being able to get out of your position at all. A strange phenomenon occurs in freefall sell-offs: the exit door (i.e. the liquidity that allows you to liquidate your entire position at the current bid) suddenly shrinks from a barndoor to a mouse-sized hole in the baseboard.

Nobody thinks a euphoric rally could ever go bidless, but as Greenspan belatedly admitted, liquidity is not guaranteed . In a real tsunami of trading-bot selling, the Plunge Protection Team's card table is no match for the sea of selling.

Risk aversion can go from zero to 200 faster than overconfident punters believe possible.

* * *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com .

* * *

My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF) .

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF) .

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook ): Read the first section for free (PDF) .

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

17,424 44 N

[May 03, 2021] The Price of the Stuff That Makes Everything Is Surging

May 03, 2021 | finance.yahoo.com

The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as the world economy roars back to life.

From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. It’s also lit the fuse on the massive reflation trade that’s gripped markets this year and pushed up inflation expectations. With the U.S. economy pumped up on fiscal stimulus, and Europe’s economy starting to reopen as its vaccination rollout gets into gear, there’s little reason to expect a change in direction.

JPMorgan Chase & Co. said this week it sees a continued rally in commodities and that the “reflation and reopening trade will continue.†On top of that, the Federal Reserve and other central banks seem calm about inflation, meaning economies could be left to run hot, which will rev up demand even more.

“The most important drivers supporting commodity prices are the global economic recovery and acceleration in the reopening phase,†said Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects commodities as a whole to rise about 10% in the next year.


[May 03, 2021] Bond Market's Inflation Bulls Get Powell Go-Ahead to Double Down

May 03, 2021 | finance.yahoo.com

The Treasury market's inflation bulls seem to have gotten a green light from Federal Reserve Chair Jerome Powell to double down on wagers that price pressures will only intensify in the months ahead.

The renewed mojo for the reflation trade follows Powell's reaffirmation this week of the central bank's intention to let the world's biggest economy run hot for some time as it recovers from the pandemic. The Fed's unwavering commitment to ultra-loose policy in the face of robust economic data is what caught traders' attention. It took on added significance as it coincided with signs infections are ebbing again in the U.S., and as President Joe Biden unveiled plans for trillions more in fiscal spending.

Investors eying all this aren't ready to give the Fed the benefit of the doubt in its assessment that inflationary pressures will prove temporary. A key bond-market proxy of inflation expectations for the next decade just hit the highest since 2013, and cash has been pouring into the largest exchange-traded fund for Treasury Inflation-Protected Securities. Globally, there's been a net inflow into mutual and exchange-traded inflation-linked debt funds for 23 straight weeks, EPFR Global data show.

The Fed is stressing that inflation's upswing "is transitory, but we likely won't have better clarity on this assertion until this initial economic wave from reopening has subsided," said Jake Remley, a senior portfolio manager at Income Research + Management, which oversees $89.5 billion. "Inflation is a very difficult macro-economic phenomenon to predict in normal times. The uncertainty of a global pandemic and a dramatic economic rebound" has made it even harder.

Ten-year TIPS provide a reasonably priced insurance policy against inflation risk over the coming decade, Remley said. The securities show traders are wagering annual consumer price inflation will average about 2.4% through April 2031. The measure has roared back from the depths of last year, when it dipped below 0.5% at one point in March.


[May 03, 2021] Warren Buffett- We are seeing substantial inflation and are raising prices

May 03, 2021 | finance.yahoo.com

Brian Sozzi · Editor-at-Large Sat, May 1, 2021, 6:05 PM

Billionaire Warren Buffett is joining the long list of executives saying serious levels of inflation are starting to take hold as the U.S. economy roars back from the COVID-19 downturn.

"We are seeing substantial inflation," Buffett said at the Berkshire Hathaway annual shareholder meeting broadcast exclusively by Yahoo Finance . "We are raising prices. People are raising prices to us, and it's being accepted."

Buffett called out much higher steel costs impacting Berkshire's housing and furniture businesses.

"People have money in their pocket, and they pay higher prices... it's almost a buying frenzy," Buffett said, noting that the economy is "red hot."

The Oracle of Omaha isn't alone in battling inflation at the moment from everything to higher steel prices to runaway copper prices.

The number of mentions of "inflation" during first quarter earnings calls this month have tripled year-over-year, the biggest jump dating back to 2004, according to fresh research from Bank of America strategist Savita Subramanian . Raw materials, transportation, and labor were cited as the main drivers of inflation .

Subramanian's research found that the number of inflation mentions has historically led the consumer price index by a quarter, with 52% correlation. In other words, Subramanian thinks investors could see a "robust" rebound in inflation in coming months in the wake of the latest round of C-suite commentary.

"Inflation is arguably the biggest topic during this earnings season, with a broad array of sectors (Consumer/Industrials/Materials, etc.) citing inflation pressures," Subramanian notes.

The world's biggest companies are taking action, just like Buffett at Berkshire.

Proctor & Gamble said recently it would begin to hike prices on baby care , feminine care and adult incontinence products in the United States. Price increases will range from mid- to high-single digit percentages. The hikes will go into effect in mid-September.


Whirlpool CFO Jim Peters recently told Yahoo Finance Live the appliance maker just jacked up prices by 5% to 12% to counteract rising steel costs.

Kleenex maker Kimberly-Clark said it will increase prices in the U.S. and Canada on the majority of its consumer products due to "significant" commodity cost inflation. The percentage increases will range from mid- to high-single digits and go into effect in June.

[May 03, 2021] New kind of leadership

Apr 26, 2021 | finance.yahoo.com

Archegos is a Greek word denoting leadership. The place where the eponymous family office led UBS, and a growing roll call of investment banks, was into a morass.

[May 03, 2021] Deepest Backwardation Since 2007 Shows World Short on Commodities

Notable quotes:
"... That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world's demand is for raw materials and how tight supplies are. ..."
May 03, 2021 | www.bloomberg.com

For an idea of exactly how strong the fundamentals are for commodities such as metals, agriculture and oil today, consider this: These markets are now showing the steepest backwardation in more than 14 years.

That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world's demand is for raw materials and how tight supplies are.

In commodities markets, futures are frequently pricier at longer maturities because they reflect the cost of carrying inventories over time as well as future demand expectations. But urgent demand has flipped about half of major commodity markets tracked by the Bloomberg Commodity Index including oil, natural gas, copper, soybeans into backwardation.

[May 03, 2021] The Housing Market Looks Like a Bubble. It s Time for the Fed to Worry

May 03, 2021 | finance.yahoo.com

When the Federal Open Market Committee begins its two-day meeting on Tuesday, it ought to consider whether its policies aimed to bolster housing may be having negative side effects. With the market for new and existing homes red hot, the rationale for subsidizing the mortgage market has largely passed. Indeed, the Fed’s policies may be hurting home affordability as much as they’re helping.

[May 03, 2021] Inflation is the 800-pound gorilla that will kill this aging bull; insiders are selling shares

Highly recommended!
Notable quotes:
"... Deluard points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points 14 months ago. ..."
"... individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105 billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters. ..."
"... The strategist also points to inflation as a worrying sign. He believes the argument that COVID-19 is distorting inflation is flawed, and that the current level of inflation, such as in commodity prices, represents more than normalization from the pandemic shock ..."
May 03, 2021 | www.marketwatch.com

Our call of the day , from strategist Vincent Deluard at broker StoneX, takes a close look at the big question hovering above these recent market gains. Are we seeing a new roaring economic cycle that started in March 2020, or “the spectacular apotheosis of a decade plus-long expansion and overvalued bull market”?

The strategist uses “the duck test” â€" which follows from the saying, “if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” His conclusion isn’t good news for stocks.

Deluard points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points 14 months ago.

There have been 12 major bear markets in the last century, according to Deluard, and stock prices never doubled in the ensuing rally after five of them. In the seven cases where stock prices in the post-bear market doubled, it took an average of four years.

“There is only one precedent in history for such a rapid doubling, when U.S. stocks doubled between June and September 1932,” Deluard says. “A 40% correction quickly followed, and then another 100% + rally in a confusing sequence of brutal bear markets and dazzling rebounds which lasted until the battle of Stalingrad turned the fate of World War II.”

Another troubling sign is that the recent, spectacular rebound in corporate earnings amid the wider economic recovery from the pandemic hasn’t led to a rise in share buybacks, which are still 30% below pre-pandemic levels, according to Deluard. “As a result, the total shareholder yield (buybacks & dividend divided by market cap) of U.S. large-caps is at its lowest level in a generation,” Deluard says.

Further to that, individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105 billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters.

Chart via StoneX.

The strategist also points to inflation as a worrying sign. He believes the argument that COVID-19 is distorting inflation is flawed, and that the current level of inflation, such as in commodity prices, represents more than normalization from the pandemic shock

The last point Deluard makes is that banks’ loan-to-deposit ratio has collapsed to 50%, which is half of its pre-2007 levels. This is a red flag for “trapped kinetic energy” that will be unleashed by steeper yield curves, stronger demand for loans, and other factors, according to the strategist. Deluard notes that the big four banks would need to issue an additional $2.1 trillion in loans to return to the pre-pandemic loan-to-deposit ratio average.

“Inflation is the 800-pound gorilla that will kill this aging bull,” Deluard says.

[May 03, 2021] US Financial Markets Have Become A Giant Mirage Built On A Foundation Of Fraud

May 03, 2021 | www.zerohedge.com

US Financial Markets Have Become A Giant Mirage Built On A Foundation Of Fraud BY TYLER DURDEN SATURDAY, APR 17, 2021 - 11:00 AM

Authored by Michael Snyder via The Economic Collapse blog,

Would you pay more than 100 million dollars for a single deli in rural New Jersey that had less than $36,000 in sales during the last two years combined? I know that sounds like a completely ridiculous question, but the stock market apparently thinks that deli is worth that much. On Thursday, the Dow Jones Industrial Average closed above 34,000 for the first time in history, and investors all over the country cheered. But this financial bubble is not real. It is a giant mirage that is built on a foundation of fraud.

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Einhorn Sees Broken Markets in N.J. Deli’s $105 Million Valuation

Investors have lost all touch with reality, and in this sort of euphoric environment a small deli in rural New Jersey can literally be valued at more than 100 million dollars …

The Paulsboro, New Jersey-based Your Hometown Deli is the sole location for Hometown International, which has an eye-popping market value despite totaling $35,748 in sales in the last two years combined, according to securities filings.

“Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey … HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing,†Einhorn said in a letter to clients published Thursday.

For young people getting ready to graduate from high school and go to college, don’t waste your time.

Just open up a small deli and go public.

Soon you will be a multi-millionaire.

Alternatively, you could start a fake cryptocurrency as a joke and watch it become worth billions of dollars.

To me, what is happening with “Dogecoin†is completely and utterly insane …

The digital currency Dogecoin surged by more than 85 percent so far this week in thrilling scenes for fans of the bizarre coin. Launched in 2013 and created by Jackson Palmer and Billy Markus as a joke, the cryptocurrency has never seen the highs of rival coins like bitcoin, which is currently worth $63,531.49. But a growing fanbase has helped kickstart the meme coins value, and today has seen the prices skyrocket.

Looking at it objectively, I don’t know why any rational investor would ever put one red cent into Dogecoin.

But in 2021, rational investors are being left in the dust, and those that foolishly rush in are getting filthy rich.

I know that it may be hard to believe, but at this point Dogecoin has a market cap that is greater than 22 billion dollars …

According to CoinDesk, Dogecoin has surged by 49.96 percent in 24 hours to $0.171956, as of 9.02pm on April 15.

In GBP, Dogecoin stands at £0.124731.

The market cap for Dogecoin is currently $22.19 billion in USD and £16.10 billion in GBP.

Someday Dogecoin will be worthless, but for now this “meme currency†is shocking the world.

Speaking of ridiculous valuations, Coinbase just went public, and it is currently valued at more than 85 billion dollars …

Coinbase was briefly valued at as much as $100 billion in its Nasdaq debut Wednesday, a landmark event for the cryptocurrency industry. The stock closed at $328.28 per share, valuing Coinbase at $85.8 billion on a fully diluted basis.

Don’t you wish that you would have been the one to launch Coinbase?

Of course all of these absurd valuations are just temporary.

This bubble will inevitably pop, and those that did not sell at the top of the market will be kicking themselves.

In the financial markets, enormous fortunes are being won and lost all the time, but none of this is real.

What is real are the riots that are happening in our streets on a nightly basis. Last night, rioters “waved a pig’s head†at police officers in Minnesota…

DAUNTE Wright protesters waved a pig’s head at cops as chaos again erupted in Brooklyn Center, with hundreds storming the police station.

Demonstrators came out for the fourth night in a row since Wright, 20, was fatally shot by police officer Kim Potter during a traffic stop on Sunday.

Sadly, instead of trying to calm the violence BLM leaders are actually arguing that rioting and looting are legitimate forms of political expression …

A prominent activist who supports the Black Lives Matter movement has appeared to support violent protests, arguing that rioting and looting are ‘a legitimate, politically-informed response to state violence’.

Bree Newsome, 35, made the passionate remarks in a series of tweets this week, arguing that police are not limited to non-violence, and that a violent response to injustice can be appropriate and justified.

And do you want to know what else is real?

As I discussed a couple days ago , social decay is transforming city streets all over America into drug-infested wastelands …

Homeless men lie on the sidewalk while others wearing blankets and rags loiter on a street strewn with garbage, feces, and drug paraphernalia along the notorious Kensington Avenue drag in Philadelphia.

Video posted online on March 10 shows people living out of suitcases on the sidewalks in the area adjacent to the entrance to the Somerset train station along the Market-Frankford train line while others openly brandish needles.

Cardboard boxes with trash bags stacked on top of them lie feet away from the entrances to various pawn shops, check-cashing stores, delis, and bodegas.

The financial bubble that we are experiencing right now will go away, but the problems on our streets are not going away.

In fact, they are only going to get worse in the months and years ahead.

But if you don’t want to believe this, go ahead and pour your life savings into Hometown International or Dogecoin and see what happens.

You only make money in the markets if you get out in time, and time is quickly running out for those that have put their faith in this financial bubble.

* * *

Michael’s new book entitled “Lost Prophecies Of The Future Of America†is now available in paperback and for the Kindle on Amazon.


Educated_Redneck 12 hours ago (Edited)

This article is late by 13 years (i.e. 2008 financial crisis) or dare I say 49 years (i.e. 1972 leaving the gold standard) or maybe 108 years (i.e. 1913 FED creation). Pick your favorite year.

Lordflin 12 hours ago

Our civilization is now run on fraud...

People expect fraud... depend on it... entire industries are built around it...

What hasn't fraud touched...?

chunga 12 hours ago

A few years ago I was semi-obsessed with looking for it. If you look you will see it is literally everywhere. It is what it is.

Lordflin 12 hours ago

Sadly...

In too many situations over the past thirty years it has come looking for me...

From my experience in education to my experience at the hands of the justice system here in Idaho...

And I have been trying to mind my own business... imagine what I could accomplish if I were actually looking for trouble...

Kreditanstalt 12 hours ago (Edited)

They're not "filthy rich" until they successfully sell their Dogecoins to some other fool...which might one day become difficult.

It's a Ponzi scheme and only the early entries get rich

truthseeker47 12 hours ago

I would not call it a bubble; looks more like a Ponzi Scheme to me.

[May 03, 2021] This Bull Market Has a Troubling Reliance on Speculation by James Mackintosh

Highly recommended!
See also Investors Big and Small Are Driving Stock Gains With Borrowed Money - WSJ The stock market definitely has gambling problem. Just look at Yahoo Finance coverage. It is insane. They cheerleading reckless behaviour and ignore each and every warning sign.
Notable quotes:
"... In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. ..."
"... The parallel in the stock market is the hunt for the greater fool . Sure, GameStop shares bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they 'like the stock.' ..."
"... The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. ..."
Mar 26, 2021 | www.wsj.com

In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less.

The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out.

A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded.

In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example.

The parallel in the stock market is the hunt for the greater fool . Sure, GameStop shares bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they 'like the stock.'

Wild bets became obvious this year, as newcomers armed with stimulus, or 'stimmy,' checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards.

The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back.

... ... ...

Write to James Mackintosh at [email protected]

[May 03, 2021] New home bubble? Home Prices Soar 18% To An All Time High

Apr 27, 2021 | www.zerohedge.com

Builders are struggling to construct new homes given an ongoing lumber shortage. Without more homeowners listing, buyers are scrambling to compete for the limited number of homes on the market, which continues to drive prices up to new heights.

[May 03, 2021] Opinion- Former Vanguard CEO- 5 hurdles facing investors now and how to overcome them

Notable quotes:
"... Jack Brennan is the former chairman and CEO of Vanguard. He is the author of More Straight Talk on Investing: Lessons for a Lifetime ..."
May 03, 2021 | www.marketwatch.com

The threat of higher inflation: For the past three decades, U.S. inflation has been low, leading some investors to discount it as a threat. Yet veteran investors will remember that in the late 1970s inflation reached double-digit levels. For the 1973â€"1982 period, the annual inflation rate averaged 8.7%. At that rate, a car that cost $20,000 would be priced at $21,740 one year later. Five years later, the price of the same car would be $30,351. Of course, it’s not just big-ticket items that are affected by inflation. Virtually everything you buy costs more â€" from a gallon of milk to a pair of running shoes.

It’s safe to assume that inflation will be a factor to one degree or another during your investing lifetime. For this reason, it’s vital to consider inflation when you calculate how your investments will grow with time.

Inflation is also an important consideration in portfolio construction. The real returns (i.e., adjusted for inflation) of cash investments have not kept pace with inflation. Bonds are particularly vulnerable, too, because a considerable portion of their return consists of interest payments, which are worth a little less each year in an inflationary period. (At one point in the 1970s, bonds were facetiously known as “certificates of confiscation.â€) As such, most long-term investors need to hold a significant stake in stocks, which provide more stable dividends and the potential to increase substantially in value

... ... ...

Jack Brennan is the former chairman and CEO of Vanguard. He is the author of More Straight Talk on Investing: Lessons for a Lifetime (Wiley, 2021) .

Pius Twelvetrees 5 hours ago Excellent advice from someone who's seen a lot of ups and downs. Many of today's investors/traders have never experienced a truly bear market. There will be some hard lessons learned over the next few months/years. I predict inflation will come roaring back.

[May 03, 2021] Every one of those people who issued bonds in late March and April [2020] ought to send a thank you letter to the Fed

May 03, 2021 | finance.yahoo.com

...“The economy went off a cliff in March [2020],†Buffett said. “It was resurrected in an extraordinarily effective way by Federal Reserve actions and, later, on the fiscal front, by Congress.â€

Buffett added that the Fed’s actions helped companies brace for impact, as the initial spread of COVID sent companies scrambling to raise funds. Berkshire Hathaway was among the many companies that turned to debt issuance as the stock market tanked in late February and early March last year, issuing a $500 million 10-year bond on March 4, 2020.

The appetite for corporate debt dried up shortly after that, prompting the Fed weeks later to create several liquidity facilities that would take on commercial paper and medium-term investment grade debt.

[Read: A glossary of the Federal Reserve's full arsenal of 'bazookas' ]

By entering the debt market as its own counterparty (through separate vehicles with equity investment from the U.S. Treasury), the central bank hoped to not only backstop markets but give private players the confidence to provide their own liquidity.

“[The Fed] took a market where Berkshire couldn't sell bonds on the day before and turned it into one where Carnival Cruise Lines, a day or two later, had record issuance of corporate debt,†Buffett said. “Companies losing money, companies were closed. It was the most dramatic move that you could imagine.â€

The Fed had been buying individual corporate bonds and corporate bond ETFs until December 31, 2020, accumulating billions in debt as part of its effort to inspire confidence in corporate funding markets.

Those purchases included over $40 million in debt issued by Berkshire Hathaway, covering its insurance, finance, and energy businesses.

Buffett applauded Powell for his “speed and decisiveness†in backstopping the corporate debt market, adding that his persistence on getting more fiscal support was also helpful to the federal government’s relief efforts.

Buffett similarly said at Berkshire Hathaway’s meeting last year that “every one of those people that issued bonds in late March and April [2020] ought to send a thank you letter to the Fed.â€

The Oracle of Omaha added that the Fed and the government have helped the economic rebound, estimating that 85% of the U.S. economy now appears to be “running a super high gear.â€

[May 03, 2021] Note on colledge entrance discrimination

May 03, 2021 | www.unz.com

,

LondonBob , says: April 26, 2021 at 10:49 am GMT • 6.6 days ago
@dearieme

My uncle did admissions at Cambridge and he actively discriminated against Public School boys, despite being one himself. He was actually involved in hiring that black woman to be the Master at Christ's College. Similarly at Citi it was very obvious any remotely competent black was promoted way beyond there competency, although that was largely limited to back and middle office roles.

Still the ONS dataset is A09, Labour Market status by ethnic group, is testament to white folks ingenuity to overcome such discrimination and the free market at work.

[May 03, 2021] The Fed's -Base-Effect- Inflation Argument Is Nonsense - ZeroHedge

May 03, 2021 | www.zerohedge.com

By Joseph Carson , former chief economist of Alliance Bernstein

Federal Reserve Chairman Jerome Powell has played down the current runup in inflation, arguing it is associated with the reopening of the economy. And as the low inflation readings of one year ago drop out, the twelve-month calculation (i.e., the so-called base effect) of reported inflation is likely to move up in the coming months.

Yet, Mr. Powell's "base effect" inflation argument is nonsense. For the "base effect" argument to be correct, the twelve-month reading of reported inflation should be markedly lower when the economy was closed than what occurred before the pandemic. But that's not the case.

Last week, the Bureau of Economic Analysis reported that the twelve-month change ending in March 2021 in the core personal consumption index (the Fed's preferred price index) was 1.83%. That compares to the 1.87% reading for the year ending in February 2020 and 1.7% for the year before that.

The 1.83% reading for twelve months ending March 2021 essentially matches the average inflation rate of the two prior years. And that 12 month period includes the three months (April to June) when the economy was closed, and GDP plunged a record 31% annualized. How could there be a "base effect" on reported inflation when the base year has the same inflation rate as it did before the pandemic?

Mr. Powell's "base effect" inflation argument has not been questioned or challenged by analysts or reporters. Regardless of that, investors need to ignore the Fed's rhetoric and treat upcoming price increases as "new" inflation.

As nonsensical as the explanation for the uptick in inflation, so too is the remedy. Demand has always been the primary force behind broad inflation cycles. Yet, Mr. Powell argues that product price inflation will ease once manufacturers increase output and eliminate "supply bottlenecks," and home inflation will slow once builders build more homes.

It's hard to see how more supply (or growth) will slow inflation anytime soon. Federal Home Loan Mortgage Company (Freddie Mac) estimates that the US needs almost 4 million new homes to meet demand. That could take two to three years. Also, it's hard to see how increasing product output will solve the inflation problem. The supply-side argument solution; fight inflation with more demand and more commodity inflation.

The Fed's mantra has always been "inflation is everywhere and always a monetary phenomenon." But nowhere in Mr. Powell's statements or comments do you find any monetary policy role for increased inflation or any responsibility for containment. Investors forewarned.

[May 03, 2021] Harry Dent -- Biggest Crash Ever Likely by End of June

Trying to guess when the bubble burst is fools game. But the fact support the idea that this is a huge bubble.
Notable quotes:
"... 'Fake earnings, fake GDP, fake interest rates and super-high valuations' make for an increasingly untenable situation, he warns. The expanding market bubble has been building since 2008. But the Federal Reserve keeps averting the next huge crisis by continuously 'printing money,' declares the Harvard Business School MBA. ..."
"... It's the riskiest market since 1929. The difference is that '29 wasn't as global. This is an everything bubble. And with the $1.9 trillion fiscal stimulus bill, we're wiling to stimulate 40-something percent of GDP just to prevent a slowdown in the economy. That's going to go down in history as the most insane thing ever. They'll say, 'What were they smoking?' ..."
"... The next crash will be worse than the last one because it will come from higher levels and [plummet] to lower levels. ..."
"... If you're willing to take more risk, you'll have one bucket in long-term U.S. Treasury bonds and maybe in a few other good governments, like Sweden or Australia. Triple-A corporate could go in there too. Then you'll have another bucket '" of short stocks, not leveraged. ..."
"... Jeremy Grantham [GMO co-founder] said [on Jan. 5] this level of euphoria means you're within months '" not years '" of a major bubble peak. You're at the end. ..."
"... The only reason people are spending is because the government handed businesses and consumers tons of money. But it will get to a point where it's not going to matter how much money is printed '" and then you'll have an avalanche. A huge collapse is coming. ..."
"... Loans will fail by the boatload. Then money disappears. That causes bank and business failures. We have to get all the financial leverage, financial assets and debt out of our economy. Twenty percent of public companies are zombies. They can't even pay their debt service in a growth economy. ..."
Mar 10, 2021 | thinkadvisor.com

That's what 'The Contrarian's Contrarian, as Dent has been dubbed, tells ThinkAdvisor in an interview.

The strategist correctly called Japan's 1989 bubble bust and recession, the dot-com crash and the populist swell that made Donald Trump president.

What could be 'the biggest crash ever,' he argues, will hit by the end of June, if not sooner. It will be 'the initiation of the next big economic downturn,' Dent predicts.

'Fake earnings, fake GDP, fake interest rates and super-high valuations' make for an increasingly untenable situation, he warns. The expanding market bubble has been building since 2008. But the Federal Reserve keeps averting the next huge crisis by continuously 'printing money,' declares the Harvard Business School MBA.

His HSD Publishing, an independent research firm, generates monthly newsletters that he and Rodney Johnson, HSD president, each write.

In the interview, Dent delivers his prescription for investing amid the weakened economy and impending disaster, as he sees it: Zero in on long-term Treasurys.

'What's better than sleeping with 30-year Treasury bonds,' he exults. They'll 'magnify your money.'

He then describes a portfolio allocation for the investor that's 'willing to take more risk.' As for the notion of high inflation, 'no way in hell,' he says.

Dent, whose latest book is ' What to Do When the Bubble Pops: Personal and Business Strategies for the Coming Economic Winter ' (G&D Media-April 2020), also tells ThinkAdvisor his considered opinions on cryptocurrency ('a big trend long term'), the GameStop frenzy ('stupid but admirable') and Sen. Elizabeth Warren's wealth tax bill ('First of all, those assets are going to crash.')

ThinkAdvisor interviewed Dent on March 5. He was speaking by phone from his base in San Juan, Puerto Rico, where he has resided for the last several years. When the conversation pivoted to folks who attack him for his frequently inaccurate predictions, he offered some choice words and an explanation, then described key indicators he employs that show 'very clear cycles.'

Here are highlights of our interview:

THINKADVISOR: How much risk is there in the stock market right now?

HARRY DENT JR.: It's the riskiest market since 1929. The difference is that '29 wasn't as global. This is an everything bubble. And with the $1.9 trillion fiscal stimulus bill, we're wiling to stimulate 40-something percent of GDP just to prevent a slowdown in the economy. That's going to go down in history as the most insane thing ever. They'll say, 'What were they smoking?'

Please elaborate on the extent of the risk you see.

This may be the biggest bubble crash ever: stocks, commodities, real estate. The next crash is the initiation of the next big [economic] downturn, which will be much worse than the one in 2008-2009.

When do you think the next crash will occur?

It will likely come by the end of June, probably sooner. The S&P falls to 2,100 '" lower than the March 2020 low '" and that would be a 47% to 48% drop from recent highs, though it may go to 4,000 first. The next crash will be worse than the last one because it will come from higher levels and [plummet] to lower levels.

Why will the downturn that you see be so harsh?

The only reason the 2008 downturn didn't turn into a depression was that they turned on the monetary spigots so hard and blew us out of it, which kept the bubble going. They kept printing money and put it off. Now we've got a bigger bubble. This downturn is going to be the Great Depression that the deep recession of 2008 was [falling into].

How long do you think the depression will last?

If the economy finally falls apart after this much stimulus, economists will flip from being endlessly bullish to endlessly bearish. They'll say, 'Now we're in a decade-long-plus depression, like the 1930s.' But I'll say, 'Nope, this thing will be hell: It's going to do its work very fast. By 2024, it will be over.' By 2023 or 2024, we're going to be coming out of it into what I call the next Spring Boom.

Right now, you favor investing in Treasury bonds. What's your strategy?

Man, what's better than sleeping with 30-year Treasury bonds '" the safest investment in the reserve currency of a country that's in big trouble '" but not as much as Europe and Japan are in and nowhere near as much as China is in. We're in the best house in a bad neighborhood.

What will happen to the 30-year Treasury bond during the massive crash you foresee?

It's going to fall to half a percent and maybe zero. It will expand your money 30%, 40%, 50%, while stocks are crashing 70%, 80%, 90%. Real estate will go down 30%, 40%, 50%. Commodities are already down 50% and are going down another 30% or 40%. Everything is going to default. Cash will preserve your money. The 30-year Treasury will magnify your money.

So, do you think 50% of an investment portfolio should be in Treasurys?

If you're willing to take more risk, you'll have one bucket in long-term U.S. Treasury bonds and maybe in a few other good governments, like Sweden or Australia. Triple-A corporate could go in there too. Then you'll have another bucket '" of short stocks, not leveraged.

Stocks are very volatile on the way down. You can also be in REITs that are in very solid areas, like multi-family housing in affordable cities and medical facilities because those will hold up the best.

There's a discernable euphoria now among investors. But John Templeton, the renowned investor and fund manager, famously said that 'bull markets die on euphoria.' Do you agree with that?

Yes. And Jeremy Grantham [GMO co-founder] said [on Jan. 5] this level of euphoria means you're within months '" not years '" of a major bubble peak. You're at the end.

Wil cryptocurrency be part of that huge crash?

Yes. I think Bitcoin is the big thing long term and that crypto and blockchain is a big trend. It's like the internet of finance '" money and assets '" instead of information. So it's a big deal '" but in its early stages.

Bitcoin is going to go to 58 [thousand], 60, 80 '" and then end up back at 3,000 to 4,000. I would buy it long term, a couple of years from now. I wouldn't touch it between now and then.

What are your expectations for the economy once the pandemic substantially fades?

Some industries are never going to come back. We're not back to where we were before COVID '" by GDP or any other major indicator. Everybody is acting like 'When we get over COVID, we'll be back better than ever.' The stock market is already anticipating that. But it's wrong.

The only reason people are spending is because the government handed businesses and consumers tons of money. But it will get to a point where it's not going to matter how much money is printed '" and then you'll have an avalanche. A huge collapse is coming.

What specifically will cause it?

There's is no way you can [keep] having fake earnings, fake GDP, fake interest rates and super-high valuations. Financial assets have to come down to reality.

What are the implications?

Loans will fail by the boatload. Then money disappears. That causes bank and business failures. We have to get all the financial leverage, financial assets and debt out of our economy. Twenty percent of public companies are zombies. They can't even pay their debt service in a growth economy. They're already dead. We've just keeping them alive with embalming.

[May 03, 2021] Parts of the U.S. equity market are in a bubble

May 03, 2021 | www.zerohedge.com

Bridgewater 's co-chief investment officer Greg Jensen warned investors that parts of the U.S. equity market are in a bubble , but shorting too early is the "easiest place to die" for an investor.

Jensen joined Bloomberg's "What Goes Up" podcast to discuss this week's Federal Reserve meeting and how ample liquidity from the central bank, combined with a booming economic rebound, make conditions ripe for markets to get more bubbly.

Q. Bubbles are a very strange phenomenon because the risk-reward relationship is so interesting. It almost seems that as an investor, you have to participate in bubbles. Because if you think it's a bubble too early, you really miss the best returns from them. How do you know when it's time to get out of an overvalued market?

A: All along through Bridgewater's history we've been systematic. So we've taken the kind of discussion we're having now -- a very qualitative view of the world -- but translated into ways to measure it. So you take something like a bubble, right? A classic qualitative thing. What do you mean by bubble? How do you measure that it's a bubble? Is it enough to say prices are high relative to history, or what's the actual measure? And then how reliable is it?

And we have six gauges of a bubble that we use all over the world. Then you could apply it to cryptocurrency. You can apply it to anything you wanted in the world to stocks, to bonds to anything. Our basic scoreboard is: Are prices high relative to traditional measures? Are prices discounting unsustainable conditions?

So, as an example today, there's something like 10% of stocks that are pricing in more than 20% revenue growth and margin expansion. If you look at history, 2% of stocks actually achieved that. That's an extremely hard thing to do.

Q: That's not counting the base effects from last year, right?

A: No. I'm talking about ongoing growth rates without the base effect. It doesn't happen. That's very, very unlikely to happen. Potentially with inflation or something you might, but in a normal kind of forward-looking picture, you don't get that. So that's an example of discounting unsustainable conditions. They can't, as a group, actually achieve that condition.

The third thing is new buyers entering the market. How many new buyers are there? How big a part of the market are they? There's the broad sentiment measures. There's purchases being financed by leverage and buyers and businesses sort of making extended forward purchases . That's all part of our checklist for a bubble. And you see today a fair amount of the equity market in the U.S. in a bubble, but not the aggregate.

There are definitely pockets that meet those standards and that's dangerous. And then, like you said, what do you want to do, buy or sell them? Well, that's a whole other dangerous thing.

And that's where, when we had a drawdown in 2000-2001 associated with the bubble -- both the dollar and the equity market and how that was playing out at the time -- that really forced us to get into flows, which is basically how we measure bubbles today. Where's the money coming from? Who are the buyers and sellers? What are their balance sheets? How much more money can they put into this bubble versus how much income they're getting and when does that start to flip? And so for us, that process of being able to look at the balance sheets of the buyers and sellers and think about when they've been stretched to an extreme -- where they won't have the money, where there's more supply coming than possible demand."

So you look at the IPO pipeline, you look at the creation of new instruments, how fast those balance sheets are growing. And that's how we try to measure that criss-cross. And it's still a very, very dangerous game, like you're saying.

So the third part is be careful and be conservative in your thinking around the ability to time those things, because that's kind of the easiest place to die in asset prices is trying to be short a bubble too early.

Click here to listen to the full podcast...

[May 03, 2021] Is the U.S. Student Loan Program Facing a $500 Billion Hole -- One Banker Thinks So.

Highly recommended!
Notable quotes:
"... Mr. Courtney's calculation was one of several supporting the disclosure in a Journal article last fall that taxpayers could ultimately be on the hook for roughly a third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500 billion, exceeding what taxpayers lost on the saving-and-loan crisis 30 years ago. ..."
May 03, 2021 | www.wsj.com

The federal budget assumes the government will recover 96 cents of every dollar borrowers default on. That sounded high to Mr. Courtney because in the private sector 20 cents would be more appropriate for defaulted consumer loans that aren't backed by an asset.

He asked Education Department budget officials how they calculated that number. They told him that when borrowers default, the government often puts them into new loans. These pay off the old loans, and this is considered a recovery, even though in many cases the borrowers haven't repaid anything and default on the new loans as well.

In reality, the government is likely to recover just 51% to 63% of defaulted amounts, according to Mr. Courtney's forecast in a 144-page report of his findings, which was reviewed by The Wall Street Journal.

"If you accounted this way in the private sector, you wouldn't be in business anymore," Mrs. DeVos said in a December interview. "You'd probably be behind bars."

Mr. Courtney's calculation was one of several supporting the disclosure in a Journal article last fall that taxpayers could ultimately be on the hook for roughly a third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500 billion, exceeding what taxpayers lost on the saving-and-loan crisis 30 years ago.

If Mr. Courtney is right, there are big implications for taxpayers and families alike. While defaulted student loans can't cause the federal government to go bankrupt the way bad mortgage lending upended banks during the financial crisis, they expose a similar problem: Billions of dollars lent based on flawed assumptions about whether the money can be repaid.

[May 03, 2021] When to Invest in a Stupid Idea

There are periods when you should sit on your money, despite inflation. This is probably one of those. When no one believes in the future, that's an opportunity. When everyone does, sell
Notable quotes:
"... Take Quantumscape, which went public via a SPAC and produces solid-state lithium metal batteries. Bill Gates and Volkswagen are investors. In 2020 it had no revenue and lost more than $1 billion. Quantumscape had a peak valuation of $50 billion last December. ..."
Apr 20, 2021 | www.wsj.com

When I read that technology can construct an image of your face from your DNA, my initial reaction was: That's the stupidest thing I've ever heard.

Fortunately, I've had a lifetime of stupidest-things-I've-heard things ( like Bleep ) became reality. Like the Kübler-Ross stages of grief -- denial, anger, bargaining, depression, acceptance -- technology goes through similar phases.

My phases of techno-hype: Incredulous. Will never happen. Dread. I'll try it. Booster. Overhype. Failed expectations.

On to the next paradigm. Understand these before plunking money into passing fancies. We know the famous will-never-happen predictions.

Understand these before plunking money into passing fancies.

We know the famous will-never-happen predictions. IBM 's Thomas Watson : "I think there is a world market for maybe five computers." Digital's Ken Olsen : "There is no reason anyone would want a computer in their home." Funny now, but not unreasonable at the time.

I've learned to harness those knee-jerk denials when I know that technology performance will increase and costs decrease. Classic scale. I'm actually suspicious of things that aren't controversial from the start. I live in those denial phases -- ask my wife. Why? Because almost every time, no one believes in the future. That's the time to invest. Until everyone believes it and then some. Then it's probably time to sell.

I live in those denial phases -- ask my wife. Why? Because almost every time, no one believes in the future. That's the time to invest. Until everyone believes it and then some. Then it's probably time to sell.

Think of the 2007 iPhone introduction. Typing on glass, are you kidding me? So many white-collar warriors hurdling through airports were thumb-writing on BlackBerry s -- aka Crackberrys. Take away my keyboard, even though it's tiny and painful to use? Over my dead body. Well, we know how that turned out. BlackBerry is now worth $5 billion. Apple a bit more.

Same for electric cars. It's my God-given right to guzzle gas and shift gears with abandon. I don't want a car that works like a high school electronics lab with a battery and a fan. No way. Yet batteries got cheaper, and range went up.

It wasn't that long ago that everyone was dubious of autonomous cars. The 2005 Darpa Grand Challenge saw Stanley, a Stanford robot, win $2 million in a 132-mile self-driving race. But on real streets with bicyclists and old ladies? No way. Well, we're not there yet, but it's certainly accepted that it will happen.

The stock market allocates capital to those ideas it believes are winners. Remember investing guru Benjamin Graham's stock market as a short-run voting machine, long-run weighing machine? So where are we now -- especially amid a Fed-fueled feeding frenzy? When markets overpay, they're voting that all that good stuff is practically guaranteed to happen. Huge expectations are built into many stock prices.

Entrepreneurs, naturally, love the overhype stage -- almost free money thrown at them at billion-dollar valuations. But it's the most dangerous time for investors. HBO has a show named "Euphoria." It's about teen drug use, but no matter; the show's best line is by the main character, Rue: "Every time I feel good, I think it will last forever . . . but it doesn't."

Expectations eventually get dashed. Reality bites. Stocks come down. Even if the market or product ends up successful, I've noticed that overhyped stocks can return to their peak values, but five to 10 years later. That's a long time to wait for hype to become real.

Take Quantumscape, which went public via a SPAC and produces solid-state lithium metal batteries. Bill Gates and Volkswagen are investors. In 2020 it had no revenue and lost more than $1 billion. Quantumscape had a peak valuation of $50 billion last December. Now it's $13.5 billion. It could work. I hope it does work. But unless something radical changes, I think it will take a long time for the company to be worth $50 billion again.

There are plenty of overhyped things to choose from, many with zero revenue. Some may be successful, others certainly won't: Air taxis (Archer and Joby). Hydroponic vertical farms (AeroFarms). Space travel (Momentus). Gamestop 's turnaround.

My advice is always to invest in the fog. When everyone else is incredulous, look for scale. Usually, no one else can see it. Squint hard, but don't make stuff up. If you can see something that everyone dismisses, and that will get cheaper over a long period of time, maybe decades, buy in cheap and go along for the long ride. Others will eventually overpay.

On the flip side, when the fog clears and we've moved from the acceptance to hype, it's time to unload your shares to those late to the party. One hint is that stocks are now worth twice gross domestic product. You might sell early. So what? No one ever lost money taking a profit. But please, know which phase we're in -- don't be the last one in the pool. Instead, start hunting for the next wave no one believes in.

But constructing a face from DNA? That'll never happen. Well, maybe . . .

[May 03, 2021] Neoliberals inflated education costs in the USA top colleges to the level at which it now is totally oriented on rich and foreigners; it reached the stage when it is not worth the money for the common folk

Community colleges are still holding at the level when it makes sense to spend money. Selected state colleges too.
May 03, 2021 | www.wsj.com

In fall 2011 the National Student Clearinghouse Research Center found that higher education enrollment was slightly more than 20.5 million students. By fall 2019 that figure had dropped to about 18.2 million, a decline of slightly over 11%. During those eight years the number of 18- to 24-year-olds remained roughly constant.

We have long had a social consensus that it's worth four years of our children's lives and very large sums of their parents' money to see their knowledge, mental capacity, and career prospects greatly expanded by going to college. Attitudes and habits formed by this consensus were bound to lag behind the reality of academia as it now is. Yet the NSCRC numbers show that already about 1 in 9 have mustered the courage and independence of thought to face reality and stop wasting time and money.

This illicit conversion of a vital social institution to an alien use deprives all Americans of the benefits of a properly functioning system of higher education. It also means that a destructive and long since discredited political ideology is now using colleges and universities to gain a degree of influence over society that it could never have achieved at the ballot box. That's election interference on a scale not remotely matched by anything that was alleged in the 2020 election.

When academia's astonishing message to society is, "We'll take your money, but we'll do with it what we want, not what you want," the response ought to be simple: "No you won't." The question is, can the millions of people who make up that wonderful abstraction called "society" act in a way that is sufficiently concerted and organized to deliver the message effectively? Many have already made a good start. But the rest need to join if we are ever again to have college campuses that aren't as academically incompetent as they are politically malevolent.

Mr. Ellis is a professor emeritus of German literature at the University of California, Santa Cruz and author of "The Breakdown of Higher Education: How It happened, the Damage It Does, and What Can Be Done."

[May 02, 2021] Biden dares Democrats to shift tax burden to wealthy Americans - BNN Bloomberg

May 02, 2021 | www.bnnbloomberg.ca

Joe Biden took the riskiest step of his presidency with a call for higher taxes on the wealthy to fund a massive investment in the nation's social safety net, betting he could sell the American public on sweeping change following a pandemic that exacerbated economic and social divides.

Biden devoted his first address to a joint session of Congress to a call for a "a once-in-a-generation investment in our families," prescribing trillions of dollars in new spending for infrastructure, child care, paid leave, community college tuition, and a bevy of subsidies for working class families.

And in a full-throated confrontation of Wall Street, Biden said the nation's wealthiest taxpayers and companies should foot the bill. He declared investors "didn't build this country" and said the wealthy had lined their pockets during the pandemic without paying their fair share.

"I stand here tonight before you in a new and vital hour of life and democracy of our nation," Biden said.

The speech was delivered to a House chamber where heightened security and social distancing measures underscored the disease and division still confronting the nation. It amounted to an audacious gamble that Biden can harness public support not only for trillions of dollars in new federal programs for lower- and middle-income Americans, but the biggest tax hikes in decades.

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But his ambitions rest on a narrow Democratic majority in the Senate, where the defections of only a single moderate or two would mean failure.

Biden painted the deadly course of the virus as embodying and exaggerating the inequalities that have broadened in recent decades, with working class Americans shouldering economic and health insecurity while the wealthiest flourished. At risk is not only his vision for rebuilding the economy, but the razor-thin advantage his party holds in Congress ahead of the 2022 midterm elections, when Republicans are well positioned to retake the majority at least in the House.

"Doing nothing is not an option," the president implored.

Unattainable Wealth

Biden's effort was in many ways a break from the cautious center-left triangulation that has defined Democratic presidential politics since the Reagan Revolution. His calculation is that voters battered by the virus just a decade after a painful recession are no longer as concerned about deficit spending or retaining low tax rates for a tier of wealth that seems increasingly unattainable.

And Biden used one of the biggest bully pulpits he's provided to offer a presidential validation of the growing influence of the progressive left, pitching at least US$3.8 trillion in new spending, sweeping new changes to the health care system, and substantial gun control measures.

Biden's own tendencies are more conciliatory, and he's likely to ultimately jettison some of the more ambitious proposals as he seeks to navigate legislation through Capitol Hill -- particularly with moderate Democrats already expressing skepticism about new taxes and spending. He took pains to caveat his broadsides against the nation's wealthiest, saying he was "not out to punish anyone" and, in a line improvised from the prepared text, acknowledged the "good guys and women on Wall Street."

But he left little room for critics within his party to argue he lacked ambition, and his presidential legacy will now be defined by his ability to deliver a once-in-a-generation suite of new government investments, services, and programs.

The forum for Biden's call for structural economic change itself seemed designed to underscore the unprecedented moment. Because of coronavirus precautions, only about 200 lawmakers were invited to attend the speech in person, and some of the Senate's most powerful moderates -- including West Virginia Democrat Joe Manchin and Utah Republican Mitt Romney -- were relegated to seats in the upper balcony.

The president's tone and tenor suggested that even if ordinary Americans weren't in the room, he felt emboldened by polls that suggest his proposals are popular – and that he himself has been buoyed by a largely successful vaccine campaign that's administered more than 315 million shots and a stimulus program that provided more than 160 million checks to taxpayers.

The president's approval rating is at 57 per cent, according to a Gallup poll released Friday, matching his post-inauguration high. And seven in 10 Americans favored Biden's initial US$1.9 trillion stimulus bill, with only around a third of those surveyed by the Pew Research Center earlier this month saying it spent too much.

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His new US$1.8 trillion families plan and the US$2.25 trillion infrastructure proposal – which he christened a "blue-collar blueprint to build America" -- directly targeted two key constituencies: suburban moms and the White working class of the Rust Belt.

The Bloomberg Dollar Spot Index erased its losses as of 12:00 p.m. in Hong Kong, as traders who were betting on a bigger spending plan from Biden cut back on currency risk positions. Treasury futures were little changed and U.S. equity futures maintained their gains.B

Pandemic Disparities

There's reason for Biden to direct his appeal to those he said "feel left behind and forgotten."

The pandemic ushered in not only disproportionate health outcomes -- a recent study by Ball State University showed a higher death rate among counties with higher poverty levels -- but deepened disparate economic trends.

While the richest 1 per cent in the U.S. saw their wealth increase by US$4 trillion, the bottom half of Americans shared just a US$471 billion increase. Female participation in the labor force has slipped to 57 per cent -- the lowest level since 1988 – and a half million more women exited the workforce than men during a crisis that saw 10 million jobs disappear.

White House advisers have made no secret about the opening they see.

Chief of Staff Ron Klain has spent recent weeks promoting stories that bluntly describe Biden's plans to hike taxes on the wealthy in a flurry of social media posts.

Economic adviser Brian Deese declined to publicly address any element of Biden's families plan ahead of its rollout Wednesday – except a provision to hike capital gains taxes on Americans making over US$1 million a year. And political adviser Anita Dunn on Tuesday penned a memo to "interested parties" pointing to recent Fox News polling that showed 56 per cent of respondents backed paying for infrastructure through increased taxes on corporations and 63 per cent supported raising income taxes on the wealthiest Americans.

"We need to make the case, but the American people seem very supportive of the idea that when it comes to longstanding challenges in this country, we need to come together and make the investments we need in order to address them," said White House economic adviser David Kamin.

Congressional Difficulties

Still, the success of Biden's effort will hinge on parlaying that popular support into votes in a narrowly divided Congress, where Republicans remain loathe to offer any assistance and without them, moderate Senate Democrats like Arizona's Kyrsten Sinema and Manchin can scuttle any piece of legislation single-handedly.

Both have already voiced skepticism about Biden's proposed tax increases, leaving open the question of how the White House's proposals can proceed. And Republicans looked to fan that uncertainty, painting the president's vision as excessive and ineffective.

"Our best future won't come from Washington schemes or socialist dreams," Senator Tim Scott, a South Carolina Republican, said in the GOP rebuttal to Biden's address. "It will come from you -- the American people."

Biden, for his part, said that big investments in jobs and infrastructure "have often had bipartisan support" and looked to win skeptics by adopting rhetoric more familiar to Republicans and painting his plans as essential to winning a global battle for the future.

"We have to prove democracy still works," the president said. "That our government still works -- and can deliver for the people."

--With assistance from Jennifer Epstein and Tan Hwee Ann.

[May 02, 2021] Wealthiest Americans get US$195 billion richer in Biden's first 100 days - BNN Bloomberg

May 02, 2021 | www.bnnbloomberg.ca

Apr 30, 2021

Wealthiest Americans get US$195 billion richer in Biden's first 100 days

Simon Hunt and Ben Steverman , Bloomberg News

https://imasdk.googleapis.com/js/core/bridge3.453.0_en.html#goog_1563483815 Getting Biden's capital gains tax through congress is slim to none: Federated Hermes' Orlando

Joe Biden's election has done little to slow the inexorable surge of wealth among U.S. billionaires.

In the president's first 100 days in office, against a drumbeat of calls for the rich to pay more in taxes, the 100 wealthiest Americans added a combined US$195 billion to their fortunes, according to a Bloomberg analysis.

The most recent gains have been fueled by the continued rise of the stock market since Biden was sworn in Jan. 20, along with the vaccination program's fast rollout and a US$1.9 trillion government stimulus package. The S&P 500 and Dow Jones indexes have both climbed more than 10 per cent during that time.

Attempts such as Biden's to refloat the economy can boost incomes and wealth at the very top, said Mike Savage, a sociology professor at the London School of Economics.

"We've seen that paradox since the 2008 financial crash with quantitative easing, which has mostly benefited people with assets, inflating their value significantly,'' Savage said.

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The richest 100 made a further US$267 billion between the 2020 election and Biden's inauguration, amounting to a total gain of US$461 billion since Nov. 4. From Donald Trump's 2017 inauguration to last fall's election, those billionaires got about US$860 billion richer.

The combined fortunes of the richest 100 Americans have reached US$2.9 trillion, greater than the combined US$2.5 trillion wealth of the bottom 50 per cent of the U.S. population, according to data from the Federal Reserve.

The rise has been driven by an explosion of wealth among a handful of ultra-billionaires. The 10 wealthiest Americans have added US$255 billion since election day, bringing their combined net worth to US$1.2 trillion.

The biggest driver of this wealth surge has been tech companies like Amazon.com Inc., Facebook Inc. and Alphabet Inc.'s Google, bolstered by increased online and stay-at-home activity during the coronavirus pandemic. The FANG stocks index has climbed 94 per cent in the past 12 months compared with the 45 per cent advance of the S&P 500.

Amazon founder Jeff Bezos, the world's richest man, has gotten US$11.7 billion richer this year, according to the Bloomberg Billionaires Index, adding to about US$120 billion of wealth gains during the Trump presidency. Mark Zuckerberg's net worth rose US$8.1 billion yesterday alone on the strength of Facebook's first-quarter results.

Google's Larry Page has added US$26.6 billion this year after the California-based company posted record profit last year, while the wealth of Tesla Inc.'s Elon Musk has grown US$5.1 billion since January.

Finance billionaires such as Warren Buffett and Blackstone Group Inc.'s Stephen Schwarzman have also been major beneficiaries of stock market rises.

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In his first 100 days, Biden has moved quickly to propose sharp tax hikes for the rich and programs to funnel trillions of dollars to middle- and lower-class Americans in the form of new infrastructure, social spending and stimulus checks. He laid out those policies in his first address to Congress on Wednesday.

"Sometimes I have arguments with my friends in the Democratic Party," Biden said. "I think you should be able to become a billionaire or a millionaire. But pay your fair share."

Under his "American Families Plan" announced Wednesday, the top rate of personal income tax would increase to 39.6 per cent for the highest 1 per cent of earners from the current 37 per cent, while the capital gains rate would be raised to the same level for those earning above US$1 million, wiping out the discrepancy between income and capital gains tax rates that has benefitted many of the ultra-rich.

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The wealthiest 1 per cent currently pay 40 per cent of all federal income taxes, according to Internal Revenue Service data, an amount that doesn't include payroll taxes.

"When you ask the American people what they want, they want corporations and millionaires and billionaires to pay higher taxes," said Erica Payne, founder of the Patriotic Millionaires, a group of progressive high-net-worth individuals. "It is politically a winner, it is economically the right thing to do and it is morally a no-brainer."

Corporate tax hike

The White House has also proposed a plan to hike corporate taxes to fund infrastructure spending. In a surprise this month, Bezos issued a statement saying he supports the general idea. "We look forward to Congress and the administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness," he said.

Conservatives say boosting spending by adding a greater burden on the wealthy can backfire.

"Government investments are often sold to the public with the promise that they will improve lives and improve the economy," Scott Hodge, president of the Tax Foundation, argued in testimony before Congress this week. "In every case, the economic harm caused by the taxes would swamp any of the benefits from the new spending, leaving taxpayers and the economy worse off."

Despite the pandemic, Fed data show all groups gained wealth last year. The top 1 per cent did best, however, adding US$4 trillion in 2020 and bringing their total net worth to almost US$39 billion, more than the bottom 90 per cent of Americans combined. Personal incomes in the U.S. jumped a record 21 per cent in March, surging after households received a third round of relief checks.

In his speech to Congress, Biden emphasized his efforts to create good-paying jobs, especially those that don't require a college degree. The increasing dominance of tech giants, however, won't necessarily help middle-class Americans. As a proportion of their market capitalization, most technology companies employ relatively few Americans compared with their older listed peers, concentrating wealth in the hands of a select few.

"The whole retail distribution system is changing," said Robert Miller, professor of economics and statistics at Carnegie Mellon University. "Recent technology has been hollowing out some parts of middle management, so you can see parts of the middle class slipping away."

Tax loopholes

Democrats in Congress are pushing other plans to close loopholes and tax wealth. To claw back gains made by America's richest during the pandemic, Senator Elizabeth Warren, a Massachusetts Democrat, proposed an Ultra Millionaire tax, a new version of the wealth tax she floated as a presidential candidate. Under her proposal, those with fortunes exceeding US$50 million would face a 2 per cent tax on their wealth, increasing to 3 per cent for those worth more than US$1 billion. The plan is unlikely to become law, given opposition from Biden and other Democrats.

Higher taxes aren't "going to have very much effect in the long term on redistributing wealth," Carnegie Mellon's Miller said. "This focus on how we're going to get the money is a bit misplaced – we should be thinking more about how we want to help the people that need help."

[May 02, 2021] If I'm going to lose the house gambling, it's more respectable to do so in the stock market.

May 02, 2021 | www.wsj.com
SUBSCRIBER 2 hours ago Borrowing money to gamble on the stock market is not a very smart thing to do in my opinion. Like thumb_up 7 Reply Share link Report R

If I'm going to lose the house gambling, it's more respectable to do so in the stock market. SUBSCRIBER 2 hours ago

Borrowing money to gamble on the stock market is not a very smart thing to do in my opinion.

[May 02, 2021] Another sign of bubble

May 02, 2021 | www.wsj.com

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R

Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .

[May 02, 2021] What Happens When Stocks Only Go Up - WSJ

May 02, 2021 | www.wsj.com

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R


What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"
What Happens When Stocks Only Go Up - WSJ

From commnets: "Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .Case Schiller PE is at all time record
margin loans at all time record . 200 day moving average at high for 95% of stocks"

...That's what some investors seem to believe -- and who can blame them? The stock market used to take years, sometimes decades, to recover its prior peak after the start of a bear-market decline. After last year's 34% meltdown, however, stocks regained record highs in only 126 trading days.

With the exception of a 100-day rebound after an interim drop in early 2009, that's the fastest-ever recovery to a prior peak. The S&P 500 has fallen at least 20% -- the conventional definition of a bear market -- 26 times in the past nine decades, according to Dow Jones Market Data. Recoveries to previous highs have typically taken almost three years, often much longer .

... ... ...

That complacency takes a toll -- even among Vanguard investors, who tend to be cautious. These people often follow the philosophy of the firm's late founder, Jack Bogle , who preached patience and repeatedly warned that stocks are risky. If anyone should come through the sharpest market decline in decades unperturbed, it's the people in this survey -- typically about 60 years old, with about $225,000 in Vanguard investments, roughly 70% in stocks.

Yet they didn't all sit tight. One group in the survey stood out: those who went into early 2020 with the highest expectations for stock returns in the upcoming year. They ended up reducing their exposure to stocks much more sharply during the crash of February and March 2020 than those who had been expecting lower returns.

They also tended to turn around and buy back much of the stock they had just sold -- but not until prices had already shot above the March lows.

Investors elsewhere seem to have concluded from the swiftness of the recovery that stocks aren't risky at all. After last spring's rebound, Dave Portnoy , a social-media celebrity, declared " Stocks only go up " so often that it began to seem like a magic incantation. And, for the past year, just about every stock has gone up .

That's largely because the Federal Reserve has backstopped markets by squashing interest rates toward zero and by buying more than $2.5 trillion in Treasury securities since February 2020, along with other massive interventions . Meanwhile, emergency government programs pumped trillions of dollars of stimulus into the economy.

SHARE YOUR THOUGHTS

Have you lost your fear of a bear market? Why or why not? Join the conversation below .

Fund managers fruitlessly complained about how these policies were distorting markets, but individual investors simply followed the old Wall Street adage: Don't fight the Fed. So long as the central bank is drenching the markets with liquidity, why not buy stocks -- and why fear another crash?

What's more, target-date funds , which continually seek to keep a predetermined exposure to stocks, command in excess of $2.8 trillion, according to Morningstar Inc. Investors added $52 billion to target-date funds in 2020.

me title=

The popularity of these portfolios has -- so far, anyway -- helped make market crashes self-correcting . The more stocks fall, the more the target-date funds have to buy them; otherwise, the portfolios would fall below their mandated ratios of stocks to other assets.

... ... ... R Ray Noack

Mr. Sinclair is correct . While I lost 100% in WAMU in 2008 , from2009 to present msft is up 1000% dwarfing my loss in WAMU .
Barrons reports that as of Friday the total value of stocks v GDP has surpassed the Dot com peak in early 2000 .
Case Schiller PE is at all time record
margin loans at all time record .
200 day moving average at high for 95% of stocks ( translation : there is nothing left to buy ) .
The course of action is clear ..Don't sell but whatever you do ..Do NOT buy . Cash is a wonderful hedge .
When asked how he got so rich Bernard Baruch replied " by selling too early"

[Apr 30, 2021] Switch to EV -- will it append and if yes, when

Apr 30, 2021 | peakoilbarrel.com

DENNIS COYNE IGNORED 04/26/2021 at 7:47 pm

Nick,

I don't really. I estimate total fuel consumption for light and heavy vehicles (road only) worldwide in 2018, then I simply assume the non-land transport demand for C+C (for farm equipment, water transport, air transport, and everything else that isn't for road vehicles (heavy trucks, buses, motorcycles, and light vehicles). I simply assume that quantity remains fixed (greater need for miles travelled by air and water matched by less fuel use due to efficiency improvements so the two factors exactly offset).

Essentially it is just a simplifying assumption. NICK G IGNORED 04/26/2021 at 7:55 pm

Dennis,

So you're assuming that global land transport oil consumption (excluding farm, rail, buses, heavy off-road trucks, motorcycles, chainsaws, etc) is 55 Mb/d, or 64% of all C&C? That seems a little high. How did you estimate that? DENNIS COYNE IGNORED 04/27/2021 at 6:52 am

Nick,

I used US data for average fuel economy for heavy trucks and light vehicles, then I used a 1300 million global fleet size, assumed average miles driven was about 10k per year, did something similar for commercial (heavy truck) fleet globally. It is a rough estimate, BP has gasoline and diesel consumption for World at 52 Mb/d in 2019, I assume most of that is for light vehicles and heavy trucks, not sure how much is used in ships (I assumed they mostly use fuel oil/bunker/residual fuel).

Also see figure 2 on page 6 of EIA document below, 55 Mboe/d in 2020 looks about right, and they estimate about 57 Mboe/d in 2025, my estimate is about 56 Mboe/d, with decreases starting in 2028.

The model is no doubt imperfect and does not account for the drop in demand in 2020 due to pandemic (the model was done in 2019 before the pandemic).

https://www.eia.gov/analysis/studies/transportation/scenarios/pdf/globaltransportation.pdf NICK G IGNORED 04/27/2021 at 1:56 pm

Thanks.

It's interesting how quickly this 2017 study has become out of date:

" The combined share of electric and plug-in hybrid electric vehicles in OECD countries increases from less than 1% in 2015 to 10% in 2040. In non-OECD countries, diesel, natural gas, and electric and plug-in hybrid electric vehicles experience a three-to-five percentage point increase in the total share of LDVs sold in non-OECD countries. In 2040, diesel and natural gas vehicles each represent approximately 11.5% of the total LDV new sales market in non-OECD countries, and electric and plug-in hybrid electric vehicles combined represent 4.5%."

They thought EVs would be about 10% in 2040, while diesel and NG vehicles would each be about 11.5%. Based on how quickly car makers are abandoning diesel and NG and adopting EVs, I'd say EVs will take pretty much all of the 23% projected for diesel and NG and, of course, much more. LIKBEZ 04/30/2021 at 1:12 pm

Dennis,

I know that you are EV enthusiast, and even own Tesla, but still we need to be realistic.

For heavy trucks transporting goods over long distances the switch to EV is very problematic and might never happen. The switch to natural gas is a possibility but this is an expensive solution. For local trucks the problem is the cost of the battery and it might happen but very slowly, as gradual displacement due to high gas prices. Even in this case natural gas will eat lithium.

Three large users of fuel that you did not account are military, airplanes and agricultural machinery. In the USA we also need to add trains as the level of electrification of railroads leaves much to be desired.

Those three categories of consumers of fuel are not switching to EV in foreseeable future. If you account for the growth of population the demand actually might increase until the price of fuel will come into play.

Globally Africa, China, India (and Asia in general), xUSSR space very rapidly add personal cars so those areas will experience growth of fuel demand. And cars in those regions often run for 15-20 years not 12 like in the USA. .

And that will affect African producers and, especially Russia. So when talking about Russia it is important to understand that the internal consumption will grow (Russia adds around 1.5 million cars a year) and that will cut exports https://knoema.com/atlas/Russian-Federation/Primary-energy-consumption although many Russian cars are running of natural gas as it is cheaper.

https://carsalesbase.com/russia-car-sales-data/

The number of cars per capita in Russia still is twice less than in the USA and this gap will gradually diminish. https://en.wikipedia.org/wiki/List_of_countries_by_vehicles_per_capita

The initial fascination with EV as passenger cars will soon pass as outside places like California with no winter they are very problematic during winter periods. I would say they are dangerous.

Currently they are kind of status symbol in certain circles and IMHO represent "conspicuous consumption." Conspicuous consumption is a term coined by American economist and sociologist Thorstein Veblen.

I wonder whether Tesla stock will be able to sustain the current crazy valuation in three-five years period. (139 minutes and 25 seconds)
DENNIS COYNE IGNORED 04/27/2021 at 5:17 pm

Hickory,

Here is a transition scenario that assumes the 37% growth rate in plug in sales continues, personally I think this is too optimistic, sales for light vehicles is 100% plugin by 2031 and the ICE light vehicle fleet is replaced 100% by 2044 with plugin vehicles. Interesting that you believe this is pessimistic. Also interesting that Ovi believes my original EV scenario is too optimistic, I seem to be somewhere between your optimism and the pessimism of Ovi. It will be interesting to watch (and I hope you are right).

REPLY HICKORY IGNORED 04/27/2021 at 9:51 pm

We shall see. It seems to me that at a certain point, there is going to be a very rapid realization that we are in new territory. Most of the manufacturers now get it, and are scrambling to react.
It will be very interesting to see if there is a component supply crunch ( I think likely) in the late decade.
A big piece of the unknown on this this is the general state of the world economy.
If there is stability and resumed growth after pandemic, the transition to plugin vehicles will be quicker.
If there is economic stagnation/contraction- it will be much slower as people hold on to what they've got.
And of course, the price oil will play a leading role in the incentive/disincentive equation.

I also think it is important to acknowledge that we are talking about percent of new sales, but not the absolute magnitude of sales. That may be more important. Vehicles last so much longer now, and if petrol is available at reasonable price, the best bet for most people financially will be to milk their current vehicle for as long as possible. But after that, the next one will probably have a plug. STEPHEN HREN IGNORED 04/28/2021 at 3:32 pm

At some point people will stop buying ICE vehicles even if no EV option is available. Operating a gas station, especially in an urban environment, is a low margin, high regulation enterprise. As gas stations in urban areas either go out of business or give up on selling gas, gas cars will lose most of their appeal for urban and suburban residents because of "range anxiety" – i.e. not enough places to fill up. I would guess that at about 20-30% EV saturation, selling gas will no longer become profitable in any given area. This will add to the spiral of concerns about resale value for ICE cars as the inevitability of the EV transition becomes ever more apparent. HICKORY IGNORED 04/28/2021 at 10:31 pm

This kind of action is hard to predict from past performance, but get used to these kind of news items-

Germany March 2021
"The number of new passenger plug-in car registrations increased to 65,681 (up 232% year-over-year), which is 22.5% of the total [new car]market. That's more than one in five new cars!" OVI IGNORED 04/26/2021 at 5:17 pm

Dennis

To me the EV market is bifurcated. From what I can see there are four concentrated EV markets in the world.
– California due to its history with car pollution.
– Norway using its massive oil revenues to heavily subsidize EVs along wth other perks.
– China with their heavy EV sales mandate and getting away from its achilles heal, oil.
– Japan also wants to reduce dependence on oil.

Looking at what is happening in two US states provides some insight on how fast the EV take up will occur in the US. California with a population of 39.5 M sold 133,000 EVs in 2020 or put another way 3,360 EVs per million population. New York with a population of 19.45 M sold 21,000 EVs in 2020 or 1,080 EVs per million population. That is a ratio of three to one. it would be a lot higher in other states.

Total US 2020 sales were 296,000. California accounts for 45% of US sales.

My point is that these 4 concentrated regions are not representative of the rest of the world. The only region that will continue to grow at a significant pace will be China with its sales mandate and I think with an eye to becoming a world leader in EV design. EVs are coming, no doubt, but at a pace that is slower than most prognosticators are forecasting, primarily because of cost.

[Apr 30, 2021] 'This is not going to end well'- Billionaire Leon Cooperman says stock market will be lower a year from now

Notable quotes:
"... nobody, myself included, knows when this is going to end. We just watch the things that would normally indicate an end. ..."
"... "I think we should recognize we're pulling demand forward and that the longer-term outlook is not particularly favorable, in my view," he said. Cooperman said he expects Federal Reserve Chairman Jerome Powell, who has described a recent pickup in price pressures as "transitory," will ultimately be surprised by inflation, forcing the central bank to signal action before the end of 2022. ..."
Apr 30, 2021 | finance.yahoo.com

Billionaire investor Leon Cooperman says he's a "fully invested bear" with "an eye on the exit.

'I suspect the market will be lower a year from today. But I don't have to make that guess now. This is not going to end well.'

-- Leon Cooperman, Omega Family Office

That's self-described "fully invested bear" Leon Cooperman, who told CNBC on Friday that given a coming rise in taxes, inflation and a "reasonably richly appraised market," he has "an eye on the exit."

Cooperman, the chair of the Omega Family Office, added that " nobody, myself included, knows when this is going to end. We just watch the things that would normally indicate an end. "

Stocks were weaker Friday , on track for a mixed weekly performance despite a hectic week of corporate results that featured blowout results for some of the world's largest tech-related companies. The Dow Jones Industrial Average DJIA, -0.54% was down more than 200 points, dragging the blue-chip gauge lower for the week. The S&P 500 SPX, -0.72% was down 0.7% for the session, while the Nasdaq Composite COMP, -0.85% was down 0.5%.

Cooperman warned that the pace of market gains since bottoming out in March 2020 following the pandemic-induced bear market plunge can't continue indefinitely.

"I think we should recognize we're pulling demand forward and that the longer-term outlook is not particularly favorable, in my view," he said. Cooperman said he expects Federal Reserve Chairman Jerome Powell, who has described a recent pickup in price pressures as "transitory," will ultimately be surprised by inflation, forcing the central bank to signal action before the end of 2022.
dougc 1 hour ago If he is a fully invested BEAR he should be invested FOR the pullback and not eyeing an exit. If he's fully invested now in a bull market strategy, he's lying about his expectations. Reply 1 1 reply Jolly 2 hours ago The fed and biden are committed to endless cash until we go bankrupt or bonds pricing go way up and this thing is forced to crash. you stay in the market and make the fed raise rates.
1Economist 4 hours ago Popcorn: Do intelligent people erase Glass/Steagall, and uptick rule? At the same time powers in charge are unable to grasp the significant loss of market makers, the progress of Ai & dark pools. Throw in new monetary policy that debt doesn't matter and you get huge liquidity and a big BANG!
John 31 minutes ago Saw the exact same thing in the 1990's. Everyone knew it was a bubble, but they all thought they could get out before everyone else if they had to.
aaa 1 hour ago I would never trust the epitome of greed, when it comes to investments that they can go long or short...into a decree of direction. You have to ask yourself how and why entities like this have accumulated billions on the market.... Reply 1 Scott 3 hours ago Leon Cooperman says he has an "eye on the exit?" So? Anyone who doesn't at all times have an eye on the exit is a fool. Tell me something I don't know, Leon.
C 49 minutes ago Another shorter trying to manipulate the market

[Apr 29, 2021] Inflated stocks are offloaded by Wall Street sharks to retail suckers

Sell in May... Wait it can be April this year...
Apr 27, 2021 | finance.yahoo.com

"Retail clients were the only buyers last week, while institutional and hedge fund clients sold," said Bank of America strategists led by Jill Carey Hall. "Retail clients have been buyers for the eighth straight week, while hedge fund clients sold for the third straight week."

The team at Bank of America notes that cumulative equity flows last week totaled a net $5.2 billion worth of outflows, the largest one-week move out of stocks since November and the fifth-largest on record. In the past, these kinds of exoduses from the market have portended shaky periods for investors.

"In the prior times weekly flows were this (or more) negative, the subsequent week's returns were -1% on avg/median with negative returns 75% of the time," the firm notes. "Four-week average flows have been trending lower in recent weeks and have now turned negative for the first time since mid-Feb, suggesting a pause to increasingly euphoric sentiment."

...But data from strategists on the Street does show that retail's participation in this market is not what it once was. The strategy team over at Deutsche Bank led by Binky Chadha published a report late last week showed that single-stock call options â€" a core part of the YOLO trade powered by retail â€" has been declining in recent weeks.


[Apr 29, 2021] Surprisingly the 10-year yield retreatws from a recent peak of 1.749% reached in March to 1.554% while the fundamentals point to higher rates

Apr 27, 2021 | www.wsj.com

The recent calm in the Treasury market contrasts with early-year selling that pushed yields to their highest levels since the pandemic started.

... Foreign investors purchased around $135 billion worth of long-term Treasuries on a net basis in January and February, according to data recently compiled by Citiâ€"the best two-month start to a year since 2012.

...But buying from foreign investors and even pension funds may not be enough to quell a rise in yields, said Mr. Goldberg. His firm is forecasting the 10-year yield to rise to 2% by the end of the year, supported by improving economic data and passage of a fiscal package later this year.

[Apr 29, 2021] After thirteen months, the BLS still cannot count the Unemployed

Apr 29, 2021 | www.shadowstats.com

After thirteen months, the BLS still cannot count the Unemployed. Headline U.3 Unemployment also remained deep in non-recovery territory. The BLS acknowledged continuing misclassification of some "unemployed" persons as "employed," in the Household Survey. Where the count of the understated unemployed had an "upside limit" of 636,000 persons in March 2021, the February 2021 upside estimate of understated unemployed was 756,000. The difference would be a potential headline U.3 of 6.44% instead of today's headline 6.05%, which was down from a headline 6.22% in February. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys of Pandemic impact, and with more than six million people missing from the headline U.S. labor force, actual headline U.3 unemployment still should be well above 10%, the highest unemployment rate since before World War II, outside of the Pandemic and possibly at the trough of the 1982-1983 recession. Broader March 2021 headline U.6 unemployment [including some decline in short-term discouraged workers and those employed part-time for economic reasons] eased to 10.71% from 11.07% in February. Including long-term discouraged/ displaced workers, the March 2021 ShadowStats Alternate Measure –- moving on top of the decline in U.6 –- notched minimally lower to 25.7%, from 25.8% in February 2021, reflecting some modeled transition of "short-term" to "long-term" discouraged workers, with the Pandemic having passed its 12-month anniversary. The latest Unemployment Rates are posted on the ALTERNATE DATA tab (above).

[Apr 29, 2021] Federal Reserve isn't fooling anybody on inflation

Apr 29, 2021 | www.moonofalabama.org

vk , Apr 29 2021 15:19 utc | 7

Food for thought:

Federal Reserve isn't fooling anybody on inflation

I don't share David P. Goldman's ideology and convictions. They are almost the polar opposite of mine's.

But he has something I don't have, something that only a bourgeois specialist can give: insider information.

I once hypothesized here that, if the USA were to collapse suddenly (which I don't think it ever will, but if it do happen), then it would surely involve an uncontrolled growing spiral of inflation/hyperinflation. That's the logical conclusion of an hypothetical collapse of the USD standard.

So far, I can only see a mild rise in inflation. I don't think the USA will ever experience hyperinflation (four-digit) or even true high inflation (two-digit). Goldman is a rabid neoliberal, and anything above 2% is hyperinflation for him, so we should take these kind of analyses with a grain of salt.

--//--

Sugar rush:

US real GDP rose 6.4 per cent on an annualised basis in the first quarter

Fed Chair Jay Powell said that the Fed was not going to tighten monetary policy any time soon. So the US stock market hit yet another all-time high.

[Apr 29, 2021] Shadow Government Statistics - Home Page

Apr 29, 2021 | www.shadowstats.com

DAILY UPDATE (April 29th to May 3rd): • First-Quarter 2021 GDP Annualized Inflation Jumped to a 31-Year High of 4.1%, With Quarterly Real GDP Growth Hitting a Consensus 6.4%, Still Shy of Pre-Pandemic Recovery • Monthly March Series Showed Broad Inflation Soaring on Top of Still-Faltering Jobs and Economic Activity [See the headlined paragraphs in the LATEST NUMBERS section]

• Fed Chairman Powell - "We've Got a Long Ways to Go" • March 2021 Money Supply and Monetary Base Growth Continued to Explode • U.S. Government's Financial Condition Deteriorated Sharply in 2020 [See the headlined paragraphs in the SYSTEMIC RISK section]

G E N E R A L .. H E A D L I N E S .. -- Pandemic-Driven U.S. Economic Collapse Continues to Harden in a Protracted "L"-Shaped Non-Recovery

-- Severe Systemic Structural Damage from the Shutdown Is Forestalling Meaningful Economic Rebound into 2022 or Beyond, Irrespective of the Advances in Coronavirus Vaccines and Treatments

-- Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit Spending Continue and Will Expand, Triggering Major Domestic Inflation

-- With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver Protects the Purchasing Power of One's Assets, Irrespective of Any Near-Term Central Bank or Other Machinations to the Contrary.

Scroll down for the latest ShadowStats outlook, headline economic news and background information on the U.S. Economy, Financial System (FOMC), Financial Markets and Alternate Data, also for Publicly Available Special Reports and Contact Information.

L A T E S T .. N U M B E R S .. Still shy by an annualized quarterly 3.53% gain of recovering the Pre-Pandemic Peak Gross Domestic Product Activity in Fourth-Quarter 2019, annualized First-Quarter 2021 Real GDP Growth surged 6.39%, effectively matching market expectations, picking up from the 4.33% growth pace of Fourth-Quarter 2020 (April 29th, Bureau of Economic Analysis - BEA). Those 1q2021 and 4q2020 GDP gains followed an annualized 3q2020 rebound of 33.44%, against respective annualized 2q2020 and 1q2020 Pandemic-driven collapses of 31.38% (-31.38%) and 4.96% (-4.96%). Where activity in 3q2020 and 4q2020 GDP was boosted heavily by Inventory Building, 1q2021 GDP growth of 6.39% was softened by heavy Inventory Liquidation. Reflecting same, "Final Sales," which is the GDP net of Inventory changes, surged to 9.03% in 1q2021, versus 2.96% in 4q2020 and against 26.87% in 2q2020.

Continued Depression in Payroll Activity Belies Some of the Headline Boom in the Heavily Gimmicked, Overstated Real GDP Numbers. Seasonally adjusted First-Quarter 2021 Payroll Employment declined year-to-year by 5.6% (-5.6%), following an annual decline of 6.0% (-6.0%) in Fourth-Quarter 2020. Outside of the current Pandemic-collapsed economy, that 1q2021 annual Payroll decline was the deepest since the 1946 realignment of the post-World War II U.S. economy to a peacetime footing. In contrast to collapsed annual Payrolls, 1q2021 Real GDP gained a headline 0.4% year-to-year. Year-to-year change in Employment is a broad, direct measure of underlying economic reality, suggestive at present of a much weaker headline GDP circumstance than is being proffered to the U.S. Public and to the Equity and Currency Markets. Discussed frequently here, much of the GDP gimmicking is tied to artificially depressed GDP Inflation, which results in overstated, headline Real (Inflation-Adjusted) numbers. Expanded detail of the current circumstance will be fully reviewed, along with related graphs in pending No. 1460 .

First-Quarter 2021 GDP Implicit Price Deflator inflation surged to 31-year high, annualized quarterly 4.07% (4.1%) Inflation, and 2-year high 1.85% (1.9%) year-to-year Inflation. Today's (April 29th) then pending GDP release prompted Federal Reserve Chairman Powell's warning at yesterday's FOMC Press Conference of a "temporary" jump in the FOMC's targeted "Core" PCE inflation rate. That is the inflation rate for the GDP's dominant [68.2% of nominal] Personal Consumption Expenditure (PCE) category (less Food and Energy). A subcomponent of the aggregate GDP Deflator, the FOMC's targeted PCE Inflation Index (Excluding Food and Energy) jumped to an annualized 2.3% in 1q2021 [above or at the FOMC Target of 2.0%-plus], up from 1.3% in 4q2020, but down from a one-time spiked 3.4% in 3q2020. The FOMC targeted deflator hit a one-year high 1.5% year-to-year reading, still well below target. Expanded discussion follows in Nos. 1460 and 1461 , also see the FOMC discussion in the SYSTEMIC RISK section.

(April 26) Real March 2021 New Orders for Durable Goods declined 0.2% (-0.2%) in the month, having declined by 1.0% (-1.0%) in February (Census Bureau). Against Pandemic-collapsed March 2020 activity, March 2021 Real New Orders surged 20.1%, where February 2021 annual change had been 0.0% against the February 2020 pre-Pandemic peak. Against that peak, those same March 2021 orders were down by 0.2% (-0.2%), and also were down by 4.9% (-4.9%) measured with a two-year stacked change (against March 2019), as commonly used with the Cass Freight Index® (see the discussion in No. 1459 and pending 1460 on Pandemic disrupted annual growth). Net of a sharp reduction in still-strong Commercial Aircraft Orders, March 2021 Real New Orders gained 1.6% in the month, having declined by 3.0% (-3.0%) in February, March activity gained 1.4% from its February 2020 pre-Pandemic peak.

(April 26) 2021 Annual Retail Sales Benchmark Revisions cumulatively reduced headline annual nominal growth rates by a 10 to 20 basis points per year from 2016 to date (Census). At the most extreme, the nominal level of March 2021 Retail Sales revised lower by 0.75% (-0.75%), while the level of the Pandemic collapsed March 2020 number revised lower by 0.85% (-0.85%). The average downside revision to the headline monthly sales level, in basis points, was 66 in 2021, 57 in 2020, 48 in 2019, 27 in 2018, 20 in 2017, 8 in 2016, which had the effect of spreading the easier growth rates over the full period of revision. See the April 15 Retail Sales paragraph; extended detail and graphs follow in pending 1460 .

(April 22) Existing-Home Sales declined for a second month, down by 3.7% (-3.7%) in March 2021, against a revised, narrowed monthly decline of 6.3% (-6.3%) in February (The National Association of Realtors® [NAR] ©2021; see: https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales). Moving aside from Pandemic-disrupted annual growth rising 12.3% in March 2021 versus March 2020, March 2021 Sales gained 5.4% from the February 2020 pre-Pandemic peak, which was down from the February 2021 gain of 9.5%, as measured both year-to-year and against the February 2020 pre-Pandemic peak [see discussion in No. 1459 ]. The monthly NAR surveying usually is highly stable, in contrast to the almost continual, nonsensical volatility common to the Census Bureau surveys. -- (April 23) March 2021 New-Home Sales soared by 20.7% in the month, recovering from a severe, weather-crashed plunge of 16.2% (-16.2%) [previously 18.2% (-18.2%)] in February (Census Bureau). Where those moves were statistically meaningfully, such rarely happens outside of extreme monthly volatility. On a year-to-year basis, March 2021 sales were up by 66.8%, but only by 42.6%, against its February 2020 pre-Pandemic peak activity. That still was higher than the February 2021 18.2% dual growth readings (year-to-year and pre-Pandemic), again, see No. 1459 .

(April 16) Seasonally adjusted, the March 2021 Cass Freight Index® gained 3.4% in the month, recovering its "Polar Vortex," weather driven 3.2% (-3.2%) plunge in February (CassInfo.com - See detail at https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/march-2021 and scroll down). The March 2021 unadjusted series gained 10.03% year-to-year, versus a weather-deflated 4.16% in February and 8.61% in January. That weather driven, downside February aberration, broke a rising string of annual gains back to 2.43% in October 2020. Such followed a 1.84% (-1.84%) annual decline in September 2020, which then was the 22nd consecutive year-to-year monthly decline. The recent monthly annual increases in Freight Activity were the first since the Federal Reserve's tightening of November 2018 began strangling U.S. Economic Activity. As much of the economy declined into an unofficial "recession," Freight Activity and the Cass Freight Index® did, too. As of March 2021, the "Two-Year Stacked Change" in the Index (March 2021 against March 2019) held negative for the 18th-straight month, albeit narrowed to a negligible 0.08% (-0.08%) from 3.67% (-3.67%) in February 2021. Given the March 2021 rebound from February weather, ShadowStats estimates that re-stabilizing April 2021 activity could take that two-year stacked change back to an annual decline around 1.5% (-1.5%). In like manner, March's "Two-Year Stacked Change" in U.S. Industrial Production held negative for the 15th straight month, down by 3.74% (-3.74%) [see second paragraph following]. Although Freight Activity and some parts of the U.S. economy [not yet Industrial Production] have recovered 2020 pre-Pandemic levels, those pre-Pandemic levels already were below actual peak Freight and Economic Activity at the end of 2018, when the Fed moved to slow the economy. Freight and related areas such as Production and Manufacturing still have not recovered their true (albeit unofficial) pre-recession peaks. -- ShadowStats regularly follows and analyzes the Cass Freight Index® as a highest-quality coincident and leading indicator of underlying economic reality. We thank Cass for their permission to graph and to use their numbers in our Commentaries. Full economic analysis of the latest monthly and quarterly economic series follows in No. 1460

(April 16) March 2021 Housing Starts and Building Permits both showed meaningful monthly gains, with Starts rebounding sharply from a weather-driven February plunge. As with Real Retail Sales, April's Starts activity likely will see some pullback from March's catch-up surge (Census Bureau). March 2021 Building Permits gained a statistically significant 2.7% in the month (90% confidence interval), having declined by a revised 8.8% (-8.8%) [previously 10.8% (-10.8%)] in February and having gained 10.7% in January. March Housing Starts jumped by a statistically meaningful 19.4% in the month, rebounding from a weather-driven collapse of 11.3% (-11.3%) [previously 10.3% (-10.3%)] in February, and a revised January decline of 1.7% (-1.7%) [previously 5.1% (-5.1%). As headlined, March 2021 Building Permits and Housing Starts respectively gained 30.2% and 37.0% year-to-year against Pandemic-savaged March 2020 activity, up respectively against their February 2020 pre-Pandemic peaks by 22.8% and 11.0%. That said, both headline March 2021 Permits and Starts still held shy of ever recovering their pre-Great Recession peak levels of activity, respectively by 22.0% (-22.0%) and 23.5% (-23.5%).

(April 15) Constrained by Motor Vehicle production issues for a second month, March Industrial Production came in well below expectations, suggestive of slowing First-Quarter 2021 GDP (Federal Reserve Board). Nonetheless, disrupted by the Pandemic, year-to-year change in March 2021 Industrial Production turned positive for the first time in 18 months (since September 2019), gaining 1.02% year-to-year, having declined by 4.77% (-4.77%) in February 2021. Yet, that annual gain was against Pandemic-collapsed activity in March 2020. Against its pre-Pandemic peak activity of February 2020, headline March 2021 production still declined by 3.40% (-3.40%), more in line with the February 2021 annual decline. A two-year stacked decline (against March 2019) showed March 2021 activity down by 3.74% (-3.74%), versus 5.00% (-5.00%) in February 2021. The issues here and the ShadowStats approaches to related reporting and graphics are detailed in Benchmark Commentary No. 1459 , with extended detail in Economic Commentary No. 1460 . Otherwise, March 2021 Industrial Production gained 1.44% in the month (up by 0.89% net of revisions), having declined by 2.62% (-2.62%) in February.

Parallel numbers for March 2021 Manufacturing showed a monthly gain of 2.73% [2.11% net of revisions], against a monthly drop of 3.73% (-3.73%) in February. Annual growth turned positive by 3.14% in March 2021, versus 20 straight months of annual decline, from July 2019 through a 4.66% (-4.66%) drop in February 2021. March 2021 activity, however, was down by 2.06% (-2.06%) against its February 2020 pre-Pandemic peak, and was down in a two-year stacked decline of 2.34% (-2.34%) in March 2021, versus 4.99% (-4.99%) in February 2021. Mining showed a monthly gain of 5.66% [5.83% net of revisions], against a monthly drop of 5.62% (-5.62%) in February. Annual growth held negative at 8.82% (-8.82%) for the 12th month (since April 2020), down by 10.39% (-10.39%) against its pre-Pandemic and pre-Oil Price War high, versus a February 2021 annual decline of 15.20% (-15.20%). Utilities showed a record monthly drop (since 1972) of 11.39% (-11.39%)[down 12.18% (-12.18%) net of revisions], against a monthly gain of 9.18% in February. A March 2021 annual decline of 0.22% (-0.22%) was seen there versus a 3.27% (-3.27%) drop against its pre-Pandemic high, and versus a February annual gain of 9.15%.

(April 15) Extreme monthly Retail Sales volatility is likely to continue for another month (Census -- see April 26 Benchmark Revision paragraph). ShadowStats standardly removes growth due to inflation from the headline Retail Sales series, reporting it in Real or Inflation-Adjusted Terms, deflated by the seasonally-adjusted CPI-U as otherwise calculated by the St. Louis Fed. On that basis, the headline nominal March 2021 monthly Retail Sales gain of 9.8% was 9.1% in real terms, net of inflation.

Beyond large monthly swings in activity reflecting massive weather disruptions, and despite intensifying Production issues, surging Motor Vehicle sales reportedly drove that greater than expected 9.1% surge in Real Retail Sales, rebounding from a 3.1% (-3.1%) weather-driven plunge in February; watch for a likely stabilizing 2.9% (-2.9%) pullback in April 2021 sales, which appears likely to bring Real Retail Sales back into balance, with monthly growth stabilizing, averaging around 0.9%. That said, Real Sales gained year-to-year by 24.4% in March 2021, against Pandemic collapsed activity in March 2020. Against its pre-Pandemic peak of February 2020, March 2021 activity gained 15.9% (see the related discussion in No. 1459 and pending 1460 . That annual gain, or change from pre-Pandemic peak activity, followed an annual gain of 4.9% (previously 4.5%) in February 2021, and a revised 8.1% [previously 8.0%, initially 6.0%] in January 2021.

(April 13) March 2021 unadjusted year-to-year March 2021 Consumer Price Inflation (CPI-U) jumped 2.62% -- a one-year high -- as gasoline prices soared, not only fully recovering pre-Oil Price War levels of a year ago, but also hitting the highest unadjusted levels since May of 2019 (Bureau of Labor Statistics - BLS). Headline March 2021 CPI-U gained 0.62% in the month, 2.62% year-to-year, against monthly and annual gains of 0.35% and 1.68% in February. That inflation pickup reflected more than a full recovery in gasoline prices, which had been severely depressed by the Oil Price War of one year ago. Such had had the effect of depressing headline U.S. inflation up through February 2021, including suppressing the 2021 Cost of Living Adjustment (COLA) for Social Security by about one-percentage point to the headline 1.3%. By major sector, March Food prices gained 0.11% in the month, 3.47% year-to-year (vs. 0.17% and 3.62% in February); "Core" (ex-Food and Energy) prices gained 0.34% in March, 1.65% year-to-year (vs. 0.35% and 1.28% in February); Energy prices gained 5.00% in March, 13.17% year-to-year (vs. 3.85% and 2.36% in February), with underlying Gasoline prices gaining 9.10% in the month, 22.48% year-to-year (vs. 6.41% and 1.52% in February).

The March 2021 ShadowStats Alternate CPI (1980 Base) rose to 10.4% year-to-year, up from 9.4% in February 2021 and against 9.1% in January 2021. The ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government's inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate COLAs. Related graphs and methodology are available to all on the updated ALTERNATE DATA tab above. Subscriber-only data downloads and an Inflation Calculator are available there, with extended details in pending No. 1460 .

(April 9) March 2021 Producer Prices exploded across the board, with record levels of annualized First-Quarter 2021 Inflation of 8.99% for Total PPI-FD, 16.04% for PPI-FD Goods Sector and 5.62% for PPI-FD Services Sector (BLS). Those record levels were in context of the current PPI historical series that began in November 2009. On the more-meaningful Goods side, Energy and "Core" inflation hit respective historic annualized quarterly peaks of 78.80% and 7.11%, while annualized quarterly Food inflation slowed to 5.44% having its earlier historic peak of 13.68% in Fourth-Quarter 2020. On a monthly basis, March 2021 PPI-FD Goods gained a stronger than expected 1.67%, versus 1.44% in February, with March 2021 year-to-year growth jumping to 6.97%, from 3.39% in February. Food, Energy and "Core" (net of Food and Energy) Sectors respectively gained 0.48%, 0.91% and 5.88% in the month, and 5.05%, 24.26% and 3.47% year-to-year.

(April 7) Continuing sharp deterioration with the headline February 2021 Real Merchandise Trade Deficit indicated a likely record First-Quarter 2021 trade shortfall, with a corresponding hit to First-Quarter GDP. (Census / BEA). Still in sharp deterioration against December 2020 and 4q2020 activity, the January 2021 Real Merchandise Trade Deficit narrowed minimally in revision, accompanied by initial headline reporting of an accelerated deepening in the February 2021 Deficit. Those numbers are on track for an historic, record Real Merchandise Trade Deficit in 1q2021. In turn, that suggests a deepening quarterly hit to the April 29th release of the "Advance" First-Quarter 2021 GDP. Expanded detail and graphs follow in No. 1460 .

(April 2) Despite some monthly improvement, March 2021 Labor Details still indicate no GDP recovery at hand (Bureau of Labor Statistics - BLS). Seasonally-adjusted March 2021 Payroll Employment declined year-to-year by 4.5% (-4.5%) versus a revised 6.1% (-6.1%) [previously 6.2% (-6.2%)] in February 2021. That narrowed annual decline was helped by initial year-ago Pandemic impact on labor conditions. February 2020 activity was the pre-Pandemic series peak, and March 2020 data were net of minimal initial Pandemic hit, in advance of the massive collapse seen in the April 2020 numbers. Against the Pre-Pandemic peak, March 2021 was down by 5.5% (-5.5%), versus the headline virus-narrowed 4.5% (-4.5%). Discussed and graphed in pending No. 1459 , and consistent with recent annual growth comparisons to pre-Pandemic levels, a 5.5% (-5.5%) drop has not been seen since the 1946 post-World War II war-production shutdown of the U.S. economy. That circumstances still indicates no imminent recovery in the U.S. GDP, irrespective of usual reporting games played with the headline GDP series.

After thirteen months, the BLS still cannot count the Unemployed. Headline U.3 Unemployment also remained deep in non-recovery territory. The BLS acknowledged continuing misclassification of some "unemployed" persons as "employed," in the Household Survey. Where the count of the understated unemployed had an "upside limit" of 636,000 persons in March 2021, the February 2021 upside estimate of understated unemployed was 756,000. The difference would be a potential headline U.3 of 6.44% instead of today's headline 6.05%, which was down from a headline 6.22% in February. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys of Pandemic impact, and with more than six million people missing from the headline U.S. labor force, actual headline U.3 unemployment still should be well above 10%, the highest unemployment rate since before World War II, outside of the Pandemic and possibly at the trough of the 1982-1983 recession. Broader March 2021 headline U.6 unemployment [including some decline in short-term discouraged workers and those employed part-time for economic reasons] eased to 10.71% from 11.07% in February. Including long-term discouraged/ displaced workers, the March 2021 ShadowStats Alternate Measure –- moving on top of the decline in U.6 –- notched minimally lower to 25.7%, from 25.8% in February 2021, reflecting some modeled transition of "short-term" to "long-term" discouraged workers, with the Pandemic having passed its 12-month anniversary. The latest Unemployment Rates are posted on the ALTERNATE DATA tab (above).

S Y S T E M I C .. R I S K -- The April 2021 FOMC Meeting produced no change in Policy or Outlook (April 28th, Federal Reserve Board's Federal Open Market Committee [FOMC] Statement and Federal Reserve Chairman Jerome S. Powell's Press Conference). With no shift in the FOMC economic or inflation outlook, existing stimulus and federal funds rate policies are expected to continue through year-end 2023, as projected previously at the March 2021 FOMC Meeting. That said, Chairman Powell forewarned of a possible "temporary" boost to the FOMC's targeted Inflation Series, as discussed earlier in the second paragraph of the LATEST NUMBERS section, and opening paragraphs on the GDP.

Today's Federal Reserve Press Release reconfirmed, once again: "The Committee [FOMC] seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved."

(April 27) March 2021 Money Supply and Monetary Base Continued to Explode (Federal Reserve Board - FRB). Where the Pandemic began hitting the system hard in March 2020, the Federal Reserve responded with a massive influx of Money Supply -- liquidity. Accordingly, comparative year-to-year change in the various March 2021 Money Supply measures tends to be depressed, against what otherwise was the February 2020 Pre-Pandemic trough in the various Money Supply measures, before the March 2020 surge. Here is how the various measures shape up. ShadowStats "Basic M1" (Currency plus Demand Deposits) gained by a depressed 62.1% year-to-year in March 2021, versus 69.6% in February 2021, yet March 2021 was up by a record 73.6% against that February 2020 Pre-Pandemic trough, contrasted versus the February 2021 62.1% change year-to-year, and against that same February 2020 Pre-Pandemic trough. The Money Supply numbers have been updated to the ALTERNATE DATA tab. See the detailed discussion and graphs in No. 1459 and pending No. 1460 .

In like manner, March 2021 versus the February 2020 Pre-Pandemic trough, and February 2021 against the February 2020 Pre-Pandemic trough (and year-to-year) shape up as follows. Newly redefined headline M1 was up a record 363.9% versus 356.9% (or 34.0% versus 32.1% on what would be a more-consistent basis going forward). M2 was up 28.6% versus 27.0%, and M3 was up 23.4% versus 22.5%.

On a parallel basis, although not hitting the record levels of the 2007-2008 Banking System Collapse, the March 2021 Monetary Base change versus the Pre-Pandemic trough and February 2021 year-to-year change hit 69.0% versus 57.7%, with Currency at a record 17.8% versus 16.9%, and with Bank Reserves surging 124.6% versus 101.9%, as though it were the 2007-2008 collapse.

The Money Supply Table and Graphs on the ALTERNATE DATA tab, and the data here, again, reflect March 2021 Money Supply and Monetary Base growth against the February 2020 Pre-Pandemic trough level, which otherwise is muted by the crisis passing beyond its first anniversary and against surging Money Supply growth in March 2020, as the FOMC entered its initial panic.

(April 6th) U.S. Government 2020 Financial Statements. -- The deepening deficit net worth of the U.S. Government's financial condition hit a record shortfall – negative net worth – of $113.8 trillion in fiscal year 2020 (year-ended September 30), widening from a $103.4 trillion negative net worth in 2019. That 2020 shortfall reflected an operating deficit "Net Position" or operating negative net worth of $26.8 trillion in 2020, widening from a Net Position deficit of $23.0 trillion in 2019, plus deepening unfunded Social Security and Medicare net liabilities (Closed Group) of $87.0 trillion in 2020, versus $80.4 trillion in 2019. As did her predecessors, Treasury Secretary Janet L. Yellen described the current "Fiscal Path" as "Unsustainable," with the government's current Debt-to-GDP ratio at 100% in 2020, predicted to go to 623% before the end of the Century. Those indications are overly optimistic in the extreme. Allowing for the "Unfunded" Liabilities, the Debt-to GDP ratio was 531% in fiscal 2020. The 2020 Financial Report is available here: https://www.fiscal.treasury.gov/reports-statements/financial-report/ -- ShadowsStats will provide extended analysis in pending No. 1461 .

Systemic Turmoil is just beginning, with both the Fed and U.S. Government driving uncontrolled U.S. dollar creation, between unconstrained Money Supply growth and uncontained Deficit Spending. Again, continued extraordinary Monetary and Fiscal Stimulus will be needed at least into 2022, irrespective of the nature of the COVID-19 vaccines. Indeed, likely leading into accelerating inflation, Hyperinflation, both extreme Monetary and Fiscal stimuli are underway. Discussions on the inflation threat and re-accelerating money growth are found in Special Hyperinflation Commentary, Issue No. 1438 , subsequent missives including particularly No. 1451 and No. 1454 , with a fully updated and expanded review pending in Benchmark Economic Commentary, Issue No. 1461 .

Economic, FOMC, financial-market, political and social circumstances all continue to evolve along with the Pandemic and unfolding political circumstances. COVID-19 vaccines and improved treatment hold out some prospect of limited economic improvement in 2021 or 2022. Still, many segments and regions of the U.S. economy, and individual, personal circumstances have suffered severe structural damage from the shutdown, areas that likely will take years to recover fully. Accordingly, ongoing massive Fiscal and Monetary Stimuli will be needed and likely will expand well into 2023, per both the current FOMC outlook and the ongoing ShadowStats assessment.

SHADOWSTATS ALERT: In context of the still-evolving Coronavirus Pandemic and related or economic crises, near-term financial-market risks from negative economic, liquidity and political issues, are intensified by potential Hyperinflation, long viewed by ShadowStats as the ultimate fate of the U.S. Dollar. That said, irrespective of recent relative weakness in gold prices and related Central Bank or other market machinations, the ShadowStats broad outlook in the weeks and months ahead remains for: (1) A continuing and renewed deepening (potentially hyperinflationary) U.S. economic collapse, reflected in (2) Continued flight to safety in precious metals, with accelerating upside pressures on gold and silver prices, (3) Mounting selling pressure on the U.S. dollar, against the Swiss Franc and other stronger currencies, and (4) Despite recent extreme Stock Market volatility, continuing high risk of major instabilities and heavy stock-market selling, complicated by ongoing direct, supportive market interventions arranged by the U.S. Treasury Secretary, as head of the President's Working Group on Financial Markets (a.k.a. the "Plunge Protection Team"), or as otherwise gamed by the FOMC.

P O S T I N G .. S C H E D U L E .. (Updated April 29th) -- Commentary postings on www.ShadowStats.com are advised to Subscribers by a coincident e-mail, along with appropriate links. [Subject to Change] Economic Commentary No. 1460 will post over this weekend, reviewing recent economic, financial-market and monetary numbers and FOMC developments. Benchmark Commentary No. 1461 likely will follow over the May 8th Weekend, updating the ShadowStats Long-Term Economic and Inflation Outlook.

PENDING EVENTS AND DATA: The Census Bureau will publish March 2021 Construction Spending and annual revisions on May 3rd at 10:00 a.m. ET, ShadowStats coverage should follow by 4:00 p.m. ET.

ARCHIVES - VIEWING EARLIER COMMENTARIES. ShadowStats postings of December 2020 and before - back to 2004 - are open to all, accessible by clicking on "Archives," at the bottom of the left-hand column of this ShadowStats homepage.

ALTERNATE DATA TAB provides the latest headline data, exclusive ShadowStats Alternate Estimates and related Graphs of Inflation, GDP, Unemployment, Money Supply [just updated] and the ShadowStats Financial-Weighted U.S. Dollar. Data downloads and the Inflation Calculator are subscriber only.

Best Wishes -- John Williams

[Apr 29, 2021] This Is the One Chart That Illustrates What's Really Going on in the Market

Apr 29, 2021 | realmoney.thestreet.com

Stocks quotes in this article: SPY , ARKK

Indices such as the Dow Jones Industrial Average (DJIA) and S&P 500 ( ( SPY ) ) are generally viewed as convenient ways to measure the health of the entire stock market. Indeed, they are the indicators that most folks in the business media use to determine if there are uptrends, downtrends, bull markets, or bear markets.

The major indices generally do a good job of measuring overall market health, but there are times when they can be very misleading. The problem is that there a small number of big-cap stocks that can move the indices in one direction while hundreds or even thousands of smaller stocks are moving in the other way.

Over the last 10 weeks, there has been a significant disconnect between the stocks that led early in the year and the indices. Growth stocks, speculative small-caps, hot theme names, and other groups have been very weak for a while, but the S&P 500 was hitting a new high Thursday morning.

For a clearer picture of what is going on out there, a much better indicator is the ARK Innovation ETF ( ARKK ) . ARKK was in a very strong uptrend off the March 2020 low and gained nearly 400%. The fund held the stocks that market participants favored for a very long time. It topped at $160 on Feb. 16 and a week later had fallen 20% to $128, which is the definition of a bear market.

Since falling into a bear market, ARKK has been in a trading range and continued to languish. It is down more than 3% Thursday as growth stocks and small-caps are taking it on the chin again.

This is what is really going on in the market for most individual traders that focus on stock-picking. The S&P 500 and DJIA are totally disconnected from this action. For most traders it has been a bear market for over two months now, but we never hear about it in the media.

This presents the most crucial question right now: What will happen to ARKK and the stocks that it reflects if there is a major correction in the senior indices? Will they continue to fall, or will there be some rotational action as money comes out of the names that are currently at highs?

There is no easy answer, but that is the dilemma we face if we start to see deeper corrective action in the S&P 500 and DJIA.

[Apr 29, 2021] On May 1, the inflation component on US Treasury I-Bonds will adjust to an annualized rate of 3.54%.

Apr 29, 2021 | finance.yahoo.com

Mary 5 days ago As an alternative to PTTRX, which is waning in the current interest rate environment...

A special deal is available and it's one of the few times you can lock in a great return with no risk. On May 1, the inflation component on US Treasury I-Bonds will adjust to an annualized rate of 3.54%. This is a tremendous jump due to inflation ramping up. I-Bonds, similar to TIPS combine the inflation rate with an interest rate component (currently 0% for I-Bonds) to get the overall yield. There is a $10k/person/year cap on the amount of I-Bonds that can be purchased through Treasury Direct. Between the folks living under your roof, that could amount to a good chunk.

In any case, you can easily set up an account on Treasury Direct and any money going in on/after May 1 will get the new 3.54% rate. You can't withdraw the funds for 5 years to avoid penalty. However, with a 3.54% yield, if you do need to withdraw early, the 6 months penalty still leaves you significantly better off than CDs or other alternatives.

The inflation component adjusts every 6 months, so the yield you get will vary. However, it's pretty well known that Powell/Treasury are looking to let the economy run hot for a while, basically committing not to raise interest rates until 2023.

Anyhow, have a look. There's a couple of good articles out there about this situation. I personally like the one on tipswatch. Mary 2 days ago @DOOGIE1 My pleasure. It's a tough environment for fixed income investors these days...I take what I can get. I think the I-Bonds are one of the best inflation hedges out there. TIPS should be good, but again, as a result of the crazy interest rate environment, the interest rate component on short-term TIPS is negative! I-Bonds never have negative interest component.

Lastly, re-reviewing terms, if you withdraw earlier than 5 years, penalty is last 3 months of interest, not 6 - so even better.

[Apr 29, 2021] The car makes a COVID comeback, and that means burning more oil

Apr 29, 2021 | www.bnnbloomberg.ca

After being stuck in their homes for so long, people are itching to get out again. It's a boon to newly reopening economies, with consumers ready to start spending more at gas stations, convenience stores, restaurants, hotels and attractions. Daimler AG, BMW AG and Toyota Motor Corp. all started the year with sales at records, and things are so hot that used car prices in the U.S. are soaring to all-time highs.

The jump in vehicle sales is a strong sign that this is more than just a passing fad.

Gasoline is the big winner.

Profits from making the fuel are near seasonal five-year highs and are expected to stay strong as the Northern Hemisphere heads into summer driving season. U.S. refiner Valero Energy Corp. says gasoline sales are nearly at pre-pandemic levels, and the biggest bulls are predicting demand could hit a record. The U.S. Energy Information Administration expects summer fuel prices to be the highest since 2018 this year.

[Apr 29, 2021] 'Earnings to the Moon' Is Just Latest Justification for Frothy Market by James Mackintosh

Notable quotes:
"... The bearish investor can take this as a sign of over-exuberance. ..."
"... The bearish investor can take this as a sign of over-exuberance. ..."
Apr 29, 2021 | www.wsj.com

The trouble with this line of reasoning is that it is hard to square with last year's market logic. A year ago, we were a month into a rebound as the valuations of big technology stocks soared, something explained at the time by far lower Treasury yields . That made sense: Lower bond yields make earnings that are expected to grow far into the future look more attractive, and Big Tech is full of those. Growth stocks were a great place to be as the longest-dated Treasury yields plumbed new lows. Valuations should rise when bond yields fall a long way.

Here we come to the problem: Just as lower yields justified a higher valuation for stocks last year, higher yields should mean a lower price-to-earnings multiple -- albeit a lower multiple of much higher earnings. Instead, valuations have gone broadly sideways as bond yields first rose and then this month pulled back a bit. The result is that the stock market's relationship with the bond market has gone haywire.

The strangeness shows up in the correlation between stocks and bond yields. Since the late 1990s higher yields have typically been good for stocks, so they tended to rise and fall together daily -- even as over the long run, yields fell and stocks rose.

Last year, this relationship broke down. Investors got into a cycle where bad news on the economy was good news for stocks, because it resulted in such extreme support from the Federal Reserve and the government. The effect canceled out the usual relationship almost entirely, breaking the link between stocks and bonds by late summer.

The odd relationship of yields up, stocks up...Yields dropped a little and growth stocks made more new highs. The tendency for both to move in the same direction, measured by the 50-day correlation of growth stocks to bond yields, has reversed and is at its most negative since the boom times of 1999. Bizarrely, the link between value stocks and bonds has also turned reversed, although not in such an extreme way, as value stocks also made new highs.

The bearish investor can take this as a sign of over-exuberance.

A

'Earnings to the Moon' Is Just Latest Justification for Frothy Market by James Mackintosh

The trouble with this line of reasoning is that it is hard to square with last year's market logic. A year ago, we were a month into a rebound as the valuations of big technology stocks soared, something explained at the time by far lower Treasury yields . That made sense: Lower bond yields make earnings that are expected to grow far into the future look more attractive, and Big Tech is full of those. Growth stocks were a great place to be as the longest-dated Treasury yields plumbed new lows. Valuations should rise when bond yields fall a long way.

Here we come to the problem: Just as lower yields justified a higher valuation for stocks last year, higher yields should mean a lower price-to-earnings multiple -- albeit a lower multiple of much higher earnings. Instead, valuations have gone broadly sideways as bond yields first rose and then this month pulled back a bit. The result is that the stock market's relationship with the bond market has gone haywire.

The strangeness shows up in the correlation between stocks and bond yields. Since the late 1990s higher yields have typically been good for stocks, so they tended to rise and fall together daily -- even as over the long run, yields fell and stocks rose.

Last year, this relationship broke down. Investors got into a cycle where bad news on the economy was good news for stocks, because it resulted in such extreme support from the Federal Reserve and the government. The effect canceled out the usual relationship almost entirely, breaking the link between stocks and bonds by late summer.

The odd relationship of yields up, stocks up...Yields dropped a little and growth stocks made more new highs. The tendency for both to move in the same direction, measured by the 50-day correlation of growth stocks to bond yields, has reversed and is at its most negative since the boom times of 1999. Bizarrely, the link between value stocks and bonds has also turned reversed, although not in such an extreme way, as value stocks also made new highs.

The bearish investor can take this as a sign of over-exuberance.

A Anthony Barnes
Thanks for the insightful article. Yet for the time being the facts don't matter. The Fed has turned investors--those who put money into the markets for the long term--into speculators--those who put money into the markets with the hope of selling to a greater fool in the short to near term. And just as most believe themselves above average, most of these speculators believe they'll be amongst those who will get out at the top. Never mind that as the saying goes, "There will be a whole bunch of fat people all trying to get out one skinny door."

[Apr 28, 2021] If Covid-19 Only Interrupted the Bull Market, the End Might Be Soon

The rise in commodity prices has pushed inflation and that raise questions about the Fed's assurances that any bump in inflation will be short-lived. Gundlach Says Fed Is Guessing That Inflation Will Be Transitory
Apr 28, 2021 | www.barrons.com

The stock market's recovery from the pandemic may be a mere continuation of the bull market that preceded this crisis. If so, stocks may be at the end of their run, rather than beginning an upswing.

It could actually be seen as the end of a longer bull market that began after the 2008-2009 financial crisis. That would mean the 2020 bear market and recession -- a health-induced crisis rather than one caused by financial excess -- interrupted a bull market that had gone on for more than a decade.

[Apr 28, 2021] Apple trading at 35 times EARNINGS?

Apr 28, 2021 | finance.yahoo.com


dopie 3 hours ago Apple....2.2 trillion market cap trading at 35 times EARNINGS? Reply 1 1 Patrick dopie 2 hours ago You think THAT'S a bubble? So that means you don't own any AMZN (P/E of 82), NFLX (61), or TSLA (695!!) either, right?

[Apr 27, 2021] Sell Signals All but Useless in Unchartable 2021 Stock Market by Lu Wang

Notable quotes:
"... The temptation to book profits and bail is getting hard to resist after the S&P 500's best 12-month rally since the 1930s. Increasing the anxiety are a mountain of charts signaling a market that's stretched to its limits. ..."
"... Earlier this month, the index soared 16% above its 200-day average, a feat that before December had occurred only a handful times over the past three decades. Moreover, the benchmark's relative strength index has surpassed 70 on both a weekly and monthly basis, a sign that the market has risen too far, too fast. ..."
"... A strategy following RSI signals has dropped 10% this year. The damage occurred as stocks entered the year with unbridled momentum that touched off an order to sell. The trade has since been in place as the S&P 500 never pulled back fast and long enough to flash buy. ..."
"... The moving average convergence/divergence indicator -- better known as MACD -- has suffered a loss of 9.8%. Five of the nine trading signals that the model has produced have been buys, and four of them have lost money. In addition, all four short recommendations have been losers. ..."
Apr 24, 2021 | finance.yahoo.com

(Bloomberg) -- If you bailed because of Bollinger Bands, ran away from relative strength or took direction from the directional market indicator in 2021, you paid for it.

It's testament to the straight-up trajectory of stocks that virtually all signals that told investors to do anything but buy have done them a disservice this year. In fact, when applied to the S&P 500, 15 of 22 chart-based indicators tracked by Bloomberg have actually lost money, back-testing data show. And all are doing worse than a simple buy-and-hold strategy, which is up 11%.

Of course, few investors employ technical studies in isolation, and even when they do, they rarely rely on a single charting technique to inform decisions. But if anything, the exercise is a reminder of the futility of calling a market top in a year when the journey has basically been a one-way trip.

"What we've seen this year is a very strong up market that didn't get many pullbacks," said Larry Williams, 78, creator of the Williams %R indicator that's designed to capture a shift in a security's momentum. A long-short strategy based on the technique is down 7.8% since the end of December.

"All the overbought and oversold indicators, mine as well as anybody else's, didn't get many buy signals, but a lot of sells," he said.

The temptation to book profits and bail is getting hard to resist after the S&P 500's best 12-month rally since the 1930s. Increasing the anxiety are a mountain of charts signaling a market that's stretched to its limits.

Earlier this month, the index soared 16% above its 200-day average, a feat that before December had occurred only a handful times over the past three decades. Moreover, the benchmark's relative strength index has surpassed 70 on both a weekly and monthly basis, a sign that the market has risen too far, too fast.

Add in pundits warning of bubble-like valuations and resurgent coronavirus concerns, and it's a recipe for sell orders. Hedge funds, for instance, have hit the exits this month, stampeding out of tech stocks just days before Apple Inc. and Amazon.com Inc. report financial results.

Yet avoiding the stock market for any period of time has proven to be the riskiest wager of all. The S&P 500 has yet to retrench more than 5% this year. At the same time, missing out on the big up days is more penalizing than ever. Absent the top five sessions, the index's 11% gain dwindles to 2%.

"To try to guess that this is the right time to be out of the market, you may as well go to Las Vegas," said Mark Stoeckle, chief executive officer at Adams Funds. "There's just as much risk doing that."

Bloomberg's back-testing model purchases the S&P 500 when an indicator signals a "buy" and holds it until a "sell" is generated. At that time, the index is sold and a short position is established and kept until a buy is triggered.

A strategy following RSI signals has dropped 10% this year. The damage occurred as stocks entered the year with unbridled momentum that touched off an order to sell. The trade has since been in place as the S&P 500 never pulled back fast and long enough to flash buy.

The moving average convergence/divergence indicator -- better known as MACD -- has suffered a loss of 9.8%. Five of the nine trading signals that the model has produced have been buys, and four of them have lost money. In addition, all four short recommendations have been losers.

Such is the cost of betting against momentum in a market where the S&P 500 has already eclipsed the average Wall Street strategist's year-end target.

"Today, and for much of 2020, the overbought conditions have been absorbed by the market with more strength, or at best a pause," said Renaissance Macro Research co-founder Jeff deGraaf, who ranked as the top technical analyst in Institutional Investor's annual survey for 11 straight years through 2015. "Overbought/oversold conditions are useless without first defining the underlying trend of the market."

Williams, who has been trading since 1962, agrees. Technical analysis tools aren't broken, he says, but in a bull market that's as resilient as this one, investors need to use them in the right context.

"You have to have a different tool, if you will, for a job you're doing," he said. "I have a hammer that can build a house, but if I use the hammer to dig a hole in the ground, that's going to be really hard."

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[Apr 27, 2021] Why The US Recovery Is Not That Strong by Daniel Lacalle

Notable quotes:
"... Since 2000, the US debt has increased about $20 trillion, roughly $1 trillion a year in deficit spending. In that same time, inflation adjusted GDP has risen one whole quarter. ..."
"... Throw the super rich into the mix and there is not much left for the little people. ..."
"... This "recovery" is based on liquidity, money printing and debt. May as well just make up the GDP numbers like the inflation numbers. ..."
Apr 20, 2021 | www.zerohedge.com
Authored by Daniel Lacalle,

There is an overly optimistic consensus view about the speed and strength of the United States' recovery that is contradicted by facts. It is true that the United States recovery is stronger than the European or Japanese one, but the macro data shows that the euphoric messages about aggregate GDP growth are wildly exaggerated.

Of course, Gross Domestic Product is going to rise fast, with estimates of 6% for 2021. It would be alarming if it did not after a massive chain of stimuli of more than 12% of GDP in fiscal spending and $7 trillion in Federal Reserve balance sheet expansion. This is a combined stimulus that is almost three times larger than the 2008 crisis one, according to McKinsey.

The question is, what is the quality of this recovery? The answer is: extremely poor.

The United States real growth excluding the increase in debt will continue to be exceedingly small. No one can talk about a strong recovery when industry capacity utilization is at 74%, massively below the level of 80% at which it was before the pandemic. Furthermore, labor force participation rate stands at 61.5%, significantly below the pre-covid level and stalling after bouncing to 62% in September. Unemployment may be at 6%, but it is still almost twice as large as it was before the pandemic. Continuing jobless claims remain above 3.7 million in April.

Weekly jobless claims remain above 500,000 and the total number of people claiming benefits in all programs -- state and federal combined -- for the week ending March 27 decreased by 1.2 million to 16.9 million.

These figures must be put in the context of the unprecedented spending spree and the monetary stimulus. Yes, the recovery is better than the Eurozone's thanks to a fast and efficient vaccination rollout and the dynamism of the United States business fabric, but the figures show that a relevant amount of the subsequent stimulus plans have simply perpetuated overcapacity, kept zombie firms that had financial issues before covid-19 alive and bloated the government structural deficit and mandatory spending.

Would the United States economy had recovered as fast as it has without the deficit-spending stimulus plans? Maybe. I believe so because the entire recovery, both in markets and the economy, has been driven by the vaccine news and the process of inoculation. Most of the programs that have been implemented have had a small impact compared to the re-opening of the hospitality sector and the vaccinations. The entire economic crisis came from the lockdowns and the virus and the entire recovery is the re-opening and the vaccinations.

My main concern is that this monster deficit and debt program has been set as the minimum for the next crisis. No one has analysed if the spending plans have been effective. In fact, in the eurozone no one seems to be concerned about the fact that countries that have spent between 20 to 30% of GDP in stimulus plans are now in stagnation. The mainstream message seems to be that if the spending plans have not worked it is because they were not large enough. Very few seem to be discussing the waste in public funding when the number one drivers of the recovery are the vaccine roll-out and the re-opening of the services sector.

It seems that governments want to convince us that they have saved the world when the reality is that the misguided lockdowns were the cause of the economic debacle and lifting them is the main cause of the recovery. In the process, trillions have been squandered. It is dangerous to accept that government spending no matter how much and what for is the only solution and even more dangerous to believe that the shape of the recovery is only a function of the size of the stimulus package. The problem was the virus and the government-imposed lockdowns, the solution is the vaccine and the re-opening. The problem was caused by government's lack of prevention and excess of interventionism and the solution is not more intervention.


Bay Area Guy 38 minutes ago

Since 2000, the US debt has increased about $20 trillion, roughly $1 trillion a year in deficit spending. In that same time, inflation adjusted GDP has risen one whole quarter. The other 19-3/4 years, real GDP declined.

This, despite the aforementioned $20 trillion in deficit spending. The "recovery" is not strong because we never got out of the recession/depression that was caused by the dot.com bubble bursting as well as the 2008 financial crisis.

When real GDP declines despite such massive infusions of debt, you're in big trouble. The fact that this also happened at a time when population (both legal and illegal) was rising means that more people are trying to get a share of an ever-shrinking pie. It's a recipe for disaster.

jim942 35 minutes ago

Throw the super rich into the mix and there is not much left for the little people.

GlassHouse101 53 minutes ago

"If you could print Prosperity, you would have thought they would have figured it out sometime over the past few hundred years." - Buffett

khakuda 32 minutes ago (Edited)

This "recovery" is based on liquidity, money printing and debt. May as well just make up the GDP numbers like the inflation numbers.

GeezerGeek 20 minutes ago

It's never made sense to me why consumer spending should be part of the gross domestic product. If .GOV passed out $20 trillion and gave people one year to spend it, would the GDP really be increased? If we had to produce those products here in the USSA it might come close to reality, but if all we spent the money on was stuff from Asia and nothing was produced here, the GDP would crash in 2022 without another $25 trillion to keep things going.

We should be using a different yardstick for measuring the economy, using things like real production (cars, corn) and non-government employment.

[Apr 27, 2021] Yet Another Ridiculous Stock Market Bubble, In Three Charts by John Rubino

Apr 27, 2021 | seekingalpha.com

There are dozens of charts that illustrate how closely today’s financial bubble resembles its predecessors. But simple is better when expressing a hard truth, so let’s go with that old standby, margin debt. This is debt created when over-stimulated investors borrow against their stocks to buy more stocks. At its high extremes, the result is always the same: A price decline that forces overleveraged investors to liquidate at any price, turning correction into bloodbath. Note that the steeper the rise in margin debt, the more severe the resulting plunge in share prices.

margin debt Wilshire 5000 stock market bubble

The next chart illustrates more clearly the “steep†thing. The current spike is one for the record books.

margin debt yearly change stock market bubble

Now, during past spikes in margin debt the “investors†who were swept up in the euphoria of easy money frequently responded to criticism with a variation on “corporate earnings are about to soar, which will make everything okay. Plus we know you’re only complaining because you missed the gravy train and you’re jealous.â€

But corporate earnings almost never completely offset extreme valuations and soaring margin debt. A useful measure for visualizing this fact is “earnings yield,†which is the S&P 500 index’s aggregate earnings expressed as a percentage of its aggregate market cap. This is how much a buyer of the average stock receives in earnings per dollar invested. Common sense says the more the buyer receives the better the deal. And history says the less the buyer receives the higher the likelihood of stock prices falling in the ensuing few years. Today’s yield of 2.36% is the second-lowest ever. That’s really bad.

... ... ...


[Apr 27, 2021] The market will collapse â€by end of June? Really? by Brett Arends

Market will definitely collapse sooner or later. But nobody knows when. Especially taking into account FED Plunge protection team activities. If is stupid and irresponsible to talk about June crash...
Highly recommended!
Apr 23, 2021 | finance.yahoo.com

Dent’s forecast seems to have struck some kind of chord. For about a week or longer, the article was the most popular article at ThinkAdvisor.com. But although he may be unique in setting a deadline, he’s not the only guru predicting disaster.

Just this week I got a note from Jonathan Ruffer, an eminent money manager in London, with this dire warning: “I take it pretty much for granted that the 40 year bull market is ending, and that it will be replaced by hard investment times.” And Jeremy Grantham (also born in England, but long based in the U.S.) recently concluded that stocks, bonds and real estate are all in a bubble and may well collapse together in the next year or two. Longstanding gloomster John Hussman estimates the S&P 500 SPX, +1.09% could end up losing us all money over the next 20 years even before you deduct inflation, and suspects a quick 25-30% market slump may be ahead.

I have a guilty secret. I’m a sucker for these warnings (OK, maybe not for Dent’s). They often make for compelling reading. The most bearish stock market forecasters are generally more intelligent, more freethinking, and more interesting than the average Wall Street salesman. They usually write much better, too. Hussman’s math and logic are almost unarguable. Why, asked John Wesley, does the devil have the best tunes? (I am not comparing these people to a religious devil, of course, only to the Wall Street equivalent: Sinners who may interfere with the business.)

And their arguments make plenty of sense. Maybe not those predicting a market collapse in time for Wimbledon, but those warning us of grim years ahead. The U.S. stock market is almost 90% above the level where the “Warren Buffett Rule” is supposed to trigger red flashing lights and deafening warning sounds. The so-called “Shiller” or cyclically adjusted price to earnings ratio ], the Tobin’s Q â€" all sorts of measures are telling us some version of Alien’s “Danger! The emergency destruct system is now activated! The ship will detonate in 30 minutes... 10 minutes ...” Run, don’t walk, to the escape pod. Don’t forget the cat.

And most of the most bullish forecasts we hear from Wall Street involve the simple fallacy of double-counting: The more stocks rise the better their “historic returns,” which a salesman then cheerfully extrapolates into the future.

... ... ...

It’s not that the bull market salesmen are clearly right. Actually, math and cold hard logic should give anyone cause for concern, especially about the most euphoric U.S. stocks.

But even if these skeptics turn out to be right, when is it going to happen? Will the market go up another 10% or 20% or 50% before it turns? Will it happen in June this year â€" or June in 2025?

I always figure that the day I finally decide to tune these guys out altogether will be the moment the Titanic hits the iceberg.

But there are options instead of trying to guess on Boom and Doom. We can just let the market decide for us instead. Money manager Meb Faber worked out years ago that pretty much every stock market crash or bear market in history has been signaled in advance. If you just cashed out when the market index first fell below its 200-day moving average, you avoided nearly all the carnage. (OK, in the sudden 1987 one-day crash you got all of a single day’s notice.)

Even if you didn’t end up making more money in the long-term than a buy-and-hold investor, he found, you made pretty much the same amount … and with far less “volatility“ (and sleepless nights).

Last year this trigger got you out of the S&P 500 on March 2, just before the main implosion. The market rose above the 200-day moving average again, triggering it was time to get back in, on June 1.

Most people will use the S&P 500 index as their trigger, but Faber found it worked for other assets such as REITs as well. Global investors may prefer the MSCI All-Country World Index.

Is this system guaranteed to work? Of course not. But nor is anything else. That includes all those bullish predictions that stocks will earn you inflation plus 6% a year. And those bearish predictions that once the market reaches a certain valuation triggers it’s heading for disaster. All rules are rely on some assumption that the future will resemble the past.

And using this rule means you can safely and happily ignore all the people predicting the end of the world.

Brett Arends

Brett Arends is an award-winning financial writer with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, "Storm Proof Your Money", was published by John Wiley & Co. Amos Library 8 hours ago It took 19 years and 2 crashes to get to even (inflation adjusted) from the 2000 peak.
James Goodwin 7 hours ago I've been among the gloomsters for the last decade and evidently wrong. That pessimism (and lost opportunity) rests on debt and demography which are connected into the future. Our vast debts are unstainable at these low interest rates unless savings are substantial and economic growth is high. For now the substantial baby boomer generation (now in their mid 70s and in their mid 50s to 60s) have no alternative but to invest in the stock market. This is self fulfilling lowering the cost of capital and pushing up returns as central banks can afford to come to the rescue. That seems to have hit the limits with record low interest rates and QE now being tested by rising bond yields. But as more retire there will be a double hit from the higher costs of their health and pensions, and a shrinking workforce which presents wage bargaining power (technology and globalisation included). That is a situation which has been slowly developing this last decade (beginning in Japan in the 1990s and more recently China) and will now accelerate across the developed world (notably in Italy and Germany). This pivots on Covid caused inflation which seems likely to be more than a blip. As part of this I am reminded that Japan's Nikkei Index is still 25% below its 1989 high of 38,000. I will retain my wait and see approach while others enjoy themselves talking and acting like its the roaring 20s. Reply 6 1 lee Hoffman James Goodwin 1 hour ago Well James you will be waiting another 10 years. Your prognostications have been wrong in the past, and will continue in the future. Bond yields in the US? What's the bond yields in Germany and Japan? Negative. Yes, the US monetary policy is suspect. But, compared to what? The Euro? The yen? The Chinese currency value is tied to ours, not an independent currency at all. Bond yields here have decelerated mostly because of the ability to arbitrage currency abroad and buy a 10 year US bond guaranteed by the US at 1.5 as opposed to a German Bund at negative .30! Yes, there is a wrinkle in the supply chain caused by Covid, and perhaps exasperated by reluctant workers to return to work, and frankly an incentive domestically not to go back to work. But the deflationary levers at work have not abated. The internet, international competition, more efficient supply chains, and the ability to tap into inexpensive labor worldwide are still there. You've missed in the last 10 years, by being out of the market a return of over 500%. Do you really feel qualified to provide investing advice? Reply 2 David Binkowski 8 hours ago The ones who treat ever rustle in the grass as a lion, also never become millionaires because they run every time the grass rustles. Sometimes surviving inhibits thriving. Reply 6 2 William Howell David Binkowski 7 hours ago Wait a minute! Your death also means thriving - for the lion! It's much better to die as a contributor to vibrant being than to get run over by an inanimate car. (Message paid for by the Lion's Pride) Reply 2 Darryl Egbert David Binkowski 7 hours ago I became a millionaire through hard work and frugal living and not touching the stock market (except for some shorts in 2000 and 2008). Todd Johnson 5 hours ago In April of this last year 2020 there were many "experts" predicting an even larger crash after the March 20th bottom from Covid, mainly due to the economic slowdown and huge jump in unemployment. I felt that as the pandemic waned the thirst for consumption would re-emerge so I bought, bought, bought. While Warren Buffet was selling all his airline stock I was buying them. I made over 50% return on these investments since then. Not bad! Reply 2 Mike Mayo 5 hours ago A homeowner since 1995, I live in St Petersburg, Florida - where real estate values have exploded over the past few years (since '17), and there is very little inventory. Without question, this is NOT a healthy market, and I'm hopeful that prices will in fact decrease modestly while inventory increases. I have over $400K in equity in the house, and can't even buy a loaf of bread with it. In fact, I continue to put money into the house, with repairs, renovations, etc. Making matters worse, I can't even downsize into something smaller and less expensive - and bank or invest the difference - since prices are sky-high and inventory so low. This is not a healthy or sustainable market. As for the financial markets, it remains the greatest wealth creator in the history of human-kind. Markets will always fluctuate, sometimes wildly, but if you keep cash on the ready, consistently buy the dips and don't sell in a panic into weakness, you will always make money - and lots of it. Throughout the bull-market that started in '09, we've had some very significant down-turns and corrections. December '18 is an excellent example. The market dropped like a rock, nearly 20% in a month. The following month, the market came roaring back. I'm confident that at some point this year, the market will have a 10%+ correction. I will stay the course, buy that dip aggressively, only to have the market come roaring back and my net-worth grow. Reply 2 Paul Johnston Mike Mayo 5 hours ago Just curious: If you want to cash out the gains on the house, why not downsize and buy elsewhere? There are lots of pleasant places to live besides St Pete, and not all have low inventory and sky-high prices. Just sayin'.... Reply
don stern 2 hours ago Since 1793, there has never been a stock market crash that hasn't resulted, ultimately, in another all time stock market high. Reply 2 Thor B don stern 2 hours ago The key word is "ultimately"... Reply Amos Library 1 hour ago from a major investment research company V and L weekly summary 4/30 There are potential flies in the ointment, however. First, there is a recent jump in inflation, with the U.S. homebuilding sector and several regional manufacturing surveys The Value Line View In This Issue suggesting greater cost pressures. Then, there’s the troubling uptick in COVID-19 cases, which could slow progress on the recovery front. Meanwhile, earnings season is proving to be a solid one so far, with strong performances from a number of banking giants, as well as several consumer and tech entities. In all, we think Corporate America will do well in the coming weeks. Here, too, there should be further improvement in the next few quarters. The bull market is rambling on, with the Dow Jones Industrial Average recently ascending 34,000 for the first time ever while the NASDAQ, off notably to close the first quarter, is back near 14,000. What’s more, the recent trends could well continue, although the high price-earnings ratios and low dividend yields now in place make the stock market, now priced for near perfection, vulnerable to unwelcome news. So, some caution is warranted. Conclusion: We think investors should proceed with some care, with a wary eye on price-earnings ratios and dividend yields. Reply 1 Michael Wilson 2 hours ago Using both the 50 and 200 DMA as signals works good also. Sell 1/2 if the 50 is crossed and the other half if the 200 is crossed. Reverse the method to buy. Worked great over the last two years.
Jakob Bear 7 hours ago Well written article thanks.. Growth stocks already crashed though so I'm guessing he is referring to tech and the dow? Could be, always a good idea to have money on the sidelines to pick up any drastic or non-sensical dips. Dividend stocks still give dividends also so the economy really would have to crash. Consider we are just coming out of covid and there is robust growth ahead, it is unlikely the economy is going to crash anytime soon, maybe not grow as fast as anticipated. But once again bond rates will go down and growth stocks will go up if that happens. Who knows I'll stick with a few select spec stocks for now they don't follow the market anyways except in short term movements. Good luck all!

CARLOS T BAEZ 7 hours ago Discipline always works in the long term. If one treats every historical proven trigger consistantly, one would do better than average. The reason that it is called discipline is because it most be acted upon consistanly. Wealth always runs to where it has been treated the best historically: Real Estate, US Treasuries, Commodities (between a cookie brand and a company that provides the flour, butter, salt and suggar I would always choose the latter), significant companies' dividend stocks, defensive stocks, major financial stocks, and major consumer staples stocks. No matter how the economy/stocks do one has to eat, drink, shelter, utilities, transportation, communication, health care and die (funeral homes). If one can not make money (consistantly) with the S&P 500, one can not make money in any other index consistantly. Never bet against the USA. We are the Financial/Wealth Heaven in the unniverse. Reply 2 2 Darryl Egbert 7 hours ago I really do believe we are now at the point that the Fed cannot allow assets prices to fall without the real economy taking a huge nosedive. They have essentially sucked (forced) everyone into the equities to avoid losing the purchasing power of their savings. If asset price were to drop by 50%, people would look into their savings accounts and realize they have to stop consuming and start saving their a significant income to make up for the losses (the "wealth effect" that the Fed built the recovery on would go into reverse). They have said as much in congressional testimony - if a fall asset prices flows through to the real economy, there is a Fed "put". One my favorite advisors made a comment this weekend that 20% fall in equities would be met by the Fed jumping in with $50 billion/month of more QE. He also postulated that they would go find some good lawyers who could find a loophole around the Federal Reserve Act, allowing the Fed to directly purchase equities - like they have been doing in Japan. As Hussman says, even if they could prevent asset prices from falling materially, the forward returns will dismal if not negative for decades to come. Fed can postpone - or maybe even prevent price discovery, but they cannot change the underlying value of assets. And long as the price of assets exceed the underlying value, you are swimming against the currents. Reply 1 William Howell 7 hours ago Fun article by Brett Arends. This seems to be a basic need of every human : to carry around at least five "end-of-the-world scenarios" at all times. Why 5? Because these scenarios have a habit of [washing out, breaking in two, being mis-placed or forgotten]. But historically they also become true, even in recent times, and perhaps to far greater depths than the imaginations of Hollywood? But one can't stop living for fear of death (or a bad-return year). At least one of your doomsayers has also been a super-bull on and off, not a perma-bear. Reply 1 T Cr 5 hours ago In the modern data-tracking of stocks, there has never been a worldwide pandemic coming a few years after a global equities and banking meltdown. This time right now is unheralded. So, all of the old "rules" for predicting a turn toward the bears simply can't and don't count. This is one data point, and you never base a statistical conclusion on one data point; you need at least 10 for significance and preferably 20. So, ignore anyone who is using these old metrics to try to win any argument about upcoming market conditions. They simply don't even enough data points to base the future on the past. Instead, look to current forces at play and use your ability to rank order investment choices for both individual and institutional investors: inflation and bond yields are ultra-low, central banks are still involved in some degree of quantitative easy, federal governments are still stimulating economic activity, unemployed resources still exist in any number of sectors (entertainment, food service, vacationing, labor), major corporations still pay dividends well in excess of inflation (I see you Verizon and AT&T), and profits in any and all health care related industries are booming as is residential real estate and IT (remote learning and work from home). As long as these factors hold, well chosen stocks or indexes will flourish. Investors don't want either bonds or CDs, and a tin can in the back yard rarely feels like a savvy choice. Reply michael pyles 3 hours ago Falling interest rates, decreasing taxes, higher government spending, rising productivity via automation, and loss of labor bargaining power via globalization and the destruction of unions, have all kept the market rising since 1982. Keep your eye of these. If they begin to change, the outlook for earnings will change. Don't be a victim to recency bias. Reply
Amos Library 1 hour ago Lance Roberts Real investment advice dot com For Jeremy Siegel, making wild predictions about markets has no consequence. If he is wrong, he makes another prediction to cover for the first. However, for you, following such a prediction can have a devastating impact on your short- and long-term financial goals. The reality is that markets are pushing “rarified air.” It is unlikely that corporate earnings will achieve the lofty goals set out by analysts currently. It is also very probable that economic growth may be weaker than expected. Of course, these are just “concerns” of an overvalued, extended, and overly bullish market. Sure, the current cyclical bull market could rise another 30%. Momentum-driven markets are hard to kill in the latter stages, particularly as exuberance builds. However, they do eventually end. Will the market likely be higher in another decade from now? Maybe. However, if interest rates or inflation rise sharply, the economy moves through a normal recessionary cycle, or if Jack Bogle is correct, things could be much more disappointing. As Seth Klarman from Baupost Capital once stated: “Can we say when it will end? No. Can we say that it will end? Yes. And when it ends and the trend reverses, here is what we can say for sure. Few will be ready. Few will be prepared.” Amos Library 1 hour ago Lance Roberts Real investment advice dot com For Jeremy Siegel, making wild predictions about markets has no consequence. If he is wrong, he makes another prediction to cover for the first. However, for you, following such a prediction can have a devastating impact on your short- and long-term financial goals. The reality is that markets are pushing “rarified air.” It is unlikely that corporate earnings will achieve the lofty goals set out by analysts currently. It is also very probable that economic growth may be weaker than expected. Of course, these are just “concerns” of an overvalued, extended, and overly bullish market. Sure, the current cyclical bull market could rise another 30%.
Jay Arant 5 hours ago Dent's thinking sounds dented. We've had quite a few pullbacks since the beginning of this year and I believe a correction is coming whenever but no one know exactly WHEN.....Do not put any "stock" into some fringe thinking doomsday prophesyer which we've all heard before. Reply 1 1 Gerry Cruzman Jay Arant 3 hours ago The US is approaching $30 trillion dollars of National Debt, and we have a mentally incompetent President and Dems in control of Congress who have no interest or clue in controlling Federal spending - and it’s but a matter of time until that massive debt and uncontrolled spending reeks havoc with our economy... Reply 1 3 Show 2 more replies Mike Staples 8 hours ago When hype runs into reality, there’s a crash. As long as reality is being hid by money from above, there’s no need to worry. Reply Alberto Perez 6 hours ago With central bankers' feet on the accelerator, it's hard for me to envision a "crash" anytime soon. Reply Maitreya riske Alberto Perez 5 hours ago Almost every crash has been caused by the Central Bank trying to goose the economy. The next one will be also. Reply Maitreya riske 6 hours ago The BIG issue with the market as currently configured is that we are relying on the FED to save us if something goes wrong even though these are the exactly the same people who have destroyed all market pricing signals/ pushed us all to the same side of the boat at the same time/ continually tried to goose the economy over and over until interest rates have been lowered to zero. Well guess what? Now they are trapped because how do you engineer a new bull market when you can't lower rates the next time something bad happens. That's the problem, we're told everything is fine but its not. If we actually had a real economy based on savings and investing instead of a giant pozzi game based on IOU's and Debt then maybe people wouldn't be so worried. You should be worried because trusting these people is a fool's errand. But don't worry Goldman Sachs will be there with plenty of cash to buy all your assets for dirt cheap when the time comes. Reply T Cr Maitreya riske 5 hours ago You see only the FED as a key actor in macro policy. Keynes holds most of the cards, though, not the FED. Stimulus by the Treasury for brick and mortar projects is ultimately much more powerful than the FED, and requires no changes in either taxation or the buying/selling of Treasuries. Any spending that is needed is simply done by creating new money via the Treasury, which is its Constitutional authority. As long as inflation is well under 3%, say most economists, creating new money nudges innovation, upgrading of infrastructure, enhanced education for a smarter future work force and enhanced productivity. Priming the economic pump is not a Ponzi scheme, since no one has to be "paid back", ever, as in a Ponzi scheme. There is no "debt" when the Treasury creates new money. Reply 1 Hey Now 4 hours ago I just figured loose monetary policy from the Fed would keep this bull market going. Reply Mike Elek 5 hours ago Somewhere between market doomsday and the never-ending party is the truth. For those who have warned, "Cash out now!" for the past five years, well, they missed out on an incredible bull run. Then there are those who post rocket emojis and expect this bull run to continue forever. I'm OK with a market downturn, because it's healthy. Fundamentals should win out, because someone always wins on Wall Street. All of those who short stocks help the market, because their bearish predictions help to keep stock prices in check (my theory). Another of my theories is that Trump kept the market in check. Every time the market seemed ready for a big run-up, he would say something ridiculous, and the market would slide. I think that this prevented a massive bubble and crash. His big mouth caused mini-corrections, which in the long run helped the market. ... See more Reply Dave N Japan 1 hour ago I see the market not doing much in he next 4 years, but not a collapse, It all depends on China and Taiwan I think Reply average american 3 hours ago Please read this info from Indian medical experts regarding COVID triple mutation. If this is true a market crash is around the corner. Western world doesn’t want you to know. The Times of India spoke to Vinod Scaria, a researcher at the CSIR-Institute of Genomics and Integrative Biology in India, who said the triple-mutant was also an "immune escape variant" â€" a strain that helps the virus attach to human cells and hide from the immune system. In other words, you may not be safe from this variant even if you were previously infected by another strain, or even if you have been vaccinated," Chinnaswamy said. Reply

[Apr 27, 2021] To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals. by Julia-Ambra Verlaine

Yield curve is available from Statista See also Daily Treasury Yield Curve Rates < and Understanding The Treasury Yield Curve Rates
Notable quotes:
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
"... The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets. ..."
Feb 23, 2021 | www.wsj.com

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?


To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.

Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

To what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals.
Extracted from Key Short-Term Bond Spread Hits Lowest Level in Nearly a Year - WSJ By Julia-Ambra Verlaine
Yield curve is available from Statista See also Daily Treasury Yield Curve Rates and Understanding The Treasury Yield Curve Rates

Feb. 23, 2021

The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress.

The two-year Treasury yield, which closed Tuesday at 0.115%, is 0.015 percentage point above the interest rate on excess reserves, or IOER. It traded as low as 0.105% earlier in February. The Fed pays banks on the reserves held above and beyond those required by central-bank regulatory policy as part of its effort to maintain liquidity in the financial system.

When the coronavirus sent markets and the economy into a tailspin in March, the Fed cut IOER by 1 percentage point to 0.10% -- alongside other interventions -- to shore up short-term lending markets and support economic activity. The spread between IOER and the two-year yield has typically been above 0.05 percentage point since the Fed cut the rate to its lowest level ever in March.

Yield on U.S. 10-year Treasury note Source: Tullett Prebon % March 2020 '21 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Traders said the shrinking of this spread reflects appetite for short-term debt as investors gobble up safe assets and park their cash. It also highlights a key tension point in financial markets: to what extent is Fed support for markets taking asset prices to unsustainable levels, and how vulnerable does that leave bond markets and other areas exposed to sudden reversals

...bond traders are concerned that inflation could rise in coming months and years as the government prints money to support the economy and cover future borrowing costs.

Traders contend that short-term yields would be higher if the central bank wasn't anchoring rates. The Fed has been buying $80 billion in Treasurys each month since June and slashed rates to near zero in March to stabilize financial markets.

The idea is that low interest rates and bond buying boost spending by providing cheap credit to businesses and households. Some bond investors fear too much cheap credit will mean inflation.

... Another corner of U.S. markets is sending warning signals: the 10-year break-even rate, which tracks annual inflation expectations over the next decade, traded as high as 2.24% last week.

....The difference between the break-even rate and the Treasury yield recently widened to more than 1 percentage point. For some this is a sign that inflation isn't far off, and in the meantime that financial markets remain vulnerable to bubbles.

"I would characterize the phase we are in now as an era of hyperstimulation between fiscal and monetary policy," said Thomas Pluta, global head of linear rates trading at JPMorgan Chase & Co. "The byproduct is all this cash sloshing around the system chasing assets like crypto, commodities and meme stocks." (Traders on Reddit's WallStreetBets forum use memes such as a rocket emoji to accompany favorite stock picks like GameStop Corp.) SUBSCRIBER 1 month ago

So every time the stock market wobbles the Fed is going to step up and say "don't worry, hang onto your stocks and bonds, we'll keep printing more money?"

How long does THIS go on....?

[Apr 27, 2021] The biggest lesson for the leveraged finance market from the late 1990s is that no amount of equity can salvage a bad business model and by extension issued junk bonds

Highly recommended!
Notable quotes:
"... Still, credit risk has been rising in the $1.2 trillion market of below-investment-grade loans, like those Cyxtera took on for its 2017 acquisition by private-equity firms. Issuers of such "leveraged loans" are also being acquired by SPACs. That will likely lead to higher levels of distress among such companies in the next economic downturn, according to Mr. Daigle. ..."
Apr 27, 2021 | www.wsj.com

... Conditions are significantly different now than in 1999, when speculative telecommunications companies raised capital by issuing stock and high-yield bonds, Mr. Daigle said. That bubble enabled companies like Global Crossing Ltd., Iridium LLC and WorldCom Inc., to raise billions of dollars before they went bankrupt .

"The biggest lesson for the leveraged finance market from the late 1990s is that no amount of equity can salvage a bad business model," Mr. Daigle said.

In contrast, the average credit quality of high-yield bond issuers today is relatively strong. More than half of high-yield bonds are rated double-B, the highest below-investment-grade rating, compared with a historical average of 35%, Citigroup's Mr. Anderson said.

Still, credit risk has been rising in the $1.2 trillion market of below-investment-grade loans, like those Cyxtera took on for its 2017 acquisition by private-equity firms. Issuers of such "leveraged loans" are also being acquired by SPACs. That will likely lead to higher levels of distress among such companies in the next economic downturn, according to Mr. Daigle.

"It's the opposite of what we saw in the 1990s when the speculative lending was happening in the high-yield bond market," he said.

... .... ...

Write to Matt Wirz at [email protected]

[Apr 27, 2021] Contra Market Definition and Examples

The problem with this idea is that then crisis stiles, previously weakly correlated accest became strong correlated in one minute.
Apr 27, 2021 | www.investopedia.com

What Is a Contra Market?

Contra market is a description of an asset or investment that moves against the trend of the broad market. Contra market securities and sectors tend to have a negative correlation , or weak correlation, with the broader market index and the general economy. When the economy is weak or stock market indexes underperform , contra segments outperform , and vice versa.

Understanding a Contra Market

A contra market stock or sector is one that performs well in bear markets and underperforms in bull markets. For example, defensive stocks â€"so called because of their relative immunity to economic cycles â€"such as large pharmaceuticals and utilities, may outperform (but not necessarily rise in value) during bear markets because of their stable revenues and cash flows. However, they may not fare as well during bull markets when investors favor riskier stocks and sectors such as technology and basic materials.

"Safe haven" securities such as U.S. Treasuries and gold, which have the greatest appeal during economic turmoil, are also classic examples of contra market plays.

KEY TAKEAWAYS Contra Market Strategies

Contra market strategies are employed for a variety of reasons. Possibly an investor believes the broader market will decline, and so they wish to gain some protection, or possibly profit, by moving some or all of their funds into contra markets. Or possibly the investor is a contrarian , meaning they prefer to buy or sell assets that go against the flow of the broader market or economy. The investor may also simply want to diversify and not hold only assets that tend to move in the same direction.

Advantages of Investing in Contra Market Sectors

During bull markets, cyclical sectors such as technology and financials perform well and get more expensive in terms of price, while contra market sectors such as consumer staples and utilities underperform. This provides investors with an opportunity to accumulate contra market stocks at lower prices and more attractive valuations. For example, as the U.S. economy performed well in the first half of 2018, technology FANG stocks outperformed the broader market. 1 As a result, utility stocks were out of favor and subsequently cheaper. This may have attracted some contra investors to start accumulating positions in these underperformers in the hopes that they will perform better in the future.

Disadvantages of Investing in Contra Markets

While contra markets provide a potentially safer or more profitable place to be when the broader market or economy changes direction, holding contra assets during a major bull market could mean missing out on big returns from the broader market. Over a 5 year period between May 2014 and 2019, the SPDR S&P 500 (SPY) returned over 50% while the SPDR Gold Trust Shares (GLD) returned -3%. Taking part in the major bull market in stocks was a more prudent play than hoping gold would find its footing.

Example of a Contra Market: Gold

Gold has a weak correlation with the S&P 500 stock index. At times the correlation is negative, other times it is positive, and tends to oscillate back and forth. Many investors like to hold gold as it is viewed as an outperformer during tough times for the stock market. Yet that isn't always the case.

When the S&P 500 rose in 1995 to 2000, gold declined and had a negative correlation. The S&P 500 then fell from 2001 into late 2002. Gold started rising while stocks were falling, trading relatively flat and then picking up steam to the upside in mid-2001. So in this case, switching to gold would have paid off.

The chart below shows the SPDR S&P 500 ETF versus gold futures (blue line), with the bottom indicator showing the correlation between the two assets.

SPDR S&P 500 ETF versus Gold Futures Monthly Chart
SPDR S&P 500 ETF versus Gold Futures (Blue Line) Monthly Chart. TradingView

From early 2003 to mid-2007 stocks and gold both rose. Stocks flattened out for most of 2007 while gold rose. For this period, gold was favorable as stocks where topping . Stocks and gold both sank in 2008, but gold turned higher earlier than stocks and ran to upside into the 2011 high.

The S&P bottomed in early 2009 and continued to rise into 2019, with several corrections . Gold peaked between 2011 and 2012, and then went into a downtrend in 2013. Between 2014 and 2018 gold moved sideways, and did not provide a safe haven during the 2015 stock market correction as gold also fell during that time. In 2018, while stocks experienced a correction, gold also fell, although it experienced a small rally prior to the stock market bottom.


[Apr 27, 2021] Stock Market Bubble Will Burst And Inflation Will Follow by Steve Forbes

Printing money has its limits after which the Central Bank loses the control of inflation. The only question is when this limit will be reached.
Notable quotes:
"... The Fed is underestimating the massive amount of money printing it will have to do to finance the largest peacetime spending the U.S. has ever engaged in. Banks, foreign governments and U.S. agenciesâ€"chiefly Social Security, which is no longer running large surplusesâ€"are not going to be the big buyers of bonds, as has previously been the case. That leaves the Fed doing the heavy lifting, and the scale of money creation it will need to do will fire up a sizable inflation. ..."
Mar 23, 2021 | www.forbes.com

The stock market is assuming that the damage the Biden administration and the Federal Reserve are beginning to inflict on the recovering economy will be limited. This episode of What’s Ahead examines why that happy assumption will explode.

https://38c955987b75409f16a397b835ed7fc9.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

The Fed is underestimating the massive amount of money printing it will have to do to finance the largest peacetime spending the U.S. has ever engaged in. Banks, foreign governments and U.S. agenciesâ€"chiefly Social Security, which is no longer running large surplusesâ€"are not going to be the big buyers of bonds, as has previously been the case. That leaves the Fed doing the heavy lifting, and the scale of money creation it will need to do will fire up a sizable inflation.

Then there are the enormous tax increases that Democrats are determined to enact on capital gains, businesses, higher incomes, gasoline, car mileage, energy, inheritances and more, which will whack the nascent recovery later this year and in 2022.

The economy has real strengths coming out of the pandemic, but it won’t be able to withstand the magnitude of these abuses.

[Apr 27, 2021] These money and investing tips can hold your portfolio together if the stock market cracks - MarketWatch

Apr 27, 2021 | www.marketwatch.com

Much depends on investors' appetite for taking risk. Why it’ll take more than easy money from the Fed to keep sparking this bull market in stocks

Change in leadership shows up weeks before the market makes a turn. High-momentum stocks have been losing steam and this could be signaling a market top

Believe it or not, worry about a bubble is widespread at the top of a bubble The psychology of a stock market bubble

Be skeptical of fads, fashions and trends and operate within your circle of competence. Warren Buffett could teach traders in dogecoin, GameStop and other hot trends a few things about ‘Mr. Market’

Higher taxes for the ultra-wealthy when they sell stocks would have a ripple effect on all investors. A capital gains tax hike might sink stocks. Here’s how financial advisers and their clients can stay a step ahead

Look for inconsistencies between reported returns and what a fund's strategy should realistically produce. Bernie Madoff’s scam was hard to spot but this red flag was â€" and still is â€" a clue

[Apr 27, 2021] The psychology of a stock market bubble by Mark Hulbert

Notable quotes:
"... This widespread concern is entirely consistent with a bubble’s formation, according to a definition proposed several decades ago by Robert Shiller, the Yale finance professor and Nobel laureate. According to him, a bubble is “a market situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, bringing in a larger and larger class of investors, who, despite doubts about fundamental value ..."
"... Rather than responding by taking some chips off the table, however, many began freely admitting that a bubble was forming. They no longer tried to justify higher prices on fundamentals, but began justifying it instead in terms of the market’s momentum. Prices should keep going up as FOMO seduces more and more investors to jump on the bandwagon. ..."
"... As a recent Wall Street Journal article outlined , the dogecoin “serves no purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.†Yet investors are flocking to it, for no other apparent reason than it has already gone up so much. Billy Markus, the co-creator of dogecoin, was quoted in that Wall Street Journal article saying “This is absurd. I haven’t seen anything like it. It’s one of those things that once it starts going up, it might keep going up.†..."
"... Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected] ..."
Apr 27, 2021 | www.marketwatch.com

I have no idea whether the stock market is actually forming a bubble that’s about to break.

But I do know that many bulls are fooling themselves when they think a bubble can’t happen when so many of us are concerned about one. In fact, one of the distinguishing characteristics of a bubble is that such concern is widespread.

This seems counterintuitive. You would think that a bubble is most vulnerable to forming and then popping when investors are oblivious to that possibility. But you would be wrong.

It’s important for all of us to be aware of this bubble psychology, but especially if you’re a retiree or a near-retiree. That’s because, in that case, your investment horizon will be shorter than for those who are younger, and you therefore are less able to recover from the deflation of a market bubble.

To appreciate how widespread current concern about a bubble is, consider the accompanying chart of data from Google Trends. It plots the relative frequency of Google searches based on the term “stock market bubble.†Notice that this frequency has recently jumped to a far-higher level than at any other point over the last five years.

This widespread concern is entirely consistent with a bubble’s formation, according to a definition proposed several decades ago by Robert Shiller, the Yale finance professor and Nobel laureate. According to him, a bubble is “a market situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, bringing in a larger and larger class of investors, who, despite doubts about fundamental value , are drawn to the investment partly through envy of others’ successes and partly through a gambler’s excitement.†(I italicized the above phrase, not Shiller.)

Notice that recognition of overvaluation is an integral part of the definition.

This recognition was certainly present during the weeks and months prior to the popping of the Internet bubble in March 2000. During the early and middle years of the 1990s, you may recall, it was possible to justify higher prices while keeping a straight face. But that became less and less possible as prices continued going higher in the late 1990s, and especially as some dot-com companies went public with huge valuations despite having no assets, revenue or business plan.

Rather than responding by taking some chips off the table, however, many began freely admitting that a bubble was forming. They no longer tried to justify higher prices on fundamentals, but began justifying it instead in terms of the market’s momentum. Prices should keep going up as FOMO seduces more and more investors to jump on the bandwagon.

There is no shortage of current analogies, of course. Take dogecoin, which was created as a joke and has no fundamental value. As a recent Wall Street Journal article outlined , the dogecoin “serves no purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.†Yet investors are flocking to it, for no other apparent reason than it has already gone up so much. Billy Markus, the co-creator of dogecoin, was quoted in that Wall Street Journal article saying “This is absurd. I haven’t seen anything like it. It’s one of those things that once it starts going up, it might keep going up.â€

Needless to say, things don’t go up forever. Those who nevertheless continue to invest in such an environment do so with the implicit assumption that they will be able to recognize it, in advance, when the bubble is about to popâ€"and therefore able to leave the party before everyone else. This is a dangerous delusion, however; not everyone can be the first to leave the party.

The bottom line? Far from being a reason why a bubble isn’t forming, the widespread current concern about a possible bubble is actually a reason to worry that it could be. Take heed.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected]

[Apr 27, 2021] SPAC Surge Pumps Up Junk-Bond Market by Matt Wirz

Apr 23, 2021 | www.wsj.com
Money from stock offerings is flowing into below-investment-grade companies at a pace not seen since the dot.com boom of the 1990s

The wave of cash raised by special-purpose acquisition companies is rolling into the junk debt market, aiding distressed companies and rewarding investors who own their bonds and loans.

SPACs, also known as blank-check companies, have issued roughly $100 billion of stock this year, a record, to buy private companies and take them public. Some SPACs are targeting companies with below-investment-grade credit ratings, hoping to use their cash piles to pay down debt and grow the businesses.

Not since the dot.com-boom two decades ago has stock-market enthusiasm been hot enough to fuel such activity in debt markets , bond investors and analysts say.

Mutual funds managers that owned WeWork bonds booked paper gains of 25% after the ailing shared-office provider started merger talks in January with a SPAC, according to MarketAxess. Companies with junk credit ratings are typically required to buy back their debt, often at a premium, when a change of control occurs via a merger. Loans of Cyxtera Technologies Inc.â€"which credit-rating companies recently warned was in danger of defaultâ€"jumped 16% in February when the data-center operator agreed to merge with one of the blank-check companies , according to AdvantageData Inc.

“There’s a lot of deja-vu of the late 1990s happening in the high-yield market right now,†said Michael Anderson, a managing director for credit research at Citigroup Inc.

[Apr 27, 2021] What Happens to Stocks When HOT Inflation Hits- - ZeroHedge

Apr 27, 2021 | www.zerohedge.com

We've been outlining how the Fed and other central banks have unleashed an inflationary bubble in all assets truly an Everything Bubble.

We've already assessed the impact this is having on commodities, bonds and other asset classes. Today I want to assess the impact this will have on stocks.

To do that, we need to look at emerging markets.

Inflation is a common occurrence for emerging markets, primarily because more often than not they devalue their currencies, whether by choice or because the markets lose faith in their ability to pay off their debts.

Because of this, emerging markets can provide a glimpse into how inflation affects stocks. So, let's dig in.

Here is a chart of South Africa's stock market since 2003. As you can see, the stock market rallied significantly until 2010, but has effectively gone nowhere ever since then.

The reason this chart looks so lackluster is because it is priced in U.S. dollars. The $USD has been strengthening against the South African currency (the Rand) since 2010.

Watch what happens we price the South Africa stock market in its domestic currency (blue line). Suddenly, this stock market has been ROARING, rising some 750% since 2003. That means average annual gains of 41%!!!

Let's use another example.

Below is a chart of the Mexican stock market priced in $USD. Once again, we see a stock market that has done nothing of note for years.

Now let's price it in pesos (actually the exchange rate of pesos to $USD, but close enough).

You get the general idea. So if hot inflation is in the U.S. financial system, it would make perfect sense for stocks (denominated in the $USD which is losing value due to inflation) to ERUPT higher.

Something like I don't know what's happened since mid-2020?

Look, we all know what's going on here. The stock market is erupting higher as inflation rips into the financial system based on Fed NUCLEAR money printing. And we all know what comes when this bubble bursts.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

[Apr 27, 2021] -They're Guessing- - Gundlach Rejects The Fed's -Inflation Is Transitory- Narrative - ZeroHedge

Apr 27, 2021 | www.zerohedge.com

Don't believe your lying eyes, will be the message tomorrow from The Fed's Jay Powell as he hypnotizes investors to believe that "inflation is transitory" and they have "the tools" to manage it.

'Bond King' Jeff Gundlach is not buying that line and told BNN Bloomberg in an interview this morning.

"...more importantly, I'm not sure why they think they know it's transitory... how do they know that?"

"...there's plenty of money-printing that's been going on, and we've seen commodity prices going up massively... home prices in the US are inflating very substantially... so there's a lot of inflation that's already baked in to input prices ."

Gundlach does admit that Powell has a point in the very near term as the prints were about to see "which could be as high as 4% [for CPI]" are off of year-ago, very depressed levels. "...what he means by transitory is that the base effect will lead to problems in the next few months but then the base effect will become less problematic."

But, Gundlach adds, "it's not clear to me that inflation is going to go back down to around 2 to 2.5%... we don't know, nobody knows... but we're most concerned with the fact that The Fed thinks they know."

This is worrisome because The Fed's track record is anything but inspiring...

"when I go back to the global financial crisis, when we almost had a complete meltdown of the financial system, Ben Bernanke completely missed all of the problems that led to the crisis."

Bernanke's infamous "contained to subprime... and subprime is only a sliver of the market" comments could be about to be trumped by Powell's "inflation is transitory" comments as Gundlach warns "there's plenty of indicators that suggest inflation is going to go higher and not just on a transitory basis."

The Fed is "trying to paint the picture" of control, but Gundlach tries to make clear: "they're guessing."

So, what does that mean for markets?

While some fear "we ain't seen nothing yet" in terms of yields rising (and multiple contraction), Gundlach notes that "it really depends on just how much manipulation the authorities are willing to do."

The billionaire fund manager notes that yields are "still very low... well below the current inflation rate... so we have negative yields everywhere on the yield curve."

It's also "hard to figure out who's going to buy the bonds," he notes, "as we are about to see issuance like we have never seen before." Foreigners have been selling bonds for years and domestically there is little demand, so Gundlach notes the only one left to soak up all this extra supply is The Federal Reserve, which has already expanded its balance sheet massively in the last 12 months.

"Who's going to buy all these many trillions of dollars of bonds? Foreigners have been selling for years and they've accelerated their selling in the last several quarters, domestic buyers are not exactly selling, but they're not adding to their holdings. So what's left to absorb all of the spawn supply is the Federal Reserve ."

"Left to true, free markets, bond yields at the long-end would obviously be higher than they are now."

And so who will buy all these bonds with negative real yields - The Fed... "and they have been transparent about their willingness and ability to buy bonds and expand their balance sheet with no ceiling."

Gundlach is talking about Yield Curve Control, reminding viewers that "The Fed can set the long-end wherever they want it... there's a precedent for this from back in the 1940s into the 50s," in order to ease the pain of the debt from World War II.

Of course, Gundlach warns ominously, "once they stopped the yield curve control, we went into a 27 year massive bear market in bonds, because of 'guns-n'butter' policies... which look like our policies today."

Simply put, he sees "an echo [in current markets and policies] of what happened in the late 1970s into the early 1980s."

His forecast is that "The Fed will allow the market forces to take yields to higher levels [10Y 2.25%] before stepping in."

The Bond King also note that the US stock market is very overvalued by virtually every important metric , and especially so versus foreign markets such as Asia and even Europe.

"I bought European equities a couple of weeks ago, literally for the first time in many years. I can't remember the last time I did it. And that's largely because I think the U.S. dollar is almost certain to decline over the intermediate to long term."

There's a lot more in the interview on the impact of Biden's stimmies and potential tax hikes...

https://webapps.9c9media.com/vidi-player/1.9.19/share/iframe.html?currentId=2189621&config=bnn/share.json&kruxId=&rsid=bellmediabnnbprod,bellmediaglobalprod&siteName=bnnb&cid=%5B%7B%22contentId%22%3A2189621%2C%22ad%22%3A%7B%22adsite%22%3A%22ctv.bnn%22%2C%22adzone%22%3A%22ctv.bnn%22%7D%7D%5D 10,571 48 NEVER


Sound of the Suburbs 26 minutes ago

We are going to train you in this Mickey Mouse economics that doesn't consider private debt and put you in charge of financial stability at the FED.

They don't stand a chance.

Financial stability arrived in the Keynesian era and was locked into the regulations of the time.

https://www.brettonwoodsproject.org/wp-content/uploads/2009/10/banking-crises.png

"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure 13.1 - The proportion of countries with banking crises, 1900-2008).

Neoclassical economics came back and so did the financial crises.

The neoliberals removed the regulations that created financial stability in the Keynesian era and put independent central banks in charge of financial stability.

Why does it go so wrong?

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and knew there was going to be a financial crisis.

Richard Vague has looked at the data for financial crises going back 200 years and found the cause was nearly always runaway bank lending.

We put central bankers in charge of financial stability, but they use an economics that ignores the main cause of financial crises, private debt.

Most of the problems are coming from private debt.

The technocrats use an economics that ignores private debt.

The poor old technocrats don't stand a chance.

WITCH PELOSI 39 minutes ago

42" entry level lawnmower @ Home Depot, spring 2014, $999. Spring 2021 $1549. That's what I call inflation! And maybe a little greed to boot!

atomp 34 minutes ago

$30 is the new $10.

Sound of the Suburbs 25 minutes ago remove link

In 2008 the Queen visited the revered economists of the LSE and said "If these things were so large, how come everyone missed it?"

It's that neoclassical economics they use Ma'am, it doesn't consider private debt.

Here it is Ma'am, look it's obvious.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

At 18 mins.

Let's get our experts in neoclassical economics to have a look.

"It was a black swan"

Not considering private debt is the Achilles' heel of neoclassical economics.

It is a black swan to them.

That's the problem.

[Apr 26, 2021] Stock Market Investors Must Keep an Eye on the Corporate Cash Mountain

Apr 26, 2021 | www.wsj.com

...the overall cash buildup still effectively means that companies have looked at the investment options available and found them wanting. When a company determines that sitting on near zero-yielding assets is the best use of their funds, it paints a very dim picture of their collective view of the economy's future.

... ... ...

The U.S. cash buildup isn't yet in Japan's league, but the situation appears to be heading that way in Europe. Investors should keep a close eye on where overall levels settle: if they stay up here where the air is thin, that will be a dispiriting signal about the future.

Write to Mike Bird at [email protected]

[Apr 26, 2021] How can someone so 'educated' be so stupid to keep 80% or more funds in stocks in thier 401K account?

Apr 26, 2021 | www.zerohedge.com

How can someone so 'educated' be so stupid?

Taleb's IYI - Intellectual Yet Idiot.

[Apr 26, 2021] Is the Stock Market in a Bubble- These Stocks Might Be. - Barron's

Apr 26, 2021 | www.barrons.com

Whether or not the broader stock market is in a bubble, ultra-growth stocks seem to be, according to an analyst at JPMorgan.

While some Wall Street analysts are concerned about a broader stock market bubble, JPMorgan's Eduardo Lecubarri, global head of small- and mid-cap equity strategy, wrote in a note that ultra-growth equities are the area of most concern. "We have argued since the start of the year that investors needed to run away from stocks trading on high multiples over rich growth expectations," said Lecubarri in...

[Apr 25, 2021] The US is facing a dollar collapse by the end of 2021 and an over 50% chance of a double-dip recession, economist Stephen Roach

Apr 25, 2021 | markets.businessinsider.com

The "seemingly crazed idea" that the US dollar will collapse against other major currencies in the post-pandemic global economy is not so crazy anymore, the economist Stephen Roach told CNBC's "Trading Nation" on Wednesday.

Roach, a former chairman of Morgan Stanley Asia, also said he sees a more than 50% probability of a double-dip recession in the United States.

He based that prediction on historical evidence, saying that in eight of the past 11 business-cycle recoveries economic output has risen briefly and then fallen.

"It's certainly something that happens more often than not," he said.


Roach last predicted a dollar crash in June , saying it would collapse 35% against other major currencies within the next couple of years. At the time, the dollar index traded at about 96. On Thursday, the index traded at about 94.41.

He said on Wednesday that he expected the collapse to happen by the end of 2021, but he did not say by how much.

Read more: Legendary investor Mark Mobius told us his process for finding the most exciting bargains in far-flung markets around the world amid the COVID-19 crisis -- and shared his 5 top stock picks right now

"We've gotten data that's confirmed both the saving and current-account dynamic in a much more dramatic fashion than even I was looking for," he said.

Explaining his outlook, Roach pointed to dire second-quarter data.

https://7a17dfd8011066c2f66b8c1052a80e96.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

"The current-account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration in the second quarter," he said.

"The so-called net national savings rate, which is the sum of savings of individuals, businesses, and the government sector, also recorded a record decline in the second quarter, going back into negative territory for the first time since the global financial crisis."

Read more: A Wall Street expert breaks down why these are the best 6 stocks to own for a second coronavirus wave in addition to the FAANMGs

Lingering vulnerability and the aftermath of the initial decline are two factors driving the dollar's ominous future, he said.

"Lacking in saving and wanting to grow, we run these current-account deficits to borrow surplus saving, and that always pushes the currencies lower," Roach said. "And the dollar is not immune to that time-honored adjustment."

Additionally, Roach said, new COVID-19 infections and higher mortality rates must be part of assessing the risk of an aftershock, Roach said.

"As we head into flu season with the new infection rates moving back up again, with mortality unacceptably high, the risk of an aftershock is not something you can dismiss," he said. "So that's a tough combination. And I think the record of history suggests that this is not a time, unlike what the frothy markets are doing, to bet that this is different."

Read more: Legendary trader Randy McKay turned $2,000 into $70,000 in just 7 months. Here are the 8 trading rules that contributed to his multiyear run of million-dollar returns.

"We've gotten data that's confirmed both the saving and current-account dynamic in a much more dramatic fashion than even I was looking for," he said.

Explaining his outlook, Roach pointed to dire second-quarter data.

https://7a17dfd8011066c2f66b8c1052a80e96.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

"The current-account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration in the second quarter," he said.

"The so-called net national savings rate, which is the sum of savings of individuals, businesses, and the government sector, also recorded a record decline in the second quarter, going back into negative territory for the first time since the global financial crisis."

Read more: A Wall Street expert breaks down why these are the best 6 stocks to own for a second coronavirus wave in addition to the FAANMGs

Lingering vulnerability and the aftermath of the initial decline are two factors driving the dollar's ominous future, he said.

"Lacking in saving and wanting to grow, we run these current-account deficits to borrow surplus saving, and that always pushes the currencies lower," Roach said. "And the dollar is not immune to that time-honored adjustment."

Additionally, Roach said, new COVID-19 infections and higher mortality rates must be part of assessing the risk of an aftershock, Roach said.

"As we head into flu season with the new infection rates moving back up again, with mortality unacceptably high, the risk of an aftershock is not something you can dismiss," he said. "So that's a tough combination. And I think the record of history suggests that this is not a time, unlike what the frothy markets are doing, to bet that this is different."

Read more: Legendary trader Randy McKay turned $2,000 into $70,000 in just 7 months. Here are the 8 trading rules that contributed to his multiyear run of million-dollar returns.

[Apr 25, 2021] Stock Market Crash 2021- Protect Yourself Now

Apr 25, 2021 | www.msn.com

In his 2008 letter to shareholders, Warren Buffett shared an important lesson.

"Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get,'" Buffett wrote. "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."

This is one of the most fundamental concepts in investing. No matter how good a company is, or how fast it's growing, it's always possible to overpay.

This is why analysts talk so much about valuation . The market price gyrates on a daily basis, especially during a market crash. But over the long term, price and value ultimately converge.

So where are stocks valued today? Despite the difficult environment, many markets are trading at historically high multiples.

"The current P/E on the U.S. market is in the top 10% of its history," said GMO Asset Management co-founder Jeremy Grantham. The Canadian stock market isn't too far behind, especially when you strip out the ailing fossil fuel industry.

Prices suggest that conditions are in the top 10% of history, but is that actually true?

"The U.S. economy in contrast is in its worst 10%, perhaps even the worst 1%," concluded Grantham. "In addition, everything is uncertain, perhaps to a unique degree."

Prepare for a market crash

The numbers are clear. Stock prices are sky-high. The value that you're getting in return, meanwhile, could be quite low.

At minimum, there's an unprecedented range of outcomes over the next 12 to 24 months. A complete return to normal could occur. Alternatively, we could slide into a deep and dark recession.

Just take a look at what some major CEOs are saying about the market crash.

Air Canada CEO Calin Rovinescu said, "It's the darkest period ever in the history of commercial aviation." He doesn't expect conditions to normalize for three years. Linamar Corp Linda Hasenfratz warned that the industry must brace for a resurgence of COVID-19. Canadian Federation of Independent Business CEO Dan Kelly said that just 17% of Canadian restaurants are reporting an average volume of sales.

Things just don't line up. Whenever the gap between price and value rises, the odds of a market crash also rise. Grantham thinks we could be experiencing one of the biggest gaps ever .

"The market's P/E level typically reflects current conditions. Markets have historically loved fat margins, low inflation, stability and, by inference, low levels of uncertainty," he explains. Yet prices are high and conditions are terrible.

"This is apparently one of the most impressive mismatches in history," Grantham concluded.

Most stocks are too expensive, but some still trade at bargain prices.

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[Apr 25, 2021] Beside Shiller, three other metrics of S P500 index flash red light

Apr 25, 2021 | www.fool.com

The S&P 500's price-to-sales ratio is worryingly high

A second reason to be concerned can be found in the S&P 500's price-to-sales (P/S) ratio . This ratio describes the value of the S&P 500 index relative to the aggregate revenue its 500 components are bringing in. As a general rule, the lower the price-to-sales ratio, the more fundamentally attractive an investment.

As of April 21, the S&P 500's price-to-sales ratio was estimated at 3.06. This is an unquestioned high point dating back at least 21 years. In fact, the S&P 500's P/S ratio hadn't ended the year higher than 2 at any point this century prior to 2017. Since the end of 2018, the P/S ratio for the widely followed index has expanded 64%.

On one hand, an increased reliance on technology should allow companies to be more efficient, thus expanding their operating margins. On the other hand, nothing historically shows that P/S ratios this high can be sustained.

A magnifying glass held over a company's balance sheet.

IMAGE SOURCE: GETTY IMAGES. 3. The S&P 500's price-to-book value spells trouble

A third metric that could cause warning bells to go off is the S&P 500's price-to-book (P/B) ratio . This is a measure of the S&P 500's market capitalization divided by the book value of the equities that make up the index. Like the P/S ratio, a lower value is generally indicative of an equity or index being undervalued.

As of this past week, the price-to-book-value of the S&P 500 topped 4.5. That's closing in on the highest level reached this century, 5.06, set back in March 2000. If March 2000 rings a bell, it's because that's when the dot-com bubble hit its peak. For some context, the average P/B value over the past 21 years is 2.87.

Although the P/B ratio has lost much of its importance as technology and innovation have taken over, it's still concerning that the index subsequently lost about half of its value the last time the ratio was this high.

A fanned pile of one hundred dollar bills laid atop a fanned pile of Treasury bonds.

IMAGE SOURCE: GETTY IMAGES. 4. The S&P 500's earnings yield isn't attractive

The fourth worrisome metric is the S&P 500's earnings yield . Whereas the price-to-earnings ratio is a measure of share price divided by earnings per share, the earnings yield is earnings per share divided by share price, and multiplied by 100 to yield a percentage.

Since 1870, the average earnings yield for the S&P 500 is 7.31%. That's a lot higher than what investors can typically generate from bonds, which is why equities are often such a smart and desirable investment. But as of April 21, the earnings yield of the S&P 500 was a measly 2.35%. It's been more than halved since the beginning of 2019, when it was 5.1%.

The issue here is that 30-year Treasury bonds sport a nearly identical yield (2.26%). Although earnings can grow over time and improve the S&P 500's earnings yield, it's worth hypothesizing that, with historically low lending rates and ongoing fiscal stimulus, earnings growth won't get any better than it is now. Future earnings growth could slow as dovish monetary policy is tightened, thereby exposing an unattractive risk-versus-reward ratio with bonds.

An hourglass on a table next to a calendar.

IMAGE SOURCE: GETTY IMAGES. 5. The frequency of double-digit-percentage corrections is a red flag

Lastly, don't overlook how common double-digit declines are for the benchmark index.

Since the beginning of 1950 (a year I've arbitrarily chosen for the sake of simplicity), there have been 38 declines of at least 10%. This works out to an average double-digit decline every 1.87 years . We're already about 1.1 years removed from the bear market bottom.

Understand, though, that averages are exactly that: averages. Sometimes the market can go an exceptionally long time without a single 10% correction (1991 through 1996), while other times they become an annual occurrence (1997-2003, with the dot-com bubble encompassing 2000 through 2002). The point is this: Corrections and/or crashes happen often.

A smirking businessman reading a financial newspaper.

IMAGE SOURCE: GETTY IMAGES. Crashes are blessings in disguise

All five of these metrics would seem to point to one inevitable conclusion: The likelihood of a stock market crash or double-digit correction is quite high. This might be unnerving to some, but it's actually great news for investors with a long-term mindset.

Every single crash and correction throughout history has been a blessing in disguise . That's because investors are trading short-term pain for long-term gain.

Eventually, every double-digit decline in the S&P 500 has been completely erased by a bull-market rally. If you buy great companies when emotion-based crashes rear their heads and you hang on to them for long periods, there's a very good chance you'll build wealth over time. While it's not normal to see total returns of 88% in 13 months following a crash, an annualized double-digit total return over the long run is quite possible.

[Apr 25, 2021] As of April 21, the Shiller P/E ratio for the S P 500 was 37.49. That's well over double its average annual reading of 16.81 since 1870

Apr 25, 2021 | www.fool.com

History serves as a warning for the S&P 500's Shiller P/E ratio

Arguably the biggest red flag from a fundamental standpoint is the S&P 500's Shiller price-to-earnings (P/E) ratio, which is also commonly referred to as the cyclically adjusted P/E, or CAPE. The Shiller P/E is based on average inflation-adjusted earnings from the previous 10 years.

As of April 21, the Shiller P/E ratio for the S&P 500 was 37.49. That's well over double its average annual reading of 16.81 since 1870.

What's particularly concerning is what's happened previously when the Shiller P/E ratio has surpassed and stayed above 30. In the previous four instances (the Great Depression, the dot-com boom, Q4 2018, and the coronavirus crash), the S&P 500 has lost anywhere from 20% to 89% of its value. While an 89% loss is very unlikely with the Federal Reserve and federal government willing to provide seemingly unlimited support to financial markets, a sizable double-digit correction has become the expectation when valuations extend well past historic norms.

[Apr 25, 2021] A Stock Market Crash May Be Imminent- 3 Things to Do Right Now - Nasdaq

Apr 25, 2021 | www.nasdaq.com


W hat I'm about to say is going to unnerve some of you, but it's the absolute truth: A stock market crash might be imminent .

Since hitting a bear-market bottom on March 23, 2020, the three major U.S. indexes have been virtually unstoppable. Through April 6, 2021, the tech-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC) has doubled, while the benchmark S&P 500 (SNPINDEX: ^GSPC) and iconic Dow Jones Industrial Average (DJINDICES: ^DJI) were up a respective 82% and 80%. There's not an optimist on Wall Street who would be dissatisfied with gains like these in just over one year's time.

The question is whether or not these gains will prove fleeting.

A visibly worried man looking at a plunging chart on a computer monitor.

Image source: Getty Images.

Signs point to a potential crash

Right now, there is no shortage of catalysts that could knock this market off its perch.

https://imasdk.googleapis.com/js/core/bridge3.453.0_en.html#goog_999278224

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In recent months, Wall Street has been worried about rapidly rising Treasury yields . Keep in mind that when I say "rapidly rising," some context is needed. Although 10-year Treasury yields have doubled over the last five months, a 1.7% yield is still historically very low.

Nevertheless, investors are concerned about the potential for higher lending rates, which could slow the borrowing capacity and growth prospects for the dozens of fast-paced and innovative companies that have led the stock market higher. It could also signal an uptick in inflation and force the Federal Reserve to consider raising interest rates earlier than expected.

Another chief concern is equity valuations . Dating back 150 years, there have only been five instances where the S&P 500's Shiller price-to-earnings (P/E) ratio has surpassed and sustained 30. The Shiller P/E ratio measures average inflation-adjusted earnings from the previous 10 years and is also known as the cyclically adjusted P/E ratio, or CAPE. On April 6, the Shiller P/E ratio for the S&P 500 was nearly 36.7, which is well over double its historic average of 16.8.

Furthermore, in the previous four instances where the S&P 500's Shiller P/E hit 30, the index lost anywhere from 20% to as much as 89% of its value. Although we're unlikely to see Great Depression-like losses of 89% ever again, at least a 20% decline has been the recipe when valuations get extended.

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The coronavirus pandemic also remains a concern. Though the light at the end of the tunnel is now visible, variants of the disease threaten to minimize vaccine efficacy or push herd immunity (i.e., a return to normal) further down the line.

A businesswoman critically reading material from a financial newspaper.

Image source: Getty Images.

Three things to do right now

So, what's an investor to do?

1. Realize that downside catalysts always exist and don't overreact

The first thing is to relax and realize that there's always a catalyst waiting in the wings that could send the market screaming lower. Whether we're mired in a recession or the economy is firing on all cylinders, I can't recall a time in my more than two decades of investing where the warning siren hasn't been sounding about one thing or another.

Investors should understand that stock market crashes and corrections are a normal part of the investing cycle and the so-called price of admission to the greatest wealth creator on the planet. With the S&P 500 experiencing a double-digit decline every 1.87 years, on average, since the beginning of 1950, it's important not to overreact to sharp or sudden moves lower in the market. It also helps knowing that these moves lower usually don't last very long .

2. Reassess what you own

Secondly, and to build on the previous point, it's always a good time to reassess your portfolio and reaffirm your investment thesis . In other words, take a closer look at the companies you own stakes in and revisit the reason(s) why you purchased them in the first place. There's a very good chance that a stock market crash is going to have little or no long-term effect on the underlying performance of the companies you've invested in and is therefore going to have no impact on your investment thesis.

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Keep in mind that you don't need to wait for a stock market crash, or even the threat of a crash, to do this a couple of times a year. Ensuring that your investment thesis still holds water will minimize the emotional aspects of stock market corrections and crashes and make it a lot easier to hold on to great stocks.

An hourglass next to stacks of coins and cash bills.

Image source: Getty Images.

3. Have cash at the ready for when opportunity comes knocking

The third thing to do is build up a healthy cash position so you can take advantage of the market's inevitable downturns. You see, despite the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite undergoing dozens of double-digit corrections and crashes throughout their history, each and every one of these moves lower has eventually been erased by a bull market rally .

In fact, data from Crestmont Research shows that at no point between 1919 and 2020 have rolling 20-year total returns (including dividends) ever been negative. If you bought an S&P 500 tracking index at any point over the past 102 years and held on to your investment for a minimum of 20 years, you made money.

When the next correction or crash does rear its head, be thankful, because you're being given an opportunity to buy great companies at a discount.

[Apr 24, 2021] When The Market Unravels There Will Be -No Place To Hide- - David Stockman - YouTube

Apr 24, 2021 | www.youtube.com

peter plouf , 4 hours ago

The current financial world has been reduced to a one-legged bar-stool in a bar where drinks are on the house. There is no scenario where this does not end well no matter how euphoric we are in the moment.

[Apr 24, 2021] Why Grantham Says the Next Crash Will Rival 1929, 2000 by further inflating money not by deflating it. So people who warn regular fold about risks are rare and they harm their own business, if they have any. Profit of doom and gloom are not popular and it is precarious occupation

He suggest that SPACs,Tesla, and bitcoin can serve are canary in the mine as for timing of bubble deflation.
This video is over two months old of course and the the market has continued to set new records. Ray Daleo also issued a warning as did Harry Dent. And market still is going up.
Because of the corona epidemic, investments in real production have dried up and the money has instead flooded the stockmarkets. I guess that if the crisis continues the stockmarket bubble can be kept inflated because the money has nowhere else to go!
electrification, especially in cars is a very long shot and here it is unlear if it make sense to invent int he currest companies involvedas they are in a bubble. Just look at Tesla. electrification, especially in cars is a very long shot and here it is unlear if it make sense to invent int he currest companies involvedas they are in a bubble. Just look at Tesla.
Notable quotes:
"... Around 37:30 , Milton Friedman ism at the corporate level, that is sociopath by any definition... : ) ..."
"... People and corporations qho like Frieman professes are driven exclusively by profit motive are "sociopaths" ..."
"... What a refreshing honest interview. The interviewer and Mr. Grantham are professional, easy to follow and are respectful. The topic they are discussing can be disheartening, but it is nice to know someone is looking out for the retail investors instead of fleecing them of their hard earned labor by misleading the retail investor to go all in and go for broke. ..."
"... Many of the big companies are just sucking up cheap money and making it look like profits with clever accounting. The fact that the markets seem unaffected by covid shows how thick the fraud is. ..."
"... SPACs " an excuse for people with reputation and marginal ethics to take 20% and dash around the country for six months" EPIC ..."
"... COVID-19 revealed that there are two kinds of jobs: essential jobs and bullshit jobs. We just eliminated all the bullshit jobs and put them onto UBI/welfare and it removed a drag on the economy. ..."
"... 1929 and 2000? Also 2008. So we have 3 very big bubbles in the space of 20 years. This is a boom / bust economy with each action of the Federal Reserve to mitigate the pain of the bursting of the previous bubble only sews the seeds for the next bubble. ..."
Jan 22, 2021 | www.youtube.com

Ian's LearnEnglishLanguageWell , 2 months ago

His comment about how workers are treated nowadays is so true and so important. I once saw a video of a guy who explained that his small company (service online) had made an extra million the previous year. He went on to explain that he wasn't going to buy another house or car or TV etc and would probably only need to employ one extra worker. He said that the "rich" don't create jobs, the lower and upper middle class create jobs. When they have a secure job and suitable income for the work they do, they will buy more things which will create more manufacturing, transport, shipping, retail jobs over time which increase the numbers in stable jobs et al


joe doe
, 1 month ago (edited)

"The future value of dividends"......I'll try to remember that. He reminds me of Buffett. All I know is, there are a lot fewer companies paying even 4% than there used to be. You're lucky now just to get 3% and it will more likely be 2%, if anything.

Money Bucket , 1 month ago

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for ten years. –Warren Buffett

David Wing , 2 months ago

I love his refutation of Milton Friedman's idea that corporate management's only job is to maximize profit and a company has no responsibility to society in general. "If you say, as an individual,' My only interest is to maximize my advantages,' which is what they say at the corporate level, you're a sociopath." - Jeremy Grantham


Paul Dacus
, 1 month ago (edited)

37:20 If you say, as an individual, 'My only interest is to maximize my advantages,' which is what they say at the corporate level, you're a sociopath. WOW! Stop & think about this. I don't think I have Ever thought about corporate America this way, but it is 100% true.


Dukeq27
, 1 month ago (edited)

The interviewer either was playing Devil's advocate or doesn't believe Grantham. Grantham is old enough to have seen some bear markets. It's now a game of musical chairs and when the music stops it will be a rush to the exits. Quote 12 days before the 1929 crash: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." – Irving Fisher, Ph.D. in economics, Oct. 17, 1929


Jian Gao
, 1 month ago

Around 37:30 , Milton Friedman ism at the corporate level, that is sociopath by any definition... : )


Richard Madison
, 2 weeks ago

I disagree that nobody saw the 2008 real estate burst coming. I saw it when I sold my house in 2004. I mean it was unprecedented that the value of my house doubled in 8 years. And the buyers of my house were given a loan of 105% of the purchase price. Then I read that people had taken out balloon mortgages. Then, I was offered a "no doc" loan to purchase a condo. I mean the red flags were HUGE

Mann , 1 day ago

This interview was 3 months ago, which means we are a lot closer to that top, if not right on top of it 😳 😱🎢🔥😭

James Palmer , 1 month ago

This is a stunning interview beautifully articulated, glad there are others who see through the fog too. We're living in massive, massively fraudulent times, value is utterly misplaced, and loss has been hidden on a scale never before seen. Extraordinary times ahead.


John R.
, 2 weeks ago

Wow a great interview with challenging questions and a calm exchange of ideas! Its been years since I've witnessed something like this.... Thank you gentlemen!


Padge Vounder
, 1 week ago

What he says at the end is the most important of all. A system, a corporate mindset that they have no responsibility to their workers, to their customers, to their communities or country or the planet, that their only responsibility is to maximize profits... that's beyond sociopathy and it's incredibly corrosive to society and humanity.


max glendale
, 2 months ago

This market has punished the savers and rewarded the speculators. Thank you for this interview.


fondombang
, 2 months ago

From Ukraine with love :) Thanks for such usefull information - it's like a breath of fresh wind in endless desert of gambling


Zee Force
, 1 month ago (edited)

The three blind mice: 1. Alan Greenspan 2, Ben Bernankie 3. Janet Yellen


Cal Ryan
, 1 month ago

Apparently, the "Great Recession" wasn't traumatic enough. Looking forward to the good old days in the 90s with 10% CDs.


Mike Collins
, 4 weeks ago

10:10 "When you have reached this level of super-enthusiasm, the bubble has always, without exception, broken in the next few months - not a few years." This video was recorded on Jan 22 Today is March 27. My daughter has been on the point of buying a house for the last 6 months, and I have been telling her to wait, so she bought a van, and has spent the Winter in it, but with the market getting ever higher, she is starting to think "Dad, you're obviously wrong. I should buy now. How long can I wait?"

Steve Joe , 3 weeks ago

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Thomas Bradley , 1 month ago (edited)

Great point 34:00 Investing in Infrastructure, more jobs, creating less energy waste....now I waste my stimmy check in the market. Italy is supporting greening of homes,....ya have too as they begin to look more and more like the colosseum.

Mike from Tampa , 2 weeks ago

People and corporations qho like Frieman professes are driven exclusively by profit motive are "sociopaths" 🤡 Hey no one is stopping interviewee or interviewing company from giving away all or most of their wealth, yet strangely none of these do-as-I-say types never do...

Michael Coughlan , 2 months ago (edited)

"Shorting is only for a handful of people who really know what they're doing". Boy did he call that one right.


Xem Mxem
, 1 week ago

Great Interview. Respect to Mr Grantham for his views on green issues and for investing in these. He sees that unless we begin to invest heavily into something which actually MATTERS in order for us Humans to inhabit this Planet long term, then we are doomed as a race. I thought the part referring to "Stuffed Chinese dogs" Sums this up perfectly.

Tom Lau , 1 week ago

This video aged well. The bubble popping in many EVs, cloud, SPACs, hyper growth techs. Now, money rotated to the junior and big cap stocks. Nasdaq hitting new highs. Soon they would start dumping the big cap stocks, then the SP500 stocks... its playing out just like in 2000

Stephen Powdexter , 2 months ago

The market has appeared to me unreal for a long time. Soaring to ever new heights for no particular reason. Reality will have its way eventually, perhaps soon.

Vincent Mc Cooey , 1 month ago

I guess what this good gentleman is saying the whole system is going to collapse this year and I guess Covid was the safety net to ease us into it. Fasten your seatbelts folks. God bless Vince in London. Brilliant interview


Thomas Anderson
, 1 month ago

I just don't get the markets, and investors, we are now at a point where the U.S. has to print money in order to survive, and printing money will never stop. Yet as far as wallstreet is concerned this is on of the best times America has ever had.


billy bowbob
, 2 weeks ago

Whenever talking with a financial investor, ALWAYS remember they will encourage what benefits them personally and discourage what benefits them personally as well.


Gianfranco Bergagna
, 1 month ago

Long terms bonds are very expensive! I am not agree with the electric cars they are not that green as they say, the good thing about electric car is, that they aren't noisy!


DeepSpace12
, 1 month ago

"long-term discounted value of a future stream of dividends" using what interest rate? The benchmarks are either close to zero or even negative these days, a simple geometric progression will diverge to infinity.

Roman Hashon , 1 week ago

@ 24:00 in... its will never pay a dividend.... your right its CALLED FORKING and everyone whos was in along time ago is quite rich off the forks alone.


Taína pura
, 1 week ago

Harry Dent gave Australian news an interview , said American market will crash this year proBably around July . Catherine Austin Fitts warns the same


Jaime Garcia
, 1 month ago

Great interview although I would have asked a couple of questions about the value stocks in emerging markets. I would have asked for concrete examples. Problem with many emerging markets is that they are riddled with political instability, and they tend to depend too much on developed economies for their exporting success. I would not bet a dime on Brazil or Russia, for example. China is a giant scam when it comes to its stock markets. India might be a different story but not sure about the BJP either.

Brian Kraker , 2 months ago

What a refreshing honest interview. The interviewer and Mr. Grantham are professional, easy to follow and are respectful. The topic they are discussing can be disheartening, but it is nice to know someone is looking out for the retail investors instead of fleecing them of their hard earned labor by misleading the retail investor to go all in and go for broke.


Jett Cooke
, 3 days ago

This is the biggest asset bubble in modern history. Very different than 99' and 08' but the same , an extremely quick increase in asset values due to available essentially free money. People can get lending as long as they have a job. Jobs go away as soon as there is an issue. I witnessed this in both 99 and 08. And BTW we did see it coming in 08. Then how do they pay for a mortgage? I can't say when it will happen, but it will with certainty.


John David Layton
, 1 month ago

There's some really useful long term perspective, mixed with nostalgia for dividends which stocks had to have to compete with interest to match risk free return of government bonds along with magical thinking about total electrification. All this is wound together with a hypnotic calm like he's imparting facts and received wisdom not opinion. Stay skeptical and take the good and leave the rest.


Retro Moto
, 1 week ago

Emerging markets and renewable energy... Don't need a brick to hit me on the head!


erfho8y
, 1 month ago

"Rival"? I think "dwarf" is the word you are looking for. WW3 is a real possibility. There's a dutch ex-soldier who predicts there is going to be be a huge war in the years between 2020 and 2022. His name is Ingo Piepers. And he did his research very thoroughly and had it even verified in multiple peer reviews. If we look back on all the big wars, they were almost always about money. Now there is a money problem brewing WORLDWIDE. Also his research was completely independent from any kind of economic information as far as I am aware, so there's a good chance he doesn't even know about the economic side of things. But they seem to overlay frighteningly well. I hope it's all going to be okay without any real war. Here's the video (it's in dutch tho): https://www.youtube.com/watch?v=9wTX3CGeOJ8

Capt Roy , 2 weeks ago

Every administration since Bush knows that if you keep interest rates low, and print money, you creat inflation. Inflation creates a strong market. TheFed has made the market the only game to invest in.


Lloyd Housh
, 1 month ago

I feel what is happening at the COMEX is criminal. I feel major banks are hording the silver and trying to drive the price of silver down for acquisition of the physical. In my mind and my gut tells me they are preparing a large horde of silver for the automotive markets to produce electrical vehicles(EV's). Look at the price of Palladium and Platinum. P&P sored when it was/is used for automotive catilittic converters. What is going to be used next for automotives (whispers batteries in huge demand). The price of silver will sky rocket for automotive use just like Palladium and Platinum. Then you will see Palladium and Platinum prices tank.


A Farías
, 1 week ago (edited)

The "usual" basics of real economy and real life are right. They have been working well for centuries despite bubbles, as well as rational investment decision did. Mr Grantham is a successful investor that has been making money investing in the pre "New Era economy". Probably, I think things work different there. So, I think that probably, the way to invest and gain money in markets would change too in near the future, as it is happening in all markets and industries. Maybe, it would grow the alternative ways to make lots of money in short periods of time (SPACS, tech startup, complex derivatives, etc..) as it already happened. There would be investments based on extremely higher business results expectations not correlated with biz fundamentals. There would be more bubbles. Anyway, I agreed with Mr Grantham on how real life works...

Sam & Faelinn , 3 weeks ago

Here's to green energy sector remaining fairly safe as it has already been corrected down pretty hard recently.


brothberg
, 2 months ago

The thing I always ask about pundits and prognosticators is: what has been their record. I believe that Grantham has been bearish and wrong for many years. I looked at GMO's Global Asset Allocation Fund (GMWAX). Since it started in June 2019, it's up 6%. The broad market (VTI) is up 43%. Correct me if I'm wrong.

Omni Champ , 2 months ago

For those complaining about his big payday on QuantumScape while being against SPACs, remember he invested $12 million in QuantumScape seven years prior to the SPAC deal, he did not have a controlling interest in the company to stop the merger.

Lady Firebird , 1 month ago

The next step is more bond buying to control yields as inflation expectations rise. The final step before the implosion is a "Credit Choke" where the government orders banks to stop lending to prevent hyperinflation, in tandem with big interest rate rises that will cause mass bankruptcies in order to purge the excess currency out of the system and stabilise prices

Neojhun , 2 months ago

""You need crazy by the way, that's the best timing for a bubble top. Is crazy behavior... in a speculative bubble" This has sadly aged insanely well.


Pine Forest
, 2 weeks ago

And, people who heeded Grantham and sold their stocks missed out on big gains.

Lets talk about Mulla , 2 months ago

Ladies and gents, avoid buying stocks on margin.

Ted Pert , 6 days ago

The market of stocks is $40trillion and our economy at @21trillion but who says it can't go higher!


AgentOrangeCoughDrop
, 1 week ago

The correction or crash will come, statistically speaking, it has to at some time eventually. In 2021 though? I'm skeptical of that given the enormous liquidity being unleashed, the pent up demand, the signs for employee new hire rates and unemployment rates. All that $ has to go somewhere so business growth will continue, equity growth, EPS and ROIC will continue to lead to further higher stock prices until they don't and then, maybe this time in 2023 things change but heck 2 years is a long time in business.


Shawn Green
, 2 weeks ago

Even a broken clock is right twice a day. That being said major US corporations are over leveraged in the bond market and are barely making interest payments while being down graded to "junk bonds". We need a hero that can trim the fat and save our country.... excuse me while I put on my super man costume. :)


Martin Mendelsohn
, 3 months ago

"There is in the end a simple arithmetic - the higher you bid up the price of an asset the lower the long term return."

TheVicdub , 1 month ago

It means we are doomed?

rocr69 , 1 month ago (edited)

Hopefully, unlike the no-fault bank, trading, and brokerage house bailouts of the 2008 crisis, the next big market flop will see people jailed, jumping from high windows a la 1929, and a general deep cull of the ruling and "investing" classes. Equities traders and corporate bonds issuers have an out-of-control need for Fed support. Cold turkey is coming, not because regulators won't rightly try to ease their massive subsidies, but because traders will just ride their over-leveraged positions right in the ground.

alanOHALAN , 1 month ago (edited)

It is not crash, it is correction, stock market always goes in cycle of up and down. It is called "fleecing the sheep", sheep being their clients and the 401k owners, rainse and repeat every 8 to 12 yeas or so.


Alan Hall
, 1 month ago

"We have lost considerable strength in the economy; we have fewer people working, and we have a reduced stream of goods and services, and yet the [market] price is much higher." "Is it really justified that we have delivered a serious blow to the world economy and yet the global stock market has gone way up? It doesn't feel right."


Barbara Cross
, 4 weeks ago

"I don't believe in a law to prevent a man from getting rich; it would do more harm than good. So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else." Abraham Lincoln

"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country... corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." Abraham Lincoln


john lin
, 1 month ago

Says tesla is the emblematic of the issues in the stock market but then encouraged every one to invest in companies that benefit from green energy


Wayne Ferree
, 2 months ago

I have listened to this Bloomberg YouTube interview in its entirety with Jeremy Grantham, at least six times now, he shares a lifetime of accumulated knowledge and wisdom in a time when we need sound logic and direction desperately. THANK YOU!!!!!!!!! Mr. Grantham.


Chris Jenkins
, 1 month ago

He lost me on Green-Energy


jim hen
, 2 months ago

Many of the big companies are just sucking up cheap money and making it look like profits with clever accounting. The fact that the markets seem unaffected by covid shows how thick the fraud is.


P Davison
, 2 months ago

Great interview. Grantham is correct. When the shoe shine boys or Uber drivers are giving you stock tips, it's time to get the hell out.


S S
,
2 weeks ago (edited)

...Our markets are in whole driven by the central bank printing. Zombie companies and vulture investment firms distort what is left, value investing is deeply buried in the grave.


Johnny Boy
, 1 month ago

The idea of a SPAC is a scheme in itself. Just try explaining it to someone.

Paul Vangilder , 3 months ago

SPACs " an excuse for people with reputation and marginal ethics to take 20% and dash around the country for six months" EPIC

Jin Kee , 1 month ago

13:30 COVID-19 revealed that there are two kinds of jobs: essential jobs and bullshit jobs. We just eliminated all the bullshit jobs and put them onto UBI/welfare and it removed a drag on the economy.

Matt Kolman , 2 weeks ago

"You cant predict a market to the week, or even the month" proceeds to say the bubble always pops within months and then says people are putting in their final in for these last few weeks. This guy doesn't see the whole picture, although i agree that eventually we will deleverage but this guy has tunnel vision on his view

James Andrew , 1 week ago

37:00 If the system demands that the only way a business can make a profit is by providing Goods and Services that make peoples lives better then what difference does the motivation make? State Power has no such obligation, in fact, the immoral can pitch groups against each other for advantage and wealth, they can borrow to cover up inefficiencies, they can empire build pointless departments for personal advancement. Similarly corporations can leverage state power for advantageous regulations, a truly free market is the only moral system.


Marcus Cook
, 1 week ago (edited)

Big inflation will hit at the same time. Remember, 40% money supply increase in the last year, and a lot of that money went into either equities or savings accounts during the uncertainty of covid. People who cash out of equities with a profit will then spend it and put it into goods as consumer confidence will still be high when this first happens and people will no longer be looking to hold onto investments during the uncertainty of covid. This is where the newly printed money makes its way back into the economy and drives prices of commodities up. Simultaneously, you will have the bagholders who got caught up in the market bubble who made little to no money or even bought in high and suffered massive losses as always happens in a bubble. This is going to get ugly. It will then turn into hyperinflation if the government's solution is once again to print their way through a crisis

John Monk , 1 month ago

"Bitcoin is 100% faith. Come the next market phase where faith is at a minimum, what do we think will happen to a stock whose entire reason for existence is faith and nothing but faith?" - But doesn't that a hundred percent describe the US dollar too??!


ftecconn
, 1 month ago

For your average American having a Savings account is .20 of a Percent Interest Investment and Corporations Force people into 401ks because the Pensions are gone, That must make a big difference in how much money is in the stock market. Normal people have no choice, The Wealthy Do.

Jennifer Small , 1 month ago (edited)

After the disaster in Texas, I'm not so sure renewable energy is great for investment. The picture of the frozen windmills has become an iconic image in the American mind, however much the windmills may or may not have contributed to the break down.

scruffle , 2 months ago

I'm going to sell half my portfolio so when the bubble bursts I'll have money to buy back in at lower rates

Jeff L , 1 month ago (edited)

1929 and 2000? Also 2008. So we have 3 very big bubbles in the space of 20 years. This is a boom / bust economy with each action of the Federal Reserve to mitigate the pain of the bursting of the previous bubble only sews the seeds for the next bubble. I wonder if there is even another cycle left in this zero %, money printing economy!


Tony Su
, 1 week ago

I can see how alluring a video like is... It's hard to disagree with anything that is described in the video, so on the whole everyone will feel it's truthful, There is a strong feeling that extended rises in any market are illogical, instinctively investors will always look for a perceived difference between current price and current real value which should be much higher and expect that eventually prices will rise to eliminate the gap. The problem as always is defining the "imminent" collapse... Is that supposed to happen today? Next week? Month(s) from now? Years from now? And like most prognosticators this video doesn't identify a date or even a range of time. Eventually all bubbles burst, and are identified in hindsight. It's an axiom that hardly anyone can properly identify the day before a bubble bursts, if that were possible than everyone would have gotten out that day before. A reasonable strategy seems to be outlined in this video which is to always transition your investments into risk-averse parts of the marketplace, and he identifies green industries that are likely to become ever more important into the next years, possibly decades. People should realize that discussing an imminent bubble burst is important, yet ironically the mere discussion by enough people will likely result in behaviors that delay that very event, perhaps indefinitely.


hodoprime
, 3 months ago

Next four years, I see extemely slow growth. Maybe slight stock pullbacks (~10%) on tax increases or other event. Raising interest rates will cause pullback greater than 20% and historically been a sure sign.


55willy S
, 1 week ago

Mr. Grantham's hope in the Biden administration doing something good for the country is both sad and misplaced. How can an intelligent person have any confidence in a corrupt liar who is barely able to read a teleprompter?


David Grider
, 1 month ago

Listening to Jeremy Grantham it occurs to me that I have never in my entire life not been able to listen to someone that says the stock market is going to crash in the near future nor at the very same time not been able to listen to someone advocating that stocks are the best investment you can make. My conclusion is that the people that say the stock market is going up are right most of the time but when the people that say the stock market is going down are more right when they are right.


Guilherme Ruzza Schuck
, 1 week ago

You all are addicted for money, thats the reason of MMT, it is needed due to your addiction, in the end it will crete poverty and satisfaction for the bubbles classes...try to free yourself from addiction


Taylore Haynes
, 1 month ago

If you think a president who has held ZERO press conferences and taken no calls with foreign leaders can fix the stock market, I'd be better off taking stock advice from Mickey mouse.

SassyHershsey SassyHershey , 3 months ago

Charlie Munger warned of this same thing at Cal Tech in December. Cash is king finally.


Ghost
, 1 month ago

He said in this video that a sign of a bubble about to burst is to look for stocks like Tesla and SPACs, and Bitcoin coming down day after day. One month later this exact thing happened. The writing is on the wall.


Rick
, 3 months ago

The bond yield graph does not take into account the inflation rate. I recall purchasing S&L CDs for 12% back in 1981 but the inflation rate was 10.5%. If you could find a fixed rate 30 year mortgage the rate was about 18.5%. So the real bond return was not much different compared to present day.


Roy Park
, 2 months ago

"I have no confidence and have not had any for over 20 years in price-to-book and PE and price-to-cash flow, price-to-sales, even, as a measure of true value. a measure of true value is the long-term discounted value of a future stream of dividends" -Jeremy Gratham


Sagar Saxena
, 2 months ago

To be fair Grantham has been giving dire predictions since atleast 3 years and he keeps making them more and more dire as the market keeps going up.


vincent anguoni
, 2 months ago

This is great... I'm starting to learn about the current situation.... I lived through 4 booms and busts.. I didn't see the first one coming because I was young and inexperienced... I was in the land business... I got out at the right time for the last three busts.. Never waited for the top.... When it starts down its too late... Get out now as he says... Brilliant guy... Thanx

Harry , 2 months ago

Greenspan talked of Irrational Exhubberence in Sept 1997 but the market continued to rise till NASDAQ peak in March 2000 and S&P Peak in July 2000. so a few months is way to fast


Mike Salisbury
, 2 months ago

it really looks like an October crash is coming - looks like it, feels like it, smells like it. People are nearly all in on the stock and crypto markets, some are taking loans to do it. We are in a frenzy. Even I am all in. I hope I listen to myself and derisk a bit into cash before the end of the year.

allen everhart , 2 months ago (edited)

Every bull market climbs a wall of worry. As WB says, "more money is lost anticipating a downturn than is actually lost in the downturn."


Voice of Raisin
, 2 months ago

SPACS remind me of the blind ipo's of 1999. Investing money in a stock with no idea what they will do with it.

[Apr 24, 2021] When The Market Unravels There Will Be -No Place To Hide- - David Stockman

This is pretty revealing interview that systematize know facts about the current bubble. That does not mean that you can predict when the bubble will deflate and from what level. It might run for another couple of year or even more. After all stock market is a casino.
See also Jim Rogers- History shows that Bitcoin will be outlawed if it becomes 'successful' - YouTube and Legendary Investor Jim Rogers Warns Of Great Depression 2.0 - YouTube
Apr 24, 2021 | www.youtube.com


Eugene Firebird , 19 hours ago (edited)

The "greatest economy in history" was the USA from the 1950s to about 1975 when its standard of living was the highest in world history. That was a time when the average man could afford to buy a nice house and raise a large family on his income alone, and mom stayed home to manage the family and the home.


CY
, 57 minutes ago

One thing I never see addressed by any of the guests here on overvaluation of stock markets this: aren't markets just pricing in the likelihood of future superinflation? They're not looking today's earning multiples, they're looking at future earning multiples when currency is worthless. I feel like most guests are talking out of both sides.

There's both inflation coming and also a crash because of fundamentals. They can't both be happening at the same time. Either the dollar crashes or the stock market crashes - if both crash at the same time, then they cancel each other out since share are traded on dollars.


Charles
, 21 hours ago

17th century Dutch tulips

Thomas OToole , 2 hours ago (edited)

Another podcast of doom and gloom.. It's informative, truthful, and revealing.. It's also the same message DS has been delivering for sometime.. Hardly news worthy..


Truthsabre7
, 23 hours ago

I have respect for Mr Stockman. But he's been very wrong for quite a while. He's been saying for a long time that the poop is going to hit the fan. Well it will hit the fan. But nobody knows when.

Gulshan hoonjan , 22 hours ago

Stock market is fake it not the real economy

[Apr 24, 2021] On today's Wall Street Journal home page, two articles appear side-by-side. One is about how a heretofore obscure, nearly-valueless cryptocurrency called dogecoin, originally created as a joke, has soared to the point of being consequential for large sections of the investing public

Apr 24, 2021 | www.zerohedge.com

All true. But this does not mean that the bubble can not inflate for another year or two...

BY TYLER DURDEN FRIDAY, APR 23, 2021 - 12:10 PM

Authored by John Rubino via DollarCollapse.com,

On today's Wall Street Journal home page, two articles appear side-by-side. One is about how a heretofore obscure, nearly-valueless cryptocurrency called dogecoin, originally created as a joke, has soared to the point of being consequential for large sections of the investing public. And it's not unique:

Last year, stocks with less in the way of fundamentals, and more reliance on telling a hard-to-disprove story about the future, had a fabulous time.

Profit provides a grounding for a stock, while story stocks can soar on the wings of the imagination for a long time before being pulled back to earth -- or occasionally confirmed as true fliers -- by hard business facts.

Dogecoin's combination of get-rich-quick speculators and you-only-live-once Reddit meme traders is similar to GameStop, which was initially pushed up by a story about a new business model and then a short squeeze, before nihilistic Redditors took over.

The story stock of the last decade was electric-car maker Tesl a, with the tale being that there was a gigantic untapped market for self-driving electric cars and clean power that would eventually both work and be highly profitable.

The danger is that the excess so obvious in dogecoin has spread beyond the story stocks into mainstream investments, and that when eventually the froth is blown away, the rest of the market cools suddenly. That would be a bad joke.

The second article notes that something similar is happening in the bond market:

Corporate Bond Gauge Signals Dwindling Economic Risk

A key measure of the perceived risk in low-rated corporate bonds is hovering around its lowest level in more than a decade, highlighting investors' mounting confidence in the economic outlook.

The average extra yield, or spread, investors demand to hold speculative-grade corporate bonds over U.S. Treasurys dropped below 3 percentage points this month to as low as 2.90 percentage points for the first time since 2007, when it set a record of 2.33 percentage points, according to Bloomberg Barclays data.

Yields on low-rated corporate bonds already hit a record low of 3.89% in February. That data point is especially important for businesses, because it signals how cheaply they can borrow when they issue new bonds. Companies including Charter Communications and United Airlines Holdings have issued a total of $184.5 billion of speculative-grade bonds this year through Tuesday, the highest over that period on record, according to LCD, a unit of S&P Global Market Intelligence.

The spread relative to Treasurys, however, is arguably an even better measure of investors' outlook for the economy, since it shows how much investors feel they need to be compensated for the risk that companies may default on their debt.

The narrow speculative-grade bond spreads indicate debt investors think that the economic environment for businesses over the next several years could be better than at any time since the 2008-2009 financial crisis -- a striking development after many feared a severe, long-lasting economic downturn just last year.

So at one end of the financial asset spectrum, a crypto originally created as a joke is generating the most enthusiasm and biggest capital gains, while way over on the corporate debt part of the spectrum, junk bonds have never been more richly valued (i.e., they've never yielded less). Each of these asset categories – cryptos and junk – are "story stocks" of a sort, securities that are perceived to be attractive because the environment is going to be nothing short of perfect for years to come. Therefore no need to worry about risk and every incentive to roll the dice for big returns.

Note the all-important sentence from the junk bond article (bold added):

"The average extra yield, or spread, investors demand to hold speculative-grade corporate bonds over U.S. Treasurys dropped below 3 percentage points this month to as low as 2.90 percentage points for the first time since 2007 "

Here's what happened to junk bond yields (and, inversely, junk bond prices) after 2007:

One last data point: I got a long-overdue haircut yesterday, and instead of the normal chitchat about our families and upcoming vacations, the stylist and I talked dogecoin, bitcoin, Robinhood, and GameStop. She (a 20-something Latina) and her husband are having a ball speculating on things they hadn't heard of six months ago on exchanges that didn't exist in 2019. So far they – like the "investors" in the above Wall Street Journal articles – are thoroughly enjoying their newfound wealth.


Lordflin 1 day ago (Edited)

There will come a day... should such a day still have prospect amid the coming chaos... and historians of that day exist such that they are still recording...

That humans will be forced to ask...

What the holy **** were they thinking...!?

Paul Bunyan 1 day ago (Edited)

It happens frequently to humanity. Real estate a decade ago. Dot com bubble. Merger and Acquisitions in '87. The inflation crash of the early '80s. So when the system buckles and we get another crash it's just another bubble of hubris that humans know and truly love. For if we didn't love creating manic bubbles, we wouldn't do it.

Entertaining1 1 day ago

These are NOT sell signals.

They just look like them. We've had 12 years of head fakes.

You will go broke trading on ZH sell signal articles.

HopefulCynical 23 hours ago

You're sort of correct. They ARE sell signals.

But then the Fed sees them too, and buys stonks, propping up the market until the wave of selling has passed and the bears are all murdered again.

The Fed then dribbles their stonks back out into the next bull leg up.

Rinse, repeat, wipe hands on pants.

XanII 2 hours ago

If one would just know when the music stops. It's been like this for so so long only old ones recall how it was to trade stocks. Not stonks that always go up.

Kreditanstalt 1 day ago (Edited)

WHEN the bubble does pop they will find it exceedingly difficult to all fit through that tiny exit door simultaneously.

The somewhat smarter segment among Bitcoin "investors" have already started selling

archipusz 23 hours ago

I don't think it will pop.

I think it will go parabolic until the currency goes kaput and then you sure as heck will be glad you are not in the currency.

radical-extremist 1 day ago (Edited)

Everything is the South Sea Bubble. Get out before gravity takes hold.

When the cute Latina chick at the hair cutting place is talking crypto...that's God's way of telling you it's time.

chunga 1 day ago

The stock market is the bellwether of US health.

Entertaining1 1 day ago

The funny thing is that this all happened a century ago.

In the 1920s, the Dow was the only measure of the economy commonly used.

We came up with GNP, later replaced with GDP, because in 1929 we realized the market is not America.

Don't worry. We'll get there again. See you in a Hooverville.

chunga 1 day ago

Dmitry Orlov has had the best one sentence quote for two years running.

The Unites States can best be described as a singular, highly integrated, systemically corrupt scheme.

[Apr 24, 2021] This bubble is going to be a whole lot bigger than the tech bubble of the late nineties, and it will probably run a whole lot longer than we think

Apr 24, 2021 | www.zerohedge.com

Chen Zhao, Founding Partner and Chief Strategist of Montreal-based Alpine Macro, has been analyzing global financial markets for more than thirty years. Numerous investors worldwide know him as the long-serving Chief Strategist of BCA Research.

Today, Zhao is confident about equity markets. He sees the ingredients for a strong recovery in the global economy, and he believes fears of higher inflation are overblown. He sees the potential for the Federal Reserve's monetary policy to inflate a new speculative bubble. "This bubble is going to be a whole lot bigger than the tech bubble of the late nineties, and it will probably run a whole lot longer than we think", says Zhao in an in-depth conversation with The Market NZZ.


Mr. Zhao, in February and March, we have witnessed a sharp upward move in long term US bond yields, temporarily causing a sell-off in the Nasdaq. What do you make of this?

Whenever bond yields rise, you should conceptually decompose this movement into two stages. One is reflective, meaning the bond market is trying to tell you something about the underlying economy. Rising bond yields are reflective of stronger economic growth. However, a market selloff could also move into a phase where bond yields become too high, constraining economic activity. In my judgement, what we are witnessing right now is purely reflective. The ISM manufacturing index is at its highest level since 1983, the world economy is in a strong recovery mode. Higher yields are consistent with the economy getting stronger. Under these circumstances, I would be more concerned if bond yields did not rise.

Aren't rising inflation expectations also playing a part?

I don't see a clear breakout in inflation expectations. People forget that during the decade after the global financial crisis, inflation expectations have fallen apart. Markets became much more concerned about deflation. Inflation breakeven rates currently are between 2 and 2.2%, whereas the average range during the decade before 2009 was more like 2.5 to 3%. So inflation expectations are simply in the process of being normalized.

Do you see room for a further rise in yields?

Our model says ten year Treasury yields are pretty much at fair value today, at around 1.5%. But we know that if we have a cyclical move in financial markets, nothing stops at fair value. Markets always undershoot or overshoot. So I could see yields rise towards 2% or even a bit more. If they approach 2%, we would be active buyers of long term Treasuries.

Don't you see structural inflation building up?

No, not at all. There is a widespread misunderstanding of this issue. Many people look at the fiscal position of the United States and see a budget deficit of almost 20% of GDP. The Fed balance sheet has expanded by $7 trillion since the beginning of the pandemic, M2 has exploded upward. How can this not be inflationary? Well, in my experience, something that is too obvious is usually wrong.

How so?

What happened is this: For all of 2020, the US government unleashed $3.5 trillion in various rescue packages, as a result of which the federal government debt rose by $3.6 trillion. At the same time, the household sector's disposable income increased by $3.5 trillion, and household savings shot up by $5.5 trillion. In other words, American households not only saved up all the transfer payments they received from the government, but they even saved $2 trillion more from their own income. These rescue programs did absolutely nothing to generate aggregate final demand or GDP growth. What we have seen was not a fiscal stimulus to boost aggregate demand, but a transfer payment. This was no different than a one-time tax cut. We know that people's spending behaviour is determined by their outlook for sustainable income. If you give them a one-time tax cut, they will save it. This is what the Permanent Income Hypothesis says and this is what has happened.

... ... ...

Does that also mean you don't see a structural bear market for bonds, where yields would drift higher over the coming years?

Correct, I don't see the drivers for structurally higher yields. That's why I think that ten-year Treasury yields above 2% would represent a good buying opportunity.


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Leonine 2 minutes ago

M2 has exploded upward. How can this not be inflationary? Well, in my experience, something that is too obvious is usually wrong.


what kind of an argument is that?

[Apr 24, 2021] -Our Bullish Conviction Is Now Lower-- JPM Joins Major Banks In Turning Bearish On -Easy- Market Gains - ZeroHedge

Apr 24, 2021 | www.zerohedge.com

Yen Cross 21 hours ago

FOAD- JPM. What you really mean to say is the stimmy money is running down so you're running outta sheep to fleece.

Rainman 21 hours ago

There's been so much stimmy the shoeshine boy who are doing dollar averaging...

Soloamber 20 hours ago

Criminal investment bank speaks and no one listerns .

venturen 21 hours ago (Edited)

We are on a Permanent High Plataue of Zero Interest Easy Money... We don't need jobs, businesses or revenue!

https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm

Soloamber 20 hours ago

Translation JP Morgan has it's shorts in place .

Time to kick the legs out of the casino .

Hezekiah PREMIUM 17 hours ago (Edited)

Even those with half a brain can twig that JP Morgan are a bunch of crooks. Simply Google "JP Morgan fines".

Those who are market savvy should Google "JP Morgan fines".

Surely in literally everly market segment the CEO, Jamie Dimond, would be banged up in prison?!!!!!!!!!!!!!!!!!!

nsurf9 21 hours ago (Edited)

You think this guy understands that, even with more than 50% of the, country in plandemic lock-down, shutter/closed and/or bankrupt for a solid year, the "markets" have literally doubled.

Wake me up when the Treasury Securities Operational Details daily theft goes to zero.

Gentleman Bastard 21 hours ago remove link

This just means that JPM like the other whores have taken their short positions and will now do everything in their power to ensure that they cash out.

[Apr 22, 2021] Pastors as black Bolsheviks: some black churches try to hold Home Depot hostage

"History Does Not Repeat Itself, But It Rhymes" -- Mark Twain (attributed). This is a naked fight for political power using very questionable means.
Apr 22, 2021 | www.zerohedge.com

Corporations, especially those headquartered in Georgia, have come out against the legislation signed by Governor Kemp. Republicans describe the bill as one that addresses election integrity while Democrats call it a voter suppression law – "Jim Crow 2.0". Coca-Cola and Delta were among the first to make a point to virtue-signal after the governor signed the bill, only to be exposed as taking part in the process and giving input into the legislation. Both were fine with the law until the governor signed it and grievance activists did their thing. Coke soon discovered that not all of its consumers think that companies should be making policy – that 's the job of lawmakers- and now it is trying to clean up the mess it made for itself.

Churches have increasingly played a part in American politics and this is an escalation of that trend. Evangelical churches have shown support for conservative and Republican candidates while black churches get out the vote for Democrats. This threat of bringing a large-scale boycott over state legislation is a hostile action against the corporation. It's political theatre. Groups like Black Voters Matter, the New Georgia Project Action Fund (Stacey Abrams), and the Georgia NAACP are pressuring companies to publicly voice their opposition and the religious leaders are doing the bidding of these politically active groups.

When SB 241 and HB 531 were working through the legislative process, the groups put pressure on Republican lawmakers and the governor to abandon the voting reform legislation. They also demanded that donations to any lawmakers supporting the legislation be stopped. The Georgia Chamber of Commerce tried to remain bipartisan while still voicing support for voting rights but then caved and expressed "concern and opposition" to some provisions . At the time, several large Georgia companies were targeted by activists, including Aflac, Coca-Cola, Delta Airlines, Home Depot, Southern Company and UPS.

The Georgia Chamber of Commerce previously reiterated the importance of voting rights without voicing opposition against any specific legislation. In a new statement to CNBC, the Georgia Chamber said it has "expressed concern and opposition to provisions found in both HB 531 and SB 241 that restrict or diminish voter access" and "continues to engage in a bipartisan manner with leaders of the General Assembly on bills that would impact voting rights in our state."

Office Depot came out at the time and supported the Chamber's statement. The Election Integrity Act of 2021, originally known as Georgia Senate Bill 202, is a Georgia law overhauling elections in the state that was signed into effect by the governor and we know what happened. Office Depot has not delivered for the activists as they demand so now the company faces boycott drama. The religious leaders are taking up where the activist groups left off.

African Methodist Episcopal Bishop Reginald Jackson said the company has remained "silent and indifferent" to his efforts to rally opposition to the new state law pushed by Republicans, as well as to similar efforts elsewhere.

" We just don't think we ought to let their indifference stand ," Jackson said.

The leader of all his denomination's churches in Georgia, Jackson had a meeting last week with other Georgia-based executives to urge them to oppose the voting law, but said he's had no contact with Home Depot, despite repeated efforts to reach the company.

Faith leaders at first were hesitant to jump into the boycott game. Now the political atmosphere has changed and they are being vocal. Jackson focused on pressuring Coca-Cola first. After that company went along to get along, before it realized its error, Jackson moved his focus onto other companies.

"We believe that corporations have a corporate responsibility to their customers, who are Black, white and brown, on the issue of voting ," Jackson said. "It doesn't make any sense at all to keep giving dollars and buying products from people that do not support you."

He said faith leaders may call for boycotts of other companies in the future.

So, here we are with Home Depot in the spotlight. There are four specific demands leveled at Home Depot in order to avoid further action from the activists.

Rev. Lee May, the lead pastor of Transforming Faith Church, said the coalition is "fluid in this boycott" but has four specifics requests of Home Depot: To speak out publicly and specifically against SB 202; to speak out against any other restrictive voting provisions under consideration in other states; to support federal legislation that expands voter access and "also restricts the ability to suppress the vote;" and to support any efforts, including investing in litigation, to stop SB 202 and other bills like it.

" Home Depot, we're calling on you. I'm speaking to you right now. We're ready to have a conversation with you. You haven't been ready up to now, but our arms are wide open. We are people of faith. People of grace, and we're ready to have this conversation, but we're very clear those four things that we want to see accomplished ," May said.

The Rev. Timothy McDonald III, senior pastor of the First Iconium Baptist Church, warned this was just the beginning.

"It's up to you whether or not, Home Depot, this boycott escalates to phase two, phase three, phase four," McDonald said. "We're not on your property -- today. We're not blocking your driveways -- today. We're not inside your store protesting -- today. This is just phase one."

That sounds a lot like incitement, doesn't it? Governor Kemp is speaking out, he has had enough. He held a press conference to deliver his comments.

"First, the left came for baseball, and now they are coming for Georgia jobs," Kemp said, referring to MLB's decision to move this year's All-Star Game from Atlanta over the new laws. "This boycott of Home Depot – one of Georgia's largest employers – puts partisan politics ahead of people's paychecks."

"The Georgians hardest hit by this destructive decision are the hourly workers just trying to make ends meet during a global pandemic. I stand with Home Depot, and I stand with nearly 30,000 Georgians who work at the 90 Home Depot stores and 15 distribution centers across the Peach State. I will not apologize for supporting both Georgia jobs and election integrity," he added.

"This insanity needs to stop. The people that are pushing this, that are profiting off of it, like Stacey Abrams and others, are now trying to have it both ways," Kemp said. "There is a political agenda here, and it all leads back to Washington, D.C."

The governor is right. The activists are in it to federalize elections, not to look out for Georgians, who will lose jobs over these partisan actions. The law signed by Kemp increases voting rights, it doesn't limit them .

[Apr 22, 2021] Market Cap Of Money-Losing Companies Surpasses Dot Com Bubble Record

Apr 22, 2021 | www.zerohedge.com

DHS Fusion Center 6 hours ago

Is Paul Krugman available to talk about how great everything is now or is he still being investigated for distribution of child ****?

archipusz 5 hours ago

I needed a cross dressing analyst to explain this mkt to me. Thanks.

YesWeKahn 6 hours ago

This is Powell speaking:

There is no bubble, this is just a optimism of "not happening" reopening and "not working" vaccine.

[Apr 22, 2021] Jobless claims preview- Another 610,000 Americans likely filed new unemployment claims

Apr 22, 2021 | finance.yahoo.com

Jobless claims preview: Another 610,000 Americans likely filed new unemployment claims Emily McCormick · Reporter Wed, April 21, 2021, 2:00 PM More content below More content below More content below More content below More content below More content below NQ=F +0.54% ^IXIC +0.75% SPY +0.68% YM=F +0.78% +2

New weekly jobless claims likely edged higher last week after plunging to the lowest level since the start of the pandemic.

The Department of Labor will release its weekly report on new jobless claims on Thursday at 8:30 a.m. ET. Here were the main metrics expected from the report, compared to consensus data compiled by Bloomberg:

Initial jobless claims, week ended April 17: 610,000 expected vs. 576,000 during the prior week

Continuing claims, week ended April 3: 3.640 million expected vs. 3.731 million during the prior week

Last week's new claims came as a welcome surprise after more than a year of elevated initial filings. At 576,000, new claims broke below the Great Recession-era high of 665,000 filed in March 2009 for the first time in more than a year. And claims have dropped precipitously from their all-time high of 6.1 million from last spring.

But the labor market recovery has still been choppy, and the general downtrend in new jobless claims over the past several months has come with some bumps higher. Other reports have also underscored the stop-and-start nature of the rebound, with the Federal Reserve's latest Beige Book last week noting that many regions continued to experience labor shortages as well as hiring challenges over the past several weeks. ^DJI +0.74% Jobless claims preview: Another 610,000 Americans likely filed new unemployment claims Emily McCormick · Reporter Wed, April 21, 2021, 2:00 PM More content below More content below More content below More content below More content below More content below NQ=F +0.54% ^IXIC +0.74% SPY +0.69% YM=F +0.78% +2

New weekly jobless claims likely edged higher last week after plunging to the lowest level since the start of the pandemic.

The Department of Labor will release its weekly report on new jobless claims on Thursday at 8:30 a.m. ET. Here were the main metrics expected from the report, compared to consensus data compiled by Bloomberg:

Initial jobless claims, week ended April 17: 610,000 expected vs. 576,000 during the prior week

Continuing claims, week ended April 3: 3.640 million expected vs. 3.731 million during the prior week

Last week's new claims came as a welcome surprise after more than a year of elevated initial filings. At 576,000, new claims broke below the Great Recession-era high of 665,000 filed in March 2009 for the first time in more than a year. And claims have dropped precipitously from their all-time high of 6.1 million from last spring.

But the labor market recovery has still been choppy, and the general downtrend in new jobless claims over the past several months has come with some bumps higher. Other reports have also underscored the stop-and-start nature of the rebound, with the Federal Reserve's latest Beige Book last week noting that many regions continued to experience labor shortages as well as hiring challenges over the past several weeks.

https://flo.uri.sh/visualisation/4169274/embed?auto=1

And even within the jobless claims report, some metrics have remained stubbornly elevated and pointed to persistently high levels of unemployment. Nearly 17 million Americans were still receiving unemployment benefits across all programs as of late March, including more than 12 million Americans on the federal Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation program, which each expire in September. And some individual states, including Nevada and Alaska, continue to post insured unemployment rates that are well above the national average.

[Apr 22, 2021] Market Cap Of Money-Losing Companies Surpasses Dot Com Bubble Record

Apr 22, 2021 | www.zerohedge.com

In a recent note from SocGen's Andrew Lapthorne, the cross-asset strategist summarizes the ongoing market insanity delightfully, saying that "there is an increasingly large number of weird and wonderful signs of market excess, from surging crypto currencies started as a joke to a single New Jersey Deli trading at $100m market cap."

To be sure, it's not just the record liquidity that has pushed the Goldman index of financial conditions to record easy levels...

... there is also a lot of good news, with the economic narrative improving and vaccination programs accelerating worldwide, with most now hoping that the worst of the pandemic is behind us. At the same time, global profit expectations are being revised upwards and earnings growth is forecast to jump by a third in 2021.

Given this almost euphoric market backdrop, Lapthorne correctly notes that "anything bearish is met with groans."

But to complete the record, the SocGen strategist adds that even after this profit rebound, global equities will be trading at over 21x earnings, which is extremely expensive on most historical measures, and at a stock level, " the distribution of valuations is as extreme as during the 1999 tech-bubble."

Finally, the amount of global market capitalization that has reported a negative profit number in the last year and in each of the last three years is higher than at any point during the past 22 years, and has even surpassed the dot com bubble.

Lapthorne's rhetorical question: " We wonder how the history books will describe 2021."

mailll 6 hours ago (Edited)

Corporate stocks are the new bitcoin. People putting trillions into worthless corporate assets. Brought to us by free money from the Federal Reserve.

I know one company that had a market cap of about $200 million about 5 years ago. It now has a market cap of about $2 billion. And as their stocks have been increasing year after year, their net incomes were becoming more and more in the negative. And in order to finance their mismanaged company, they have been issuing more stocks. And instead of decreasing the value of their stocks, their stocks actually doubled. Once again, brought to us by free money from the Federal Reserve.

But keep in mind, the Fed giveth, and the Fed taketh away. And each time they taketh away after issuing all of this easy money, they have gained more and more power over our financial system, and over our government. In fact, the Federal Reserve is now Uncle Sam's new daddy. And Uncle Sam is loving it. And investors are loving it, many of who don't even realize why this is happening.

I expect the Fed to taketh it all away sometime in 2022.

istt 3 hours ago

P/E ratio for the NASDAQ are not anywhere close to 1999. But the Buffett Indicator is near record highs.

[Apr 22, 2021] Credit Suisse's Prime Unit Risk Chief Had Been Archegos Salesman

Apr 22, 2021 | www.bnnbloomberg.ca

(Bloomberg) -- Wall Street banks have long relied on a familiar system to limit the dangers of trading with big clients: assign sales staff to win deals, and risk controllers to keep them in check -- even if it sacrifices some profit.At Credit Suisse Group AG, executives had given the point salesman to Archegos Capital Management on its swaps desk the new responsibility of instead overseeing risk-taking in the broader prime-brokerage unit, according to people with knowledge of the matter. This year, Archegos's swap bets spectacularly collapsed, saddling the bank with a $4.7 billion writedown, and setting it up as the biggest loser to emerge from the debacle at Bill Hwang's family office.

Parshu Shah -- the salesman who became head of prime-services risk -- hasn't been accused of any impropriety in previous trades with Archegos. But the bank has faced questions in the wake of the debacle over whether managers prioritized boosting revenue over managing against downside. Shah is among a roster of Credit Suisse executives who've been forced to step down following the blowup, according to an internal memo early this month.

The usually behind-the-scenes functions of risk controls have been thrust into the limelight after Credit Suisse was left holding the bag on two financial catastrophes in just a few months -- Hwang's firm and the collapse of Greensill Capital. The Swiss lender's losses have left investors puzzling over whether it has sufficient checks in place.

In recent years, Credit Suisse Chief Executive Officer Thomas Gottstein and his predecessor Tidjane Thiam gave the task of resetting risk management and the bank's risk appetite to Lara Warner, head of risk, who is stepping down as well. She challenged risk managers to stop thinking only about defending the bank's capital and also look at strategic business priorities, Bloomberg reported earlier.

While it's not typical for revenue-generating finance employees to switch to risk-oversight roles, some banks make such shifts.Credit Suisse, the worst-performing major bank stock this year, is set to disclose first-quarter earnings results on Thursday that are likely to involve a more-detailed discussion around the Archegos mess. Anna Christensen, a spokeswoman for Credit Suisse declined to comment for the firm and Shah, or say how long he'd been in the risk-oversight position.

me name=

Shah, who has been with the bank for more than 20 years, was one of the people at the firm who helped nurture the relationship with Archegos as the fund began growing in size.When Shah left the swaps desk, his sales role ended and he took over the new oversight position within the prime-brokerage group. That job included overseeing the risk of several clients, including Archegos. An existing member of Shah's team was assigned to Hwang's firm for monitoring its activity on a daily basis, according to a Credit Suisse executive who asked not to be identified discussing internal matters.

The prime-brokerage risk group was one among several lines of defense set up to shield a firm of Credit Suisse's size from confronting hefty losses in dealings with any one client. But the enormity of the bank's exposure coupled with the rapid implosion of Hwang's firm ripped through the safety net Credit Suisse had set up, leaving management befuddled, the lender's workforce frustrated and investors furious.

In 2016, under then-CEO Thiam, Credit Suisse underwent a significant restructuring of its risk functions that led to many people leaving. The risk-control center was shifted to Zurich, Credit Suisse's headquarters, from New York, where the majority of the bank's investment-banking and trading activities sit.

Since the restructuring, efforts to cut costs have damped the bank's ability to add talent and replenish the defense lines, a person familiar with the matter said.

[Apr 22, 2021] Money Isn't Pouring Into U.S. Stocks. What That Means for the Market

It would be stupid to buy US stocks at those valuations. But it is strange that 401K investors do not participate, they usually have fixed allocation heavily biased to stocks providing Wall Street sharks with ample food chain...
Apr 22, 2021 | finance.yahoo.com
Jacob Sonenshine Wed, April 21, 2021, 6:30 AM

Household equity holdings now account for 47% of total assets, according to Citi. That is the highest level since 1970. Returns were subpar for the next decade.

[Apr 22, 2021] Economic growth is 'peaking'- Goldman Sachs

Apr 22, 2021 | finance.yahoo.com

Brian Sozzi · Editor-at-Large Thu, April 22, 2021, 4:32 PM

If you believe the market is a forward looking mechanism -- and most investors would agree that it is -- then you may want to prepare your portfolios for a sharp slowdown in economic growth later this year and into 2022 as fiscal stimulus wanes.

U.S. economic growth for this year is "peaking," Goldman Sachs strategists led by Ben Snider warned in a new note on Thursday. Snider said Goldman's economists predict 10.5% GDP growth for the second quarter, the strongest quarterly growth rate since 1978. The projection is also near the high-end of most economists on Wall Street.

From there, well, it's all downhill for GDP growth.

Goldman estimates growth in the third and fourth quarters of this year will clock in at 7.5% and 6.5%, respectively. Growth is then seen slowing in each quarter of 2022 -- by the fourth quarter Goldman is modeling a mere 1.5% GDP increase.

Economic growth is peaking, warns Goldman Sachs.

"Although our economists expect U.S. GDP growth will remain both above trend and above consensus forecasts through the next few quarters, they believe the pace of growth will peak within the next 1-2 months as the tailwinds from fiscal stimulus and economic reopening reach their maximum impact and then begin to fade," Snider said.

The economic growth peak could have major implications for investor returns, Snider thinks.

Goldman's research shows decelerating economic growth usually leads to weaker -- though still positive -- equity returns and greater volatility. Since 1980, the S&P 500 has averaged a monthly return of 0.6% when economic growth was positive but decelerating. That is half the 1.2% average gain when economic growth was positive and accelerating, points out Snider.

"Decelerating economic growth is also typically accompanied by sector rotations within the equity market,' Snider added. "Cyclical industries tend to lead the market in environments of positive and accelerating economic growth, but as growth peaks and decelerates more defensive industries typically outperform."


[Apr 20, 2021] US government bond investors left bewildered by 'bonkers' market move

Is this move reflect rising fear of stock bubble burst?
Apr 20, 2021 | finance.yahoo.com

Bond investors are bewildered after last week's stellar US economic data sparked a rally in haven US Treasuries -- a market reaction that breaks the typical dynamic for fund managers. The price of highly rated government bonds tends to jump in response to bad news, pushing down yields. Mike Riddell, a portfolio manager at Allianz Global Investors, described the market move as "bonkers".

[Apr 20, 2021] How slogans "Diversuty, inclution and equity" are abused on campuses

Apr 20, 2021 | www.wsj.com

B

Brian N SUBSCRIBER 4 hours ago

With politics leaning ever more left on university campuses, I hope Dr Ladapo doesn't lose his job at UCLA for writing a cogent and concise opinion piece.
RICHARD SANDOR SUBSCRIBER 3 hours ago
Brian : Yes, an expensive university in my largely Democrat-controlled state state has a student group which wants to ' censor ' the university president for not being focused enough on ' diversity, inclusiveness and equity . ' Hope the parents realize the high price they are paying for this left wing indoctrination. mrs

[Apr 19, 2021] Investors should literally 'go away in May' this year -- NYSE trader

The idea of seasonality is not bad per se, but needs to be applied intelligently. In this sense, May is not fixed month and can occur during any month of the year when signs of impeding collapse are prominent. Selling when you (still) have some gains is kind of insurance against the crash.
Apr 19, 2021 | finance.yahoo.com

"Sell in May and go away," advises the trading maxim. But with stocks at record highs, one trader at the New York Stock Exchange is recommending the strategy with a twist.

... The full axiom was originally, "Sell in May and go away, and come on back on St. Leger's Day." It has its roots in the City of London . Financial professionals would go on holiday in May for approximately four months to escape the summer heat and return for the St. Leger derby in mid-September. Traders and bankers in the U.S. appropriated the aphorism over the years and condensed it to its current form.

Many traders still leave their desks for the summer. Volume dries up, liquidity tends to wane, and the bearish summer tendencies become a self-fulfilling prophesy -- to an extent. The likelihood of markets to follow predictable patterns based on the calendar is called seasonality -- accounting for up to one-third of a market's price movement.

While a powerful indicator at times, there can easily be overriding factors. Entire books and websites are dedicated to the study, such as The Stock Trader's Almanac , which has been published since 1967. The author, Jeff Hirsch, has combined seasonality with other technical indicators to produce a robust trading strategy over time.


Woods takes account of the current year-to-date gains for the indices and sees the potential for some cooling off.

"We could see a pause in this market. It seems too obvious, but right now seeing where we've gone and how strong this rally has been -- a pause would be fine. And you throw in the seasonality factor where April is the second strongest month over the last 20 years. Now we're coming into that slowdown. We didn't see it last summer, which was great. But this summer, rationale would dictate that we're gonna go away," said Jay.

... ... ...

Jared Blikre is an anchor and reporter focused on the markets on Yahoo Finance Live. Follow him @SPYJared

Kevin 17 hours ago I don't think anyone can give you good advice about this market. I am 50/50 and unsure...and I think everybody else is in all honesty. We all know that valuations are high, the market may be over-heated, and the market is due for a pullback. We all know that. But, in my lifetime, we have never had an economic reopening after a forced government shutdown during a pandemic. You can make arguments for a pullback or a continued rally very easily. Both sides make perfect sense. With that being said, I think you just have to be playing both sides. Stay in the game and keep some dry powder as well. Yes, I know that is very simplistic and basic, but this thing really could go either way during the coming months. Frank 22 hours ago Slashing interest rates and backstopping corporate debt, for example, helped direct money into the financial system. Some of the biggest beneficiaries were wealthier Americanswho hold investments. As a stark sign of how the rich got richer in the past 12 months, the number of billionaires on Forbes's 35th-annual ranking grew by nearly a third, swelling by 660.
BananaBob 22 hours ago It makes sense to sell in Q2 when the markets are at record highs. Q3 is usually the worst quarter of the year. Lots of companies take their losses in Q3 (at least on paper) to make their Q4 numbers look better. Then, then they can say 'a gain of x% since last quarter' to boost their year end numbers and show a hockey stick shaped chart on their annual reports.
MickinMD 6 hours ago Yahoo should point out here that a "trader" is more of a gambler than an investor.

While May-Sept. may be bad, history says that people that sell generally miss the optimum reentry point and buy back at a higher price.

Still, the P/E of the S&P 500 was 18 in 2014 and is 43 now - something not seen since 2000 when Fed Chair Alan Greenspan wisely warned against "irrational exuberance."

The problem with selling stocks today is: where are you going to put the money for the short term until you reinvest? In 0.1% credit union savings or 0.05% 1-year M&T bank CD (0.025% is the national avg.)?

A big reason for the big-bubbled market is that the people who tend to invest in the market also tended not to lose their jobs during the pandemic, they have money to invest, and CD's and Bonds don't pay anything.

I've taken money out of stocks but only to spend a ton to repair and remodel my house: my "emergency" CD's pay 2.1% to 2.85% interest and mature in 2024: I'm not going to redeem them and later replace them with 0.5% CD's.

The clincher for me to sell stocks is because the market is SO overpriced. My personal, conservative, retiree's stock portfolio's P/E went from 20 in 2014 to 26 now - value stocks are mostly not in a huge bubble.

So I partially-sold stocks that made big gains last year but tend not to be moving up this year and have higher than usual P/E's. For ex., Costco (COST) returned 33% last year but is down 2% this year and it's P/E is 39 - it was 27 to 29 from 2015-18.
Uald NRA 19 hours ago You might want to look at a chart of national debt. Republicans make a big deal about the debt whenever Democrats are in power, but the moment they are in control that worry goes away completely. The national debt increased by 186% under Reagan, 101% under Bush, Obama was 74%. Reality doesn't fit perception when it comes to who actually increases our debt faster.
a 16 hours ago Don't sell out rather reblance your portfolio to restore your asset allocation to a what makes sense for you from a risk tolerance standpoint. Also study the previous market crashes. 1987, 1992, 2000, 2008 and 2020, They all happened for completely different reasons. History never repeats itself. The next crash will be for something completely different yet again. Work on possible senarios that might tigger a market crash, for example a run on the dollar, or crypto goes bust and the leverage take the banks with it, massive inflation, covid comes back, etc. When you have a few scenarios then look for asset classes that can survive that crash. That's where you get insight from studying previous crashes. mike s 1 day ago "Thoughts On the Market" podcast had a bit on this. While it is old, there seems still some truth in it - but with newer influences and some specific to NOW. Taxes, financial experts taking vacations, etc. I am more concerned with supply chains slowly coming back as demand is there, inflation, rising costs in things like corn, lumber (other commodities), etc. Also, I think many "day-traders" will continue to chase gains with cryptos - not sure what that will do. I'm only in a little bit with GBTC and RIOT. I've got a decent bit of cash on the side to buy in if (when - many think) there is another major dip. There are a few areas that have been slowing down (tech, small caps, SPACs, ARK-type stuff) that I am still buying little bits here and there - BUT not over-buying (I hope)... Where to buy? Services? Airlines? Shipping? not sure.. (is anyone? nope)
Hose 22 hours ago Fed banksters and wall st. Analyst Criminals should go to Jail.
David2 1 day ago Sell in May and then pay the capital gains tax in April. Tax harvesting after a decline seems like a much smarter move
sixpacktwo 5 hours ago I'm older and last year went to dividend paying funds and utilities. After 50 years I'm letting other people keep me safe. DENNIS S 1 day ago With the S & P at 37.9 times earnings, the highest in history it may be time for some profit taking .
Evolution 6 hours ago The calm before the storm is here. Ultra smart market. Totally undetectable.

[Apr 19, 2021] Microsoft buys speech recognition company Nuance in $16B deal, second biggest since LinkedIn

This amount of money is another sign of the tech stocks bubble. Microsoft has similar technology and Nuance quality of speech recognition is weak.
Apr 19, 2021 | www.nbcnews.com

Microsoft buys speech recognition company Nuance in $16B deal, second biggest since LinkedIn

Nuance has a strong reputation for its voice recognition technology, and it has been considered an acquisition target for companies like Apple, Microsoft and more for several years.

[Apr 19, 2021] New investors beware -- the easy money you made in the stock market probably won't continue by Russ Wiles

Apr 18, 2021 | finance.yahoo.com

Russ Wiles Sun, April 18, 2021, 7:28 PM

The past year or so has been one of the oddest periods ever for the stock market and economy, with a rare pandemic shutting down businesses and throwing millions of people out of work.

At the same time, the federal government stepped up with unprecedented amounts of stimulus payments, free loans to businesses, eviction moratoriums and other aid -- even a delayed deadline for filing income-tax returns.

Things are off-the-charts unusual. Yet for novice investors who stuck a toe in the stock market for the first time over the past year or so, it's all they know.

And it's not just a few people, either. Armed with stimulus checks and motivated by boredom perhaps, millions of people took the stock market plunge last year -- a whopping 15% of all current stock investors got their start in 2020, according to a new Schwab survey.

Most must be thinking, "This is easy." Here are some reasons why they should think twice.

Don't expect the next down cycle to be so kind.

Not a joke anymore: Dogecoin, the cryptocurrency created as a spoof, sees its market value top $40B

The stock market has climbed steadily for the past 13 months, over which time it has nearly doubled in value. That's rare in itself. But the really unusual part was the extremely short duration of the preceding bear market or downward spiral, which lasted just five weeks.

No wonder these first-year investors are more optimistic about near- and long-term results compared to more seasoned market participants, according to the Schwab survey. The newbies also tend to be younger -- 35 years old, on average, compared to 48 for people who started investing prior to 2020. They thus can afford to be more optimistic, as they have more time to make up losses.

It's true that rising or bull markets always spring from the ashes of bear markets, but usually those preceding downdrafts are much more prolonged. That's the real challenge of investing -- dealing with month after month, if not year after year, of falling prices, when disappointment leads to despair and then desperation. If you blinked, you missed the bearish phase of 2020. The next downward cycle won't be so kind.

... ... ...

Investing, like gambling, isn't so difficult when you're playing with house money. That was somewhat the case for millions of Americans who received stimulus payments from Uncle Sam or possibly souped-up unemployment benefits.

Sure, plenty of people used this cash as financial lifelines, to stay afloat. But others saved their stimulus checks or put them to use in the stock market.

In other words, some new investors probably don't fully appreciate that investing involves sacrifice: You forego consumption today in hopes that your money will grow enough over time that higher spending will be possible years down the road.

Stimulus checks don't arrive every year, though there is one form of free money that you can tap into on an ongoing basis. These are the matching funds available through workplace 401(k)-style funds that employers ante up to encourage workers to invest.

Even the federal government offers limited retired matching funds to lower-income workers, through the widely underappreciated Retirement Savers tax credit (details at irs.gov). It's not a huge sum -- a maximum credit of $1,000 annually to the lowest-income workers -- but it beats the stimulus money you can count on most years.

Don't assume your buddies are right

There's a lot of psychology to investing, and one tendency is that people seek out confirming views from friends, family members and colleagues. There's something heartening about having your investing ideas validated by others. The danger is that these other parties might have even less knowledge than you.

More than in most years, collaborative investing appears to be on the rise. For example, a survey by MagnifyMoney, a subsidiary of Lending Tree, found that nearly six in 10 investors age 40 or younger are members of online forums such as Reddit. These can be good ways to learn about finances, but they also might lead you astray.

"It's great that these communities are introducing a lot of people to investing, which is one of the best ways to build wealth over a lifetime," said Tendayi Kapfidze, LendingTree's chief economist, in a statement. "A concern is that some are leading to relatively short-term trading concentrated in a few stocks with hopes of getting rich quick."

Usually, investors are better off thinking for themselves and tuning out the "noise" or outside distractions. In part, this is because other people often have different goals, tolerance for risk or other motivations compared to you. Or, they're just wrong.

... .... ...

And rather than concentrate your money in a handful of stocks, Sandoval recommends spreading it out through low-cost, diversified mutual funds or exchange-traded funds. The market's strong performance last year, she noted, was driven by a smattering of large, technology-focused companies including Facebook, Amazon, Apple, Netflix and Google.

But already, there are signs that the market's leadership is shifting. Besides, pinpointing future hot stocks isn't easy to do, except in hindsight...

This article originally appeared on Arizona Republic: Stock market: New investors should know what's next for stocks

[Apr 19, 2021] Revival of bonds as buffer for market shocks

Apr 19, 2021 | finance.yahoo.com

Katie Martin Sun, April 18, 2021, 8:00 PM

The recent run-up in government bond yields is a gift to any fund manager fretting over market risks ranging from geopolitics to leverage. It is true that the first quarter of this year was no fun for holders of government bonds, which dropped in price on the largest scale in four decades. The pullback means that, just as Russia and the US once again lock horns, and as the Archegos implosion stirs concerns over potentially systemic risks stemming from plentiful global leverage, government bonds again offer something of a safety net.

[Apr 19, 2021] Central Bank Will Begin Reducing Bond Purchases 'Well Before' Raising Interest Rates, Powell Says

At least $120 billion a month of Treasury debt and mortgage-backed securities bought by FED since last June is around trillion dollars now. This is just putting money from one pocket to another not a real buy or sell. Essentially the naked emission of dollars -- attempt to export inflation.
So FED seeks to increase inflation to somewhere between 2 and 3 percent a year. Which means payment to the forign owners of the US national debt will increase accordingly. And payments to foreign owners is a real thing as central banks are now reluctant to recirculate supruss dollars into treasuries and China cuts it purchases of dollar denominated debt.
Apr 19, 2021 | www.wsj.com

The Fed has been buying at least $120 billion a month of Treasury debt and mortgage-backed securities since last June to hold down long-term borrowing costs. Since December, the central bank has said the economy must make "substantial further progress" toward its goals of maximum employment and 2% inflation before it scales back those purchases.

"We will taper asset purchases when we've made substantial further progress toward our goals, from last December when we announced that guidance," Mr. Powell said in a virtual event held by the Economic Club of Washington, D.C. "That would in all likelihood be before -- well before -- the time we consider raising interest rates."

The Fed has said it will hold rates near zero until it sees the labor market return to full employment and inflation rise to 2% and is forecast to moderately exceed that level for some time. Mr. Powell reiterated that he thinks it is highly unlikely that the Fed would raise interest rates this year and noted that most central-bank officials see rates remaining near zero through 2023.

Tuesday's report fueled concerns that inflation, dormant through the record-long economic expansion from 2009 to 2020, could soon become a challenge for policy makers. Mr. Powell acknowledged those worries while reiterating that the Fed seeks inflation "that is moderately above 2% for some time" to make up for the past decade's shortfalls.

Both the Biden administration and the Fed acknowledge the possibility of prices rising faster than usual in coming months as the economic recovery strengthens and demand for goods and services temporarily outruns supply. But both expect the acceleration in inflation to prove temporary.

[Apr 19, 2021] U.S. Treasury Yields Fell Sharply

What has driven bonds lower from 10 year interest around 1.7% to around 1.5%? Which means around 2% difference in the price of the bonds. This is the question.
Is this about the concerns about the status of dollar as global reserve currency, that were eased? Or that Biden administration is paralyzed and will not be able to extend the USA debt as it planed to do.
Apr 15, 2021 | www.wsj.com

Treasury yields still remain much higher than where they started the year.

The 10-year finished last year at 0.913%. The yield on the 30-year bond settled Thursday at 2.210%, down from 2.325% Wednesday but up from 1.642% at the end of last year.

[Apr 19, 2021] British liberal journalist and academic George Monbiot has written about his own experiences being dragged away from his family at the tender age of 8 to be 'educated', that is emotionally crippled, in an elite British private boarding school (primary stage prep-school).

Apr 19, 2021 | www.moonofalabama.org

ftmntf , Apr 18 2021 14:33 utc | 122

See: https://www.monbiot.com/2008/01/22/unsentimental-education/

"British private schools create a class culture of a kind unknown in the rest of Europe. The extreme case is the boarding prep schools, which separate children from their parents at the age of eight in order to shape them into members of a detached elite. In his book The Making of Them the psychotherapist Nick Duffell shows how these artificial orphans survive the loss of their families by dissociating themselves from their feelings of love(14). Survival involves "an extreme hardening of normal human softness, a severe cutting off from emotions and sensitivity."(15) Unable to attach themselves to people (intimate relationships with other children are discouraged by a morbid fear of homosexuality), they are encouraged instead to invest their natural loyalties in the institution.

This made them extremely effective colonial servants: if their commander ordered it, they could organise a massacre without a moment's hesitation (witness the detachment of the officers who oversaw the suppression of the Mau Mau, quoted in Caroline Elkins's book, Britain's Gulag(16)). It also meant that the lower orders at home could be put down without the least concern for the results. For many years, Britain has been governed by damaged people.

I went through this system myself, and I know I will spend the rest of my life fighting its effects. But one of the useful skills it has given me is an ability to recognise it in others. I can spot another early boarder at 200 metres: you can see and smell the damage dripping from them like sweat. The Conservative cabinets were stuffed with them: even in John Major's "classless" government, 16 of the 20 male members of the 1993 cabinet had been to public school; 12 of them had boarded(17). Privately-educated people dominate politics, the civil service, the judiciary, the armed forces, the City, the media, the arts, academia, the most prestigious professions, even, as we have seen, the Charity Commission. They recognise each other, fear the unshaped people of the state system, and, often without being aware that they are doing it, pass on their privileges to people like themselves.

The system is protected by silence. Because private schools have been so effective in moulding a child's character, an attack on the school becomes an attack on all those who have passed through it. Its most abject victims become its fiercest defenders. How many times have I heard emotionally-stunted people proclaim "it never did me any harm"? In the Telegraph last year, Michael Henderson boasted of the delightful eccentricity of his boarding school. "Bad work got you an 'order mark'. One foolish fellow, Brown by name, was given a double order mark for taking too much custard at lunch. How can you not warm to a teacher who awards such punishment? Petty snobbery abounded," he continued, "but only wets are put off by a bit of snobbery. So long as you pulled your socks up, and didn't let the side down, you wouldn't be for the high jump. Which is as it should be."(18) A ruling class in a persistent state of repression is a very dangerous thing."

See also

https://www.monbiot.com/2012/04/23/dark-hearts/

And

https://www.monbiot.com/2012/10/08/the-empire-strikes-back/

[Apr 17, 2021] Stocks are at all-time highs and the U.S. economy is booming. So why is everyone so freaked out

Apr 17, 2021 | www.marketwatch.com

... the financial markets sometimes feel like a house of cards.

...the more existential questions: what's the right level for a stock market that plunged 33% in about two weeks just a year ago? How much of that gain comes down to policy stimulus and how much is real? How much of the expected economic rebound is already priced in? What happens if the vaccine promise falls short? What if this is as good as it gets?

Taken together, it leaves people who manage money, their clients, and the companies that advise them, just as befuddled as Andersen, with almost as many perceived red flags as there are theories as to what's causing it all.

"The most common observation we get from clients is that markets don't "feel right", and we absolutely get that," wrote Nicholas Colas, co-founder of DataTrek Research, in a recent note. "For us, a big piece of this unease comes from the novelty of seeing capital markets go from distress to euphoria in such a short period of time."

[Apr 17, 2021] The stock market resembles a casino those days, with people piling in who are unafraid of, or just not used to, losing money.

Apr 17, 2021 | www.marketwatch.com

...there's been a rush for young companies to go public, sometimes before they have the full business model ironed out and sometimes when profits are still far on the horizon. That means the stock market resembles a casino some days, with people piling in who are unafraid of, or just not used to, losing money.

...the current moment, full of Redditors and memes and SPACs and electric cars and Zoom meetings to 1999, when the internet was the wild, wild west and trading had just moved on line.

...still worth considering. It's simultaneously true that for the past 20 years, any time any tech stock anywhere gets a little pricy, it prompts a lot of pearl-clutching about the dot-com bust -- and that there are uncanny similarities that do warrant more attention.

Why do periods of disruption so frequently lead to speculation? Why do we let snake-oil-sounding financiers sell us whatever they're selling us? ...

... the traditional ways of managing risk -- government bonds, for example -- aren't really up to the job the way they might have been a few decades ago, as yields remain low and the decades-long bull market comes to an end.

[Apr 17, 2021] For investors unfamiliar with the municipal space, "high-yield" is a different animal than in the corporate sector: much safer, with very infrequent defaults

Apr 17, 2021 | www.marketwatch.com

Instead, the muni market "yawned" when the bill was passed, said Eric Kazatsky, Bloomberg Intelligence head municipal strategist, a signal that the aid money had already been priced in. But muni ETFs are still worth a look, he thinks.

Kazatsky is a fan of the "gorillas" in the marketplace for all the usual reasons -- what he calls "solid" management, low fees, liquidity and robust inflows. He mentions the $21 billion iShares National Muni Bond ETF MUB, -0.06% , which tracks investment-grade bonds. For investors willing to take on a little more risk, there's the VanEck Vectors High Yield Muni ETF HYD, -0.02% , which has $3.3 billion under management. For taxable munis, the Invesco Taxable Municipal Bond ETF BAB, -0.21% is one of the bigger funds.

For investors unfamiliar with the municipal space, "high-yield" is a different animal than in the corporate sector: much safer, with very infrequent defaults. The space "could actually offer a much bigger reward because there are a lot of bargains to be had from the market dislocation last year, if you don't think they've run their course," Kazatsky told MarketWatch.

With slightly less risk comes a bit less reward: HYD has a 30-day SEC yield of 2.82% as of March 5 while the largest corporate junk-bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF HYG, -0.21% , has yielded 3.42%.

[Apr 16, 2021] Suze Orman thinks a market crash could be imminent -- here's what to do

Apr 16, 2021 | finance.yahoo.com

The stock market has been breaking records over the last year while the real economy has struggled in the face of the pandemic.

And that discrepancy is starting to make experts a little nervous.

One expert, Suze Orman, would go so far as to say she's now preparing for an inevitable crash.

... ... ...

"I don't like what I see happening in the market right now," Orman said in a video for CNBC. "The economy has been horrible, but the stock market has been going [up]."

While investing is as easy now as using a smartphone app , Orman is concerned about where we can go from these record highs.

And even with stimulus checks, which are still going out, and the real estate market breaking its own records last year, Orman worries about what will come with the coronavirus -- especially as new variants continue to pop up.

And given how long the market has been surging, she feels it's just been too long since the last crash to stay this high much longer. "This reminds me of 2000 all over again," Orman says.

The Buffett Indicator

... the Buffett Indicator, which is a measurement of the ratio of the stock market's total value against U.S. economic output, continues to climb to previously unseen levels.

And those in the know are wondering if it's a sign that we're about to see a hard fall.

Even Tesla boss Elon Musk is starting to feel anxious. Musk recently asked investing bigwig Cathie Wood, CEO of Ark Invest, if we should be expecting a crash.

While Wood initially brushed off any concerns, she did tell Musk she would have her team take a closer look.

HHw to prepare for a rainy day
Freedomz / Shutterstock

Orman has three recommendations for setting up a simple investment strategy to help you successfully navigate any sharp turns in the market.

1. Buy low

Part of what upsets Orman so much about the furor over meme stocks like GameStop is it goes completely against the average investor's interests.

"All of you have your heads screwed on backwards," she says. "All you want is for these markets to go up and up and up. What good is that going to do you?"

She points out that, the only extra money most people have goes toward investing for retirement in their 401(k) or IRA.

Because you probably don't plan to touch that money for decades, the best long-term strategy is to buy low. That way, your dollar will go much further now, leaving plenty of room for growth over the next 20, 30 or 40 years.

... ... ...

First, prepare for the worst and hope for the best. Since the onset of the pandemic, Orman now recommends everyone have an emergency fund that can cover their expenses for a full year.

[Apr 16, 2021] Over have million Americans filed for unemployment insurance

NOTE: At their peak in April 2020, more than 6 million Americans made first-time claims for unemployment assistance in a single week. And for 20 weeks in a row, more than a million people filed initial jobless claims.
Apr 16, 2021 | finance.yahoo.com

On Thursday, we learned that for the week ending April 10 , some 576,000 Americans filed for unemployment insurance.

As of March, total employment in the U.S. was still more than 8 million below February 2020 levels. In short, the labor market recovery still has a very long way to go.


[Apr 15, 2021] Why index funds are nuts

Highly recommended!
Notable quotes:
"... How much of my retirement portfolio do I really want to gamble on a high-risk, low-profit company that is already valued at over 1,000 times its most recent earnings, plus seven times the peak earnings of its entire industry, and which is controlled and run by a volatile, drug-taking eccentric? ..."
"... You've got nearly five times as much of your retirement portfolio invested in Tesla than you do in the entire U.S. home-building industry. ..."
Apr 15, 2021 | finance.yahoo.com

How much of my retirement portfolio do I really want to gamble on a high-risk, low-profit company that is already valued at over 1,000 times its most recent earnings, plus seven times the peak earnings of its entire industry, and which is controlled and run by a volatile, drug-taking eccentric?

Right now if you hold an S&P 500 or similar stock market index fund you've got more money invested in Tesla than you do in, say, Ralph Lauren (RL) Molson Coors (TAP) Gap (GPS) Hasbro (HAS) American Airlines (AAL) United Airlines (UAL) Delta Air Lines (DAL) Campbell Soup (CPB) Domino's Pizza (DPZ) Hershey (HSY) Wynn Resorts (WYNN) Kellogg (K) General Mills (GIS) Darden Restaurants (DRI) Clorox (CLX) and many others.

You've got nearly five times as much of your retirement portfolio invested in Tesla than you do in the entire U.S. home-building industry.

[Apr 15, 2021] Einhorn -- The Market Is In The Process Of Breaking Completely

Apr 15, 2021 | www.zerohedge.com

The professional poker player finally points out some of the insane moves observed in pennystocks in Q1, focusing on a tiny deli owner in rural NJ:

Strange things happen to all kinds of stocks. Last year, on one day in June, the stocks of about a dozen bankrupt companies roughly doubled on enormous volume. Recently, the Wall Street Journal reported a boom in penny stocks.

Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey. The deli had $21,772 in sales in 2019 and only $13,976 in 2020, as it was closed due to COVID from March to September. HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing. Small investors who get sucked into these situations are likely to be harmed eventually, yet the regulators – who are supposed to be protecting investors – appear to be neither present nor curious.

We don't find it at all surprising that Einhorn's conclusion from his capital markets observations over the past quarter is identical to ours, when we discussed the insane stock moves that dominated much of January and February:

"From a traditional perspective, the market is fractured and possibly in the process of breaking completely."

[Apr 15, 2021] Having a large amount of leverage is like driving a car with a dagger on the steering wheel

Apr 08, 2021 | www.wsj.com

A Eichler

"Having a large amount of leverage is like driving a car with a dagger on the steering wheel pointed at your heart. If you do that, you will be a better driver. There will be fewer accidents but when they happen, they will be fatal ." Warren Buffett

[Apr 15, 2021] The Financial Instability Hypothesis by Hyman P. Minsky -- SSRN

Apr 15, 2021 | papers.ssrn.com

The Financial Instability Hypothesis (FIH) has both empirical and theoretical aspects that challenge the classic precepts of Smith and Walras, who implied that the economy can be best understood by assuming that it is constantly an equilibrium-seeking and sustaining system. The theoretical argument of the FIH emerges from the characterization of the economy as a capitalist economy with extensive capital assets and a sophisticated financial system.

In spite of the complexity of financial relations, the key determinant of system behavior remains the level of profits: the FIH incorporates a view in which aggregate demand determines profits. Hence, aggregate profits equal aggregate investment plus the government deficit. The FIH, therefore, considers the impact of debt on system behavior and also includes the manner in which debt is validated.

Minsky identifies hedge, speculative, and Ponzi finance as distinct income-debt relations for economic units. He asserts that if hedge financing dominates, then the economy may well be an equilibrium-seeking and containing system: conversely, the greater the weight of speculative and Ponzi finance, the greater the likelihood that the economy is a "deviation-amplifying" system. Thus, the FIH suggests that over periods of prolonged prosperity, capitalist economies tend to move from a financial structure dominated by hedge finance (stable) to a structure that increasingly emphasizes speculative and Ponzi finance (unstable). The FIH is a model of a capitalist economy that does not rely on exogenous shocks to generate business cycles of varying severity: business cycles of history are compounded out of (i) the internal dynamics of capitalist economies, and (ii) the system of interventions and regulations that are designed to keep the economy operating within reasonable bounds.

[Apr 15, 2021] Anatomy of a Stock Market Bubble by FRANK VENEROSO

Highly recommended!
Notable quotes:
"... much like the dot-com period, there is a broad subset of stocks (mostly in technology) that have become completely untethered, particularly since the summer of 2020, from business fundamentals like earnings and even sales -- driven higher only by euphoric market participants extrapolating from a past extraordinary trajectory of prices. ..."
"... A lot of today's US stock market has become what I call a "pure price-chasing bubble." Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare (I have found nine in total) market events; the presence of most of these factors has usually been necessary for markets to reach the requisite escape velocity. ..."
"... To fuel the bubble further, there was a rapid expansion of bank money beginning three years before the market peak -- but the expansion of credit was even greater, owing to an explosion of margin credit (with implied annuaized interest rates sometimes reaching 100 percent) through an informal system utilizing postdated checks ..."
"... The US market certainly exhibits an exceptional record of price appreciation, with the S&P 500 having risen by almost 500 percent over more than a decade. In contrast to most other bubbles, however, it is notable that US economic growth over this period has been relatively anemic. ..."
"... Due to a sustained high rate of corporate equity purchases financed with debt, this overarching expansion of credit has also made its way into the last decade's bull market and steepened its price trajectory. ..."
"... The role of message boards and chat rooms -- with their millions of participants, all in instant real-time contact -- has created crowd dynamics in speculative stock market favorites at a pace without parallel in other pure price-chasing bubbles. ..."
"... a peak will be reached, a decline will follow, and the psychological dynamics in play on the way up will go into reverse and will accelerate the fall. ..."
"... Moreover, in the context of a grossly underestimated mass of corporate debt, history tells us the consequences of the bursting of the US stock market bubble should be another financial crisis and another recession ..."
Apr 01, 2021 | www.levyinstitute.org

According to Frank Veneroso, a broad subset of today's US stock market has become what he calls a "pure price-chasing bubble." Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare market events.

The most extreme such case was an over-the-counter market in Kuwait called the "Souk al-Manakh." This exemplar of a pure price-chasing phenomenon may shed light -- albeit unflattering -- on the current US equity market, Veneroso contends.

[Apr 14, 2021] US Trade Deficit Rises 4.8% in February to Record High

Apr 14, 2021 | angrybearblog.com

Our trade deficit rose 4.8% February, as both our exports and imports decreased, but the value of our exports fell by almost three times as much as the value of our imports did .the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $3.3 billion to $71.1 billion in February, from a January deficit that was revised down to $67.8 billion from the $68.2 billion deficit reported a month ago in rounded figures, the value of our February exports fell by $5.0 billion to $187.3 billion on $4.8 billion decrease to $131.1 billion in our exports of goods and a $0.2 billion decrease to $56.1 billion in our exports of services, while our imports fell $1.7 billion to $258.3 billion as a $2.0 billion decrease to $219.1 billion in our imports of goods was partially offset by a $0.3 billion increase to $39.2 billion in our imports of services . export prices averaged 1.6% higher in February , which means our real exports fell more month over month than the nominal decrease by that percentage, while import prices rose 1.3%, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage

[Apr 14, 2021] Energy Price Surge Continues to Drive Everyday Prices Higher - Seeking Alpha

Apr 14, 2021 | seekingalpha.com

Summary

[Apr 14, 2021] How To Estimate -Rational- Market Expectations Of Future Inflation

Apr 14, 2021 | angrybearblog.com

For a given time-horizon, it has been conventional for those estimating such a "rational" market forecast of expected inflation to take the appropriate Treasury security nominal yield of that time horizon (say 5 years) and simply subtract from it the yield on the same time horizon TIPS, which covers security holders for inflation. So it has long looked like this difference is a pretty good estimate of this market expectation of inflation, given that TIPS covers for it while the same time horizon Treasury security does not.

Well, it turns out that there are some other things involved here that need to be taken account, one for each of these securities. On the Treasury side, it turns out that the proper measure of the expected real yield must take into account the expected time path of shorter term yields up to that time horizon. This time path has associated with it a risk regarding the path of interest rates throughout the time period. This is called the Treasury risk premium, or trp. It can be either positive or negative, with it apparently having been quite high during the inflationary 1979s.

The element that needs to be taken into account with respect to the TIPS is that these securities are apparently not as liquid in general as regular Treasury securities, and the measure of this gap is the Liquidity premium, or lp. This was apparently quite high when these were first issues and also saw a surge during the 2008-09 financial crisis. In principle this can also be of either sign, although has apparently been positive.

Anyway, the difference between the nominal T security yield and the appropriate TIPS yield is called the "inflation breakeven," the number that used to be focused on as the measure of market inflation expectations. But the new view is that this must be adjusted by adding (tpr – lp).

In a post just put up on Econbrowser by Menzie the current inflation breakeven for five years out is 2.52%. But according to Menzie the current (tpr – lp) adjustment factor is -0.64%. So adding these two together gives as the market expected inflation rate five years from now of 1.88%, although Menzie rounded it out to 1.9%.

If indeed this is what we should be looking at it says the market is not expecting all that much of an increase in the rate of inflation from its current 1.7% five years from now. The Fed and others are looking at a short term spike in prices this year, but the market seems to agree with their apparent nonchalance (shared by Janet Yellen) that this will wain later on, with that expected 5 year rate of inflation still below the Fed's target of 2%.

Certainly this contrasts with the scary talk coming from Larry Summers and Olivier Blanchard, not to mention most GOP commentators, regarding what the impact of current fiscal policies passed and proposed by Biden will do to the future rate of inflation. Not a whole lot, although, of course, rational expectations is not something that always forecasts all that well, so the pessimists might still prove to be right.

Barkley Rosser

Likbez , April 14, 2021 6:27 pm

Larry Summers is a puppet of financial oligarchy. Everything that he writes should be viewed via this prism. He also is highly overrated.
IMHO rates are no longer are determined by only domestic factors.

I think that the size of foreign holdings of the USA debt and their dynamics is another important factor. FED will do everything to keep inflation less then 2% but this is possible only as long as they can export inflation.

BTW realistically inflation in the USA is probably 30%-60% higher than the official figure. Look at http://www.shadowstats.com/ :

March 2021 annual Consumer Price Index inflation hit an unadjusted three-year high of 2.62%, as gasoline prices soared to multi-year highs, not seen since well before the 2020 Oil Price War. -- March Producer Price Index exploded, with respective record annualized First-Quarter PPI inflation levels of 9.0% in Aggregate, 16.0% in Goods and 5.6% in Services.

L A T E S T .. N U M B E R S .. March 2021 unadjusted year-to-year March 2021 CPI-U Inflation jumped 2.62% -- a one-year high -- as gasoline prices soared, not only fully recovering pre-Oil Price War levels of a year ago, but also hitting the highest unadjusted levels since May of 2019 (April 13th, Bureau of Labor Statistics – BLS). Headline March 2021 CPI-U gained 0.62% in the month, 2.62% year-to-year, against monthly and annual gains of 0.35% and 1.68% in February.

That inflation pickup reflected more than a full recovery in gasoline prices, which had been severely depressed by the Oil Price War of one year ago. Such had had the effect of depressing headline U.S. inflation up through February 2021, including suppressing the 2021 Cost of Living Adjustment (COLA) for Social Security by about one-percentage point to the headline 1.3%. By major sector, March Food prices gained 0.11% in the month, 3.47% year-to-year (vs. 0.17% and 3.62% in February); "Core" (ex-Food and Energy) prices gained 0.34% in March, 1.65% year-to-year (vs. 0.35% and 1.28% in February); Energy prices gained 5.00% in March, 13.17% year-to-year (vs. 3.85% and 2.36% in February), with underlying Gasoline prices gaining 9.10% in the month, 22.48% year-to-year (vs. 6.41% and 1.52% in February).

The March 2021 ShadowStats Alternate CPI (1980 Base) rose to 10.4% year-to-year, up from 9.4% in February 2021 and against 9.1% in January 2021. The ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government's inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate COLAs.

Related graphs and methodology are available to all on the updated ALTERNATE DATA tab above. Subscriber-only data downloads and an Inflation Calculator are available there, with extended details in pending No. 1460 .

In this sense China and Japanese policies will influence the USA rates. If they cut buying the US debt the writing for higher rates is on the wall. In a way, recent events might signal that FED can lose the control over rate if and when foreign actors cut holding of the USA debt.

Behavior of foreign actors is probably the key factor that will determine the rates in the future.

[Apr 13, 2021] Archegos Ripples Through Banks' Lucrative Hedge Fund Business

Hedge fund managed reinvent old tricks on a regular basis. Regulators simply can't catch up and are not willing to catch up as they are captured by big bonds.
Apr 13, 2021 | finance.yahoo.com
NMR 0.00% Cathy Chan and Steven Arons Tue, April 13, 2021, 11:36 AM More content below NMR 0.00%

(Bloomberg) -- The collapse of Archegos Capital Management LP, an investment firm that few even on Wall Street had heard of until it imploded last month, is changing a lucrative, decades-old part of global banking.

Nomura Holdings Inc. and Credit Suisse Group AG, the two lenders hit hardest, have started to curb financing in the business with hedge funds and family offices. European regulators are looking at risks banks are taking when lending to such clients, while in the U.S., authorities started a preliminary probe into the debacle.

Together, steps taken from Washington to Zurich and Tokyo could portend some of the biggest changes since the financial crisis to a cornerstone of global banking known as prime brokerage. Typically housed in the equities units of large investment banks, these businesses lend cash and securities to the funds and execute their trades, and the relationships can be vital for investment banks.

But the collapse of Archegos, the family office of former hedge fund trader Bill Hwang, has underscored the risks banks are taking with these clients, even when their loans are secured by collateral. Credit Suisse has been the worst-hit so far, taking a $4.7 billion writedown in the first quarter.

The lender, one of the biggest prime brokers among European banks, is now weighing significant cuts to its prime brokerage arm in coming months, people familiar with the plan have said.

It has already been calling clients to change margin requirements in swap agreements -- the derivatives Hwang used for his bets -- so they match the more restrictive terms of other prime-brokerage contracts, people with direct knowledge of the matter said. Specifically, the bank is shifting from static margining to dynamic margining, which may force clients to post more collateral and could reduce the profitability of some trades.

Nomura, which is facing an estimated $2 billion from the Archegos fiasco, followed suit, with restrictions including tightening leverage for some clients who were previously granted exceptions to margin financing limits, Bloomberg reported on Tuesday. A representative for the Tokyo-based firm declined to comment.

Hwang's family office built positions in at least nine stocks that were big enough to rank him among the largest holders, fueled by bank leverage that would have been unusual even for a hedge fund. Archegos was able to place outsize wagers using derivatives and, as a private firm, avoid the disclosures required of most investors. Almost invisibly, he accumulated a portfolio that some people familiar with his accounts estimate at as much as $100 billion.

While Hwang's financiers had clues about what Archegos was doing and the trades they had financed, they couldn't see that he was taking parallel positions at multiple firms, piling more leverage onto the same few stocks, according to people familiar with the matter.

In the U.S., regulators are already privately dropping hints of new rules to come. Securities and Exchange Commission officials have signaled to banks that they intend to make trading disclosures from hedge funds a higher priority, while also finding ways to address risk and leverage.

"Hopefully this will cause the prime brokerages of regulated banking organizations (and their supervisors) to re-assess their relationships with highly leveraged hedge funds," Sheila Bair, a former chairman of the Federal Deposit Insurance Corp., wrote on Twitter.

In Europe, the top banking regulator has asked some of the bloc's largest banks for additional information on their exposure to hedge funds, people familiar with the matter said. While the checks by the European Central Bank on lenders such as Deutsche Bank AG and BNP Paribas SA are standard practice after such a disruptive event, they underscore regulators' concern, even as most euro-region banks skirted big losses.

"There is a need to scrutinize the reasons why the banks enabled the fund to leverage up to such an extent," ECB executive board member Isabel Schnabel said in an interview with Der Spiegel last week. "It is a warning signal that there are considerable systemic risks that need to be better regulated."

[Apr 13, 2021] Weekly Indicators for April 5 - 9 at Seeking Alpha

Notable quotes:
"... When 10 years treasures yield goes down from 1.7%, when stock market goes up and inflation is up too, that suggests rising level of fear. ..."
"... Lemming (aka 401K speculators) are pushed from bonds into riskier assets. We saw this development before. ..."
Apr 12, 2021 | angrybearblog.com

My Weekly Indicators post is up at Seeking Alpha .

The big news continues to be a bifurcation between the currently unfolding Boom, fueled by the fire hose of monetary and fiscal stimulus, and the fallout in the long leading forecast based on the increase in interest rates as a result.

  1. Likbez , April 13, 2021 1:50 pm

    Basing your investment decisions on indicators derived from the past is like driving the car using only rear-view mirror :-). I forgot to whom this quote belongs (buffet?) but there is some truth to that.

    Add to this that government stats are distorted (we can debate how much), especially unemployment stats (U3 vs. U6 vs. reality). That same is true about inflation. Both are highly politically charged metrics and as such is subject to political pressures both in methodology and actual stats collection.

    When 10 years treasures yield goes down from 1.7%, when stock market goes up and inflation is up too, that suggests rising level of fear.

    Lemming (aka 401K speculators) are pushed from bonds into riskier assets. We saw this development before.

    It is quite probable that stock market will be lifted further while economy as a whole deteriorates. Then what?

    Nothing will revive business that were closed during pandemic. Situation with the commercial real estate now is very interesting indeed.

    The problem in the US economy are systemic and they can't be patched with stimulus. Financial oligarchy needs to be tamed. Regulations needs to be restored. And some most obnoxious players jailed or eliminated by other means. Or, at least, the revolving door needs to be closed for GS and company. As Jesse put it

    "THE BANKS MUST BE RESTRAINED, AND THE FINANCIAL SYSTEM REFORMED, WITH BALANCE RESTORED TO THE ECONOMY, BEFORE THERE CAN BE ANY SUSTAINABLE RECOVERY."

    Jesse's Café Américain (jessescrossroadscafe.blogspot.com)

[Apr 13, 2021] Here's where investors see a market bubble -- and it isn't stocks, says Bank of America

I think leverage in cryptocurrencies is higher then in other sectors, as this is the most reckless speculators market by definition, so the collapse is quite possible
Apr 13, 2021 | finance.yahoo.com
Barbara Kollmeyer Tue, April 13, 2021, 7:29 AM

Our call of the day from Bank of America narrows down where investors see the most risk these days. Fingers are pointing at the world's most popular cryptocurrency.

[Apr 13, 2021] U.S. Treasury yields slip despite surge in inflation to 2˝-year high by very small number of companies.

Treasury yields slipped Tuesday after bond investors shrugged off an increase in U.S. consumer prices in March that sent yearly inflation measures to the highest level in two and a half years. Treasury yields slipped Tuesday after bond investors shrugged off an increase in U.S. consumer prices in March that sent yearly inflation measures to the highest level in two and a half years.
economistsview.typepad.com

The 10-year Treasury note yield TMUBMUSD10Y, 1.653% fell to 1.659%, down from 1.675% at the end of Monday, while the 2-year note TMUBMUSD02Y, 0.168% was steady at 0.169%. The 30-year bond yield TMUBMUSD30Y, 2.339% slid 0.9 basis point to 2.336%.

What's driving Treasurys?

The U.S. consumer price index rose 0.6% in March, while the core gauge that strips out for energy and food prices came in at an 0.3% increase.

The annual rate of inflation climbed to 2.6% from 1.7% in the prior month, marking the highest level since the fall of 2018.

[Apr 12, 2021] What Warren Buffett said about the 'Buffett Indicator'

Apr 12, 2021 | finance.yahoo.com
'The ratio has certain limitations in telling you what you need to know'

Who wouldn't love to replicate the investing success achieved by billionaire Warren Buffett? This is why investors are drawn to stories about the "Buffett Indicator."

Lately, the Buffett Indicator has been flashing a warning sign about the stock market. Many outlets have been reporting on this including Fortune , Bloomberg , the Wall Street Journal , Business Insider , MarketWatch , and even Yahoo Finance .

For those catching up, the Buffett Indicator is the value of a country's publicly traded stocks divided by its gross national product (and different people have different ways of accounting for those inputs ). This ratio first became associated with Buffett in a 2001 interview with Fortune's Carol Loomis where the investor characterized the ratio as "probably the best single measure of where valuations stand at any given moment."

At the time he noted, the ratio was very high in the late 1990's, portending the dot-com bubble which eventually burst.

And now that this ratio is exceeding levels seen during that era, people are sounding the alarm again. Even Elon Musk has put a spotlight on the metric via a tweet .

... ... ...

At the 2017 Berkshire Hathaway ( BRK-A , BRK-B ) annual shareholders meeting, Buffett fielded a question about the Buffett indicator as well as Robert Shiller's legendary CAPE ratio . He had this to say: "Every number has some degree of meaning. It means more sometimes than others...And both of the things that you mentioned get bandied around a lot. It's not that they're unimportant They can be very important. Sometimes they can be almost totally unimportant. It's just not quite as simple as having one or two formulas and then saying the market is undervalued or overvalued ." (Emphasis ours.)

In that response, Buffett went on to say "the most important thing is future interest rates," arguing that low rates justify higher valuations .

[Apr 12, 2021] The Economy Is Recovering- How to Invest When Everything Is Expensive by Jon Sindreu

Sometimes it is prudent to stop investing for a while.. And what the author calls savers and investors should properly be called speculators. Petty speculators that serve as the feed for Wall Street sharks.
Apr 10, 2021 | www.wsj.com
,,,valuations have never been so stretched at the beginning of an economic cycle. Savers need to plan for lower future returns. S&P Composite 1500, cyclically adjusted price/earnings ratio Source: Prof. Robert Shiller Note: Economic troughs are defined by the National Bureau of Economic Research: . times MONTHS SINCE TROUGH GDP trough 1990-2001 2001-07 2007-20 2020-Now -30 0 30 60 90 120 0 5 10 15 20 25 30 35 40 45 10:05 am ET

The S&P Composite 1500 is trading at a CAPE of 37. That is more than twice the historical average, though still less than the dot-com bubble peak of 44. It reached 33 before the 1929 crash.

Historical data show that negative returns can happen at almost any level of valuation, but that overall there is still an inverse correlation between CAPE and future 10-year equity returns. Usually, stocks progressively cheapen after economic growth reaches a peak. Once they hit a bottom, they slowly become expensive again. In the 2009-2020 cycle, for example, CAPE started at 16 and ended at 31.

[Apr 12, 2021] Put Aside Inflation. Debt-Fueled Growth Is the Real Wild Card

Apr 12, 2021 | www.barrons.com

Economic data have been phenomenal lately, lifting the U.S. stock market to new highs as investors celebrate an end in sight to the global nightmare of the past year.

And so it's an awkward time to be a killjoy, even if just hypothetically.

The fiercest debate among market participants this year has revolved around inflation -- will it or won't...

[Apr 12, 2021] 'We are in a bearish environment' - veteran trader

Apr 12, 2021 | finance.yahoo.com

None of this is to say risk markets are set to crash or that it's time to short everything.

Parets says, "As long as US Financials are above those 2007 highs, it's tough to make a structurally bearish case. The weight-of-the-evidence suggests this is just a messy environment within a larger more macro advance for stocks."

He also highlights the bullish breadth thrusts in stocks over the last year, where large numbers of stocks all advance simultaneously. "This first wave off the lows last year was tremendous. All those breadth thrusts we've seen since June, and even through January this year are characteristic of early cycle behavior. These thrusts historically show up near the beginning of bull markets, not near the end of them. But one common denominator among all of these longer-term bullish environments, is that there were corrections along the way."

Markets can correct through both price and time -- eventually working off excesses and settling into equilibrium, waiting for the next catalyst.

Parets doesn't know how long it will take for markets to set up for the next big move. However, he is looking at the energy sector for clues. "One tell will likely be how long it takes for Energy stocks to digest this overhead supply from those former lows in early 2016," he says, referencing a chart of the Energy Select Sector SPDR Fund ( XLE ). "We're also looking for Small-caps, Mid-caps and Micros to get back above those February highs. But again, how long will that take?"

In the meantime, investors may reduce position size...

"There are times to make money in the market, and then there are times to keep your money. In sports, you play offense and you play defense," says Parets. "Offense sells tickets, but defense wins championships."

[Apr 12, 2021] A State Lockdown Accounting

Apr 12, 2021 | www.wsj.com

The Bureau of Economic Analysis (BEA) recently published state personal income and GDP data for the fourth quarter and 2020 calendar year. Most states suffered a massive decline in GDP in 2020's second quarter as governors followed the advice of public-health officials to shut down businesses to "flatten the curve."

But the new data show that states that allowed businesses to reopen sooner, and maintained fewer restrictions for the rest of the year, recovered by year-end. Real GDP for private industries fell 1.3% nationally at an annual compounded rate between the first and fourth quarters, according to BEA.

Yet there was large variation among the states. Hawaii's economy declined the most (-9.9%) -- no surprise given its dependence on tourism. Wyoming (-6.6%) and other energy-producing states were also slow to bounce back. New York's (-5%) recovery was third worst, and even New Jersey (-2.3%) and Connecticut (-0.3%) fared better. Utah performed the best, growing 4.3%. It also has the sixth lowest per capita Covid death rate.

[Apr 12, 2021] The markets are not designed to make the majority succeed

Apr 12, 2021 | finance.yahoo.com


More content below More content below More content below More content below More content below More content below Jared Blikre Sat, April 10, 2021, 8:22 AM

Warren Buffett's Berkshire Hathaway should scale back its passive investment in the S&P 500 ( ^GSPC ) and plow it right back into Berkshire stock ( BRK-A , BRK-B) . That's because the environment for stock picking is ripe for a shift away from passive investing, which could suffer a decade of low or nonexistent returns.

"This is the single worst time to be a passive investor in since they started passive investments... The [S&P 500] index is highly likely to not make money over the next 10 years," said Bill Smead, chief investment officer of Smead Capital Management, during the most recent Yahoo Finance Plus webinar on Wednesday. "Whether you look at historical price earnings ratios, whether you look at the normalization of interest rates, whether you look at ridiculously high levels of participation by individual investors -- compared to household network going back for decades, it all points to the same thing. The markets are not designed to make the majority succeed."

'You have to be a deviant to outperform'

In investing parlance, alpha is the return above and beyond a benchmark, such as the S&P 500 -- in other words, a trader's edge. By definition, an investor in an ETF that tracks the index, such as the SPDR S&P 500 ETF ( SPY ), will see no alpha. But an active trader needs to find alpha by thinking differently.

"Alpha comes from deviation. You have to be a deviant to outperform -- not a non-deviant," said Smead.

Not all stock pickers are alike. Cathie Wood 's ARK Innovation ETF quickly became the world's largest actively managed ETF, with $28 billion in assets under management at its February peak. Over the last year, the fund loaded up on high growth names like Tesla ( TSLA ), Square ( SQ ) and the Grayscale Bitcoin Trust ( GBTC ).

Smead prefers a more value-focused approach that also incorporates growth strategies. He uses a few recent examples to warn how quickly momentum trades can reverse. "[W]hen money comes out of popular growth stocks, it's like a fire hose. And the companies that it's going into are a teacup. You're pouring water from a fire hose into a teacup. And that's also part of what happened with Reddit and Archegos," he said.


[Apr 09, 2021] Over the past decade, corporations have benefitted at the expense of labor to an unprecedented degree. This is already leading to serious, "political problems," of the sort predicted by Warren Buffett 20 years ago

Apr 09, 2021 | www.zerohedge.com

...Part of the runup in stock prices over the past year is due to the rebound in earnings we will see over the next few quarters. However, now that interest rates, oil prices and the dollar index have each been rising for some time, earnings growth will almost certainly peak and rollover next year, falling back into negative territory. As the stock market discounts fundamentals roughly 18 months into the future, according to Stan Druckenmiller, this bearish reversal in fundamentals could begin to affect stock prices relatively soon.

Longer-term there is a very real risk to record-high corporate profit margins. Over the past decade, corporations have benefitted at the expense of labor to an unprecedented degree. This is already leading to serious, "political problems," of the sort predicted by Warren Buffett 20 years ago. The current administration appears to view rectifying this situation as its primary mandate and will, apparently, go about fulfilling it by, among other things, raising corporate income taxes and boosting a jobs market already showing signs of overheating.

Finally, as Mehul Daya has demonstrated, history shows that rising interest rates regularly act as a bearish catalyst for both markets and the economy. To the extent that low interest rates and easy money have encouraged and incentivized the unprecedented amount of leverage supporting risk assets today, the reversal in rates, which is already more dramatic than anything we have seen in decades, threatens to reveal just how fragile markets and the economy have now become.

For the rest of the chart book and a more detailed discussion of these issues, check out the interview, scheduled to be released tomorrow, at MacroVoices.com .

[Apr 09, 2021] US yields are heading lower, the US dollar is heading down, and US stocks are heading up, in a continuation of their own long-running impossible dream

Apr 09, 2021 | www.zerohedge.com

That seems to be the mood music at the White House; and the IMF; and the World Bank; and the Fed, and in fact most central banks. All of them are busy building back better-ly. Ambitious global tax plans are on the table to wipe tax havens off them; US spending plans are being pushed; and Treasury Secretary Yellen is talking about "labor vs. capital": perhaps she will soon add "M > C > MP > C+ > M+" to underline how the economy actually works, which none of the neoclassical models at the Treasury or the Fed do?

Regardless, US yields are heading lower, the US dollar is heading down, and US stocks are heading up, in a continuation of their own long-running impossible dream . Let me tell you a tall tale: perhaps just one man is ultimately responsible for that right now - US Democrat Senator Joe Manchin. He appears on what some might see as an anti -quixotic quest that may stop the White House from tilting at any windmills (or solar panels or broader "infrastructure").

Senator Manchin yesterday reaffirmed via a Washington Post op-ed that he will not back proposed changes to the Senate filibuster rule (" I have said it before and will say it again to remove any shred of doubt: There is no circumstance in which I will vote to eliminate or weaken the filibuste r") or support " shortcutting the legislative process through budget reconciliation ." Both of those statements, if not negotiating positions, will prove to be giants obstructing the path of President Biden's domestic agenda. It doesn't mean nothing will get done – but it means nothing like what some people were recently thinking was going to get done now will.

If so, as stocks and bonds ebulliently suggest, there is still a white knight to save us, however : those plodding Sancho Panzas turned would-be dashing Dons, our central banks . It is they who will continue to chase their own impossible dream of saving the world via yield curve manipulation and junk asset purchases without lancing price-discovery and capitalism at the same time. On a related note, Fed Chair Powell spoke yesterday against a backdrop of supply-chain stresses that mean Americans can't get ketchup to go with their fries , and explained he isn't worried about inflation, but infections. As I keep repeating, this stance is only logically consistent if one really *is* thinking about labour vs. capital: but Fed policy cannot deal with that populist 'red' issue any more than it can with a popular red condiment. It's all fiscal and political-economy, which seems a dream too far at the moment.

Some might think it remarkable that the fate of the US economy, and hence the world economy, can really turn on the actions of just one man. Welcome to the absurdity of real life. As Cervantes noted: "When life itself seems lunatic, who knows where madness lies? Perhaps to be too practical is madness. To surrender dreams -- this may be madness. Too much sanity may be madness -- and maddest of all: to see life as it is, and not as it should be!" At least Manchin was elected. By contrast, who elected central banks? (On which, what happens if the US, or anywhere, elects an administration which wants to move away from a green economy when their "independent" central bank has pledged to support the transition towards one? Has anyone thought about that, or are we all too busy singing from the same hymn sheet to suppose it could ever happen?)

[Apr 09, 2021] Tech boost lifts S P to record as U.S. Treasury yields retreat

Apr 09, 2021 | finance.yahoo.com

Interesting combination: Rise of fear in bond market along with rising recklessness in stoack markets

10-year U.S. Treasury note fall as low as 1.628% for a second straight day as it continues to back away from a 14-month high of 1.776% hit in late March.

...

The recent pullback in yields has helped high growth names such as those in the technology sector, the best performing sector on the day, while megacap stocks such as Apple , Microsoft and Amazon were the biggest boosts to the S&P 500.

The gains have also sent the tech-heavy Nasdaq to a seven-week high and within 2% of its February 12 record closing high.

The Russell 1000 growth index, which consists of tech-related stocks, gained 1.05%, while its value counterpart , comprising mostly financials and energy names, slipped 0.11%.

[Apr 09, 2021] Inflation is different for different income stratas of the US population with poor hit much harder then the rich

Apr 09, 2021 | www.zerohedge.com

For low-income Americans, it has been a double-whammy of job losses (the total number of Americans receiving jobless benefits from the government has basically stagnated for the last four months)...

Source: Bloomberg

...and significant increases in the costs of living.

As Bloomberg reports , while the headline consumer inflation rate in the U.S. remains subdued, at 1.7% - but it masks large differences in what people actually buy .

If you like to eat, food-price inflation is running at more than double the headline rate , and staples like household cleaning products have also climbed.

Source: Bloomberg

if you drive a car, gas prices have soared in recent months...

Source: Bloomberg

All of which might explain why confidence among the lowest income Americans is lagging significantly (because groceries or gas take up a bigger share of their monthly shopping basket than is the case for wealthier households, and they're items that can't easily be deferred or substituted )...

Source: Bloomberg

An analysis by Bloomberg Economics , which reweighted consumer-price baskets based on the spending habits of different income groups, found that the richest Americans are experiencing the lowest level of inflation .

As Bloomberg 's Andrew Husby points out:

"On average, higher-income households spend a smaller fraction of their budgets on food, medical care, and rent, all categories that have seen faster inflation than the headline in recent years, and 2020 in particular."

The question of who exactly gets hurt most by higher prices could become more urgently concerning as most economists - and even The Fed itself - expect inflation to accelerate in the next 12 months.

"The food price story and inflation story are important to the issue of equality," says Carmen Reinhart, the World Bank's chief economist.

"It's a shock that has very uneven effects."

So, in summary, The Fed is telling Americans - ignore "transitory" spikes in non-core inflation (such as food and energy), it's just temporary and base-effect-driven (oh and we have the "tools" to manage it). However, despite all The Fed's pandering and virtue-signaling about "equity" and "fairness", it is precisely this segment of the costs of living that is crushing most of the long-suffering low-income population ($1400 checks or not) .

And now all eyes will be on this morning's PPI print which is expected to surge to +3.8% YoY.

[Apr 09, 2021] Inflation might be the way out of the debt crisis

Highly recommended!
An interesting headline from Financial Times
Apr 09, 2021 | finance.yahoo.com
Pascal Blanqué Wed, April 7, 2021, 8:00 PM

Bond markets are firmly in the driving seat. For too long, inflation has disappeared from investors' radar. The key ones include a hostile environment for trade and globalisation, business and labour support public programmes and the extraordinary debt burden fuelled by the pandemic. These are set to create a turning point in the current market regime before long.

[Apr 09, 2021] A modest suggestion for semi-vacant malls

Apr 09, 2021 | www.zerohedge.com

Cock Strong 38 minutes ago

Bezos notches another $100 billion.

Mando Ramos 7 minutes ago (Edited)

My simple solution is to turn the vacant malls into giant marijuana growing operations,and huge meth labs,and use the revenue from the meth and weed sales to balance the Federal budget..As an additional plus,you put the Mexican drug cartels out of business,which can't be a bad thing,either

FurnitureFireSale 26 minutes ago

The smile on the side of the Prime trucks looks like a big wang (Bezos's?) saying "F-U, take THIS!" to all the small businesses. Once you see it, you cannot unsee it.

Puppyteethofdeath 14 minutes ago

Turn them into homeless shelters.

744,000 Americans filed for 1st time unemployment last week.

Every week the numbers are the same.

no cents at all 5 minutes ago

Yet mall property owners and their ilk have equity prices in the stratosphere. Same with cruise lines. A mystery. (Although doesn't take scooby doo to understand why)

is scooby canceled yet?

aarockstar 7 minutes ago

A 60 year retail experiment goes bust...

[Apr 09, 2021] Mall Vacancy Rate Hits Another Record High by Daphne Howland

The situation with office and retail space after COVID-19 is simply bad. There will be no return to previous state. And this situation generall reflact that general situation in the US economy/ In this sense stock market is completely detached from reality, fueled by speculation and 401K inflows. The latter makes passivly managed funds like based on S&P500 index yet another Ponzi scheme.
Apr 09, 2021 | www.zerohedge.com

By Daphne Howland of RetailDive ,

Summary:

... " Both office and retail are going through a structural change that will continue to cause many firms to look closely at their respective footprints," LaSalvia said . "As their leases expire, it is likely some will move or downsize, putting further downward pressure on rents and vacancy rates through this year and into 2022."

The fate of malls is the most dire. Retailers were already shrinking their footprints, especially at malls, well before the pandemic. The flight of anchors has also picked up, as department stores like Nordstrom and Macy's increasingly shy away from the mall. Since the start of the pandemic, with retail businesses scrutinizing their store productivity more closely than ever, much power has shifted away from landlords , which are making more concessions to lease terms.

..."[R] etail is slogging through the evolutionary process that started well before the pandemic," LaSalvia said . "Malls are of more concern than neighborhood centers, but even then, it is unlikely that we will close down every single mall in the US."


9.1ontherichterscale 34 minutes ago (Edited)

Who wants to go to a mall to be immersed in all sorts of diversity?

Malls were nice in the 1980s.

SMC 13 minutes ago

Strength through diversity expects that each human will on average, provide their best and not be silenced or restrained by expectations of physical and/or intellectual equality.

Our ancestors fought and bled so all citizens are free men and women. The virtual chains some citizens wear today are of their own making. If they are not tossed aside, tomorrow they may real for all.

FurnitureFireSale 30 minutes ago

I don't feel like dealing with hood rats. Most of America feels the same way, I suspect.

PGR88 26 minutes ago (Edited)

Our local mega-mall, when it was functioning "normally" a decade ago, needed an actual army of hired security on Thursday/Friday/Saturdays to manage the local hood rats who crossed the highway from the ghetto, to prevent them from tearing the place apart.

CheapBastard 25 minutes ago

Mall vacancies and business closures all time high under Biden.

Fact Checked : True ✔️

yerfej 11 minutes ago

Sometimes reality bites.

homeskillet 17 minutes ago

The Malls will also be listed as a Covid fatality, but they had many other underlying causes... like a motorcycle accident being listed as a Covid fatality.

itstippy 23 minutes ago

The big mall in Madison, WI (East Towne Mall) has been dying for a couple decades now, but all kinds of Big Box stores and chain restaraunts around it have been thriving. As mall traffic diminished every year, Gander Mountain, Cabellas, Target, and many others built giant retail outlets in the same area stealing the mall's business. Dozens of chain restaraunts moved in too. Traffic was busy, busy.

Now the entire area, mall and surrounding retail, is dying. It started before the Covid-19 retail catastrophe and I doubt it will reverse. People sit at home, buy stuff from Amazon, buy food from Go Grub, and get social interaction on Twitter & Facebook.

The mall has nothing left but a Sunglasses Hut and a store that sells cinnamon sticky buns.

arby63 29 minutes ago

Too much has changed for traditional malls to survive. I cannot imagine a solid path forward.

adr 25 minutes ago (Edited)

You can go to what was one of the busy high end malls outside Boston, and see half of it empty.

The stores that are open only allow five to eight customers in at a time, and have a ten minute time limit for you to spend inside. Stores worth going to have lines of people outside. You are also pretty much forced to buy something, otherwise the people waiting in line scream at you for wasting their time.

The food courts are open, but only for takeout. You can't sit in the mall and eat.

It is just about the worst experience you can have. Then you can't even go to a bar, because all bars in Massachusetts are still closed. You can only get alcohol if you are eating food.

Cock Strong 38 minutes ago

Bezos notches another $100 billion.

[Apr 09, 2021] US Bonds Aren't Giving Investors The Returns They Once Did. Here's Why by Jack Pitcher and Christopher Cannon

Apr 09, 2021 | www.bloomberg.com
American savers could once count on bonds to provide meaningful returns with modest risk. Not anymore.

More than a decade of easy money has kept the U.S. economy afloat in times of crisis and fueled an unprecedented boom in financial markets.

But it's also created a whole new series of risks, especially for savers.

Where there was once a vast pool of safe debt in which they could park their cash and count on annual payouts of 5% or more -- comfortably above inflation -- today there's little more than a puddle, and a shrinking one at that. In fact, never has the amount of new government and corporate debt paying even modest yields been so minuscule.

Institutional investors and savers looking for a 5% annual interest rate had plenty of new bond and loan offerings rated BB and above to choose from prior to the 2008 financial crisis. These included debt from government-sponsored mortgage-loan companies like Fannie Mae and Freddie Mac.

$932.6B

580 parent issuers

Rating:

BB

BBB

A

AA

AAA

$84.0B

Federal National Mortgage

Association

(Fannie Mae)

$179.4B

Federal Home Loan Banks

$85.2B

Federal Home Loan Mortgage Corp

(Freddie Mac)

By 2019, after a decade in which the Federal Reserve kept benchmark rates near zero, the pool had shrunk dramatically, despite the fact that issuance of new debt was near record levels. Debt rated A or above paying 5% virtually disappeared, leaving the vast majority of such offerings rated in the lowest tier of investment-grade, or worse.

$333.0B

301 parent issuers

$7.5B

Altice USA Inc

$11.7B

◀ The Walt Disney Company

Now, after the Fed's unprecedented intervention in bond markets drove rates down even further in the pandemic, finding anything paying more than 5% has become difficult, except for investors willing to dip into the riskiest parts of the junk-bond market. While cheap borrowing costs have been a boon for corporate America, the same can't be said for money managers that need to generate returns that match their long-term obligations.

$131.7B

138 parent issuers

$23.9B

Petroleos Mexicanos

The repercussions -- for pension managers, endowments, insurance companies and 70 million baby boomers starting their retirements -- are vast. Sure, yields aren't negative like in much of Europe, but many are nonetheless being forced to, as legendary investor Warren Buffett recently put it , "juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers."

Others may choose to heed the advice of Ray Dalio, the founder of hedge fund giant Bridgewater Associates, who now recommends avoiding the U.S. bond market entirely and focusing on higher-returning, non-debt investments.

Junk's Rock-Bottom Rates
The average yield on bonds rated BB and lower recently fell to a record low.

Average yield

12%

Covid-19

Recession

10

8

6

3.89%

4

2011

2013

2015

2017

2019

2021

While the potential payout is greater, such moves also carry significant risk, especially for groups previously accustomed to holding only the safest assets.

It's possible that as savers push deeper into lower-rated debt, equities and more esoteric markets, the reckoning never comes.

But most know that's ultimately unlikely.

"It's a struggle that all of the public pension plans have been facing for a number of years -- there are some solutions, and there are some hope and pray trades," said Steve Willer, who helps manage $21 billion as deputy chief investment officer at the Kentucky Public Pensions Authority, which has lowered certain return targets amid the changing investment environment. "People are having to be more creative in looking at different segments of the debt market. That comes with different risks."

Source: Bloomberg compilation of government and corporate dollar-denominated bond and loan offerings with a yield of 5% or more at issue and at least one BB- or higher rating from S&P Global Ratings, Moody's Investors Service or Fitch Ratings. Issuance is for the six months ended March 31. Debt amounts are aggregated by issuer and ratings tier. Data includes debt issued in exchange for older bonds and notes linked to currencies that may yield more than traditional securities.

Editors: Boris Korby, Natalie Harrison and Alex Tribou

[Apr 09, 2021] Ethnicity Is a Bad, Often Destructive, Reason to Hire

Highly recommended!
Apr 08, 2021 | www.wsj.com

Judge James C. Ho is absolutely correct to imply it is profoundly offensive to be offered opportunity based on race rather than merit (" Notable & Quotable: Judges ," March 27).

When I was approaching graduation and beginning my job search, a friend of the family, who was Jewish himself, approached me with an opportunity. His accounting firm, one of the "Big Eight" firms, had inquired if he knew any young Jewish accountants it could hire because it didn't have any Jews working in the firm. The family friend told me this was a wonderful opportunity and that I would be made partner and become prosperous. He was shocked when I responded no, and asked why. I told him if I accepted this offer, I would never know if I was successful because I was Jewish or because I was talented and skilled.

I have never once regretted my decision.

[Apr 08, 2021] The Remarkable Accuracy of CAPE as a Predictor of Returns - Articles - Advisor Perspectives

Apr 08, 2021 | www.advisorperspectives.com

The Remarkable Accuracy of CAPE as a Predictor of Returns by Michael Finke , 7/20/20

On July 21, 2020, this article was corrected to attribute the term "animal spirits" to John Maynard Keynes instead of Adam Smith.

What return can I expect from my stock investments over the next 10 years?

The most common answer is to use the historical average. The geometric average historical return on the S&P 500 is about 10%.

Is it reasonable, then, to project 10% stock returns?

Another method is to consider the valuation of stocks. If stocks are at a higher price than their historical average as a multiple of recent earnings, can we then expect a lower return than we have in the past?

Can valuations predict future earnings?

There have been a number of recent criticisms of Robert Shiller's measure of stock valuation – the cyclically-adjusted price to earnings ratio (CAPE) – as a predictor of future stock returns. A 2017 Advisor Perspectives article pointed out that the ratio wasn't a realistic measure of future stock returns because 10-year earnings included the global financial crisis. Others have argued that changes in accounting rules mean that you can't compare today's CAPE to historical CAPE. An analysis by Vanguard found that the R-squared, or predictive ability, of the Shiller CAPE and 10-year returns between 1926 and 2011 was 0.43. Although 0.43 is high for an asset whose returns are assumed to be random, it gives CAPE critics a reason to dismiss its value.

Care to guess how well the monthly CAPE predicted future 10-year returns between January 1995 and May 2020?

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In a period where accounting rules changed and the 2008 global financial crisis decimated profits, CAPE explained 90% of the variation in 10-year returns. Here's what it looks like when I model 10-year nominal, annualized, geometric returns starting every month from January 1995 through June 2010 (185 blue dots) as a function of their CAPE value during this period:

The standard deviation of the error (how far off the prediction was from the actual value) is 1.37%. This is the difference between the predicted annual return (the yellow dot) and the actual return (the blue dot) at each initial Shiller PE ratio. In other words, 67% of the time the return was plus or minus 1.37% from the CAPE model prediction; and 95% of the time the actual return was within 2.74% of the future 10-year predicted returns. CAPE's ability to predict 10-year future returns during the last 25 years has been remarkable.

As I write this, the S&P CAPE is 29.28. The 10-year return we can expect using the 1995-2020 model is 5.89%, with a 67% probability that it will be between 4.52% and 7.26%. This is about 1% per year lower than Blackrock's 10-year capital market expectations for large-cap U.S. stocks, but still in the ballpark.

Over the next 10 years, a hypothetical equity return of 10% is exactly three standard deviations above what the CAPE model would predict (5.89%). If returns are normally distributed, a 10% S&P return has about a 0.3% chance of occurring (or a 99.7% chance of not happening).

Was the 1995-2020 period different than historical periods? As the Vanguard study notes, CAPE predicted only 43% of the variation in 10-year S&P returns between 1926 and 2011. You might expect that the recent predictability of CAPE is an anomaly.

It's not.

me title=

Since 1975, the Shiller CAPE has explained 85% of variation in future stock returns. In fact, CAPE's ability to predict 10-year returns was remarkably strong until just before the Great Depression. The R-squared starting at 1940 is 0.7. It's hard to dismiss the value of an indicator that can predict 70% of the variation in future stock returns.

The figure below shows CAPE's ability to predict 10-year returns beginning in 1920. I started with the Jan 1995-May 2020 time period and went back in time to estimate how the R-squared changed within various periods. The predictability of the CAPE model has remained consistent in the post-WW2 era, but the lower predictive power prior to 1975 may mean that the expected future 10-year return of stocks starting from a CAPE of 20 using the 1940 model may differ from the predicted return on stocks using the 1975 or 1995 models. Again, it's not much different.

The marginal effect of investing in a higher CAPE stock market today is remarkably similar to investing in high-CAPE periods through the latter half of the 20th century. For each point increase in CAPE, investors should expect a 10-year stock return that is just over half a percent lower. Higher stock returns after 1975 pushed the predicted value up slightly compared to the 1940 model, but not by a huge amount. For example, the predicted S&P return from investing when CAPE values are 20 is 11.1% in both the 1975-2020 and 1995-2020 periods, and 9.8% in the 1940-2020 period.

An investor can grab the current CAPE ratio online and refer to the table below to estimate (with a surprising degree of confidence) the expected return on an equity portfolio over the next 10 years. For a one standard deviation range, add plus or minus 2% to the predicted values for the earlier time periods.

me title=

What is CAPE measuring?

How can stock returns be this predictable? In 1981, economist Robert Shiller rocked the efficient market world when he asked a simple question: If stock prices are rational, why are they so much more volatile than dividends? Historical dividends don't bounce around all that much, while stock prices exhibit wild swings in value that don't reflect future volatility in cash flows. Something must be amiss.

Shiller's article heralded a new stream of literature on the impact of market sentiment, or what John Maynard Keynes referred to as "animal spirits," on stock prices. Sometimes people are more excited about the idea of investing in stocks, and other times they lose their nerve. This results in valuation swings that are higher during periods of economic expansion and positive sentiment, and fall during recessions when investors are pessimistic.

In my own research , I have found that measured risk tolerance of retirement plan participants rises and falls with periods of high and low market sentiment. During the global financial crisis, risk tolerance, measured using a popular financial planning instrument, had a 0.9 correlation with the S&P 500 and a high correlation with other measures of consumer sentiment. Investors' appetite for investment risk is not constant.

What is a stock return? According to the capital asset pricing model, a stock returns consist of a risk-free return and a risk premium. The risk premium is the amount of extra expected return that is needed to incent risk-averse investors into buying a stock instead of a bond. The Sharpe Ratio of the market portfolio is positive because investors are generally risk averse, but sentiment can drive the reward for risk up or down. What if the price of risk is driven predictably by market sentiment?

A risk premium that rises and falls with changes in investor risk tolerance has enormous implications for portfolio construction. When investors are risk averse, the market Sharpe Ratio rises and investors receive a greater reward for taking investment risk. When investors are risk tolerant, the Sharpe Ratio falls and investors don't get as much juice from buying stocks instead of bonds.

The predictability of CAPE presents a problem for those who use historical mean returns to project future returns. Although often considered heresy, return predictability also challenges the investment policy approach of maintaining a constant asset allocation.

Why? Let's assume two investors – one is a Vulcan and the other a behavioral human whose risk preferences depend on market sentiment. The Vulcan will simply look at current valuations and adjust asset allocations based on the expected return being offered by the market. If the CAPE is 34, the expected stock return is between 2% and 4% over the next 10 years. This paltry compensation for taking investment risk means that the Vulcan will select an optimal portfolio with a lower percentage of stocks. Conversely, the Vulcan will go all-in on stocks when CAPE ratios revert to the teens.

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me title=

The behavioral investor is willing to accept low-return stocks during an economic expansion because they are highly risk tolerant. During a bear market, they suddenly become risk averse and avoid investing in stocks. A constant equity allocation can help the behavioral investor rebalance toward risk when markets fall and away from risk when markets rise in value. Maintaining a constant allocation is better than the alternative, and automatic rebalancing is one of the reasons target-date fund participants outperform other fund investors.

Constant equity allocations are still not optimal.

Rebalancing toward a desired equity allocation is not optimal because the Vulcan can do better by responding to what markets are willing to pay for risk. Building valuation-based portfolios is hard because portfolio managers and individual investors aren't Vulcans. They don't want to take more risk after markets fall. They don't want to reduce risk when markets rise.

But investors would be wise to think of CAPE as the price of risk. An investor is a price-taker walking through the aisle of the investment store. When risk is on sale, investors should buy more risk. When risk is expensive, they should buy less. And they shouldn't expect to eat as well when, like today, nothing in the investment store is on sale.

Michael Finke, PhD, is a professor of wealth management and the Frank M. Engle Distinguished Chair in Economic Security at The American College of Financial Services.

More Global Markets Topics >

[Apr 08, 2021] Looking Back at Jeremy Siegel on the Business Cycle and the Markets - Articles - Advisor Perspectives

Apr 08, 2021 | www.advisorperspectives.com

Looking Back at Jeremy Siegel on the Business Cycle and the Markets by Erik Conley , 7/10/18

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives

Dr. Jeremy Siegel, professor of finance at The Wharton School of the University of Pennsylvania, has done a remarkable study of the returns of different types of assets over the past 200 years. He published his findings in the book Stocks for the Long Run in 1994. He has updated the book several times, most recently in 2014. It is surely one of the best books on investing of all time.

This article focuses on chapter 15 in Siegel's book, "Stocks and the Business Cycle." This chapter was a revelation to me when I first read it in 1994. It makes so much sense, and yet it's rarely discussed in the financial literature. It's as if Siegel discovered a gold mine and nobody else was interested. I'll give you the short version of this landmark chapter.

https://7c83d0ab61ed2b1220de369707f5eb1e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Cliff notes for chapter 15 of Stocks for the Long Run

Invariably the stock market turns down before a recession hits and rises before it is over. Of the 47 U.S. recessions since 1802, 43 (9 out of 10) have been preceded by stock market declines of 8% or more. The table below is from the book.

Stock Prices and Business Cycle Peaks, 1948-2017

If an investor went to cash or Treasury bonds four months before each recession, the gains would be significant. The problem, of course, is knowing when to get back into stocks.

Here's where the real money is made

I have a voracious appetite for anything related to the stock market, the economy and behavioral science. When I come across information like what is shown in these tables, I pay attention. Is it just coincidence, or is there something else going on? Do stock market investors "sense" when a recession is coming, precipitating a market decline? To answer this question, we also must talk about false signals.

Recession False Alarms by Stock Market, 1945-2017

The stock market telegraphs the onset of a recession, but it also gives false signals. What are we to make of this?

https://7c83d0ab61ed2b1220de369707f5eb1e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Market declines that are not followed by a recession (false signals) are notably shorter in duration and less severe than declines that presage recessions. This is an easy hurdle to clear. When the market is in decline, but the economic indicators are healthy, investors should stay invested and take the short-term pain that the market is dishing out.

If, on the other hand, the economic indicators are in decline, an aggressive and proactive defensive strategy is warranted. That might involve cutting back on equity exposure, buying a put on the market or switching from stocks to bonds. Each investor must decide for him/herself how to play defense.

Why go to all the trouble?

According to Siegel, an investor who correctly plays defense stands to gain as much as 5% per year in returns, versus an investor who simply stays put throughout recessionary periods. This is more than enough reward for going to all the trouble. Here is what Siegel had to say in his book:

My studies show that if investors could predict in advance when recessions will begin and end, they could enjoy superior returns to the returns earned by a buy and hold investor. Specifically, if an investor switched from stocks to cash or short-term Treasuries 4 months before the start of a recession and back to stocks 4 months before the end of the recession, he or she would gain almost 5 percentage points over the buy and hold investor.

Gains through timing the business cycle – Part 2

We now move from the theoretical aspects of Siegel's research to the practical realm. We do this by looking at actual returns, using real clients with real money invested, by applying various investment strategies over the past 20 years.

The numbers in the table below come from actual client accounts, beginning in 2002. Prior to 2002, the numbers come from back testing, using the identical strategy parameters.

I would like to draw your attention to the 6th strategy in the table – "Recession Defense." This is the strategy I designed to capture the 4-5% bonus returns from timing the business cycle, as described in Siegel's book.

The returns for the Recession Defense strategy are the same as they are for a traditional buy-and-hold strategy for the time period that began after the last recession. This is because the strategy is only invoked at the early stages of a new recession forecast. Most of the time this strategy will remain operating quietly in the background until it's needed.

Once the model raises the alarm for a new recession, the returns for buy-and-hold and Recession Defense start to diverge. At the end of the full 20-year period, the Recession Defense strategy has outperformed the buy-and-hold strategy by 13% per year. If that seems hard to believe, consider this. The last 20 years included two severe recessions and two severe bear markets. All an investor had to do was get out of the way when the warning signs were there and get back into stocks when the model sounded the all-clear. Yes, it can be and has been done.

As I said earlier, my model isn't perfect (87% accuracy score), and it's not the only one. But it has worked well enough to add substantial value to my clients' portfolios over time.

https://7c83d0ab61ed2b1220de369707f5eb1e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

If you decide to stand pat during recessions, eventually you will get back to even. This is why the buy-and-hold doctrine is so appealing, and Siegel is a big advocate of this doctrine. But here's the thing. A bear market may not cost you money in the long run, but it will certainly cost you time, and lots of it.

For example, those unfortunate souls who bought into the stock market mania in 1929 not only lost their collective shirts in the downturn, but it took them more than 20 years to get back to even. Do you have 20 years to wait to get back to even?

Recession forecasting

Returning once again to Siegel,

If one could predict in advance when recessions will occur, the gains would be substantial. That is perhaps why billions of dollars have been spent trying to forecast the business cycle. But the record of those efforts is extremely poor.

My own research agrees with that statement. Forecasting recessions is extremely difficult. But it's not impossible. I know of at least three recession forecasting services ( here , here and here ) that have been around for at least a decade and have accuracy scores of 80% or higher. (I did my own analysis on their published forecasts to arrive at this accuracy score.) I also have my own recession forecasting model that has an 87% accuracy score, using the same analysis methods I used for the other three forecasting services.

The benefits of having a contingency plan

Unless you're financially independent, stock market investing is going to play an important part in your retirement planning. The whole point of financial planning is to find a way to make sure your cash doesn't run out before you do.

But investing in stocks means you're going to go through some harsh market declines. Investors who expect to earn generous returns while watching their net worth rise smoothly are fooling themselves.

The best way to protect your nest egg from the next bear market is to plan ahead. Having a contingency plan, even a simple one, will save you from the worst parts of a bear market. You will never be able to sell at the top and buy back in at the bottom, but if you can avoid the worst months of a bear market, your returns will be significantly higher than a buy-and-hold investor.

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A contingency plan is an add-on to your strategic plan. Brokers, advisors and planners often don't cover this critical aspect of investment planning. The advice industry does a good job of designing plans that serve investors well while the economy and the market are healthy and growing. That's how it is about two-thirds of the time. But what about the other one-third of the time? Their standard answer is "Don't worry about it, just stay invested and ride the waves."

That's not bad advice for many investors, especially those who don't have the time to fiddle with their investment accounts. Many others just aren't interested in investing, so not worrying about bear markets or recessions makes perfect sense for them. For those who do care about bear markets, there is a better alternative: your "plan B."

An example of a contingency plan

A contingency plan doesn't have to be complicated to be effective. What's required is to take some time, perhaps an hour, and think about what you should do when things start to fall apart. The method I teach my clients is setting up a simple rules-based tactical plan that tells them exactly what to do, and when to do it. For example

This is a very simplistic example. But with such a plan in place, you don't have to stress about what to do. You just look at the recession indicator and follow your own instructions.

Final thoughts

Recessions and bear markets are two of the topics about which I'm the most passionate. I've devoted most of my career to studying the link between the two, and the models I designed are the result of hundreds of hours of effort. I would be happy to answer any questions you have about this topic, and I encourage you to sign up for the free stuff on my website, like the weekly newsletter, the mini-courses in investment theory, and the quizzes.

Erik Conley was a trader and portfolio manager from 1975-2001 and former head of equity trading at Northern Trust Co. in Chicago. He is now a private investor, founder of a nonprofit investor advocacy firm and private investing coach.

[Apr 08, 2021] This totally looks like 1929 all over again

Apr 08, 2021 | www.wsj.com

B Bill Hestir SUBSCRIBER 1 day ago Stocks Soar As Bank Aid Ends Fear of Money Panic
By W. A. Lyon in the New York Herald Tribune on March 28, 1929

The stock market strode out from under the shadow of a panic in call money that so lately threatened, but was revived in all its old strength yesterday.

Assured that the New York banks were ready with their boundless resources to prevent a money crisis, the public and the professional trader set out to repair the damage done to prices on Monday and the major part of Tuesday.

Stocks in the aggregate, though bucking a 15 per cent rate for loans, enjoyed the greatest advance they have known in a single day in the last two years. Not even the surging bull markets of the memorable year 1928 saw such a day of heavy buying. Like thumb_up 8 Reply Share link Report P Peter Hayes SUBSCRIBER 1 day ago This totally looks like 1929 all over again. Maybe we'll even see "Bidenvilles" popping up at some future date.

[Apr 08, 2021] Financial crises get triggered about every 10 years -- Archegos might be right on time by Paul Brandus Paul Brandus Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Long-Term Capital Management (LTCM). Its reach and operating practices were such that Federal Reserve Chairman Alan Greenspan said that when LTCM failed, "he had never seen anything in his lifetime that compared to the terror" he felt. LTCM was deemed "too big to fail," and he engineered a bailout by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data.

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Here's the potential danger. Family offices generally aren't regulated. The 1940 Investment Advisers Act says firms with 15 clients or fewer don't have to register with the Securities and Exchange Commission. What this means is that trillions of dollars are in play and no one can really say who's running the money, what it's invested in, how much leverage is being used, and what kind of counterparty risk may exist. (Counterparty risk is the probability that one party involved in a financial transaction could default on a contractual obligation to someone else.)

This appears to be the case with Archegos. The firm bet heavily on certain Chinese stocks, including e-commerce player Vipshop Holdings Ltd. VIPS, -1.59% , U.S.-listed Chinese tutoring company GSX Techedu Inc. GSX, -3.81% and U.S. media companies ViacomCBS Inc. VIAC, -3.65% and Discovery Inc. DISCA, -3.48% , among others. Share prices have tumbled lately, sparking large sales -- some $30 billion -- by Archegos.

The problem is that only about a third of that, or $10 billion, was its own money. We now know that Archegos worked with some of the biggest names on Wall Street, including Credit Suisse Group AG CS, +0.74% , UBS Group AG UBS, -0.18% , Goldman Sachs Group Inc. GS, +1.41% , Morgan Stanley MS, +1.47% , Deutsche Bank AG DB, -0.88% and Nomura Holdings Inc. NMR, -1.30% .

But since family offices are largely allowed to operate unregulated, who's to say how much money is really involved here and what the extent of market risk is? My colleague Mark DeCambre reported last week that Archegos' true exposures to bad trades could actually be closer to $100 billion .

Danger of counterparty risk

This is where counterparty risk comes in. As Archegos' bets went south, the above banks -- looking at losses of their own -- hit the firm with margin calls. Deutsche quickly dumped about $4 billion in holdings, while Goldman and Morgan Stanley are also said to have unwound their positions, perhaps limiting their downside.

So is this a financial crisis? It doesn't appear to be. Even so, the Securities and Exchange Commission has opened a preliminary investigation into Archegos and its founder, Bill Hwang.

One peer, Tom Lee, the research chief of Fundstrat Global Advisors, calls Hwang one of the "top 10 of the best investment minds" he knows.

But federal regulators may have a lesser opinion. In 2012, Hwang's former hedge fund, Tiger Asia Management, pleaded guilty and paid more than $60 million in penalties after it was accused of trading on illegal tips about Chinese banks. The SEC banned Hwang from managing money on behalf of clients -- essentially booting him from the hedge fund industry. So Hwang opened Archegos, and again, family offices aren't generally aren't regulated.

Yellen on the case

This issue is on Treasury Secretary Janet Yellen's radar. She said last week that greater oversight of these private corners of the financial industry is needed. The Financial Stability Oversight Council (FSOC), which she oversees, has revived a task force to help agencies better "share data, identify risks and work to strengthen our financial system."

Most financial crises end up with American taxpayers getting stuck with the tab. Gains belong to the risk-takers. But losses -- they belong to us. To paraphrase Abe Lincoln, family offices -- a multi-trillion dollar industry largely allowed to operate in the shadows in a global financial system that is more intertwined than ever -- are of the super-wealthy, by the super-wealthy and for the super-wealthy. And no one else.

The Archegos collapse may or may not be the beginning of yet another financial crisis. But who's to say what thousands of other family offices are doing with their trillions, and whether similar problems could blow up?

[Apr 08, 2021] The Next "Minsky Moment" Is Inevitable by Lance Roberts

Images removed. See the original for the full text.
Feb 18, 2020 | www.advisorperspectives.com
by Lance Roberts of Real Investment Advice , 2/18/20

In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a "Minsky Moment." At that time, this idea fell on "deaf ears" as the markets, and economy, were in full swing.

However, it wasn't too long before the 2008 "Financial Crisis" brought the "Minsky Moment" thesis to the forefront. What was revealed, of course, was the dangers of profligacy which resulted in the triggering of a wave of margin calls, a massive selloff in assets to cover debts, and higher default rates.

So, what exactly is a "Minskey Moment?"

https://3c6bcb34a49679400fd6aa5e60679e39.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Economist Hyman Minsky argued that the economic cycle is driven more by surges in the banking system, and in the supply of credit than by the relationship which is traditionally thought more important, between companies and workers in the labor market.

In other words, during periods of bullish speculation, if they last long enough, the excesses generated by reckless, speculative, activity will eventually lead to a crisis. Of course, the longer the speculation occurs, the more severe the crisis will be.

Hyman Minsky argued there is an inherent instability in financial markets. He postulated that an abnormally long bullish economic growth cycle would spur an asymmetric rise in market speculation which would eventually result in market instability and collapse. A "Minsky Moment" crisis follows a prolonged period of bullish speculation which is also associated with high amounts of debt taken on by both retail and institutional investors.

One way to look at "leverage," as it relates to the financial markets, is through "margin debt," and in particular, the level of "free cash" investors have to deploy. In periods of "high speculation," investors are likely to be levered (borrow money) to invest, which leaves them with "negative" cash balances.

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While margin balances did decline in 2018, as the markets fell due to the Federal Reserve hiking rates and reducing their balance sheet, it is notable that current levels of "leverage" are still excessively higher than they were either in 1999, or 2007.

This is also seen by looking at the S&P 500 versus the growth rate of margin debt.

The mainstream analysis dismisses margin debt under the assumption that it is the reflection of "bullish attitudes" in the market. Leverage fuels the market rise. In the early stages of an advance, this is correct. However, in the later stages of an advance, when bullish optimism and speculative behaviors are at the peaks, leverage has a "dark side" to it. As I discussed previously:

"At some point, a reversion process will take hold. It is when investor 'psychology ' collides with 'leverage and the problems associated with market liquidity. It will be the equivalent of striking a match, lighting a stick of dynamite, and throwing it into a tanker full of gasoline."

That moment is the "Minsky Moment."

As noted, these reversion of "bullish excess" are not a new thing. In the book, " The Cost of Capitalism, " Robert Barbera's discussed previous periods in history:

The last five major global cyclical events were the early 1990s recession -- largely occasioned by the U.S. Savings & Loan crisis, the collapse of Japan Inc. after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the millennium and the unprecedented rise and then collapse for U.S. residential real estate in 2007-2008.

All five episodes delivered recessions, either global or regional. In no case was there as significant prior acceleration of wages and general prices. In each case, an investment boom and an associated asset market ran to improbably heights and then collapsed. From 1945 to 1985 there was no recession caused by the instability of investment prompted by financial speculation -- and since 1985 there has been no recession that has not been caused by these factors.

Read that last sentence again.

Interestingly, it was post-1970 the Federal Reserve became active in trying to control interest rates and inflation through monetary policy.

As noted in "The Fed & The Stability Instability Paradox:"

"In the U.S., the Federal Reserve has been the catalyst behind every preceding financial event since they became 'active,' monetarily policy-wise, in the late 70's. As shown in the chart below, when the Fed has lifted the short-term lending rates to a level higher than the 2-year rate, bad 'stuff' has historically followed."

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The Fed Is Doing It Again

As noted above, "Minsky Moment" crises occur because investors, engaging in excessively aggressive speculation, take on additional credit risk during prosperous times, or bull markets. The longer a bull market lasts, the more investors borrow to try and capitalize on market moves.

However, it hasn't just been investors tapping into debt to capitalize on the bull market advance, but corporations have gorged on debt for unproductive spending, dividend issuance, and share buybacks. As I noted in last week's MacroView :

"Since the economy is driven by consumption, and theoretically, companies should be taking on debt for productive purposes to meet rising demand, analyzing corporate debt relative to underlying economic growth gives us a view on leverage levels."

"The problem with debt, of course, is it is leverage that has to be serviced by underlying cash flows of the business. While asset prices have surged to historic highs, corporate profits for the entirety of U.S. business have remained flat since 2014. Such doesn't suggest the addition of leverage is being done to 'grow' profits, but rather to 'sustain' them."

Over the last decade, the Federal Reserve's ongoing liquidity interventions, zero interest-rates, and maintaining extremely "accommodative" policies, has led to substantial increases in speculative investment. Such was driven by the belief that if "something breaks," the Fed will be there to fix to it.

Despite a decade long economic expansion, record stock market prices, and record low unemployment, the Fed continues to support financial speculation through ongoing interventions.

John Authers recently penned an excellent piece on this issue for Bloomberg:

"Why does liquidity look quite so bullish? As ever, we can thank central banks and particularly the Federal Reserve. Twelve months ago, the U.S. central bank intended to restrict liquidity steadily by shrinking the assets on its balance sheet on "auto-pilot." That changed, though. It reversed course and then cut rates three times. And most importantly, it started to build its balance sheet again in an attempt to shore up the repo market -- which banks use to access short-term finance -- when it suddenly froze up in September. In terms of the increase in U.S. liquidity over 12 months, by CrossBorder's measures, this was the biggest liquidity boost ever:"

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While John believes we are early in the global liquidity cycle, I personally am not so sure given the magnitude of the increase Central Bank balance sheets over the last decade.

Currently, global Central Bank balance sheets have grown from roughly $5 Trillion in 2007, to $21 Trillion currently. In other words, Central Bank balance sheets are equivalent to the size of the entire U.S. economy.

In 2007, the global stock market capitalization was $65 Trillion. In 2019, the global stock market capitalization hit $85 Trillion, which was an increase of $20 Trillion, or roughly equivalent to the expansion of the Central Bank balance sheets.

In the U.S., there has been a clear correlation between the Fed's balance sheet expansions, and speculative risk-taking in the financial markets.

Is Another Minsky Moment Looming?

The International Monetary Fund (IMF) has been issuing global warnings of high debt levels and slowing global economic growth, which has the potential to result in Minsky Moment crises around the globe.

While this has not come to fruition yet, the warning signs are there. Globally, there is roughly $15 Trillion in negative-yielding debt with asset prices fundamentally detached for corporate profitability, and excessive valuations on multiple levels.

As Desmond Lachman wrote:

"How else can one explain that the risky U.S. leveraged loan market has increased to more than $1.3 trillion and that the size of today's global leveraged loan market is some two and a half times the size of the U.S. subprime market in 2008? Or how else can one explain that in 2017 Argentina was able to place a 100-year bond? Or that European high yield borrowers can place their debt at negative interest rates? Or that as dysfunctional and heavily indebted government as that of Italy can borrow at a lower interest rate than that of the United States? Or that the government of Greece can borrow at negative interest rates?

These are all clear indications that speculative excess is present in the markets currently.

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However, there is one other prime ingredient needed to complete the environment for a "Minsky Moment" to occur.

That ingredient is complacency.

Yet despite the clearest signs that global credit has been grossly misallocated and that global credit risk has been seriously mispriced, both markets and policymakers seem to be remarkably sanguine. It would seem that the furthest thing from their minds is that once again we could experience a Minsky moment involving a violent repricing of risky assets that could cause real strains in the financial markets."

Desmond is correct. Currently, despite record asset prices, leverage, debt, combined with slowing economic growth, the level of complacency is extraordinarily high. Given that no one currently believes another "credit-related crisis" can occur is what is needed to allow one to happen.

Professor Minsky taught that markets have short memories, and that they repeatedly delude themselves into believing that this time will be different. Sadly, judging by today's market exuberance in the face of mounting economic and political risks, once again, Minsky is likely to be proved correct.

At this point in the cycle, the next "Minsky Moment" is inevitable.

All that is missing is the catalyst to start the ball rolling.

An unexpected recession would more than likely due to trick.

Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors . He is also the host of " The Lance Roberts Podcast " and Chief Editor of the " Real Investment Advice " website and author of " Real Investment Daily " blog and "Real Investment Report". Follow Lance on Facebook , Twitter , Linked-In and YouTube

© Real Investment Advice

© Real Investment Advice

[Apr 08, 2021] Minsky Moment' Hangs Over World Swimming in Debt: QuickTake Q A by Enda Curran

Talk about Minsky moment started in 2017 and as of 2021 the bubble did not burst. Warning from Keynes to short sellers: Market can stay irrational longer then you can stay solvent.
Oct 25, 2017 | www.bloomberg.com
The mere mention of a "Minsky moment" -- a sudden crash of markets and economies that are hooked on debt -- is enough to send shudders through policy makers. The theory stems from the work of Hyman Minsky, a U.S. economist who specialized in how excessive borrowing fuels financial instability. Record debt levels around the world, coupled with sky-high financial market valuations, have kept Minsky's theory prominent, drawing warnings from the International Monetary Fund and others. Before taking over the U.S. Federal Reserve, Janet Yellen described his work as " required reading ." 1. What makes a Minsky moment?

The term refers to the end stage of a prolonged period of economic prosperity that has encouraged investors to take on excessive risk, to the point where lending exceeds what borrowers can pay off. At that point, Minsky wrote, there's an increase in "speculative and Ponzi finance." When a destabilizing event as simple as an increase in interest rates occurs, investors are forced to sell assets to raise money to repay loans. That in turn sends markets into a spiral amid a demand for cash. There have been attempts to distinguish between a Minsky moment and a Minsky process that leads up to it. To continue reading

[Apr 08, 2021] There is never just one rat in the basement

At the same time "the market can stay irrational longer than you can stay solvent"
Apr 08, 2021 | www.wsj.com
C C Cook SUBSCRIBER 1 day ago The unanswered question is not if there are a lot of other Archegos, no doubt there are. But what are the big banks going to do? When one bank gets burned and execs fired, other bank execs and investors get nervous. Maybe unwind similar investor deals. Maybe quickly.

There is never just one rat in the basement... K Kevin H SUBSCRIBER 1 day ago The argument we hear as every bubble inflates is that "this time is different". Perhaps the reason each bubble deflates is different, but irrational investor psychology seems to be the driving force behind each lap on the rollercoaster.

Admittedly, the search for yield of any kind has forced many investors to stay more heavily in the market than they might otherwise consider doing. While risk free (or close to risk free) returns are usually at least somewhat uninspiring, they're virtually non-existent right now.

So, the search for any type of yield could be fueling the market's fire for at least a while longer. Even with that said, the wildly speculative behavior I'm seeing lately does make me a bit nervous.

It reminds me of the dot com era, and the housing bubble... both were times when people repeatedly reassured each other with the thought that "it's different, this time". J James Webb SUBSCRIBER 1 day ago John, an old market saying I'm sure you're familiar with, "the market can stay irrational longer than you can stay solvent."

Plus identifying market tops are far more difficult than identifying market bottoms. March 2020 was EASY!

A crash will come. This year? Next year? 5 years from now? 20 years from now?

I've gone through four crashes in my life. 1987, 2001, 2008, 2020. 1974 was also during my life but way before I even knew what the stock market was.

The 1987 and 2020 were very short lived, deep and scary, but were over very quickly. 2001 and 2008 were scary and felt never ending.

Pick an allocation, rebalance and live life. When a crash comes, BUY! B BA Byron SUBSCRIBER 1 day ago @ LANCE

Because most people see an insane increases in the market as a wonderful thing, rather than a worrisome trend. They congratulate themselves for buying high in a bull market and they never learn from their mistakes - because they refuse to admit they made any. It is always those greedy "others" who did this to them.

It goes like this:
Bull market = " Buy! I'm a genius! "
Bear market = " Sell! Bad luck! "

Rinse wash repeat.

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful. " - Warren Buffett
Like thumb_up 2 Reply Share link Report

[Apr 08, 2021] The derivatives, options, swaps, margin investing are effective instruments to skim the cream and leave the traditional investors to sit on the foam

Apr 08, 2021 | www.wsj.com

C Charles Bromley SUBSCRIBER 16 hours ago The old joke: There are two steps that can be taken to be absolutely sure of making $1M on Wall Street. First Step......start with $2M...... R Richard Hightower SUBSCRIBER 23 hours ago At some point the revelation will be clear, in all probability after the fact, that the trade Archegos had on, in one variant or the other, is the same trade that is on in every corner of the markets, and on a global basis. The "trade" is simple and works like magic to its practitioners, some of whom are quite unwitting.

The underlying is an asset class steadily rising in price devoid of valuation consideration , levered by leverage upon leverage, and contingent upon low and lower rates - financing rates, carrying costs, discount rate assumptions, and market derived interest rates. If rates are low and lower, bravo. If rates rise, the trade unwinds.

The unwind has already started, slowly at first and then spectacularly.

It will truly be a Minsky Moment, with a Dornbusch footnote. Look it up.

Like thumb_up 17 Reply Share link Report A Anin Nathan SUBSCRIBER 1 day ago The derivatives, options, swaps, margin investing are effective instruments to skim the cream and leave the traditional investors to sit on the foam. You may hate to hear that, but that is how the system works. Like thumb_up 8 Reply Share link Report J John Goldin SUBSCRIBER 1 day ago Interesting how everyone frets about "unsophisticated" individual investors distorting the market, while so called "sophisticated" investors are the ones with much higher leverage. Individuals levering up is a risky personal choice. Multi-billion dollar hedge funds levering up 10x (or more) is a systemic risk.

[Apr 08, 2021] Excessive leverage is a sign of coming Minsky moment

Highly recommended!
Low interests rate fuel stock bubble
Notable quotes:
"... That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowings had grown so rapidly was during the dot-com bubble in 1999. ..."
"... Significant increases in value without corresponding increases in earnings is the sign of a bubble. The entire S&P 500 has been significantly overvalued for several years now. The cyclically adjusted PE ratio is several times it's historical mean. Historically markets have ALWAYS reverted back to the mean. ..."
Apr 07, 2021 | www.wsj.com

Originally from: Investors Big and Small Are Driving Stock Gains By Alexander Osipovich and David Benoit

As of late February, investors had borrowed a record $814 billion against their portfolios, according to data from the Financial Industry Regulatory Authority, Wall Street's self-regulatory arm. That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowings had grown so rapidly was during the dot-com bubble in 1999.

... some analysts say run-ups in margin debt contribute to bubbles, and they fear that today's levels of borrowing will hurt investors if the market has a downturn.

... Leverage combined with internet hype can be dangerous, the Commodity Futures Trading Commission said in a notice to investors Tuesday.

...It is unclear how many other investment firms have obtained Archegos-style levels of leverage. Little disclosure is required in the market for total return swaps, which Wall Street banks privately tailor for clients.


Like thumb_up 1 Reply Share link Report P Peter Hayes SUBSCRIBER 8 hours ago (Edited) In the year prior to CoVid the S&P grew 21%, from 2,775 to 3,380, meaning it already factored in robust future growth. It plummeted to 2,305 in March 2020, and has since rebounded to 4,080. Are we saying the economy is 20% better than it was right before CoVid? Are we kidding ourselves? While things in general are much better than they were last summer, there are still huge segments of the economy which have been utterly devastated by the shutdowns, i.e. commercial real estate, tourism, hospitality and restaurant industries, and countless mom-and-pop businesses. The hot housing market masks the huge number of mortgages which have been forbeared since April 2020, and will continue so to the end of this year. There's going to be a day of reckoning for all this, probably sooner than later. The S&P should probably be in the range of 3,000 right now, not 4,000, meaning it's at least 33% overvalued. Like thumb_up 1 Reply Share link Report K Kim Jady SUBSCRIBER 9 hours ago Remember the Duke brothers in Trading Places? "Margin call gentlemen." ike thumb_up 3 Reply Share link Report B Bill Payne SUBSCRIBER 10 hours ago Only one thing gives a stock any value; the underlying company's ability to generate an income stream into the future. If the price/earnings ratio increases significantly it means that the stock is increasing in value for some reason other than earnings. There is no valid reason for the stock price to increase other than through increased earnings. Significant increases in value without corresponding increases in earnings is the sign of a bubble. The entire S&P 500 has been significantly overvalued for several years now. The cyclically adjusted PE ratio is several times it's historical mean. Historically markets have ALWAYS reverted back to the mean. Even though the Fed has kept the market artificially propped up there will be a massive correction coming at some time probably followed by a recession. Historically it has always worked this way. We had better watch out. It's not only limited to one sector of the market like it was in 1999 or 2008. It's the entire market. A ANDREW BLENCOWE SUBSCRIBER 12 hours ago 1927 returns

Benjamin Strong cut the Fed's discount rate 0.5% in 1927

So -- it would appear -- the world is currently two years away from its 1929
Like thumb_up Reply Share link Report K Kamalesh Banerjee SUBSCRIBER 17 hours ago (Edited) The total market capitalization of the US stock market now is about $41 trillion (that is trillion with a t). Total margin debt of $ 814 billion is not a large percentage of the total market cap (under 2%). Thus it is misleading to say that margin debt is fueling the bull market. Yes, some investors (individuals and hedge funds) may be over leveraged but the market as a whole is not. Some pockets of the market are frothy but the market as a whole is not. This is not the roaring 1920s. - yet! Like thumb_up 2 Reply Share link Report P Paul Smith SUBSCRIBER 9 hours ago (Edited) Interesting! Curious what it was prior to great depression and great recession, and if similar why was margin blamed, to a great extent, for great depression? EDIT a quick read indicates in 1928 margin of 2 to 1 was allowed, and many margin calls wiped people out resulting in a spiralling downward of share prices. So seems that margin issue perhaps causes an outsize amount of market risk despite it's low overall percent. Like thumb_up Reply Share link Report MARK JURECKI MARK JURECKI SUBSCRIBER 8 hours ago That's an astute observation. The potential damage of widespread margin calls is the destruction of the 'buy side' of stock transactions.

The Great Depression was sometimes described as a failure of the Demand Side. Deflation causing potential investors to hold onto cash and wait for a better deal. Quashing the market. R Richard Hightower SUBSCRIBER 23 hours ago At some point the revelation will be clear, in all probability after the fact, that the trade Archegos had on, in one variant or the other, is the same trade that is on in every corner of the markets, and on a global basis. The "trade" is simple and works like magic to its practitioners, some of whom are quite unwitting. The underlying is an asset class steadily rising in price devoid of valuation consideration , levered by leverage upon leverage, and contingent upon low and lower rates - financing rates, carrying costs, discount rate assumptions, and market derived interest rates. If rates are low and lower, bravo. If rates rise, the trade unwinds.

The unwind has already started, slowly at first and then spectacularly.

It will truly be a Minsky Moment, with a Dornbusch footnote. Look it up. Like thumb_up Reply Share link Report P PJ L SUBSCRIBER 1 day ago Stocks are up and everyone is buying on margin to get in on the unprecedented bull market, more millionaires are being created than ever in the entirety of history.

in the fanatical exuberance disconnected to reality, Every company begins overproducing goods to fill a demand because look how high the market is! We're in an economic boom, everyone is going to buy OUR stuff. Make more!

Credit is so cheap, you're missing out if you don't lever up and get in on all this sweet action...

Sound familiar? Oh wait that's what led to the crash of 1929 and the great depression thereafter...

[Apr 08, 2021] As Meme Stock Mania Fizzles, Wall Street Sees 'Big Reckoning' - Articles - Advisor Perspectives

Apr 08, 2021 | www.advisorperspectives.com

As Meme Stock Mania Fizzles, Wall Street Sees 'Big Reckoning' by Bailey Lipschultz , 4/6/21

The day-trading Reddit crowd turned the first quarter of 2021 into one of the wildest periods of stock market mania in modern history. Books -- plural -- will undoubtedly be dedicated to the topic in years to come.

But after these small-time speculators banded together to drive up dozens of obscure stocks by hundreds or even thousands of percent -- and in the process burned a few hedge-fund barons betting on declines -- the movement appears to be petering out. An index that tracks 37 of the most popular meme stocks -- 37 of the 50 that Robinhood Markets banned clients from trading during the height of the frenzy -- is essentially unchanged over the past two months after soaring nearly 150% in January.

Talk to Wall Street veterans and they'll tell you that this flat-lining is the beginning of what will be an inexorable move downward in these stocks.

https://a99dc3c35fcc43a213aef0858d659f0e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

It's not so much about the poor fundamentals of the companies. At least not in the short term. The day-trading zealots have shown a surprising ability to ignore those facts. It's more that as the pandemic slowly winds down and the economy starts to open up, many of them will leave their homes and start going back into offices and out to restaurants and embarking on trips near and far. And as they do, they may stop obsessing about their Robinhood accounts.

Their collective sway on the meme-stock universe, in other words, will wane.

"People are going to be doing other things," said Matt Maley, chief market strategist at Miller Tabak + Co. There will be a "big reckoning" at some point, he said. "There's no question in my mind."

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Of course, the Wall Street set has, broadly speaking, misread the Reddit crowd for weeks earlier this quarter, and it's possible their analysis is wrong again now. Preliminary data, though, suggests they're right.

Recent reports suggest vaccinated Americans are planning long-awaited vacations with searches for " Google flights " reaching a peak popularity score of 100 this week, according to a Google Trends tracker. The opposite is being seen for terms like " stock trading " and " investing " which have plunged, Google Trends shows.

"The stimulus check impact on retail trading is waning," said Edward Moya, senior market analyst at Oanda. "Many Americans are looking to go big on attending sporting events, traveling across the country, vacationing, visiting family and friends, and revamping wardrobes before going out to restaurants, pubs and returning to the office."

Gamestop Juggernaut

Video-game retailer GameStop Corp. became the poster child for retail traders looking to rage against the hedge fund elite. However, the stock's 2,460% roller coaster alongside other favorites touted on Reddit's WallStreetBets thread caused as much pain as it did joy.

The stock's more than 900% surge this year has drawn a wary eye from the Wall Street analysts that follow it. The average 12-month price target implies the stock will lose more than three-quarters of its value from current levels. Only Jefferies holds a price target near Thursday's $191.45 close and that call came with the warning that shares are "subject to volatility beyond fundamentals."

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But any sense of GameStop trading on fundamentals has been ignored since it first captivated Wall Street and Reddit users in the back half of January. Bulls are more than happy to tout their bets on forums as a move to stick it to short sellers as they buy into a company rebirth delivered by activist investor Ryan Cohen.

Given AMC Entertainment Holdings Inc.'s position as a movie theater many Americans went to at some point, it's not a complete surprise as to why Reddit users rushed to the company's aide. #SaveAMC trended on Twitter and amateur investors appeared more than happy to fight against Wall Street's skeptics despite most movie theaters being closed due to the ongoing pandemic.

The chain's latest rally came amid plans to continue reopening cinemas, however, Wall Street is skeptical. None of the nine analysts tracking the company rate it a buy and the average price target implies the stock will lose 63% of its value in the coming year.

Retail euphoria leaked over to a broader range of securities from cult-favorites like Bitcoin, Tesla Inc., and the ARK Innovation ETF to smaller companies like the clothing retailer Express Inc. Chinese tech company The9 Limited is among the group's best performers this year with an 860% surge.

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The company's rally has been fueled by recent moves to ride the Bitcoin wave alongside peers like Future FinTech Group Inc. and Ault Global Holdings Inc.

Zomedica Corp., a small-cap animal health company, has become a cult favorite among retail investors chasing stocks with low share prices. The Ann Arbor, Michigan-based company started the year worth less than a quarter, but had soared as high as $2.91.

Trading volume of the company has accelerated this year with an average of 174 million shares changing hands per session, more than four times the average over the course of 2020. A mention from Tiger King's Carole Baskin helped it go viral in mid-January.

Bloomberg News provided this article. For more articles like this please visit bloomberg.com .

Read more articles by Bailey Lipschultz


[Apr 08, 2021] How We Work Vaporized Billions of Investor Wealth

Apr 08, 2021 | www.advisorperspectives.com

The good news is that you can obtain the historical perspective missing from Billion Dollar Loser with a reading list that is every bit as much fun . Start with The Smartest Guys in the Room by Bethany McLean and Peter Elkind, the story of the Enron con. Then travel back into the Roaring Twenties with Frederick Lewis Allen's description of Samuel Insull's electrical utility empire in The Lords of Creation , then finish up with Edward Chancellor's nonpareil Devil Take the Hindmost , which describes Neumann's most remote business ancestors, John Blunt of the South Sea Company and the nineteenth century English railway titan, George Hudson. Finally, for sheer moral turpitude, nothing beats John Carreyrou's exposition of the Elizabeth Holmes/Theranos disaster, Bad Blood .

Not only will you be entertained, but the WeWork, Enron, Insull, Hudson, Blunt, and Holmes narratives will alert you to the signs of impending catastrophe: lofty rhetoric, millennial predictions, and public adulation that almost inevitably give rise to overweening hubris. With luck you'll be able to immunize your portfolios against the siren song of the never-ending parade of entrepreneurial heroes served up by your colleagues, your clients, and a breathless financial press.

Elon Musk and TSLA, anyone?

William J. Bernstein is a neurologist, co-founder of Efficient Frontier Advisors, an investment management firm, and has written several titles on finance and economic history. He has contributed to the peer-reviewed finance literature and has written for several national publications, including Money Magazine and The Wall Street Journal. He has produced several finance titles, and four volumes of history, The Birth of Plenty, A Splendid Exchange, Masters of the Word, and The Delusions of Crowds about, respectively, the economic growth inflection of the early 19th century, the history of world trade, the effects of access to technology on human relations and politics, and financial and religious mass manias. He was also the 2017 winner of the James R. Vertin Award from CFA Institute.

[Apr 08, 2021] The Minsky Moment- Why Stability Leads To Panic And What To Do About It by John Jennings

Jan 04, 2021 | www.forbes.com

GETTY

We all know that the economy moves in cycles; boom is followed by bust is followed by boom seemingly forever. A question we'd all like the answer to is: "Where are we now in the cycle?" Economist Hyman Minsky's "financial instability hypothesis" helps answer this question.

Classical Economics Assumes the Market is Fundamentally Stable

An assumption underlying classical economic theory is that the economy is fundamentally stable and seeks equilibrium. The theory holds that as excesses occur, rational market actors see the excesses and act to make money or avoid losing it, and thereby move the economy back toward equilibrium.

According to this theory, bubbles and crashes are caused by external shocks to the economy such as disease, wars, and technological discoveries. While external shocks, such as the OPEC oil embargo of the 1970s or the current pandemic, certainly have significant economic effects, they don't adequately explain the sequence of booms and busts that we have seen. The dotcom bust of 2000 and the financial crisis of 2008 weren't caused by external shocks; they illustrate that the economy is not fundamentally stable.

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https://18a6d127e285c2024e5eafff212be843.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html Minsky Proposed that the Market is Fundamentally Unstable

Hyman Minsky was an economist at Washington University in St. Louis from 1965 to 1990. He proposed a theory he labeled the financial instability hypothesis, which holds that the economy creates its own bubbles and crashes. The gist of his theory is that stable economies sow the seeds of their own destruction because stability, seeming safe, encourages people to take risks. That risk-taking creates financial instability that eventually results in panic and crisis.

Unfortunately, during his lifetime, neither Minsky nor his hypothesis was taken seriously. He died in 1996, before the dotcom bubble and the Great Recession, both of which gave credence to his ideas. His theory is now accepted as a primary explanation for the boom-and-bust cycles in the economy.

MORE FOR YOU Dubsmash, A Home For Black And Latino Teens, Is Figuring Out How To Turn Its Influencers Into Paid Stars Five Undeniable Truths About Marketing To Gen-Z What 2020 Taught Us About The Stock Market

The financial instability hypothesis is rooted in swings between excessive risk-taking and the panic that follows when the risk-taking overheats and the economy collapses. Increased risk in the economy can be seen in the terms on which debt is incurred. Minsky hypothesized three stages of lending he dubbed hedge, speculative, and Ponzi.

During the hedge stage, lenders and borrowers are cautious because of the losses they incurred in the prior recession. Borrowers are wary of leverage, and lenders make loans in modest amounts with stringent credit requirements. During this stage, the amount of debt in the system is reasonable.

In the following speculative stage, market participants become more confident of a recovery. Borrowers take on greater amounts of debt, and the economy begins to boom. Lenders grant credit based on ever-lower standards, assuming that asset prices will continue to rise. During this stage, borrowers can cover the interest on the loans, but become less able to repay the principal.

By the final Ponzi stage, lenders and borrowers have forgotten the lessons of the prior crisis. Everyone is sure that asset prices will continue to rise, and debt is granted with repayments based on that assumption. The economy becomes over-leveraged; debt and risk-taking have created a financial house of cards.

Finally, a "Minsky Moment" -- as the Paul McCulley of PIMCO dubbed it -- occurs. Market insiders take profits, everyone panics, and a crash ensues before the cycle starts over.

The key insight of Minsky's model is that stability itself is destabilizing (see figure below) because during times of economic stability, healthy investments lead to speculative euphoria, increasing financial leverage, and over-extending debt, eventually resulting in a Minsky Moment, which leads to a recession or even a financial crisis.

The economy moves from stability to instability, through periods of displacement, boom, euphoria, profit taking and panic.

Minsky's Cycle of the Economy

IMAGE SOURCE: THE ST. LOUIS TRUST COMPANY

Paradoxically, Minsky's hypothesis teaches us that the time of greatest investment risk is when everything seems good, and investing is actually least risky when, as Baron Rothschild once put it, there is "blood in the streets."

How Minsky Can Help Us Be Better Investors

Minsky's financial instability hypothesis is an essential mental model for us to have in our toolkit. Each cycle has its own characteristics and length. Euphoria and panic can both last longer than we might expect. And outside shocks such as a pandemic or geopolitical events can have big effects as well. So, we can't predict with precision when the economy will transition from one part of the cycle to the next.

But knowing roughly where we are in the cycle can inform good strategies for investors and business owners. As the economy and markets move from boom to euphoria, it's essential to have a healthy margin of safety in the form of cash and high-quality bonds. Smart businesses will increase their cash to shore up liquidity and resist the temptation to take on more debt. Then when the profit-taking and panic occur, they can redeploy their safety margin into bargain-priced risk assets.

The most important lesson to take from Minsky's hypothesis is not to get caught up in the fear that comes with the panicky part of the cycle, or the greed that accompanies the euphoria. While it's not possible to accurately time the tops and bottoms of the market, knowing roughly where we are in the cycle may help you stick with your investment strategy and avoid following the herd at full speed into a bust.

https://buy.tinypass.com/checkout/template/cacheableShow?aid=Yj2fRrCPpu&templateId=OTXWKFJL53QM&templateVariantId=OTVHN4ZSSNY5S&offerId=fakeOfferId&experienceId=EXWS41VWG3FD&iframeId=offer_6f89429c2a934bc2daf2-0&displayMode=inline Twitter or LinkedIn . Check out my website . John Jennings John Jennings

I am the chief strategist and president at The St. Louis Trust Company , a multi-family office and boutique trust company that serves wealthy families across the U.S.

[Apr 08, 2021] 'We're seeing widespread frothiness, bubbles, risk-taking and leverage,' warns 'Dr. Doom' on state of stock-market

Apr 08, 2021 | www.marketwatch.com

Roubini said that a climb above 2% for the benchmark 10-year Treasury note TMUBMUSD10Y, 1.628% , which is used to set rates from everything from mortgages to auto loans, could foster further investor blowups.

Rising yields have propelled investors to sell more speculative wagers because higher yields imply that borrowing costs are also climbing for investors, making such speculative wagers less economically attractive.

Known as "Dr. Doom" in some circles for his bearish predictions, Roubini has been persistently downbeat on his outlook for markets and the economy since the pandemic took hold in earnest in the U.S. last year. Last year, he said that the V-shaped bounce "is becoming a U, and the U could become a W if we don't find a vaccine and don't have enough stimulus."

[Apr 08, 2021] US corporate debt now exceeds $22 Trillion. A significant portion of this debt is used to buy back stock

Apr 08, 2021 | www.wsj.com

Like thumb_up 10 Reply Share link Report S Sandeep Jain SUBSCRIBER 1 day ago This article is missing the whale in the stock markets. Individuals borrowing Billions on margins is insignificant compared to corporations borrowing in the Trillions. US corporate debt now exceeds $22 Trillion. A significant portion of this debt is used to buy back stock.

[Apr 08, 2021] Inside players can use cheap money from the Fed to lever up 10, 20 times as Archegos did

Apr 08, 2021 | www.wsj.com

C C Cook SUBSCRIBER 17 hours ago ....inside players can use cheap money from the Fed to lever up 10, 20 times as Archegos did. Where is the SEC? Where are the banking regulators? Are those investors/speculators that much smarter than all the Ivy lawyers working in the government?

The Hedges have paid off the DNC to keep the government at bay and the tax preferences safe. Look who funded Hillary and Biden campaigns.

[Apr 08, 2021] There is no inflation, it is just that everything costs more.

Apr 08, 2021 | www.wsj.com


B
BA Byron SUBSCRIBER 1 day ago @ Anthony

Economists: " There is no inflation, it is just that everything costs more. "

[Apr 07, 2021] A Gigantic Clusterf*k -- How Morgan Stanley Avoided $10BN In Archegos Losses By Selling First

Apr 07, 2021 | www.zerohedge.com

One week ago, in our initial take on the biggest hedge fund collapse since LTCM, we explained that - in our view - the catalyst for the failure of the Archegos hedge fund, which had as much as 10x leverage allowing it to hold some $100BN in positions, was Morgan Stanley and Goldman breaking ranks with their fellow prime brokers, and sparking the biggest margin call since Lehman and AIG.

Turns out we were right.

In the most detailed account yet of what happened in the fateful 24 hours between March 25 and 26, when many - but not all - of Archegos' big prime brokers starting dumping blocks of Bill Hwang's margined stock, CNBC's Hugh Son writes that "the night before the Archegos Capital story burst into public view late last month, the fund's biggest prime broker quietly unloaded some of its risky positions to hedge funds, people with knowledge of the trades told CNBC."

That prime broker was Morgan Stanley and to avoid what could have been up to $10 billion in losses, the bank sold about $5 billion in shares from Archegos' holdings in media and Chinese tech names to a small group of hedge funds late Thursday, March 25, roughly around the time a last ditch negotiation between prime brokers including Credit Suisse failed to reach a compromise to avoid a firesale.

Morgan Stanley's scramble to "be first" is a previously unreported detail that shows the extraordinary steps some banks took to protect themselves from incurring losses from a client's meltdown. The moves, Son reports, benefited Morgan Stanley, while banks that were slow to react such as Credit Suisse and Nomura have seen billions in losses and widespread C-Suite layoffs. Credit Suisse said Tuesday that it took a $4.7 billion hit after unwinding losing Archegos positions; the firm also cut its dividend and halted share buybacks.

It was also not previously known that Morgan Stanley had the blessing of Archegos itself to shop around its stock late Thursday. The bank offered the shares at a discount, telling the hedge funds that they were part of a margin call that could prevent the collapse of an unnamed client.

Alas, all those hedge funds that bought Archegos holdings late on Thursday are now deep underwater on their positions. That's because Morgan Stanley had information it didn't share with the stock buyers: as CNBC details, the basket of shares it was selling, comprised of eight or so names including Baidu and Tencent Music, was merely the opening salvo of an unprecedented wave of tens of billions of dollars in sales by Morgan Stanley and other investment banks starting the very next day.

And now, it is Morgan Stanley's other clients - those who bought the Archegos positions when approched by the mega broker - that are furious at the bank for having been betrayed and not receiving that crucial context, according to one of the people familiar with the trades. The hedge funds learned later in press reports that Hwang and his prime brokers convened Thursday night to attempt an orderly unwind of his positions, a task which we reported last week proved to be impossible especially once word of the conclave got out.

That means that at least some bankers at Morgan Stanley knew the extent of the selling that was likely and that Hwang's firm was unlikely to be saved, CNBC's sources claim. And, as we explained one week ago in " Goldman And Morgan Stanley Broke Ranks ", it was that knowledge that helped Morgan Stanley and rival Goldman Sachs avoid losses because the firms quickly disposed of shares tied to Archegos.

Morgan Stanley had another reason why it had to be first, smartest or cheat: it was the biggest holder of the top ten stocks traded by Archegos at the end of 2020 with about $18 billion in positions overall, its prime broker going crazy in how much leverage it allowed Hwang to put on via Total Return Swaps. Credit Suisse was the second most exposed with about $10 billion, these sources noted. According to CNBC, that means that Morgan Stanley could've faced roughly $10 billion in losses had it not acted quickly.

"I think it was an ' oh shit ' moment where Morgan was looking at potentially $10 billion in losses on their book alone, and they had to move risk fast," the person with knowledge said. Meanwhile, for those who missed it, this is how Credit Suisse lost $4.7 billion .

And while Goldman's sale of $10.5 billion in Archegos-related stock on Friday, March 26 was widely reported after the bank blasted emails to a broad list of clients, Morgan Stanley's move the night before went unreported until now because the bank dealt with fewer than a half-dozen hedge funds, allowing the transactions to remain hidden.

Needless to say, all those hegde funds would like nothing more than inflicting major pain on James Godman's bank, although in retrospect, their losses are their own fault: the clients which comprise a subgenre of hedge funds dubbed "equity capital markets strategies," don't have views on the merits of individual stocks. Instead, they'll purchase blocks of stock from big prime brokers like Morgan Stanley and others when the discount is deep enough, usually to unwind the trades over time.

Alas, that deep discount would prove to get much more deep in coming days.

After Morgan Stanley and Goldman sold the first blocks of shares with the consent of Archegos, the floodgates opened. Prime brokers including Morgan Stanley and Credit Suisse then exercised their rights under default, seizing the firm's collateral and launching a full blown firesale on Friday as CNBC details:

In a wild session for stocks on that Friday in late March came another twist: Some of the hedge fund investors who had participated in the Thursday sales also bought more stock from Goldman, which came later to market at prices that were 5% to 20% below the Morgan Stanley sales. While these positions were deeply underwater that day, several names including Baidu and Tencent rebounded, allowing hedge funds to unload positions for a profit.

"It was a gigantic clusterf--- of five different banks trying to unwind billions of dollars at risk at the same time, not talking to each other, trading at wherever prices were advantageous to themselves," one industry source said.

While Morgan Stanley exited most Archegos positions by Friday, March 26 it had one last holding: 45 million shares of ViacomCBS, which it shopped to clients on Sunday. The bank's delayed disposal of Viacom shares has sparked questions and speculation that it held onto the stock because it wanted a secondary offering run by Morgan Stanley the week before to close. A clusterfuck indeed.

Yet in a repeat Wall Street irony, while many funds are furious at Morgan Stanley they will get over it quick: as CNBC concludes, despite leaving some of its hedge fund clients feeling less-than-thrilled, Morgan Stanley isn't likely to lose them over the Archegos episode because the funds want access to shares of hot IPOs that Morgan Stanley, as the top banker to the U.S. tech industry, can dole out.

In other words, half Boiler Room, half Margin Call.... which is a good excuse as any for us to end with one of the best Wall Street movie clips in the past decade, one which in 2011 predicted with uncanny accuracy everything that would happen to Archegos and its prime brokers...



delta0ne 16 hours ago (Edited)

if this isn't the most obvious case for Insider Trading to avoid big losses than I don't know what Insider trading is.

The difference is some boys are allowed to do it, while the rest aren't.

sabaj49 15 hours ago

all those hedge funds that bought Archegos holdings late on Thursday are now deep underwater on their positions.

isn't that called insider trading and ripe for lawsuits against the MORGAN STANLEY

should be as they WITHHELD VITAL INFORMATION

hey it's not that big risk - we just need to raise more CASH FOR COLLATERAL

of course we didn't mention other 10 banksters needing to unload same

Paul Bunyan 10 hours ago

Sold $10B of bad investments hours before the margin call. If that's not an inside track I don't know what is. Not sure what you do for a living yuri, but it ain't trading.

overbet 13 hours ago

Inside information has nothing to do with order flow knowledge.

Paul Bunyan 10 hours ago (Edited) remove link

Bro you think MS figured out what hours before a margin call? Order flow knowledge? Do you think the traders are rain man? They aren't. They are coked out frat boys trying to get any advantage they can, and Wall Street leaks like a sieve.

Simple1 13 hours ago

The bankers are the law, they run the government, the markets and print your money.

2+2 ≠ 5 10 hours ago

Morgan Stanley did a classic pump n' dump with the hedge fund monies!

JR Wirth 14 hours ago

Morgan Stanley was smart. The fine will be about 500m, the settlements will be about $ 2 Billion. They saved 7.5 billion that night.

BorisTheBlade 7 hours ago remove link

I wouldn't be surprised if they came up with a similar back-of-the-envelope guesstimate hours prior at the board meeting.

The Ordinal Numbers PREMIUM 15 hours ago

And people wonder why we clap when we hear of bankers jumping from buildings.....

Chipper609 15 hours ago

Much like a bank run....if there is a line....you're too late.

Stackers 16 hours ago remove link

" They dont lose money. They dont care if everyone else does, but they dont lose money "

~Will Emmerson

jamesblazen62 15 hours ago

A gigantic cluster**** that sent the market to all-time highs.

Overpowered By Funk 15 hours ago

Serious Alice in Wonderland **** going on these days.

pashley1411 14 hours ago (Edited)

When facing 11 digit losses; lawyers are cheap, politicians cheaper.

gunner1867 15 hours ago (Edited)

Why would those clients continue to do business with Morgan Stanley. MS had to know it was the beginning of the selling and not a "clean up" situation. They decided that reputation was less important than money.

beaker 15 hours ago

Hence the truth in the term, "No honor amongst thieves."

GRDguy 9 hours ago

Sociopathic financiers will gang up when it benefits them, but rip each others' face off when need be. Easy to do when there's no empath nor conscience. Just be first. The movie Margin Call is classic.

mjl975 12 hours ago

Dear lord..how can you risk $10 billion on any one customer..let alone one with the history of Hwang/Archegos

spanish inquisition 15 hours ago remove link

This was a controlled demolition . I am guessing they figured out the scam and that it was going to collapse. All that is left is to create an official narrative.

It was also not previously known that Morgan Stanley had the blessing of Archegos itself to shop around its stock late Thursday.

anti-bolshevik 15 hours ago

It was also not previously known that Morgan Stanley had the blessing of Archegos itself to shop around its stock late Thursday.

Wait a minute, and this is the salient point here:

Was Archegos the Stock Owner or were these Security-based Swaps (SBS) / Total Return Swaps (TRS) with Morgan Stanley as the Counterparty? Morgan also granted leverage to Archegos??

x_Maurizio 15 hours ago

And therefore the SP500 soared 130 pts...

tobagocat 4 hours ago

Cracks are beginning to appear in this fraud we call a financial system. Counterfeiting and rigging are losing their effect. Illusion soon to turn into reality...look out below

Enraged 8 hours ago

How were they able to avoid the loss?

James Gorman, the Chairman and CEO of Morgan Stanley, is on the board or directors for the New York Federal Reserve. https://www.newyorkfed.org/aboutthefed/org_nydirectors.html

Joebloinvestor2 15 hours ago

Kinda neat when the bankers screw each other.

Due diligence?

HA!

Tomdelay 15 hours ago

unprotected sex...

Flynt2142ahh 11 hours ago (Edited)

Long story short, Banks and risk managers learned nothing from the financial crisis ....

Meanwhile the SEC is monitoring reddit and Congress was calling diamond hands to testify cuz wrong folks made money. House of cards.

Just_Sayin_To_Save_Ya 13 hours ago (Edited)

SEC is happily and conviniently turning blind eyes to whole Archegos saga. Archegos was actually created and sponsored by MS & other criminal banks, is quite obvious. The Archegos entiry is to trade off books and off market in a black box. Now if you think, FED is doing the same thro these banks and playing in this markets.

The problem is, no body can invoke margin call on FED. Not main street, not wall street not precious metals or commodities or bonds or $. They all are in together to squeeze out little guys and make them work for that retirement dream :) LOL.

Sound of the Suburbs 5 hours ago

Why is it so easy for bankers to make lots of money?

Banks create money out of nothing.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

What could possibly go wrong?

Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into serious trouble.

Banking requires prudent lending.

Sound of the Suburbs 5 hours ago remove link

Why is neoclassical economics so dangerous to the financial system?

We never did learn as much as we should have done from 1929.

Neoclassical economics produces ponzi schemes of inflated prices.

When they collapse it feeds back into the financial system.

Neoclassical economics still has its 1920's problems.

What's wrong with neoclassical economics?

  1. It makes you think you are creating wealth by inflating asset prices
  2. Bank credit flows into inflating asset prices, debt rises faster than GDP and you eventually get a financial crisis.
  3. No one notices the private debt building up in the economy as neoclassical economics doesn't consider debt.

What is the fundamental flaw in the free market theory of neoclassical economics?

The University of Chicago worked that out in the 1930s after last time.

Banks can inflate asset prices with the money they create from bank loans.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.

"Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money."

https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons

Margin lending had inflated the US stock market to ridiculous levels.

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

Real estate lending was actually the biggest problem lending category leading to 1929.

The IMF re-visited the Chicago plan after 2008.

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Existing financial assets, e.g. real estate, stocks and other financial assets, are traded and bank credit is used to fund the transfers. This inflates the price.

You end up with a ponzi scheme of inflated asset prices that will collapse and feed back into the financial system.

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.

The use of neoclassical economics and the belief in free markets, made them think that inflated asset prices represented real wealth accumulation.

1929 – Wakey, wakey time

Why did it cause the US financial system to collapse in 1929?

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

What could possibly go wrong?

Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into serious trouble.

Banking requires prudent lending.

If someone can't repay a loan, they need to repossess that asset and sell it to recoup that money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.

As the real estate and stock market collapsed the banks became insolvent as their assets didn't cover their liabilities.

They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most of the money they lend out back again to balance their books.

The banks become insolvent and collapsed, along with the US economy.

When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.

What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?

Japanese real estate.

They avoided a Great Depression by saving the banks.

They killed growth for the next 30 years by leaving the debt in place.

https://www.youtube.com/watch?v=8YTyJzmiHGk

What was the ponzi scheme of inflated asset prices that collapsed in 2008?

"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

They avoided a Great Depression by saving the banks.

They left Western economies struggling by leaving the debt in place, just like Japan.

It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this problem has made our economies so sluggish since 2008.

The last lamb to the slaughter, India

They had created a ponzi scheme of inflated asset prices in real estate, but it collapsed.

https://www.wsj.com/articles/indias-ghost-towns-saddle-middle-class-with-debtand-broken-dreams-11579189678

Now they need to recapitalize their banks.

Their financial system is in a bad way, recovery isn't going to be easy.

marketneutraldecor 10 hours ago remove link

"Meanwhile, for those who missed it, this is how Credit Suisse lost $4.7 billion .". C'mon translation:

For those who weren't utter fuqing complete squmbag pieces of shilt.....

gcjohns1971 14 hours ago

If you are a Globally Systemically Important Bank, nothing is illegal, it seems.

Cash Is King 13 hours ago

Or a Biden.

Gringo Viejo 16 hours ago

I'm a techno dinosaur and don't have the necessary skills. Would someone please cut and paste

"It Do Go Down" from YouTube. Perfect place for it.

Rev Winton Dupree 15 hours ago

https://youtu.be/DYzT-Pk6Ogw

Propaganda Ripper 7 hours ago (Edited)

The movie Margin Call is first and foremost the story of what happened in 2008 when investment banks unloaded on their unsuspecting clients Mortgage Backed Securities they knew had become worthless.

ToSoft4Truth 13 hours ago

The Big Short (2015) - Brownfield Fund and Scion Capital unload short positions [HD 1080p]

https://www.youtube.com/watch?v=ktGarjZC8E8

[Apr 07, 2021] JPMorgan's Dimon Admits -Something Has Gone Terribly Wrong- In America... And China Knows It

Neoliberalism is what is wrong with Amerca, but Fimon would never admit that.
Apr 07, 2021 | www.zerohedge.com

As his bank tries to offload big blocks of Manhattan real estate , JPMorgan CEO Jamie Dimon proclaimed in his latest annual letter to shareholders, published Wednesday morning, that the economic expansion in the US could run through 2023, which would justify lofty equity valuations which recently pushed the S&P 500 north of 4K.

And the CEO who once called for the US to raise taxes on the rich and adopt more explicitly socialist policies to expand access to higher education, housing and child care, praised the federal government's response to the economic crisis caused by the COVID pandemic. Consumers who are now flush with savings will help drive an economic boom, Dimon wrote in his 34K-word missive.

"I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the US economy will likely boom," Dimon said.

"This boom could easily run into 2023 because all the spending could extend well into 2023."

"Ascertaining the quality of the government's spending will take years, Dimon said, but he has little doubt that "spent wisely, it will create more economic opportunity for everyone," he said.

Although equity valuations are already "quite high", Dimon aid a multi-year boom may help to justify current levels, because markets are pricing in economic growth and excess savings that may soon be poured into the market.

https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1379743600460894212&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fmarkets%2Fjp-morgans-dimon-says-economic-boom-could-justify-lofty-stock-valuations-lasting-through&sessionId=8417802b6e5c6a22d7fec2cfb0a1f13788060f75&siteScreenName=zerohedge&theme=light&widgetsVersion=1ead0c7%3A1617660954974&width=550px

Dimon, who built the biggest and most profitable bank in the US, warned shareholders in his industry that disruption by big tech had finally arrived, as shadow lenders have gained ground, having the benefit of being unconstrained by strict capital requirements that have forced big banks to hold more capital in reserve.

"Banks have enormous competitive threats - from virtually every angle," Dimon said.

"Fintech and Big Tech are here big time!"

Echoing Jerome Powell and other senior Fed officials, Dimon offered an oblique reference to "froth and speculation" in the market, but didn't point to any specific areas he saw as threats. He also offered some thoughts on yields and the inflation outlook that, unlike comments from Jerome Powell, raised the possibility that the rise in inflation might be more than "transitory."

"Conversely, in this boom scenario it's hard to justify the price of US debt (most people consider the 10-year bond as the key reference point for US debt)," Dimon said.

"This is because of two factors: first, the huge supply of debt that needs to be absorbed, and second, the not-unreasonable possibility that an increase in inflation will not be just temporary."

Speaking of government spending, Dimon wrote about the need for more infrastructure spending roughly one week after President Biden laid out his sweeping infrastructure plan in Pittsburgh last week.

"We need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote.

"Virtually everyone agrees that we have done a woefully inadequate job investing in our infrastructure – from highways, ports and water systems to airport modernization and other projects. One study examined the effect of poor infrastructure on efficiency (for example, poorly constructed highways, congested airports with antiquated air traffic control systems, aging electrical grids and old water pipes) and concluded this could all be costing us hundreds of billions of dollars per year."

However, while Dimon said he's bullish about the future of the US, some challenges remain, including our increasingly polarized society. In closing, he wrote: "While I have a deep and abiding faith in the United States of America and its extraordinary resiliency and capabilities, we do not have a divine right to success. Our challenges are significant, and we should not assume they will take care of themselves. Let us all do what we can to strengthen our exceptional union."


jamesblazen62 10 hours ago remove link

Dimon knows massive deficit spending can't and won't continue forever. The short-term earnings benefit is more than offset by the long-term damage to the nation's balance sheet.

He doesn't care. Cheerlead the cocaine high and leave the consequences to somebody else.

same2u 10 hours ago

Stock market is the food stamps program and UBI for the rich....

And they had it better than ever before over the past 40 years...

Working is for fools...

Brazillionaire 28 minutes ago

Our leaders should be selected from an acceptable pool of globalist elite, that's all. Hard to understand why the proles would see the need to question that. Seems easy enough to understand. <s>

GreatUncle 32 minutes ago

He does say it eloquently ... Although equity valuations are already "quite high"

Just means more 0's added to the number keep 'em coming now where is my stimmy check because I want to see the more 0's added to that too.

Then he says populism on the left or right should not be allowed to drive policy ... in other words left and right ...

"you ain't getting what you want so screw you."

Lordflin 10 hours ago

How these demonic creatures can talk about an economic boom on one hand, and continuing lock downs of the economy with the other is a marvel...

They really believe they control the narrative with their media and their celebrity...

Sadly, in some parts of the country they still do...

In others the anger is building to an explosive level...

gatorengineer 10 hours ago

I don't see any anger just sorrow and misery here in pa

Rise Of The Machines 9 hours ago

Take the FED away and show me the boom!

yogibear 9 hours ago

Dimon is a bankster/crook, why believe anything he says?

artless 1 hour ago

Well as much as I despise Dimon as a criminal he is the smartest bankster out there and he does tend to get some things correct like the idea that there will be a boom and it will last until 2023 or so. That is very likely. Of course the comedown from that high will probably be extraordinarily horrible but...as the say hedge accordingly.

No way they will let the thing crash just too soon. Gotta cement the new regime and make the sheeple think all is going well and that THIS time the folks in charge REALLY care about them and are working in there interests. There is still a ton of wealth to be extracted from the country-trillions of dollars yet and these parasites are not going to end their program just yet and miss out on that. I mean, what's M1 these days again? We are in full fledged LaLa land.

You have to read all of it and parse out the stuff that indicates his and the rest of the bankster crowd's intentions then work off that.

But otherwise, yes, Jamie Dimon should be strung up from the street posts.

FiscalBatman 1 hour ago

Of course the economy will "expand" through 2023. They did everlasting damage with the lockdowns. It has nowhere to go but up, for now. Until it implodes.

Peak Finance 2 hours ago remove link

Didn't even read his non-sense

remember this guy would literally be a dour-faced walmart greeter if not for the bailouts

this "master of the universe" has no clothes and clay feet

OldNewB 1 hour ago

Give a man a gun and he can rob a bank.

Give a man a bank and he can rob the world.

MommickedDingbatter 1 hour ago

Fed member bank( JPM for one) gets money for next to nil at a key stroke, loans out said money to XYZ small bank. As an asset, now loans out said money to hedge fund FUD. As another asset, lends again to 3rd world country in a derivative contract. Meanwhile, flipping it over in an overnight swap. How this hasn't exploded is beyond comprehension.

LJC 9 hours ago

"And then finally, when there's nothing left, when you can't borrow another buck from the bank or buy another case of booze, you bust the joint out. You light a match"

Goodfellas

Bdubs 9 hours ago

I'm with you... at least in feudal societies, the landed aristocracy has skin in the game, will saddle up and lead their regiment into the fray.

Dimon and ilk have an air of vulture.

efrustrated 2 hours ago

Dear Mr. Dimon,

You are the living embodiment of everything that has gone wrong with the American economy.

Yours,

The rest of the world.

Drink Feck Arse Girls @ edifice 1 hour ago

" China's leaders believe America is in decline..."

China's leaders might be correct.

2banana 10 hours ago remove link

So the $1 Trillion in obama "shovel ready jobs" was a sham? Who knew?

"We need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote. "Virtually everyone agrees that we have done a woefully inadequate job investing in our infrastructure – from highways, ports and water systems to airport modernization and other projects.

Be of Good Cheer 10 hours ago

Who is the "everyone"? Who decided that our infrastructure needed more money? This sounds like COVID rationalizing all over again. I think our roads and bridges are fine enough, at least the ones I travel. Stop spending.

Buzz-Kill 9 hours ago

Infrastructure Con Job: Only 10% of Bidens stimulus will go into this category.

The other 90% goes into Green New Deal & Reparations Projects.

But, don't tell anyone the truth about the new scam.

Globalistsaretrash 53 minutes ago remove link

America is in decline due to people like Dimon .

PGR88 1 hour ago

Dimon says that America's oligarchs and politicians are to blame for intense polarization - with no sense of irony whatsoever.

MontCar PREMIUM 1 hour ago

While the music's playing ya gotta get up n dance. When it stops, turn out the lights.

yerfej 2 hours ago

A society cannot succeed when it doesn't enforce the rules on half the people because of some level of wealth or cult affiliation. People who visit the US are astonished at the number of brain dead idioyts wandering around, they should be in zoo's. Although its as bad in France. When society hands out unlimited free shyyyit with nothing asked in return it gets the quality of fhreaks the US now produces.

Zeus123 9 hours ago

Is this Jamie Dude HIGH?

ChromeRobot 9 hours ago

High on himself. He'll do whatever is necessary to make money for his sleazeball bank.

toady 1 hour ago

"We need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote.

The first thing that needs to happen is the definition of "infrastructure"... Dimon goes on and on about planes, trains, and automobiles, while Bribe'm's "infrastructure" bill plows trillions into his cronies pockets, then throws 10 or 20 billion at "racist highways".

se48s2t8sn 1 hour ago

Jamie Dimon doesn't understand how hated he is.

t0mmyBerg 1 hour ago

Dimon supports the same policies that have killed America. Trading with China ==> the hollowing out of the economy, massive financialization of the economy ==> unproductive debt, skewing of law favoring big business over small

ThomasJefferson69 2 hours ago

States "excess savings" and then " 30% of Americans don't have enough savings to deal with unexpected expenses that total as little as $400" This dumbass can't remember the lies he starts with.

onemorething 2 hours ago (Edited)

JPMorgan's Dimon Admits " Something Has Gone Terribly Wrong " In America...

some people stole something

John Pierpont Morgan has been dead for 108 years but he still keeps ******* us over.

Jamie Dimon saying Something Has Gone Terribly Wrong, is like Captain Renault decrying gambling in Casablanca.

(((here are your winnings, sir)))

Francis Uwood 2 hours ago

How about a wealth tax on people like Dimon and Bezos. They are all for increasing taxes but their wealth is not based on their salaries. How about a wealth tax on their assets.

JoePesci 2 hours ago (Edited)

**** yeah, I'm thinking 95% on everything above $1Billion dollars. Nobody is worth more than that. You get a billion dollars you can use your time to do things other than accumulate wealth, which at that point you will only continue to do so at the destruction of everyone else.

ChromeRobot 9 hours ago remove link

Jamie D comes on tv and smiles I reach back to make sure I still have my wallet. It's a reflex.

Machido 32 minutes ago (Edited)

35 K words. Another 'Das Kapital'

These guys manipulated markets to get where they are, Now they are all invoking socialism/communism so they can take charge of looting whats left.

shepnkc PREMIUM 1 hour ago remove link

Always trying to pump the markets....probably hasn't gotten all his shorts in place yet....

Evil-Edward-Hyde 2 hours ago

Dimon says somethings wrong in the USA

I don't think the Mega Banks like Chase Bank had anything to do with that 😂

Look in the Mirror Mr Dimon .

radical-extremist 2 hours ago

Jamie Dimon has as much authority to weigh in on the Socio-political issues of our time as does the CEO of Coke or Delta Airlines or MLB. Stay in your lane banker boy.

Verrick 2 hours ago

Although equity valuations are already "quite high", Dimon aid a multi-year boom may help to justify current levels, because markets are pricing in economic growth and excess savings that may soon be poured into the market.

"Quite high" phhh. You sir, are quite high

mickeydouglas 2 hours ago

Jamie Dimon was the butt boy of Sandy Weill, the man who destroyed the US economy so he could acquire Citigroup.

Herdee 5 hours ago (Edited) remove link

This guy is nothing but a f * c king crook and a gangster. They just paid a fine of a BILLION dollars for manipulating the Gold Market. And they even give time for this shyster to even speak?

jamesblazen62 10 hours ago remove link

Dimon is in greed's grasp and he can't escape. He's had 2 brushes with death (cancer and emergency heart surgery). You'd think a billionaire with more money than he can ever need or want has something better to do in his life than conniving for more money and playing big corporate games of manipulation and deceit.

Evil-Edward-Hyde 50 minutes ago

J P Morgan is a crime Syndicate.

They constantly Break the Laws.

No Problem for Them,

They Just Pay The Fines.

Their secret is they make much much more money on the scam did they have to pay in fines.

FiscalBatman 1 hour ago remove link

It's amazing how out of touch these guys are. They just don't get it. Dimon will be swaying back and forth with the rest of them at this rate

newworldorder 1 hour ago (Edited)

The US Political class is not investing Govt funds, to bolster America and Americans, - the are however investing in WOKEISM, EQUITY AND DIVERSITY, based on skill color, gender and sexual orientation.

Truce 1 hour ago remove link

Rich man tells nation: if you all work together really well you can make me richer.

Tomdelay 1 hour ago

'And, I've been a big supporter of all the radical Lefties in the Dem party. My tribe contributes 50% of the annual budget of the DNC & me & my banking Zionists at the Fed have been steadily undermining the USA for over 100 years. So if you believe a word of the BS I just laid on you, then you haven't been paying attention and deserve the servitude or death that awaits you.'

Rubicon727 2 hours ago

The monster problem in the US is: people like Dimon, and all the other ultra-rich-multi-billionaires who have absolute power. THEY ARE THE PROBLEM and have been since the early 1990s.

Leroy Whitby 2 hours ago (Edited)

Biden's infrastructure plan is a tax hike plus

  • USD 180bln for research and development (ONE HUNDRED EIGHTY BILLION fluffy accounting Bull$#!+)

  • USD 85bln for public transit (probably Bull$#!+)

  • USD 80bln for Amtrak and freight rail (Bull$#!+ and Berkshire Hathaway)

  • USD 174bln to encourage EVs via tax credits and other incentives to companies that make EV batteries in the US instead of China (ONE HUNDRED SEVENTY FOUR BILLION pretend to compete with China while taking their bribes Bull$#!+)

  • USD 100bln for broadband (tech sector Bull$#!+)

  • USD 300bln to promote advanced manufacturing (THREE HUNDRED BILLION Elon Musk type with a dash of hypocrisy Bull$#!+)

  • USD 400bln spending on in-home care (FOUR HUNDRED BILLION socialist wet fantasy level Bull$#!+)

  • USD 46bln in fed procurement programs for government agencies to buy fleets of EVs (environmental crazy type Bull$#!+)

  • USD 35bln in R&D programs for cutting-edge, new technologies (Elon Musk squared level Bull$#!+)

  • USD 50bln in dedicated investments to improve infrastructure resilience (probably Bull$#!+)

  • USD 16bln program intended to help fossil fuel workers transition to new work (Bull$#!+ from the government teat)

  • USD 10bln for a new "Civilian Climate Corps." (stinking piles of utter Bull$#!+)

Anything left for roads and bridges and airports after the ONE TRILLION spent on home care, EV's, and research?

Bay of Pigs 9 hours ago

Legs Dimon has always been a serial liar.

He's incapable of being honest.

One Moment Please 9 hours ago

My neighbors and I are not experiencing any of this 'economic boom' he speaks of.

Maybe we abide in some mysterious economic dead zone?

Mr..Lucky 10 hours ago

"Stock prices have reached what looks like a permanently high plateau," Yale economist Irving Fisher.

[Apr 07, 2021] UBS Predicts 80,000 More Retail Stores Will Close In Five Years

Notable quotes:
"... Lasser said that equates to approximately 59 square feet of shopping center space per U.S. household, less than 62 square feet in 2010. That number is expected to plunge by 2026 as online shopping dominates. ..."
"... UBS estimates 9% of all retail stores will shutter operations by 2026, or about 80,000 retail stores. ..."
"... The bankster crash took tons of auto dealerships with it too. Very little is rising to replace any of it, unless it can be tied to an overpriced underdelivering data-mined subscription. ..."
Apr 06, 2021 | www.zerohedge.com

The retail apocalypse has been well documented for readers (see: here & here & here ) over the years as tens of thousands of brick and mortar stores nationwide have shuttered their doors. The problem today - is that millions of jobs lost during the pandemic are never coming back - in a consumer-based economy - this sets up for even more store closures.

UBS analyst Michael Lasser told clients this week that a whopping 80,000 retail stores are estimated to close in the next five years as the virus pandemic has deeply scarred the economy and resulted in a permanent shift in how consumers shop, that is, online .

"An enduring legacy of the pandemic is that online penetration rose sharply ," wrote Lasser.

"We expect that it will continue to increase, which will drive further rationalization of retail stores , especially as some of the unique support measures from the government subside," he said.

UBS found at the end of 2020, there were 115,000 shopping malls, compared with 112,000 in 2010 and 90,000 in 2000.

Lasser said that equates to approximately 59 square feet of shopping center space per U.S. household, less than 62 square feet in 2010. That number is expected to plunge by 2026 as online shopping dominates.

UBS estimates 9% of all retail stores will shutter operations by 2026, or about 80,000 retail stores.

Lasser assumes during this period that e-commerce sales will jump to 27% of total retail sales by then, up from 18% today.

UBS said many retail stores have been on life support following cheap government loans and a supercharged consumer via stimulus checks . The short-term artificial boost will be short-lived, which will lead to even more store closures.

Many of the closures will be retailers who sell clothing and accessories. UBS believes 21,000 closures from this industry will be by 2026. Office supplies and sporting goods businesses are other retailers that will be hit hard.

The good news is that auto parts, home improvement, and grocery retailing will be less susceptible to the retail apocalypse.

However, there is more bad news. The labor market recovery is not robust. The economy is still short 8 million jobs and 19 million people are collecting some form of unemployment insurance . This is a large swath of the population who have fallen into financial hardships and are increasingly unlikely to return to their jobs (and thus, absent UBI, in a vicious cycle can no longer spend like pre-COVID times). play_arrow

RKDS 38 minutes ago (Edited)

Not surprising. The feeling I've been getting more and more is that civilization is receding. My town had a KMart for most, if not all, of my life. After the Jamesway next town over closed, decades ago, it was the only general merchandise store for 20 miles in either direction. Now it's gone. Schools, grocery stores, power plants, gas stations, you name it, it's closing.

So many stores I used to shop in are gone, general and specialty. The toy stores are all gone. Best Buy is the last (lousy) electronics retailer standing.

Books, forget about it, may as well go to the library. Art/craft stores are mostly gone except I guess Michaels which was always the weakest selection.

Want to rent a movie? Too bad. Almost as hard to go watch a movie with so many theatres having gone under even before the plandemic. Put together a computer or buy software? You're joking, right?

When that WSB bubble bursts, GameStop will be a dead man walking.

Sears and JCP locations sit idle everywhere. Not even sure where I'd buy shoes/sneakers if I had to go to a store. The bankster crash took tons of auto dealerships with it too. Very little is rising to replace any of it, unless it can be tied to an overpriced underdelivering data-mined subscription.

I used to have to order specialty items online. Now it's like everything is online or bust. Even Target and Walmart don't bother to stock their shelves most of the time. Then we've got that clown of a postmaster general going "herp derp I's gon' raise da' prices cuz I's don't gots no udder ideas!1" Everything in this country is engineered to maximize problems for working people.

[Apr 07, 2021] A significant stock market consolidation may only be months away - Deutsche Bank

Apr 06, 2021 | finance.yahoo.com

More content below Brian Sozzi · Editor-at-Large

Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.

But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19 economic recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.

"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months," Chadha wrote in a new research note on Tuesday.

Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market pullback.

"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation," explains Chadha.

Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic data has been impressive.

The U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates for a 660,000 increase. The gain has some economic forecasters telling Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.

Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.

But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19 economic recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.

"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months," Chadha wrote in a new research note on Tuesday.

Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market pullback.

"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation," explains Chadha.

Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic data has been impressive.

The U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates for a 660,000 increase. The gain has some economic forecasters telling Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.

Meanwhile, data from IHS Markit and the Institute for Supply Management on activity in the services sector on Monday blew the doors off analyst estimates as the ISM's activity index surged to a record high, as Yahoo Finance's Myles Udland wrote in the Morning Brief newsletter. IHS Markit's reading was the best in seven years, noted Udland.

And last but not least, corporate profit estimates for the first quarter have continued to trend noticeably higher amid the acceleration in economic data.

But if economic data moderates as Chadha expects, the stock market could lose a key catalyst. That's not lost by Chadha's peers on Wall Street.

"Our view coming into 2021 was that earnings will drive markets higher and valuations will take a backseat, and actually be flat to down for the year. But the good news is actually starting to get priced in here, and we think it's going to become more challenging for investors and trickier," said Saira Malik, global equities chief investment officer and global portfolio manager at Nuveen...

[Apr 07, 2021] Jamie Dimon in the eyes of ZH crowd

Such comments were definitely impossible before 2007. The level of vitriol is simply incredible. That spells trouble...
Apr 07, 2021 | www.zerohedge.com

10 hours ago

Jamie has Jerome's phone number.

That makes Jamie brilliant. play_arrow 5 play_arrow 1


zorrosgato 10 hours ago

"flush with savings"

HA!

Yen Cross 10 hours ago

Jack, ****, Dimon? Which one was it Z/H Google moderator?

I donate at Christmas.

Basil 20 minutes ago

whats gone wrong is the cancer of progressiveism. wokeism, social justice nonsense.

Gadbous 29 minutes ago

Don't you want to just slap these people?

MuleRider 18 minutes ago

You misspelled decapitate.

GrandTheftOtto 2 hours ago

"It was a year in which each of usfaced difficult personal challenges"

boundless hypocrisy...

Mr. Rude Dog 2 hours ago remove link

" Americans know that something has gone terribly wrong, and they blame this country's leadership: the elite, the powerful, the decision makers - in government, in business and in civic society," he wrote.

"This is completely appropriate, for who else should take the blame?"

Lets see if he projects the problem back on the citizens...Let's see what happens.

"But populism is not policy, and we cannot let it drive another round of poor planning and bad leadership that will simply make our country's situation worse."

I knew the so called elites could not take the blame... You know populism always makes bad decisions with the economy, our monetary system, our infrastructure and just managing our tax money in general...Yes I knew Jamie could not take the blame..LOL.!!!!

QE4MeASAP 2 hours ago

So Dimon is giving the state of the union instead of Biden?

Budnacho 2 hours ago

Jamie Dimon....Friend of the Little Guy....

Tomsawyer2112 PREMIUM 11 hours ago

He doesn't believe a word of what he just said. But he knows that if he wants his bank to continue to be an extension of the government and curry favor then he needs to tow the line. I am sure he also has his eye on a future role as Fed Lead or US Treasurer but might be tough since he's not a diversity candidate.

oknow 2 hours ago

Someone turn off his mike, dont need your sorry *** confession

Just confiscate his wealth and make him do 9 to 5 jobs for the rest of his life.

ChromeRobot 9 hours ago remove link

This guy is a rarity in the banking industry. He's a billionaire. Running a bank I was often told in my early years in finance was foolproof. Everybody needs money and they have it. Hard to fk up. Somehow this "titan" has gamed it to do really well doing something incredibly easy. Positioning yourself to be a SIFI helps too! Too big to fail has it's perks.

a drink before the war 10 hours ago

What Jamie is really saying without saying it is " I get paid in stock options however since the pandemic JPM and other banks haven't been allowed to do stock buy back but come June we get back to the NORMAL and with the FED printing money and giving it to us we going to talk this stock WAY up no matter what because I got almost two years of stock options I gotta get paid for!"

lay_arrow 2
archipusz 10 hours ago

If you want to get to the top, you must speak the party line narrative.

The truth is something different altogether.

Eddie Haskell 10 hours ago

If you want to be a state-approved oligarch you've gotta suck the right dickie. Good job.

Detective Miller 38 minutes ago

"Jaimie Tells Bagholders To 'Buy Buy Buy!!!'"

Onthebeach6 38 minutes ago

The US is addicted to helicoptor money.

The world looks fine to an addict until the supply is cut off.

sbin 41 minutes ago

Jimmy going to lock himself in jail and forfeit his assets?

34k of jerkoff.

Nuk Soo Kow 2 hours ago

How magnanimous of Jamie to blame elitists and civic "leaders" for the structural problems in America. It was the banksters that pushed NAFTA and helped China engineer it's currency against the dollar, which led to massive outflows of productive capital. It was the banksters via the use of financial legerdemain who engineered the collapse in 2008 (not to mention every other banking panic and collapse prior to). It's high time to throw out this den of vipers once and for all.

Nature_Boy_Wooooo 2 hours ago

He lost me at.....

We need more cheap immigrant labor...... housing is unaffordable for many.

No **** moron!......you suppressed our wages and increased demand for housing.

PT 10 hours ago remove link

I always consult the fox when I want to know about the state of the hen house.

QuiteShocking 10 hours ago

Economic boom?? Is really just trying to get back to where we were previously before the pandemic hit with things opening back up etc... More people have been working from home so different spending patterns are developing.. but could change... Supply chain chaos makes it seem like shortages and inflation etc... It may only last through 2023?? but with Dems in charge this is not a given with their anti business slant??

same2u 11 hours ago

UBI for the rich= stock market...

Hope Copy 3 hours ago (Edited)

Jamie knows that the core of Crypto is at the CIA and that the pseudo Republic has far to much Fascist politics at the core .. There has been a competitive failure at most all levels of the government in recent times with a 'winner take all' at the cost of keeping competitive practices alive (not to mention kickbacks).. Of course China is laughing even though they have a history of cutting corners (and outright fraud) in every economic sector.

Mario Landavoz 20 minutes ago

Banker. That's all ya need to know.

Just a Little Froth in the Market 40 minutes ago

But the CEO was very candid about China...

"China's leaders believe America is in decline... The Chinese see an America that is losing ground in technology, infrastructure and education – a nation torn and crippled . . . and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals

This is correct.

Joe A 55 minutes ago

He is just mocking and taking a piss at everybody. That America is such a mess is because of people like him with his scorched earth robber baron rogue capitalism. But there is a way to redeem yourselves. Just make all your assets available to the American people. And oh, blow your own brain out.

Abi Normal 3 hours ago remove link

What else is he supposed to say? As long as things don't go bad for Jamie it's cool.

OrazioGentile 3 hours ago

The Banksters, after years of mismanagement, borderline fraud, and endless bailouts now see that investments in unicorn startups, selling mindless BS to each other, and the quick buck lead to a burned out husk called America?!? Now?!? Let all of them live in the great paradise called the Cayman Islands that they helped build and see how far they get selling "capital instruments" to each other. The last 20 years have taught most Americans that hard work is meaningless to get ahead IMHO.

[Apr 07, 2021] Jamie Dimon: "This boom could easily run into 2023 because all the spending could extend well into 2023."

When did market cheerleading became the key responsibility of all key executives in major banks?
Apr 07, 2021 | www.zerohedge.com

Bay of Pigs 9 hours ago

Legs Dimon has always been a serial liar.

He's incapable of being honest.

One Moment Please 9 hours ago

My neighbors and I are not experiencing any of this 'economic boom' he speaks of.

Maybe we abide in some mysterious economic dead zone?

Mr..Lucky 10 hours ago

"Stock prices have reached what looks like a permanently high plateau," Yale economist Irving Fisher.

[Apr 07, 2021] A significant stock market consolidation may only be months away - Deutsche Bank

Apr 06, 2021 | finance.yahoo.com

More content below Brian Sozzi · Editor-at-Large

Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.

But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19 economic recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.

"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months," Chadha wrote in a new research note on Tuesday.

Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market pullback.

"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation," explains Chadha.

Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic data has been impressive.

The U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates for a 660,000 increase. The gain has some economic forecasters telling Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.

Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.

But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19 economic recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.

"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months," Chadha wrote in a new research note on Tuesday.

Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market pullback.

"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation," explains Chadha.

Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic data has been impressive.

The U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates for a 660,000 increase. The gain has some economic forecasters telling Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.

Meanwhile, data from IHS Markit and the Institute for Supply Management on activity in the services sector on Monday blew the doors off analyst estimates as the ISM's activity index surged to a record high, as Yahoo Finance's Myles Udland wrote in the Morning Brief newsletter. IHS Markit's reading was the best in seven years, noted Udland.

And last but not least, corporate profit estimates for the first quarter have continued to trend noticeably higher amid the acceleration in economic data.

But if economic data moderates as Chadha expects, the stock market could lose a key catalyst. That's not lost by Chadha's peers on Wall Street.

"Our view coming into 2021 was that earnings will drive markets higher and valuations will take a backseat, and actually be flat to down for the year. But the good news is actually starting to get priced in here, and we think it's going to become more challenging for investors and trickier," said Saira Malik, global equities chief investment officer and global portfolio manager at Nuveen...

[Apr 06, 2021] House prices are seriously insane. Even my kind of crappy little place went up $85k on zillow in the last two months!

Apr 06, 2021 | www.zerohedge.com

Handful of Dust

House prices are seriously insane. Even my kind of crappy little place went up $85k on zillow in the last two months!

The only people I see buying are people from out of state (mostly Calif, NY and Oregon---unfortunately) and local government employees who never missed a paycheck during this entire ****show.

The people selling are private sector economic losers who are down sizing. Even the Family Doc down the street is selling his business is so slow because people are afraid to sit in an office+insurance reimbursements are down.

The entire USA economy is now more topsy turvey then ever in my life time.

[Apr 06, 2021] IMF Lifts Global Growth Forecast, Warns of Diverging Rebound by Eric Martin

That will probably sustain stock bubble for longer...
Apr 06, 2021 | www.bloomberg.com

The International Monetary Fund upgraded its global economic growth forecast for the second time in three months, while warning about widening inequality and a divergence between advanced and lesser-developed economies.

The global economy will expand 6% this year, up from the 5.5% pace estimated in January, the IMF said in its World Economic Outlook published on Tuesday. That would be the most in four decades of data, coming after a 3.3% contraction last year that was the worst peacetime decline since the Great Depression.

[Apr 06, 2021] UBS Predicts 80,000 More Retail Stores Will Close In Five Years

Apr 06, 2021 | www.zerohedge.com

archipusz 1 hour ago

Market surges on 80,000 retail outlet closings optimism.

[Apr 05, 2021] Financial crises get triggered about every 10 years -- Archegos might be right on time by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data.

www.wsj.com

Here's the potential danger. Family offices generally aren't regulated. The 1940 Investment Advisers Act says firms with 15 clients or fewer don't have to register with the Securities and Exchange Commission. What this means is that trillions of dollars are in play and no one can really say who's running the money, what it's invested in, how much leverage is being used, and what kind of counterparty risk may exist. (Counterparty risk is the probability that one party involved in a financial transaction could default on a contractual obligation to someone else.)

This appears to be the case with Archegos. The firm bet heavily on certain Chinese stocks, including e-commerce player Vipshop Holdings Ltd. VIPS, -1.19% , U.S.-listed Chinese tutoring company GSX Techedu Inc. GSX, -10.63% and U.S. media companies ViacomCBS Inc. VIAC, -3.90% and Discovery Inc. DISCA, -3.86% , among others. Share prices have tumbled lately, sparking large sales -- some $30 billion -- by Archegos.

The problem is that only about a third of that, or $10 billion, was its own money. We now know that Archegos worked with some of the biggest names on Wall Street, including Credit Suisse Group AG CS, +1.59% , UBS Group AG UBS, +1.01% , Goldman Sachs Group Inc. GS, -1.25% , Morgan Stanley MS, -0.28% , Deutsche Bank AG DB, +0.74% and Nomura Holdings Inc. NMR, +1.87% .

But since family offices are largely allowed to operate unregulated, who's to say how much money is really involved here and what the extent of market risk is? My colleague Mark DeCambre reported last week that Archegos' true exposures to bad trades could actually be closer to $100 billion .

Danger of counterparty risk

This is where counterparty risk comes in. As Archegos' bets went south, the above banks -- looking at losses of their own -- hit the firm with margin calls. Deutsche quickly dumped about $4 billion in holdings, while Goldman and Morgan Stanley are also said to have unwound their positions, perhaps limiting their downside.

So is this a financial crisis? It doesn't appear to be. Even so, the Securities and Exchange Commission has opened a preliminary investigation into Archegos and its founder, Bill Hwang.

One peer, Tom Lee, the research chief of Fundstrat Global Advisors, calls Hwang one of the "top 10 of the best investment minds" he knows.

But federal regulators may have a lesser opinion. In 2012, Hwang's former hedge fund, Tiger Asia Management, pleaded guilty and paid more than $60 million in penalties after it was accused of trading on illegal tips about Chinese banks. The SEC banned Hwang from managing money on behalf of clients -- essentially booting him from the hedge fund industry. So Hwang opened Archegos, and again, family offices aren't generally aren't regulated.

Yellen on the case

This issue is on Treasury Secretary Janet Yellen's radar. She said last week that greater oversight of these private corners of the financial industry is needed. The Financial Stability Oversight Council (FSOC), which she oversees, has revived a task force to help agencies better "share data, identify risks and work to strengthen our financial system."

Most financial crises end up with American taxpayers getting stuck with the tab. Gains belong to the risk-takers. But losses -- they belong to us. To paraphrase Abe Lincoln, family offices -- a multi-trillion dollar industry largely allowed to operate in the shadows in a global financial system that is more intertwined than ever -- are of the super-wealthy, by the super-wealthy and for the super-wealthy. And no one else.

The Archegos collapse may or may not be the beginning of yet another financial crisis. But who's to say what thousands of other family offices are doing with their trillions, and whether similar problems could blow up?

[Apr 05, 2021] According to John Kenneth Galbraith, financial memory is usually about 20 years, then lessons need to be re-learned the hard way

Apr 05, 2021 | www.wsj.com

M Michael OFarrell SUBSCRIBER 3 hours ago Biden, or whoever is actually in charge, is giving this country away. It will the younger generation that will pay the price. Like thumb_up 6 Reply Share link Report M Mark A. Rosasco SUBSCRIBER 3 hours ago "A whole generation with a new explanation" , history definitely rhymes.

According to John Kenneth Galbraith, financial memory is usually about 20 years, then lessons need to be re-leaned the hard way, either with financial euphoria or I would say with tax polices that promote economic growth. J John Augsbury SUBSCRIBER 4 hours ago It is regrettable that Biden has done less than nothing to bring the country together. Biden has allowed Nancy Pelosi and Chuck Schumer to set their own agendas and leadership seems to come from back rooms. Main Stream Media provide nothing but a cheer leading section or cover for the illegal immigration crisis. Like thumb_up Reply Share link Report S Sharif Ahmed SUBSCRIBER 4 hours ago "he doesn't have a mandate .... no, he doesn't have a mandate... no mandate....no..," the conservative muttered as he stared blankly at the asylum walls.

Another 'no mandate' article from the people who continue to disregard a 7 million vote thrashing. We'll be forced to read these for years to come I guess.

Like thumb_up 3 Reply Share link Report Andrew Colin Andrew Colin SUBSCRIBER 4 hours ago When they decided to count those *7 million at 4am is when things get sticky Sharif.

Sadly these fringe ideas this joke of a president is pushing will never be mainstream, no matter how many times the media tells us that they are. D Daniel Altorfer SUBSCRIBER 3 hours ago Biden has been a life long salaried public tax absorber for 50 years with nothing to show for it. Maybe your vote is the real comedy here. Like thumb_up 12 Reply Share link Report John Briscoe John Briscoe SUBSCRIBER 4 hours ago This whole piece is an admission that Republicans have lost any credibility with US Citizens aged less than 60 years. Like thumb_up 7 Reply Share link Report D Daniel Whitworth SUBSCRIBER 4 hours ago I am under 60 years old and am now a Republican; formerly a Democrat. I challenge your assessment.
Like thumb_up 19 Reply Share link Report Andrew Colin Andrew Colin SUBSCRIBER 4 hours ago Former Dem, under 40, now a Repub, will never vote Dem again after the handling of COVID-19 and the woke mob.

In fairness I don't typically side with Facebook and corporate America on fringe ideas, but rather actual progressive ideas.

You couldnt be more wrong in your assessment. The Dem party is a collection of underemployed social media addicts that are typically obese and unhappy... if we want to be accurate. Like thumb_up Reply Share link Report C C F ETTER SUBSCRIBER 4 hours ago

The Bolsheviks, a tiny but ferociously focused minority, proceeded in this way in 1917.
Those who don't know their history are doomed to repeat it. Like thumb_up 14 Reply Share link Report J JOHN OWEN SUBSCRIBER 4 hours ago The Bolsheviks led to the rise of Stalin. Like thumb_up 13 Reply Share link Report M Mary Rhee SUBSCRIBER 5 hours ago I just finished reading "I chose Freedom," by Victor Kravchenko, published in 1946. He writes about his eventual repudiation of the Communist system and his escape to the west. Like so many young idealists, he was an ardent believer in the teachings of Lenin, Marx, and Stalin--until he saw the evils of collectivization and the subsequent starvation of the peasants, the lying of the press, and the State's justification of brutality and often murder for "the higher good." In our country today, some of these same tactics are being implemented. True, they are being implemented on a lesser scale than Victor Kravchenko experienced, but the seeds of totalitarianism are being groomed, fostered, and even praised by today's extreme Left. We need to stop this brainwashing. Granted, the extreme Right has its flaws, too, but they don't control the press, universities, or Silicon Valley. Both parties need to dump their extremists so that we can get our country back. Like thumb_up 3 Reply Share link Report C C F ETTER SUBSCRIBER 4 hours ago It wasn't stolen. It was manipulated. Manipulated by the press, by social media, the FDA, the FBI and our intelligence 'professionals' of the past and present and Covid was the blessing bequeathed upon the Democratic Party by the Chinese communists. S Susan Lynch-Smith SUBSCRIBER 4 hours ago Also, news media with their selective coverings, especially with Hunter Biden and Biden himself, of whom is an idiot. But wait, we the people are the idiots as it is a runaway train now with you do not speak out unless it is for the administration and the left-wing ideologies.

[Apr 05, 2021] Only the Retired Professors Dare to Speak Out Freely

Apr 05, 2021 | www.wsj.com

Over the months there have been letters to the editor regarding academia. April 4, 2021 2:59 pm ET

Listen to this article 1 minute 00:00 / 00:37 1x

Over the months there have been letters to the editor regarding academia, "Academic Freedom Long Ago Withered Away" (Letters, March 5) being a case in point. I find it interesting that for the most part they are written by professors emeriti or retired academics, not active ones with a job to lose. This is very telling in and of itself.

Kenneth White

Chicago


[Apr 04, 2021] Predicting The Next Crash

Apr 04, 2021 | www.zerohedge.com

David Zeiler's post ("How We Know Stock Market Crash Is Coming") was one of several crash predictions in the first quarter of 2021. And yet, the first day of the second quarter ended with the S&P 500 breaking through 4,000 to close at an all-time high of 4,019.87. Rounding up, that's four thousand twenty reasons to ignore permabears . It's one thing to hedge against downside risk - we've been big advocates of that (more on that below) - but betting on a collapse because you're negative about politics or the government is a recipe for losing money.

There were certainly reasons to be cautious at the end of last year - there always are. But if you bet against the market and the dollar and bet on gold then, you've taken L's on all three since.

The Markets Versus The Real World

Markets impact the real world and vice-versa. George Soros spends lots of words explaining this under his theory of " reflexivity ", but it's easier to explain with a couple of examples. The real world impacting the market is an easy one: Russia invaded Finland in 1939, and Finish bonds tanked. But markets impact the real world too. A recent example was the WallStreetBets crowd bidding up the price of AMC shares. That enabled AMC to float a secondary offering, raising money to keep the theater chain in business. Thanks to a bunch of Robinhood traders, movie theaters stayed open in the real world.

Although markets and the real world impact each other to some extent, markets are not the real world. A lot of negative things that happen in the real world have no impact on the market, and vice-versa. For example, we've written recently about the anarcho-tyranny in America's cities, and how depraved teens murdered an immigrant working a sub-minimum wage in our capital. Terrible stuff, but it has no impact on the stock market, and another new high in the S&P 500 won't impact it either.

Japan As Another Example

Japan offers another example of the distinction between markets and the real world. In February, the Nikkei 225, Japan's main stock index, crossed above the 30,000 level for the first time since 1990. For thirty years, Japanese stocks went nowhere, but that doesn't mean Japan went nowhere. They kept improving their enviable country. Compare, for instance, their bullet train network in 1990...

To their network in 2020.


Lost in translation 10 hours ago

Stop investing; instead, cash out, go Galt.

Stop supporting a system that hates you and wants you dead.

Orlov warned us ...

philipat 5 hours ago

I really like Orlov, he makes some very smart observations. One of his most brilliant I thought was to point out that " A large part of the US economy depends on selling over-priced services to ourselves, which ultimately doesn't amount to much ". How very true..

philipat 13 hours ago

2020 GAAP Earnings have a forward P/E of 40X. That's unprecedented and absurd, especially since there is no recovery and the economy will collapse after the "stimulus" ends.

Agreed about Silver, especially now FINALLY more people have understoof what a scam the paper PM derivatives "markets" are and are buying physical. It's collapsing at the edges, with the Perth Mint leading the way in exposed fraud!!

Automatic Choke PREMIUM 8 hours ago (Edited)

ok. an interesting read, though, is "This Time Its Different". a very thorough evaluation of all financial crises since the stone age. they ask the question, "is it possible to borrow your way out of a debt crisis?" spoiler: "no".

your argument says that the fed must keep spiking the punchbowl harder and harder to keep the party going. i don't disagree. i only claim that there is a limit, and all of history agrees.

(edit) by the way...how old are you? i was around when people were buying home mortgages at 18%, and it wasn't pretty.

philipat 5 hours ago (Edited)

I think the Fed has nothing left. All it can do is jawbone and QE (Or QE in the slightly different form of YCC). And it will until it collpases or there is the reset - whichever comes first. The economy started turnong down in 4Q2018 and became noticeable in Sept 2019 with the Repo events. Well before Covid, which is just the excuse and cover for many things. So if Covid goes away, as soon as the "stimulus" ends, the economy will turn down again.

I'm old enough to remember that too. But luckily never had a mortgage. Moved around the world with MNCs and had accommodation paid for until I designed and built my own place in the tropics and by then was able to pay cash.

[Apr 03, 2021] Using religion as smoke screen to cover blatant greed and avoiding regulation

Abuse of "Family office" was the only invention of Bill Hwang. and he was not the first to exploit this loophole to accumulate unsustainable level of leverage.
Apr 03, 2021 | finance.yahoo.com

Christian Capitalist

One of them walks for hours through New York's Central Park listening to recordings of the Bible and embraces a new, 21st-century vision of an age-old ideal: that of a modern Christian capitalist, a financial speculator for Christ, who seeks to make money in God's name and then use it to further the faith. A generous benefactor to a range of unglamorous, mostly conservative Christian causes, this Hwang eschews the trappings of extravagant wealth, rides the bus, flies commercial and lives in what is, by billionaire standards, humble surroundings in suburban New Jersey.

That same Bill Hwang, it turns out, is also a backer of one of Wall Street's hottest hands of late, Cathie Wood of Ark Investments. Like Hwang, Wood is known to hold Bible study meetings and figures into what some refer to as the "faith in finance" movement.

And here, at last, is where the Bill Hwangs collide. The fortune he amassed under the noses of major banks and financial regulators was far bigger and riskier than almost anyone might have thought possible -- and these riches were pulled together with head-snapping speed. In fact, it was perhaps one of the greatest accumulations of private wealth in the history of modern finance.

And Hwang lost it all even faster.

... ... ...

But before the next success, Tiger Asia ran into more trouble -- this time, trouble big enough to bring Hwang's days as a hedge fund manager to an end.

When Tiger Asia pleaded guilty to wire fraud in 2012, the SEC said the firm used inside information to trade in shares of two Chinese banks. Hwang and his firm ended up paying $60 million to settle the criminal and civil charges. The SEC banned him from managing outside money and Hong Kong authorities prohibited him from trading there for four years (the ban ended in 2018).

Shut out of hedge funds, Hwang opened Archegos, a family office. The firm, which recently employed some 50 people, initially occupied space in the Renzo Piano-designed headquarters of the New York Times. Today it's based further uptown, by Columbus Circle, sharing its address with the Grace & Mercy Foundation.

"My journey really began when I was having a lot of problems in our business about five or six years ago," Hwang said in a 2017 video. "And I knew one thing, that this was a situation where money and connections couldn't really help. But somehow I was reminded I had to go to the words of the God."

That belief helped Hwang rebuild his financial empire at dizzying speed as banks loaned him billions of dollars to ratchet up his bets that unraveled spectacularly as the financial firms panicked. What ensued was one of the greatest margin calls of all time, pushing his giant portfolio into liquidation. Some of the banks may end up with combined losses of as much as $10 billion, according to analysts at JPMorgan Chase & Co.

... ... ...

Doug Birdsall, honorary co-chairman of the Lausanne Movement, a global group that seeks to mobilize evangelical leaders, said Hwang always likes to think big. When he met with him to discuss a new 30-story building in New York for the American Bible Society, Hwang said, "Why build 30 stories? Build it 66 stories high. There are 66 books in the bible."

Before so much went so wrong so fast, Archegos appeared to be ramping up. A year ago, Hwang petitioned the SEC to let him work or run a broker-dealer; the SEC agreed.

It's impossible to say where Bill Hwang, the hard-charging financial speculator, ends, and Bill Hwang, the Christian evangelist and philanthropist, begins. People who know him say the one is inseparable from the other. Despite brushes with regulators, staggering trading losses and the question swirling around his market dealings, they say Hwang often speaks of bridging God and mammon, of bringing Christian teaching to the money-centric world of Wall Street.

[Apr 03, 2021] World Economy Risks 'Dangerously Diverging' Even as Growth Booms

One in six restaurants in the USA permanently closed during the pandemic. So the return to normal for in this area is impossible.
Universities, health clubs, all kind of training schools also will suffer permanent decline.
Fed might partially lose the control of rates and inflation will start showing its ugly head.
Apr 03, 2021 | finance.yahoo.com

By 2024 world output will still be 3% lower than was projected before the pandemic, with countries reliant on tourism and services suffering the most, according to the IMF.

... "The Biden stimulus is a two edged sword," said former IMF chief economist Maury Obstfeld, who is a now senior fellow at the Peterson Institute for International Economics in Washington. Rising U.S. long-term interest rates "tighten global financial conditions.

[Apr 03, 2021] Manhattan Office Supply Skyrockets To Three Decade High - ZeroHedge

Apr 03, 2021 | www.zerohedge.com

BY TYLER DURDEN FRIDAY, APR 02, 2021 - 07:00 PM

Whether "working from home" is a temporary fad or a permanent "new normal" remains to be seen; what becomes more evident is the mounting supply glut of corporate space in Manhattan, according to Bloomberg , citing a new report from real estate firm Savills.

Savills said the amount of office space available in Manhattan is at a three-decade high. The report, released on Thursday, said the availability rate soared to 17.2% in the first quarter. The rise in the rate was primarily due to a massive surge in sublease space, which now stands at 22 million square feet, or 62% higher than 2019 levels.

"Abundant short- and long-term options are driving price reductions," Savills noted. "Many owners are proposing historically aggressive rates, concessions, and flexibility to secure tenants amid so much competition."

Savills said rents fell for the fifth consecutive quarter to around $76.27 a square foot, down 9% from a year earlier. These cheaper rents are creating a massive opportunity for companies who want to enter the city.

Desperate landlords were offering generous concessions for long-term leases at newly constructed buildings: "Average tenant improvement allowances jumped 16% and free rent surged 17% to an average of 13.5 months. The tenant-friendly market is expected to last for at least the next 12 to 18 months," Savills said.

The Manhattan office market continues to struggle more than one year after the pandemic hit, which has emptied Manhattan's skyscrapers. And since most employees are still working from home, just around 24.21% of workers in the New York metropolitan area were back at their desks as of this week.

Even with the vaccine rollout now reaching 100 million Americans, companies are still opting for "hybrid" work as remote working dominates .

In a past report, Jim Wenk, a vice chairman at Savills North America, said commercial real estate in the borough will have a "very choppy period for the foreseeable future."

A recent survey from the Partnership for New York City found 66% of Manhattan's most prominent employers would allow employees to work under hybrid work arrangements, meaning they would Manhattan's most prominent employers.

As more proof the work environment is rapidly changing, major magazine publisher Conde Nast (who owns brands such as ARS Technica, GQ, Teen Vogue, The New Yorker, Vanity Fair, Vogue, Wired, among other popular magazines) is a major anchor tenant in the new World Trade Center, recently skipped out on rent as it asked for rent discounts and a reduction in square footage.

Last month, JP Morgan was reportedly looking to sublet hundreds of thousands of square feet at 4 New York Plaza in the financial district and 5 Manhattan West in the Hudson Yards area.

To make matters worse, Hudson Yards, a massive complex on Manhattan's Far West Side with condos, office space, and retailers built over an enormous railroad yard had investors panic because the company refuse d to open its books. The combination of work-at-home and folks moving to suburbs has left Hudson Yards and other places across the borough a 'ghost town.'

This all suggests that the virus pandemic has brought years of technological change to the work model that has possibly made companies more productive and cut costs as employees work from home or adopt a hybrid work model. Without office workers returning to the borough, there can't be a robust recovery in the near term.

[Apr 03, 2021] Inflation Is Coming. Why it Could Be Here to Stay by Jacob Sonenshine

Apr 01, 2021 | www.marketwatch.com

...Economists do expect inflation to rise to above 2% as more states reopen and then stay there. And the St. Louis Fed is forecasting a 2.35% rate for the next 10 years.

...China's economy has dynamics that could raise the U.S. inflation rate over time. Key to the argument are China's aging population and the value of the country's currency, the Yuan. First, age. Today, the average age in China is 38, the same as in the U.S. By 2040, though, the number skyrockets to 47 in China and dips to 37 here.

The shift means fewer Chinese workers and upward pressure on pay. Higher wages probably would cause Chinese manufacturers to raise prices of exports, which could be passed onto American consumers.

Now, the Yuan. The currency bottomed at 7.12 per dollar in late 2019 after a more than five-year down-trend. China wants a weaker currency so its exports are more competitive -- cheaper -- for global buyers. Since the end of 2019, the Yuan has risen to 6.50 per dollar. If the trend continues, U.S. importers might raise prices because the cost of their imports are higher.

"Over the next decade, Asia's growth will slow dramatically, its wages will rise, its factories will close, its surpluses will melt and its currencies will rise sharply," wrote Vincent Deluard, global macro strategist at StoneX in a note. "For the rest of the world, this will be a massive and unexpected inflationary shock."

[Apr 02, 2021] Yield on the benchmark note rose to 1.72% in a holiday-shortened session

Bill Gross expect that it will end the year at 2.5% Gross said he bet against the 10-year Treasury through the futures market and remains short, anticipating a combination of rising commodity prices, a weaker dollar and stimulus-driven demand will spark inflation. "Inflation, currently below 2%, is not going to be below 2% in the next few months," Gross said. "I see a 3% to 4% number ahead of us." Bloomberg
Apr 02, 2021 | www.marketwatch.com
  • OVERVIEW
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  • [Apr 02, 2021] The Twilight-Zone Economy Alternate-Reality Equity Markets - ZeroHedge

    Highly recommended!
    Apr 02, 2021 | www.zerohedge.com

    The Twilight-Zone Economy & Alternate-Reality Equity Markets BY TYLER DURDEN FRIDAY, APR 02, 2021 - 09:00 AM

    Authored by Patrick Hill via RealInvestmentAdvice.com,

    "It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science (reality) and superstition (bubbles), and it lies between the pit of man's fears and the summit of his knowledge (fundamentals). This is the dimension of (economic) imagination. It is an area which we call The Twilight Zone."

    - Rod Serling, introduction to the TV series, 1959 [our comments in ( )]

    Our economy has entered the twilight zone. Today, economic leaders base policies on a hoped-for utopia with bubbles called 'growing markets' and greed termed 'good valuations'. The twilight zone economy is a place where fundamentals have disappeared. It is a utopian world of no moral hazard for business, financial or economic mistakes. In the last year, the Federal Reserve has injected over $4.1T into the banking, hedge fund, Wall Street complex of the financial elite. Vast injections of dollars have sent stock valuations to record highs. Yet, the pandemic-driven economy is real for 19M Americans out of work, others who lost 540,000 loved ones, and millions carrying housing debt due to missed rent and house payments.

    Policymakers Disconnected From the Real Economy

    Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates surge to 3 – 4 % by year end. Does all this monetary and fiscal stimulus result in a healthy solid economy or the most catastrophic inflationary bubble in modern times ? Our post identifies the dimensions of the Twilight Zone Economy.

    Astronomical Public Debt Drags Growth

    The country is drowning in low-interest debt. But, this liquidity 'soma' drug is putting investors to sleep, thinking everything will be ok. Now, public debt is at levels not seen since WWII and projected to go to 200% of GDP by 2051.

    Source: CBO, The Daily Shot – 3/15/21

    During WWII, debt supported production capacity for building weapons, planes, and infrastructure to support the war effort. When the war was over, the US was the only major economy intact, leading to a high growth productive economy. The investment in productive industries increased the standard of living for most Americans.

    Sources: Blackrock, IMF, OECD, The Daily Shot – 3/15/21

    Are the present monetary debt and fiscal stimulus programs of relief payments resulting in productive investment? This chart, by Lance Roberts, shows how increasing public debt has resulted in a continuing decline in real economic growth.

    Source: RIA, Lance Roberts, 3/17/21

    Public debt not used for solid investments in infrastructure, basic research for innovation, or productivity has resulted in an ever-growing debt level to achieve a continuing decline in economic growth. This cycle of low-cost ballooning debt to finance debt service and transfer payments will likely result in economic stagnation or worse.

    Negative Yielding Debt Triggers Speculation

    Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader speculation in Bitcoin and other cryptocurrencies.

    Sources: Daily Feather, Bloomberg – 3/22/21

    Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in value at some date in the near future.

    Equity Markets Are In An Alternate Reality

    Why is a firm like Tesla valued at the same level as the next six largest car companies or the oil industry's total market capitalization? Isn't Tesla's valuation in the economic twilight zone? Analysts value Tesla at $1M per vehicle produced versus GM at $5000 per vehicle. While VW is building six battery factories in the EU, and vows by 2025 to produce over 1.2M EVs in 2022, matching Tesla's total output. VW has now taken over the dominant market share in Europe and is opening EV plants in Asia and North America.

    There are 15 major car manufacturers, including GM, Ford, Toyota, Honda, Nissan, BMW, Mercedes, investing billions into EV production plants and battery facilities. Tesla may have a first-mover advantage in the EV market, but it may wind up like Yahoo, losing out to Google in the internet search sector. The following chart shows S&P valuations at Dotcom Crash levels in 2000.

    Source: Topdown Charts, Refinitiv Datastream. – 3/17/21

    The following chart shows the record valuation of stocks as a percentage of GDP back to 1952!

    Sources: Charles Schwab, Bloomberg – 12/31/20

    Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals don't support this extreme valuation case.

    This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales growth of 42% and GDP growth at 22% since 2007.

    Source: Real Investment Advisors – 3/20/21

    Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time will come when the zero-interest economic drug won't work anymore, and withdrawal sets in spiraling into a market crash.

    Bubbles Bubbles Everywhere

    Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie's just sold a digital work of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just $100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is authentic. Beepi knows he's riding a soaring market, observing, 'Absolutely it's a bubble, to be honest."

    An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace, StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey's first tweet sold for $2.9M. Venture capitalists Marc Andreessen and Ben Horowitz note what motivates mania buyers at a collectible forum:

    Andreessen: "A big part of the entire point of life is aesthetics. The way that we live and the design of things around us and artistic creativity."

    Horowitz: "It's a feeling. You're buying a feeling. And what's that worth?"

    Writer Ben Carlson notes in his analysis of bubble markets that:

    "We're emotional. We lead with our feelings. We're superstitious."

    Superstition is a characteristic of the Twilight Zone Economy.

    Core City Life Is Changed Forever

    Many think life will go back to the way things were in February 2020. We disagree. Life has changed forever in America. The lack of commuters changes core city life where they are the heartbeat of neighborhoods surrounded by office towers. Millions of small businesses and restaurants dependent on commuter patronage are scrambling to survive. When they had the opportunity, millions of workers worked from home and found they could perform successfully remotely. Hundreds of thousands of workers left cities to move to another less costly city or region. Some analysts think 99% of commuters will come back to city offices.

    Yet, surveys show that from 20 – 25 % of professionals in dense city centers like New York and San Francisco want to work from home at least 3 – 4 days a week or work from home full time. Based on remote worker management experience companies are restructuring their reporting hierarchy. Global corporations to startups are moving to a distributed worker organization, further flattening the reporting structure for improved performance and business agility.

    The lack of office workers leaves 20% of offices in core cities vacant, putting banks and commercial office space landlords at risk for billions of dollars in lease income. Plus, small businesses in these core cities have lost 50- 60% of their sales. Business owners hold billions of dollars in lease debt which must be paid off even after 80% of commuters return. Innovative new small businesses and restaurants will emerge to support these commuters. Plus, new attractions and business models will bring back visitors crucial for the leisure and hospitality sectors.

    Millions of Workers Are Long Term Unemployed

    About 19M workers collect continuing unemployment, of which 39.5% have been unemployed over 27 weeks. These permanently unemployed workers will have a difficult time finding their next job. While Indeed reports that job openings are up 3.7 % from January 2020, millions of workers are still unemployed. Many of these workers do not have the job skills to be hired for many new manufacturing and services jobs. Bank of America completed an analysis of unemployment pre – COVID to the trajectory of employment post COVID showing a lingering decline in the labor force.

    Sources: Bank of America, CBO, Zerohedge, Real Investment Advisors – 2/12/21

    The BofA analysis shows a permanent loss of employment in labor force size in Phase 3 of the recovery. The reality of the economy that workers and consumers will likely live in is an economy of debt dragging economic growth with poor job prospects. Job prospects for millions of workers will be limited by their lack of marketable skills. A major workforce segment faces a long financial recovery time from either the loss of their business or job. Lack of consumer spending by the permanently unemployed will slow the recovery.

    Corporate Executives Join In the Party

    In the 1950s, CEO pay to average worker pay was 50 times. Today, CEO pay is 350 times average worker pay, with Wall Street applauding stock buybacks totaling 1.4T in 2019. While buybacks fell to $450B in 2020, Bloomberg forecasts stock buybacks to resume $150B per quarter in 2021. Stock buybacks create overvalued markets. Ned Davis Research estimates the SPX as overvalued by at least 20% due to stock buybacks distorting prices in 2019. A company gooses prices by using cash to purchase shares in the open market, thereby reducing the stock pool for public investors. If demand stays the same, prices go up.

    Yet, the company has not increased in substantive value. Many executives used low-cost debt to make stock purchases that saddle the company with major debt obligations. Executives must refinance these debt obligation or pay them off in the near future. In January 2020, corporate debt hit a 30-year record 49% of GDP, while interest rates were low. Fitch forecasts a jump in corporate loan defaults in 2021 to 8 – 9% from a 2020 default range of 5 – 6%.

    Sources: Fitch Ratings, Vuk Vukovic – 9/22/20

    A significant default storm looms in the coming years as interest rates rise.

    Another cash flow squeeze is developing in profit margins. Prices paid for goods and services are increasing at a rate far faster than corporations can raise end customer prices in the following chart.

    Sources: Mizuho Securities, The Federal Reserve Bank of Philadelphia, The Daily Shot – 3/19/21

    Note the gap between prices paid and prices received in 2009 just before the 2009 fall. A similar cash flow squeeze seems to be strengthening.

    Policy Makers Are Missing Solid Economic Landmarks

    To pilot a ship along a coast and into a safe harbor, a captain needs recognizable landmarks and beacons. Our policy – captains are in a twilight zone fog. Many key economic indicators do not actually measure what policymakers tell us they do. Stock earnings per share reports are financially manipulated by stock buybacks misleading investors as to the actual earnings per share compared to pre-buybacks. The Fed holds interest rates artificially low with the resulting liquidity injections distorting debt markets. Unemployment rates are not accurate when the Bureau of Labor Statistics shows a rate of 6.7%. But, according to state unemployment reports, 19M workers are on continuing unemployment. Thus, the unemployment rate is more like 12.6%.

    The Fed's inflation consumer price index figures exclude 'volatile energy and food prices, which are expenses consumers experience every day. Since the federal government in 1999 changed to a 'consumer lifestyle buying pattern' approach rather than a standard price comparison, inflation has consistently been under-reported. In 1998 the Bureau of Labor Statistics shifted to an 'owner equivalent rental cost' for homeownership. Using the Case-Shiller Home Price Index since 2019 shows the BLS OER-based approach understates CPI dramatically at 1.0% vs. the Case-Shiller model at 2.5%.

    Industry Research On The Real Economy Is More Accurate

    Chapwood Investments publishes a biannual index including 50 cities comparing consumer goods and services prices on 500 consumer items. Their analysis showed the top ten cities in the US with an average inflation rate of 10% in the second half of 2020. A marketing industry research firm compared price changes for 220 often purchased consumer products at Target and Walmart comparing 2018 to 2019 prices on average, the increase was 5 – 6% for both stores. Corporate marketing executives must have accurate information to make reasonable sales forecasts and plans for investment. Our policy leaders can learn from their example.

    The Way Out of the Twilight Zone

    To leave the Twilight Zone grip requires policymakers to recognize financial and real economy fundamentals. They need to drop the no economic pain utopia model. Policymakers need to get real with their statistics and tracking systems to base their policy initiatives on the real economy. Analysts need to use fundamentals for stock market and financial valuations. The Fed should stop rescuing failing hedge funds, zombie companies and end the addiction to low-cost debt. Washington can start paying for new spending programs with increased focused taxes, ending government waste and lower spending. The focus needs to be on a monetary and fiscal set of policies sustaining entrepreneurship, hard work, and allowing the economic consequences of business failure to run their course.

    To avoid the inevitable market crash, these programs need to be phased in over several years to allow for investors, executives, and consumers to make adjustments to their portfolios. It is as if economic leaders have sent investors up an infinite 'wall of price' like a free solo climber, with no safety rope leaving them to the inevitable fate of fundamental economic gravity .


    takeaction 3 hours ago (Edited)

    I stopped right here...

    " who lost 540,000 loved ones "

    People die every day...and it is NOT from the scamdemic...

    In regards to this economy...with Biden being propped up, the printing will not stop...

    So watch asset prices continue to explode. Don't short anything right now.

    There will be a time to short...but IMO not now..you will get crushed.

    mrktwtch2 PREMIUM 3 hours ago remove link

    I live in a small suburb north of Chicago in the county of mchery il we r 12 miles south of the Wisconsin border..my wife paid 139k for her town home in 2002 it went down to 78k during the crash but now its worth 195..since the joggers burned the cities down everyone is trying to move out of the city..strange times indeed

    USAllDay 3 hours ago

    The stupidity is just getting started. Yield curve control, price fixing, never ending eviction and foreclosure moratorium extensions, constant stimulus for fat alcoholic/meth addicted "single mothers". The collapse will be beautiful. Nothing this dirty should exist.

    SMC 27 minutes ago

    The thing we can do is enjoy every day to the fullest and not help them peddle their idiocy and fear.

    If we are right, they are destroying themselves.

    Mathematics, Physics and Chemistry may be "*-ist" but they combined with staying in shape, focus and dedication are key to our survival.

    Prepare. Learn. Train. Prevail.

    [Apr 02, 2021] Higher Interest Rates Won't Kill the Bull Market, but This Could by Al Root

    Stocks are essentially traded as private fiat currencies, supported only by market sentiment . So issuing a new stock usually drives them down.
    Apr 02, 2021 | www.barrons.com

    There's a saying that bull markets climb a wall of worry.

    Investors are always looking for something to go wrong when things are going right. With stocks at or near all-time highs, investors have begun to fret over higher interest rates and their potentially negative impact on economic growth, coming inflation and what higher rates portend for stock-market valuations.

    Higher rates, however, probably won't kill the bull market. Corporate management teams might do that all on their own. New stock sales by companies already flush with cash is sending a coded message to investors that things might be as good as they get.

    Interest rates are always a concern for the market and the overall economy. Higher interest rates make everything more expensive including home mortgages and car payments. It also makes it harder to start and grow businesses.

    For the market, higher interest rates tend to depress price-to-earnings multiples. The reason is, essentially, math. If investors can make more interest on their bonds, they demand more return from stocks. Higher returns tomorrow means paying less for stocks today.

    Here's the thing. Inflation isn't running wild. The yield on the 10-year Treasury bond is about 1.7%, up from recent lows, but lower than where yields finished 2019. That isn't a high enough rate to choke off economic growth. At 3% and higher, the oxygen intake could start to get cut off.

    Inflation expectations aren't out of line with history either. Inflation expectations can be measured by the difference in traditional government bonds yields and the yield on government inflation protected securities. Essentially, the face value of an inflation protected bond goes up by the consumer price index. The difference in yield between the traditional bond and the inflation protected bond is the level of inflation required to make an investor the same return on both.

    Today, the 10-year yield is at roughly 1.7%. The 10-year inflation protected yield is negative 0.7%. So inflation has to average about 2.4% for both bond holders to get the same return.

    Investors should watch out for inflation, but they should be more concerned with recent stock sales by companies flush with cash.

    [Apr 02, 2021] Rising yields and S P500 ar 4000

    Apr 02, 2021 | www.wsj.com

    While a robust domestic recovery is great news for corporate profits, it might not be for stock prices if bond yields keep climbing -- especially technology stocks, which have proven to be especially sensitive to yields recently. Back in December when vaccine and stimulus plans were known, economists thought that the 10 year note's yield would be 1.08% in June. It jumped to 1.72% on Friday in response to the jobs report. Some forecasters see it topping 2% this year for the first time since the summer of 2019.

    That would be no yield of dreams for stock bulls.

    [Apr 02, 2021] But let's be reasonable - how is it possible to have 700K - 800K initial jobless claims every week and create nearly a million new jobs?

    Highly recommended!
    If we are to believe authorities the USA. added 916K jobs in March, and the official unemployment rate is at 6% (note the word official; the current official U6 unemployment rate as of March 2021 is 10.70%; so the real number is probably much higher than 10%)
    Fudging data became as prominent as it was in the USSR. The neoliberal empire can't afford objective stats.
    Notable quotes:
    "... monthly data is collected over a brief timeframe - just a few days - and that the calculations are seasonally adjusted. ..."
    "... Yes, at least half the sheep population think they are real. It's insane how dumb people are today. ..."
    Apr 02, 2021 | www.zerohedge.com

    variousmarkets

    I spent the last 2 weeks digging into the numbers - especially timing of the surveys and data collection. I get the fact that weekly claims don't reflect new hires. I also realize that monthly data is collected over a brief timeframe - just a few days - and that the calculations are seasonally adjusted.

    But let's be reasonable - how is it possible to have 700K - 800K initial jobless claims every week and create nearly a million new jobs? Does anyone really believe any of these numbers?

    Globalistsaretrash

    Yes, at least half the sheep population think they are real. It's insane how dumb people are today.

    [Apr 02, 2021] Who's Hiring And Who's Firing

    Apr 02, 2021 | www.zerohedge.com

    Not only was the March payrolls report a blockbuster, golidlocks number, much higher than expected but not too high to spark immediate reflation/hike fears thanks to subdued wage inflation, job growth in March was also widespread unlike February, where 75% of all new jobs were waiters and bartenders . By contrast, in March the largest gains occurring across most industries with the bulk taking place in leisure and hospitality, public and private education, and construction.

    Here is a full breakdown:

    It's hardly a surprise that with the US reopening, the one industry seeing the biggest hiring remains leisure and hospitality where jobs rose by 280,000, as pandemic-related restrictions eased in many parts of the country, with nearly two-thirds of the increase in "food services and drinking places", i.e., waiters and bartenders, which added +176,000 jobs in March.

    And another notable change was in the total number of government workers, which surged by 136K in March, reversing the 90K drop in February, as a result of 49.6K state education workers and 76K local government education workers added thanks to the reopening of schools around the country.

    Here is a visual breakdown of all the March job changes:

    Finally, courtesy of Bloomberg , below are the industries with the highest and lowest rates of employment growth for the most recent month.


    7 play_arrow


    Jack Offelday 1 hour ago

    The "V" recovery. Where Food Service jobs are the new "Golden Age".

    Creamaster 47 minutes ago (Edited)

    My wife is a nurse in an outpatient office under a large hospital umbrella here. Normally these outpatient spots go within days to a week.

    Currently they have 2 openings they have been trying to fill for a few months now. Combine that with the fact my wife got 3 years worth of raises in a single shot, recently and out of the blue for no reason, tells me the hospitla is really screwed trying to fill nursing spots.

    After this pandemic crap, it has likely scared alot of people away from entering healthcare, and if a nurse was on the fence about retirement , likely decided to call it quits after all this BS.

    newworldorder 45 minutes ago

    There are an estimated, 30 million illegals currently in the USA waiting legalization.

    WHEN legalization happens, they will bring into the USA (by historical averages,) another 60 to 90 million of their family members in 10 years.

    And all of them US Minority workers, by current US Diversity Laws, - same as all Black Americans.

    [Apr 02, 2021] The Twilight-Zone Economy Alternate-Reality Equity Markets - ZeroHedge

    Highly recommended!
    Apr 02, 2021 | www.zerohedge.com

    The Twilight-Zone Economy & Alternate-Reality Equity Markets BY TYLER DURDEN FRIDAY, APR 02, 2021 - 09:00 AM

    Authored by Patrick Hill via RealInvestmentAdvice.com,

    "It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science (reality) and superstition (bubbles), and it lies between the pit of man's fears and the summit of his knowledge (fundamentals). This is the dimension of (economic) imagination. It is an area which we call The Twilight Zone."

    - Rod Serling, introduction to the TV series, 1959 [our comments in ( )]

    Our economy has entered the twilight zone. Today, economic leaders base policies on a hoped-for utopia with bubbles called 'growing markets' and greed termed 'good valuations'. The twilight zone economy is a place where fundamentals have disappeared. It is a utopian world of no moral hazard for business, financial or economic mistakes. In the last year, the Federal Reserve has injected over $4.1T into the banking, hedge fund, Wall Street complex of the financial elite. Vast injections of dollars have sent stock valuations to record highs. Yet, the pandemic-driven economy is real for 19M Americans out of work, others who lost 540,000 loved ones, and millions carrying housing debt due to missed rent and house payments.

    Policymakers Disconnected From the Real Economy

    Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates surge to 3 – 4 % by year end. Does all this monetary and fiscal stimulus result in a healthy solid economy or the most catastrophic inflationary bubble in modern times ? Our post identifies the dimensions of the Twilight Zone Economy.

    Astronomical Public Debt Drags Growth

    The country is drowning in low-interest debt. But, this liquidity 'soma' drug is putting investors to sleep, thinking everything will be ok. Now, public debt is at levels not seen since WWII and projected to go to 200% of GDP by 2051.

    Source: CBO, The Daily Shot – 3/15/21

    During WWII, debt supported production capacity for building weapons, planes, and infrastructure to support the war effort. When the war was over, the US was the only major economy intact, leading to a high growth productive economy. The investment in productive industries increased the standard of living for most Americans.

    Sources: Blackrock, IMF, OECD, The Daily Shot – 3/15/21

    Are the present monetary debt and fiscal stimulus programs of relief payments resulting in productive investment? This chart, by Lance Roberts, shows how increasing public debt has resulted in a continuing decline in real economic growth.

    Source: RIA, Lance Roberts, 3/17/21

    Public debt not used for solid investments in infrastructure, basic research for innovation, or productivity has resulted in an ever-growing debt level to achieve a continuing decline in economic growth. This cycle of low-cost ballooning debt to finance debt service and transfer payments will likely result in economic stagnation or worse.

    Negative Yielding Debt Triggers Speculation

    Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader speculation in Bitcoin and other cryptocurrencies.

    Sources: Daily Feather, Bloomberg – 3/22/21

    Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in value at some date in the near future.

    Equity Markets Are In An Alternate Reality

    Why is a firm like Tesla valued at the same level as the next six largest car companies or the oil industry's total market capitalization? Isn't Tesla's valuation in the economic twilight zone? Analysts value Tesla at $1M per vehicle produced versus GM at $5000 per vehicle. While VW is building six battery factories in the EU, and vows by 2025 to produce over 1.2M EVs in 2022, matching Tesla's total output. VW has now taken over the dominant market share in Europe and is opening EV plants in Asia and North America.

    There are 15 major car manufacturers, including GM, Ford, Toyota, Honda, Nissan, BMW, Mercedes, investing billions into EV production plants and battery facilities. Tesla may have a first-mover advantage in the EV market, but it may wind up like Yahoo, losing out to Google in the internet search sector. The following chart shows S&P valuations at Dotcom Crash levels in 2000.

    Source: Topdown Charts, Refinitiv Datastream. – 3/17/21

    The following chart shows the record valuation of stocks as a percentage of GDP back to 1952!

    Sources: Charles Schwab, Bloomberg – 12/31/20

    Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals don't support this extreme valuation case.

    This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales growth of 42% and GDP growth at 22% since 2007.

    Source: Real Investment Advisors – 3/20/21

    Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time will come when the zero-interest economic drug won't work anymore, and withdrawal sets in spiraling into a market crash.

    Bubbles Bubbles Everywhere

    Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie's just sold a digital work of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just $100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is authentic. Beepi knows he's riding a soaring market, observing, 'Absolutely it's a bubble, to be honest."

    An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace, StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey's first tweet sold for $2.9M. Venture capitalists Marc Andreessen and Ben Horowitz note what motivates mania buyers at a collectible forum:

    Andreessen: "A big part of the entire point of life is aesthetics. The way that we live and the design of things around us and artistic creativity."

    Horowitz: "It's a feeling. You're buying a feeling. And what's that worth?"

    Writer Ben Carlson notes in his analysis of bubble markets that:

    "We're emotional. We lead with our feelings. We're superstitious."

    Superstition is a characteristic of the Twilight Zone Economy.

    Core City Life Is Changed Forever

    Many think life will go back to the way things were in February 2020. We disagree. Life has changed forever in America. The lack of commuters changes core city life where they are the heartbeat of neighborhoods surrounded by office towers. Millions of small businesses and restaurants dependent on commuter patronage are scrambling to survive. When they had the opportunity, millions of workers worked from home and found they could perform successfully remotely. Hundreds of thousands of workers left cities to move to another less costly city or region. Some analysts think 99% of commuters will come back to city offices.

    Yet, surveys show that from 20 – 25 % of professionals in dense city centers like New York and San Francisco want to work from home at least 3 – 4 days a week or work from home full time. Based on remote worker management experience companies are restructuring their reporting hierarchy. Global corporations to startups are moving to a distributed worker organization, further flattening the reporting structure for improved performance and business agility.

    The lack of office workers leaves 20% of offices in core cities vacant, putting banks and commercial office space landlords at risk for billions of dollars in lease income. Plus, small businesses in these core cities have lost 50- 60% of their sales. Business owners hold billions of dollars in lease debt which must be paid off even after 80% of commuters return. Innovative new small businesses and restaurants will emerge to support these commuters. Plus, new attractions and business models will bring back visitors crucial for the leisure and hospitality sectors.

    Millions of Workers Are Long Term Unemployed

    About 19M workers collect continuing unemployment, of which 39.5% have been unemployed over 27 weeks. These permanently unemployed workers will have a difficult time finding their next job. While Indeed reports that job openings are up 3.7 % from January 2020, millions of workers are still unemployed. Many of these workers do not have the job skills to be hired for many new manufacturing and services jobs. Bank of America completed an analysis of unemployment pre – COVID to the trajectory of employment post COVID showing a lingering decline in the labor force.

    Sources: Bank of America, CBO, Zerohedge, Real Investment Advisors – 2/12/21

    The BofA analysis shows a permanent loss of employment in labor force size in Phase 3 of the recovery. The reality of the economy that workers and consumers will likely live in is an economy of debt dragging economic growth with poor job prospects. Job prospects for millions of workers will be limited by their lack of marketable skills. A major workforce segment faces a long financial recovery time from either the loss of their business or job. Lack of consumer spending by the permanently unemployed will slow the recovery.

    Corporate Executives Join In the Party

    In the 1950s, CEO pay to average worker pay was 50 times. Today, CEO pay is 350 times average worker pay, with Wall Street applauding stock buybacks totaling 1.4T in 2019. While buybacks fell to $450B in 2020, Bloomberg forecasts stock buybacks to resume $150B per quarter in 2021. Stock buybacks create overvalued markets. Ned Davis Research estimates the SPX as overvalued by at least 20% due to stock buybacks distorting prices in 2019. A company gooses prices by using cash to purchase shares in the open market, thereby reducing the stock pool for public investors. If demand stays the same, prices go up.

    Yet, the company has not increased in substantive value. Many executives used low-cost debt to make stock purchases that saddle the company with major debt obligations. Executives must refinance these debt obligation or pay them off in the near future. In January 2020, corporate debt hit a 30-year record 49% of GDP, while interest rates were low. Fitch forecasts a jump in corporate loan defaults in 2021 to 8 – 9% from a 2020 default range of 5 – 6%.

    Sources: Fitch Ratings, Vuk Vukovic – 9/22/20

    A significant default storm looms in the coming years as interest rates rise.

    Another cash flow squeeze is developing in profit margins. Prices paid for goods and services are increasing at a rate far faster than corporations can raise end customer prices in the following chart.

    Sources: Mizuho Securities, The Federal Reserve Bank of Philadelphia, The Daily Shot – 3/19/21

    Note the gap between prices paid and prices received in 2009 just before the 2009 fall. A similar cash flow squeeze seems to be strengthening.

    Policy Makers Are Missing Solid Economic Landmarks

    To pilot a ship along a coast and into a safe harbor, a captain needs recognizable landmarks and beacons. Our policy – captains are in a twilight zone fog. Many key economic indicators do not actually measure what policymakers tell us they do. Stock earnings per share reports are financially manipulated by stock buybacks misleading investors as to the actual earnings per share compared to pre-buybacks. The Fed holds interest rates artificially low with the resulting liquidity injections distorting debt markets. Unemployment rates are not accurate when the Bureau of Labor Statistics shows a rate of 6.7%. But, according to state unemployment reports, 19M workers are on continuing unemployment. Thus, the unemployment rate is more like 12.6%.

    The Fed's inflation consumer price index figures exclude 'volatile energy and food prices, which are expenses consumers experience every day. Since the federal government in 1999 changed to a 'consumer lifestyle buying pattern' approach rather than a standard price comparison, inflation has consistently been under-reported. In 1998 the Bureau of Labor Statistics shifted to an 'owner equivalent rental cost' for homeownership. Using the Case-Shiller Home Price Index since 2019 shows the BLS OER-based approach understates CPI dramatically at 1.0% vs. the Case-Shiller model at 2.5%.

    Industry Research On The Real Economy Is More Accurate

    Chapwood Investments publishes a biannual index including 50 cities comparing consumer goods and services prices on 500 consumer items. Their analysis showed the top ten cities in the US with an average inflation rate of 10% in the second half of 2020. A marketing industry research firm compared price changes for 220 often purchased consumer products at Target and Walmart comparing 2018 to 2019 prices on average, the increase was 5 – 6% for both stores. Corporate marketing executives must have accurate information to make reasonable sales forecasts and plans for investment. Our policy leaders can learn from their example.

    The Way Out of the Twilight Zone

    To leave the Twilight Zone grip requires policymakers to recognize financial and real economy fundamentals. They need to drop the no economic pain utopia model. Policymakers need to get real with their statistics and tracking systems to base their policy initiatives on the real economy. Analysts need to use fundamentals for stock market and financial valuations. The Fed should stop rescuing failing hedge funds, zombie companies and end the addiction to low-cost debt. Washington can start paying for new spending programs with increased focused taxes, ending government waste and lower spending. The focus needs to be on a monetary and fiscal set of policies sustaining entrepreneurship, hard work, and allowing the economic consequences of business failure to run their course.

    To avoid the inevitable market crash, these programs need to be phased in over several years to allow for investors, executives, and consumers to make adjustments to their portfolios. It is as if economic leaders have sent investors up an infinite 'wall of price' like a free solo climber, with no safety rope leaving them to the inevitable fate of fundamental economic gravity .


    takeaction 3 hours ago (Edited)

    I stopped right here...

    " who lost 540,000 loved ones "

    People die every day...and it is NOT from the scamdemic...

    In regards to this economy...with Biden being propped up, the printing will not stop...

    So watch asset prices continue to explode. Don't short anything right now.

    There will be a time to short...but IMO not now..you will get crushed.

    mrktwtch2 PREMIUM 3 hours ago remove link

    I live in a small suburb north of Chicago in the county of mchery il we r 12 miles south of the Wisconsin border..my wife paid 139k for her town home in 2002 it went down to 78k during the crash but now its worth 195..since the joggers burned the cities down everyone is trying to move out of the city..strange times indeed

    USAllDay 3 hours ago

    The stupidity is just getting started. Yield curve control, price fixing, never ending eviction and foreclosure moratorium extensions, constant stimulus for fat alcoholic/meth addicted "single mothers". The collapse will be beautiful. Nothing this dirty should exist.

    SMC 27 minutes ago

    The thing we can do is enjoy every day to the fullest and not help them peddle their idiocy and fear.

    If we are right, they are destroying themselves.

    Mathematics, Physics and Chemistry may be "*-ist" but they combined with staying in shape, focus and dedication are key to our survival.

    Prepare. Learn. Train. Prevail.

    [Apr 02, 2021] 'The world will never be the same-' Coursera CEO on learning post pandemic

    Apr 02, 2021 | finance.yahoo.com

    'The world will never be the same:' Coursera CEO on learning post pandemic Reggie Wade · Writer Fri, April 2, 2021, 12:43 PM More content below More content below ^IXIC +1.76% COUR +1.73%

    The online learning platform Coursera ( COUR ) saw a big pop following its Nasdaq ( ^IXIC ) debut this week. Coursera revenue was up 60% last year, and CEO Jeff Maggioncalda predicts online learning is here to stay even after the pandemic eventually winds down.

    "The world needs more access to high-quality learning. ... There will be a new normal that emerges. We don't know what that will look like either in terms of how we work remotely versus in an office and how we will learn online and also on campus. But it's pretty clear that the world will never be the same again and that online learning will be a big part of it," he told Yahoo Finance Live.

    "So we really think about the long term, all the structural reasons why people will need to learn continuously through their lives to learn new skills as the world goes more digital," he said.

    Dec 27, 2019 Mountain View / CA / USA - Coursera headquarters in Silicon Valley; Coursera is an American online learning platform that offers massive open online courses, specializations, and degrees

    One area that Coursera is looking to expand is its degree and certification programs. Maggioncalda tells Yahoo Finance that the company can use technology to shake up traditional degree offerings.

    "What we've seen for centuries is that college degrees are the most meaningful, recognized learning credential that there is, and the credential type hasn't really innovated that much over the last period of history. We think with technology, the ability to create not only degrees but other types of credentials," he said.

    "It will be a portfolio of credentials. We believe that will serve lifelong learning needs in a world where people need to keep learning, even as they're working," he added.

    [Apr 01, 2021] Amazon, Stock Compensation Equity Valuation

    Apr 01, 2021 | www.zerohedge.com

    Submitted by Jim Rocchio of Kailash Concepts

    Bloomberg News recently published an article, Amazon Fights Union Drive With Fact-Free Bombast , discussing Amazon's alleged use of misinformation to prevent employees from unionizing. In the same manner Kailash recused itself from having a "bull" or "bear" thesis on Bitcoin, we will recuse ourselves from any discussion of unions. What we would like to draw our readers' attention to however is the method by which Amazon pays many senior executives. In the Bloomberg article it noted that the former head of Amazon's logistics business was awarded stock compensation worth $160 million dollars.

    In the wake of the scandals that occurred during the financially profligate dot.com bubble, rule FAS123 was passed requiring stock compensation be expensed in a company's income statement. In papers written both in the professional and academic worlds, Kailash has used Amazon as an example of how cash flow accounting contradicts the intent of FAS123. The Kailash note found here showed how Amazon's well explained and GAAP compliant use of lease and stock comp accounting could potentially cause confusion among analysts. Kailash's academic expert on stock compensation put his work, Stock Compensation Expense, Cash Flows and Inflated Valuations through peer review. His work made it painfully clear that this GAAP compliant accounting method diminished the information value of traditional calculations of free cash flows.


    [Apr 01, 2021] Some investors or managers are losing sight of reality and sustainable value-at-risk levels.

    Apr 01, 2021 | www.zerohedge.com

    Authored by Vassilis Karamanis, FX and rates strategist who writes for Bloomberg

    Albert Einstein is widely credited as saying that insanity is doing the same thing over and over again and expecting a different result. The phrase keeps coming to my mind as I read story after story on the Archegos Capital Management saga and look at a series of charts on the euro. At first, the two might seem unrelated, but they both hold relevant lessons about market complacency.

    The story reads as expected -- or feared: The firm, little known outside finance circles, had amassed tens of billions of dollars in stocks bets, much of it using opaque derivatives and borrowed funds, including some giant bets on a small group of equities. And then it all went awry.

    The acronym LTCM doesn't mean much, it seems, to some market participants. Common sense either. Maybe Margin Call, J.C. Chandor's 2011 movie, should be trending in streaming services, serving as a healthy reminder.

    Those of us who still remember the spectacular collapse of the U.S. hedge fund Long-Term Capital Management in the late 1990s though are probably asking ourselves how this happened again.

    Was it a regulatory issue, a market inherently at fault or just human nature? Will the story simply be forgotten again, especially given the few signs of lasting damage on markets? Or maybe we are all grown ups now and can move on quietly and in peace instead of obsessing over every set back. At least until the next tail risk comes knocking on our door, that is.

    So what does the euro have to do with any of this?

    It's not that there is a secret correlation with stocks that unveiled itself amid the Archegos turmoil. But I'd argue that there's a link. And it's that some investors or managers are losing sight of reality and sustainable value-at-risk levels.

    The common currency hit its lowest level in nearly five months today. Fair enough, right? The yield on 10-year U.S. notes reached its highest level since January 2020 Tuesday, and is now just a whisker away from halving its decline since 2018, so it makes sense for the dollar to keep applying pressure on euro bulls.


    Darth Vader 5 hours ago

    I think it's unfair to mix Albert Einstein up with these grubby little thieves.

    The game is rigged and they're picking winners and losers. Best not to play their game.

    Misesmissesme 5 hours ago

    I think these fit better:

    Only two things are infinite, the universe and human stupidity, and I'm not sure about the former. A Einstein

    The difference between genius and stupidity is that genius has its limits. A Einstein

    OrazioGentile 5 hours ago

    Still waiting for a movie on the collapse of Bear Stearns or Lehmann- fact I'm sure will be loads more entertaining than fiction!

    [Apr 01, 2021] Archegos Blowup Puts Spotlight on Gaps in Swap Regulation

    Apr 01, 2021 | www.wsj.com

    Former regulators and financial-reform advocates say one rule change, in particular, could have prevented the debacle : requiring greater disclosures of the bets that investors such as Archegos place on companies using swaps.

    [Apr 01, 2021] Amazon, Stock Compensation Equity Valuation

    Apr 01, 2021 | www.zerohedge.com

    Submitted by Jim Rocchio of Kailash Concepts

    Bloomberg News recently published an article, Amazon Fights Union Drive With Fact-Free Bombast , discussing Amazon's alleged use of misinformation to prevent employees from unionizing. In the same manner Kailash recused itself from having a "bull" or "bear" thesis on Bitcoin, we will recuse ourselves from any discussion of unions. What we would like to draw our readers' attention to however is the method by which Amazon pays many senior executives. In the Bloomberg article it noted that the former head of Amazon's logistics business was awarded stock compensation worth $160 million dollars.

    In the wake of the scandals that occurred during the financially profligate dot.com bubble, rule FAS123 was passed requiring stock compensation be expensed in a company's income statement. In papers written both in the professional and academic worlds, Kailash has used Amazon as an example of how cash flow accounting contradicts the intent of FAS123. The Kailash note found here showed how Amazon's well explained and GAAP compliant use of lease and stock comp accounting could potentially cause confusion among analysts. Kailash's academic expert on stock compensation put his work, Stock Compensation Expense, Cash Flows and Inflated Valuations through peer review. His work made it painfully clear that this GAAP compliant accounting method diminished the information value of traditional calculations of free cash flows.


    [Apr 01, 2021] There Are Still Over 18 Million Americans Getting Government Jobless Benefits

    Apr 01, 2021 | www.zerohedge.com

    After mixed messages in last week's claims data (low initial claims, record high pandemic continuing claims), analysts expected a further fall in first time jobless benefit seekers but were disappointed as claims rose from 684k the previous week to 719k last week.

    ... Total return swaps are brokered by Wall Street banks. They provide investors with exposure to the profits or losses of stocks or other assets, without the investor actually holding the underlying shares. Archegos's strategy backfired in recent weeks after ViacomCBS and other stocks sold off. Mr. Hwang's firm was unable to meet its obligations to its banking partners, which in turn liquidated large chunks of stock they had amassed to underpin the trades. Among the banks now facing steep losses are Credit Suisse Group AG and Nomura Holdings Inc.

    [Apr 01, 2021] Archegos's Collapse Is a Wakeup Call for Regulators

    Apr 01, 2021 | www.wsj.com

    ...history shows that one messy unwind can easily spread. The U.S. Office of Financial Research finds that the ten largest hedge funds were leveraged far more heavily than the next 40 largest funds, as of June. And many family offices may not be counted in these statistics at all, which mostly rely on disclosure forms they are able to avoid.

    There are some obvious responses for regulators, such as mandating disclosure of the total return swaps that allowed Archegos to build big positions out of the public eye. But there are no easy answers to the wider challenge of overseeing leverage within the broadest financial complex when debt is almost free.

    The system has held up under the latest strain, but this isn't a victory. Archegos means one who leads the way. Regulators must do what they can to ensure as few as possible follow.

    Write to Rochelle Toplensky at [email protected] and Telis Demos at [email protected]

    [Apr 01, 2021] Deutsche Bank Dodged Archegos Hit With Quick $4 Billion Sale - Bloomberg

    Apr 01, 2021 | www.bloomberg.com

    Swiss rival Credit Suisse expects a hit in the billions of dollars from Archegos, people with knowledge of the matter have said, while Nomura Holdings Inc. has signaled it may lose as much as $2 billion. Analysts at JPMorgan Chase & Co. estimate the Archegos blowup may cause as much as $10 billion of combined losses for banks.

    David Herro, chief investment officer of Harris Associates -- one of Credit Suisse's biggest shareholders -- said on Bloomberg Television on Wednesday that the Archegos incident was a "wake-up call" for Credit Suisse and should lead to sweeping changes to its culture and oversight practices.

    Shares of Credit Suisse tumbled 21% this week on concern over the size of its potential Archegos hit. Deutsche Bank is down 2.9%.

    [Apr 01, 2021] Riskiest U.S. Junk Bonds Are Outperforming Just About Everything - Bloomberg

    Apr 01, 2021 | www.bloomberg.com

    ...High-yield bonds rated in the CCC tier, usually the lowest-graded bonds that trade, gained 3.58% year-to-date, according to Bloomberg Barclays index total return data. They performed better than leveraged loans, which saw returns of 1.78%, and high-grade bonds, which posted a 4.65% loss. They outperformed mortgage bonds and Treasuries too.

    The higher coupons that the securities pay can offer insulation against the sting of rising yields. CCC notes average coupons of 7.7%, compared with 5.9% for high yield debt overall and 3.7% for investment-grade corporate notes, according to Bloomberg Barclays index data.

    "The lower quality trade still has some legs," said Scott Kimball, co-head of U.S. fixed income at BMO Global Asset Management. "Investors typically look to high-yield securities, particularly CCCs, when yields are on the rise. Now, we see record positive revisions for U.S. growth by economists being further boosted by record fiscal stimulus expectations."

    [Mar 31, 2021] Looks like Goldman and Morgan managed to sell thier shares in Archegos meltdown first as usual pushing other clients under the bus: Billions in Secret Derivatives at Center of Archegos Blowup

    Casino capitalism is the fertile ground for the most sleazy types of speculators. The stock market has become a giant slot machine financed by 401K lemmings. The marks here are 401K investors.
    Excessive leverage is a immanent feature of the pre-collapse stage of Minsky cycle. So those who argue that we are close to another crash get some additional confirmation due to this event. The Masters of the Universe rediscovered the hidden areas of huge risk, and like in 2008 are afraid but can't and do not want to anything.
    TBTF such as Goldman and Morgan aid the most sleazy types as they bring outsized profits for them. So this a catch 22 as Goldman and other TBFT controls SEC not the other way around.
    It would be prudent to view banksters as a special type of mafia and treat accordingly and prohibit for them serving in government. But this is impossible under neoliberal as financial oligarchy has all political power.
    The question is: Is there another fund that's larger, that's more leveraged with the same characteristics that could prove to be a more systemic event? That's the major concern right now." Wall Street's hottest trades such as pure-tech plays and high-flying tech/media like the ones bet on by Hwang -- could be unwound. The Hwang blowup wakes up investors to the realization that many parts of the market are overvalued and it's time to sell -- and quickly as yields are going up. For the the FAANGS, the Tesla's out there -- the fundamentals don't support the stock. So it would be logical to a large correction.
    Notable quotes:
    "... The idea that one firm can quietly amass outsized positions through the use of derivatives could set off another wave of criticism directed against loosely regulated firms that have the power to destabilize markets. ..."
    Mar 31, 2021 | finance.yahoo.com

    Much of the leverage used by Hwang's Archegos Capital Management was provided by banks including Nomura Holdings Inc. and Credit Suisse Group AG through swaps and so-called contracts-for-difference, according to people with direct knowledge of the deals. It means Archegos may never actually have owned most of the underlying securities -- if any at all.

    While investors who own a stake of more than 5% in a U.S.-listed company usually have to disclose their holdings and subsequent transactions, that's not the case with positions built through the type of derivatives apparently used by Archegos. The products, which are transacted off exchanges, allow managers like Hwang to amass exposure to publicly-traded companies without having to declare it.

    The swift unwinding of Archegos has reverberated across the globe, after banks such as Goldman Sachs Group Inc. and Morgan Stanley forced Hwang's firm to sell billions of dollars in investments accumulated through highly leveraged bets. The selloff roiled stocks from Baidu Inc. to ViacomCBS Inc., and prompted Nomura and Credit Suisse to disclose that they face potentially significant losses on their exposure.

    One reason for the widening fallout is the borrowed funds that investors use to magnify their bets: a margin call occurs when the market goes against a large, leveraged position, forcing the hedge fund to deposit more cash or securities with its broker to cover any losses. Archegos was probably required to deposit only a small percentage of the total value of trades.

    The chain of events set off by this massive unwinding is yet another reminder of the role that hedge funds play in the global capital markets. A hedge fund short squeeze during a Reddit-fueled frenzy for Gamestop Corp. and other shares earlier this year spurred a $6 billion loss for Gabe Plotkin's Melvin Capital and sparked scrutiny from U.S. regulators and politicians.


    The idea that one firm can quietly amass outsized positions through the use of derivatives could set off another wave of criticism directed against loosely regulated firms that have the power to destabilize markets.


    Bob 2 days ago This is another major reminder that the stock market is not as rational as we want to believe. A small group of very large, leveraged funds can have far more impact on the market than dozens or hundreds of well thought out and researched programs. Sigh. Take your lumps and move on. Hasso 2 days ago 2008 - Hwang's Tiger Asia suffered losses from the Volkswagen short, 2012 - Hwang's Tiger Asia paid $44M to settle insider trading charges, banned 2014- Hong Kong fined him $5.3M & banned him for four years. 2021 - And here we are again.
    Tyrone 2 days ago Gee, Credit Suisse involved in sleezy investments. Again. I'm shocked, just shocked!
    Manohar 2 days ago Banks haven't learnt anything yet...you know why? Because its other people's money and the no one gets prosecuted when they are caught with hand in the cookie jar.
    killer klown 2 days ago it's a sign that the market and it's regulators have learned nothing.........to even pretend that a penny difference in assumed earnings versus actual earnings using the GAAP accounting (which itself says it's not exact but generally accepted accounting principles)moves a stock is in itself a joke, this situation of a BIG BLACK BOX calls for the complete dismantle of the derivatives market which was created to lay off risk. Bill Hawng should be FLAT Broke his possesions seized, The board of Credit Suisse and Nomura et all should be unemployed as of 8:31 this morning. But they won't and it's only going to happen again and again.
    Amvet 2 days ago Market manipulators have a free rein in the USA. Are politicians also involved? Reply 16 3 George 2 days ago Just amazing how some of the world's most sleazy characters have access to cosmic sums of money and remain under the radar and legal(???). Then nothing seems to happen except that loads of other folk get burned while they move on to the next bright idea. Reply 13 1 Rick 2 days ago So clearly limiting those who can purchase these to exclude amateur players has not been successful. Recklessness is not limited to amateurs. Mr. H. 2 days ago In 2008 high finance was playing very high risk games with clients money at the undefined edge between legal and illegal. A bunch of firms went away along with many billions of dollars because a bunch of players were playing CYA. They came up with the term "too big to fail" when they were picking winners and losers. "too big to fail" is is fetid bovine excrement. The SEC, that is the administrative government, was not doing its job! There were many questions about government employee competence to do those jobs. The government should have let the market place pick the winners and losers, then the government should have prosecuted everyone who failed to perform their fiduciary duty and set a major precedent about high risk play with other people's money; keep it legal or go to jail and lose your shirt. That is what should happen this time too! Noone 2 days ago Almost like something that is so dangerous and risky to both the market AND the "investor" that retail traders ARE BANNED from doing it should.. idk.. BE ILLEGAL FOR EVERYONE? Useless SEC. Do your job right.
    Philip 2 days ago Ironic that Hedge Funds are the most unhedged game going.... Dan 1 day ago The managers of these HFs lack morality, they steal from other companies because they believe in their twisted little minds if they set up a system whereby they can trade in dark pools with illegal naked shorting, counterfeit shares and stock manipulation under the radar -- it makes the crime okay. All of this criminality is been done with the aid of supplementary leverage ratio (SLR) If they can manage to bankrupt the company they short with Government SLR they end up paying no tax and pocket the money GME/AMC and more for example.. Bingo the most audacious robbery attempt in the history of the state. Oh boys did they fail, wow what a spectacular failure. Now they have to deleverage destabilizing the entire market. Do these HF managers rank their values differently to the moral code we all live by? Obviously they do! There's no doubt they'll get lots of time to think about their behaviour when they're in the slammer. Each case will have to be evaluated on its own merit at some stage of course. On the face of it, all indications points to a tradeoff that benefits themselves at the disadvantaging of other. Sad for them! I rest my case!
    Jodes 1 day ago The spikes in shares like ROKU, BIDU, SHOP and many more have huge parabolic spikes at the top accounting for the disfunctional market as we were seeing it at the top. They had huge buy orders to artificially spike the prices keep them up and then experts come in after and raise price targets and put a BUY rating on the stock. Then get retail to buy in and then drop them like a rock. Greedy and dispicibale. All probably done for a huge bonus. While retail suffers for their greed.
    Vince 2 days ago More than 100 Trillion (with a T) are moving around the world in Derivatives each and every day., some say closer to 200 Trillion! You figure it our when THAT bubble bursts! Reply 2 1 SniffMopWho 2 days ago Interesting how these guys make millions and billions, just by pressing keys on a keyboard.
    ... 2 days ago More sleaze trying to bring down the market by making risky bets with swaps and derivatives, yet the regulators are caught asleep again. Just more proof of incompetence by Biden and his hired idiots at the SEC.

    [Mar 31, 2021] Us market collapsed in March2020, but nobody has courage to admit that.

    Mar 31, 2021 | www.unz.com

    anon [406] Disclaimer , says:

    [Mar 31, 2021] Citadel and friends have shorted the treasury bond market to oblivion using the repo market.

    Mar 31, 2021 | www.zerohedge.com

    play_arrow


    Crash Overide 2 hours ago (Edited)

    Speaking of treasuries... and Citadel, I thought it was an interesting read.

    TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short & trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE global financial economy is modeled after a fractional reserve system that is beginning to experience THE MOTHER OF ALL MARGIN CALLS.

    THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has officially come full circle.

    tnorth 4 hours ago

    another month of completely rigged 'markets'

    mtl4 4 hours ago remove link

    Music is still playing, make sure you have a chair when it stops

    this_circus_is_no_fun 1 hour ago remove link

    Consider these two points:

    1. Treasuries are claimed to be backed by the "full faith and credit of the United States".
    2. In Q1, Treasuries suffer their biggest loss in 40 years.
    y_arrow
    Kreditanstalt 1 hour ago (Edited)

    I've always wondered why seemingly contradictory and uncorrelated assets and asset classes alternately "soar" and "plunge" on different days, usually in random conjunction with others...

    It seems so counterintuitively...MECHANICAL...or theory-driven, rather than rational "investing".

    Almost like random BETTING

    [Mar 31, 2021] Treasuries Suffer Biggest Loss In Over 40 Years

    Mar 31, 2021 | www.zerohedge.com

    S&P gained over 6% as Treasury's total return fell over 4%...

    Energy stocks soared 30% in Q1 (after rising 26% in Q4) and Tech underwhelmed (but was still higher in Q1...

    brian91145 4 hours ago

    TOTAL FRAUD FUELED BY DEBT!

    [Mar 30, 2021] Guys, guys, we were not lying, the economic boom is coming! In fact, it's more than coming, it's "looming"!

    Mar 30, 2021 | www.moonofalabama.org

    vk , Mar 30 2021 15:46 utc | 12

    Millions might miss out on looming economic boom

    Guys, guys, we were not lying, the economic boom is coming! In fact, it's more than coming, it's "looming"!

    It's just that most of you won't see it or feel it.

    [Mar 30, 2021] SEC role in the Archegos collapse: this time excessive leverage was hidden under family office scheme which means that SEC learned nothing from 2008 and is completely hijacked by banksters

    This is first of all about the corruption of SEC. all this hacking of financil system in not new. So the failure to prevent it is the failure of regulation.
    Mar 30, 2021 | finance.yahoo.com
    One of World's Greatest Hidden Fortunes Is Wiped Out in Days
    More content below More content below VIACA +4.87% GSX +4.75% Katherine Burton and Tom Maloney Tue, March 30, 2021, 8:29 AM More content below More content below VIACA +4.87% GSX +4.75%

    (Bloomberg) --

    From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building one of the world's greatest fortunes.

    Even on Wall Street, few ever noticed him -- until suddenly, everyone did.

    Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time -- a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink.

    Hwang's most recent ascent can be pieced together from stocks dumped by banks in recent days -- ViacomCBS Inc., Discovery Inc. GSX Techedu Inc., Baidu Inc. -- all of which had soared this year, sometimes confounding traders who couldn't fathom why.

    One part of Hwang's portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos's net capital -- essentially Hwang's wealth -- had reached north of $10 billion. And as disposals keep emerging, estimates of his firm's total positions keep climbing: tens of billions, $50 billion, even more than $100 billion.

    It evaporated in mere days.

    "I've never seen anything like this -- how quiet it was, how concentrated, and how fast it disappeared," said Mike Novogratz, a career macro investor and former partner at Goldman Sachs who's been trading since 1994. "This has to be one of the single greatest losses of personal wealth in history."

    Late Monday in New York, Archegos broke days of silence on the episode.

    "This is a challenging time for the family office of Archegos Capital Management, our partners and employees," Karen Kessler, a spokesperson for the firm, said in an emailed statement. "All plans are being discussed as Mr. Hwang and the team determine the best path forward."

    The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so many banks, under the noses of regulators the world over?


    part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a decade ago.

    A disciple of hedge-fund legend Julian Robertson, Sung Kook "Bill" Hwang shuttered Tiger Asia Management and Tiger Asia Partners after settling an SEC civil lawsuit in 2012 accusing them of insider trading and manipulating Chinese banks stocks. Hwang and the firms paid $44 million, and he agreed to be barred from the investment advisory industry.

    He soon opened Archegos -- Greek for "one who leads the way" -- and structured it as a family office.

    Family offices that exclusively manage one fortune are generally exempt from registering as investment advisers with the U.S. Securities and Exchange Commission. So they don't have to disclose their owners, executives or how much they manage -- rules designed to protect outsiders who invest in a fund. That approach makes sense for small family offices, but if they swell to the size of a hedge fund whale they can still pose risks, this time to outsiders in the broader market.

    "This does raise questions about the regulation of family offices once again," said Tyler Gellasch, a former SEC aide who now runs the Healthy Markets trade group. "The question is if it's just friends and family why do we care? The answer is that they can have significant market impacts, and the SEC's regulatory regime even after Dodd-Frank doesn't clearly reflect that."

    Valuable Customer

    Archegos established trading partnerships with firms including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG. For a time after the SEC case, Goldman refused to do business with him on compliance grounds, but relented as rivals profited by meeting his needs.

    The full picture of his holdings is still emerging, and it's not clear what positions derailed, or what hedges he had set up.

    One reason is that Hwang never filed a 13F report of his holdings, which every investment manager holding more than $100 million in U.S. equities must fill out at the end of each quarter. That's because he appears to have structured his trades using total return swaps, essentially putting the positions on the banks' balance sheets. Swaps also enable investors to add a lot of leverage to a portfolio.

    Morgan Stanley and Goldman Sachs, for instance, are listed as the largest holders of GSX Techedu, a Chinese online tutoring company that's been repeatedly targeted by short sellers. Banks may own shares for a variety of reasons that include hedging swap exposures from trades with their customers.

    'Unhappy Investors'

    Goldman increased its position 54% in January, according to regulatory filings. Overall, banks reported holding at least 68% of GSX's outstanding shares, according to a Bloomberg analysis of filings. Banks held at least 40% of IQIYI Inc, a Chinese video entertainment company, and 29% of ViacomCBS -- all of which Archegos had bet on big.

    "I'm sure there are a number of really unhappy investors who have bought those names over the last couple of weeks," and now regret it, Doug Cifu, chief executive officer of electronic-trading firm Virtu Financial Inc., said Monday in an interview on Bloomberg TV. He predicted regulators will examine whether "there should be more transparency and disclosure by a family office."

    Without the need to market his fund to external investors, Hwang's strategies and performance remained secret from the outside world. Even as his fortune swelled, the 50-something kept a low profile. Despite once working for Robertson's Tiger Management, he wasn't well-known on Wall Street or in New York social circles.

    Hwang is a trustee of the Fuller Theology Seminary, and co-founder of the Grace and Mercy Foundation, whose mission is to serve the poor and oppressed. The foundation had assets approaching $500 million at the end of 2018, according to its latest filing.

    "It's not all about the money, you know," he said in a rare interview with a Fuller Institute executive in 2018, in which he spoke about his calling as an investor and his Christian faith. "It's about the long term, and God certainly has a long-term view."

    ... ... ...

    "You have to wonder who else is out there with one of these invisible fortunes," said Novogratz. "The psychology of all that leverage with no risk management, it's almost nihilism."

    [Mar 30, 2021] A Very Surprised JPMorgan Calculates The Damage From The Archegos Collapse

    Mar 30, 2021 | www.zerohedge.com

    BY TYLER DURDEN TUESDAY, MAR 30, 2021 - 12:37 PM

    Unlike the devastating London Whale debacle in 2012, which was all JPMorgan eventually drawn and quartered quite theatrically before Congress (and was a clear explanation of how banks used Fed reserves to manipulate markets, something most market participants had no idea was possible), this time JPMorgan was nowhere to be found in the aftermath of the historic margin call that destroyed hedge fund Archegos. Which is may explain why JPMorgan bank analyst Kian Abouhossein admits he is quite " puzzled" by the recent fallout from the Archegos implosion (or maybe JPM simply was not a Prime Broker of the notorious Tiger cub), which however does not prevent him from trying to calculate the capital at risk from the Archegos collapse.

    In a note published this morning, Kian writes after Nomura yesterday confirmed (at least) a $2Nn potential claim and fellow Japanese bank Mitsubishi UFJ Securities Holdings announcing today of another potential $300MM loss - which as the JPM strategist admits " for a likely non-material PB player is surprising to us" – JPMorgan now expects losses well beyond normal unwinding scenario for the industry : and explains that it now sees "the losses as very material in relation to lending exposure for a business that is mark-to-market and holds liquid collateral" and makes Nomura's indication of potentially losing $2bn and press speculation of CSG $3-4bn losses "as not an unlikely outcome" according to the JPM strategist.

    So why is JPM surprised?

    Because as Abouhossein writes, " in normal circumstances... we would have suspected industry losses of $2.5-5bn. We now suspect losses in the range of $5-10bn ." In other words, JPM has doubled its max loss estimate to as much as $10BN, a number which could yet rise.

    To get there, JPM estimates that Archegos was highly leveraged at 5-8x (i.e. $50-80bn of exposure for $10bn of equity ) - using Total Return Swaps and Certificates for Difference to lever up so massively as we discussed yesterday - and it was this use of equity-swaps tha "tincreased the inability of PBs to see the concentration risk in holdings within the hedge fund in question."

    Even so, Kian admits that he remains " puzzled why Credit Suisse (CSG) and Nomura have been unable to unwind all their positions at this point – as we would expect to get an announcement as soon as this is the case, on the scale of potential losses (especially in the case of CSG which hasn't provided numerical impact)" although we have gotten some headlines suggesting the total loss could be as big as $7 billion.

    That said the JPM analyst expects full disclosure by the end of the week at the latest from CSG and would keep an eye on credit agencies statements as well. And in the harshest slam of JPM's competitors, Kian says he suspects "potentially poor risk mgmt being an issue here considering i) late unwinding, and ii) possibly significant more leverage than for GS/MS similar exposures."

    Alternatively, one could argue that it was Goldman and Morgan Stanley who rushed to break ranks with the syndicate of Prime Brokers and started dumping blocks of Archegos shares for one reason or another on Friday morning as we detailed yesterday, which meant that while they suffered the least losses, those banks - like CS, Nomura and Wells - which were slow to start selling, would end up with the largest losses (for more see " How Goldman And Morgan Stanley Broke Ranks And Triggered The Biggest Margin Call Since Lehman ").

    Source: @KennethDredd

    In terms of actual loss estimates with an empahsis on Credit Suisse which so far appears to be the hardest hit, here is a breakdown from JPMorgan of what is known:

    In terms of capital at risk, based on press articles, Credit Suisse seems to have bigger issues than Nomura assuming press speculation of $3-4bn are correct and Grensill could potentially lead to additional litigation cost of $1-3bn. In the case of Nomura, JPM has reduced the share buyback for FY2020 from Ą75 billion to Ą10 billion; if the press speculation losses are correct, it would expect CS at a minimum will have to cancel its share buyback for 2021, preserving the dividend and we assume no buyback for the next 2 years assuming Basel 4 implementation as of Jan 2023.

    Assuming no RWA growth vs. YE2020 levels, JPM calculates that CS can absorb a max. one-time pre-tax hit of c$4.5b n (CHF 4.2bn) for Archegos which post-tax is 116bps of CET1 capital offset by 32bps of Retained earnings (1Q Net Income less 1Q dividend accrual of CHF 0.2bn and share buyback of CHF 0.3bn completed YTD) and still reach 12% by end of 1Q 21 which is seen as an acceptable level for S/Hs under Basel 3 – with further hits to come (see below). The minimum CET1 requirement is 10% and every additional $1bn pre-tax hit is 26bps of CET1 capital based on YE2020 RWAs and hence "any hits beyond $5bn pre-tax from Archegos will call into question the capital position in our view", JPM warns.

    Separately, Bloomberg adds that March's blowups may - in addition to wiping out more than a year of profits for the bank and threaten its stock buyback plans - also add add to the reputational hit from the other missteps by bank CEO Thomas Gottstein. With the shares posting the only decline among Europe's major banks in 2021 and a new chairman starting next month, Chief Executive Officer Thomas Gottstein is facing questions over whether he and risk chief Lara Warner have a handle on the bank's exposures.

    "Risk control at every level in this bank must be examined and changes made where there are deficiencies," David Herro, chief investment officer at Harris Associates, one of the biggest investors in the bank, said in an email. "But I state the obvious?"

    As Bloomberg further notes, the hits from Archegos and Greensill have spoiled a plan by Gottstein to start the year with a clean slate.

    The CEO late last year wrote down the value of the bank's stake in hedge fund York Capital and took a hit related to a long-standing legal case into residential mortgage-backed securities, dealing the bank its first quarterly loss in three years. The crises have more than overshadowed its best start to the year in a decade.

    "While all four events appear idiosyncratic in nature, it inevitably has led investors to question the strategic decision making at CS and the risk culture of the firm," Andrew Coombs, a Citi bank analyst wrote Tuesday.

    While Credit Suisse has not quantified the full damage yet, and has merely said that it faces "highly significant" losses tied to Archegos, Berenberg analysts pegged the hit at 3 billion Swiss francs, on top of 500 million francs from the Greensill issues.

    * * *

    Finally, JPM tries to answer a key question for many investors, namely what has happened with holdings (as speculated in the press ) of Archegos Capital?

    As Kian writes, the share price of Arhcegos Capital linked stocks fell by -39% on avg. since the beginning of last week. According to press reports (Bloomberg), Archegos Capital was forced to sell large shareholdings in eight online and entertainment companies ( GSX Techedu, ViacomCBS, Discovery, iQIYI, Tencent Music, Vipshop, Baidu, Farfetch) to cover potential losses after some positions moved against the fund. Once Archegos Captial failed to meet its margin commitments, the sell-off intensified further as banks started offloading via sizeable block trades the holdings posted by the fund as collateral, prompting more declines.

    Based on the latest publicly available disclosure the banks with the largest exposure to the mentioned companies were Morgan Stanley, Credit Suisse, Goldman Sachs, Nomura and to a lesser extent UBS and DB (more details below). On Friday alone, both ViacomCBS and Discovery saw their largest ever daily decline, with each falling by more than -27%. Traded volumes for the eight companies peaked on Friday with daily volumes being on avg. more than 13x the 90 days moving average. The sell-off continued on Monday 29th with the aforementioned stocks falling further -6% on average.

    Based on latest available public filings, JPM calculates that the banks which had the largest holdings in the eight Archegos Capital-linked stocks mentioned by the press were Morgan Stanley, Credit Suisse, Goldman Sachs and Nomura. Morgan Stanley exposure was relatively broad based with 5%+ holdings in all but one companies and with 10%+ stake in both GSX Techedu and iQIYI. Credit Suisse exposure was also broad based with holdings in all but one companies and with the largest exposure being its 9% stake in Discovery. Goldman Sachs exposure was mainly concentrated in GSX Techedu (22% stake), while Nomura had exposure in all but one companies and a relatively large holding of 7% in GSX Techedu. Other banks such as Bank of America, Citi, UBS, Deutsche and Barclays also had holdings above 2% in some the mentioned companies (mainly GSX Techedu and Discovery).

    Finally, courtesy of JPM, here is a summary of all the latest publicly available information disclosing what exposure each bank may have had - and still has - to Archegos:

    play_arrow


    Calculus99 4 hours ago (Edited)

    If you listen to the corporate ******** from ALL of these firms, they'll all say the same crap -

    "We employ the some of the smartest guys in finance as well as run cutting edge risk management systems so as to protect our shareholders and (cliche) stake holders."

    Then something like this happens, ie you let a degen gambler margin up xfold in a highly charged and volatile market betting on some of the riskiest go-go stocks.

    Any old non-smartest guy with a $10 Casio calculator could have predicted the massive risks they were taking and the probable fallout.

    Smartest guys?

    Cutting edge risk management?

    Their words aren't even worth a penny...

    bonsai_king 3 hours ago

    Thats just what they post online.

    In the real world, its all backroom deals, tit for tat, exchange of favors kind of BS.

    Do you actually think anyone involved lost their personal fortunes?

    101 years and counting 3 hours ago

    if you're running JPM or GS, etc....why wouldnt you leverage everything to the top? if you go boom, Jerome will save you. afterall, if you dont save us, the "World will end".

    john milton 3 hours ago

    This is it in banking, sometimes you win big time and got your big bonuses, sometimes you lose big time and taxpayers pay your bonuses.

    ssgredux 4 hours ago

    Wait till JPM hears about JPM's exposure to derivatives...

    highwaytoserfdom 2 hours ago

    4th Q is out what is 60 T among friends? Good read scare number what just started to wade through the FX credit are most the one thing that got me was the metals and size... https://www.occ.gov/publications-and-resources/publications/quarterly-report-on-bank-trading-and-derivatives-activities/files/q4-2020-derivatives-quarterly.html

    STP 2 hours ago

    I love the OCC Quarterly. You have to go all the way to the back, to see the good stuff. GS is leveraged, waaay beyond everybody else!

    Kefeer 3 hours ago remove link

    Banking crisis, artificial chip shortages, artificial price manipulation of oil , artificial wuhan-flu war, with artificial experimental injections, artificial everything - even the clouds above.

    What is the plan with all these working together and add the artificial dementia installed President and you have the recipe for something huge??? ....

    ssgredux 4 hours ago

    Incoming CNBC headline

    "Archegos ... yada yada ... Jim Cramer ... yada yada ... SYSTEMIC RISK ... yada yada ... Jerome Powell contacted ... yada yada ... $100 billion bank bailout ... yada yada"

    1980XLS 4 hours ago

    So glad these casinos have Gubmnt subsidized, FDIC insurance.

    Great Iota 59 minutes ago (Edited)

    Save this post ...

    The "Damage" from the Archegos collapse will be a nano piss drop in a rain compared to the damage from the upcoming cryptocurrency collapse.

    Bitcoin alone could cause quadrillion USD damage when you count the worthless underlining asset plus the 100X derivatives. I'm surprised that governments and its citizens have embraced this worthless asset. 1000 Years from know we will be teaching about the "Bitcoin Blowup".

    What can cause Bitcoin to go worthless? Lots!

    1 - No real need (only purpose is its a Ponzi Scheme designed to increase in value).
    2 - Unrecoverable (lost your account, password, or remote drive? your SOL)
    3 - Uninsurable (no one can return your Bitcoin to you)
    4 - Open to program hacks
    5 - Not backed by anything
    6 - Needs electricity and internet.
    7 - Can never be a useful currency

    You people have all gone mad!

    stop_the_fraud 43 minutes ago

    Saved and archived.

    Great Iota 30 minutes ago

    I'm hoping that the only reason the global leaders are allowing Bitcoin is so it can mop up the trillions of paper being added to the system to save the system without creating inflation. At the end of the day, it gives avenue for abusive money printing without inflating a real asset that people need.

    Can you imagine if all the money flowing into crypto was going into housing or food? Look at the stock market bubble caused by all the low interest money flowing into it.

    This madness will end when the fed tightens or the global economy collapse (one will happen for sure).

    Cheap Chinese Crap 5 minutes ago remove link

    You're crazy. There's nothing wrong with treating an IOU from some anonymous guy on the Internet as a cash substitute.

    Lef-ty PREMIUM 2 hours ago

    Just another reason to make the banks smaller. How about no derivatives trading other than a hedge book. Synthetic positions should be part of 5% disclosure rule. The fact that no one knew what was happening is just another warning signal. lay_arrow

    highwaytoserfdom 3 hours ago (Edited)

    Bring in Kenny Griffin and Bernake from Citadel to front run the whole market... ROFLMAO While at it bring in Peter Griffin, and Lois; Meg, Chris, and Stewie and Brian. heck bring in all Quahog, Rhode Island.. Wait a second Gina M. Raimondo Secretary of Commerce jeez did not think it could get much worse that Wilber but one of the granny culling governors (oh yea those machines flipped votes) ..medical murder scam plan demonic reset....

    LMAO--------> Look MAO CIA globalony..

    Bill of Rights 3 hours ago

    The same JPM thats dumping Commercial and Residential Real Estate at a massive clip, that JPM?

    Ozarkian 3 hours ago

    10x Leverage caused the 1929 crash. History repeats.

    RevIdahoSpud3 1 hour ago

    I have just lived through the 2nd Major Coup in my lifetime as a U S Born citizezn. The first for me was JFK's assassination by government insiders. The Second was the 2020 election with the lunatic Biden installed (not elected) as president of the U S Corporation. Before that may have been the establishing of the Fed Reserve in 1913 but I wasn't alive yet. Others may have been WWI, WWII, Viet Nam...and how many others such as 911 and the Patriot Act.

    I mention because we are supposed to read news of the banking industry, trade agreements, border breaches and hundreds of other topics that are supposed to be events of the day? Spontaneous and not preplanned as if these events have any relevance to a freeman's life.

    Since the Trump coup, there is nothing really noteworthy that the deep state cycles as news. It's all smoke and mirrors. Perhaps it is to the 'players', the top 1% who battle each other for world domain in a global chess game who actually care as they seem to be the ones with something at stake. Their vast fortunes and their need for more.

    At the bottom of the totem it's all irrelevant. This level is just survival of the fittest. News, fake news, and irrelevant news has no impact on reality.

    And yet, how many people dwell/devote their lives and time to being abreast of Meghan and Harry, Congress, Goldman Sachs, Tesla, Climate cooling/heating, racism, discrimination, womyns rights... . Such as waste!

    denker 2 hours ago

    RWA growth ► Risk Weighted Average Growth
    CET1 ► Common Equity Tier 1
    CSG ► Credit Suisse Group
    $300MM ► $300 million
    $2Nn ► fark knows?
    PB player ► Primary Broker player?
    GS/MS ► Goldman Sachs and Morgan Stanley
    S/Hs under Basel 3 ► Share Holders under Basel 3

    Cheap Chinese Crap 4 minutes ago

    That's 2 nanu-nanus. Mork's account got hacked.

    ponchoramic 2 hours ago

    Daily Reminder; The financialization of everything sucked the life out of real capitalism and everything you see right now is a product of that life sucking parisitical scheme.

    King of Ruperts Land 2 hours ago (Edited)

    Don't worry, be happy.

    Secret Weapon 3 hours ago

    Greedy parasites getting their balls kicked in. Very fun to watch.

    scoop2020 3 hours ago

    I would imagine all the big losers are putting their numbers out there so they can take them to the bankruptcy courts and claim GS and MS had privilege(by selling before the news came out) and try and claw back there benefits. Never brag about dodging a bullet. It only pisses off the people who didn't dodge the bullet.

    NuYawkFrankie 4 hours ago (Edited)

    It's this kind of reckless gambling suggests that we leaned nothing from the Long Term Capital Management fiasco

    zob2020 4 hours ago

    Time to ban asset management and speculation for the same company?

    archipusz 4 hours ago

    The gov't will take care of it.

    They wouldn't take care of robinhood's traders buying gme, but they'll take care of this to make sure hedge funds can keep trading. Y'see, hedge funds are important.

    ted41776 4 hours ago

    once they were deemed institutions too big to fail and too big to jail they became the government

    there is nothing they won't get away with now

    naro 1 hour ago

    There has never been so much margin debt in the history of America, because interest rates are so low that it seems like almost free money, and that is exactly what led to the Market collapse on 1929

    Nuxx PREMIUM 3 hours ago

    If this had everything to make a LTCM or Lehmann 2.0, how convenient that a ship got stuck in the mud last week and had everybody and their mother looking towards Egypt whilst Goldman Sachs and Morgan Stanley unloaded their cargo in the meantime.

    tunetopper 3 hours ago

    What is the limitation of Friends and Family on Family Offices?

    Why did Soros, Cohen, Tudor Jones, Druckenmuller, and Hwang all get an exemption out of Dodd-frank in 2019.

    Omphalos of Delphi 3 hours ago

    Don't worry. The Federal Reserve is bailing out the pedophiles while you schmucks get stuck with the bag-o-crap. Here are some stocks rallying hard on the face of 700.000 a week unemployment claims

    Olaf Myfrenzargay 4 hours ago

    Total return swaps should be banned outright.

    jack-of-all-trades 29 minutes ago remove link

    Just to add to JPM analyst's comments. It's all pure speculation but...

    Other Archegos' equity swaps were most likely linked to the Viacom swaps via standard legal arrangements (cross default-like). E.g. if Archegos' were to fail on its obligations to the counterparty on one swap, the counterparty gets the right to terminate other outstanding swaps with Archegos and sell its underlying hedges in the open market. This is done firstly to eliminate/reduce counterparty's risk exposure to Archegos and, secondly, offset any losses the counterparty would incur on Viacom with [hopefully] gains on other swaps outstanding or, if no gains, reduce its hedge unwind losses.

    Any PB service provider to Archegos knew with 100% certainty early last week that Archegos would not have a penny left to settle any arising swap liquidation losses/claims to it the moment Archegos failed to meet its ViacomCBS margin call(s). MS and GS PB desks knew that, as the US houses, their ECM desks were best positioned to find buyers for ViacomCBS compared to CS/UBS, not to mention DB and Japanese houses that have no real ability in most of those names. Coincidentally, it's wrong to refer to the group of these banks as a "syndicate".
    It's likely that many of these PB desks knew other and coordinated things on regular basis but there certainly wasn't any legal arrangement/obligation among these banks to coordinate liquidation of any of their Archegos swap hedges. Their decision-making was straight-forward -- GS/MS, with the best chance to get out unscathed (lower Archegos exposure, better ECM teams) -- didn't dither and headed for the exit ASAP. For CS (and perhaps UBS/DB), it was more complicated -- not as well-placed to find buyers for ViacomCBS stock yet with [much] larger exposures, they probably tried to coordinate the fire sale but quickly realised that they would not be the first out the door and ultimately got stuck in the doorframe. For the Japanese houses, the situation was worse -- without their own ECM teams, they depended on other banks to place large CBSViacom blocks -- a mission impossible under the circumstances.

    With regards to the huge size of these losses... everyone must be stunned:

    1. The market has been bullish up until now, despite the recent rollover of top speculative names like TSLA and other techs and yield rises in longer dated Treasuries -- the mood is nothing like 2007-08;
    2. Granted, the stock trading volumes since the GFC time in 2008 have been massively diluted with the high-speed/algorithmic trading, short-gamma [index] ETFs hedging, etc, etc -- these trading flows are not "real", so to speak. But everyone's market risk people must have known (or reasonably guessed) how to tweak their risk models for the above.... Guess they were wrong!!!

    It's safe to assume that the terms of every single one of the PB (and not PB) equity swaps/CFDs/"whatevers" out there will be scrutinised, re-assessed, and renegotiated when and if possible.

    The silver lining to this cloud is that it happened while the sun is still shining, relatively speaking.

    [Mar 29, 2021] What's ahead for the all-time high stock market

    Mar 29, 2021 | finance.yahoo.com

    ... Elevated valuations is probably the biggest source of consternation for investors.

    ... Barclays sees limited upside in the near term. The firm has a 4,000 year-end target for the S&P, which suggests less than a 1% gain from Friday's close.

    ...All that said, it can be treacherous to make big bets on what may happen in the short-term. You never know when some unexpected market rocking event emerges like a single ship running aground disrupting global trade or a big hedge fund liquidating causing all sorts of dislocations in the market.

    [Mar 29, 2021] Hedge fund blowup sends shockwaves through Wall Street and the City

    Mar 29, 2021 | finance.yahoo.com

    A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.

    Shares in Credit Suisse ( CSGN.SW ) and Nomura ( 8604.T ) sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.

    Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge losses.

    Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it also means hedge funds can theoretically lose more money than they hold in client funds.

    If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This process is known as a margin call.

    Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported on Friday that Goldman Sachs ( GS ) and Morgan Stanley ( MS ) were selling huge chunks of shares in businesses including ViacomCBS ( VIAC ), Discovery ( DISCA ) and Chinese stocks Baidu ( BIDU ) and Tencent Music ( TME ). The block sales are estimated to be worth around $20bn (Ł14.5bn), according to the Financial Times .

    Shares in Credit Suisse sunk after it warned of 'significant losses' linked to the blow up at Archegos Capital. Photo: Fabrice Coffrini/AFP via Getty Images

    A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.

    Shares in Credit Suisse ( CSGN.SW ) and Nomura ( 8604.T ) sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.

    Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge losses.

    Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it also means hedge funds can theoretically lose more money than they hold in client funds.

    If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This process is known as a margin call.

    Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported on Friday that Goldman Sachs ( GS ) and Morgan Stanley ( MS ) were selling huge chunks of shares in businesses including ViacomCBS ( VIAC ), Discovery ( DISCA ) and Chinese stocks Baidu ( BIDU ) and Tencent Music ( TME ). The block sales are estimated to be worth around $20bn (Ł14.5bn), according to the Financial Times .

    "Things started going wrong for Archegos when shares of companies such as Viacom started to slide mid-last week," said Michael Brown, a senior market analyst at Caxton Business. "It was at that point that margins were called, and couldn't be provided, hence the block sales seen Friday."

    A fire sale can have a negative impact on stock prices and shares in both ViacomCBS and Discovery sunk 27% on Friday. Banks therefore risked making less back from the sales than they lent to clients to fund the investments.

    Credit Suisse on Monday warned it was facing "highly significant" losses linked to Archegos that could be "material to our first quarter results".

    The Swiss lender didn't name Archegos but said: "A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks."

    Credit Suisse said it was "in the process" of selling shares held by Archegos. The bank said it was "premature" to estimate how much it would likely lose from the crisis.

    "We intend to provide an update on this matter in due course," Credit Suisse said.

    Shares sunk 13.4% in Zurich.

    "One would assume that, judging by the size of positions sold, the 'game is up' for Archegos," Brown said.

    He said it was "unlikely" that Archegos would pose a systemic risk to the financial system. Neil Wilson, chief market analyst at Markets.com, said the hedge fund "appears to have been too concentrated in a number of risky stocks."

    A hedge fund blow up is relatively unusual and Archegos' undoing has raised concerns that other funds could find themselves in similar positions.

    "Block equity-trades stemming from margin-calls on Archegos will have sent the market's spidey senses a tingle," said Bill Blain, a senior strategist at Shard Capital. "Who is next?"

    Alex Harvey, a portfolio manager at Momentum, said: "We tend to find out after the event that other funds get caught up as sometimes hedge funds may be crowded into similar trades."

    "When we look at this and think about the GameStop saga and the decline in Tesla as two examples -- what we're seeing are more and more pockets of very unusual trading activity in some stocks," he said. "You worry that this sort of frothy trading activity in turn creates pockets of distress among investors and banks that leads to larger unwinds and losses for financials."

    [Mar 28, 2021] Medicaid Enrollment Grew -30% Year-Over-Year

    Mar 28, 2021 | angrybearblog.com

    run75441 | March 27, 2021 7:55 pm

    HEALTHCARE

    Medicaid expansion enrollment grew nearly 30% year-over-year in 19-state sample, Andrew Sprung, XPOSTFACTOID, March 17, 2021

    An update on Medicaid expansion enrollment growth since the pandemic struck. Below is a sampling of 19 expansion states through January of this year, and 14 states through February.

    Maintaining the assumption, explained here , "relatively slow growth in California would push the national total down by about 2.5 percentage points." These tallies still point to year-over-year enrollment growth of approximately 30% from February 2020 to February 2021.

    If that's right, then Medicaid enrollment among those rendered eligible by ACA expansion criteria (adults with income up to 138% FPL) may exceed 19 million nationally and may be pushing 20 million. Assuming the sampling of a bit more than a third of total expansion enrollment represents all expansion states more or less and again accounting for slower growth in California.

    [Mar 28, 2021] One year later, unemployment insurance claims remain sky-high

    Notable quotes:
    "... Last week was the 53rd straight week total initial claims were greater than the second-worst week of the Great Recession. (If that comparison is restricted to regular state claims -- because we didn't have PUA in the Great Recession -- initial claims are still greater than the 14th worst week of the Great Recession.) ..."
    Mar 28, 2021 | www.epi.org

    One year ago this week, when the first sky-high unemployment insurance (UI) claims data of the pandemic were released, I said " I have been a labor economist for a very long time and have never seen anything like this ." But in the weeks that followed, things got worse before they got better -- and we are not out of the woods yet. Last week -- the week ending March 20, 2021 -- another 926,000 people applied for UI. This included 684,000 people who applied for regular state UI and 242,000 who applied for Pandemic Unemployment Assistance (PUA), the federal program for workers who are not eligible for regular unemployment insurance, like gig workers.

    Last week was the 53rd straight week total initial claims were greater than the second-worst week of the Great Recession. (If that comparison is restricted to regular state claims -- because we didn't have PUA in the Great Recession -- initial claims are still greater than the 14th worst week of the Great Recession.)

    Figure A shows continuing claims in all programs over time (the latest data for this are for March 6). Continuing claims are currently nearly 17 million above where they were a year ago, just before the virus hit.

    FIGURE A Continuing unemployment claims in all programs, March 23, 2019–March 6, 2021 *Use caution interpreting trends over time because of reporting issues (see below)*
    Date Regular state UI PEUC PUA Other programs (mostly EB and STC)
    2019-03-23 1,905,627 31,510
    2019-03-30 1,858,954 31,446
    2019-04-06 1,727,261 30,454
    2019-04-13 1,700,689 30,404
    2019-04-20 1,645,387 28,281
    2019-04-27 1,630,382 29,795
    2019-05-04 1,536,652 27,937
    2019-05-11 1,540,486 28,727
    2019-05-18 1,506,501 27,949
    2019-05-25 1,519,345 26,263
    2019-06-01 1,535,572 26,905
    2019-06-08 1,520,520 25,694
    2019-06-15 1,556,252 26,057
    2019-06-22 1,586,714 25,409
    2019-06-29 1,608,769 23,926
    2019-07-06 1,700,329 25,630
    2019-07-13 1,694,876 27,169
    2019-07-20 1,676,883 30,390
    2019-07-27 1,662,427 28,319
    2019-08-03 1,676,979 27,403
    2019-08-10 1,616,985 27,330
    2019-08-17 1,613,394 26,234
    2019-08-24 1,564,203 27,253
    2019-08-31 1,473,997 25,003
    2019-09-07 1,462,776 25,909
    2019-09-14 1,397,267 26,699
    2019-09-21 1,380,668 26,641
    2019-09-28 1,390,061 25,460
    2019-10-05 1,366,978 26,977
    2019-10-12 1,384,208 27,501
    2019-10-19 1,416,816 28,088
    2019-10-26 1,420,918 28,576
    2019-11-02 1,447,411 29,080
    2019-11-09 1,457,789 30,024
    2019-11-16 1,541,860 31,593
    2019-11-23 1,505,742 29,499
    2019-11-30 1,752,141 30,315
    2019-12-07 1,725,237 32,895
    2019-12-14 1,796,247 31,893
    2019-12-21 1,773,949 29,888
    2019-12-28 2,143,802 32,517
    2020-01-04 2,245,684 32,520
    2020-01-11 2,137,910 33,882
    2020-01-18 2,075,857 32,625
    2020-01-25 2,148,764 35,828
    2020-02-01 2,084,204 33,884
    2020-02-08 2,095,001 35,605
    2020-02-15 2,057,774 34,683
    2020-02-22 2,101,301 35,440
    2020-02-29 2,054,129 33,053
    2020-03-07 1,973,560 32,803
    2020-03-14 2,071,070 34,149
    2020-03-21 3,410,969 36,758
    2020-03-28 8,158,043 0 52,494 48,963
    2020-04-04 12,444,309 3,802 69,537 64,201
    2020-04-11 16,249,334 31,426 216,481 89,915
    2020-04-18 17,756,054 63,720 1,172,238 116,162
    2020-04-25 21,723,230 91,724 3,629,986 158,031
    2020-05-02 20,823,294 173,760 6,361,532 175,289
    2020-05-09 22,725,217 252,257 8,120,137 216,576
    2020-05-16 18,791,926 252,952 11,281,930 226,164
    2020-05-23 19,022,578 546,065 10,010,509 247,595
    2020-05-30 18,548,442 1,121,306 9,597,884 259,499
    2020-06-06 18,330,293 885,802 11,359,389 325,282
    2020-06-13 17,552,371 783,999 13,093,382 336,537
    2020-06-20 17,316,689 867,675 14,203,555 392,042
    2020-06-27 16,410,059 956,849 12,308,450 373,841
    2020-07-04 17,188,908 964,744 13,549,797 495,296
    2020-07-11 16,221,070 1,016,882 13,326,206 513,141
    2020-07-18 16,691,210 1,122,677 13,259,954 518,584
    2020-07-25 15,700,971 1,193,198 10,984,864 609,328
    2020-08-01 15,112,240 1,262,021 11,504,089 433,416
    2020-08-08 14,098,536 1,376,738 11,221,790 549,603
    2020-08-15 13,792,016 1,381,317 13,841,939 469,028
    2020-08-22 13,067,660 1,434,638 15,164,498 523,430
    2020-08-29 13,283,721 1,547,611 14,786,785 490,514
    2020-09-05 12,373,201 1,630,711 11,808,368 529,220
    2020-09-12 12,363,489 1,832,754 12,153,925 510,610
    2020-09-19 11,561,158 1,989,499 10,686,922 589,652
    2020-09-26 10,172,332 2,824,685 10,978,217 579,582
    2020-10-03 8,952,580 3,334,878 10,450,384 668,691
    2020-10-10 8,038,175 3,711,089 10,622,725 615,066
    2020-10-17 7,436,321 3,983,613 9,332,610 778,746
    2020-10-24 6,837,941 4,143,389 9,433,127 746,403
    2020-10-31 6,452,002 4,376,847 8,681,647 806,430
    2020-11-07 6,037,690 4,509,284 9,147,753 757,496
    2020-11-14 5,890,220 4,569,016 8,869,502 834,740
    2020-11-21 5,213,781 4,532,876 8,555,763 741,078
    2020-11-28 5,766,130 4,801,408 9,244,556 834,685
    2020-12-05 5,457,941 4,793,230 9,271,112 841,463
    2020-12-12 5,393,839 4,810,334 8,453,940 937,972
    2020-12-19 5,205,841 4,491,413 8,383,387 1,070,810
    2020-12-26 5,347,440 4,166,261 7,442,888 1,450,438
    2021-01-02 5,727,359 3,026,952 5,707,397 1,526,887
    2021-01-09 5,446,993 3,863,008 7,334,682 1,638,247
    2021-01-16 5,188,211 3,604,894 7,218,801 1,826,573
    2021-01-23 5,156,985 4,779,341 7,943,448 1,785,954
    2021-01-30 5,003,178 4,062,189 7,685,857 1,590,360
    2021-02-06 4,934,269 5,067,523 7,520,114 1,523,394
    2021-02-13 4,794,195 4,468,389 7,329,172 1,437,170
    2021-02-20 4,808,623 5,456,080 8,387,696 1,465,769
    2021-02-27 4,457,888 4,816,523 7,616,593 1,237,929
    2021-03-06 4,458,888 5,551,215 7,735,491 1,207,201

    Other programs (mostly EB and STC) PUA PEUC Regular state UI Jul 2019 Jan 2020 Jul 2020 Jan 2021 0 10,000,000 20,000,000 30,000,000 40,000,000 Chart Data Caution: Trends over time in PUA claims may be distorted because when an individual is owed retroactive payments, some states report all retroactive PUA claims during the week the individual received their payment.

    Click here for notes.

    Source: U.S. Employment and Training Administration, Initial Claims [ICSA], retrieved from Department of Labor (DOL), https://oui.doleta.gov/unemploy/docs/persons.xls and https://www.dol.gov/ui/data.pdf , March 25, 2021. Share Tweet Embed Download image

    The good news in all of this is Congress's passage of the sweeping $1.9 trillion relief and recovery package. It is both providing crucial support to millions of working families and setting the stage for a robust recovery. One big concern, however, is that the bill's UI provisions are set to expire the first week in September, when, even in the best–case scenario, they will still be needed. By then, Congress needs to have put in place long-run UI reforms that include automatic triggers based on economic conditions.

    [Mar 28, 2021] Seconding Paul Krugman- inflationary pressures will be a transient phenomenon in 2021 (will they cause a recession in 2022)

    Krugman is is barking on the wrong tree. The question right now is not wage inflation but the inflation due to weakening dollar as purchases of Treasuries by foreign buyers weakened. That what probably caused the spike on 10 year Treasuries yield.
    Without foreign buyers of the US debt the deficit spending does not work. So it is quite possible that this time inflationary pressures will come from the weakening of the status of the dollar as the world reserve currency. As along the this status is unchallenged the USA will be OK. If dollar is challenged the USA will experience the Seneca cliff.
    Paul Krugman argues once's again this morning that any increase in inflation this year as part of a post-pandemic boom will be transitory:
    Mar 28, 2021 | angrybearblog.com

    Paul Krugman

    A few months of rising prices won't mean the 70s are back

    I agree. I want to elaborate on one point he hasn't emphasized; namely, you can't have a wage-price inflationary spiral if wages don't participate!

    To make my point, let me show you three graphs below, covering wages and prices in three different periods: (l) the inflationary 1960s and '70's, (2) the disinflationary
    Reagan-era 1980s and early '90's, and (3) the low inflation period of the late 1990s to the present.

    In addition to the YoY% change in CPI, I also show CPI less energy (gold), better to show oil shocks, and also that it takes about a year for inflation in energy prices to filter through to inflation in other items.

    Also, hourly wages were greatly affected (depressed) by the entry of 10,000,000's of women into the workforce between the 1960s and mid-1990s. This increased median household income, which would be the better metric, but since that statistic is only released once a year, I've approximated its impact by adding 1% to the YoY% change in average hourly wages (light blue).

    Here are the three graphs:

    ... ... ...

    [Mar 28, 2021] Krugman Dismisses 1970s-Style Inflation, With Faith in Fed by Julia Fanzeres

    Are FED pushing on the string?
    Mar 19, 2021 | finance.yahoo.com

    "It took really more than a decade of screwing things up -- year after year -- to get to that pass, and I don't think we're going to do that again," Krugman said of the inflation scourge of the 1970s to early 1980s. He spoke in an interview with David Westin for Bloomberg Television's "Wall Street Week" to be broadcast Friday.

    ...The worst-case scenario out of the fiscal stimulus package would be a transitory spike in consumer prices as was seen early in the Korean War, Krugman said. The relief bill is "definitely significant stimulus but not wildly inflationary stimulus," he said.

    ...Economists predict that the core inflation measure tied to consumer spending that the Fed uses in its forecasts will remain under 2% this year and next, a Bloomberg survey shows. A different gauge, the consumer price index is seen at 2.4% in 2021 and 2.2% next year. The CPI peaked at over 13% in 1980.

    The risk is that policy makers are "fighting the last war" -- countering the undershooting of the 2% inflation target and limited fiscal measures taken after the 2007-09 financial crisis, the economists said.

    Even so, he argued that "redistributionist" aspects of the pandemic-relief package will reduce the need for the Fed to keep monetary stimulus too strong for too long in order to address pockets of high unemployment. Fed Chair Jerome Powell has repeatedly said the central bank wants to see very broad strengthening in the labor market, not just a drop in the national jobless rate.

    "It's not silly to think that there might be some inflationary pressure" from the fiscal package, Krugman said. But it was designed less as stimulus than as a relief plan, he said.

    [Mar 28, 2021] Need Amid Plenty- Richest US Counties Are Overwhelmed by Surge in Child Hunger

    Mar 28, 2021 | www.nakedcapitalism.com

    The financial fallout of covid-19 has pushed child hunger to record levels. The need has been dire since the pandemic began and highlights the gaps in the nation's safety net.

    While every U.S. county has seen hunger rates rise, the steepest jumps have been in some of the wealthiest counties, where overall affluence obscures the tenuous finances of low-wage workers. Such sudden and unprecedented surges in hunger have overwhelmed many rich communities, which weren't nearly as ready to cope as places that have long dealt with poverty and were already equipped with robust, organized charitable food networks.

    Data from the anti-hunger advocacy group Feeding America and the U.S. Census Bureau shows that counties seeing the largest estimated increases in child food insecurity in 2020 compared with 2018 generally have much higher median household incomes than counties with the smallest increases. In Bergen, where the median household income is $101,144, child hunger is estimated to have risen by 136%, compared with 47% nationally.

    That doesn't mean affluent counties have the greatest portion of hungry kids. An estimated 17% of children in Bergen face hunger, compared with a national average of around 25%.

    But help is often harder to find in wealthier places. Missouri's affluent St. Charles County, north of St. Louis, population 402,000, has seen child hunger rise by 69% and has 20 sites distributing food from the St. Louis Area Foodbank. The city of St. Louis, pop. 311,000, has seen child hunger rise by 36% and has 100 sites.

    "There's a huge variation in how different places are prepared or not prepared to deal with this and how they've struggled to address it," said Erica Kenney , assistant professor of public health nutrition at Harvard University. "The charitable food system has been very strained by this."

    Eleni Towns, associate director of the No Kid Hungry campaign , said the pandemic "undid a decade's worth of progress" on reducing food insecurity, which last year threatened at least 15 million kids.

    And while President Joe Biden's covid relief plan, which he signed into law March 11, promises to help with anti-poverty measures such as monthly payments to families of up to $300 per child this year, it's unclear how far the recently passed legislation will go toward addressing hunger.

    "It's definitely a step in the right direction," said Marlene Schwartz , director of the Rudd Center for Food Policy and Obesity at the University of Connecticut. "But it's hard to know what the impact is going to be."


    Randall Flagg , March 28, 2021 at 8:12 am

    Let's just keep spending all that money on our misadventures around the world though. I believe in a strong defense but just that, defense. I would like to hear the warmongers justify the ridiculous amounts of money spent on that, yet we can take care of our own to a basic minimum. What the hell happened to this country over the years

    Massinissa , March 28, 2021 at 8:30 am

    "What the hell happened to this country over the years "

    4 to 5 decades of neoliberalism will do that. Its like the nation-state equivalent of being addicted to a drug. Makes you feel better in the short term: Reagan America worked great! In the 80s. Long term everything gets screwed over, health wise.

    JBird4049 , March 28, 2021 at 5:36 pm

    Ronnie Raygun was patriotic meth. The only good thing he did as the President was getting the number of American and Soviet nuclear warheads reduced.

    mrsyk , March 28, 2021 at 8:34 am

    Nothing says "Third World!" like 25% child food insecurity rate.

    roxan , March 28, 2021 at 8:44 am

    Typical banana republic, spending on war and ridiculous, dysfunctional but grandiose weapons, usually shown off in parades – lorded over by a rich oligarchy – while people starve and live in hovels. However, a healthy well-fed population is the source of a nation's strength, so we are well on the way to fading into a has-been.

    Bob Hertz , March 28, 2021 at 9:14 am

    Here is the real problem .

    "Sierra had to leave her Amazon warehouse job when the kids' school went remote, and Morales stopped driving for Uber when trips became scarce and he feared getting covid on top of his asthma".

    In other words, our skimpy unemployment insurance systems in man states, plus gaps in the pandemic special relief, plus the insufferable arrogance of closing the schools with no financial relief for parents, and here we are.

    Thanks for posting, this is indeed a tragedy.

    The Rev Kev , March 28, 2021 at 10:21 am

    Sorry guys but this is Failed Nation stuff. I am one of those that happen to believe that it is the most fundamental duty of a State to protect children and pregnant women. Anything after that is a bonus if not an embellishment. America is not only the wealthiest country in the world but is also the wealthiest in history. And yet child hunger is tolerated. And just to add the bread slices to this s*** sandwich, there are about 800 billionaires in the US at the moment. How many of them could wake up one day and say to themselves: 'You know what? I am going to abolish child hunger in America with my money and be remembered forever and even have statues raised to myself!' But it never happens.

    tegnost , March 28, 2021 at 11:01 am

    America's incredible success is going to require americans to have a vastly reduced standard of living to the point that they are equally as poverty stricken as the poors the world over. Globalisation really makes any other out come unfair, and we must globalize. Everyone being a poverty stricken gig worker is the plan. Here in this case an amazon worker and an uber driver, on the dole. In reality, I think the biden admin has just dusted off the plans that were to be unleashed under hillary, that's one of the reasons it all seems so ham handed. The TPP was going to keep the world in our orbit and create supra national barriers to autonomy in order to stop what is in fact happening now where they are free to choose between china/russia and the US. From this perspective trump really screwed the plans of the despicables.

    Synoia , March 28, 2021 at 11:56 am

    America's incredible past success .

    1. It in the past
    2. It was built on predation against the British Empire

    Who needs a German Enemy with friends who help with lend-lease, Cancel the German War debt, and not their "allies." Combined with subverting the British Empires rule with a twisted version of self-rule – Governance dependent on not having US Sanctions, aka imperialism absent responsibility.

    This after dispossession the local US natives of the ancestral lands by force, and tricky legalities.

    tegnost , March 28, 2021 at 12:10 pm

    I agree that it's in the past but people ordering their entire life from amazon that I know think this is the beginning of our incredible greatness.

    The S , March 28, 2021 at 1:45 pm

    It's not a failed nation, it's how the US was always designed to work. It might have had some good years of P.R. and marketing after WWII but it was always a lie. The Constitution was written by a bunch of wealthy slavers that hated commoners and feared economic democracy and popular governance. The US became the wealthiest country by starving kids and killing people the world over; it was forced into a bit of wealth distribution for a few decades by multi-state steel strikes, the Bonus Army, armed miners unions, tenants unions, the Farmers Holiday movement, and the contrast of a Soviet Union that was advancing by leaps and bounds economically while the US festered in a depression. But whether it was the indigenous, the slaves, the Filipinos, the Haitians, the Chinese, the Nicaraguans, the Mexicans, the Hondurans, the Iranians, the Guatemalans, the Chileans, the Koreans, the Vietnamese, the Laotians, the Cambodians, the Russians, the Iraqis, the Libyans, the Syrians, or it's own citizens, the US has always killed for money. If it runs out of places to take over and expand it'll just starve the kids at home to make a buck. It'll charge the poor overdraft fees for having no money then chalk that up as a financial service. It'll have its state security forces kill you for a traffic stop and then beat every citizen en masse that dares to object. It'll cannibalize the very infrastructure and fabric of society and hand it over to oligarchs and private equity. It'll give all the wealth to people who charge usury and own embroidered pieces of paper but who don't actually do anything useful or necessary. And the marks that watch US movies and television and news will believe that the US is somehow benevolent and that they can somehow bend the will of the rapacious through the very electoralism that the wealthy designed to keep the poor from having a say.

    Starving children. Children in concentration camps. Children forced into schools during a plague. These aren't 'oopsies.' This is how the country is set up to run. Look at how much money the wealthy gained by letting a pandemic run wild. Look at how the entire investment class should have gone bankrupt in 2008 but instead workers were fired from jobs and cast out of their homes by the millions. Now the kids of those sacrificed are starving right next to the wealthy that should have gone bust. The affluent are literally taking food out of kids mouths because they won't let their precious stocks or real estate go down in price one iota. The only good thing about kids starving in wealthy districts is that a Robin Hood won't have to go to far to find money to give to those kids.

    drumlin woodchuckles , March 28, 2021 at 4:50 pm

    The 800 billionaires consider child hunger in America to be one of their greatest achievements.

    The child hunger in America problem won't be solved until the 800 billionaires and all their ideological supporters and economic servants have been " rounded up and exterminated", so to speak.

    Maritimer , March 28, 2021 at 4:19 pm

    Thank you, Palaver. All "food" is not equal. Nutrition should be the emphasis.

    In my jurisdiction, the Food Bank Industry encourages donations of packaged, processed, industrialized "food". For example, fifty pounds of oats gives much more nutrition bang for the buck than the equivalent $$$ amount of Conglomerate Cereals.

    At my Conglomerate Stupormarket, they have a bin for unthinking donors to drop in "food" that was bought in the Stupor. I've seen poptarts, jars of frosting, jello, etc. all sorts of "food". And why do I think the Stupormarket just recycles a lot of this stuff back onto their shelves, making a huge profit?

    Next time you donate, check out what your Food Bank is actually peddling and who runs it. Food Banks have become a huge Industry and we know what happens to huge Industries.

    Louis Fyne , March 28, 2021 at 4:47 pm

    My mother gives rides to some of her friends (without expectation of any compensation cuz friendship). In return, some of the friends give random items from their weekly food bank allotment.

    the food is shelf-stable processed items with produce and baked goods nearing expiration from the local gourmet independent chain and the local Whole Foods.

    Manslow's hierarchy of needs applies obviously and the food banks do truly heroic deeds daily, but long-term people can't live healthy lives eating boxed Mac 'n Cheese, PBJ sandwiches and organic cookies every single day.

    I say expand WIC spending and eligibility, but as I'm not too familiar with that program, dunno if that'll do any good.

    [Mar 28, 2021] In the USA, the top one percent of household net worth starts at $11,099,166

    Mar 28, 2021 | www.unz.com

    J , says: March 27, 2021 at 6:23 am GMT • 1.6 days ago

    @anonymous

    In the USA, the top one percent of household net worth starts at $11,099,166.

    It is seems improbable that the commenter achieved that goal. May be he is thinking of 1% of Indonesia or Philippines. The reference to tenant farmers also appears to indicate a country like that. Retiring to live in the Indonesian countryside is not my idea of a good old age. Correct me please if I am wrong.

    [Mar 28, 2021] The one good thing about bringing back neoclassical economics. We know what led to Wall Street Crash in 1929. The same mistakes have been repeated globally.

    Mar 28, 2021 | www.nakedcapitalism.com

    Sound of the Suburbs , March 27, 2021 at 3:45 pm

    The one good thing about bringing back neoclassical economics.
    We know what led to Wall Street Crash in 1929. The same mistakes have been repeated globally.

    At 25.30 mins you can see the super imposed private debt-to-GDP ratios.

    https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

    No one realises the problems that are building up in the economy as they use an economics that doesn't look at debt, neoclassical economics.

    As you head towards the financial crisis, the economy booms due to the money creation of unproductive bank lending, as it did in the 1920s in the US.

    https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

    The financial crisis appears to come out of a clear blue sky when you use an economics that doesn't consider debt, like neoclassical economics, as it did in 1929.

    1929 – US

    1991 – Japan

    2008 – US, UK and Euro-zone

    The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above. The Chinese were lucky; it was very late in the day. Everyone has made the same mistake; only the Chinese worked out what the problem was.

    Sound of the Suburbs , March 28, 2021 at 4:24 am

    The Chinese don't seem too worried about the competition.

    Putin and Xi are jealous of Wall Street.
    No matter how hard they try, they have never been able to inflict the same level of damage to the West, Wall Street managed in 2008.

    The Chinese know what to look out for to spot a financial crisis coming. They look for the problems brewing in private debt and inflated asset prices.
    This nice Chinese chap tried to warn the Americans the US stock markets was at 1929 levels at Davos 2018.
    https://www.youtube.com/watch?v=1WOs6S0VrlA
    We know what a correction from 1929 levels looks like.
    We have seen it before.

    "They've done it again, I can't believe my luck. US stock markets are at 1929 levels, this isn't going to end well" president Xi
    Xi has probably rung Putin up to tell him the good news.
    I bet they had a right old laugh.

    Luckily for the Chinese, the Americans have no idea what they are doing.
    The Chinese have been making all the classic mistakes of neoclassical economics, but have been learning from them to ensure they don't make the same mistakes again.
    We haven't been doing this in the West.

    At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.
    1929 – Wakey, wakey time

    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn't.
    It didn't then, and it doesn't now.

    What was the ponzi scheme of inflated asset prices that collapsed in 2008?
    "It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.
    It wasn't real wealth, just a ponzi scheme of inflated asset prices.

    Real estate – the wealth is there and then it's gone.
    1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines, Thailand
    2000s – Iceland, Dubai, US (2008), Vietnam
    2010s – Ireland, Spain, Greece, India
    It wasn't real wealth, just a ponzi scheme of inflated asset prices.

    It's been the same since Tulip Mania.
    You can inflate asset prices, keeping them inflated is the hard bit.

    Sound of the Suburbs , March 28, 2021 at 8:29 am

    The battle of ideas.
    Keynesian capitalism won the battle against Russian communism.

    The Americans could clearly demonstrate the average American was much better off than their Russian counterparts.

    Today's opioid addicted specimens might have struggled.

    It was much easier for the Americans to win the war of ideas last time. This time they could be in trouble.

    Look at the great system we've developed to concentrate wealth with the 1%.

    http://static5.businessinsider.com/image/557ef766ecad04fe50a257cd-960/screen shot 2015-06-15 at 11.28.56 am.png

    It's not quite the same, is it?

    Sound of the Suburbs , March 28, 2021 at 8:30 am

    Oh yeah, we had a system like that where all the wealth stayed at the top. We called it Feudalism. The Americans are progressing in the reverse direction.

    drumlin woodchuckles , March 28, 2021 at 3:05 pm

    Perhaps certain counter-Feudalist towns, cities, communities, etc. should study up on how certain Free Towns and Free Republics survived in Europe during the Feudalist Period. And try to set themselves up as the Free Towns, Free Cities, Free Republics in the midst of a future Feudalist America.

    Phil in KC , March 28, 2021 at 3:59 pm

    Thank you, RMO, you summarized US-Russian relations from 1991 to the start of the Putin era much better than me. We really missed an opportunity to integrate the Russians into the US-EU alliance (such as it was), especially with regard to NATO.

    Bush Jr. compounded this failure by mistaking Putin for an ally in the war against terror, thinking that our concerns in the middle east paralleled Putin's affairs in Chechen. They could have, but didn't. Putin was a more strategic thinker.

    My sense is that Putin played a waiting game for much of the first two decades of this century...

    Phil in KC , March 28, 2021 at 4:01 pm

    Sensible proposal once we codify and make manifest modern serfdom and indentured servitude (i.e. debt slavery). Shouldn't be too hard.

    [Mar 28, 2021] February personal income and spending decline

    Mar 28, 2021 | angrybearblog.com

    NewDealdemocrat | March 27, 2021 9:23 am

    US ECONOMICS US/GLOBAL ECONOMICS February personal income and spending decline : the back end of January stimulus payments

    Last month I wrote that the:

    "report on January personal income and spending shows just how important the stimulus packages enacted by the federal government both last spring and last month have been to sustaining the economy."

    The truth of that was confirmed on the back end in this morning's report for February, in which January's 10% increase in income was followed by a -7.1% decrease (red). January's increase of 3.4% in spending was also partially reversed by a -1.0% decrease in February (blue):

    ... ... ...

    Employment is down over 5% since last February, while production is down 4%. Meanwhile, income is down only 2.5%, and real sales have actually increased by nearly 5%! Most recently, in the combined two-month period since December, two of the series – payrolls and real sales – have increased, while the other two – industrial production and income less government payments – have declined.

    Since the Big Texas Freeze impacted probably substantially impacted all of these, the underlying situation is presumably better.

    [Mar 28, 2021] Bubble Deniers Abound to Dismiss Valuation Metrics One by One by Vildana Hajric , Claire Ballentine , Lu Wang

    Notable quotes:
    "... How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency. Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms. ..."
    "... At 35, the CAPE is at its highest since the early 2000s. ..."
    "... Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was developed in 1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies. It's showing a reading just shy of a peak reached in 2000. T ..."
    "... the signal sent by the "Buffett Indicator," a ratio of the total market capitalization of U.S. stocks divided by gross domestic product. ..."
    "... Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an average 3% a quarter since 2015. ..."
    "... "This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'" ..."
    "... To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a signal, he says. "That's usually an indication we're trying to justify something," he said. ..."
    Mar 287, 2021 | www.bloomberg.com

    March 27, 2021

    Everywhere you look, there's a valuation lens that makes stocks look frothy. Also everywhere you look is someone saying don't worry about it.

    The so-called Buffett Indicator . Tobin's Q. The S&P 500's forward P/E. These and others show the market at stretched levels, sometimes extremely so. Yet many market-watchers argue they can be ignored, because this time really is different. The rationale? Everything from Federal Reserve largesse to vaccines promising a quick recovery.

    How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency. Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms.

    "Every time markets hit new highs, every time markets get frothy, there are always some talking heads that argue: 'It's different,'" said Don Calcagni, chief investment officer of Mercer Advisors . "We just know from centuries of market history that that can't happen in perpetuity. It's just the delusion of crowds, people get excited. We want to believe."

    relates to Bubble Deniers Abound to Dismiss Valuation Metrics One by One

    Source: Robert Shiller's website

    Robert Shiller is no apologist. The Yale University professor is famous in investing circles for unpopular valuation warnings that came true during the dot-com and housing bubbles. One tool on which he based the calls is his cyclically adjusted price-earnings ratio that includes the last 10 years of earnings.

    While it's flashing warnings again, not even Shiller is sure he buys it. At 35, the CAPE is at its highest since the early 2000s. If that period of exuberance is excluded, it clocks in at its highest-ever reading. Yet in a recent post , Shiller wrote that "with interest rates low and likely to stay there, equities will continue to look attractive, particularly when compared to bonds."

    Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was developed in 1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies. It's showing a reading just shy of a peak reached in 2000. To Ned Davis, it's a valuation chart worth being wary about. Still, while the indicator is roughly 40% above its long-term trend, "there may be an upward bias on the ratio from technological change in the economy," wrote the Wall Street veteran who founded his namesake firm.

    Persuasive arguments also exist for discounting the signal sent by the "Buffett Indicator," a ratio of the total market capitalization of U.S. stocks divided by gross domestic product. While it recently reached its highest-ever reading above its long-term trend, the methodology fails to take into consideration that companies are more profitable than they've ever been, according to Jeff Schulze, investment strategist at ClearBridge Investments.

    "It's looked extended really for the past decade, yet you've had one of the best bull markets in U.S. history," he said. "That's going to continue to be a metric that does not adequately capture the market's potential."

    At Goldman Sachs Group Inc., strategists argue that however high P/Es are, the absence of significant leverage outside the private sector or a late-cycle economic boom points to low risk of an imminent bubble burst. While people are shoveling money into stocks at rates that have signaled exuberance in the past, risk appetite is rebounding after a prolonged period of aversion, according to the strategists, who also cite low interest rates.

    "Today is a very different situation -- I don't think we've got a broad bubble," Peter Oppenheimer, chief global equity strategist at the firm, said in a recent interview on Bloomberg Television. "Given the level of real rates, where they are, it's still likely to be broadly supportive for equities versus bonds."

    Another rationale employed to dismiss certain valuation metrics is the earnings cycle. Corporate America is just emerging from a recession, with profits forecast to stage a strong comeback. The strong outlook for profits is why many investors are giving similarly stretched valuations the benefit of the doubt. Trading at 32 times reported earnings, the S&P 500 looks quite expensive, but with income forecast to jump 24% to $173 a share this year, the multiple drops to about 23.

    The valuation case becomes more favorable should business leaders continue to blow past expectations. For instance, if this year's earnings come in at 16% above analyst estimates, as they did for the previous quarter, that'd imply a price-earnings ratio of less than 20. While that exceeds the five-year average of 18, Ed Yardeni is not troubled by what he calls "the New Abnormal."

    "Valuation multiples are likely to remain elevated around current elevated levels because fiscal and monetary policies continue to flood the financial markets with so much free money," said the founder of Yardeni Research Inc. He predicts the S&P 500 will finish the year at 4,300, about an 8% gain from current levels.

    Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an average 3% a quarter since 2015.

    "This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'"

    Returns of 2%

    Valuations are never useful market-timing tools because expensive stocks can get more expensive, as was the case during the Internet bubble. Yet viewed through a long-term lens, valuations do matter. That is, the more over-valued the market is, the lower the future returns. According to a study by Bank of America strategists led by Savita Subramanian, things like price-earnings ratios could explain 80% of the S&P 500's returns during the subsequent 10 years. The current valuation framework implies an increase of just 2% a year over the next decade, their model shows.

    To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a signal, he says. "That's usually an indication we're trying to justify something," he said.

    [Mar 28, 2021] Willful Blindness - Wash and Rinse in Metals and Stocks

    Mar 28, 2021 | jessescrossroadscafe.blogspot.com


    "In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves."

    John Kenneth Galbraith, The Great Crash of 1929

    "Foolishness is a more dangerous enemy of the good than malice. One may protest against evil; it can be exposed and, if need be, prevented by use of force. Evil always carries within itself the germ of its own subversion in that it leaves behind in human beings at least a sense of unease.

    In conversation with them, one virtually feels that one is dealing not at all with a person, but with slogans, catchwords and the like that have taken possession of them. They are under a spell, blinded, misused, and abused in their very being."

    Dietrich Bonhoeffer, Prisoner for God: Letters and Papers from Prison

    "The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated communist, but people for whom the distinction between fact and fiction, true and false, no longer exists."

    Hannah Arendt, The Origins of Totalitarianism

    "When we trade the effort of doubt and debate for the ease of blind faith, we become gullible and exposed, passive and irresponsible observers of our own lives. Worse still, we leave ourselves wide open to those who profit by influencing our behavior, our thinking, and our choices. At that moment, our agency in our own lives is in jeopardy."

    Margaret Heffernan

    Today was a general wash and rinse in the markets.

    Wax on, wax off.

    If you look at the charts you will see the deep plunges in the early trading hours in stocks and the metals, especially silver.

    Simply put, it is called running the stops.

    This is not 'the government' doing this.

    These are the monstrous financial entities that we have allowed lax regulation and years of propagandizing to create, in the biggest Banks and hedge funds.

    Most will run back to the familiar sources of their ideological addiction, the so-called 'news sites' that thrive on the internet and alternative radio funded by the oligarchs.

    If you are one of those who cannot wait to run back to your familiar ideological watering hole to relieve the tension of thought, you might just be one of the willfully blind and lost.

    Truth is more palatable to the sick at heart when it has been twisted out of shape.

    The good news perhaps is that a cleaning out like this often proceeds a resumption of a move higher.

    First they kick off the riff raff. Oh, certainly that does not include you, but those others, right?

    Or not. It is not easy to think like a criminal when you are not privy to the same jealously guarded information and perverse perspective on life.

    On the lighter side I have experienced no side effects from the first dose of the Coronavirus vaccine which I had the other day.

    Let's see if the second shot has the same results.

    The whole experience reminded me of 'Sabin Oral Sunday' back in 1960. I don't recall any anti-vaxxer or ideologically driven whack-a-doodlism back then, but I was too young to care. And polio shots were no fun. But it beat doing time in an iron lung.

    And the band played on.

    Have a pleasant evening.

    [Mar 28, 2021] Real unemployment is double the 'official' unemployment rate

    Notable quotes:
    "... The Globe and Mail ..."
    "... The Globe and Mail ..."
    "... The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China ..."
    Mar 28, 2021 | systemicdisorder.wordpress.com

    How many people are really out of work? The answer is surprisingly difficult to ascertain. For reasons that are likely ideological at least in part, official unemployment figures greatly under-report the true number of people lacking necessary full-time work.

    That the "reserve army of labor" is quite large goes a long way toward explaining the persistence of stagnant wages in an era of increasing productivity.

    How large? Across North America, Europe and Australia, the real unemployment rate is approximately double the "official" unemployment rate.

    The "official" unemployment rate in the United States, for example, was 5.5 percent for February 2015. That is the figure that is widely reported. But the U.S. Bureau of Labor Statistics keeps track of various other unemployment rates, the most pertinent being its "U-6" figure. The U-6 unemployment rate includes all who are counted as unemployed in the "official" rate, plus discouraged workers, the total of those employed part time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up). The actual U.S. unemployment rate for February 2015, therefore, is 11 percent .

    Share of wages, 1950-2014 Canada makes it much more difficult to know its real unemployment rate. The official Canadian unemployment rate for February was 6.8 percent, a slight increase from January that Statistics Canada attributes to "more people search[ing] for work." The official measurement in Canada, as in the U.S., European Union and Australia, mirrors the official standard for measuring employment defined by the International Labour Organization -- those not working at all and who are "actively looking for work." (The ILO is an agency of the United Nations.)

    Statistics Canada's closest measure toward counting full unemployment is its R8 statistic, but the R8 counts people in part-time work, including those wanting full-time work, as "full-time equivalents," thus underestimating the number of under-employed by hundreds of thousands, according to an analysis by The Globe and Mail . There are further hundreds of thousands not counted because they do not meet the criteria for "looking for work." Thus The Globe and Mail analysis estimates Canada's real unemployment rate for 2012 was 14.2 percent rather than the official 7.2 percent. Thus Canada's true current unemployment rate today is likely about 14 percent.

    Everywhere you look, more are out of work

    The gap is nearly as large in Europe as in North America. The official European Union unemployment rate was 9.8 percent in January 2015 . The European Union's Eurostat service requires some digging to find out the actual unemployment rate, requiring adding up different parameters. Under-employed workers and discouraged workers comprise four percent of the E.U. workforce each, and if we add the one percent of those seeking work but not immediately available, that pushes the actual unemployment rate to about 19 percent.

    The same pattern holds for Australia. The Australia Bureau of Statistics revealed that its measure of "extended labour force under-utilisation" -- this includes "discouraged" jobseekers, the "underemployed" and those who want to start work within a month, but cannot begin immediately -- was 13.1 percent in August 2012 (the latest for which I can find), in contrast to the "official," and far more widely reported, unemployment rate of five percent at the time.

    Concomitant with these sobering statistics is the length of time people are out of work. In the European Union, for example, the long-term unemployment rate -- defined as the number of people out of work for at least 12 months -- doubled from 2008 to 2013 . The number of U.S. workers unemployed for six months or longer more than tripled from 2007 to 2013.

    Thanks to the specter of chronic high unemployment, and capitalists' ability to transfer jobs overseas as "free trade" rules become more draconian, it comes as little surprise that the share of gross domestic income going to wages has declined steadily. In the U.S., the share has declined from 51.5 percent in 1970 to about 42 percent. But even that decline likely understates the amount of compensation going to working people because almost all gains in recent decades has gone to the top one percent.

    Around the world, worker productivity has risen over the past four decades while wages have been nearly flat. Simply put, we'd all be making much more money if wages had merely kept pace with increased productivity.

    Insecure work is the global norm

    The increased ability of capital to move at will around the world has done much to exacerbate these trends. The desire of capitalists to depress wages to buoy profitability is a driving force behind their push for governments to adopt "free trade" deals that accelerate the movement of production to low-wage, regulation-free countries. On a global basis, those with steady employment are actually a minority of the world's workers.

    Using International Labour Organization figures as a starting point, professors John Bellamy Foster and Robert McChesney calculate that the "global reserve army of labor" -- workers who are underemployed, unemployed or "vulnerably employed" (including informal workers) -- totals 2.4 billion. In contrast, the world's wage workers total 1.4 billion -- far less! Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China , they write:

    "It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well." [page 145]

    The earliest countries that adopted capitalism could "export" their "excess" population though mass emigration. From 1820 to 1915, Professors Foster and McChesney write, more than 50 million people left Europe for the "new world." But there are no longer such places for developing countries to send the people for whom capitalism at home can not supply employment. Not even a seven percent growth rate for 50 years across the entire global South could absorb more than a third of the peasantry leaving the countryside for cities, they write. Such a sustained growth rate is extremely unlikely.

    As with the growing environmental crisis, these mounting economic problems are functions of the need for ceaseless growth. Once again, infinite growth is not possible on a finite planet, especially one that is approaching its limits. Worse, to keep the system functioning at all, the planned obsolescence of consumer products necessary to continually stimulate household spending accelerates the exploitation of natural resources at unsustainable rates and all this unnecessary consumption produces pollution increasingly stressing the environment.

    Humanity is currently consuming the equivalent of one and a half earths , according to the non-profit group Global Footprint Network. A separate report by WWF–World Wide Fund For Nature in collaboration with the Zoological Society of London and Global Footprint Network, calculates that the Middle East/Central Asia, Asia-Pacific, North America and European Union regions are each consuming about double their regional biocapacity.

    We have only one Earth. And that one Earth is in the grips of a system that takes at a pace that, unless reversed, will leave it a wrecked hulk while throwing ever more people into poverty and immiseration. That this can go on indefinitely is the biggest fantasy.

    [Mar 28, 2021] D.C. spent around $30,115 per pupil in 2016-17, while in 2017-18, nearby Arlington County was expected to spend $19,340,

    Mar 28, 2021 | www.unz.com

    Seamus , says: March 25, 2021 at 8:32 pm GMT • 2.8 days ago

    "Underfunded" is a euphemism for "have students with low test scores." E.g., "Washington D.C.'s underfunded schools."

    D.C. spent around $30,115 per pupil in 2016-17, while in 2017-18, nearby Arlington County was expected to spend $19,340, the City of Falls Church to spend $18,219; the City of Alexandria, $17,099; Montgomery County, $16,030; Fairfax County, $14,767; Prince George's County, $13,816; Loudoun County, $13,688; City of Manassas, $12,846; City of Manassas Park, $11,242; and Prince William County, $11,222.

    But I suppose those are hate facts.

    https://townhall.com/columnists/terryjeffrey/2020/09/16/washington-dc-public-schools-spend-30k-per-student-23-of-8th-graders-proficient-in-reading-n2576265

    https://www.insidenova.com/news/arlington/for-good-or-ill-arlington-per-student-spending-again-tops-region/article_0f441fe4-cef5-11e7-b4d4-cf5ac038e374.html

    [Mar 28, 2021] You know how we raised black test scores to the level demanded? We fudged the numbers

    Mar 28, 2021 | www.unz.com

    Anonymous [369] Disclaimer , says: March 25, 2021 at 11:18 am GMT • 3.2 days ago

    "Underfunded" is a euphemism for "have students with low test scores." E.g., "Washington D.C.'s underfunded schools." Presumably, it means "underfunded relative to some theoretical amount of money, such as a gajillion dollars, that would be sufficient to raise these students' test scores to average."

    My dad was a school administrator in one of the top county public school systems in the country. A politically deep-blue part of the country. He retired in the early '80's. I remember him telling me once after he retired that his school(s) would get constant demands from the school board to raise black (not many Hispanics then) test scores. He said the school(s) focused all kinds of resources on black students which yielded no appreciable results. He then said, "You know how we raised black test scores to the level demanded? We fudged the numbers."

    [Mar 27, 2021] It is not just Jens Quisling, half (or more) of the European political elite are USA proxies. China stated that it will forego the benefits of trade if sanctions regime persists and doesn't care if the EU's dire economic condition worsens

    Mar 27, 2021 | www.moonofalabama.org

    karlof1 , Mar 24 2021 22:11 utc | 56

    The EUP is cutting its own throat trying to bully China. I see the move was made as soon as Blinken arrived and began spreading lies about both Russia and China. I know China and Russia would like these rogue nations to uphold their honor by obeying the UN Charter, but it seems too many have caught the Outlaw US Empire's disease and now want to return to their Colonial ways. If the EUP ends up trashing the Comprehensive Agreement on Investment (CAI) with China, many individual European nations are going to be very angry. China won't mind if that's what the EUP does as is explained here :

    "After China announced sanctions on 10 individuals and four entities from the EU as a countermove to EU's unilateral sanctions against China, some people from the EU reacted strongly, claiming China's countermeasures were "unacceptable." The European Parliament canceled a meeting on Tuesday to discuss the Comprehensive Agreement on Investment (CAI) with China. Some members of the European Parliament warned that the lifting of Chinese sanctions should be a condition to promote talks on CAI. Voices that support to block the agreement in an attempt to punish China have been hyped by some anti-China forces.

    "Yet those forces should be told that the CAI between China and the EU is mutually beneficial, rather than a gift from the EU to China. If the European Parliament wants to obstruct the deal, taking it as a bargaining chip in interactions with China, it should first reach a consensus among European countries. If they all agree, let's just take it as negotiations between China and the EU never took place last year. But don't blackmail China with the case. China despises such ugly deeds."

    China's saying essentially that it will forego the benefits of trade if it isn't properly respected and doesn't care if the EU's dire economic condition worsens because it can't stand up for itself in the face of the world's #1 Bully, which is exactly the same line Russia has taken.

    Lurk , Mar 25 2021 1:33 utc | 74

    @Norwegian | Mar 24 2021 21:19 utc | 46

    It is not just Jens Quisling, half (or more) of the European political elite are USA proxies.

    Take for example the European green parties.

    I am pretty sure that the Dutch green party is at its core a NATO/military intelligence operation. It was created as a merger of three parties, all of whom had a distinct pacifist and socialist signature. The new party, GroenLinks ("GreenLeft") has forgotten all of that and has limited itself to churning out Big Climate slogans. The party leader is an obviously hollow puppet in the image of Justin Trudeau. His opinions are handed to him by advisors in the shade.

    A few years ago, an MP for GroenLinks, Mariko Peters was enthousiastically promoting more military missions in Afghanistan. She was also a board member of the "Atlantische Commissie", the local Dutch chapter of the Atlantic Treaty Organisation (the USA chapter is the more well-known Atlantic Council). If you study her antics and associations more closely, it is pretty obvious that there is nothing green or left about this lady and that she is an obvious atlanticist diplomat/spy type.

    Currently, there are no political parties in the Netherlands that are critical of NATO. This used to be very different not even a very long time ago.

    About the German green party I know a bit less, but I trust well-informed members of the CDU when they point out the NATO dirt on Die Grüne:
    Green Party is an 'arm of the US elites' & doesn't care about German interests – Merkel's ally to RT

    What the article does not mention is the association, reputedly for a six-figure salary) of former Grüne luminary Joschka Fisher to the Nabucco pipeline project (competing with ns2). Fischer is also a member of the council on foreign relations and a founding member even of the European chapter ECFR.

    [Mar 27, 2021] I have been surprised by the explosion in the numbers of people locally living in cars and vans lately

    Notable quotes:
    "... freedom is material: a human being must be free from material privation, here and now, in life (and not in the mythical afterlife of reincarnation) in order to be really free. In other words, freedom from need is true freedom. ..."
    Mar 27, 2021 | www.moonofalabama.org

    vk , Mar 24 2021 17:07 utc | 3

    Health is primary indicator of people's happy life: Xi

    Marx's concept of freedom is completely different from the liberal or pre-liberal concepts of freedom. For Marx, freedom is material: a human being must be free from material privation, here and now, in life (and not in the mythical afterlife of reincarnation) in order to be really free. In other words, freedom from need is true freedom.

    Human beings can only be materially free. Don't fall for the moral victories of liberalism, the snake oil salesmen's promise of a spot in Paradise from the Abrahamics or the nihilist bullshittery from the Buddhists et al.


    William Gruff , Mar 24 2021 17:47 utc | 6

    vk @3

    Excellent point by vk here. Despite sometimes pretending to myself that I am a Buddhist (I am really good at meditating!), real freedom is being free from need. Abstract and metaphysical "freedoms" are luxuries of the wealthy that few under the thumb of the empire can afford.

    I have been surprised by the explosion in the numbers of people locally living in cars and vans lately. I guess from my Buddhist perspective they have been freed from the attachment to a residence. Who could have guessed that capitalism would be such a good teacher of the path to enlightenment?

    karlof1 , Mar 24 2021 21:30 utc | 50

    John @44--

    It's freedom from Want. The Four Freedoms as articulated by FDR in 1941 were:

    1.Freedom of speech
    2.Freedom of worship
    3.Freedom from want
    4.Freedom from fear

    Earlier this year on the 80th anniversary of FDR's speech, I wrote a series of comments on the topic. They remain the four main tasks needing to be accomplished for the Common Man to be genuinely free. At the time, they were to be the main goals of WW2; goals that were further articulated by Henry Wallace in 1942 & '43 in his speeches and writings. Currently, several nations have accomplished those four goals; none of them is a NATO/Neoliberal nation however.

    [Mar 27, 2021] Retirees who pay the most in taxes make only $36,000 a year on average, study finds

    Mar 27, 2021 | finance.yahoo.com

    Stephanie Asymkos · Reporter Fri, March 26, 2021, 1:54 PM

    Retirees who have the most money pay the most in taxes, according to a recent working paper , but they're not necessarily rich.

    "Most of the tax burden is carried by the top quintile of households," Anqi Chen , co-author and assistant director of savings research at the Center for Retirement Research at Boston College, told Yahoo Money. But "it's important to keep in mind that when we think about the top quintile of households -- the top 20% -- they're not the super wealthy."

    Read more: Here's how to get your retirement savings back on track

    Those in the highest quintile are mostly married couples with average combined Social Security benefits of $50,900, 401(k)/IRA balances of $325,400, and financial wealth of $441,400. When annuitized, those assets and retirement accounts earn account holders roughly $3,000 per month -- or $36,000 per year -- ostensibly making them middle-income earners, Chen said.

    "That's some money but not a ton of money," Chen said, "and these households will have to pay about 11% [in taxes]."

    (Photo: Getty)

    The highest quintile pays 11.3% on their retirement income, while the top 5% is taxed at 16.4%, and the top 1% is taxed at 22.7%, according to the analysis. Overall, retired households pay 6% in federal and state taxes on their income.

    Researchers used income data from 3,419 individuals and 1,907 households included in the Health and Retirement Study, a nationally representative longitudinal survey of older Americans. The analysis assumes the retirees follow the required minimum distributions for their retirement accounts and consume only interest and dividends from their assets.

    Read more: Ask the expert: How to build an emergency fund after the pandemic

    The heavy tax burden carried by well-off retirees demonstrates that even those who enter their golden years with the most money are still short on savings, an ongoing problem for many Americans. Roughly 40% of the top quintile of savers are at risk of maintaining their standard of living, meaning "taxes will make the goal even more difficult to attain," the study said.

    For the majority of retired households, "taxes are negligible," Chen said, paying 0% to 1.9%. But they are far from lucky.

    Those in the "bottom two-thirds of the income distribution don't have a lot in financial assets" that yield material income in retirement, she added.

    Yahoo Money sister site Cashay has a weekly newsletter.

    Stephanie is a reporter for Yahoo Money and Cashay , a new personal finance website. Follow her on Twitter @SJAsymkos .

    [Mar 27, 2021] S P 500 returns to a record high and that's a problem

    The USA remains is secular stagnation mode caused by neoliberalization of the economy and 2008 financial crisis. Nothing can change that.
    When Microsoft and Facebook are called high growth stock the question arise about the sanity of the author. How they can achieve high growth? Facebook user base probably might even shrink, not expand due to negative publicity as being a surveillance company and more and more obnoxious censorship.
    Microsoft achieved dominance in desktop long ago and with PC sales basically stagnant how it can grow in its key market? Connections to PRISM also do not help.
    Wall Street speculated on the identity of the mysterious seller behind the massive $10.5 billion in block trades executed on Friday by Goldman Sachs Group Inc. The question is why did these block trades occur? Does one firm know something others don't or were they somehow forced to cut risk? Read More: 'Unprecedented'- Wall Street Ponders Goldman's Block-Trade Spree
    Mar 27, 2021 | finance.yahoo.com

    Much of the stock market's recent turbulence has been an after-effect of movements in the bond market, where Treasury yields have been largely climbing since last autumn. Higher yields can make investors less willing to pay high prices for stocks, with companies seen as the most expensive taking the most pain. Companies that ask their investors to wait many years for the payoff of big profit growth have also been hit hard.

    The yield on the 10-year Treasury rose to 1.67% from 1.61% late Thursday. But that's still below where it was last week, when it rose above 1.70% and touched its highest level since before the pandemic began.

    The higher yields helped lift stocks of banks, in part because higher interest rates allow them to make bigger profits from making loans. Financial stocks also got a boost after the Federal Reserve said it will soon allow banks to resume buying back their own stock and to send bigger dividend payments to shareholders. The Fed restricted such moves last summer to force banks to hold onto cash cushions amid the coronavirus-caused recession.

    Some of Friday's biggest gains came from energy stocks, which benefited from a $2.41 rise in the price of U.S. oil, settling at $60.97 per barrel.

    ... ... ...

    President Joe Biden is pushing for big spending on the nation's infrastructure , as many past presidents have done to little effect. "Whether or not it happens or doesn't happen, the market feels like there's more of a possibility that it will happen," Plumb said.

    ... high-growth stocks were turning in a mixed performance on Friday. Apple rose 0.5%, but only after swinging between gains and losses numerous times through the day. Microsoft rallied 1.8%, and Facebook climbed 1.5%, but Tesla dropped 3.4%.

    [Mar 27, 2021] After shedding 140,000 jobs in December, the economy added back just 50,000 jobs in January.

    Mar 27, 2021 | www.vox.com

    In the background is a continuing stark economic situation in the US : After shedding 140,000 jobs in December, the economy added back just 50,000 jobs in January. The country is still short 10 million jobs from where it was pre-pandemic, and some 4 million workers have dropped out of the workforce. In that context, it's hard to gauge just how much to worry about overshooting it on the response.

    [Mar 27, 2021] As 30-year yield rises foreigners shun new US debt

    The Asia times article did it connect the dots for me. china especially is not buying US bonds anymore. Hence low demand for it , causing the yields to ride to attract buyers.
    Mar 27, 2021 | asiatimes.com

    The 30-year Treasury yield has climbed all the way back to its 2019 level, mainly because inflation expectations built into the yield have risen to the highest level since 2014. A US government deficit equal to 20% of GDP, a falling dollar and rising commodity prices mean more inflation in the future.

    The Federal Reserve bought most of the Treasury debt issued in the past year, and will have to buy most of the Treasury debt issued during the coming year, as Bridgewater's Ray Dalio told the China Economic Forum on Sunday.

    Unlike the period after the 2009 crash, when foreigners financed roughly half of the US government deficit, foreigners haven't increased their holdings of US debt during the past twelve months.

    Dalio, one of the world's most successful investors, warns that they might start to sell the debt they already own. "The situation is bearish for the dollar," Dalio concluded.

    As the late Herbert Stein said, anything that can't go on forever won't.

    Budan University Professor Bai Gang told China's Observer website last week: "For the past year, the US has continued to issue more currency to ease its internal situation. The pressure will eventually seriously damage the status of the US dollar as the core currency in the international payment system."

    [Mar 26, 2021] Are GLD and SLV Legitimate investment instrumnets -- A Gem from the skwealthacademy Archives

    Notable quotes:
    "... "Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense " (emphasis mine); and ..."
    "... "The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor. ..."
    Mar 26, 2021 | maalamalama.com

    Is it also not a conflict of interest that HSBC bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV?

    In fact, how is this situation any different than Goldman Sachs's actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm's own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.

    ... ... ...

    Some may say that the word delusional is a harsh term, but a mere glance at the GLD and SLV prospectuses explains my use of this term. Both the GLD and the SLV prospectus contain the following two statements:

    "Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense " (emphasis mine); and

    "The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor.

    Furthermore, the SLV prospectus additionally states, "As an owner of iShares, you will not have the protections normally associated with ownership of shares in an investment company (emphasis mine) registered under the Investment Company Act of 1940, or the protections afforded by the Commodity Exchange Act of 1936."

    Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete, and that in fact, any claims that the prospectus is truthful and complete is a "criminal offense"? So with nothing in the marketing materials of how these trusts operate or what exactly they buy on behalf of shareholders vetted by an independent third party, how is it that both of these respective trusts are still allowed to cumulatively sell tens of billions of dollars worth of shares to shareholders based upon a prospectus that could possibly be a complete fabrication?

    [Mar 26, 2021] Media Momo Meltdown, Small Caps SPACs Slammed As Bonds The Buck Bounce - ZeroHedge

    Mar 26, 2021 | www.zerohedge.com

    Cathie Wood had another bad week with ARKK down almost 10% to its lowest weekly close since early November ...

    It wasn't just US tech, there was a major liquidation in a number of China tech stocks this week...

    And media stocks were monkeyhammered (this was the biggest weekly drop in media stocks since March 2020) ...

    This all had the smell of a major media/tech fund liquidation. ViacomCBS was a total shitshow...

    Momentum stocks melted down...

    Source: Bloomberg

    SPACs dumped...

    Source: Bloomberg

    On the week, Staples outperformed as Discretionary dumped and Energy stocks changed their mind faster than Fauci...

    Treasury yields were lower across the curve this week led by the long-end... Is the pullback in Small Caps relative to Big-Tech implying that rates have peaked for now? 1.60% remains a key level for 10Y yields...


    NightWriter 5 hours ago

    We're starting to see bad news causing price drops as opposed to 2020 where the worst thing imaginable caused more bull runs. If there's some really bad news this weekend, the market could open up to a new low.

    Peak Finance 4 hours ago (Edited)

    I expect a flip back to bad news = good market news

    word is they going to rig the UE this coming month to some crazy + millions of jobs to make biden look good just like they did for O, same tricks messing with the "no logner in workforce" numbers to up the employment rate

    which is NOT going to have the effect on the market they think it will

    SuperareDolo 2 hours ago

    I concluded after Bernanke's printing that the market is able to see alpha (which security is more valuable than another), but blind to beta (the valuation of the whole market). It can judge one against another, but is incapable of reacting to overall valuations. Those are a factor only of how much money is in the financial system. And there's too much.

    Iskiab 1 hour ago (Edited)

    Well bad news is good news sorta isn't it. Bad economic news means more QE in a situation where it won't help that much keeping the gravy train going.

    I would be careful around momentum stocks. Any deviation from the trendline will be a big buy signal for algos, they're trained to look for opportunities and ride upward momentum, then get out faster if things go bad. If it diverges much from the old trend line they might buy en mass and see if it can create any momentum.

    CheapBastard 5 hours ago (Edited) remove link

    Dow soars 450 points!

    Greatest recover eva!

    ok, now get back in the food line for your bowl of soup.

    Keltner Channel Surf 4 hours ago remove link

    More than half a dozen indices/sectors I follow had very odd charts for the bulk of the day, VERY tightly wound with suppressed vertical action well into the post-lunch period. If you think of a tug-of-war game at company picnics that sits at a stalemate until one side gains the edge, it always snaps hard in one direction.

    The amplitude of most Daily candles wasn't terribly out of line with stronger days the past few weeks -- but the irregular concentration of orders in time certainly was.

    If I had to guess, the news of large liquidations may have torqued the spring to a near black hole density, as machines were spooked (or, more likely, thwarted) by unusual order patterns, then when the liquidations ended with prices well below VWAP, we break with speed as most machines end Friday's flat, and the bias starting yesterday afternoon was a weekly reversion back up.

    As I've said before, when less active larger players suddenly become active, more active daily algos, which control things 80% of the time, see their impact muted or overrun. But these little devils don't EVER stop so, like a Roomba robot vacuum that hits an obstacle, once the path is clear, it mindlessly goes where it planned. Again, this is your market on drugs (or computers).

    [Mar 26, 2021] S P 500 And US Economy Face Seismic Shifts From Joe Biden And The Federal Reserve

    The UBS economics team holds the out-of-consensus view that annual core PCE inflation won't exceed the Fed's 2% target until 2024. And what will happen with S&P500 if inflation brakes 3% barrier in late 2021 or 2022. Pumping money into stock market is a Ponzi scheme by definition so at one point mistki moment might arrive.
    Mar 26, 2021 | www.investors.com

    Biden hailed the new law's focus on growing the economy "from the bottom up and the middle out," after decades of supply-side, or "trickle down" tax policies. It "changes the paradigm" for the first time since President Johnson's Great Society programs, he said.

    But the last time free-spending, inflation-permissive "regime shifts for fiscal and monetary policymakers" coincided, wrote Deutsche Bank economists David Folkerts-Landau and Peter Hooper, "such shifts touched off a sustained surge in inflation in the U.S.," beginning in 1966.

    Growth in core prices, which exclude food and energy, jumped from well under 2% in 1965 to nearly 3.5% in 1966 and approached 5% by late 1968, Deutsche Bank noted. Inflation remained elevated into the early 1970s, even before an oil shock hit in 1973. The pickup was broad-based, but health care inflation played a key role, going from less than 3% to nearly 7% by early 1967.

    The S&P 500 suffered through a bear market in 1966. Another 19-month bear market began in late 1968. The Dow Jones made a major top in January 1966. It would take the Dow Jones until 1982 to finally break through that ceiling for good.


    What Is Inflation And Why Does It Matter To The Fed -- And You?


    Outlook For Inflation, Federal Reserve Policy

    Almost everyone expects a notable pickup in inflation this year -- including the Fed. Monetary policymakers expect the personal consumption expenditures (PCE) price index to rise 2.4% this year. That's vs. 1.5% in the 12 months through January.

    Fed Chair Jerome Powell said March 17 that the Fed will discount this year's jump in prices as a transitory bounce from pandemic-induced weakness. What happens in 2022 will be key. Fed projections show inflation easing back to 2%. But if pressures don't ease, the Fed will have to reassess its 2024 timetable for the cycle's first rate hike.

    It's easy to see how Fed projections might understate next year's inflation. Policymakers likely are not factoring in any impact from the Democrats' next massive spending package.

    Subdued health care prices might help keep inflation in check, depending on what Congress does. A 2% hike in Medicare reimbursements is scheduled to lapse in April, but lawmakers appear set to extend it. A 3.75% increase in Medicare fees for physicians could end in January, Deutsche Bank said.

    Democrats also are eyeing spending curbs to help pay for their infrastructure package. Letting Medicare negotiate prescription drug prices is high on the list of options.

    Longer term, the inflation outlook may depend on whether a post-pandemic productivity boom offsets upward price pressure as globalization backslides.

    10-Year Treasury Yield Surges On U.S. Economy Growth Outlook

    This week, the 10-year Treasury yield has eased to 1.66%, after hitting 1.75% last week, the highest of the Covid era. Still, the 10-year yield is up 66 basis points since Jan. 5.

    Financial market pricing now indicates an expectation that inflation will average 2.35% over the coming decade. That's the difference between the 10-year Treasury yield and the -0.69% yield on 10-year Treasury Inflation-Protected Securities, or TIPS.

    "Negative real yields seem highly incongruous with the robust economic growth in train," Moody's Analytics chief economist Mark Zandi wrote. As real yields rebound, Zandi sees the 10-year Treasury yield reaching 2% by year end, 2.5% in 2022 and 3% by late 2023.

    What Do Taxes, Interest Rates Mean For S&P 500?

    As the new fiscal and monetary policy regime takes hold, investors will have a lot to process. If the era of too-little inflation and ultralow interest rates is drawing to an end, but earnings growth surges as the economy catches fire, what will that mean for the S&P 500? And how might tax hikes affect stock prices?

    ... ... ...

    The UBS economics team holds the out-of-consensus view that annual core PCE inflation won't exceed the Fed's 2% target until 2024. Chief U.S. economist Seth Carpenter expects the new stimulus checks to be largely saved. The next fiscal package might likewise have a "muted" bang for the buck, while adding just $600 billion to the federal deficit.

    ... ... ...

    Interest Rates: Parker finds that a 50-basis-point rise in the 10-year Treasury yield compresses price-earnings multiples by six-tenths of a point. Based on the S&P 500's current forward earnings multiple of about 21.5, that would equate to about a 3% decline in the S&P 500.

    Capital Gains Taxes: Biden has proposed hiking the capital gains tax rate from 20% to 39.6% for high earners. Parker figures that could slice 1.5 points off the S&P 500 P/E multiple, potentially a 7% hit. However, UBS expects that not quite half the tax plan will become law.

    Parker arrives at a 19.5 forward earnings multiple for the S&P 500. That also factors in some compression because the fiscal boost to earnings is bound to slacken...

    [Mar 26, 2021] Dow and S P 500 Close at Records as Oil Prices Rise

    Mar 26, 2021 | finance.yahoo.com

    Teresa Rivas Fri, March 26, 2021, 4:31 PM

    Global stocks are higher as a positive session on Wall Street inspires investors. Oil prices rise as the crucial Suez Canal waterway remains blocked.

    [Mar 26, 2021] Absurd NFT PRices Expose a Global Financial House of Cards - ZeroHedge

    Mar 26, 2021 | www.zerohedge.com


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    Absurd NFT PRices Expose a Global Financial House of Cards BY SKWEALTHACADEMY FRIDAY, MAR 26, 2021 - 5:59

    The insanity of absurd NFT prices reveals the fraud of the global currency system. The pricing for assets worldwide has gone insane at a time when the vast majority of the world's population became poorer, not wealthier, over the past 12 months due to the global economic lockdowns. As an example, there was an article in the Philadelphia Inquirer the other day of a cassette tape of hip hop icon Nas's Illmatic album selling for $13,999 . Not a CD, but a cassette tape. A rectangular piece of cardboard, known as an NBA trading card, for star Luka Doncic's rookie trading card, recently auctioned for $4.6M. Luka Doncic is not a star that played in 1925, and for this reason, his rookie card is worth so much. Luka Doncic entered the NBA in the 2018-19 season, less than three years ago. Nostalgic or collector items are simply selling for insane price because, in my opinion, wealthy people have captured so much of the world's wealth through a global currency system designed and engineered to produce this end result, that they have no better use for their money than to pay $14,000 for a music item that the vast majority of people do not even have the necessary hardware to actually play and to pay more than $4.5M for a piece of cardboard. Anyone that truly understands the difference between a sound and an unsound monetary system realizes that the likelihood, under a sound monetary system, of people paying exorbitant prices for the types of assets and NFTs described above would be a fraction of the probability at which they are occurring today.

    Banksy, a UK-based street artist infamous for mocking the very wealthy people that pay millions for his artwork, even titling a piece "Morons" which depicted an art auction with a framed picture of the words "I can't believe you morons actually buy this shit". Instead of being offended by the artist's mockery, someone paid nearly 44,000 pounds for it and it recently sold for nearly 10 times the original purchase price when the piece was destroyed and the act of destruction was turned into an NFT. By the way Banksy also sold a very simple drawing of a girl with a red balloon that was mounted inside a frame in which he had hidden a shredder. After it sold for $1.4M, Banksy remotely activated the hidden shredder and shredded his artwork into thin strips as perhaps "revenge" against the idiocy of narcissistic, wealthy art collectors that can't find any better use of their money than purchasing stencil created art for which no rational person would ever pay $1.4M. To demonstrate the idiocy of the art world, Sotheby's immediately coined the shredding of the art piece as "the first work in history ever created during a live auction", which art collectors worldwide seemed to accept, and thereby increased the value of the destroyed piece of art to perhaps as high as double the original auction price at the current time and avoiding a more rational valuation for the art piece to near zero.

    I once read a book called the $12M Stuffed Shark, in which the author revealed that US hedge fund manager Steve Cohen paid $12M to an artist to kill a shark and put it in a vat of plexiglass sealed formaldehyde that he could display in the foyer of his house and basically concluded, after a careful introspection into the art world, that pieces of art like pyramids built from tiny Godiva chocolates and stainless-steel colored balloon animals ($58M or more) would be priced at whatever price dealers could convince the dumbest rich person it was worth. Certainly this conclusion seemed to be supported when someone purchased an "art installation" of a banana taped to the wall with duct tape at a Miami Beach art gallery for $120,000 at the end of 2019 . When people conclude that the best use for $5M or $58M is to buy a piece of cardboard or a steel balloon animal during a period in which Rome is burning (i.e. exploding homelessness numbers in Los Angeles nearing 70,000 as evidenced here and here ), either this is a sign of the fraud of the monetary system, the decline of civilization, or both. If you have ever lived in Los Angeles, as I have, and watch the video referenced in the second link, you will find it astonishing that massive homeless encampments have sprung up throughout Los Angeles in areas that prior to recent years, had no homelessness. (depending on the social media platform you may be watching this on, the soaring prices for which art that I consider to be the lowest form of art that many do not even consider as art is selling for such absurd prices, including NFTs that I will soon discuss, is certainly reflective of the rapid decline of civilization.

    This rapid decline of civilization is also reflected in the fact that giant titans of the tech world and social media platforms continue to promote and push the most morally reprehensible content to the top positions of success on their platforms. When popular YouTube Logan Paul visited the "suicide forest" in Japan and found a dead body hanging from the tree, he filmed it and mocked the dead person and YouTube quickly promoted his video as one of their top trending videos on their entire platform for 24 hours, until Logan Paul, not YouTube executives, deleted the video due to the outrage it provoked. Another popular YouTuber, David Dobrik, has had many of his reprehensible videos monetize bullying and belittling of others, often promoted on YouTube among the top trending videos. Recently Dobrik came under fire for allegedly monetizing a video of an actual rape on his channel, and he was roundly mocked when his initial apology consisted of trying to blame the rape victim, who was allegedly underage and too drunk to consent to sex. In his "apology", Dobrik stated he always gains consent for his videos, but sometimes people he victimizes consent at first but then change their minds later, and that is why it appears in many of his videos that he is monetizing morally reprehensible behavior. In any event, YouTube executives allegedly allowed such morally and cowardly behavior to be monetized to massive sums of income for such YouTubers and seem to be more focused on demonetizing anyone that challenges a narrative, true or false, forwarded by the oligarchs.

    And as ludicrous as are the prices paid for some of the assets I've mentioned above, the level of insanity paid for NFTs, in my opinion, are at an even exponentially higher level. For those of you that may not know what are NFTs, Non-Fungible Tokens are unique blockchain-based digital assets that represent an increasing number of commodities, from art and real estate to collectibles like sports trading cards. One platform, Original Protocol, recently auctioned off the world's first NFT music album by American DJ 3LAU. Collectively, the artist's fanbase paid out more than $11 million for 33 NFTs contained on 3LAU's album Ultraviolet. In this case, since musicians are routinely ripped off by giant record labels and often have such suffocating, unfair contracts that make it near impossible to earn any significant income from album releases, the digitization of music in the form of NFTs that allow musicians to control their income is a wonderful aspect of the new digital economy of NFTs.

    The Non-Fungibility of NFTs and Most Cryptocurrencies Disqualify Them for Use in Financial Derivative Currency Swaps

    NFTs sell digital representations of items, including some that used to be represented in the physical world, like trading cards and pieces of art. As is the case in the fine art world, an NFT's price is the highest price you can convince someone to pay for it, a pool of clients that often overlaps with the over indulgent, narcissistic people that comprise the bidders for modern art pieces that sell for millions of dollars. Perhaps the most amazing quality of NFTs is that they actually have a more meaningful value than any cryptocurrency not backed by any type of hard asset. For example, bitcoin is a digital asset, but one would be hard pressed to describe its intrinsic value. One cannot say its fungibility is its price because its price is denominated in fiat currencies with intrinsic values of near zero. Furthermore, for those that constantly and very wrongly argue that non hard-asset backed cryptocurrencies are sound money, if bankers truly believed that bitcoin even remotely qualified as sound money, they would have zero problem offering currency swap derivative contracts between any fiat currency and bitcoin.

    Yet, there is not a single corporation in the entire world that has a currency swap that hedges their corporate cash treasury holdings with bitcoin. You can never have any type of financial contract without unlimited risk if it is denominated in bitcoin in which both parties realistically have no idea of the price range of that currency for the maturity of that contract. No rational party will lock themselves into a contract in which a currency presents unlimited risk to them. The simple understanding of why there are no derivative currency swaps or hedging contracts denominated in bitcoin should easily explain to any rational person the very reason why BTC is not considered as sound money by a single banker in the entire world. On the contrary, even as volatile in price as gold and silver may be, gold and silver mining companies routinely hedge their inventory risk and their revenue risk of yet-to-be-mined gold and silver ounces by establishing open positions of gold and silver futures contracts years into the future.

    You can't argue that BTC's intrinsic value is the block of the blockchain that records the transaction, because whether that block is used to record an NFT, BTC, or ownership of real estate, a photo or song, the price represented by that block could possibly vary from just a few dollars to several million dollars. So the blockchain has no intrinsic value either. However, with NFTs, its value, is more uniquely determinable than the block upon which a bitcoin transaction is stored that records the price of bitcoin, because that value is simply the highest price willing to be paid by all available bidders at any given time. If there are no available bidders willing to bid on a particular NFT for weeks or perhaps months on end, then one can assume the price of that NFT, even if the last paid price was $100,000, is likely zero. But even if there is one available bidder for that NFT at a price of $1,000,000 then the market price of that NFT is $1M. Though one may state that the bidding mechanism is much more controlled in BTC markets and that BTC could never be priced at zero or $1M per BTC in such a cavalier manner that mimics the pricing of NFTs, the similarities between the pricing mechanisms based upon lack of fungibility should not be ignored when considering the inherent risk imbedded in the price of BTC in its near $60,000 per coin current price. You will either understand this risk and behave accordingly, or ignore this risk and likely expose yourself to strong downside risk in the future at some point that should be expected but will remain unexpected to those that cannot, or will not, accept this existing risk.

    The five biggest whales that own BTC in order from top to bottom, are believed to be as follows: (1) The collective of institutions/people called Satoshi Nakamoto; (2) The FBI; (3) The Winklevoss Twins; (4) Micree Zhan; and (5) Jihan Wu. Other notable owners among the top 10 BTC whales are Huobi, Tim Draper and the North Korean State. In 2017, Bloomberg reported that only 1,000 people owned 40% of all BTC in the entire world. Given that in the past two years, it has been reported that the top whales had been cornering the BTC market and increasing their market share, it would not be surprising if they had increased their market share to 50% or perhaps even higher by 2021. In any event, this translates into 0.00012658% of the world's population likely controlling majority ownership of BTC. I don't know of any world in which such a statistic does not translate into enormous risk.

    Unanswered Questions

    But fungibility is what reveals why cryptocurrencies like BTC and NFTs cannot ever qualify as sound money. For those that don't understand why sound money needs to be a fungible asset, take gold for example. Fungibility essentially means that money should never vary in its qualitative properties but only its quantitative properties. All gold has electroconductivity properties no matter its form. Electroconductivity is an intrinsic quality of gold. Because all purified four nine gold has the same density, the same volume will always be measured by the exact same weight in grams, again another fungible quality of gold. However, depending on how paper gold futures markets are being manipulated and the date, that same gram of gold will vary wildly in fiat currency price. Fiat currency price, thus can never be the quantitative property used to value gold. Weight is the constant that should be used for gold's value when it is to be used as sound money, because this quantitative property is always unwavering, always constant no matter if one is using gold as money in Moscow, Capetown, Montevideo, Santiago, Montreal, Phoenix, Miami, Mogadishu, Kiev, Paris, Heidelberg, Reykjavik, Chiangmai, or Seoul.

    What quantitative property of bitcoin that is consistent and always the same across all uses? This is a question without an answer. For this same reason, NFTs could never serve as sound money either. No matter the latest fiat currency price paid for a Banksy "Morons" drawing set on fire, how can one determine the exchange rate for this NFT and an NFT representing a Mark Cuban tweet. Should the Banksy NFT be priced 10 million times higher than a Mark Cuban tweet NFT? Is an NBA TopShot NFT worth 1/1000 the price of a Banksy burning piece of art NFT? And even though NFTs have more uniqueness than say, a satoshi of BTC, because price assigned to that uniqueness is entirely subjective, the uniqueness leaves it no more fit to use as sound money than a cryptocurrency that has no backing of a hard asset. Miami-based art collector Pablo Rodriguez-Fraile proved the absurd pricing mechanism for NFT when he recently sold an NFT that he acquired for $66,666 in October, a 10-second computer-generated video clip of a slogan-covered giant Donald Trump created by digital artist Beeple , for mor than 100 times his original cost at $6.6M.

    The last point of irony in the BTC is the solution to the unsound global fiat currency system narrative is that many HODLers of BTC are well aware of the oligarch's use of their power consolidation strategy of (1) Create a crisis; (2) Present the solution to the artificially created crisis; and (3) Implement the solution to consolidate power, yet will never give any type of consideration to the possibility of how perfectly the creation of BTC, in response to the 2008 global financial crisis, fits this exact historical narrative that oligarchs have repeatedly implemented, instead choosing to believe that BTC is the special unique exception to this oft-deployed strategy.

    This despite, three US employees of the Central Bank, Galina Hale, Marianna Kudlyak, and Patrick Shultz, and one US university professor, Arvind Krishnamurthy, admitting that the premise I presented to my social media followers in December of 2017, when BTC hit $20,000, that the introduction of the US bitcoin futures market was going to be used to slash the BTC price drastically, essentially writing the premise for the referenced US Central Banker paper five months before it was written. In that paper, titled "How Futures Changed Bitcoin Prices", the four authors basically echoed my premise, and stated,

    "We suggest that the rapid rise of the price of bitcoin and its decline following issuance of futures on the CME is consistent with pricing dynamics suggested elsewhere in financial theory and with previously observed trading behavior. Namely, optimists bid up the price before financial instruments are available to short the market (Fostel and Geanakoplos 2012). Once derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value. While we understand some of the factors that play a role in determining the long-run price of bitcoin, our understanding of the transactional benefits of bitcoin is too imprecise to quantify this long-run price. But as speculative dynamics disappear from the bitcoin market, the transactional benefits are likely to be the factor that will drive valuation."

    While they did not name the players in the BTC futures markets that drove BTC prices downward from $20,000 to $3,000 in 2018, the implication is that Central Bankers were involved in this downward spiral. And if Central Bankers were involved in this downward spiral, the downward price spiral would of course, been far easier to execute, if Central Bankers were also among the members of the collective that constitutes the largest BTC whale, Satoshi Nakamoto. Even though these dots, though purely speculative, are clearly possible, most every BTC HODLer that is confident in the achievement of end-year $300,000 BTC prices or higher, will never consider this possibility, even for a nanosecond, despite heavy suggestions of three US Central Bank employees that Central Bankers were involved in the 2018 BTC price crash. But if one did, as is the rational and logical thing to do, then one would have far greater difficulties distinguishing the mechanisms that set the price for NFTs and BTC. And as the introduction of the first BTC ETFs seem to be on the near horizon now, one would be smart to heed the lessons learned after trading of BTC futures was introduced at the end of 2017. Subscribe to my youtube channel here , to my free newsletter here , to my podcast here , and to learn more about bonus content delivered to skwealthacademy patreons every week, click here , and to download the skwealthacademy fact sheet, click here .

    [Mar 26, 2021] A Structurally Deficient US Economy Will Soon Implode Again

    Feb 23, 2021 | maalamalama.com

    ... On December 7, 2009, I sent out a warning from our Managing Director, J. Kim, to thousands of people via email about the deterioration of the global economy...

    ...J. Kim: "Despite the weapons of mass financial destruction that bankers have created and governments worldwide have coddled and shielded from proper regulation, the majority of people still incredibly do not understand the crime syndicate-like relationships among governments, corporations and banks. The public sees that the US markets are up a little over 10% this year and many are duped into believing that that the stock market performance means that the economy is recovering. And this belief is reinforced by idiot talking heads on TV like Jim Cramer that do nothing but misinform people. Sure, US markets have now risen by more than 36.79% since they crashed in 2008, a figure that sounds impressive on the surface level. Then combine this impressive sounding figure with US Fed Reserve Chairman Ben Bernanke's national appearance on 60 Minutes, when he lies to the nation about inflation rates and about continuing to create more money out of thin air, and you have millions more that are converted into sheeple. How do I know? Because I talk almost every month to people in the US that tell me they believe the economy is recovering. So when people believe that inflation is still less than 2% because the Fed tells them to believe this, they look at a near 37% gain in the US markets in the last two years and believe that they have made substantial recovery in their pensions and IRAs and consequently believe the economy must be recovering as well! (by comparison, J. Kim's Crisis Investment Opportunities newsletter(that he published back then) has returned more than 105.25% over the same time period, clobbering the S&P 500's 36.79% return, and yielding very substantial REAL gains, even after the inflationary monetary effects of the US Federal Reserve's schemes)."

    James C : "So besides the government and bankers deliberately keeping people in the dark, why else do you think some, or even many, people believe the economy is recovering?"

    J. Kim: "First of all, the Federal Reserve's insane POMO (Permanent Open Market Operation) schemes this year (2010) are largely responsible for propping up the US market this year. In 2009, when I stated that the US would experience significant economic shocks in 2010 and 2011, I did not yet know the duration of the Fed's POMO operations and how insane they were going to be. Although daily POMOs had already reached upwards of $6 billion and $7 billion per day as of mid-2009 (just for US Treasuries, but up to multiples of these figures when including US Treasuries and other debt-related financial products), many had speculated that the POMOs would soon end. Obviously, with projected cumulative POMOs of nearly $1,000,000,000,000 just between November 2010 and June 2011 (again just for US Treasuries), the Fed Reserve POMO scheme not only did not end, but it received an injection of steroids in 2010. So POMOs that were used to buy future contracts of US market indexes is a major factor that has kept the US market afloat at this juncture and may continue to keep it afloat for several more months. Rising stock markets have no correlation to a strong economy anymore due to scams run by Central Banks and due to gains that largely occur due to the devaluing currencies that these markets are denominated in . The best performing stock market of the past decade has been the Zimbabwe stock market. Still, it's irrelevant if you made a quadrillion Zimbabwe dollar profit investing in the Zimbabwe stock market, as by 2008, a loaf of bread would have cost you 1.6 trillion Zimbabwe dollars."

    James C: "If the economy is really not recovering, then can you explain what is really going on?"

    J. Kim: "Let me explain what is really going on with the economy with the following disaster analogy. In June of 1995, the Sampoong department store, a five-story building with four basement levels, suddenly collapsed in Seoul, South Korea, tragically killing 501 people and injuring 937 others. When the Sampoong department store was constructed, the owners, due to a desire to cut costs, made several fatal decisions. First, they decided to cut away a number of support columns in the original blueprint in order to install escalators. Secondly, in order to cut costs, the owners shrunk the original width of the support columns from the required 80cms to only 60 cms, an inadequate width to support the load of the building. In addition, the original blueprint called for only a four-story building but the owners built an additional fifth story that housed a restaurant with a very heavy heated concrete base that quadrupled the load of the original building design.

    Two months before the building collapsed, worrisome cracks appeared in the ceiling of the south wing's floor. On the day of the collapse, cracks as wide as 10 centimeters appeared in the top floors of the building five hours before the building collapsed, but the owners hid this information from its patrons and refused to shut down and/or evacuate the building as they did not want to lose its daily revenue. When it became clear that the building was going to collapse, senior executives of the department store fled without warning any of the patrons still inside the building. An alarm to evacuate the building was only sounded when the building started to make loud cracking sounds, just 7 minutes before its collapse at 5:57 PM despite signs of an imminent collapse being clearly visible more than five hours prior. City officials Lee Chung-Woo and Hwang Chol-Min, in charge of overseeing the construction of the building, were responsible with concealing the illegal changes to the original blueprint designs and were later charged with and convicted of bribery."

    "Amazingly, the above story serves as nearly a perfect analogy for the US economy. The government and bankers laud a rising stock market as proof that the economy is recovering. They go on record stating that inflation is less than 2% when in reality it is more than four times higher. They state unemployment is less than 10% when it is nearly 23% [Editor's Note: These statistics all apply to the year in which this original interview was conducted, 2010]. Thus, to many people, the economy appears as the Sampoong department store's exterior appeared to the public right before its collapse, structurally sound and with a solid exterior. This is the reason why 40,000 people a day visited the department store despite its fatal structural integrity problems. The government and bankers are just like the Sampoong department store owners, actively concealing all warning signs from the public and selling them an illusion that all is okay when instead, the economy is heading for collapse. Just as the Sampoong department store owners constructed a crappy building destined to collapse due to excessive greed, bankers with the help of government officials, constructed dozens of financial derivative products destined to collapse due to their excessive greed as well."

    "The US regulators that also see the impending cracks in the economy, are just like Lee Chung-Woo and Hwang Chol-Min. They receive inordinate pressure and bribes from the bankers to look the other way and keep the public in the dark about the impending doom that is coming. In the case of the Sampoong disaster, when the contractors refused to continue work on the building when the owners changed structural regulations that endangered the integrity of the building, the owners fired the contractors and hired ones that would cut corners. US regulators that are honest and that try to protect the American public, like Brooksley Born, received the same fate as the original Sampoong contractors and are also fired or forced to resign. When the entire system is corrupt, even the rare good person can't save disasters from happening. Thus, the public is none-the-better-off despite the presence of regulators that are supposed to protect the public's interests and safety, but in reality, protect the greed and profits of companies that exploit the public's interests."

    "And finally, the economy itself is like Sampoong's interior. It is replete with cracks and fractures that warn us of the disaster ahead. But even so, a large percentage of the masses still remains ignorant because the banker/corporate/government three-headed monster keeps the people's vision in a tunnel by pummeling the public with a constant stream of propaganda on MSNBC, newspapers, and financial talk shows. In Seoul, Sampoong's owners distracted the public's attention away from the developing disaster with stores fully of luxury goods. So when the US economy finally experiences shocks in the future more disastrous than those in 2008, as was the case with the Sampoong department store collapse, many will believe that now warning signs had existed despite the evidence that exists to the contrary today. And I'm quite certain the media, just as they did in 2008, will stupidly ask the same questions they did back then, such as "How did this happen?" when in fact, all the answers stare them in the face right now. With the Fed's POMO schemes, regulators that aid and abet fraud, and governments and bankers that conceal truth from the public, the combined effect of these actions is just to delay disaster for another year or two. So that is why I say now that disaster will visit the US sometime between 2011-2013."

    [Mar 26, 2021] The Most Important Thing to Understand About the Ongoing Global Economic Crisis

    Mar 26, 2021 | maalamalama.com

    ... As I already stated above, anyone that has a rudimentary understanding of real finance (meaning finance as it operates in the real world, not finance as taught in MBA programs) already understood that Central Bankers' massive provisions of liquidity in the overnight repo market pointed to US banks being undercapitalized in cash

    ... in my referenced April 2020 article above, I only explained why it was necessary for Central Bankers to keep interest rates extremely low, and I had not yet realized, as we were only a few weeks into a global economic lockdown that was promised to last only a few weeks, that the global economic destruction caused by lockdowns would be the mechanism used to achieve this goal of keeping interest rates extremely low. In other words, only in hindsight, a few months into the lockdown, did I connect the dots myself and understand why it was necessary to keep the economic lockdowns going forever, which is also why I stated at the end of 2020 that only the extremely naïve and foolish believe that the bankers and politicians would end the lockdowns in the New Year, as the problem I explained in April 2020 that needs to be managed to avoid meltdown of the global financial system still very much exists in March of 2021.

    [Mar 26, 2021] US Corporate Junk Bond Yields Warning of Trouble Ahead

    Mar 22, 2021 | maalamalama.com

    I often look at rising US corporate junk bond yields after long periods of decline as the proverbial "canary in the coal mine" to predict major trouble ahead in global stock markets.

    As you can see, US corporate junk bond yields have just started to rise after nearly a full year of plunging yields. Is the rise enough to spark concern? In my opinion, the rise in yields is not significant enough to yet spark major concern, but if they break 5.0% then at this point, I will dive deeper into the muck to see what I can find.

    So stay tuned, and if you have not yet subscribed to my free newsletter, please do so at the link at the top of this page.

    [Mar 26, 2021] Treasury Markets Calm, but Investors Anticipate a Rate Rise Soon by Paul J. Davies

    Higher inflation in any country is typically currency negative. Fears of rampant inflation in the US have gone unfulfilled for years. the current level of deficit spending raises the question whether some sort of existential crisis for the dollar is in the books. In 2020 the US budget deficit hit 14.9% of GDP , the highest level since 1945. FEd now owns around 22% of the US beft -- in essence, one branch of the government buys debt from the another part of government. This might be a bad news for stocks, bonds and the dollar. The demand for Treasuries from private investors, including foreign buyers, appears to have weakened recently.
    Trust in government statistics, especially such measures as inflation and unemployment hit new low (see comnets below) and that also spell troble in the long run.
    Under neoliberalism financial oligarchy dominates and labor reduced to the role of "debt slaves" and lacks any wage bargaining power. So the main danger is deficits and eroding trust in the US economy which supports the role of dollar as world reserve currency. US foreign policy and sanctions encourages "flight from dollar" for Russia and China.
    Notable quotes:
    "... the difference between longer-term and shorter-term yields remains far greater in real yields than in nominal yields. This difference over time, known as the yield curve, illustrates how much investors expect interest rates to rise in the future: A steep curve equals more rate rises. ..."
    "... For normal Treasury yields, that five-year to 10-year gap was 0.798 percentage points, up from 0.550 percentage points at the end of 2020 ..."
    "... Seems like a very effective way to "tax" 401k money indirectly. ..."
    Mar 25, 2021 | www.wsj.com
    ...

    The Fed reiterated last week that its rate-setting committee doesn't expect to increase interest rates until after 2023. However, investors predict that it will, according to Sebastien Galy, senior macro strategist at Nordea Asset Management.

    ... the difference between longer-term and shorter-term yields remains far greater in real yields than in nominal yields. This difference over time, known as the yield curve, illustrates how much investors expect interest rates to rise in the future: A steep curve equals more rate rises.

    ... For normal Treasury yields, that five-year to 10-year gap was 0.798 percentage points, up from 0.550 percentage points at the end of 2020 .

    ... ... ...

    Some investors also fear that a sharper rise in interest rates later will be more destabilizing for other assets such as stocks or riskier corporate debt...

    ... ... ...

    Harold Begzos Harold Begzos SUBSCRIBER 1 week ago The value of fiat currency is only as good as the government that prints the paper. We are managing the dollar like a Caudillo running a banana republic. The U.S. is experiencing a sugar high. When the sugar runs out the crash will cause harm for the next decade. A Andy Kives SUBSCRIBER 1 week ago One of my many price increases this year was this morning from my metal and plastic container wholesaler, who I buy a few hundred thousand pieces from annually. Prices are only going up 10-26% in April.

    What inflation? Like thumb_up 3 Share link Report S Susan Croxton SUBSCRIBER 1 week ago (Edited) The dollar tanked under Trump, like he wanted Like thumb_up Share link Report G Gerald Garibaldi SUBSCRIBER 1 week ago (Edited) My grandmother was a deft investor, and her credo when investing was always "Don't ignore what's around you." I'm not her equal, but what's around me doesn't seem to be middle/working class families and people gearing up to shoot their stimulus wad on new TV sets and sunglasses. I think growth will after a short spirt, disappoint. And inflation will hit like a tsunami. EU is not following our example, by the way. Most inflation will be imported. 1 Share link Report J John Harris SUBSCRIBER 1 week ago (Edited) An included modest understatement of the year:

    "The flip side of this exceptionalism is a growing fear of higher inflation that could eventually reverse the dollar's fortunes, according to some investors."
    J
    John Harris SUBSCRIBER 1 week ago (Edited) Duh --
    Did anybody look at M2 ?? Austin Lowrie Austin Lowrie SUBSCRIBER 1 week ago The currency debasement will continue, until morale improves.... Like thumb_up 5 Share link Report I Ivaylo Ivanov SUBSCRIBER 1 week ago The article misses an important component of the equation. Various estimates suggest about half of all US cash in circulation, about $700-800 billion, circulates outside US borders. The trigger of a run on the dollar (a collapse, really) might be these holders, not foreign governments. The moment they realize they are holding increasingly worthless money they will try to dump it. Often ordinary people figure out the worthlessness of a currency much faster than governments.

    M1 (hot money) has increased by 70% in 12 months. The question is how fast people realize what that means.
    Like thumb_up Share link Report Frank Mostek Frank Mostek SUBSCRIBER 1 week ago If you drive car, own a home, require healthcare, have kids and eat - you have noticed plenty of inflation... L Lester Brown SUBSCRIBER 1 week ago Makes you realize how slanted the CPI measurement is. 1.4% in 2020 - my a $$!! B Brett M SUBSCRIBER 1 week ago go through the exercise of reconstructing the CPI with research online. I did. It won't take you long to see that there is no component less than 2%. you will find edu costs +5% annully for years, medical costs +4% annually for years. 2 Share link Report B bruce strong SUBSCRIBER 1 week ago So the Federal debt as a percentage of GDP was about 30% in 2001 and it's now around 100%. Seems we are living way beyond our means and this can only lead to trouble in the coming years. The only question is will Congress do anything to stop the spending? Forget about worrying about inflation as it;s the least of our concerns. p 5 Share link Report Frank Mostek Frank Mostek SUBSCRIBER 1 week ago I think it around 130% now...
    T
    Ted Terry SUBSCRIBER 1 week ago Apparently the Business Kids are surprised at the strength of the dollar but knowledgeable readers are not that surprised. The Dollar competes against the Euro and look at where the EU is. They are squabbling at each other over their ineffective response to the virus and their economies are struggling to break back to normal. I'm not sure where the Dollar is with respect to the Pound but the Brits too are still more virus bound than we are.
    B
    bruce strong SUBSCRIBER 1 week ago Japan's been running with a debt load of over 200% and the Yen has held up quite well. 2 Share link Report S Stephen S S Hyde SUBSCRIBER 1 week ago "The U.S. has a big advantage because the dollar is the world's most commonly used currency."

    This both understates and buries the lede on this seemingly granitic foundation of a fiscal/monetary system that has allowed us to get away with simultaneously lowering taxes, explosively expanding borrowings, creating the money to cover it, and then lending it to ourselves. (Eat your heart out, Argentina.)

    Unfortunately, having the world's reserve currency is not a skyhook, as our British cousins learned with their once indomitable Sterling. Like thumb_up 23 Share link Report I Ivaylo Ivanov SUBSCRIBER 1 week ago If you do everything in your power to debase your currency foreigners eventually notice. It will take one big player noticing to bring down the house (of cards). In the 60-s and the gold backed dollar it was de Gaulle. It will be interesting to see who will jump the gun this time around. 3 Share link Report S Stephen S S Hyde SUBSCRIBER 1 week ago You obviously have an informed sense of history. The dollar's gold backing had been increasingly precarious but relatively stable until de Gaulle pulled the fatal trigger. David Van Wie David Van Wie SUBSCRIBER 1 week ago

    Fears of rampant inflation have gone unfulfilled for years. The U.S. has had low and stable inflation for nearly three decades.
    Indeed. That point can't be emphasized enough. Said differently: for all of our research, economic theories and modeling, we still don't understand what causes inflation in our economy.

    Is it caused by massive amounts of deficit spending? Nope. We've had lots of that and no serious inflation. Higher taxes? Lower taxes? No and no. What about high or low trade deficits? Sorry, try again. No correlations here.

    I could go on, but you get my point. All of the things forecasters such as myself rely on to model inflation all sound like they should be predictive, but they aren't. Intuition creates cognitive bias, which in turn leads to bad trades that don't work.

    We won't figure out what's going on until about 6-12 months after inflation restarts, unfortunately. Then, everyone will have known it all along! Just don't ask to see their old forecasts. Like thumb_up 15 Share link Report S Stephen S S Hyde SUBSCRIBER 1 week ago Great comment, Mr. Van Wie. On top of your point (or underneath it) is the tendency for complex systems to fail not gradually, but suddenly and catastrophically. Think the Great Depression, the Soviet Union, the Great Credit Crunch, and Long Term Capital Management (talk about a moniker to challenge the gods!). I don't know when, how, or why, but I think our lifetimes will witness the opportunity to dig through the ruins of a once magnificent edifice built on sand. Like thumb_up 10 Share link Report B Brett M SUBSCRIBER 1 week ago Yes but your whole basis is on the government orgs giving your inflation information [% year over year ] are telling the truth. They are not. Like thumb_up Share link Report J Domingo J Domingo SUBSCRIBER 1 week ago Everyone is worried about inflation except the Fed.

    Which is why everyone is worried about inflation except the Fed. Like thumb_up 21 Share link Report I Ivaylo Ivanov SUBSCRIBER 1 week ago

    Everyone is worried about inflation except the Fed.
    Which is why everyone should be very worried about inflation. The seeming carelessness of the Fed is the best indication inflation will get out of hand. Like thumb_up 3 Share link Report Stuart Young Stuart Young SUBSCRIBER 1 week ago With the government pumping trillions of dollars into the economy, anyone who chooses to ignore serious inflation problems is just fooling themselves. Like thumb_up 11 Share link Report A Anne T SUBSCRIBER 1 week ago Not an investment expert here at all.

    But anyone with a mind knows where the Biden-Harris Administration is going and it's worse than route Obama-Biden took us on.

    Seems Democrats still refuse to stop themselves from getting in the way of a budding recovery.

    And learned nothing between 2009-2020. Like thumb_up 6 Share link Report P Paul Kaufmann SUBSCRIBER 1 week ago Did you happen to notice the debt/gdp graph in the article? The slope in the past 4 years is so great that it is almost uncalculable...infinite. Like thumb_up Share link Report A Anne T SUBSCRIBER 1 week ago Yes I did.
    From 2008-1016 it soared from 40% to 76% where it pretty much stayed until the Covid stimulus of 2020. Like thumb_up Share link Report H H S Howell SUBSCRIBER 1 week ago We are already in an inflationary spiral. Don't rely on gov figures, just take a trip to the local hardware or grocery store. In the past the danger of big socialist government was Tax and Spend, today it is Print and Spend resulting in an enormous escalation of Debt (the largest in the world).

    China officially holds $1.1 trillion of our debt, but actually much more when counting Hong Kong, other regions of China. Should China sell (debt dump) their US bonds, it would have the destabilizing effect of lower bond prices and higher yields, devaluation of the dollar, higher cost of servicing our debt and a stock market crash. J Jeffrey Cunningham SUBSCRIBER 1 week ago Seems like a very effective way to "tax" 401k money indirectly. thumb_up Share link Report P Peter Sherman SUBSCRIBER 1 week ago Bond investors are selling.
    The Unholy Marriage of the Federal Reserve and Treasury allowing for the implementation of MMT ( Magic Money Tree ) probably create high inflation .

    Given the rotten value in bonds now ( negative real yield) and rising odds of higher inflation, expect to see more selling.
    B
    Brett M SUBSCRIBER 1 week ago (Edited) I read a quote in an article one time

    "until the bond market rebels"

    It means people become like me - refusing to own US treasuries nor USA bonds. The only exception is a 529 account I have which limits choices.

    If people became like me relatively fast, investors sell bonds off, interest rates shoot through the roof as the USA gov loses control of their puppet show. Then the government defaults - and rather quickly, say within a year after.

    I personally believe that USA government debt is worthless. I am a big fan of gold right now.
    If China ever moved toward being a reformed country that didn't have George Orwell cameras in every alley, field and wooded grove, then the dollar would plummet. If there was another country that was not pathetic financially I would move my money there.

    [Mar 26, 2021] This Bull Market Has a Troubling Reliance on Speculation - WSJ by James Mackintosh March 25, 2021 9:42 am ET Listen to this article 6 minutes 00:00 / 06:06 1x Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. U.S. 10-year Treasury yield Source: Tullett Prebon As of March 24 % Pre-pandemic peak of S&P 500 2020 '21 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 S&P 500 forward price/earnings ratio Source: Refinitiv Note: Weekly data S&P 500 peak 2020 '21 12 14 16 18 20 22 24 The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is the The parallel in the stock market is the hunt for the greater fool . Sure, GameStop < shares bear no relation to the reality < of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they "like the stock." Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards. Speculative bets such as the solar and ARK ETFs rallied up until mid-February, long after growth stocks peaked in August Price performance Source: FactSet *Russell 1000 indexes As of March 25, 7:02 p.m. ET % Invesco Solar Value* ARK Innovation Growth* Sept. 2020 '21 -25 0 25 50 75 100 125 The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. me title= A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%.
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    Since June the story has reversed. Earnings forecasts have soared, and this year's earnings predictions are now back up to match where 2020 earnings were expected to be before the recession. The bond yield has leapt almost a full percentage point, and is higher than it was last February.

    Yet, since June, the market's overall valuation is slightly up, and growth stocks are up 23%. Sure, cheap value stocks responded as expected, rising almost a third and beating growth stocks. But if a lower bond yield justified the rise in valuations, a higher bond yield ought to mean lower valuations, and probably outright lower prices for growth stocks.

    me title=

    This is concerning but, directionally at least, is explained by the oddity of August, when bond yields rose alongside valuation multiples and the biggest technology stocks leapt in price . Measure it from the end of August, instead of the end of June, and valuations have dropped a bit as bond yields have risen.

    But the fall isn't enough to provide much comfort, and worse is that the highly speculative stocks popular with many individual traders bucked the trend. Notable themes including electric cars, hydrogen, SPACs and wind and solar power went into ludicrous mode until the middle of February this year, when the rise in bond yields accelerated and the speculative stocks fell back some.

    Share prices propelled more by earnings expectations than bond yields is healthy, while speculation is -- by its nature -- fickle, and so a poor basis for holding on to a stock for long. My hope is that the contribution of pure gambling to the overall level of the market is relatively small. But it is hard to explain why stocks should be so much higher than before the pandemic panic when the earnings outlook is worse and bond yields are back to where they were.

    Write to James Mackintosh at [email protected]

    Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

    Appeared in the March 26, 2021, print edition as 'This Bull Market Has A Gambling Problem.'

    [Mar 24, 2021] VTIP - Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares

    Mar 24, 2021 | finance.yahoo.com

    The investment seeks to track the performance of the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index. The index is a market-capitalization-weighted index that includes all inflation-protected public obligations issued by the U.S. Treasury with remaining maturities of less than 5 years. The manager attempts to replicate the target index by investing all, or substantially all, of its assets in the securities that make up the index, holding each security in approximately the same proportion as its weighting in the index.

    Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) NasdaqGS - NasdaqGS Real Time Price. Currency in USD Add to watchlist
    51.69 +0.13 (+0.25%) At close: 4:00PM EDT

    51.66 -0.03 (-0.06%)

    After hours: 4:21PM EDT

    [Mar 24, 2021] Fed's Bullard sees inflation at 2.5% this year, easing only slightly in 2022

    Mar 24, 2021 | www.reuters.com

    WASHINGTON (Reuters) - Inflation will hit 2.5% this year and not fall much in 2022, which the Federal Reserve should welcome as a way to reaffirm the central bank's inflation target, St. Louis Federal Reserve Bank President James Bullard said on Tuesday.

    " I am not seeing the inflation rate come down very much in 2022 ... maybe just slightly, " Bullard said in comments that placed him among the more aggressive Fed officials in terms of willingness to see inflation move higher this year and remain there without raising interest rates.

    "Part of the goal is to take the increase in inflation that we have this year penciled in and allow some of that to move through to inflation expectations," and keep them cemented at the Fed's 2% inflation target.

    [Mar 24, 2021] US Inflation Rate by Year- 1929 - 2023

    The real inflation for the past 20 years was probably around 5%: that buypoer of$100 dinimisnes by 50% in 20 years. In some areas like education and healthcare much faster that that. In some areas slower then that. Official inflation was around half of that (and this discrepancy is systemic -- due to the desire of any regime based of fiat currency to underestimate inflation and thus diminish additional payment to Social Security and other linked to inflation budget items) . Thanks to a massive federal deficit inflation might pick up.
    Higher inflation in 2021-2023 is now the consensus,
    Mar 24, 2021 | www.thebalance.com
    Year Inflation Rate YOY Fed Funds Rate* Business Cycle (GDP Growth) Events Affecting Inflation
    ... ... ... ... ...
    2000 3.4% 6.50% Expansion (4.1%) Tech bubble burst
    2001 1.6% 1.75% March peak, Nov. trough (1.0%) Bush tax cut, 9/11 attacks
    2002 2.4% 1.25% Expansion (1.7%) War on Terror
    2003 1.9% 1.00% Expansion (2.9%) JGTRRA
    2004 3.3% 2.25% Expansion (3.8%)
    2005 3.4% 4.25% Expansion (3.5%) Katrina, Bankruptcy Act
    2006 2.5% 5.25% Expansion (2.9%) Bernanke became Fed Chair
    2007 4.1% 4.25% Dec peak (1.9%) Bank crisis
    2008 0.1% 0.25% Contraction (-0.1%) Financial crisis
    2009 2.7% 0.25% June trough (-2.5%) ARRA
    2010 1.5% 0.25% Expansion (2.6%) ACA, Dodd-Frank Act
    2011 3.0% 0.25% Expansion (1.6%) Debt ceiling crisis
    2012 1.7% 0.25% Expansion (2.2%)
    2013 1.5% 0.25% Expansion (1.8%) Government shutdown. Sequestration
    2014 0.8% 0.25% Expansion (2.5%) QE ends
    2015 0.7% 0.50% Expansion (3.1%) Deflation in oil and gas prices
    2016 2.1% 0.75% Expansion (1.7%)
    2017 2.1% 1.50% Expansion (2.3%) Core inflation rate 1.7%
    2018 1.9% 2.50% Expansion (3.0%) Core rate 2.2%
    2019 2.3% 1.75% Expansion (2.2%) Core rate 2.3%
    2020 1.2% 0.25% Contraction (-2.4%) Forecast: Core rate 1.4%
    Impact of COVID
    2021 1.8% 0.25% Expansion (4.2%) Forecast: Core rate is 1.8%
    2022 1.9% 0.25% Expansion
    (3.2%)
    Forecast: Core rate is 1.9%
    2023 2.0% 0.25% Expansion (2.4%) Forecast: Core rate is 2.0%

    [Mar 24, 2021] Powell Says Rise in Long-Term Bond Yields Reflects Economic Optimism

    Higher interest rates means higher interest payment of the new government debt. The USA can't afford this so FED probably will try to suppress rate.
    Mar 24, 2021 | www.wsj.com

    "The Fed has signaled that its dovish monetary policy is here indefinitely," Mr. Toomey said, noting a recent uptick in commodity prices and a brightening outlook for economic growth. "I worry that the Fed will be behind the curve when inflation picks up."

    Mr. Powell, however, reiterated that he doesn't expect supply-chain bottlenecks or an expected surge in consumer demand later this year as the economy reopens to change in long-term price trends. The Fed generally doesn't alter its policies in response to temporary price pressures.

    "In the near term, we do expect, as many forecasters do, that there will be some upward pressure on prices," Mr. Powell said. "Long term we think that the inflation dynamics that we've seen around the world for a quarter of a century are essentially intact. We've got a world that's short of demand with very low inflation and we think that those dynamics haven't gone away overnight and won't."

    Sen. Richard Shelby (R., Ala.) pressed Ms. Yellen on her changing views on the risks of high and rising federal debt. Government red ink has swelled over the past year as economic activity stalled and Congress ramped up spending to combat the pandemic.

    [Mar 24, 2021] No Inflation Panic Yet, but There Is Concern

    Mar 24, 2021 | www.wsj.com

    John Gimmy Chesapeake City, Md

    . Alan S. Blinder is correct that with the slack in the economy and high unemployment there is no risk of wage inflation (" There's No Need to Panic About a Little Inflation ," op-ed, March 16).

    ... ... ...

    Lloyd B. Thomas, Ph.D. University of Missouri Columbia, Mo.

    The Federal Reserve is capable of nipping any surge of inflation, but it has made clear it will be behind the curve as inflation rises. It has announced that it will not boost interest rates until it is confident we have reached full employment and until inflation substantially exceeds 2% annually for a considerable period.

    Ed Kah, l Woodside , Calif,

    The Fed's "foresight" in the 1970s sleepwalked us over 10 years into 14.5% inflation, 18.5% mortgage rates, 7.5% unemployment and a severe recession in 1980. The Fed's repression of interest rates has already inflated asset prices. It is now favoring spending that will move the national debt held by the public toward 150% of GDP if the Democrats keep passing multitrillion-dollar stimulus spending bills in a fast recovering economy.

    The big risk comes when interest rates regress to higher historic averages that increase the cost of government debt. Even a very small rise in short-term rates shook the markets recently. The Fed should at the very least hedge this risk by lengthening the maturity of most government debt. They should also caution Congress about the sorry history of countries whose debt exceeds GDP.

    Jacob R. Borden , P.E. Trine University, Angola, Ind.

    Prof. Blinder uses macroeconomic anecdotes to argue that upward of 4% inflation is no big deal. But it is a big deal when you recognize that inflation is a tax on the accumulation of wealth. Sen. Elizabeth Warren must be smiling.

    Even worse, inflation is a regressive tax on wealth. The professional class is already shifting assets to protect against inflationary headwinds. Mary B. Flyover, on the other hand, has few such assets and instead spends relatively more of her money on fuel and groceries, the very elements missing from Mr. Blinder's preferred measure of inflation.

    Every year, inflation saps the spending power of a dollar earned, putting future savings further out of reach for people already being left behind. What little savings is available is largely in checking and savings accounts that don't even keep up with current inflation, let alone just a little more. Then add the compounding impact of inflated incomes on inflated tax bills. Once 4% inflation is baked in, Ms. Flyover's tax bill will be forever higher, while her purchasing power will trend ever lower.

    Thomas Porth, Hockessin, Del.

    The facts that Prof. Blinder doesn't cite are what worry me. When I studied economics at Princeton in 1981 (using Prof. Blinder's textbook), the yield on the 10-year Treasury stood at 14% as of the end of December, while the CPI-U inflation rate stood at 8.9%. The real risk-free rate of return was therefore a positive 5.1% or so. In contrast, today the CPI-U stands at 1.7% (March 10), while the yield on the 10-year Treasury stands at 1.71% (March 18), for a real risk-free rate of return of what is effectively zero.

    me title=

    Even relying on current measures of inflation, the real rate of return has dropped from positive 5.1% in 1981 to zero or, let's be serious, less than zero today (when I am retired). Sorry, Prof. Blinder, but I'm starting to panic.

    Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

    Appeared in the March 23, 2021, print edition.

    [Mar 24, 2021] S P 500 And US Economy Face Seismic Shifts From Joe Biden And The Federal Reserve

    The Federal Reserve's $3.4 trillion in asset purchases and the roughly $4.5 trillion in Covid recovery funds Congress approved in 2020 largely succeeded in [reventing the 2020 recession hitting the stock market. Unemployment increased to the recession level and will stay at this level.
    S&P 500 Thrived During Federal Reserve's Low-Rate Regime. This regime by-and-large ended.
    Almost everyone expects a notable pickup in inflation this year -- including the Fed. Monetary policymakers expect the personal consumption expenditures (PCE) price index to rise 2.4% this year. That's vs. 1.5% in the 12 months through January. The 10-year yield is up 66 basis points since Jan. 5.
    Mar 24, 2021 | www.investors.com

    Now, as President Joe Biden gets ready to tee up another massive spending package focused on infrastructure, Wall Street is weighing what unleashed fiscal policy might mean for interest rates, tax rates and stock prices.

    The implications are magnified by the Federal Reserve's recent about-face on inflation , from standing on guard against it to trying to stoke it. The combination of easy fiscal and monetary policy may lift the Dow Jones and S&P 500 in the near term. Yet some on Wall Street think it could mean lower returns in the future.

    The seismic shifts in fiscal and monetary policy are drawing comparisons to another old-economy moment: the latter half of the 1960s. That era was marked by strong economic growth. But it also brought rising inflation -- and a long-term stock market top.

    S&P 500 Hits Highs While Techs Slip

    The Dow Jones and S&P 500 index rallied to new highs this month, though they have pulled back modestly in recent days. The Nasdaq remains 9% off its Feb. 16 peak, selling off this week What ails big techs that dominate the Nasdaq, like Apple stock, Amazon.com ( AMZN ) and highly valued growth names such as Tesla ( TSLA )?

    Tech giants are no longer are the only game in town given the bullish outlook for cyclical and value stocks. Meanwhile, the surge in Treasury yields has led stock market strategists to rethink growth stock valuations -- and much more.

    ...If not for Jan. 5, the latest round of fiscal stimulus might have been $1.25 trillion smaller -- like the $600 billion package pitched by moderate GOP senators.

    The Democrats' bill went well beyond $1,400 stimulus checks, emergency jobless aid and funds for Covid vaccines and testing. Washington also will send $580 billion to state and local governments. That "is significantly higher than the estimated $85 billion net budget shortfall facing state and local governments," wrote Moody's Analytics economist Bernard Yaros.

    ...

    Biden also promised "historic investments in infrastructure, manufacturing, innovation, research and development, and clean energy." These more tangible investments, however, would involve a one-time appropriation that could be financed with deficits.

    The Biden campaign's plan to spend $2 trillion on green-tinted infrastructure over four years will likely serve as a starting point. The whole package could add up to $4 trillion, Goldman Sachs estimates.

    [Mar 24, 2021] This rotation has benefitted the value and cyclical sectors, like industrials (XLI), energy (XLE) and financial (XLF) stocks

    Money started flowing out of technology stocks that led the market higher for much of the last year. The sharp increase in bond yields in recent weeks has taken the steam out of technology stocks
    Despite FED cheerleading of stock market money managers are betting that inflation will climb sharply, and could spur the central bank to raise interest rates or pare back bond purchases.
    Mar 24, 2021 | finance.yahoo.com

    This rotation has benefitted the value and cyclical sectors, like industrials ( XLI ), energy ( XLE ) and financial ( XLF ) stocks -- which have all outperformed this year. Meanwhile, defensive sectors, like consumer staples ( XLP ), health care ( XLV ) and utilities ( XLU ) have been the worst performers.

    Tech ( XLK ) is the fourth biggest sector laggard this year, as attention (and money) has shifted from the high-growth names like Peloton ( PTON ) and Zoom ( ZM ) to the less sexy names that are more likely to benefit from a recovery, like Caterpillar ( CAT ), American Airlines ( AAL ) and Goldman Sachs ( GS ).

    A record 52% of those surveyed by BofA now think we'll see more of the same over the next year -- that value will outperform growth.

    ...if bond yields simply climb higher, problems emerge for the entire market when the moves in the bonds are too rapid or disorderly. The pace of the rise or fall in yields matters.


    [Mar 24, 2021] On Jerome Powell pronouncements

    Mar 24, 2021 | www.wsj.com

    P Paul Avila SUBSCRIBER 8 hours ago U.S. stocks edged higher Wednesday as investors awaited more testimony from Federal Reserve Chairman Jerome Powell.

    Good grief. Is there any way his subordinates could prevent that? Perhaps lock him in a supply closet until the market closes? Every time he opens his pie hole, I lose money. W Will Bee SUBSCRIBER 8 hours ago Actually I suspect we are waiting for all the FED and Treasury "people" to stop jawboning us so Markets can assimilate their irrelevance

    [Mar 24, 2021] Bubble watch: Record Number of U.S. Homes Selling for More than Asking Price

    Mar 24, 2021 | www.mansionglobal.com

    Sellers got more than they listed for in 36% of deals in February, according to Redfin

    ... the median home price of U.S. residences rose 14.4% last month, to $336,200, compared to the same time the previous year, the data showed. That marks the biggest jump since July 2013.

    [Mar 24, 2021] BlackRock, others' risks should be studied, 'systemic' tag may not be best- Yellen

    Mar.24 -- Senator Elizabeth Warren (D-MA) asks Treasury Secretary Janet Yellen if she would direct the Financial Stability Oversight Council (FSOC) to consider designating BlackRock as a firm whose failure could threaten the financial system.
    Mar 24, 2021 | finance.yahoo.com

    (Reuters) - Treasury Secretary Janet Yellen said on Wednesday it is important to "look carefully" at systemic risks posed by asset managers, including BlackRock Inc, but said designating them as systematically important financial institutions may not be the right approach.

    Yellen's remarks came in response to questions from Senator Elizabeth Warren, a longtime Wall Street critic, who demanded to know why BlackRock and other large asset managers had not been added to the list of designated institutions.

    "I believe it is important to look very carefully at the risks posed by the asset management industry, including BlackRock and other firms," Yellen, who as Treasury secretary, chairs the Financial Stability Oversight Council (FSOC), which is charged with making such designations.

    "FSOC began to do that, I believe, in 2016 and 2017, but the risks it focused on were ones having to do with open-end mutual funds that can experience massive withdrawals and be forced to sell off assets that could create fire sales. That is actually a risk we saw materialize last spring in March," she said.

    In 2014, BlackRock and other asset managers won a battle in their fight against tighter regulation when a panel of top financial regulators agreed to revamp their review of asset-management firms to focus on potentially risky products and activities rather than individual firms.

    "I think that with respect to asset management, rather than focus on designation of companies, I think it is important to focus on an activity like that and consider what the appropriate restrictions are," Yellen said.

    "The past two administrations in the US, and numerous global regulators, have studied our industry for a decade and concluded that asset managers should be regulated differently from banks, with the primary focus being on the industry's products and services," BlackRock said in a statement.


    [Mar 24, 2021] If we look back at the last four recessions the yield curve steepened every time- Citi U.S. Wealth Mngt-

    Mar 24, 2021 | finance.yahoo.com

    [Mar 23, 2021] The Collapse Of Greensill- 'Unwise Enablers' A Dearth Of Due Diligence - ZeroHedge

    How many additional Greenville exists?
    Mar 23, 2021 | www.zerohedge.com

    The collapse of Greensill involved a predicable cast of unwise enablers, but it should serve as a warning to the growing number of Alternative Asset buyers on the dangers of complex deals which promise much but deliver less. Due diligence is critical in the highly illiquid alternatives sector.

    You really can't make it up when it comes to the collapse of supply chain charlatan Greensill. I suspect it will make a great film It should also send a judder down our spines, reminding us things are seldom what they seem in complex structured finance:

    At least former UK premier David Cameron will be happy. A majority comprising Tory MPs on the UK's Treasury Select Committee blocked an inquiry into Greensill yesterday on the basis it may be politically influenced. The fact Call-Me-Dave was texting chancellor Rishi Sunak pleading for GFC to be a special case for Covid Bailout loans says it all about the dangers of lobbying. The SNP will be equally delighted at the lack of scrutiny of dodgy dealings up in the Highlands.

    The Greensill collapse is unlikely to be the last time financial chicanery is exposed as sham. And that is why holders of European Alternatives and Asset backed transactions should be nervous. The lessons of the Greensill deals are multiple:

    Let's review the unfolding Greensill mess:

    There over 1000 holders of the $10 bln plus of defaulted Greensill investment structures packaged and issued by Credit Suisse – which marketed them as ultra-safe secured investments. Under the law, what the holders recover on these deals will rather depend on how much the administrator and the courts can jemmy out of Sanjay Gupta's dead-firm walking ; steel and commodities business GFC Alliance. (I have no hesitation in saying GFC will go to the wall – there can't be a single sane financial firm on the planet willing to finance them as the story of its' Greensill relationship emerges and its connected in-house banking arrangements become clearer – although, apparently, a state rescue is under consideration to save jobs.)

    Investors will be lucky to see much more than the 30% recovery already in the pot from non-Gupta related investments in the Greensill funds – but Credit Suisse may decide to make its investors good. The reputational damage of seeing their private and investment banking clients clobbered for their stupidity, which would negate their private banking brand, may mean it's worth taking the hit. No wonder CS staff are very grumpy about their bonuses.

    Successful financial scams require willing participants. All the usual fools are there in the mix.

    Yet again the German regulator missed what was going on in Greensill's German bank and its exposures to Gupta. The team at Credit Suisse who agreed to warehouse Greensill originated "future receivables" and sell them as pristine secured assets have a limited shelf life. The insurance broker who managed to convince an insurance fund the underlyings were AAA quality looks vulnerable. Or what about the sales teams in Morgan Stanley who actually marketed the deals. Yet again Softbank is in the frame after it invested in excess of $1.5 bln at a $4-7 bln valuation, hailing Greensill as a leading Finech, when the actual truth is that its high-tech driven lending algos were nothing more than basic Excel spread sheets.

    Greensill's financial magic was little more than sheer chutzpah – being able to persuade investors that the dull old low margin conservative business of factoring – short-term secured lending against invoices and accounts receivable, was something incredibly clever, undervalued and able to generate huge returns based on unique proprietary tech.

    Greensill deals went further. Rather than just factoring Gupta's bills to suppliers and its invoices, the firm conjured up "future receivables" – pledging the company's expected future earnings for lending now. That's not necessarily a bad thing – its basic credit – but it only works if these earnings were completely predictable like obligated mortgage payments. What Greensill was doing was lending on future earnings on very volatile commodities. Remember – oil prices went negative in 2020.

    In return for funding challenging names we know Greensill took divots out these clients. It made over Ł36 mm financing Gupta's deals in Scotland, and an amazing $108mm in fees from the $850mm Bluestone coal deals in the US – for which it is now being taken to court. All these fees gave Lex Greensill the wherewithal for his private Air Greensill fleet – but didn't make the financings any safer.

    Any smart investors would probably have asked questions – but what's not to like about a deal that's secured on receivables, offers a high coupon, is wrapped with an insurance package from reputable insurer and involves major investment firms like Credit Suisse banking them, and Morgan Stanley marketing them?

    One question is how did Greensill get away with it so long?

    It was clear as early as 2017 there were major issues with some of the supply chain financing deals Greensill was putting together. The following year a major Swiss investment group, GAM, blew up when deals a leading fund manager had bet the shop on were questioned internally. A review by external investigators discovered a lack of information and documentation on a whole series of Greensill deals. They questioned how due diligence was done on the deals. The fund manager was suspended and later dismissed – triggering a redemption run on the fund. The whistle-blower was also shown the door on the back of massive client exits.

    GAM invested in the funds because it's very hard to turn down the promise of a low risk / high return deal that promised so much more than the tiny yields available in conventional credit markets.

    Despite the events at GAM, Credit Suisse went on to package $10 bln plus of Greensill deals. It was all done with an insurance wrap from a single name put them in its safe bucket. I know other insurance firms refused the deals. The trigger for the collapse of the Greensill scam was the withdrawl of that critical insurance – causing Credit Suisse to stop. Greensill has known for a year Tokyo Marine (which sacked the underwriter involved) would not renew and had been unable to find alternative cover.

    Perhaps Credit Suisse bought the story and Softbank link that Greensill was a remarkable new Fintech with the Midas touch of changing dull, conservative factoring into a money machine? All that glitters is not gold.

    One of the major developing themes in markets has been a shift from financial assets – which are seriously mispriced due to monetary distortion and financial asset inflation – into real assets, the so-called alternatives market. Alternative because they are not stocks or bonds, but cash flows and real assets. The collapse of Greensill will heighten awareness of due diligence risks in these non-standard, off-market, asset backed alternatives. Alternative asset holders will be looking at holdings for what else might be wobbly.

    For instance, I might urge them not to be hypnotised by the assumptions underlying a well-known fund investing in music royalties, the basis of which is also being questioned by analysts. (I certainly won't mention the fund by name as the manager is a well-known litigant.) I have no reason to believe or disbelieve what analysts, the FT and a US investment bank have said about it overpaying for assets or questioning the valuation hikes it puts on future revenues when it acquires catalogues. Personally I like music assets, know their value, and, given certain circumstances the fund in question might come good. Equally.. it might not.

    To understand how these deals works its critical to understand exactly what's occurring within the structures – how real are the assets, how the cash flows, how its accounted, and where it goes. That's why having top notch accountants and lawyers is such an important requirement for any deal. However, if they are working in the interests of the issuers and bankers – then investors are the likely patsies. There is a real difference between the way US and European Asset Backed deals are structured – basically US deals are transparent. European deals tend to be opaque.

    Alternative deals based on real assets and tangible cash flows are often, but not always, decorrelated from distorted financial assets, allowing low risk deals to yield better long- term returns. They tick can the box in terms of risk vs return and provide significant diversification away from conventional markets. The major negative is there is little pretence they will be liquid assets. If you want to sell – even in good markets it will not be easy.

    The only way you should participate in Alternative type deals is by knowing exactly what's going on. And – yes, my day job is Head of Alternative Assets. Happy to discuss in depth any time.

    [Mar 22, 2021] How to Collect $1.4 Trillion in Unpaid Taxes: Wealthy Americans are concealing large amounts of income from the I.R.S. There is a straightforward corrective.

    Mar 22, 2021 | www.nytimes.com

    Most tax havens are either American possessions or British possessions. Then there are the tax havens that are firmly under American geopolitical control (Switzerland, Monaco, Luxembourg, Ireland). Then there is the State of Delaware (of which the present POTUS is from). There are no tax havens under the control of an enemy of the West.

    The USA should stop with that charade. If it wanted to curb on tax evasion, it would've already done so decades ago.

    Capitalism is value that self-valorises. The rich must get richer and the poor must get poorer over the long term. That's how a healthy capitalist system operates. To try to claim USD 1.4 trillion from their bourgeoisie is not how the American Empire should work. This is a desperate attempt of the American Federal State to survive.

    [Mar 22, 2021] Goldman -- There Is No Bubble, There Is No Bubble, There Is No Bubble

    Mar 22, 2021 | www.zerohedge.com

    When the most respected bank in the US feels compelled to publish A 42-page "guide to bubbles and why we are not in one" in response to what is a clear outpouring of client concerns that we are, in fact, in one we repsectfully leave it up to readers to read between the lines and reach the obvious conclusion.

    We say that because reading Goldman's actual lines is quite painful: in his (futile) attempt to convince the bank's clients that US stocks are not, in fact, in a bubble, Goldman strategist Peter Oppenheimer writes that "in recent weeks there have been growing concerns about a bubble building up in the equity market and across financial markets in general" before eventually concluding that "while there are pockets of excessive valuations in equities, and parts of the market are justifiably de-rating as interest rates adjust, in our assessment only a few of these common characteristics are currently present or being partially met. Importantly, the absence of significant leverage (outside of the government sector) and the early stage of the cycle suggest that the risks of an imminent bubble with systemic risks to the financial system and economies is relatively low."

    ... ... ...

    But wait, it gets even dumber, because in the very next attempt to refute the existence of a bubble, Goldman says that there are only "a few" consistent hallmarks of financial bubbles, with the majority "characterized by many, if not most, of the following":

    1. Excessive price appreciation & extreme valuations

    2. New valuation approaches justified

    3. Increased market concentration

    4. Frantic speculation and investor flows

    5. Easy credit, low rates & rising leverage

    6. Booming corporate activity

    7. New Era narrative and technology innovations

    8. Late Cycle economic boom

    9. The emergence of accounting scandals and irregularities

    Hilariously, despite admitting that there are bubble signs of 7 out of 9 categories, Goldman claims there has been no emergence of accounting scandals and irregularities..

    ... ... ...

    If we had to summarize Goldman's thesis it would be that while pockets of exuberance and excessive price rises increase, they do not necessarily mean that a broader and systemically dangerous bubble is forming more broadly.

    In any case, it was around point that we gave up on reading more of this drivel, and sent our condolences to the junior analysts who had to work a soul-crushing 100 hours a week (even though there are millions of 25-year-olds who would kill to work 200 hour weeks for half the pay of a Goldman analyst) to put this together.

    ay_arrow

    JohnGaltsChild 6 hours ago remove link

    There is no bubble.

    Biden won fair and square.

    There is no crisis at the border.

    The government never surveils private citizens.

    Critical race theory is not racist.

    I'm a mindless robot.

    Im4truth4all 6 hours ago

    Add:

    Epstein committed suicide.

    The FBI is committed to truth and integrity.

    The Supreme Court is committed to truth and integrity.

    The democrat/marxists tell no lies.

    And the list goes on ad infinitum.

    stop_the_fraud 6 hours ago

    Bitcoin is the new world currency.

    Gold is a worthless pet rock.

    EV's are the future.

    JohnGaltsChild 6 hours ago

    "Who are you going to believe, me or your own eyes?"

    Groucho Marx

    Art_Vandelay 7 hours ago (Edited)

    When the most respected bank in the US.

    Respected by whom, again?

    Buzz-Kill 6 hours ago (Edited)

    Operated by FED thieves, with politicians close behind.

    khakuda 6 hours ago (Edited) remove link

    Go back to 1999 and you will see all of the street brokers saying the same thing. It's different this time is basically what they are saying, which is what one always hears during bubbles.

    And the accounting irregularities usually appear after the decline when they can no longer be hidden...think Madoff or Lehman.

    Victory_Rossi 6 hours ago

    I don't know why anyone would do business with Goldman at all. Even if you're greedy as fvkc and think you'll be the special one that GS doesn't screw over, why take a chance? It's like the parable of the scorpion or snake - you know what they are so why'd you pick it up. Good luck Muppets!! You're going to need it.

    Im4truth4all 6 hours ago remove link

    "If you repeat a lie often enough, people will believe it, and you will even come to believe it yourself." - Joseph Goebbels

    Art_Vandelay 6 hours ago

    Is Goldman getting into the comedy business now? I was sort of laughing at their analysis the whole way through.

    Watching in Baltimore 6 hours ago

    "I have no fears for the future of our country. It is bright with hope."

    Herbert Hoover, March 4, 1929

    Death2Fiat 6 hours ago

    Take a look at the Fed's M* monetary base charts.

    It's straight up. 90 degree angle all the way up.

    Great Iota 5 hours ago (Edited)

    No Bubble? I couldn't find a single stock that was worth investing (value). Think this was the first time in 25 years that it has happened. All equity is either losing money per share or for every $100 you invest, you make between .001 cent to $3.50.

    I remember the days when you expected companies to earn $10 to $20 per $100 depending on industry.

    Now, you got virtual intangible assets like Bitcoin, which is a total scam, its not a currency, has no real use, and is an exact definition of a Ponzi scheme. Brilliant idiots who collect billions from the government for having a green company and at the same time invests billions in a Ponzi scheme that consumes ridiculous amount of energy.

    in 3 months, Bitcoin will undo all the green initiatives the democrats has pushed for in the last 20 years. Grats morons!

    No one knows how to calculate energy use?

    cooll 7 hours ago

    Goldman = contrarian indicator.

    YesWeKahn 6 hours ago

    Sure, based on goldman's logics, not only there is no bubble, this is actually a multi generational bottom, they should sell all their other assets and buy stocks.

    [Mar 22, 2021] The sugar rush economy by Michael Roberts

    Mar 22, 2021 | thenextrecession.wordpress.com

    Last week the US Federal Reserve raised its growth forecasts for the US economy for this year and next. Fed officials now reckon the US economy with expand in real terms by 6.5%, the fastest pace since 1984, a few years after the slump of 1980-2. This is a significant rise from the Fed's previous forecast. Also, the unemployment rate is expected to drop to just 4.5% by year-end, while the inflation rate ticks up to 2.2%, above the official target rate set by the Fed.

    Driving this new optimism on growth is the fast roll-out of vaccines to protect Americans from COVID-19 plus the huge fiscal stimulus package put through Congress that most mainstream forecasters expect to add at least 1% point to economic growth and bring down unemployment.

    But Fed chair Jay Powell made it clear that the Fed had no intention of raising its target interest rate until 2023 at the earliest even if inflation accelerates. He wants to see the unemployment rate drop to 3.5% and inflation averaging 2% or so. He would tolerate the economy "running hot" until that happens because he reckons that any rise in inflation would be transitory.

    The implication of Powell's view was that the US economy was going to have a 'sugar rush' from the fiscal stimulus and from the 'pent-up' demand of consumers with cash savings ready to spend on restaurants, leisure, travel etc once the pandemic restrictions were relaxed. But as every parent knows, giving a child too much sugar leads to a rush of energy. And then comes the letdown and sleep. That is what Powell worries about, namely that after this burst of energy on the 'sugar high' of government paychecks and restaurants meals, the US economy will slip back into the low growth trajectory that applied before the pandemic slump.

    Powell is also concerned about a potential relapse in the fight against the virus and expects fiscal support from the stimulus starting to fade next year and worries that the labour market will continue to struggle. So he expects 'core inflation' (excluding food and energy prices) will fall back to 2 per cent next year and 2.1 per cent in 2023. So no inflationary spiral.

    It is significant that the long-term growth forecast by the Fed is just 1.8% a year, which is hardly any higher than average real GDP growth of 1.7% since the end of the Great Recession and before the pandemic.

    This implies that the Fed reckons the US economy is going to drop back to the rate of growth experienced in the Long Depression since 2009, and the 'sugar rush' is just that.

    What this also implies is that contrary to the views of the Keynesians, the multiplier effect of the fiscal stimulus will soon dissipate and then the US economy will depend, not on consumers' pent-up demand but on the willingness and ability of the capitalist sector to invest. It's investment not consumer demand that will matter in sustaining any significant recovery; not sugar treats but on new energy in the form of new surplus value (to use Marx's term for profits).

    Financial investors are less convinced that Powell is right. After all, getting the US economy to achieve a 3.5% unemployment rate and 2% inflation has been achieved only twice since 1960! So 'inflation expectations' among investors have been rising, suggesting an inflation rate of 2.6% on a five-year view. As a result, US government bond yields have also risen significantly, as bond yields suffer in real terms if inflation rises.

    The view that the US economy may 'overheat' has been argued by Larry Summers, the arch-Keynesian of several administrations. He fears that the fiscal and monetary stimulus will lead to 'excess demand' and so drive up prices across the board, eventually forcing the Fed to raise interest rates. Summers argues this, because this time last year, he was telling the world that the COVID pandemic would have little long-lasting impact and the economy would bounce back once it was over, just like seaside towns go to sleep in the winter and then wake up when the tourist season starts. He seems to think that the US economy will revive of its own accord and fiscal stimulus is unnecessary. But the experience of the last year has been much longer and more damaging than a 'winter break'.

    At the other end of the argument, Summers has been scathingly attacked by post-Keynesians and leftists who reckon there is no danger of 'overheating' and rising inflation, because there is plenty of 'slack' in the economy ie workers needing jobs and businesses needing to start up. But what this view ignores is the 'hysteresis' effect on the economy from the pandemic slump; namely that many workers have been forced to leave the workforce for good over the last year and many small to medium businesses will never return. The Long Depression has seen a steady reduction in estimates of US productive capacity.

    That means the room for economic recovery is reduced unless investment in new means of production and employment rises significantly. So there could be 'overheating' and higher inflation, not because of pent-up consumer demand but because of weak productive capacity – not 'too much demand' but 'not enough supply'.

    What the last ten years has shown is that business investment growth has slowed as the profitability of productive capital has fallen in the US. Cash-rich companies and investors, borrowing at record-low interest rates, have preferred to speculate in financial assets. The huge tally of bailouts by central banks and cuts in corporate taxation have been spent on driving the stock and bond markets to all-time highs while the 'real economy' has stagnated. The bottom 80% of American households, who drive the bulk of personal consumption expenditures (PCE), continue to struggle to make ends meet.

    And down the road, rising debt cannot be ignored. And it is not so much public sector debt, which in the US is now well above 100% of GDP; more important is corporate debt. If interest rates for firms do start to rise because of increased inflation, then debt servicing costs for a whole swathe of so-called 'zombie' companies will become an excessive burden and bankruptcies will ensue.

    According to Bloomberg, In the US, almost 200 big corporations have joined the ranks of so-called zombie firms since the onset of the pandemic and now account for 20% of top 3000 largest publicly-traded companies. With debts of $1.36 trillion. That's 527 of the 3000 companies didn't earn enough to meet their interest payments!

    As before, the Fed is caught. If it does not end the monetary largesse at some point, then inflation could rise which will eat into real incomes and drive up corporate debt costs. But if it acts to curb inflation, it could provoke a stock market crash and corporate bankruptcies. That is what happens when an economy is in 'stagflation': namely rising inflation and low growth.

    A stock market crash caused by rising interest rates does not always lead to an economic recession. Mainstream economist Paul Samuelson used to joke that the stock market has predicted 12 out of the last 9 recessions. Indeed, as Marx argued, financial crashes have a law of their own and do not always coincide with 'commercial crises'.

    For example, the very sharp fall in stock prices in 1987 did not lead to economic recession and prices recovered quickly. The reason then was that the profitability of capital in the major economies had been rising for over five years and was at a relatively high level in 1987 and profitability continued to rise for another decade. But that is not the situation now. The profitability of capital is near all-time lows and even a recovery in 2021 and 2022 will not put levels back to that before 1997 or 2006. And corporate debt has never been higher historically.

    These underlying forces suggest that the 'sugar rush' will be just that – a short burst followed by slumber at best.

    1. 21st Century Poet March 21, 2021 at 10:31 pm

      "If it does not end the monetary largesse at some point "

      There's the rub. Moral hazard is in full effect. Too big to fail has essentially been codified by the politicians the capitalists have purchased. So, theoretically, how long can it all go on, assuming the power elite all agree to keep the game up? I'm surprised they've been able to do it this long Reply

    2. stevenjohnson March 21, 2021 at 11:47 pm

      Doesn't the role of government debt in maintaining the nominal values of fictitious capital, either directly or by preserving nominal value of the currency, mean that many of the winners in the depression (those that have capital reserves always win distressed properties in a depression, no?) will find an excessive debt an unbearable burden long before they find the gigantic flow into the banks, the stock market and corporate bonds a threat. Given the perception that the rest of the world will always bear the brunt of US government contraction, isn't there likely to be a major political demand for austerity?

      If the US weren't the financial nerve center, I would expect a monetary crisis in exports, but there is no reserve currency to compete. Making a basket of currencies work or switching to Special Drawing Rights to replace the Fed have the problem of opposing the US government while coordinating in a kind of monetary union with other states, which is not what good bourgeois democracies do. Gold and oil, the commodities most likely to be sought to preserve value are either too scarce or their markets too manipulated by a handful of players. Although an inflationary crisis/dollar collapse seems unlikely (and fears of hyperinflation wildly inflated, barring a military defeat of the US,) It's clear to me that a stagflation scenario is probable. Reply

    3. ucanbpolitical March 22, 2021 at 10:55 am

      I think it is Powell who is having the sugar high. If we examine Retail Sales for the combined months January and February a strange combination is seen. In terms of adjusted data, the two months were up by 5.1% on the previous year, but if we examine unadjusted figures sales were flat. Thus it appears it is all in the adjustment, with the fall in February effectively wiping out the rise in January. https://www.census.gov/retail/index.html

      Thus a $900 billion injection was effective for only one month. Yes there will be a short term boost from the $1,900 billion ARP Bill, but that has to be set against so many negative potential events. First and foremost, the issue of interest rates. The 10 year rate is above, what I called the red line at 1.6%, and markets, while not sneezing have certainly got itchy noses. I would caution against using 1987 to substantiate the view that market crashes do not cause recessions. Conditions now are very different and the economy, because of inequality, is much more dependent on capital gains. Thus a market crash will wipe out any gains from these relief packages. I have been trying to look up losses in the global bond market, which amounted to $3 trillion when the rate hit 1.4%. It is likely now to be in the vicinity of $5 trillion.

      Anyway we will know more this Thursday when corporate profits are released. Once again I will prepare a post which looks at the rate of profit both with and without subsidies. Reply

    4. Pasionaria March 22, 2021 at 1:45 pm

      Hi Michael, love the blog- I just had a quick question about the US stimulus package I was hoping you could help with.

      It's about the stimulus cheques- if I remember right they're about $1,400 each. This helicopter money sounds good, but am I not right in thinking that a lot of this will just go into the pockets of private landlords or other rentiers and will thus have a limited effect in terms of boosting consumer spending?

    [Mar 21, 2021] How inflation's bite makes bonds riskier than stocks by MarkHulbert

    Mar 13, 2021 | www.marketwatch.com

    Last Updated: March 20,2021 at 12:33 p.m. ET
    First Published: March 13,2021 at 7:08 a.m. ET

    You'd have to hold U.S. Treasury bonds for 57 years to not lose to inflation

    [Mar 20, 2021] Wall Street Pros From Goldman to JPMorgan on New Inflation Era

    So far damage to intermediate bonds was so far medium in size. For example VFICX Vanguard Intermediate-Term Investment-Grade Fund Investor Shares lost 2% while yield is 2.41%. At the same time VWEHX (high yield bond fun) did not lost any money so far because the stock market is still holding.
    But if FED lost control think can became really break soon. Theoretically TIP bought directly from Treasury might be an escape for misery but currently they are not as their yield right now is just 0.125% while inflation is somewhere probably between 2 and 6 percent per year. CPI Inflation Calculator shown that $1K in 200 is equivalent to $1558 now so the official annual inflation is around 2.5%
    Mar 20, 2021 | finance.yahoo.com

    ...The economics of trading from stocks and real estate to interest rates would be turned upside down if projections of runaway prices are to be believed.

    Yet there are clear divisions. Goldman Sachs Group Inc. says commodities have proven their mettle over a century while JPMorgan Asset Management is skeptical -- preferring to hide in alternative assets like infrastructure.

    Pimco, meanwhile, warns the market's inflation obsession is misplaced with central banks potentially still set to undershoot targets over the next 18 months.

    ... There will be rotation into real-economy assets such as small caps, financials and energy stocks instead of rates and credit, and that will generate a lot of volatility.

    ... TIPS (only if bought directly from the treasury) offer reasonable insurance for an inflation overshoot. Commodities and assets linked to real estate should also benefit in an environment of rising inflation.

    [Mar 20, 2021] Bond Vigilantes Are Unlikely to Cause a New Black Monday for Stocks

    Bind vigilanties is a myth... Concerned speculators are real. They would "sell first and ask questions later", pushing up interest rates and battering bonds and stocks...
    Mar 20, 2021 | finance.yahoo.com

    The bond vigilantes appear to have returned, punishing not only the Treasury market but also exacting a toll on the Nasdaq Composite's highfliers. What's different this time is that the bond vigilantes are fighting the Fed, to mix two market aphorisms. The Federal Reserve just reiterated its intention to maintain its ultra-accommodative policy until it sees what it deems as maximum employment and inflation steadily above 2%.

    [Mar 18, 2021] U.S. Must Fabricate High-End Chips Again

    Letter tot he editor
    Mar 18, 2021 | www.wsj.com

    Your editorial "The Semiconductor Shortage" (March 13) is right that government action is not needed to correct the short-term supply-demand imbalance causing the global chip shortage, but wrong that the U.S. can "prod" its way to stronger domestic semiconductor production and more secure chip supply chains in the long term. Global competitors haven't passed the U.S. as a location for chip manufacturing by prodding. They've done it by funding ambitious government incentives to lure semiconductor production to their shores.

    As a result, only 12% of global manufacturing is now done in the U.S., down from 37% in 1990.

    ... ... ...

    John Neuffer

    President and CEO

    Semiconductor Industry Association

    [Mar 18, 2021] You might want to file your taxes soon -- even though there's an extension

    Mar 18, 2021 | finance.yahoo.com

    Ethan Wolff-Mann · Senior Writer

    The IRS uses the information it has on hand to determine your eligibility for a stimulus. If your income in 2020 was higher than in 2019, you might want to wait to file if the two numbers straddle the cutoffs for stimulus eligibility, which are $75,000 for single people and $150,000 for married couples .

    [Mar 18, 2021] 10-year treasury yields briefly touched 1.75%

    This is the first tine the benchmark 10-year note trades up above 1.7% since Covid-19 pandemic began. Though much higher than last year, when it spent months between 0.6% and 0.9%, the 10-year yield also remains low on a historical basis, It have been above 3% as recently as 2018.
    The key problem is that the S&P500 level is in the bubble territory using Shiller metric and that means that a large correction is a possibility.
    Mar 18, 2021 | www.zerohedge.com

    As 10-year TSY yields briefly touched 1.75% this morning in the wake of Wednesday's FOMC, an overnight note from Zoltan Pozsar predicting the end of SLR relief , and a report by the Nikkei noting that the BOJ would allow long-term interest rates to move in a slightly larger range of about 0.25%, versus 0.2% now...

    Bank of America warned that ... 10-year yields above that level could become a headwind for the equity complex. As BofA strategist Savita Subramanian wrote "history suggests that 1.75% on the 10-yr (the house forecast and ~25bp above current levels) is the tipping point at which asset allocators begin to shift back to bonds" and thus sell stocks in the next wave of aggressive liquidations.

    Why 1.75%? Because that yield on the 10Y is decisively above the S&P's dividend yield, and where according to BofA "there is an alternative to stocks", or TIAA.

    Separately, in its fund manager survey, Bank of America found that while few believed that rates at 1.5% would cause an equity correction (which they did as Nomura originally predicted one month ago ), the move from 1.5% to 2% is critical as 43% of investors now think 2% is the level of reckoning in the 10-year Treasury that will cause a 10% correction in stocks .


    Ajax_USB_Port_Repair_Service_ 7 hours ago

    2.0 is the new 1.75

    paid_attention 4 hours ago (Edited)

    I've noticed that there hasn't been any down days over 2% in months...

    Globalistsaretrash 7 hours ago remove link

    Just last week an article said 1.54% would trigger Armageddon.

    Boxed Merlot 7 hours ago

    ...last week...1.54% would trigger Armageddon...

    I know this is getting old, but being cursed with a "boomer memory", I still remember when interest only real estate purchases at 1% of purchase price per month to service one's "note" was considered a steal. Home loans at 16-18% were common and t-bills were paying a mere 10-12% a year.

    What's more, me and mine are still here after all those years, albeit a bit longer in the tooth, but that's life.

    I know, I know, this time is different.

    Seasmoke 7 hours ago

    So no Ponzi Collapse at 1.65 ?? Because I read that somewhere last week.

    Globalistsaretrash 7 hours ago

    Me too.

    radical-extremist 7 hours ago (Edited) remove link

    OMG! I can't decide whether I want a 1.75% yield in treasuries or SPY dividends....just so I can keep pace with 2.2% inflation of the DXY...of my $1400 stimmie.

    nope-1004 7 hours ago remove link

    1.75.... lmao. The rigged casino is THAT weak?

    mtl4 7 hours ago (Edited) remove link

    Everyone was a genius back in the Dot Com era too.......works until it doesn't.

    drjd 6 hours ago

    Because life is all about the pursuit of profits?

    I woke up 7 hours ago

    How much more fake money needs to be printed to cover the debt when yields go to 1.75

    gcjohns1971 6 hours ago

    When everyone is a finacialized zombie, a rotation from stocks bankrupts everyone. If corporates are deprived of their financial casino takes, then you have until quarterlies to see that as a GDP bloodbath.

    Then the only place to go will be commodities. The inflation the Fed has been searching for lives there. PPI will go wild, up double and some times triple digits in a matter of days, spooking everyone.

    itstippy 7 hours ago

    Does the Fed have some sort of tool in their toolbox they could use to suppress market yields on the 10 year if needed?

    JZimmerman901 7 hours ago

    They only have one "tool" and that's to print money. And sure, if they print money to buy 10 years, that would suppress yields.

    Chutney ferret Harris 7 hours ago

    Correction to the article - "Then again, Goldman has been wrong about virtually everything it has said publicly in recent years so take the bank's optimism with a metric ton of salt."

    We know privately Goldman knows what is going on and happily collecting its vig from the taxpayers.

    ReadyForHillary 6 hours ago

    Why would anyone assume that what GS states publicly is their true opinion?

    silverredux 7 hours ago

    Goldman has been correct because they've invested in the other side of the argument every time

    Goldman up 152% in 12 months.

    Rising rates keep metals in check too. Just a bonus

    MrNoItAll 7 hours ago

    Goldman Sach bank's optimism is fabricated hope-filled messaging to the "investors" their mega-bonuses are dependent on.

    QE4MeASAP 7 hours ago

    Maybe we'll get to see if "Not in my Lifetime" Bernanke was correct.

    Everybody All American 7 hours ago remove link

    We are now over the 100% debt to GDP ratio barrier and if rates rise from here to any even small degree it is game, set, match. Since the market top of the 10yr in price there has been a 7% loss for those who bought as it stands right now. We are talking some big losses. Remember, no one is buying this stuff for the yield.

    incalescent 7 hours ago

    While I like to disagree with Goldman on principle. I think there is a better argument than the dividend yield of S&P500 stocks to account for the upcoming shift. The 2% and 3% inflections points have more weight with the general trends. This 1.5% number feels like an exercise in finding a reason to pick the number, not a sharp pin to prick the bubble.

    Bubble though, it is, and we live in cactus times.

    Calvinharrison 1 hour ago

    I put all my pension into government bond funds.. it will drop the least compared to stocks. And I could enter stocks again later. 30% up on the year is ridiculous and there are some funds that went up close to 50%.

    AUD 3 hours ago

    I think it's the volatility of the move which concerns the Fed. If interest rate spreads stay tight as rates move higher, the casino can stay afloat. If rates move to fast, things get out of control.

    Ozarkian 7 hours ago

    Does this mean you can't have your cake and eat it too?

    [Mar 17, 2021] Putting the Risk Into Risk-Free Treasurys

    Mar 17, 2021 | www.wsj.com

    The value of a 30-year Treasury fell 15.6% in just three months. That is the equivalent of almost a decade of the income it offered three months ago, and it is the flip side of the sudden rise in yields. Shorter-maturity Treasurys have fallen less, but even for the 10-year note it will take six years of income to recover the loss of the past three months.

    ...But the probability of inflation averaging over 3% for the next five years has reached 30%, the highest since the taper tantrum, showing the rising uncertainty about the impact of stimulus combined with easy money.

    [Mar 17, 2021] End Of The Line- Morgan Stanley -Downgrades Small Caps- As Equity Valuations Set To Drop - ZeroHedge

    Mar 17, 2021 | www.zerohedge.com

    Morgan Stanely's chief US equity strategist Mike Wilson told investors Monday in a new podcast titled "A Tougher Road Ahead for Small Caps?" that "extraordinary outperformance" of cyclicals and small caps is coming to an end . He downgraded small caps on Monday to reduce risk.

    "From our perspective, the equity market is doing exactly what it should be at this stage of the recovery. The recent non-linear move in long-term interest rates means equity investors can no longer ignore this risk. The rates market is mispriced , and now that the seal has been broken, there's good chance equity markets start to price in the next 50bps move, even if it's months away. What this really means is that equity valuations are likely to fall this yea r - a key part of our call for 2021 ," Wilson said.

    The downgrade comes as Wilson told investors last week three reasons why the "stock correction has further to go before it's over." His latest podcast indicated the "extraordinary outperformance and earnings revisions and valuation expansion" of small caps is likely "coming to an end."

    Wilson warned:

    "Falling equity valuations is what always happens at this stage of the recovery , and we see little reason to think it will be different this time. Having said that, the recent fiscal stimulus may provide one last final push higher as this money leaks into the market. We would use that strength to reduce positions in the more expensive parts of the market."

    He said his team upgraded small caps near the pandemic low last April as his core "thesis was that we would experience a V-shape recovery in the economy, and the government subsidy of the unemployment cycle would accrue to the bottom line of corporations, especially small caps." Since then, Russell 2000 has outperformed S&P 500 and Nasdaq 100 by 50% and 40%, respectively.

    With the Russell 2000 down more than 1% and the Nasdaq 100 up more than 1% on Tuesday morning, one of the most significant shifts from value to growth is underway since late October.


    Lt. Frank Drebin 4 hours ago

    Does today appear more and more like the beginnings of the Dot Com bust?

    Not that I don't like charts or comparisons (good job Tyler's), but the dot com bust didnt have trillions of dollars pumped into it to keep it propped up. Little apples to oranges if you ask me.

    yerfej 4 hours ago

    There might be some new highs in the next week or two as the cash flows into the market but it pretty much over. Get out now as the implosion is going to be fast and furious.

    You_Cant_Quit_Me 3 hours ago

    You have to be crazy to open a small business when the federal or local govt can shut you down based on no scientific data. Similar story for being a landlord when the govt can ban evictions for nonpayment of rent. Why risk your capital when those with no skin in the game can indirectly destroy your life savings.

    Mrgior31513 1 hour ago

    Because not doing so is leaving money on the table. People open small businesses because being an employee is not generally the most lucrative option, and higher paying jobs are not always available. Opening a small business is always extremely risky, now we just have more added risks to the mix. Federal, state and local governments could always shut you down based on no scientific data and ridiculous regulations, this is nothing new ~simply wider spread than it normally is.

    radical-extremist 3 hours ago

    This analyst has yet to realize we're no longer living in 2005. We're living in world with previously unfathomable liquidity brought about through Central Banks and perpetually low interest rates. And our government has just pumped another $1.9 Trillion into everything. You can't look at one segment and predict it should go lower, without considering the volatility of the Whole Enchilada.

    [Mar 15, 2021] A worry for retirees- Inflation forecasts hit 8-year high

    Mar 15, 2021 | finance.yahoo.com

    A worry for retirees: Inflation forecasts hit 8-year high

    A worry for retirees: Inflation forecasts hit 8-year high
    Brett Arends Mon, March 15, 2021, 10:01 AM

    Nobody suffers more from high inflation than retirees. Back in the 1970s, it was those in retirement living on fixed income that got hit the hardest as prices rose year after year. The investment returns from their bonds and cash fell way behind.

    [Mar 15, 2021] Now everybody knows that almost overnight we went from a roaring economy to a tragic nationwide shutdown

    Mar 15, 2021 | www.unz.com

    Kristi Noem; A throwback to better times

    Now, let's consider the stark contrast between Biden's presentation and a speech delivered by Governor Kristi Noem of South Dakota at the CPAC conference. For those who don't know, Noem is the one bright star in a year of Orwellian darkness and gloom. She's a strait-laced, plain-talking, clear-thinking conservative who sticks to her principles like glue. She is a stalwart, red-blooded American girl who believes in God, the Constitution and the United States of America. Here's an excerpt from her CPAC speech:

    "Now everybody knows that almost overnight we went from a roaring economy to a tragic nationwide shutdown. By the beginning of 2020, President Trump had created 7 million new American jobs. We had the lowest unemployment rate in over half a century, and unemployment rates for black, Hispanic, and Asian Americans reached the lowest levels in history. More than 10 million people had been lifted out of poverty and out of welfare. And all of that changed in March .

    Now, most governors shut down their states . What followed was record unemployment, businesses closed, most schools were shuttered and communities suffered, and the U.S. Economy came to an immediate halt. Now let me be clear, COVID didn't crush the economy, government crushed the economy . And then just as quickly, government turned around and held itself out as the savior, and frankly, the Treasury Department can't print money fast enough to keep up with Congress's wishlist. But not everyone has followed this path. For those of you who don't know, South Dakota is the only state in America that never ordered a single business or church to close. We never instituted a shelter in place order. We never mandated that people wear masks. We never even defined what an essential business is, because I don't believe that governors have the authority to tell you that your business isn't essential. " (" Kristi Noem CPAC 2021 Speech Transcript", rev.com)

    She's right, isn't she? No elected official has the right to close a business or a church EVER. Period. We do not bestow those powers on our governors nor are they granted under the Constitution. Neither war nor pandemic nor any other national emergency or crisis should ever be used to strip Americans of the liberties that are guaranteed under the Constitution of the United States . Biden was wrong to say that the "most important function of government is to protect the American people." That's just wrong. The most important function of government is to preserve and protect the liberties that are outlined in the Bill of Rights. That's job#1: Defend Freedom at all cost . Everything else is a footnote. Here's more from Noem:

    "South Dakota schools are no different than schools everywhere else in America, but we approached the pandemic differently. From the earliest days of the pandemic our priority was the students, their wellbeing and their education. When it was time to go back to school in the fall, we put our kids in the classroom. Teachers, administrators, parents and the students themselves were of one mind to make things work for our children, and the best way to do that was in the classroom. Now in South Dakota, I provided all of the information that we had to our people, and then I trusted them to make the best decisions for themselves, for their families, and in turn, their communities. We never focused on the case numbers. Instead, we kept our eye on hospital capacity. Now, Dr. Fauci, he told me that on my worst day I'd have 10,000 patients in the hospital. On our worst day, we had a little over 600 . Now, I don't know if you agree with me, but Dr. Fauci is wrong a lot."

    Naturally, Noem got a standing ovation when she blasted the duplicitous Lord Fauci, the man, who more than any other, bears responsibility for almost single-handedly plunging the country into an unprecedented crisis. Here's more:

    "Even in a pandemic, public health policy needs to take into account people's economic and social wellbeing. Daily needs still need to be met. People need to keep a roof over their heads . They need to feed their families. And they still need purpose. They need their dignity . Now my administration resisted the call for virus control at the expense of everything else. We looked at the science, the data and the facts, and then we took a balanced approach . Truthfully, I never thought that the decisions that I was making were going to be unique. I thought that there would be more who would follow basic conservative principles, but I guess I was wrong."

    Yes, she was wrong, but who could have foreseen that every reprobate Democrat governor in the country would simultaneously take advantage of a public health crisis to impose de facto martial law? We never saw that coming, although, we have to assume that there must have been some tacit agreement and coordination among the governors and their paymasters that they would fall-in-line when the time was right . Ahh, but that's conspiracy talk!

    Damn right, it is! Here's more:

    "Many in the media, criticized South Dakota's approach. They labeled me as ill-informed, that I was reckless, and even a denier. The media did all of this while simultaneously praising governors who issued lockdowns, who mandated masks and shut down businesses, applauding them as having taken the right steps to mitigate the spread of the virus. At one point, I appeared on George Stephanopoulos' Sunday Show. He had just wrapped up a segment with New York Governor, Andrew Cuomo, where he asked Cuomo to give me some advice on how to deal with COVID." (Loud Laughter)

    In South Dakota, we did things differently. We applied common sense and conservative governing principles. We never exceeded our hospital capacity and our economy is booming. We have the lowest unemployment rate in the nation. We are number one in the nation for keeping jobs, keeping businesses open and keeping money in the pockets of our people. The people of South Dakota kept their hours and their wages at a higher rate than workers anywhere else in the nation. And our schools are open . Our founding fathers established our National Constitution, and the people of individual states crafted their own constitutions that place specific limits on the role of government. Those limits are essential to preventing government officials from trampling on people's rights."

    The people themselves are the ones entrusted with expansive freedoms, the free will to exercise their rights to work, worship and to earn a living. No governor should ever dictate to their people which activities are officially approved or not approved. And no governor should ever arrest, ticket or fine people for exercising their freedoms. Governors, and members of Congress and the president have a duty to respect the rights of the people who elected them, but it seems these days that conservatives are the only ones who know what that means. Personal responsibility is considered a God-given gift in South Dakota. Personal responsibility is not a term that conservatives have abandoned..

    We should illustrate to the world that people thrive when government is limited, and people's ingenuity and their creativity is unleashed. We should also remind the world what happens when tyranny and oppression are allowed to thrive. God bless each and every one of you and may God bless the United States of America."

    By now, we should all realize that the greatest threat to personal freedom is always and everywhere the State; that is the main lesson of this unfortunate Covid fiasco. The Democrat governors usurped powers and issued edicts for which they had no authority and for which they should be held to account. They should be impeached and prosecuted. They were undoubtedly acting on behalf of criminal elites who fill their campaign coffers in return for assistance in advancing their own self-centered interests.

    If you haven't figured it out yet, we are in the fight of our lives with "do goodie" billionaire climate alarmists who have inserted themselves into the political process and who have the power to shut down the economy with the flip of the switch. These same buttinskis have gone to great lengths to create the global health infrastructure along with significant control of the mainstream media, that allows them to grossly inflate an aggressive but thoroughly-manageable viral infection and transform it into the Black Plague. This, in turn, creates the pretext for preventing people from running their businesses or attending school or gathering with friends or family or traveling at will or doing any of the things that people in a free country are at liberty to do. There is no way to reason with people who think that the only way they can achieve their own malicious objectives, is by enslaving, incarcerating or liquidating the millions of people who stand in the way of their grand design. We must defend ourselves from these hostile elites by recommitting ourselves to the fundamental principles upon which this country was founded. These are the same principles that Kristi Noem has not only articulated so well in her speech, but also put into practice in her home state of South Dakota.

    We should never accept the oppressively dark and dystopian vision of Joe Biden. That's not for us. We should aspire to Noem's "shining city on a hill", a place where people can work when and where they please, travel when and where they please, and meet with friends and family when and where they please. It's not selfish for us to want these things for ourselves and our families. Freedom is a basic human necessity like eating, drinking or breathing. We need freedom, just like we need leaders who believe as we do and who are unshakable in their convictions. We need leaders like Kristi Noem who was as steadfast as Gibraltar when everyone else went weak-in-the-knees. The woman is a real American hero and a patriot.

    Booyah, Kristi Noem!

    [Mar 14, 2021] Inflation Isn't Happening, and It Likely Won't. Here Are 7 Charts Showing This. - Barron's

    Real inflation in the USA is probably close to 3-4% a year judging from the dynamic of rental payments and prices on on food. Annual Food inflation was between 3.93%, to 3.78% in December to February timeframe.
    The February 2021 ShadowStats Alternate CPI (1980 Base) increased 9.4% year-to-year, up from 9.1% in January 2021, 9.0% in December 2020 and against 8.8% in November. The ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government's inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate COLAs.
    Mar 14, 2021 | www.barrons.com

    Inflation may be on many investors' minds, but it has yet to show up in the numbers. Moreover, a close reading of the data suggests that inflation won't be a problem for some time, if ever.

    The latest reading of the consumer price index shows that Americans' cost of living was only 1.7% higher in February 2021 than a year earlier. That's the fastest inflation reading since the pandemic began, but still substantially slower than the pre-pandemic average. Exclude volatile food and energy prices, and inflation is running at 1.3%...

    [Mar 14, 2021] Fact vs. Fiction: Understatement Of Housing Inflation Exceeds Bubble Levels

    Mar 14, 2021 | www.zerohedge.com

    Submitted by Joseph Carson, former chief economist of AllianceBernstein

    The understatement of housing inflation in the consumer price index has reached a new milestone. As reported, the gap between the actual change in house prices and owners' rent, published by the Bureau of Labor Statistics (BLS), exceeds the "bubble" levels.

    In February, BLS reported owner's rent increased 2% over the last 12 months. House price inflation, as reported by the Federal Housing Finance Agency (FHFA), increased 11.4%. That gap over 900 basis points exceeds the 800 basis point gap recorded during the housing bubble peak.

    The consumer price index was created and designed to measure prices paid for purchases of specific goods and services by consumers. The CPI was often referred to as a buyers' index since it only measured prices "paid" by consumers.

    The CPI has lost that designation. It is no longer measures actual prices. For the past two decades, BLS imputes the owners' rent series, using data from the rental market, no longer using price data from the larger single-family market.

    Imputing prices for the cost of housing services make the CPI a hybrid index or a cross between a price index and a cost of living index. A hybrid index is not appropriate as a gauge to ascertain price stability, especially when the hypothetical measure of owner's rent accounts for 30% of the core CPI.

    The CPI missed the price "bubble" of the mid-2000s, and the economic and financial fallout was historic. History sometimes repeats itself in economics and finance. Policymakers forewarned.

    [Mar 14, 2021] Some thought on the current money bubble from ZeroHedge crowd

    Mar 14, 2021 | www.zerohedge.com

    USAllDay 3 hours ago

    The FED has been inflating a cheap money bubble for 40 years. The response to every recession is to cut rates. But the Fed never returns rates to pre-recession levels so the economy ultimately enters one recession after the next at lower and lower rates. Now at near zero, the gig is up. Dropping rates by nearly 50 basis points per year for four decades has created the mother of all bubbles.

    Greed is King 1 hour ago remove link

    USA, the new Roman Empire and just like the old Roman Empire was, the scourge of the planet.

    A Sovereign debt ridden nation, that only survives due to its enormous military that enables the USA to pillage the resources of other countries via a foreign policy of threat, intimidation, invasion and occupation; exactly the same tactics used by the original Roman Empire.

    Unfortunately for the USA, the MIC and American armed forces, are the biggest consumer of all of the income and resources obtained from pillaging and debt, they are a greedy insatiable monster that continues to grow and demands more and more to be fed.

    We`re now in the ludicrous, unsustainable and unacceptable situation of, all of the countries who are having their resources stolen by the USA, and all of the American tax payers who are underwriting the debt incurred by the USA are in fact paying for the MIC and armed forces to repress them.

    Here`s a radical idea; why not stop borrowing to feed the MIC monster, and try treating the rest of planet Earth with respect and cooperation.

    Make peace, not war.

    Utopia Planitia 2 hours ago

    It's a positive feedback loop...

    [Mar 14, 2021] CPI Rose 0.4% in February on Higher Prices for Energy and Medical Services

    Mar 14, 2021 | angrybearblog.com

    CPI Rose 0.4% in February on Higher Prices for Energy and Medical Services

    run75441 | March 10, 2021 9:59 pm

    US ECONOMICS

    Commenter R.J.S. Discuses CPI Rising led by Food, Energy, and Medical

    The consumer price index rose 0.4% in February , as higher prices for fuel, groceries, utilities, and medical services were only partly offset by lower prices for clothing, used vehicles, and airline fares the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.4% higher in February, after rising by 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, after falling by 0.1% in May, falling by 0.7% in April and by 0.3% in March, but after rising by 0.1% in February of last year .the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 261.582 in January to 263.014 in February , which left it statistically 1.6762% higher than the 258.678 reading of February of last year, which is reported as a 1.7% year over year increase, up from the 1.4% year over year increase reported a month ago .with higher prices for energy and foods both factors in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up just 0.1% for the month, as the unadjusted core price index rose from 269.755 to 270.696, which left the core index 1.2826% ahead of its year ago reading of 267.268, which is reported as a 1.3% year over year increase, down from the 1.4% year over year core price increase that was reported for January and the 1.6% the year over year core price increase that was reported for December

    The volatile seasonally adjusted energy price index rose 3.9% in February , after rising by 3.5% in January, 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after falling by 2.3% in May, by 9.5% in April, 5.8% in March, and by 2.5% last February, and hence is only 2.4% higher than in February a year ago the price index for energy commodities was 6.6% higher in February, while the index for energy services was 0.9% higher, after falling 0.3% in January .the energy commodity index was up 6.6% on a 6.4% increase in the price of gasoline and a 9.9% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 7.3% higher within energy services, the price index for utility gas service rose 1.6% after falling 0.4% in January and is now 6.7% higher than it was a year ago, while the electricity price index rose 0.7% after falling 0.2% in January .energy commodities are now averaging 1.6% higher than their year ago levels, with gasoline price averaging 1.5% higher than they were a year ago, while the energy services price index is now up 3.2% from last February, as electricity prices are also 2.3% higher than a year ago

    The seasonally adjusted food price index rose 0.2% in February, after rising by 0.1% in January and 0.3% in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August and in September, after falling 0.3% in July, rising 0.5% in June, 0.7% in May, 1.4% in April, 0.3% in March, and by 0.3% last February, as the price index for food purchased for use at home was 0.3% higher in January, after falling 0.1% in January, while the index for food bought to eat away from home was 0.1% higher, as average prices at fast food outlets rose 0.4% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 12.2% lower notably, the price index for food at elementary and secondary schools was down 13.7% and is now down 32.5% from a year ago

    [Mar 14, 2021] Another sign of the bubble: Goldman's Clients Are Asking Is There Are Any Cheap Stocks Left

    Mar 14, 2021 | www.zerohedge.com

    Well, technically, Goldman clients are asking if they should be buying anything at all, period, in a time of resurgent volatility driven by rising rates and bond market vol, which sparked a high beta/growth panic in equities two weeks ago but have since seen the influence fade.

    Yet anyone hoping for a quick and painless reprieve from surging rates will be disappointed. In his latest Weekly Kickstart, Goldman's David Kostin writes that the bank's economists expect that rates will continue to rise in coming months and forecast 11% real US GDP growth in 2Q with core PCE inflation rising to 2.3% "suggesting that investors will have to continually grapple with the anxiety about economic overheating and Fed tightening that has gripped markets in recent weeks." Goldman also expects the 10-year yield will rise to 1.8% by mid-year and 1.9% by year-end. At the rate it is going, it may get there next week.

    This is a big problem for Goldman because while we already know that equities are extremely overpriced according to most valuation metrics, with the S&P 500 trading above the 90th percentile in absolute valuation...

    ... ... ...

    So what else do Goldman's clients think? Well, based on Kostin's client conversations, most investors share the bank's view that interest rates will continue rise, but many believe that the equity market rotations that have recently accompanied rising rates have gone too far. Translation: Goldman clients are desperately trying to convince nobody but themselves that the turmoil is over (spoiler alert: it is only just starting).

    ... ... ...

    But what may be even more challenging is that value no longer is cheap as it was just a few weeks ago. Specifically, Kostin notes that this week Goldman's equity analysts' proprietary Reopening Scale climbed to a 5 on a scale of 1 to 10...... even as the bank's Reopening basket has already recovered 75% of its decline, suggesting markets have vastly outrun the recovery. Consider that Goldman's Cyclicals vs. Defensives basket pair has climbed to its highest level since the post-tax reform surge of early 2018... ... and the relative P/E valuation of the baskets stands at its highest historical level outside of the post-GFC recovery.

    So with many cyclicals and "reopening" stocks no longer trading at depressed levels, and with growth stocks susceptible to further market turmoil on the back of rising rates, Goldman's clients ask: " Where is there still value in the US stock market ?"

    Well, since Goldman makes its money by making markets, and has a sworn duty to encourage clients to buy cheap stocks even when there aren't, Kostin answers with a decisive yes .

    ... In fact, the Goldman strategist admits that valuations today are even more elevated than they were in 2000. 20 years ago, the aggregate S&P 500 P/E was a similar 24x, but the median stock traded at 14x. Today, the median firm trades at 21x .

    ...

    Energy - which we have been pounding the table on since last summer (see the Exxon posts) - has returned 40% YTD and continues to trade with a very close relationship to long-term oil prices. Goldman's commodity strategists expect Brent crude will rise 8% to $75/bbl next year. Energy is also the only S&P 500 sector with short interest above its historical average. This will be key once Quants (which recently covered their energy shorts) go massively long the energy sector as we previewed on Friday . Similarly, Financials, the second best sector YTD (16%), trades closely with Treasury yields. Although it has recently rallied more than its typical relationship with rates would have implied, relative valuations remain low compared to history and Goldman expects value to keep outperforming if the economy continues to accelerate and rates continue to rise. play_arrow

    The Count 3 minutes ago (Edited) remove link

    Listen to a guy who experienced all crashed since 1987. Whenever you have housewives trade stocks, futures or real estate over the kitchen table the end is very near. Whenever pundits say the market cant go down the end is very very near. Whenever people want to buy whatever hasn't gone up yet the end is just around the corner.

    [Mar 14, 2021] Disposable People by Sandwichman

    Mar 04, 2021 | angrybearblog.com

    Disposable people are indispensable. Who else would fight the wars? Who would preach? Who would short derivatives? Who would go to court and argue both sides? Who would legislate? Who would sell red hots at the old ball game?

    For too long disposable people have been misrepresented as destitute, homeless, unemployed, or at best precariously employed. True, the destitute, the homeless, the unemployed and the precarious are indeed treated as disposable but most disposable people pursue respectable professions, wear fashionable clothes, reside in nice houses, and keep up with the Jones.

    Disposable people are defined by what they do not produce. They do not grow food. They do not build shelters. They do not make clothes. They also do not make the tractors used to grow food, the tools to build shelters or the equipment to make clothes.

    Although disposable people do not produce necessities what they do is not unnecessary. It is simply that the services they provide are not spontaneously demanded as soon as one acquires a bit of additional income. One is unlikely, however, to engage the services or purchase the goods produced by disposable people unless one is in possession of disposable income. Disposable income is the basis of disposable people. Conversely, disposable people are the foundation of disposable income.

    [Mar 14, 2021] Shadow Government Statistics General headlines

    Mar 14, 2021 | www.shadowstats.com

    Pandemic-Driven U.S. Economic Collapse Continues in a Hardening, Protracted "L"-Shaped Non-Recovery

    - Severe Systemic Structural Damage from the Shutdown Will Forestall Meaningful Economic Rebound into 2022 or Beyond, Irrespective of Advances in Coronavirus Vaccines and Treatments

    - Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit Spending Continue and Will Expand, Triggering Major Domestic Inflation

    - With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver Protects the Purchasing Power of One's Assets

    Scroll down for the latest ShadowStats outlook, headline economic news and background information on the U.S. Economy, Financial System (FOMC), Financial Markets and Alternate Data, also for Publicly Available Special Reports and Contact Information.

    [Mar 14, 2021] Goldman expects the 10-year yield will rise to 1.8% by mid-year and 1.9% by year-end

    Mar 14, 2021 | www.zerohedge.com

    Goldman's Clients Are Asking Is There Are Any Cheap Stocks Left - ZeroHedge

    Yet anyone hoping for a quick and painless reprieve from surging rates will be disappointed. In his latest Weekly Kickstart, Goldman's David Kostin writes that the bank's economists expect that rates will continue to rise in coming months and forecast 11% real US GDP growth in 2Q with core PCE inflation rising to 2.3% "suggesting that investors will have to continually grapple with the anxiety about economic overheating and Fed tightening that has gripped markets in recent weeks." Goldman also expects the 10-year yield will rise to 1.8% by mid-year and 1.9% by year-end. At the rate it is going, it may get there next week.

    [Mar 14, 2021] I would say that when 10-years were at 0.75%, that was the wrong price

    Looks like ZH croud expects higher 10 year bond rates at the end of the year...
    Mar 14, 2021 | www.zerohedge.com

    HARLEY BASSMAN: Well, that's a good question. I would say that this notion that rates are exploding higher and bad things are happening, it's not quite the case. I would say that when 10-years were at 0.75, that was the wrong price. All we're doing now is going to the right price as opposed to where we were before , which is the wrong price. I would push back at you. We've seen a significant curve steepening. I'm quite certain we're going to talk about that today quite a bit.

    ... ... ...

    The banking system, maybe there's bad guys in there and certainly there were villains 10 years ago who should have gone to jail, and didn't, but the banking system is the plumbing of our financial economy, and we need to maintain it. Therefore steeper curve helps that plumbing system, so the government can do it. The Fed and fiscal policy can be more efficient.

    ... ... ...

    HARLEY BASSMAN: Circling back to our first two sentences here, it's never different this time. That's my mantra. It's never different this time. I can't explain why or how but I just do not think that we've reinvented human tragedy. Hubris, greed, ego. We wrote about it, the Greeks wrote about it, Shakespeare wrote about it. It just hasn't changed, and it's this idea that we've invented a new paradigm I just don't believe it. It's a different song, but it's still music and I think that we'll find some way to go and cause trouble, which is why I believe in inflation ultimately.

    Is it next year? No. Is it in 20 years? I don't know. What I do think, it's going to happen in two to four years when the demographic bubble rolls over. We could do that later on. I think we're going to get it because I don't think you could print the coin of the realm at a faster pace than the overall growth of the economy without inflation at some point. Now, could it take 20 years? Why not? It took 400 years for the Roman Empire collapsed, so in the grand scheme of things, maybe not.

    This policy of money printing is not going to end well. That doesn't mean it was a bad public policy, by the way, because having the economy totally collapse either in 2009 or last year is certainly a bad idea, so maybe deferring the pain or spreading the pain out. I think that inflation is the ultimate solution. Because inflation is a beautiful tax. It taxes, everybody. It taxes them silently, and the politicians dumped a vote on it. As a tax, everyone -- well, I wasn't happy, but it's the easiest one to live with in a democracy.


    ebworthen 1 hour ago remove link

    " They purchase a Rembrandt for a sandwich and our souls for a glass of whisky. Krupp and Stinnes get rid of their debts, we of our savings. The profiteers dance in the palace hotels." -- Klaus Mann, 1923; Weimar, Germany.

    The more things change, the more they stay the same.

    YuriTheClown 1 hour ago

    And the Weimar Republic was run by who? Very similar make up to that of the Bolsheviks.

    85% non members of the Royal Church of Scotland.

    Creamaster 1 hour ago

    Covid timing was sure convenient for a lot of things to occur

    You decide, was it naturally occurring, or released intentionally?

    Son of Loki 1 hour ago (Edited)

    The 10-years will hit 2% soon, and 3% by end of year.

    Given the sad state of the economy and leadership (Yellen, Bribem, etc), no way of stopping it.

    Son of Loki 1 hour ago (Edited)

    The 10-years will hit 2% soon, and 3% by end of year.

    Given the sad state of the economy and leadership (Yellen, Bribem, etc), no way of stopping it.

    Jalmar Shockt 14 minutes ago

    It doesn't work that way and it's not about inflation the way one usually thinks of it.

    Hyperinflation is not the same as the ultimate inflation of the money supply. It is the ultimate depreciation of the currency unit. The two concepts are far from being the same. When the populace eventually figures out what's going on the bonds, notes, bills, and other obligations of the United States government that are all irredeemable will be repudiated.

    aeslong 48 minutes ago (Edited) remove link

    "I would say that when 10-years were at 0.75, that was the wrong priceI would say that when 10-years were at 0.75, that was the wrong price. All we're doing now is going to the right price as opposed to where we were before , ....."

    yea, only bond was mispriced, right? other assets, including public debts don't have to be priced to where they were before.

    Ted Baker 1 hour ago

    more market manipulation...

    Bank_sters 1 hour ago (Edited)

    Central banksters print money and give most to the wealthy and connected, foreign govts, the war machine and then send a few crumbs to the serfs. Meanwhile destroy their currency, savings and future.

    Yields? what a joke. CPI- pure fiction.

    Finance so easy a psychopathic child can do it.

    overbet 1 hour ago

    Wall Street adage:

    The most dangerous words on Wall Street are, this time its different.

    YuriTheClown 1 hour ago (Edited)

    Bassman's outlook for rates and markets. Unsurprisingly, he sees more volatility, and higher convexity, ahead.

    I've tried searching for the definition of "convexity" in this context and had no luck. Anyone care to enlighten?

    Oops. I guess the internet had some additions since then. Convexity

    Ron_Paul_Was_Right 46 minutes ago remove link

    "A steeper curve helps the baking system."

    Did you mean like, a more steeply curved cookie sheet? To help the baking of brownies? I don't follow.

    vote_libertarian_party 1 hour ago remove link

    Something will trigger the stock and bond bubble to pop...

    [Mar 12, 2021] Why the U.S. Manufacturing Renaissance Is Essential for U.S. Survival

    Mar 12, 2021 | www.nakedcapitalism.com

    Sound of the Suburbs , March 11, 2021 at 5:53 am

    Why is it so expensive to get anything done in the US?

    Neoclassical economics and the missing equation.

    Disposable income = wages – (taxes + the cost of living)
    

    The US's high cost of living pushes up wages making it expensive to get anything done in the US.

    See where neoclassical economists go wrong?
    Employees get their money from wages, and the employers pay the cost of living through wages, reducing profit.
    It is the US's employers who pay the high cost of living, via wages, reducing profit.

    Do you really want to pay the US's high cost of living in wages?
    No way.
    You will have to off-shore to maximise profit.

    Sound of the Suburbs , March 11, 2021 at 5:55 am

    It's supposed to be like that.

    The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between "earned" and "unearned" income and they conflated "land" with "capital".
    They took the focus off the cost of living that had been so important to the Classical Economists as this is where rentier activity in the economy shows up.

    It's so well hidden no one even knows it's there.

    The neoliberals picked up this pseudo economics and thought it was the real deal.
    Things were never going to go well.

    LawnDart , March 11, 2021 at 7:03 am

    Imagine the Chamber of Commerce actively lobbying for state-supported child care, massive increases in funding for public transportation, public education, public health, and housing.

    Perhaps we should take a look at China to learn how we too can become better capitalists, and so help USA businesses focus on the business of business.

    Sound of the Suburbs , March 11, 2021 at 8:43 am

    Maximising profit is all about reducing costs.

    Western companies couldn't wait to off-shore to low cost China, where they could make higher profits.
    China had coal fired power stations to provide cheap energy.
    China had lax regulations reducing environmental and health and safety costs.
    China had a low cost of living so employers could pay low wages.
    China had low taxes and a minimal welfare state.
    China had all the advantages in an open globalised world.

    LawnDart , March 11, 2021 at 1:56 pm

    So aside from low cost of living, the Chinese are basically Republicans?

    Synoia , March 11, 2021 at 10:56 pm

    Maximising profit is all about reducing costs.

    Actually it is not. Maximizing profit requires customer first, The so call high wage costs in the US also drive purchases.

    Maximizing profit has a very large sales dimension. Destroying one's customers, by impoverishing them is not going to lead to record profits.

    Sound of the Suburbs , March 11, 2021 at 8:44 am

    What was Keynes really doing?
    Creating a low cost, internationally competitive economy.

    Keynes's ideas were a solution to the problems of the Great Depression, but we forgot why he did, what he did.
    They tried running an economy on debt in the 1920s.
    The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn't look at private debt, neoclassical economics.

    Keynes looked at the problems of the debt based economy and came up with redistribution through taxation to keep the system running in a sustainable way and he dealt with the inherent inequality capitalism produced.

    The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living
    Disposable income = wages – (taxes + the cost of living)

    Strong progressive taxation funded a low cost economy with subsidised housing, healthcare, education and other services to give more disposable income on lower wages.
    Employers and employees both win with a low cost of living.

    Keynesian ideas went wrong in the 1970s and everyone had forgotten the problems of neoclassical economics that he originally solved.

    Mike , March 12, 2021 at 9:52 am

    "Keynesian ideas went wrong in the 1970s" and from the 80s on because the (primarily) Republicans had forgotten that Keynes originally stipulated that the government debt incurred during "bad times" be liquidated during "good times". Since Reagan, Republicans have increased debt to stimulate the economy, but failed to pay it down once that part of Keynes's took effect. Republicans are the biggest half-Keynesians of all time.

    drumlin woodchuckles , March 11, 2021 at 7:52 pm

    US wages are only "high" when compared to the semi-slave-labor "low" wages zones.

    Abolish Free Trade and restore Militant Belligerent Protectionism and you solve that problem.

    ambrit , March 11, 2021 at 6:31 am

    Behind all this is the neo-liberal renunciation of any 'national' policies. Define a 'nation' as you will, it still is a valid category. It has definite 'needs' and requirements to function well and continue as a viable entity. The 'national' government has functioned in the past as the representative and facilitator for the 'nation.' "Drown that in a bathtub" and you eventually eliminate the 'nation's' ability to function. The end stage of that process is the collapse and extinction of the 'nation.'
    The above process should be familiar to anyone who has studied the past few decades of American history. What the proponents of the neo-liberal dispensation have not advertised, if indeed they even know, is what replaces the 'nation?' An International Syndicate of Oligarchs? If so, such an endeavour is doomed to failure. History has shown, time and again, that the concept and practice of commercial business is not an adequate organizing principle for large scale human society. It simply does not make allowances for human variability.
    The best example of the point above that I can think of is the present dominance of short term thinking and planning in the business sphere. Restricting the inputs of the decision making process to short term issues, such as quarterly earnings and stock prices in the bourse, leads to the dysfunctions bemoaned in the piece above. Offshoring a factory makes sense from a short term business point of view, but ignores the long term 'national' implications. Here is a direct conflict between the two methods of social organization. At present the short term methodology is ascendant. Alas, it looks as if America is going to have to learn this lesson of setting proper 'national' priorities the hard way; such as by losing a war decisively.
    I look on the bright side here. A small thermonuclear exchange between America and some peer adversary will not only 'thin out' the population, but also bring on a nuclear winter and retard the progression of global warming for a while. It might be the breathing space the Terran human race needs to survive beyond the upcoming evolutionary bottleneck.

    [Mar 12, 2021] Higher Gas, Energy Prices Boost Consumer Inflation

    Mar 12, 2021 | www.wsj.com

    The consumer-price index rose 0.4% in February from the prior month, as the pace of the economic recovery increased following a winter lull, buoyed by higher gasoline and energy costs.

    [Mar 12, 2021] Value Investors Finally Have Reason to Celebrate -- for Now

    investors are more worried about rising interest rates, asset bubbles, inflation and geopolitical risks than they were in November
    Mar 12, 2021 | www.wsj.com

    Value stocks are beating growth stocks by the widest margin in two decades, the latest sign that investors expect the next year to bring a powerful economic rebound.

    As the rollout of Covid-19 vaccines quickens and the economy bounces back from last year's shutdowns, portfolio managers are snapping up cyclical stocks -- banks, energy companies and others whose fortunes are closely linked to economic growth. Those shares often fit the description of value stocks, which trade at low multiples of their book value, or net worth.

    The shift in bets marks a reversal of a trend that has held essentially since the financial crisis, in which growth stocks outpaced value stocks. That reflected in part the rise of big tech companies such as Apple Inc. and Amazon.com Inc. AMZN -0.77% and in part the softness of the U.S. economy. This year, the Russell 1000 Value Index is up 11% and the Russell 1000 Growth Index has edged up 0.2%.

    [Mar 12, 2021] Tech Wrecks As Yields Breakout - ZeroHedge

    Mar 12, 2021 | www.zerohedge.com

    Tech Wrecks As Yields Breakout BY TYLER DURDEN FRIDAY, MAR 12, 2021 - 11:05

    10Y Yields topped the March 5th highs...

    And 30Y has broken out...

    And that triggered selling long-duration growth-tastic stocks, sending Nasdaq notably lower...

    And more rotation into value as the Dow and Small Caps jump...

    And the correlation between bonds and stocks remains extremely high and extremely unusual...

    That won't help the asset-allocators?


    OldNewB 39 minutes ago

    It will all reverse as soon as Europe closes.

    bonsai_king 17 minutes ago remove link

    Already reversing heavily.

    Tech not routed is what this article should read.

    A 1% dip in MSFT, QCOM, NVDA, APPL is not exactly a rout....

    OldNewB 15 minutes ago

    Yep. PPT is real.

    zeroshrubbery 35 minutes ago (Edited) remove link

    The senate blew their load by using their budget reconcilliation for the year to pass stimulus, so nothing else will pass this year. Biden pretty much said point blank there will be no more stimulus period. So right now we're in a buy the rumor, sell the news dip. The 100 billion or so flowing into the market should create one final massive blow off top before everyone and their brother's snake's feed mouse starts taking profits.

    I'm tracking the trading shows some completely dense permabulls, who think they are god's gift to humanity sharing expert trading advise with their portfolio of HODLing meme stocks. I can't wait to bathe in the schadenfreude as the losses start hitting 40-50%, they probably will mark their channels private at 80% losses so I'm not expecting it to last long but one can only hope.

    OldNewB 28 minutes ago

    Don't be so sure. If the Fed doesn't buy absolutely everything (just like BOJ), the final crash happens and America goes under. They're not going to let it happen. Inflation and hyperinflation is the plan, even though they will continue to lie about it being low. Liars and thieves all.

    [Mar 12, 2021] The US economy still has almost 10 million fewer jobs than it did before the coronavirus pandemic took hold

    Mar 12, 2021 | finance.yahoo.com

    The jobs picture overall has been improving with 379,000 workers added in February , although the U.S. economy still has almost 10 million fewer jobs than it did before the coronavirus pandemic took hold. Economists have been revising their employment and GDP forecasts are higher.

    Goldman Sachs Chief Economist Jan Hatzius, for example, wrote in a report this week that the jobless rate would fall to 4.1% by the end of 2021, from 6.2% last month.

    Hyams has been seeing similar encouraging signs on Indeed, with postings on the site already lapping where they were pre-pandemic. "On Indeed, when we look at new job postings and our benchmark pre-pandemic of February 1, 2020, at the end of this February we were up 5% year-over-year. That's still with entire sectors completely shut down," he said.

    As for where the hottest demand lies for new jobs, Hyams pointed to e-commerce-related occupations including logistics, warehousing and delivery, as well as jobs in health care and pharmacy.

    While some of those openings may require showing up regularly in-person, many will not, which again feeds into Hyams' thesis that interviews will remain virtual.

    "If you're going to be a remote worker, interviewing over video actually makes a whole lot more sense. It's more convenient. It will cut down on travel," he said.

    That means many interviewees can continue to pull their blazers and ties out of the closet -- along with their sweatpants.

    [Mar 12, 2021] The pandemic 'will change how hiring is done forever,' says CEO of jobs website Indeed

    Mar 12, 2021 | finance.yahoo.com

    Remember job interviews pre-pandemic? The jitters, the choosing of just the right suit, the race to get there early, maybe even the drive across town or flight across the country for a shot at a new opportunity?

    Like most everything else, the pandemic changed that dynamic. The jitters may remain, but in-person meetings are largely off the table, interviews among them. The CEO of one of the most-trafficked jobs websites says it's likely to stay that way even after people get back to the office.

    "People being able to conduct an interview from the safety and convenience of their own home is going to change hiring forever," said Chris Hyams, Indeed CEO, in an interview with Yahoo Finance Live. "We believe this is the beginning of a massive secular shift."

    "In April, we saw the number of requests for interviews to happen over video shoot up by 1,000%. Even as things have started to stabilize and the economy has opened up over the last 11 months, we've seen that continue to grow," Hyams said.

    The jobs picture overall has been improving with 379,000 workers added in February , although the U.S. economy still has almost 10 million fewer jobs than it did before the coronavirus pandemic took hold. Economists have been revising their employment and GDP forecasts are higher. Goldman Sachs Chief Economist Jan Hatzius, for example, wrote in a report this week that the jobless rate would fall to 4.1% by the end of 2021, from 6.2% last month.

    Hyams has been seeing similar encouraging signs on Indeed, with postings on the site already lapping where they were pre-pandemic. "On Indeed, when we look at new job postings and our benchmark pre-pandemic of February 1, 2020, at the end of this February we were up 5% year-over-year. That's still with entire sectors completely shut down," he said.

    As for where the hottest demand lies for new jobs, Hyams pointed to e-commerce-related occupations including logistics, warehousing and delivery, as well as jobs in health care and pharmacy.

    While some of those openings may require showing up regularly in-person, many will not, which again feeds into Hyams' thesis that interviews will remain virtual.

    "If you're going to be a remote worker, interviewing over video actually makes a whole lot more sense. It's more convenient. It will cut down on travel," he said.

    That means many interviewees can continue to pull their blazers and ties out of the closet -- along with their sweatpants.

    [Mar 12, 2021] Behind on Rent- You May Qualify for Federal Assistance

    Mar 12, 2021 | www.wsj.com

    Millions of renters have been unable to pay some or even all of their rent since March 2020, when the pandemic struck . An analysis by the Urban Institute, a Washington think tank, found that the amount of unpaid rent could exceed $52 billion . It estimated that the average household that has fallen behind on rent owed $5,586.

    [Mar 12, 2021] 'No peace' for markets until 10-year Treasury yield hits 2%, strategist says

    Mar 12, 2021 | www.marketwatch.com

    A bond market selloff is calling the tune across financial markets. Equilibrium is unlikely to return until the yield on the benchmark 10-year U.S. Treasury note hits 2%, a well-known macro strategist argued Friday.

    "There will be no peace until U.S. 10s reach 2%," said Kit Juckes, global macro strategist at Société Générale, in a note.

    ... ... ...

    "The pattern seems clear enough: The equity market is seeing a sector rotation but not a correction; the bond market is seeking a new equilibrium in the light of a vastly improved economic outlook in both the U.S. and elsewhere; some policy makers are pushing back against the bond moves, with little success," Juckes wrote.

    As yields rise, the dollar rallies, but when yields settle at a new level, the dollar drops back. The pattern probably goes on until bonds find an equilibrium, unlikely before 10-year note yields have a 2-handle, judging by taper tantrums and past cycles," he said.

    [Mar 11, 2021] Opinion- The stock market is behaving in mysterious ways -- is it bullish, bearish or something else by Lawrence G. McMillan

    Mar 11, 2021 | www.marketwatch.com

    the majority of stocks are weakening and not making new highs, it's not a good sign when only 30 stocks are leading the way.

    Institutional investors pile into stocks

    We have different (hopefully better) ways of measuring divergence these days -- specifically, cumulative breadth indicators, new highs vs. new lows, etc., so we don't have to "stretch" to draw a conclusion about the Dow today.

    [Mar 11, 2021] When the Stock Boom Turns to Bust by Andy Kessler

    Highly recommended!
    For a pump and dump to work, you need a certain type of investor—specifically, the type P.T. Barnum said is born every minute (on platforms like Reddit and Robinhood, more like every nanosecond). To be nice, let’s call them dupes. “Greater fools” works too. The Federal Reserve owns a share of the blame. You can’t pump without hot air, which the Fed has been supplying for way too long. Sometimes these schemes last a while, even years. Pay attention to the stories told by presstitutes hyping many of today’s overvalued stocks. The question arise: "Is today’s market a giant pump and dump?" The market is priced at 32 times earnings; the historic norm is 16. Expect the inevitable Reddit group: r/StockBagHoldersClub.
    Notable quotes:
    "... Bull markets need fuel. When the marginal buyer is done, there are no more greater fools to buy in, no matter how well companies actually perform. The dream is priced in, and firms can only meet, not beat, expectations. ..."
    "... For those lulled by today's bull market, remember that you own a piece of paper. Low-yielding U.S. Treasury bills and bonds are safe because they are backed by the U.S. government, by cash flow of tax dollars and by the country's assets (think land, not Fort Knox). Stocks are backed by expectations of future earnings, but if you overpay during periods of high expectations (like today), then your downside is huge. Crypto is backed simply by the faith of those who proclaim it is a store of value. Even art and exotic cars and silly NFT tokens are backed only by faith the wealthy will overpay for uniqueness. Faith becomes scarce when the selling starts. ..."
    Mar 07, 2021 | www.wsj.com

    ... ... ...

    Remember that banker talking about losing 90%? He was talking about the late-'70s death march down, characterized by stocks going up in the morning and then down in the afternoon -- optimists quickly stepped on by pessimists. Sure enough, after 2000, high-flying tech names were down 90%. Many went to zero.

    How do these bull bashes end? When the last skeptical buyer finally sees the light and buys into the dream that every car will be electric, that crypto replaces gold and banks, that we overindulge on vertically farmed "plant-based steaks" while streaming "Bridgerton" Season 5 before we hop on an air taxi for our flight to Mars. Those last skeptics (maybe already) convince themselves there's no longer any downside. And then boom, it's over.

    Bull markets need fuel. When the marginal buyer is done, there are no more greater fools to buy in, no matter how well companies actually perform. The dream is priced in, and firms can only meet, not beat, expectations.

    For those lulled by today's bull market, remember that you own a piece of paper. Low-yielding U.S. Treasury bills and bonds are safe because they are backed by the U.S. government, by cash flow of tax dollars and by the country's assets (think land, not Fort Knox). Stocks are backed by expectations of future earnings, but if you overpay during periods of high expectations (like today), then your downside is huge. Crypto is backed simply by the faith of those who proclaim it is a store of value. Even art and exotic cars and silly NFT tokens are backed only by faith the wealthy will overpay for uniqueness. Faith becomes scarce when the selling starts.

    Write to [email protected].

    [Mar 11, 2021] What was the Ponzi scheme of inflated asset prices that collapsed in 2008?

    Mar 08, 2021 | www.zerohedge.com

    Sound of the Suburbs 41 minutes ago (Edited)

    The US, UK and Euro-zone went on a joint economic suicide mission before 2008. What was the ponzi scheme of inflated asset prices that collapsed in 2008? "It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

    Our bankers had distributed this load of old doggie-doo across the financial systems of the US, UK and Euro-zone. When these asset prices collapsed, so did our financial systems. Bankers just need to create as many products as they can from something in the real world, e.g. subprime mortgages.

    They all go up together and down together. They call it leverage. I think they are doing the same with ETFs now, since no one worked out what they were up to last time.

    [Mar 11, 2021] Inflation rebound means '40-year bull market in bonds is over,' says Bofa by Sunny Oh

    Mar 11, 2021 | www.marketwatch.com

    ... ... ...

    "2020 marked the secular low point for inflation and interest rates," warned Michael Hartnett, chief investment strategist for Bofa Global Research, in a Thursday note. "The 40-year bull market in bonds is over."

    His cautionary words come as investors contend with the sudden surge in long-term Treasury yields this year which has surprised even the bond bears.

    The 10-year note yield TMUBMUSD10Y, 1.540% was at 1.532% on Thursday, over 60 basis points from where it traded at the beginning of the year.

    That rise has, in turn, heightened concerns around stretched valuations in equities, briefly sending the Nasdaq Composite COMP, +2.52% into correction territory this week, defined as a 10% fall from its intraday peak. Stocks have recently found their footing again, with the S&P 500 SPX, +1.04% up nearly 3% this week.

    Investors throughout the multidecade long bull market in bonds have sometimes bet against a continued slide in long-term Treasury yields, but as inflation has struggled to break above the Federal Reserve's 2% target for any sustained stretch, forecasts for higher yields have often proved a losing proposition.

    Still, Hartnett suggested any complacency is dangerous as undercurrents in the economy and policymaking pointed towards a tidal wave of inflationary pressures that could overwhelm buyers of Treasurys.

    [Mar 10, 2021] Nasdaq in crosshairs as dot-com bubble threatens repeat

    Mar 10, 2021 | www.foxbusiness.com

    The Nasdaq Composite has fallen 7.25% from its Feb. 12 record high through Tuesday as a sharp rise in the 10-year year yield caused investors to flee stocks in the growth-heavy index. At the same time, the Dow Jones Industrial Average has held within 0.4% of its record peak.

    "The lesson here is that near or at market peaks, it is common for the Nasdaq to first succumb to the overhyped inflation fears and the rise in bond yields, and after the mega caps slip, the Dow follows with a lag," Rosenberg said. "And the blue-chips decline, albeit at a slower rate."

    The 10-year Treasury yield has climbed 64 basis points this year to 1.56%, a 13-month high, amid concerns the unprecedented amount of fiscal and monetary stimulus used to combat the economic slowdown caused by COVID-19 will bring back inflation that has been lacking since the 2008 financial crisis.

    ... ... ...

    The last two major bond-market selloffs, in 2016 and 2012, resulted in the 10-year yield rising by 132 basis points and 162 bps, respectively. Measuring from the August 2020 low of 0.515% suggests the top in yield could occur in the 1.82% to 2.13% area and begin forming in May, according to Bank of America's analysis. In both examples, the top took about three months to form.

    [Mar 10, 2021] 3 Reasons the Stock Market Could Crash

    Over the past five years the Nasdaq Composite has increased in value by 127%. Which is less then the 456% growth in the Nasdaq during the heyday of the dot-com era but still significant. With the recent listing of Snowflake ($SNOW) in what was the largest software IPO ever, some have argued that this is reminiscent of the dot-com bubble where the share price for technology companies routinely doubled or more on their first day of trading. Snowflake's astronomical valuation aside, the frenetic market behavior surrounding this summer's IPO craze is a cause for concern. Also look at the hype around Nikola project. The current P/E ratio od S&P500 of 28.8 is below the high of 44 in December 1999 but still very high.
    Mar 10, 2021 | www.fool.com
    Valuations are at nearly two-decade highs

    Arguably the single greatest concern for the stock market is valuation, which is something I've been harping on for months .

    As of Feb. 22, the Shiller S&P 500 price-to-earnings (P/E) ratio -- a P/E ratio based on average inflation-adjusted earnings from the previous 10 years -- stood at 35.30. That's more than double its average reading of 16.78 over the past 150 years, and it's the highest the Shiller P/E ratio has been for the S&P 500 since the dot-com crash two decades ago.

    There have only been five instances in the 150-year history of the Shiller S&P 500 P/E ratio where a bull market rally has sustainably taken it above 30: The Great Depression, the dot-com bubble, Q4 2018, the COVID-19 crash of Q1 2020, and currently. In each of the previous four instances, the S&P 500 lost between 20% and 89% of its value. Admittedly, the Great Depression was a unique scenario that would be unlikely to play out today. Nevertheless, bad things have historically been in the cards for the S&P 500 when the Shiller P/E ratio gets north of 30.

    Rising Treasury yields portend trouble for spoiled homeowners and prospective buyers

    A third market crash-causing concern is that the multiyear housing boom could dry up at the drop of a pin.

    Without getting too far into the weeds, current homeowners and prospective buyers have been driven by historically low lending rates. Though the Fed doesn't directly control mortgage rates, there's been a fairly tight correlation between mortgage rates and 10-year Treasury yields for a long time. Last year, 10-year Treasury yields hit roughly 0.5%, paving the way for historically low mortgage and refinance rates, as well as tempting homeowners to take equity out of their homes.

    [Mar 10, 2021] Warren Buffett- Why Hasn't the Market Crashed Yet

    Mar 10, 2021 | www.fool.ca

    Buffett's disciples are looking at their idol's indicator, which seems to suggest the stock market is significantly overvalued. The Berkshire Hathaway chief said in 2001, "The ratio (stock market capitalization to annual GDP) has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment."

    While the Federal Reserve continues to pump liquidity and fuel new record highs, the COVID-19 pandemic depresses economic output. The Buffett indicator stands at 194%, which is well above the 159.2% just before the dot.com bubble. Hence, the Oracle of Omaha sees a very strong warning signal.

    [Mar 10, 2021] Don't Learn the Wrong Lessons from the Dot Com Crash

    Is the stock market heading for a crash in 2021? Pundits seem sure a severe correction is coming because of the irrational exuberance that's happening at present. Some analysts liken it to the events in the late 1990s when the dot.com bubble burst. We witnessed the longest bull market
    Mar 10, 2021 | intrinsicinvesting.com

    While the narrative of the Dot Com crash is commonly understood as a market-wide crash, the chart above shows that over the five years after the peak of the bubble, the S&P 500 Equal Weight Index generated a positive 36% return while the Nasdaq declined by 58%. If you look at the white line representing the S&P 500 Equal Weight Index, you'll see that by the end of 2001, when the NASDAQ had fallen by almost 60%, the average stock was actually up about 9% despite the Dot Com crash and the horrific events of 9/11.

    [Mar 10, 2021] You have not seen a real bear market until you lost at least 50% in value of your stocks

    This is especially true for tech stocks
    Mar 10, 2021 | www.n1gworld.com

    With IT being one of few sectors that have continued to deliver stable results amid the Covid-19 recession, analysts and investment advisors alike have urged for caution as some have feared a repeat of the 1995-2000 tech bubble that ultimately burst in 2002 when 80% was wiped off the stock market. However, as some more level-minded commentators have pointed out, the differences between 2002 and today outnumber the similarities as private and institutional investors alike have a better understanding of how digital services work now than 18 years ago – and P/E ratios have been more reasonable lately than they were during the dot-com bubble.

    As difficult as it is to imagine a world without the internet, the medium as we know it today only took off in earnest with the event of Windows 95 and the Netscape browser. The tech bubble began with Netscape, the company behind the browser, which was loss-making at the time of its IPO but still saw its share price increase from $28 to $75 within the first few hours of trading. Netscape would be joined by other tech and software companies which had underlying structural problems but still saw their share prices skyrocket – investors jumped at the opportunity to buy stocks in any company with the prefix "e-" or suffix "-com". The tech companies spent millions on advertising campaigns but failed to make a profit and in 2000, valuations began to fall. Between 2000 and 2002 Nasdaq fell by 80% – and the dot-com bubble burst.

    In its infancy, the internet seemed to offer unlimited possibilities and so it us understandable that investors felt optimistic. Cut-throat competition and limitations in what consumers and corporate users were actually willing and able to do with the new medium limited the potential of many tech companies, and start-ups with poor finances were generally not in a position to compete with giants such as Microsoft, IBM and Apple who already had been established for decades.

    The proliferation of smartphones and 3G as well as fast broadband around 2010 enabled a new wave of innovation and saw a rise in social media users and online streaming services. Some pre-existing firms, such as Facebook and Netflix have been able to tap into this new market while newcomers such as Uber and Lyft offer services that would have been unviable without smartphones. While tech start-ups have proliferated in recent years, many stay away from the stock market precisely because they are not yet profitable – food delivery service Deliveroo being one example. Cab-hailing app Uber's IPO and subsequent plummeting stock price served as a lesson to many others.

    While it could be argued that the fall in value of stocks from Uber, FitBit and other tech start-ups is tech bubble 2.0 starting to burst, a broader view calls for another assessment. As noted, start-ups have not seen their stock prices surge when going public, but rather plummet immediately. Unlike in 2000, investors are more aware of the differences between tech firms and the services they offer – simply having an "e-" or "-com" in the company name does not make investors queue up to buy stock – and investors also know that corporate IT is a larger market than products directed as consumers. As an illustration, Amazon earns two-thirds of its revenue from its cloud computing platform and not from physical sales or video streaming.

    Among the IT stocks on the S&P500 index that have seen the highest increase in the last decade, we find Apple, Alphabet (the owner of Google), Amazon, Facebook, Mastercard, Microsoft and Visa. These continue to deliver robust returns.

    Taken together, the buzz word "the winner takes it all" seems to ring true as tech giants, with their relatively high P/E multiples are in a position to dominate the market and acquire promising start-ups. How their domination will impact the stock exchanges remains to be seen, but for the time being it seems unlikely that their stocks would collapse.

    [Mar 10, 2021] The Cyclically Adjusted Price Earnings Ratio, or CAPE, a measure developed by Robert Schiller is flashing red

    10-year treasury rates average at around 5% during this entire growth period. This is a stark contrast to the 1.5% we are seeing now (which already seem to rattle markets).
    Mar 10, 2021 | www.zerohedge.com

    The Cyclically Adjusted Price Earnings Ratio, or CAPE, a measure developed by Robert Schiller, is also flashing red with the second highest reading in history going back to the late 1900s (see exhibit 4).

    Price to sales ratios also hit a record high (see Exhibit 5).

    There are other indicators that suggest that equity prices have detached from underlying fundamentals. The put / call ratio on the CBOE has now reached the levels of the dot.com bubble (see Exhibit 6).


    [Mar 10, 2021] Opinion- Bill Gates and Warren Buffet should thank American taxpayers for their profitable farmland investments - MarketWatch

    Mar 10, 2021 | www.marketwatch.com

    Bill Gates is now the largest owner of farmland in the U.S. having made substantial investments in at least 19 states throughout the country. He has apparently followed the advice of another wealthy investor, Warren Buffett, who in a February 24, 2014 letter to investors described farmland as an investment that has "no downside and potentially substantial upside."

    [Mar 10, 2021] The Dot-Com Bubble -- The First Crash of a Boom-Bust Tech Cycle

    Mar 10, 2021 | www.dotcombubble.org

    The World Wide Web, which is what people really tend to mean when they say 'the Internet,' was officially invented by Tim Berners-Lee in 1989. When people interact with the Internet today, they are using the World Wide Web, which is technically not the same as the 'Internet.' However, the Web did not become fully commercialized right away.

    When the Mosaic Web browser was released in 1993, the commercial growth of the Internet started to become much more prominent. Really, the commercialization of the Internet and the dawn of mass Internet commerce began around this point. However, the Dot Com Boom itself did not really get into full force until 1997. The Dot Com Bubble was characterized by the unprecedented growth of companies that came to be known as Dot-com companies.

    There are still a companies today that are referred to as 'dot-com companies.' However, in many cases, the people who say that are going to date themselves. The dot-com companies of the late 1990's were more or less formed in order to take advantage of the remaining venture capital in the markets that they entered. They often had little more than a great domain name and a basic idea. They hoped people would invest in what they had in order for them to rise through the ranks, but many of them would have no real idea of how to produce anything even if their companies could have had any substance.

    [Mar 10, 2021] Devil Take the Hindmost - A History of Financial Speculation,

    Highly recommended!
    Notable quotes:
    "... The psychologies of speculation and gambling are almost indistinguishable: both are dangerously gambler places a bet on a horse he is creating a risk, while the speculator who buys a share is simply involved in the transfer of an existing risk. ..."
    "... To repeat Keynes's warning from the 1930s: "when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done." Momentum trading, trend-following currency speculators, overleveraged hedge funds, and corporate managements obsessed with daily fluctuations in share quotations are unlikely to produce the optimal distribution of scarce resources in the global economy. We have reached Keynes's "third degree." ..."
    "... ...options, developed by Scholes and Merton, which lies at the heart of the modem derivatives world, is dependent on the similar assump- tion diat past volatility is a reliable guide to future volatility. This assumption may be likened to driving a motorcar by looking in the rearview mirror -- line as long as the road continues straight but disastrous when you reach the first comer. ..."
    Mar 10, 2021 | www.amazon.com

    For Smith, the speculator is defined by his readiness to pursue short-term opportunities for profit: his investments are fluid whereas those of the conventional businessman are more or less fixed. This distinction was retained by John Maynard Keynes, who described "enter- prise" as "the activity of forecasting the prospective yield of assets over their whole life,1' in contrast to speculation, which he called "die activity of forecasting the psychology of the market.'1

    Specidation is conventionally defined as an attempt to profit from changes in market price. Thus, forgoing current income for a prospective capital gain is deemed speculative. Speculation is active while investment is generally passive. According to the Austrian economist J. A. Schumpeter, "the difference between a speculator and an investor can be defined by the presence or absence of the intention to 'trade,1 i.e. realize profits from fluctuations in security prices.112 The line separating speculation from investment is so thin that it has been said both that speculation is the name given to a failed investment and that investment is the name given to a suc- cessful speculation. Fred Schwed. a Wall Street wit, declared that clarifying the difference between investment and speculation was "like explaining to the troubled adolescent that Love and Passion are two different things. He perceives that they are different, but they don't seem quite different enough to clear up his problem." Schwed concluded the two could be separated on the grounds that the first aim of investment was the preservation of capital while the primary aim of speculation was the enhancement of fortune.

    As he put it: "Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money becoming a little."'

    Similar problems of definition are encountered in distinguishing speculation from gambling. While a bad investment may be a spec- ulation, a poorly executed speculation is often described as a gamble. The American financier Bernard Baruch was once dismissed from the presence of Pierpont Morgan for uttering the word "gamble" in relation to a business proposition.4 Later, Baruch recalled that "there is no investment which doesn't involve some risk and is not something of a gamble."

    The psychologies of speculation and gambling are almost indistinguishable: both are dangerously gambler places a bet on a horse he is creating a risk, while the speculator who buys a share is simply involved in the transfer of an existing risk. Speculation is generally considered riskier them investment. The securities analyst Benjamin Graham declared that investment requires a "margin of safety" so that the value of the principal is maintained even in unforeseen adverse conditions.

    An uninformed or spontaneous investment is more speculative than one in which the investor has taken the time to investigate and assess its potential returns. Graham added that buying shares with borrowed money was always speculative. The capitalist is confronted with a broad spectrum of risk with prudent investment at one end and reckless gambling at the other. Speculation lies somewhere between the two.

    ... ... ...

    It is often said that speculation never changes because human nature remains the same. "Avarice, or desire of gain, is a universal passion which operates at all times, in all places, and upon all per- sons," wrote David Hume in the eighteenth century. To this we might add that the fear of loss, emulation of one's neighbour, the credulity of the crowd, and the psychology of gambling are equally universal. The early stock markets were moved by hopes and fears as much as their later counterparts. These emotions are unleashed during moments of speculative euphoria. They follow die path of least resistance, moulding each mania, regardless of its historical context, into a common form. This explains why all great specula- tive events seem to repeat themselves and why the experience of the 1690s seems so familiar.

    The theory of the "rational bubble" appears to be nothing more than an elaborate restatement of the "greater fool" investment strategy, whereby the speculator knowingly buys shares above their intrinsic value hoping that a "greater fool" will pay more for them later. The exponents of the "rational bubble" appear to overlook the fact that the success of this strategy is dependent on liquidity (i.e., the constant presence of both buyers and sellers in the mar- ket) and that in a panic buyers vanish at the very moment when "rational bubble" speculators are seeking to unload their shares. The "greater fool" method of investment has enjoyed great popu- larity' in the 1990s American bull market where it has been renamed "momentum investing." Speculators look to buy shares that are rising faster than the market and sell quickly when the rise begins to peter out.* The fate of the London banker John Martin in 1720 illustrates the dangers of this frivolous approach to invest- ment. Early in the summer, he had gleefully argued that "when the rest of the world is mad, we must imitate them in some measure," but he failed to sell out before the crash, lost a fortune, and ended up complaining pathetically of being "blinded by other people's advice."19

    ... ... ...

    During the upturn of the cycle, Bagehot argued, people become convinced the prosperity will last forever and mercantile houses engage in excessive speculations. At the same time, an increasing number of frauds are perpetrated on investors, which only come to light after a crisis: "All people are most credulous when they are most happy."

    ... ... ... ...According to John Stuart Mill, the seeds of each boom are sown during the preceding crisis, when the liquidation of credit causes asset prices to decline so severely that they become genuine bargains. Their subsequent sharp rise from a low level leads to a revival of speculation.55 After each crisis, the financial markets invariably shrug off past follies and losses to confront the future with bright optimism and fresh credulity. Capital becomes "blind," to use Bagehots term. Unable to remember the past, investors are condemned to repeat it.

    ... ... ...

    The most striking similarity between the 1920s and 1990s bull markets is the notion that traditional measures of stock valuation had become obsolete. Once again it was argued that an investment in the stock market helped retain purchasing power during infla- tionary periods and that management wras becoming more respon- sive to shareholders' interests. Abby Joseph Cohen of Coldman Sachs claimed that a longer business cycle and lower inflation justi- fied an upward valuation in stock prices. In their Securities Analy- sis, Benjamin Craham and David Dodds wrote that "instead of judging the market price by established standards of value, the new' era [of the 1920s] based its standards of value upon the market price." In similar fashion, consultants in the 1990s invented a con- cept named "market value added," which simply measured the difference between the market value of the firm and the amount of capital tied up in it. The higher the "market value added," the greater the firm is deemed to be worth.

    The net asset value of a company -- the value of its factories, machinery, and suchlike -- became the most despised of traditional valuation tools. Dividend yields, which slipped to a historic low of less than 1 Vi percent, were also dismissed as irrelevant. At times even the price-eamings ratio, a measure favourable to speculative values, has looked too conservative. Discounting future cash flow's was used to justify any price for fast-growing technology companies. In late October 1996, a headline in the Investors Business Daily, a stock market daily which published relative strength fig- ures, asked and answered a question that vexed many minds: "Overvalued? Not If the Stock Keeps on Rising."90

    The new paradigm, or new' economics, of the 1990s provided the intellectual underpinning for the greatest bull market in American history. When stock prices fell sharply in October 1997, Abby Joseph Cohen of Goldman Sachs saved the day by advising her clients to increase their holding of shares. James Grant has sug- gested that the reappearance of the new era ideology was a sign that "markets make opinions not the other way round."

    ... ... ...

    Keynes defined speculation as the attempt to forecast changes in the psychology of the market. He compared it to various parlour games -- snap, old maid, and musical chairs. Switching his metaphor, Keynes likened speculation to a newspaper competition in which the competitors have to pick out the six prettiest faces from hundreds of photographs, so that each competitor has to pick, not those faces which he Itimself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view ... We have reached the third degree w here we devote our intelligences to anticipating what average opinion expects the average opinion to be.'8 Speculation which is a beneficial, indeed vital, component of the capitalist process has come to dominate the system to an unhealthy degree. To repeat Keynes's warning from the 1930s: "when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done." Momentum trading, trend-following currency speculators, overleveraged hedge funds, and corporate managements obsessed with daily fluctuations in share quotations are unlikely to produce the optimal distribution of scarce resources in the global economy. We have reached Keynes's "third degree."

    ... ... ...

    ...options, developed by Scholes and Merton, which lies at the heart of the modem derivatives world, is dependent on the similar assump- tion diat past volatility is a reliable guide to future volatility. This assumption may be likened to driving a motorcar by looking in the rearview mirror -- line as long as the road continues straight but disastrous when you reach the first comer.

    In common with all the practical ideas generated by the Efficient Market Hypothesis, it is based on the belief that when financial theories are turned into practice there is no change to the underlying reality. This was the error of portfolio insurance in the 1980s and remained die error of the derivatives markets a decade later. If markets are not efficient but are subject to chaotic feedback loops, then the entire financial superstructure created around derivatives in the 1990s, with its $50 trillion worth of exposure, is based on shaky premises. Even outside the field of options pricing, the teaching of the Efficient Market Hypothesis has insinuated itself into the practices of modem finance: the fads for "shareholder value" and corporate stock-option schemes, the Capital Asset Pricing Model (which "scientifically" calculates companies' cost of capital), and popular investment in stock index funds are all predicated, to a greater or lesser extent, on the assumption that shares are efficiently priced by the market. But if the hypothesis is false -- e.g., because speculative... >


    Daniel Ferris

    The No. 1 history of financial speculation

    5.0 out of 5 stars The No. 1 history of financial speculation Reviewed in the United States on July 3, 2018 Verified Purchase Absolutely the single best history of financial speculation. Chancellor seems to have assimilated just about everything one could on all the major speculative episodes, from ancient origins through the 1990s.

    There's not much else to say. If you're an investor, this is a must-read history of how things can go horribly wrong in financial markets.

    In fact, with U.S. equities bumping against all-time high valuations (in mid-2018), this is the perfect moment to take your time and read through this book. It'll show you all the ways you might be getting swept up in speculative excess, of which you might not be aware, even if you're invested in the greatest businesses that have ever existed. >


    Daniel Ferris
    The No. 1 history of financial speculation


    Shashank V. Nerurkar 4.0 out of 5 stars Historical Perspective of Financial Speculation Reviewed in India on September 9, 2019 Verified Purchase Devil Take The Hindmost is very informative book which covers the history of financial speculation from the third century. The author has narrated relevant details from various sources which reflects the scholarly research undertaken by him. The major speculative bubbles such as tulip mania, south sea bubble, railway network in Britain and US, automobile revolution in US, the crash of 1929, junk bonds mania, the Japanese bubble of 1980 and havoc created by derivatives and hedge funds after 1990 are covered in great details. One realizes that not much has changed as far as factors that lead to financial speculation over the history. The reader will be better equipped to compare the conditions in financial markets with historical perspective. The author could have avoided bias against the Republicans in US and Conservatives in Britain as their opposition has not done any better in managing the financial speculation. The book is a bit dated and as such do not cover the dot-com bubble and 2008 financial crisis. The book is great read for all participants in financial markets.

    [Mar 10, 2021] Businesses Have Changed Permanently as a Result of the Pandemic by Wolf Richter

    Mar 10, 2021 | www.nakedcapitalism.com

    By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street .

    One of the biggest permanent changes coming out of the Pandemic is that businesses have invested in technologies that have long been available, but that hadn't been deployed because there was no visible need to deploy them, and because businesses were stuck in a rut, and change is hard and costly – and the rules of inertia had taken over.

    But now the Pandemic has forced businesses to change. There is no going back to the old normal. And these technologies impact employment in both directions.

    We encountered precisely that when we went cross-country skiing last week at Royal Gorge in the Sierra Nevada, which we do every year. What is said to be the largest cross-country ski resort in the US with 120 miles of groomed trails (if they're groomed) had fallen on hard times years ago, filed for bankruptcy, and was acquired out of bankruptcy in 2011/2012. It is now operated by Sugar Bowl Resort, the downhill ski area nearby. There have been some improvements since then, such as new warming huts. But the resort remained largely low tech, or no tech. And even there, things changed massively and permanently with the Pandemic.

    The way it used to work: You stood in line every morning to buy old-fashioned trail passes that you then stuck on your poles and that you then tried to scrape off at night. If you rented equipment, you spent more time standing in line. There was a website, but you couldn't buy anything on it. There were quite a few employees involved in dealing with the skiers that wanted to buy trail passes and rent equipment. The place could get crowded, and customers wasted time standing in line and dealing with logistics.

    Now, the requirements of social distancing and contactless commerce forced the resort to invest in an ecommerce website. You have to use the website to buy trail passes and pay for and make reservations for the rental equipment (actually fitting the rental equipment is still done in person at the lodge).

    Trail passes are now rechargeable cards, similar to prepaid debit cards with a radio chip. You get them at an ATM-type machine outside the lodge by holding the QR code -- that black-and-white square-shaped maze -- of your reservation (paper or smartphone) under the scanner. And it spits out the card. You can recharge the trail pass online and reuse next year .

    This should have been done 10 or 15 years ago. It's superfast and convenient, and you don't have to stand in line anywhere. You can park, scan, and ski.

    And the resort has gone entirely cashless. You can buy some corn bread, but you have to use your card. Credit card transactions are automated. No one needs to balance the cash drawer or count cash.

    And some of the staff that used to deal with the trail passes and other stuff are now either doing other things at the resort or are no longer needed at all.

    But there are people who manufacture, install, and maintain the equipment, build and maintain the ecommerce site, and deal with the other issues that tech produces. They're different jobs and only have a small local component.

    This is a permanent change. And it's an improvement for users of the resort. It may have also reduced employment at the resort, while supporting employment at companies that provide and service the technology.

    I chatted with one of the employees at the resort. Trail pass sales were doing pretty good, he said, but equipment rentals were down by about half compared to last year. He figured that a lot of people have bought their own equipment.

    This would be in line with a surge in sporting goods purchases that right off the bat last spring led to a shortage of bicycles and spiraled out from there, and led to the biggest-ever and ongoing spike in spending on durable goods .

    It would make sense: quite a few people have apparently left San Francisco and other high-cost Bay Area cities, and some of them have moved into the Sierra Nevada, including the Lake Tahoe area and the whole strip along I-80, including Truckee, now that they're "working from home" and can take a daily ski break between Zoom calls.

    The healthcare industry has done a similar thing: Using technology to avoid contact, thereby making a lot of basic stuff simpler and cheaper. At our healthcare provider, we could always make a phone-appointment with a doctor. This was free and quick, and often all that's needed for minor things, and avoided the time and cost of "going to the doctor." This was an option.

    Now telemedicine – or "virtual care" – has turned into a thing. Making video appointments is now encouraged. Prescriptions are filled online and delivered. When that's all that is needed, it saves time for the patient and the healthcare provider.

    Obviously, telemedicine still doesn't work for many medical issues, but the routine issues that doctors spend much of their time on can be handled that way.

    Only some of these technologies are visible to patients. For the healthcare providers, it meant investing in video tools and other technologies and in the infrastructure needed to support this on a large scale.

    The Pandemic has also pushed even reluctant consumers and businesses into ecommerce. In Q4 last year, when brick-and-mortar stores were open nearly everywhere, ecommerce sales soared by 32% from a year earlier .

    Package deliveries by UPS nearly doubled to 34 million packages a day, UPS chief information and engineering officer Juan Perez said at a Wall Street Journal event. And the company had to adapt and scale its digital technologies to deal with it. The Pandemic drove some of the most significant changes in the company's history, he said.

    The entire ecommerce sector, likely the biggest beneficiary of the Pandemic, has invested vast sums in technologies and infrastructure to deal with the surge in demand.

    This now includes ski resorts and grocery stores and other previously unlikely suspects for ecommerce. They will not go back to the old normal, nor will their customers.

    While lots of office employees who now work at home will eventually return to the office, the old times of nine-to-five every day at a desk farm are gone for many employees. Companies have invested in technologies to succeed with their hybrid work-from-home models, and they are cutting costs where possible by reducing the real estate footprint and related costs.

    People who like working in an office can gravitate to employers that encourage or require it. People who like working at home can gravitate to employers with hybrid models. Companies will make one or the other a selling point when recruiting talent. That's how that will wash out.

    It will take years to sort through the issues that these sudden and often massive shifts leave behind. But from what I have seen, many of the shifts are positives and should have happened a long time ago – and only inertia prevented them from happening.

    [Mar 10, 2021] Real bond yields are negative, except for junk and forign bonds funds

    Mar 10, 2021 | www.zerohedge.com

    Dishonest Inflation Reporting

    The blunt answer is that the Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports consumer inflation as honestly as Al Capone reported taxable income.

    In short: The Fed has been lying about (i.e. downplaying) inflation for years.

    As we've shown in many prior reports, the Consumer Price Index (CPI) scale used by the BLS to measure U.S. consumer price inflation is an open charade, allowing the BLS, and hence the Fed, to basically "report" inflation however they see fit -- at least for now.

    If, for example, the weighting methodologies hitherto used by the Fed to measure CPI inflation in the 1980's were used today, then US, CPI-measured inflation would be closer to 10% not the reported 2%.

    Concerned about by rising consumer costs, the Fed simply tweaked its CPI scale for measuring the same, effectively downplaying rising costs like a fat-camp scale which downplayed the significance of say beer, chocolate or pizza.

    In short, the Fed didn't like the old CPI scale for measuring inflation, and so they simply replaced it with one in which 2+2 =2.

    But why all the mathematical gymnastics and creative writing at the current BLS and Fed?

    What explains the ongoing double-speak wherein the Fed wishes to target higher inflation yet simultaneously and deliberately mis-reports it at far lower levels?

    Necessity: The Mother of Invention .

    The Fed, in deep need of keeping its IOU-driven (i.e debt-driven) façade of "recovery" in motion, has no choice but to invent a respectably controlled (i.e. LOW) CPI inflation rate in order to make US Treasury bonds look even moderately attractive to others.

    After all, the US lives on those IOU's. They need to look pretty.

    If, however, the more honest and much higher 10% inflation rate were honestly reported on an honest CPI scale, the inflation-adjusted yield on the US 10-Year Treasury would be negative 8%–which hardly makes it a pretty bond for the world to either admire or buy.

    That's a problem for Uncle Sam.

    And so the Fed invents a CPI inflation number that is less embarrassing than reality. It's just that simple.

    By the way, if real yields on the US 10-Year were honestly reported at -8%, gold would be ripping to the moon right now (it skyrocketed in the 1970's when real yields were -4%).

    This is because gold rises fastest the faster real yields go negative .

    We all know, however, that the Fed (and the bullion banks it serves) are terrified of rising gold prices, as a rising gold price confirms the absolute failure of their monetary policies and the open, and ongoing, debasement of the US Dollar.

    This further explains why the world's central and bullion banks openly manipulate the paper gold price in the COMEX markets on a daily basis.

    Furthermore, given that the only thing that seems to be "healthy" in the US today is the biggest stock and bond market bubble in its history, the Fed wants to keep that bubble growing rather than naturally popping.

    And toward this end, the Fed may be desperate, dishonest and delusional, but they aren't completely stupid.

    They know, for example, that for the last 140 years, ALL (and I mean ALL) of the stock market's gains came during disinflationary periods, not inflationary periods -- which is all the more reason for the Fed to lie about inflation and keep the bubble rising.

    So, please don't fall for Powell's double-speak that he's more concerned about focusing on employment than inflation.

    The unspoken truth is that Powell (as well as Yellen, Bernanke et al) have been absolutely obsessed with inflation for years. They simply mis-report it (i.e. lie), as the dollar's purchasing power continues its slow fall toward the floor of history.

    Having Your Cake and Eating it Too.

    What the Fed has been doing ever since Greenspan (the veritable "Patient Zero" of the current global $280T debt disaster) is very clever yet extremely toxic, as well as openly duplicitous.

    Specifically, the Fed now prints over $120B per month (to buy $80B in unwanted Treasury bonds and another $40B in unwanted, toxic MBS paper) with no apparent inflationary effect (despite the fact that inflation is defined by money supply) beyond its 2% "allowance."

    Such extreme money creation openly dilutes the USD to inflate away US debt with increasingly diluted dollars, now a desperate as well as deliberate Fed policy.

    But by simultaneously and dishonestly mis-reporting CPI inflation as they dilute the dollar, the Fed can inflate away US debt without having to make the inflation-adjusted yields on Treasury bonds appear too embarrassingly ugly (i.e. grotesquely negative ) for circulation and consumption.

    Such open fraud, of course, allows the Fed to have its cake (debased currencies to inflate away debt) and eat it too (by under-reporting the otherwise disastrous CPI inflationary consequences of such a desperate policy.)

    In short, by putting lipstick on the pig of what would otherwise by highly negative real yields on an openly bogus Treasury bonds if the CPI inflation rate were accurately reported, the Fed can continue to live on more debt, more IOU's and more dishonesty.

    Such veiled inflationary dishonesty allows the U.S. to effectively extend and pretend as the US credit market marches forward like a veritable Frankenstein -- that is dead, yet still marching, arms outstretched and moaning like a beast.


    QuiteShocking 4 hours ago

    Gas was around $2 a gallon on Election Day (Nov 3rd 2020)... and now over $2.70 a gallon for a 35% increase and we're just getting started... So much for the 2% fantasy...

    PodissNM PREMIUM 3 hours ago

    The price of practically everything has doubled in the past 20 years. Other than a few outliers like TVs, which have seemingly never been cheaper.

    Now they're reducing package quantities in consumer staples to obfuscate further price increases.

    philipat 3 hours ago (Edited)

    It's all a confidence game. The Fed CANNOT let rates rise (USG can't afford to pay higher rates on interest on the ever increasing debt, let alone paying down principal - that can never happen) but on the other hand it needs inflation to inflate away some of the debt. And it cannot allow Equity markets to crash (they have become the surrogate US economy) so as the debt grows the equity markets must continue to grow. Just a smallish sustained drop would cripple GDP.

    Which means the USD should collapse.

    BUT it's like keeping all the plates spinning together. All three are manipulated. EVERYTHING is manipulated, there are NO free markets. The ESF and Central Banks (Why does the Fed need trading floors?) intervene daily in everything. And so far they are getting away with it.

    Which brings us back to confidence......

    buzzsaw99 4 hours ago (Edited) remove link

    The principal value of TIPS rises as inflation rises. Inflation is the pace at which prices increase throughout the U.S. economy, as measured by the Consumer Price Index (CPI)...

    real yields all negative baybee, except the 30y is a whopping +0.010%

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield

    thezone 3 hours ago

    NBL = Nothing But Lies.

    Let it Go 3 hours ago

    The purpose of the consumer price index (CPI) is to reflect just how much inflation is eating into both our incomes and our savings. Currently, the government understates inflation by using a formula based on the concept of a "constant level of satisfaction" that evolved during the first half of the 20th century in academia. More on this subject in the article below.

    https://The CPI Understates Inflation Skewing Our Expectations.html

    Give Me Some Truth 43 minutes ago

    There are many reasons the stock market HAS to keep rising. One of the main ones is that all of the city and state pension funds are heavily invested in the stock market. If the stock market wasn't rising, tax-payers would have to pick up a greater share of pensions. Simply put, this can't happen.

    MrBoompi 1 hour ago remove link

    Come on. The only jobs Fed employees care about are their own jobs. They supervised the dismantling of our manufacturing jobs, without lifting a finger, since 1971. They are not screaming to end the lockdowns either.

    Just like minimum wage, Seniors have been denied the true COL increases, which are the law, for Social Security. These payments should at least be double what they are today.

    They are globalists and as such could care less about common folk. A must-have skill if you want to be Fed Chair is the ability to lie. This skill will be needed much more than your business, law, and accounting degrees.

    Give Me Some Truth 1 hour ago remove link

    Thanks to the author for pointing out the elephant in the room that "officials" and the mainstream media are not allowed to discuss. Namely (from this article):

    "We all know, however, t hat the Fed (and the bullion banks it serves) are terrified of rising gold prices, as a rising gold price confirms the absolute failure of their monetary policies and the open, and ongoing, debasement of the US Dollar.

    This further explains why the world's central and bullion banks openly manipulate the paper gold price in the COMEX markets on a daily basis."

    In short, EVERYTHING the "Powers that Be" do is designed to keep gold and silver prices contained, which thus protects the all-important fiat printing press.

    Inflation numbers are rigged to help achieve this result and so too are precious metal markets rigged.

    I'd also add that the "unemployment" numbers are equally bogus. So too are many of the COVID numbers and metrics.

    If numbers can be rigged - if definitions can be changed - to support a specious narrative, they will be ... All for the same purpose.

    [Mar 09, 2021] Texas' power 'death spiral' was unavoidable; it is that simple

    Mar 09, 2021 | peakoilbarrel.com

    JOHN S 03/07/2021 at 6:25 pm An interesting and fact based article on the Texas Power Crisis: https://www.mrt.com/business/oil/article/Texas-power-death-spiral-was-16005919.php

    "There is no one party in the electrical power generation chain on which to lay the blame, and we should quit trying"

    Power lines are shown Tuesday, Feb. 16, 2021, in Houston. More than 4 million people in Texas still had no power a full day after historic snowfall and single-digit temperatures created a surge of demand for electricity to warm up homes unaccustomed to such extreme lows, buckling the state's power grid and causing widespread blackouts.

    In 1882, Thomas Edison formed the Edison Electric Illuminating Co., which brought electric light to Manhattan but most Americans still lit their homes with gas light and candles for another 50 years. Only in 1925 did half of all homes in the U.S. have electric power. It has been many years since the US has been fully electrified, but in 2015, 1 billion people (three times the US population) in the world had no access to electricity. Access to electricity is a key metric to determining a nation's affluence; as late as 2001, the entire county of Afghanistan was virtually without electricity. Afghani GDP was $500 per person in 2019 while the United States GDP was $65,000 per person.

    We have come to expect that we should have electric power 100 percent of the time, and when that doesn't happen, then it must be someone else's fault (Oncor, ERCOT, power generators, retail electric providers like Griddy, employees and/or board members of any and all of the above, etc.). There are very few who know how electric power is generated and even fewer who understand the vast number of both mechanical and human factors that must operate seamlessly (and do operate seamlessly 99.9 percent of the time) to provide this modern miracle. We should really consider ourselves quite fortunate to have electricity at all, but of course we, as Americans, are smarter, better looking and more talented than everyone else and expect to have our every wish granted immediately; "Vanity of vanities, and all is vanity" spoke Ecclesiastes. Not a few have observed that this event occurred at the beginning of Lent, forcing involuntary penance on a people who refuse even the slightest voluntary inconveniences.

    Within ERCOT, natural gas burned in gas turbines provides about 50 percent of the generating capacity in Texas, with wind/solar at about 30 percent, coal about 15 percent and nuclear about 5 percent. Since natural gas provides such a large percentage of electric power, and in an effort to find the appropriate scapegoat to Texas' woes, we first need to understand what a typical oil and gas production facility contains. A three-phase stream (oil, salt water and natural gas) is produced from the wellhead and flows to a separator, where the gas leaves the top of the separator in the vapor phase and the oil-salt water mixture leaves the bottom of the separator in the liquid phase and goes to a (gas-fired) heater-treater, which applies heat to break the oil-water emulsion and separate the oil from the saltwater. Oil then goes to storage tanks or pipelines, while water is either sent to a disposal well (via electric pump) or trucked off the lease.

    Let's examine what really happened during the 221 consecutive hours with temperatures below the freezing point of water (32 degrees Fahrenheit). The natural gas in the vapor phase leaving the separator is saturated with water vapor, and since all the functions listed above occur above ground in steel pipes and vessels, the gas quickly drops in temperature, and the water vapor can freeze in the pipeline creating an ice block (a hydrate). If the gas cannot leave the lease then, unless the gas is flared, the well must be shut in. Even if the gas does not freeze in the line, if the paved roads and dirt lease roads are too hazardous for 18-wheeled truck transports to pick up the oil and water from the lease, then as soon as the on-lease storage is filled, the well must be shut in. Most leases have some level of electric power for pumps, lighting, heat tracing or similar uses, and when the electric provider ceases to provide that power, then any efforts to restore production and unfreeze equipment are hampered. The combination of freezing within on-lease flowlines, hazardous conditions preventing company employees from getting to the lease, lack of crude and water truck hauling, and the loss of electricity results in a complete wellhead shut in.

    The graph below illustrates actual field production data from a Reagan County producer who battled all the issues above:

    Virtually 100 percent of the gas produced in the Permian Basin must be processed in a gas processing plant for the removal of water, hydrogen sulfide, carbon dioxide and valuable natural gas liquids (NGLs, which are ethane, propane, butanes and heavier), with the remaining molecules consisting almost entirely of methane (called residue gas) delivered into large-diameter pipelines at the plant outlet. As producers struggled to keep wells on, gas processors also struggled as volumes to their plants steadily decreased (making it more difficult to operate), and they faced similar issues of employee safety, in-plant freezes and loss of electricity to key pieces of equipment like NGL pumps (if the NGLs cannot be pipelined from the plant on a continuous basis, the plant is forced to shut down). All plants have a minimum volume of gas required to run the plant, and many plants hit this wall; Navitas' processing complex east of Midland dropped from 750,000 Mcf per day to zero Mcf per day) while Cogent in Reagan County dropped from 460,000 Mcf per day to 40,000 Mcf per day.

    Assuming a total loss of wind/solar and a 50 percent loss in coal, natural gas' share of the remaining generating capacity rose to about 80 percent; when wellhead freezes dramatically reduced gas flow to the processing plants, and when plants were having their own freeze issues, electric providers then cut power to these plants, eliminating what little gas supply was left available, effectively creating a "death spiral."

    So, irrespective if (a) power generators were properly winterized, or (b) we had more gas-fired powered generation, or (c) Texas was not deregulated, the fuel supply simply was not available, "not even for ready money" (in Oscar Wilde's "The Importance of Being Earnest," Algernon expresses his dismay to the butler regarding why there were no cucumber sandwiches, to which the butler replies "There were no cucumbers in the market this morning, sir, not even for ready money"; after you read this comedy you should read his equally compelling but more somber tale, "The Picture of Dorian Gray").

    As gas supply dwindled, and power demand increased, the price of gas "for ready money" jumped from its normal price of $3/MMBtu to $100-$200/MMBtu, and as the price of gas surged, and the demand for power increased while its availability decreased, the price of power also surged from $.03 per kilowatt-hour to $9 per kilowatt-hour. The typical consumer reaction was that there was "price gouging" simply because the price increased; what we witnessed was the classic supply-demand-price dynamic of the free market, which that same consumer enjoys on a regular basis when shopping for virtually any product.

    Griddy customers enjoyed the rewards of supply-demand-price when power was plentiful and cheap, but they knew full well that they were susceptible to price spikes; Griddy updated open-market prices every five minutes and sent alerts when the price was increasing or decreasing, so those customers had the tools available on their "smart" phones and could elect to cease or continue to use power at a known cost.

    Force majeure is a French term that literally means "greater force" and is related to an act of God, an event for which no party can be held accountable, such as a hurricane or a tornado (or 221 consecutive hours below 32 degrees). Try as we might, there is no one party in the electrical power generation chain on which to lay the blame, and we should quit trying. Will all the entities in the chain expend the money to protect against an event that happens once in a hundred years? Will you expend the money to buy and maintain a gas- or diesel-powered generator and beef up the insulation in your house to protect against an event that happens once in a hundred years? Do you expect the answers to both questions to be the same?

    It is very unfortunate that lives were lost as an indirect consequence to the temporary loss of electricity. In another segment of our lives where man and machine interact, let's look at deaths on Texas roadways, which run about 3,500 per year. For the last 20 consecutive years, at least one person has died every single day in a vehicle accident; are we filing lawsuits or calling for the resignation of employees of TxDOT, DPS or vehicle manufacturers? If we were serious about reducing deaths to zero (TxDOT's 2050 goal) would we drop the speed limit to 30 miles per hour on all roadways and post officers every 10 miles to issue mandatory citations? Or would we appeal to taking personal responsibility for safe driving habits every time we turned the key in the ignition?

    Switching gears, what should oil and gas producers be prepared for in late March when they are paid for gas delivered in February? Just because natural gas traded for $100-$200/MMBtu for a few days does not mean you will receive that price; it depends on what your gas contract stipulates and whether the plant to which you are connected sold any gas during that period. In an effort to be equitable, gas processors who did sell some high-priced gas could possibly allocate that value to only those producers who actually delivered gas to them during that period, rather than compute an average monthly price and applying that price to all deliveries during February. If your gas processor passes through your share of its electricity bill, you could be in for a shock on high pass-through power costs. You may get inquiries from royalty owners wondering why they are not seeing the effects of $100/MMBtu gas and whether you exercised a fiduciary responsibility to obtain that price.

    This is only a partial list; the storm outside is over, but the financial and legal storm could only be beginning.

    [Mar 08, 2021] Who is buying falling tech stocks? Is this another FED bailout. The bailout of S P500 by Plunge Protection team

    Highly recommended!
    Notable quotes:
    "... ... on Friday we reported that according to the latest EPFR fund flow data , $22.2Bn in new money flowed into equities last week, following the previous week's massive $46.2Bn inflow which was the 3rd biggest on record, bringing the total 16 week inflow to $436BN, a stunning burst of inflows as shown in the chart below. ..."
    "... So bizarre has been this divergence - historically, investors have always pulled money during times of stress and heightened volatility, instead they are plowing record amounts of cash into stocks now ..."
    "... "they're opting for parts of the market that have suffered the most, doubling down in arguably risky ways with triple-leveraged tech funds and options galore." ..."
    "... "Historically it's been a bad signal that retail investors are piling into the market and a signal of a top," said Art Hogan, chief market strategist at National Securities Corp. And yet, as he admits in the very next sentence, " every time we tried to call a top in 2020 because of retail participation, it was wrong." ..."
    "... Because in a centrally-planned "market" where the Fed guarantees no losses ever, why not buy any and every dip? Sure enough, that's what they did and boy did they buy the dip : ..."
    "... lots and lots and lots of stimmy checks are about be deposited to daytraders' checking accounts ..."
    "... As long as you feed $$ into the military industrial complex, the stock market goes up. The military is the key industry of the US and that will not change. ..."
    "... Neoclassical economics is a pseudo economics that hides the inconvenient truths discovered by the classical economists. The classical economists identified the constructive "earned" income and the parasitic "unearned" income. Most of the people at the top lived off the parasitic "unearned" income and they now had a big problem. ..."
    "... In 1984, for the first time in American history, "unearned" income exceeded "earned" income. ..."
    "... It looks like a parasitic rentier capitalism because that is what it is. ..."
    Mar 08, 2021 | www.zerohedge.com

    Originally from: Another Market Paradox- Wall Street Struggles To Explain Record Equity Inflows Amid Stock Turmoil

    Something bizarre is happening in the stock market: for the past three weeks stocks - and especially tech - has gotten hammered, with the Nasdaq briefly sliding into a 10% correction while the S&P has also been hard hit (although one can't say the same for reflation stocks such as energy which have soared in recent weeks). Some other notable casualties: Apple has tumbled 15% since late January. Tesla has lost more than a quarter-trillion dollars in market value in three weeks, and more than $1.5 trillion has been wiped off the Nasdaq in less than a month.

    And yet, despite this hit to risk assets on the back of the recent in surge in interest rates, accompanied by a parallel spike in both the VIX, and its bond market equivalent, the MOVE index...

    ... on Friday we reported that according to the latest EPFR fund flow data , $22.2Bn in new money flowed into equities last week, following the previous week's massive $46.2Bn inflow which was the 3rd biggest on record, bringing the total 16 week inflow to $436BN, a stunning burst of inflows as shown in the chart below.

    So bizarre has been this divergence - historically, investors have always pulled money during times of stress and heightened volatility, instead they are plowing record amounts of cash into stocks now - that Goldman's David Kostin dedicated his Weekly Kickstart report to the topic. In a note titled "Rising rate anxiety roils share prices but also supports outlook for strong equity inflows" , the Goldman chief equity strategist writes that as "rates rose, and equities fell, long-duration growth stocks plummeted, but equity funds continued to see large net inflows."

    Equity mutual fund and ETF inflows have totaled $163 billion since the start of February, the largest five-week inflow on record in absolute dollar terms and third largest in a decade relative to assets. Even though the recent backup in rates has weighed on equity prices broadly, the pace of inflows into equity funds during the last few weeks has accelerated compared with the start of the year.

    In contrast, weekly flows into bond funds averaged roughly $10 billion in February, 50% less than weekly inflows in January. In addition, money market funds have seen net outflows of $34 billion during the past month.

    ... ... ...

    According to Bloomberg, even though the market peaked almost a month ago, retail traders have plowed cash into U.S. stocks at a rate 40% higher than they did in 2020, which was a record year. Yet one way retail capital allocation differs from the charts above, is that "they're opting for parts of the market that have suffered the most, doubling down in arguably risky ways with triple-leveraged tech funds and options galore."

    Could it be that nothing but sheer stupidity and/or certainty in yet another Fed bailout is behind the record inflows? And is Powell to blame?

    Retail traders, many of them newbie investors, have consistently held strong, buying virtually every dip during what's been the best start to a bull market in nine decades. But now the world is wondering how much it'll take for them to call it quits, especially after a year in which retail traders were right way more often than wrong.

    "Historically it's been a bad signal that retail investors are piling into the market and a signal of a top," said Art Hogan, chief market strategist at National Securities Corp. And yet, as he admits in the very next sentence, " every time we tried to call a top in 2020 because of retail participation, it was wrong."

    Just how aggressive has retail buying been? According to data from VandaTrack, which monitors retail flows in the U.S. market, retail investors snapped up an average of $6.6 billion in U.S. equities each week, up from an average $4.7 billion in net weekly purchases in 2020 even as stocks swooned over the last three weeks.

    They've doubled down on areas of the market that have been hit the hardest. Apple, which has plunged 15% since late January, was the most-popular retail buy this past week. NIO Inc., the electric-vehicle maker down almost 40% since Feb. 9, was the second-most popular. Next up were exchange-traded funds tied to the Nasdaq 100, the Invesco QQQ Trust Series 1 (ticker QQQ) and a triple leveraged version (ticker TQQQ).

    Because in a centrally-planned "market" where the Fed guarantees no losses ever, why not buy any and every dip? Sure enough, that's what they did and boy did they buy the dip :

    On Thursday, when the Nasdaq 100 fell as much as 2.9%, almost 32 million bullish call options traded across U.S. exchanges, the fifth-most on record. The other four have all occurred within the last four months.

    There is one fundamental reason why retail investors are buying: the just passed $1.9TN Biden stimulus ensures lots and lots and lots of stimmy checks are about be deposited to daytraders' checking accounts:

    "There's a lot of excess liquidity and we just had this $600 check going to many families in January," said Jimmy Chang, chief investment officer of Rockefeller Global Family Office. "We're going to get an additional liquidity injection in the $1,400 check and part of that money is going into risk assets."

    Incidentally, the question of how much of Biden's $1.9TN stimulus will end up in the market is one we discussed last week in the context of a recent Deutsche Bank survey :

    "Given stimulus checks are currently penciled in at c.$405bn in Biden's plan, that gives us a maximum of around $150bn that could go into US equities based on our survey.

    as we reported earlier today , Morgan Stanley's Michael Wilson believes that the selloff has more room to go before it's over. Bloomberg agrees and notes that "if past is precedent, that could mean the sell-off has more room to run. Retail investors tend to buy the initial dips, and it's not until they capitulate and sell that markets ultimately bottom, according to Eric Liu, co-founder and head of research at Vanda Research. The firm's data show that was the case in both selloffs in 2018, as well as roughly a year ago during the Covid crash."

    To Victoria Fernandez, chief market strategist for Crossmark Global Investments, their continued presence in the markets likely means elevated volatility will persist. Still, that doesn't mean retail investors' efforts are misguided.

    "Is there some dumb money in retail trades? Yes. But not all of it," she said. "Some of these people are doing their homework, looking for opportunities and trying to take advantage of it. Some win, some lose -- it's really not that different than what professionals do on an institutional basis."

    Maybe there is dumb money in retail, but that's hardly what matters. What does matter - in our view - is what we reported earlier today, namely that last week we saw the biggest shorting among hedge funds since last May. And with the squeeze having started on Friday and clearly continuing on Sunday, the upcoming "mega squeeze" ( which we predicted earlier today ) is all that matters.

    As such while Wall Street ruminates about the cause (and reflexive effect) of the current record capital inflows into equity stocks amid growing market turmoil, the only thing that matters for this broken, illiquid market is positioning and right now the "max pain" is higher. A lot higher, especially since the Fed will have no choice but to step in if stocks continue to fall as all the careful centrally-planned work of the past 12 years would implode with a massive bang if it does not.
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    Hobbit of Hyperinflation 6 hours ago

    Two words: THE FED.

    SQRT 69 1 hour ago remove link

    Three letters: PPT

    DontFollowMyAdviceImaDummy PREMIUM 10 hours ago

    probably going to sell off for another 8 to 10 business days and then the magic money pump machine will get activated along with every stonk price target seeing huge price target increases because of fantasies about flying cars and infinite forever profits by 2040...

    Whats-A-Theta PRO 10 hours ago

    As no one stops and asks what stocks are actually worth we shouldn't have too much trouble.

    Chiefisme 4 hours ago remove link

    There is a simple explanation. The market is rigged. The Fed is wildly "printing" money and supporting all of the markets including equity to keep the faced going.

    VioLaTor 5 hours ago remove link

    Oil past 70 also this morning. I saw CW had a new podcast over the weekend, and on BB today to rally the troops. See what happens. I think the new investors might well be learning that stocks also go down, and diversification is good. 10 year auction on Wednesday will be interesting.

    uhland62 7 hours ago remove link

    As long as you feed $$ into the military industrial complex, the stock market goes up. The military is the key industry of the US and that will not change.

    You_Cant_Quit_Me 27 minutes ago

    When you get nothing on your savings people move the cash elsewhere for higher yield. The FED is inflating bubbles in equities and real estate

    Sound of the Suburbs 4 hours ago

    The wealth is there and then it's gone. At the end of the 1920s, the US was a ponzi scheme of inflated asset prices. The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth. 1929 – Wakey, wakey time

    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn't.

    It didn't then, and it doesn't now.

    Real estate - the wealth is there and then it's gone.

    • 1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines, Thailand
    • 2000s – Iceland, Dubai, US (2008), Vietnam
    • 2010s – Ireland, Spain, Greece, India

    Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.

    It's not real wealth. What is real wealth? Weimar Germany and Zimbabwe were never short of money. Weimar Germany and Zimbabwe had created far too much money compared to the goods and services available within the economy causing hyper-inflation. States can just create money, and the last thing you want is too much of the damn stuff in your economy. They had made so much money it lost nearly all its value, and they needed wheelbarrows of the stuff to buy anything.

    Money has no intrinsic value; it comes from what it can buy. Central bankers actually look at the money supply, and expect it to rise in line with the new goods and services in the economy, as it grows. More goods and services in the economy require more money in the economy. Paul Ryan was a typically confused neoliberal and Alan Greenspan had to put him straight. Paul Ryan was worried about how the Government would pay for pensions. Alan Greenspan told Paul Ryan the Government can create all the money it wants, there is no need to save for pensions.

    https://www.youtube.com/watch?v=DNCZHAQnfGU

    What matters is whether the goods and services are there for them to buy with that money. That's where the real wealth in the economy lies. They worked it out last time. The real wealth creation in the economy is measured by GDP. The transfer of existing assets, like stocks and real estate, doesn't create real wealth and therefore does not add to GDP. Real wealth creation involves real work, producing new goods and services in the economy. It took them a long time to disentangle the hopelessly confused thinking of neoclassical economics in the 1930s.

    This is the second time around and it has already been done.

    Sound of the Suburbs 4 hours ago remove link

    Neoclassical economics is a pseudo economics that hides the inconvenient truths discovered by the classical economists. The classical economists identified the constructive "earned" income and the parasitic "unearned" income. Most of the people at the top lived off the parasitic "unearned" income and they now had a big problem.

    This problem was solved with neoclassical economics, which hides this distinction. It confuses making money and creating wealth so all rich people look good. If you know what real wealth creation is, you will realise many at the top don't create any wealth. Look what has happened to the US since they got confused between making money and creating wealth. In 1984, for the first time in American history, "unearned" income exceeded "earned" income.

    The American have lost sight of what real wealth creation is, and are just focussed on making money. You might as well do that in the easiest way possible. It looks like a parasitic rentier capitalism because that is what it is. You've just got to sniff out the easy money. All that hard work involved in setting up a company yourself, and building it up. Why bother?

    Asset strip firms other people have built up, that's easy money. The private equity firms have found an easy way to make money that doesn't actually create any wealth. Bankers make the most money when they are driving your economy into a financial crisis. They will load your economy up with their debt products until you get a financial crisis.

    On a BBC documentary, comparing 1929 to 2008, it said the last time US bankers made as much money as they did before 2008 was in the 1920s.

    https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

    At 18 mins.

    The bankers loaded the US economy up with their debt products until they got financial crises in 1929 and 2008. As you head towards the financial crisis, the economy booms due to the money creation of bank loans.

    https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

    The financial crisis appears to come out of a clear blue sky when you use an economics that doesn't consider debt, like neoclassical economics.

    CB Newkirk III 5 hours ago (Edited) remove link

    All the Business Knowledge is in the algorithms (programs), and no one knows what they do, or how to maintain and upgrade them for a changing environment. The just keep patching them and hope that it works. But hey, those graphs are nifty looking.

    [Mar 08, 2021] Change we can believe in

    Mar 08, 2021 | www.marketwatch.com

    Shoe shop chain Shoe Zone replaces Peter Foot with Terry Boot as finance director. It's not a joke.

    [Mar 08, 2021] Tesla down 31%? Not a problem I will use the dividends to offset my losses. Oh wait!

    Mar 08, 2021 | www.zerohedge.com


    2 play_arrow


    bentaxle 54 minutes ago

    Tesla down 31%? Not a problem I will use the dividends to offset my losses. Oh wait!

    BigJJ 13 minutes ago

    I've never understood how Tesla could possibly make money given all the infrastructure they had to install just to sell shoddily thrown together rusty cars that are useless when the grid crashes.

    Sound of the Suburbs 41 minutes ago (Edited)

    ...What was the ponzi scheme of inflated asset prices that collapsed in 2008?

    El Hosel 1 hour ago (Edited)

    Clearly "It's different this time", now that everybody knows "stocks only go up"...

    [Mar 08, 2021] Tech stocks are selling off. Don't buy the dip, sell the bounces, strategist says

    Looks like 2000 dot com bubble replayed...
    Mar 08, 2021 | www.marketwatch.com

    In our call of the day, Miller Tabak & Co's chief market strategist Matt Maley said investors need to be "very careful" about buying the dip when it comes to the tech-laden index and should instead be selling the bounces.

    ... the FAANG Index -- which includes Facebook FB, +2.58% , Amazon AMZN, +0.77% , Apple AAPL, +1.07% , Netflix NFLX, +1.00% and Google parent Alphabet GOOGL, +3.10% -- is only 6% off February highs and still sits above its 100 day moving average. "A break below that moving average would send up a big warning flag on the group," he said.

    ... The price of Brent crude BRNK21, -0.56% briefly topped $70 a barrel for the first time in a year after Saudi Arabia and Yemen rebels traded airstrikes.

    [Mar 08, 2021] Tesla as an indicator of froth in the stock market and things to come

    Mar 08, 2021 | www.zerohedge.com

    Over the last month, Tesla has fallen from about $868 to $598, a plunge of about 31%. But it isn't just Tesla investors that are feeling the pain: with the stock having risen in popularity over the last 18 months, Tesla is now tied to numerous ETFs that it winds up pulling lower when it underperforms. In fact, Bloomberg notes that "at one point on Friday, every one of the 54 U.S.-based ETFs that have assets under management exceeding $1 billion and more than 1% invested in Tesla had fallen."


    Mando Ramos 1 hour ago

    A year ago today it was trading at $72 dollars a share, and it was criminally, outrageously overvalued then. But as we've all learned in the last 10 years, crime actually does pay

    buzzsaw99 50 minutes ago (Edited)

    the idea was to add tsla to the s&p is about fleecing all the index buyers. Read 401K lemmings.

    Xi the Pooh 51 minutes ago remove link

    Tesla and Bitcoin are two bubbles that need popping. Useless overvalued garbage.

    Son of Loki 17 minutes ago

    What's the definition of malinvestment?

    The NYSE and NASDAQ.

    hedge4Gain 51 minutes ago

    "Betting On A Dream": Could Tesla Be The Canary In The ETF Liquidity Coal Mine? Betting on Tesla has always been like betting on a yellow school bus winning the 500 mile race or a windmill in snowstorm.

    Lordflin 35 minutes ago

    The PPT and the CBs have your backs folks... you will be fine...

    [Mar 07, 2021] The New York Stock Exchange president says the stock market is not a casino. But academic research sayd it is

    Mar 07, 2021 | timesnewsexpress.com

    Academic research suggests stock-market trading and more traditional gambling have quite a bit in common. One paper published in January says there's 3.5 times more gambling in stock markets than in more traditional venues like casinos and lotteries.

    The paper -- from Alok Kumar of the University of Miami, Houng Nguyen of the University of Danang, and Talis Putnins at the University of Technology Sydney and Stockholm School of Economics -- says the U.S. and Hong Kong have the highest per capita levels of what they call stock-market gambling in the world. They identify so-called lottery stocks by looking at volume divided by market cap, and looking for unusually large ratios.

    That's not to say all stock market investing is gambling. The researchers say about 15% of stock market volume in the U.S. is associated with gambling, a percentage that runs as high as 30% in the stock markets of China and Thailand.

    [Mar 07, 2021] Offshore Oil Gas Projects Set For Record Recovery by Tsvetana Paraskova

    Commitments are not oil...
    Mar 07, 2021 | oilprice.com

    Offshore oil has already started to show signs of emerging from last year's crisis, as costs have been slashed since the previous downturn of 2015-2016. Deepwater oil breakevens have dropped to below those of U.S. shale supply, making deepwater one of the cheapest new sources of oil supply globally, Rystad Energy said last year.

    In its new report this week, the energy research firm expects 592 offshore project commitments between 2021 and 2025, up from 355 projects in the 2016-2020 period and up from the 478 project commitments in the period 2011 to 2015.

    Over the next five years, deepwater is set to show the most impressive growth in the number of commitments, with the number of projects rising to 181 from 106 in 2016-2020 and 115 in the five years before that, Rystad Energy has estimated.

    "The search for large new fields in deep and remote waters became much more economically viable after dayrates for drilling rigs and offshore supply vessels fell in the wake of the oil price crash in 2014 and 2015. This offers significant support for companies interested in deepwater," said Rajiv Chandrasekhar, energy service analyst at Rystad Energy.

    By Tsvetana Paraskova for Oilprice.com

    [Mar 07, 2021] Newton, Physics, The Market Bubble by Lance Roberts

    Notable quotes:
    "... Many of these new companies made outrageous, and often fraudulent, claims about their business ventures for the purpose of raising capital and boosting share prices. ..."
    "... However, in the midst of the "mania," things like valuation, revenue, or even viable business models didn't matter. It was the "Fear Of Missing Out," which sucked investors into the fray without regard for the underlying risk. ..."
    "... Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea Corporation. Newton quickly made a lot of money and recognized the early stages of a speculative mania. Knowing that it would eventually end badly, he liquidated his stake at a large profit. ..."
    "... However, after he exited, South Sea stock experienced one of the most legendary rises in history. As the bubble kept inflating, Newton allowed his emotions to overtake his previous logic and he jumped back into the shares. Unfortunately, it was near the peak. ..."
    "... The story of Newton's losses in the South Sea Bubble has become one of the most famous in popular finance literature. While surveying his losses, Newton allegedly said that he could "calculate the motions of the heavenly bodies, but not the madness of people." ..."
    "... Yes, this time is different. "Like all bubbles, it ends when the money runs out." – Andy Kessler ..."
    Sep 19, 2020 | www.zerohedge.com

    Authored by Lance Roberts via RealInvestmentAdvice.com,

    I have previously discussed the importance of understanding how "physics" plays a crucial role in the stock market. As Sir Issac Newton once discovered, "what goes up, must come down."

    Andy Kessler, via the Wall Street Journa l, recently discussed a similar point with respect to the momentum in stock prices. To wit:

    "Does this sound familiar: Smart guy owns stock in March at $200, sells it in June at around $600, but then buys it back in July and August for between $900 and $1,000. By September it's back at $200. Ouch. Tesla this year? Yahoo in 2000? Nope. That was Sir Isaac Newton getting pulled into the great momentum trade of the South Sea Co., which cratered 300 years ago this month. He lost the equivalent of more than $3 million today. Newton, whose second law of motion is about the momentum of a body equaling the force acting on it, didn't know that works for stocks too."

    To understand what happened to the South Sea Corporation, you need a bit of history.

    The South Sea History

    In 1720, in return for a loan of Ł7 million to finance the war against France, the House of Lords passed the South Sea Bill, which allowed the South Sea Company a monopoly in trade with South America.

    England was already a financial disaster and was struggling to finance its war with France. As debts mounted, England needed a solution to stay afloat. The scheme was that in exchange for exclusive trading rights, the South Sea Company would underwrite the English National Debt. At that time, the debt stood at Ł30 million and carried a 5% interest coupon from the Government. The South Sea company converted the Government debt into its own shares. They would collect the interest from the Government and then pass it on to their shareholders.

    Interesting Absurdities

    At the time, England was in the midst of rampant market speculation. As soon as the South Sea Company concluded its deal with Parliament, the shares surged to more than 10 times their value. As South Sea Company shares bubbled up to incredible new heights, numerous other joint-stock companies IPO'd to take advantage of the booming investor demand for speculative investments.

    Many of these new companies made outrageous, and often fraudulent, claims about their business ventures for the purpose of raising capital and boosting share prices. Here are some examples of these companies' business proposals (History House, 1997):

    A Speculative Mania

    However, in the midst of the "mania," things like valuation, revenue, or even viable business models didn't matter. It was the "Fear Of Missing Out," which sucked investors into the fray without regard for the underlying risk.

    Though South Sea Company shares were skyrocketing, the company's profitability was mediocre at best, despite abundant promises of future growth by company directors.

    The eventual selloff in Company shares was exacerbated by a previous plan of lending investors money to buy its shares. This "margin loan," meant that many shareholders had to sell their shares to cover the plan's first installment of payments.

    As South Sea Company and other "bubble " company share prices imploded, speculators who had purchased shares on credit went bankrupt. The popping of the South Sea Bubble then resulted in a contagion that spread across Europe.

    Newton's Folly

    Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea Corporation. Newton quickly made a lot of money and recognized the early stages of a speculative mania. Knowing that it would eventually end badly, he liquidated his stake at a large profit.

    However, after he exited, South Sea stock experienced one of the most legendary rises in history. As the bubble kept inflating, Newton allowed his emotions to overtake his previous logic and he jumped back into the shares. Unfortunately, it was near the peak.

    It is noteworthy that once Newton decided to go back into South Sea stock, he moved essentially all his financial assets into it. In general, Newton was intimately familiar with commodities and finance. As Master of the Mint, his post required him to make many decisions that depended on market prices and conditions. The story of Newton's losses in the South Sea Bubble has become one of the most famous in popular finance literature. While surveying his losses, Newton allegedly said that he could "calculate the motions of the heavenly bodies, but not the madness of people."

    For More On The History Of Speculative Bubbles: "Devil Take The Hindmost."

    History Never Repeats, But It Rhymes

    Throughout financial history, markets have evolved from one speculative "bubble," to bust, to the next with each one being believed "it was different this time." The slides below are from a presentation I made to a large mutual fund company. What we some common denominators between all previous bubbles and now.

    The table below shows a listing of assets classes that have experienced bubbles throughout history, with the ones related to the current environment highlighted in yellow. It is not hard to see the similarities between today and the previous market bubbles in history. Investors are currently chasing "new technology" stocks from Zoom to Tesla, piling into speculative call options, and piling into leverage. What could possibly go wrong?

    Oh, by the way, the slides above are from a 2008 presentation just one month before the Lehman crisis. The point here is that speculative cycles are always the same.

    The Speculative Cycle

    Charles Kindleberger suggested that speculative manias typically commence with a "displacement" which excites speculative interest. The displacement may come from either an entirely new object of investment (IPO) or from increased profitability of established investments.

    The speculation is then reinforced by a "positive feedback" loop from rising prices. which ultimately induces "inexperienced investors" to enter the market. As the positive feedback loop continues, and the "euphoria" increases, retail investors then begin to "leverage" their risk in the market as "rationality" weakens.

    The full cycle is shown below.

    During the course of the mania, speculation becomes more diffused and spreads to different asset classes. New companies are floated to take advantage of the euphoria, and investors leverage their gains using derivatives, stock loans, and leveraged instruments.

    As the mania leads to complacency, fraud and manipulation enter the market place. Eventually, the market crashes and speculators are wiped out. The Government and Regulators react by passing new laws and legislations to ensure the previous events never happen again.

    The Latest Mania

    Let's go back to Andy for a moment:

    "When bull markets get going, investors come out of the woodwork to pile in. These momentum investors -- I call them momos -- figure if a stock is going up, it will keep going up. But usually, there is some source of hot air inflating stocks: either a structural anomaly that fools investors into thinking ever-rising stock prices are real or a source of capital that buys, buys, buys -- proverbial 'dumb money.' Think of it as a giant fireplace bellows, an accordion-like contraption that pumps in fresh oxygen to keep flames growing." – Andy Kessler

    We have seen these manias repeated throughout history.

    In 2020?

    What about today? Look back at the chart of the South Sea Company above. Now, the one below. See any similarities. Yes, that's Tesla. However, you can't solely blame the Federal Reserve as noted by Andy:

    "Most simply blame the Federal Reserve -- especially today, with its zero-interest-rate policy -- for pumping the hot air that gets the momos going. Fair enough, but that's only part of the story. Long market runs have always allured investors who figure they're smart to jump in, even if it's late.

    Everyone forgets the adage, 'Don't mistake brains for a bull market.'"

    As stated, while no two financial manias are ever alike, the end results are always the same. Are there any similarities in today's market? You decide.

    "From SPACs, or special purpose acquisition companies, which are modern-day blind pools that often don't end well. Today's momos also chase stock splits, which mean nothing for a company's actual value. Same for a new listing in indexes like the S&P 500. Isaac Newton could explain the math." – Andy Kessler

    You get the idea. But one of the tell-tale indications is the speculative chase of "zombie" companies which are only still alive primarily due to the Federal Reserve's interventions.

    Fixing The Cause Of The Crash

    Historically, all market crashes have been the result of things unrelated to valuation levels. Issues such as liquidity, government actions, monetary policy mistakes, recessions, or inflationary spikes are the culprits that trigger the "reversion in sentiment." Importantly, the "bubbles" and "busts" are never the same. I previously quoted Bob Bronson on this point:

    "It can be most reasonably assumed that markets are efficient enough that every bubble is significantly different than the previous one. A new bubble will always be different from the previous one(s). Such is since investors will only bid prices to extreme overvaluation levels if they are sure it is not repeating what led to the previous bubbles. Comparing the current extreme overvaluation to the dotcom is intellectually silly.

    I would argue that when comparisons to previous bubbles become most popular, it's a reliable timing marker of the top in a current bubble. As an analogy, no matter how thoroughly a fatal car crash is studied, there will still be other fatal car crashes. Such is true even if we avoid all previous accident-causing mistakes."

    Comparing the current market to any previous period in the market is rather pointless. The current market is not like 1995, 1999, or 2007? Valuations, economics, drivers, etc. are all different from cycle to the next.

    Most importantly, however, the financial markets always adapt to the cause of the previous "fatal crash." Unfortunately, that adaptation won't prevent the next one.

    Yes, this time is different. "Like all bubbles, it ends when the money runs out." – Andy Kessler

    [Mar 07, 2021] Pimco income fund

    Mar 07, 2021 | finance.yahoo.com

    PIMIX 11.98 -0.02 -0.17% - PIMCO Income Fund Institutional Class - Yahoo Finance

    Top 10 Holdings AS OF 12/31/2020; 47.15% of Total Portfolio

    10 Year Treasury Note Future Mar 211                         2.37%
    Federal National Mortgage Association 2.5% 03/11/2051        6.76%
    Federal National Mortgage Association 2.5% 02/11/2051        5.93%
    Federal National Mortgage Association 2% 03/11/2051          5.41%
    Pimco Fds                                                    5.38%
    Federal National Mortgage Association 3%                     2.97%
    FTSE Bursa Malaysia KLCI Future Mar 21                       2.60%
    Federal National Mortgage Association 2% 02/11/2051          2.18%
    CSMC TRUST 3.32183%                                          1.86%
    Fin Fut Us Ultra 30yr Cbt 03/22/21                           1.69%
    7706 holdings as of 12/31/2020
    

    [Mar 07, 2021] JPMorgan Estimates Up To $316 Billion In Forced Month-End Selling - ZeroHedge

    Mar 07, 2021 | www.zerohedge.com

    In one of his latest Flows and Liquidity reports, JPM quant Nick Panigirtzoglou writes that as we approach quarter-end, the equity rebalancing flow question is resurfacing in client conversations. As we notes, "the equity rally and the bond sell-off during the current quarter is naturally creating a pending rebalancing flow for multi-asset investors away from equities into bonds for pension funds and balanced mutual funds. How much of equity/bond rebalancing flow should we expect into current quarter-end?"

    To answer this question, the Greek strategist applies a familiar framework and looks at the four key multi-asset investors that have either fixed allocation targets or tend to exhibit strong mean reversion in their asset allocation. These are balanced mutual funds, such as 60:40 funds, US defined benefit pension plans, Norges Bank, i.e. the Norwegian oil fund, and the Japanese government pension plan, GPIF.

    For those curious about the details, below is a more detailed summary of the considerations behind the four key investor classes ahead of month and quarter-end.

    1. Balanced mutual funds including 60:40 funds , a close to $7.5tr AUM universe globally, tend to rebalance over 1-2 months or so. The lesson from last Nov/Dec is that balanced mutual funds exhibit flexibility and they do not necessarily rebalance every single month. During the previous quarter, they appear to have postponed rebalancing for Nov-end or Dec-end and to have waited until January to de-risk/rebalance. JPM believes that funds de-risked in January, as a result of the tumble in balanced MFs equity beta...

    .. and since it would have been too soon to rebalance again in February, the quant believes that they have likely postponed any pending rebalancing to March. Assuming they were fully rebalanced at the end of January, which is a reasonable hypothesis given the reduction in their betas in January and by taking into account the performance of global equities and bonds since then, JPMorgan estimates around $107bn of equity selling by balanced mutual funds globally into the end of March in order to revert to their 60:40 target allocation.

    lay_arrow

    HankMFRearden PREMIUM 18 hours ago

    Reconcile this with previous post about off the hook equity inflows. Would not passive mostly be rebalancing by targeted direction of new flows vs. selling of existing positions, particulalry in tech which has declined?

    BandGap 1 hour ago

    It's all good.

    Janet weighs in.

    https://finance.yahoo.com/news/yellen-says-higher-treasury-yields-015420252.html

    The lies get bigger and bigger. We, the peons, are expected to believe the unbelieveable.

    [Mar 07, 2021] When Yields Rise, Narratives Fall

    Mar 07, 2021 | www.zerohedge.com

    Americans aren't spending but saving, by paying down debt at an enormous rate, the nightmare of Keynesians the world over.

    They are unleashing trillions in new spending but cutting back, in the stimulus bill, support for actual Americans whose lives they've ruined with lockdowns and public health terrorism.

    They have held interest rates at or below zero for so long that when the market makes the slightest move to go somewhere else, it precipitates massive market dislocation in fundamental markets.

    We're no longer talking about the sub-prime mortgage market or Turkish corporate debt loads . We're talking about massive short bets against the U.S. 10 year Treasury Note.

    Eventually reality always reasserts itself. The central banks are running out of maneuvering space before he entire system collapses. Maybe that's what they want.

    Maybe they think they can maintain their narrative of competence long enough to shift the blame to incompetent governments who have incurred the wrath of their people through inhuman COVID-19 lockdowns and endless psychological torture.

    I don't know at this point. But I can tell you that debt first extends and then destroys all illusions about who is and who isn't truly solvent.

    And over the past few weeks it's clear there are an increasing number of people who command real amounts of money who don't buy the narratives the central banks are selling.

    * * *

    play_arrow

    Hickory Dickory Dock 21 hours ago

    Inflation expectations are rising because of fiscal and monetary stimulus and the "re-opening" of the economy.

    Those rising inflation expectations cause nominal interest rates to rise.

    If nominal interest rates rise more than inflation rises, real interest rates rise.

    Rising real interest rates cause stocks, bonds and gold/silver to fall.

    Falling 'markets' cause the Fed to step in and save the day by capping nominal interest rates.

    Capped nominal interest rates cause real rates of interest to fall (assuming no change in inflation rates).

    Falling real rates of interest mean higher gold and silver prices.

    conraddobler 21 hours ago (Edited)

    Interest rates were near 15% in 1979, what did gold and silver do back then?

    Hickory Dickory Dock 21 hours ago

    Incorrect. Real interest rates were below zero in 1979-1980.

    https://www.longtermtrends.net/real-interest-rate/

    BarneyFife714 20 hours ago

    Real rates not interest rates.

    Hickory Dickory Dock 17 hours ago

    Real rates are interest rates (just not nominal interest rates).

    hisnamewas 7 hours ago

    I assume by "real" you mean an imaginary number called the "inflation" which they can set arbitrarily low by choosing what is included in the calculation.

    Hickory Dickory Dock 17 hours ago

    Since real interest rates are calculated as being equal to nominal interest rates minus the rate of inflation, understating inflation (whether intentionally or simply through mis-measurement) will have the effect of overstating real interest rates, not understating them. E.g., if the nominal interest rate is 10% and the inflation rate is 7%, the real interest rate is 3%. However, if the inflation rate is understated in this example as being 4% instead of 7%, the real interest rate (10% nominal interest rate minus 4% inflation rate) will appear as 6% rather than 3% (thus overstating the real inflation rate).

    I do believe that the inflation data on Shadowstats is more accurate than the CPI or other government-supplied figures, which are heavily gamed.

    I believe it's only a matter of time before yield curve control will be implemented. Keep in mind it may not be called that, but the net effect will be to suppress longer term interest rates. Assuming the policy is effective at doing that, you can expect gold and silver to resume their bull runs, virtually overnight.

    George Bayou 21 hours ago remove link

    It is obvious what the Fed is doing, they want to devalue the dollar so the gov't can continue to service the debt. YCC will keep the debt serviceable and devalues the dollar at the same time. The Fed is on board with any spending the democrats can dream up now because they know the dollar will be devalued in the future. That is the only way they can get out of this mess.

    The problem with devauling the dollar is it will transfer real wealth to the wealthy elites in the process. That is something that the democrats fail to tell their base.

    itstippy 22 hours ago remove link

    Today's Central Bankers never stop jawboning. They think it's their job to somehow "justify" the way they support banks and the financial sector at the expense of the working and middle classes. They're no longer economists, but just more politicians.

    Central Banker: "Please stop yawning when I'm talking."

    Real Economist: "I'm not yawning, I'm trying to say something."

    dead hobo 22 hours ago

    Long yields have about 3/4% to rise to reach recent historical levels. The world didn't end a couple of years ago at these rates. It won't end now. No YCC for you.

    zorrosgato 19 hours ago

    Since September 21,1981 the yield on the US 10yr treasury has been falling. A 40 year descent to where we are at today, at times easing off from the fall but seemingly never to take back over 3%. If the powerful bond market and/or the Fed decided that inflation, yields or interest rates were either too high or too low they most likely wouldn't have waited until today to fix the problem. A day when insurmountable debt has pretty much taken that option out of the equation. Lets not forget, as always, no market goes straight down or straight up.

    https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

    [Mar 07, 2021] Yellen denies the existance of the stock market bubble

    Mar 07, 2021 | finance.yahoo.com

    WASHINGTON (Reuters) - U.S. Treasury Secretary Janet Yellen on Friday said higher long-term Treasury debt yields were a sign market participants were anticipating a stronger recovery, not of increased inflation concerns.

    "I don't see that the markets are expecting inflation to rise above the 2% inflation objective that the Fed has as an average inflation rate over the longer run," Yellen said in a PBS Newshour interview.

    She added the United States needs faster job growth than seen during February, but can reach full employment by next year with President Joe Biden's $1.9 trillion stimulus plan in place.

    [Mar 07, 2021] Google might be not shriking, but it is not growing iether

    Mar 07, 2021 | www.fool.com

    Bing nips at Google's heels again. Here's why it doesn't matter. Tim Beyers (TMFMileHigh) Updated: Apr 6, 2017 at 11:29AM Published: Sep 21, 2010 at 12:00AM Author Bio

    According to the latest data from comScore, Google 's (Nasdaq: GOOG) share of the search market fell four-tenths of a percentage point in August just as Bing partners Microsoft (Nasdaq: MSFT) and Yahoo! (Nasdaq: YHOO) gained share. Thus, the headline: Google is shrinking.

    Except that it isn't true. Let's take a closer look at Google's average search market share for the first and second quarters of 2010, and then compare the findings with the average revenue growth of the top three search contenders:

    Search Sites

    Q1 2010

    Q2 2010

    % Point Change

    Google Sites

    65.3%

    63.6%

    (1.7)

    Yahoo! Sites

    16.9%

    18.3%

    1.4

    Microsoft Sites

    11.5%

    12.2%

    0.7

    Ask Network

    3.8%

    3.6%

    (0.2)

    AOL Network

    2.5%

    2.3%

    (0.2)

    [Mar 07, 2021] 10 Year Treasury Rate - 54 Year Historical Chart - MacroTrends

    Mar 07, 2021 | www.macrotrends.net

    Interactive chart showing the daily 10 year treasury yield back to 1962. The 10 year treasury is the benchmark used to decide mortgage rates across the U.S. and is the most liquid and widely traded bond in the world. The current 10 year treasury yield as of March 04, 2021 is 1.54% .

    [Mar 06, 2021] Both major parties work according the the scheme of a pyramidal control

    Mar 06, 2021 | www.moonofalabama.org

    Piotr Berman , Mar 6 2021 14:01 utc | 101

    Both major parties work according the the scheme of a pyramidal control. To control a company A, you need to get majority of voting shares. Which belong to company B that owns, say, 60%. In turn, 60% or shares of B belongs to C which controls A while having 60% x 60% = 36% of capital. After adding D, E etc., you can get away with the following: you start with actual majority of shares, and the company prospers. Time to realize gains. But that would deprive you of control. Thus you organize company B and sell 40% of its shares. Control preserved. Wash and repeat.

    In a similar spirit, a narrow circle can control a major party. Of course, the rules are different and more hidden. On the bottom level, the equivalent of B controlling A, it was observed that rational arguments are boring, and the wide masses have hard time following them and following what (itself controlled) B advocates. So you invent easy to remember [expletive deleted] like "Obama birth's certificate", "Russian collusion" etc. An energetic group with group solidarity needs its tribal spirit and shibboleths.

    [Mar 06, 2021] The Democratic Party civil war between the 'progressive anti-war socialist' and 'neocon Wall Street beltway' wings

    Mar 06, 2021 | www.zerohedge.com

    Kreditanstalt 1 hour ago (Edited) remove link

    Haha. IT BEGINS...

    The Democratic Party civil war between the 'progressive anti-war socialist' and 'neocon Wall Street beltway' wings. It will go on for at least two years

    TBT or not TBT 1 hour ago

    Oh hogwash. The minute Obama took over from Bush Cindy Sheehan and the rest disappeared from the news. There was no real push back within the Dem electorate against the foreign wars because they all support the Democrat War on America above all. They only pretend to give a rip about some backward misogynist theocratic craphole people when Republicans are in office.

    King of Kalifornia 1 hour ago

    It's been going on for years. The socialists keep falling for it, and the neoliberals (in the mold of their heroes, Reagan and Thatcher) have forced their compliance.

    [Mar 06, 2021] Pointless Pain Is What We're Enduring. And All for the Sake of Accepting That Money is Not a Constraint on Our Potential

    Mar 06, 2021 | www.nakedcapitalism.com

    I worry that people cannot survive this. Real, warm blooded, caring, loving people can be broken by this. And that's what makes me angry. Because this is unnecessary. The money to deliver a decent society exists.

    All that we need to make the lives of the vast majority of people in this country is a real understanding of economics, of money, of how it interacts with tax, and how we can use that for the common good.

    But no political party seems to get that as yet. And until they do, this unnecessary suffering will continue. And that makes me very angry. Pointless pain is what we're enduring. And all for the sake of accepting that money is not a constraint on our potential, and never will be.


    DTK , March 6, 2021 at 8:28 am

    Hey Steve K,
    Please explain why MMT is a bad joke.
    Thank You

    dummy , March 6, 2021 at 2:59 pm

    Let me have a go.
    If prosperity and wealth can be created by printing more money, why there is still poverty in the world?
    After all, isn't every country equipped with a central bank that can print as much money as they want?

    eg , March 6, 2021 at 5:37 pm

    Depends upon what the additional money is used for -- if it's to employ the currently unemployed productively, then everyone is better off.

    dummy , March 6, 2021 at 6:59 pm

    Real wealth is not denominated in dollars, only in what those dollars can buy. Devaluing the dollar doesn't hurt the wealthy, most of their wealth is in the form of equity and real assets, not dollars.
    The average person's wealth is measured mostly in his future labor, how much he is going to earn. He will earn less because the Fed devalues his labor through its manipulation of the dollar. He will see this in the rising cost of living without an increase in his pay. Sure perhaps the value of labor will at some point catch up to the devalued dollar, but in the interim he will earn less and will never catch up to what he would have earned otherwise. It doesn't hurt the wealthy, it hurts the middle class, and will for years to come.

    occasional anonymous , March 6, 2021 at 5:43 pm

    That isn't what MMT says. You're arguing against a strawman.

    eg , March 6, 2021 at 10:14 am

    Your macroeconomic ignorance is duly noted, featuring as it does the usual "commodity money" and mercantilist shibboleths.

    MMT describes fiat monetary operations which have been in effect since the Nixon shock and the abandonment of Bretton Woods almost 50 years ago . Do catch up.

    Louis Fyne , March 6, 2021 at 7:53 am

    honest question, wouldn't MMT (in a hypothetical universe run by committed MMTers) in the UK likely will produce vastly different results than MMT in relatively autarkic economics like the USA or Russia?

    The UK relies on imports to one degree or another for virtually every physical good necessary for a first-world living standard (food -- even basic foodstuffs like wheat, medicine, spare parts, petrol, apparel, even steel, etc).

    While the UK's economy tilts to exporting services education, finance, media, medicinal/technological intellectual property, tourism, etc.

    Would a weaker UK pound encourage more service exports? Or merely increase inflation, particularly for the bottom 50%?

    honest question.

    PlutoniumKun , March 6, 2021 at 8:03 am

    Because MMT analysts tend to be mostly US or Australian, the applicability of it to smaller, more open economies has not, I think, had the attention thats needed (although to be fair, Richard Murphy has done quite a lot of writing on this). While the UK is a large economy, its also very open (although increasingly less so, thanks to Brexit). So it clearly has much less room to manoeuvre in terms of monetary or fiscal policy than a more autarkical nation. Its not just with MMT and inflation – things like Keynesian multipliers tend to be lower in more open economies as the benefits of fiscal expansion get exported out. The Labour party under Corbyn did put together some very interesting and well thought through MMT-influenced policies, but of course that all got thrown out with Corbyn.

    As Yves has pointed out before, the UK has a particular problem in that it has little spare physical capacity in its economy to take advantage of a weaker currency. In the past, it has been unable to increase output when the pound has been weaker. So a weakening pound is likely to be more inflationary than in many other economies.

    I think that in a general sense, MMT makes sense in all economies in a Covid scenario of a massive drop in output thanks to a black swan event. As Murphy points out, you just need to shove the cash into the economy through monetary means and forget about having to repay it. Inflation just isn't a problem in those circumstances, and it has the benefit of maintaining productive capacity within the economy. But in more 'normal' times, MMT needs to be applied with far more care in an economy like the UK than in a US or China or Russia or EU.

    Susan the other , March 6, 2021 at 1:16 pm

    Kind of wondering here what would happen if all the poor and unemployed/welfare recipients and even the precarious middle class also decided to offshore their money. Why not? Say in every country; say it became a global movement. The neoliberal nightmare should inform us all. Just because a small country doesn't have spare capacity or idle resources is not really a contraindication for MMT. It is more a factor of having an intrinsic imbalance due to decades if not centuries of grift and graft by those in a position to help themselves. And it creates confused politics. As you mentioned above – the Tories in the UK seem to have also usurped the opposition. Well, to my thinking, that is exactly what Trump did. And it is almost a crazy hope of "If you can't beat them, join them." And just exactly where does that leave a functional economy? My first image is a junkyard.

    James E Keenan , March 6, 2021 at 9:55 am

    Two points:

    First, apropos the applicability of Modern Money Theory to relatively open economies like that of the U.K., see the discussion of the prerequisites for monetary sovereignty as outlined by Robert Hockett and Aaron James in their 2020 book, Money for Nothing . In addition to the well-known requirements (nation must issue its own currency; currency not pegged to metal or any other currency; no borrowing in foreign currencies), Hockett and James add others, including "limited trade dependence in essential goods such as food or energy sources, in order to mitigate foreign exchange and inflation risk ." (274)

    Second, apropos the applicability of MMT to smaller economies, I am pleased to note that Fanny Pigeaud and Ndongo Samba Sylla's 2018 book, L'Arme Invisible de la Françafrique: Une Histoire du Franc CFA , has at last been published in English as Africa's Last Colonial Currency: The CFA Franc Story . (Your search engine will take you either to the publisher or to an internet behemoth where you can order it.)

    Pigeaud and Sylla's book is a history and analysis of the political economy of the CFA zone: the countries of central and west Africa which were French colonies and which continue to use a common currency imposed on them by the French imperialists in 1945.

    This book is, in my estimation, the best book we have so far in applying the insights of Modern Money Theory to non-monetarily sovereign economies. You have to love any book that starts out by translating Hyman Minsky's most famous aphorism into French: Tout un chacun peut creér de la monnaie: le problème est de la faire accepter.

    HotFlash , March 6, 2021 at 11:42 am

    "limited trade dependence in essential goods such as food or energy sources, in order to mitigate foreign exchange and inflation risk ."

    Again, we/they have choices based on resource constraints. But, as usual, they are political. Most of these choices seem impossible now, but remember Victory Gardens ? Alas, such things are not looked upon favourably by Big Ag and the supermarket chains, but my depression-era grandparents grew most of their own food for their very large (by our standards) families. Maternal side, farmers -- my mother, born 1923, said that she never even knew there was a depression until she read about it later in high school. Grandpa paid his property taxes by driving snowplow for the county in the winter. Father's side -- my father, born 1922, grew up in a village (5-bedroom two story house built by his father, a shoemaker, and friends/relatives/contractors) on a biggish, maybe 1-2 acre? lot, which was part of a grant to the family for Civil War service. Grandma still had apple, peach, cherry and walnut trees, raspberry and currant bushes when I knew her, and had grown beans, tomatoes, potatoes and all that stuff before the 7 kids got married. Obviously, the kids did a lot of the work, too. Sewing room -- made most of the clothes for family, Dad says the kids' diapers were made of sugar sacks.

    IOW, this is not rocket science. We did this sort of thing for millions of years, omitting the last 200 or so, and can very likely do it again. People explored the whole round world, and conquered a lot of it, without electricity or the internal combustion engine. We're not all gonna die!

    Unless we as a species continue to act on maximizing shareholder value rather than surviving.

    fwe'theewell , March 6, 2021 at 1:01 pm

    Michelle Obama, izzat you? Gorgeous designer bootstraps.

    The Rev Kev , March 6, 2021 at 5:53 pm

    I think that you might be onto something here. I suspect that the lives of our grandchildren as they grow older will resemble the lives of our grandparents from your description. Of course that may mean a lot off decentralization from out of big cities but it can be done – especially if there is no other choice. And it's not like in the US that there is not the land to do this with.

    RODGER MITCHELL , March 6, 2021 at 8:21 am

    It is an excellent article, with one small exception, the words, "I accept that creating money this way is inflationary."

    Contrary to popular wisdom, inflation is not caused by money creation . All inflations are caused by shortages , most often shortages of food or energy.

    That includes hyperinflations. Consider, for one, the Zimbabwe hyperinflation. The government took farmland from farmers and gave it to non-farmers. The inevitable food shortages caused inflation. The government's "money-printing" was merely the wrongheaded response to the inflation, not the cause.

    In fact, the hyperinflation could have been cured by more money creation, had that money been used to cure the food shortage, by purchasing food from abroad and distributing it, or by teaching the non-farmers how to farm.

    In the past year, the U.S. has spent an astounding $4 trillion, and soon it will spend another $2 trillion, Yet, there will be no inflation so long as there are no shortages of food, oil, or labor.

    Bottom line: Scarcity, not money creation, causes inflation.

    Economists: Revise your economics textbooks.

    Gengiskahn , March 6, 2021 at 3:55 pm

    How do you define inflation?

    DTK , March 6, 2021 at 8:36 am

    In the US, as in the UK, planned inequality and (managed) unequal access to the benefits of the money system are two of the most salient activities of our (US) three government branches.

    Patrick , March 6, 2021 at 9:02 am

    So are ye telling me the reason conservatives don't (for example) want to raise the minimum wage is not because of some economic or monetary reason or law but instead just to keep people in their place, i.e. preserve the status quo? Amazing! And I guess them conservatives that "havenot" go along because of that "relative advantage" thing – they are so fixated on keeping those below in their place that they are blind to the upside of a more democratic and social monetary policy. Well I'll be. Now I git it!

    Patrick ,

    Patrick , March 6, 2021 at 9:21 am

    Adding that yes, "fear of inflation" is an applicable "economic or monetary reason or law" that may explain the conservative position.

    Anonapet , March 6, 2021 at 11:42 am

    Then the MMT School are conservatives since they'd use taxation to curb inflation (by some undisclosed means that does not curb consumption).

    But why should price inflation be a problem so long as:
    1) It does not exceed income gains for ALL citizens;
    2) the means that produce it do not violate equal protection under the law;
    and
    3) it is not extreme?

    The only reason I can think of, and it's a contemptible one, is that large fiat hoarders* would see their hoards diminish in value in real terms.

    *not to disparage those saving for a home, initial capital formation, legitimate liquidity needs, etc.

    Adam Eran , March 6, 2021 at 1:50 pm

    One point of inflation is to restrain creditors (rhymes with "predators").

    Meanwhile, "printing" money does not initiate inflation. Most inflation–even hyperinflation–is "cost push," i.e. related to shortages of goods. In Zimbabwe, the Rhodesian farmers left, and the people to whom Mugabe gave their land were not as productive. Result: a shortage of food requiring imports (balance of payments problem).

    In Weimar Germany, the French army invaded the Ruhr, shutting down Germany's industrial heartland, making a shortage of goods. They already had a balance of payments problems with WWI reparations.

    Patrick , March 6, 2021 at 1:50 pm

    "Then the MMT School are conservative"

    In my example, no. The MMT School does not invoke inflation FEAR to deny nurses a meaningful wage raise.

    Fear. Of change. Of "others". Of a level playing field? These pesky conservatives.

    (For the record I did not excel in Father Brennan's freshman year logic class. And that was fifty years ago!)

    Amfortas the hippie , March 6, 2021 at 2:23 pm

    https://en.wikipedia.org/wiki/Bond_vigilante

    it was always thus.
    the real Burkean Conservatives behind it all, who yes want to keep everyone in their place.
    as i've lamented many times, it's hard to get a read on who the real Bosses are, since they don't go on TV and brag, generally(various rightwing billionaires in the last 15 years, notwithstanding)
    C.Wright Mills and Domhoff are the only taxonomists of that cohort that i'm aware of Diannah Johnstone, perhaps.
    Maybe Pepe Escobar when they hide the rum.
    otherwise, every attempt i've seen in the last 30 years has had elements of tinfoil and illuminatii/NWO scattered throughout.
    I reckon this is by design, at some level.
    whatever there exists a demographic cohort of humanity that is exceedingly wealthy, thinks it's in charge and mostly really is and that is truly cosmopolitiain citizens of the world.
    their most defining feature is that they pretend real hard not to exist and most of us little people give them no mind, and pretend right along.
    This cohort is not monolithic, nor all powerful they each are as prone to tunnel vision and stupidity as any of us but they have better connected steering wheels, and cleaner windshields, and mirrors that work.
    One hopes that, like in FDR Times, they will feel threatened enough by the results of their long term policy preferences to allow a few larger crumbs to fall from the table, so as to mollify the ravening hordes .ere those hordes notice who the real Hostis Humani Generis are.
    But it looks like they're more likely to double down on the diversionary division of the Bewildered Herd hence, Cancel Seuss! and Sinema's little antoinette dance .and an hundred other mostly unimportant things that happened just yesterday to keep us'n's riled up about the wrong things.

    see: https://www.latimes.com/archives/la-xpm-1994-06-16-me-4587-story.html

    for an enlightening memento mori of being right here before .Time is, indeed, cyclical, like the Ancients insisted.

    Patrick , March 6, 2021 at 6:39 pm

    "Maybe Pepe Escobar when they hide the rum". LOL! Needed that.

    [Mar 06, 2021] Value investor John Rogers sees an end to Big Tech's stock market dominance

    Mar 06, 2021 | finance.yahoo.com

    Michael Mackenzie and James Fontanella-Khan in New York Fri, March 5, 2021, 7:00 PM

    The veteran value investor John Rogers predicted the US is headed for a repeat of the "roaring twenties" a century ago that will finally encourage investors to dump tech stocks in favour of companies more sensitive to the economy. The founder of Ariel Investments told the Financial Times in an interview that value investing "dinosaurs" like him stood to win as higher economic growth and rising interest rates took the air out of some of the hottest stocks of recent years. The US central bank is "overly optimistic that they can keep inflation under control", he said, and higher bond market interest rates would reduce the value of future earnings for highly popular growth stocks such as tech companies and for the kinds of speculative companies coming to market in initial public offerings or via deals with Spacs.

    [Mar 06, 2021] BRAZIL SUMMARY Peak Oil Barrel

    Mar 06, 2021 | peakoilbarrel.com

    Oil Production

    Production jumped in late 2019 but has struggled to maintain a plateau since then as FPSO start-ups have become sparser while the Campos basin decline continued apace.

    Drilling rig numbers offshore increased in 2020 in support of the new FPSOs but land drilling virtually disappeared.

    Rate of decline in the Campos basin, onshore and for small offshore basins have accelerated decline rates through 2019 and 2020, and all growth is coming from the Santos basin, which seems to be entering middle age with a rising water cut and the first developments reaching exhaustion.


    Future Projections

    Fitting a Verhulst curves to Santos basin production is virtually impossible as it is in such an early stage of development. An attempted fit resulted in remaining reserves of 22Gb compared to the APB figure of 11 to 12Gb. The estimate is bound to increase as a number of very large FPSOs come on line before 2025. Therefore the projection is based on a bottom up on recent, developing and possible projects that have started up or been announced, using any data for throughput, reserves etc., that is available and otherwise using usual design practice (e.g. typical field size for a given design throughput, FPSO availability, ramp-up times, decline rates, plateau periods).

    The Verhulst best fit including annual production through 2019 results in a much thinner tail than from 2017 because recent figures have been much lower than the fit then. 2020 production was not used in the fit but the value prorated from monthly data through September shows the declining trend is continuing. The remaining reserves calculated from the fit is only 2Gb compared to 6 to 7 Gb from APB data. Fitting the curve but constraining the reserves to this numbe produces an unrealistically thick tail. The 2017 gave a better match but more likely there is another round of developments due that would need a separate curve to match. The first three of this are currently under development and their expected additional flow over the next few years matches the prediction from Petrobras – it only shows Petrobras' share of total equivalent production so the line shown has been prorated to total oil.

    [Mar 06, 2021] On the Dollar Standard today: the USA is buying USA.

    Mar 06, 2021 | www.moonofalabama.org

    vk , Mar 5 2021 13:54 utc | 93

    Fed lures banks to buy unwanted US Treasuries

    I recommend everybody to read it all, but here's the crucial paragraph for the topic being discussed here:

    Foreigners, who took up a great deal of Treasury debt during and after the Global Financial Crisis of 2008-2009, have stopped buying Treasuries. China, the largest official holder of US government bonds, isn't motivated to bail America out at the moment.

    This Treasury debt buying spree during 2008-2009 is what the American people still call "the Obama Recovery". In fact, Obama had nothing to do with it: it was China that saved the USA from collapse in 2008 as it bailed it out.

    But now it's different. On the USA is buying USA. The problem here is that we aren't talking about manufacturing and commodities, but fictitious capital: you know something's wrong when you have to buy your own debt in order to create a raison d'être for your own debt's existence.

    Old and Grumpy , Mar 5 2021 15:07 utc | 95

    Bankers rule the world. Corporations are international fiefdoms serving the banks. The deep state is just the goon squad to steal resources from locals, and to kill any uppity serf who might have any aspiration for freedom. Trump was for show, so as to turn the guns on pesky, uppity, and white Americans. I am both dreading and please they hate my side. Biden is the senile old coot who just signs proclamations. The real advantage to Biden is he doesn't tweet to stir up the masses. Apparently that was a no, no.

    [Mar 06, 2021] Despite Happy Headline Gains in January 2021 Real Retail Sales, Production and Construction, the Underlying Payroll Employment Numbers Tell the Opposite Story First-Quarter 2021 GDP Remains at Risk of Relapsing into Quarterly Contraction January 2021 Producer Price Index Monthly Inflation Hit a Record, 10-Year High U.S. Dollar Collapse Accelerates

    Mar 06, 2021 | www.moonofalabama.org

    karlof1 , Mar 4 2021 22:19 utc | 41

    psychohistorian @23 & William Gruff @28--

    Here's the synopsis for today's Keiser Report :

    "In this episode of Keiser Report, Max and Stacy look at the 'growing concern that market-based inflation expectations have become unreliable as indicators,' i.e. the central banks have destroyed the price signal foundational to free and fair markets. In this environment, we see Goodhart's Law at work: When a measure becomes a target, it ceases to be a good measure. Billionaire hedge fund investor Paul Singer says of the 'market craziness' that there is a 'scarcity of honest profits.'"

    From Shadowstats most recent Flash Commentary on 24 Feb:

    "Despite Happy Headline Gains in January 2021 Real Retail Sales, Production and Construction, the Underlying Payroll Employment Numbers Tell the Opposite Story • First-Quarter 2021 GDP Remains at Risk of Relapsing into Quarterly Contraction • January 2021 Producer Price Index Monthly Inflation Hit a Record, 10-Year High • U.S. Dollar Collapse Accelerates."

    Shadowstats next Benchmark Commentary will cover "major definitional and accuracy issues with current Federal Reserve and Federal Government Monetary and Economic data, along with corrective approaches." Of course, that's one way of saying Here's how the government lies about the economy and how you can see through them and come close to the truth .

    Would Putin or the Chinese allow their governments to operate in such a manner? IMO, once the USA began to lie about the basic economic stats it became a failed state and has been in decline ever since despite all outward appearances. Earlier this week, Strategic-Culture published an Infographic to answer this question:

    "Is the American Dream Still Alive?"

    Do note the point of separation between productivity and wages that's been pointed at now for several decades and how closely it follows Nixon's exit from the Gold Standard.

    [Mar 06, 2021] Some complementary factors that we can consider discussion COVID-19 recession

    Mar 06, 2021 | www.moonofalabama.org

    uncle tungsten , Mar 5 2021 22:08 utc | 41

    Some complementary factors that we can consider:

    The new, 34-year old Democratic Senator from Georgia, Jon Ossoff, let a very big cat out of the bag at yesterday's Senate Banking hearing. For at least a year, from September 17, 2019 through at least September 30, 2020, the New York Fed, acting as an agent for the Federal Reserve, doled out a cumulative $9 trillion or more in repo loans. The Fed would say only that the money was going to some of its 24 Primary Dealers on Wall Street, without naming any specific bank receiving the money. In June of 2020, the New York Fed abruptly stopped reporting the dollar amounts it was pumping out each day.

    and from the same source:

    Pull up a chair and get comfy. You're about to watch the first act in what is likely to be a long-running show called "The Great Tech Wreck of Zero-Dividend Stocks." The show's sponsor is rising yields on U.S. Treasury notes which make tech stocks that have ballooned in price (as the Fed held interest rates artificially low) and pay no cash dividends to compete with the rising yields, particularly unattractive.

    [Mar 06, 2021] Wall Street strategists think the USD will strengthen in 2021, so who knows ...

    Mar 06, 2021 | www.moonofalabama.org

    Canadian Cents , Mar 5 2021 6:08 utc | 81

    Passer by @21 and @26, had a thought related to your mention that "the US dollar still remains 62% of world currency reserves" , or "nearly two thirds of world currency reserves" . That seems to correspond to the IMF figure of 61.5% from December 2019. The IMF figure from December 2020, however, is now down to 60.4% .

    A few months ago I read that Goldman Sachs had suggested the USD could drop 6% in 2021, while Citigroup suggested that it could drop as much as 20%.

    Assuming no other changes to reserves, a 6% drop in the USD seems to imply the 60.4% percentage would become less than 58%. And a 20% drop in the USD seems to imply that US dollar holdings could fall to around 50% of world currency reserves.

    And if it gets to around 50%, does a tipping point, as William Gruff @28 mentioned, kick in?

    On the other hand, other Wall Street strategists think the USD will strengthen in 2021, so who knows ...

    [Mar 05, 2021] The Feedback Loop Between The Fed The Elite

    Mar 05, 2021 | www.zerohedge.com

    More Evidence Of The Loop

    The New York Times recently went further into the numbers:

    "America's economy has almost doubled in size over the last four decades, but broad measures of the nation's economic health conceal the unequal distribution of gains. A small portion of the population has pocketed most of the new wealth, and the coronavirus pandemic is laying bare the consequences of the unequal distribution of prosperity."

    Of course, a significant contributor to the "wealth gap" was the rise in the stock market fostered by trillions of liquidity injected by the Federal Reserve. As NYT noted:

    "The affluent, of course, do tend to own stock, and the median net worth of the richest 10 percent of households rose 13 percent from 2007 to 2016 (the last year for which the Fed has released data).

    Another way to view this issue is by looking at household net worth growth between the top 10% and everyone else.

    "Wealth disparities have widened over time. In 1989, the bottom 90 percent of the U.S. population held 33 percent of all wealth. By 2016, the bottom 90 percent of the population held only 23 percent of the wealth. The wealth share of the top 1 percent increased from about 30 percent to about 40 percent over the same period." – Equitable Growth

    Such is more visible when you see that since 2007, the ONLY group has seen an increase in net worth in the top 10% of the population. Such is also the group that owns 90% of the stock market as discussed in "How The Fed Made The Top 10% Richer."

    " That is not economic prosperity. It is a distortion of economics."

    An Elite Club

    Central Bank's globally sought to stoke economic growth by inflating asset prices. Unfortunately, the consumption of the benefit was only those with savings and discretionary income to invest.

    In other words, the stock market became an "exclusive" club for the elite.

    While monetary policy increases the wealth of those that have wealth, the Fed mistakenly believed the "trickle-down" effect would be enough to stimulate the entire economy.

    It hasn't.

    The sad reality is that these policies only acted as a transfer of wealth from the middle class to the wealthy. Such created one of the largest "wealth gaps" in human history. Via Forbes :

    "'The top 10% of the wealth distribution hold a large and growing share of U.S. aggregate wealth, While the bottom half hold a barely visible share.' Fed economists wrote in a paper outlining the new data set on inequality. The charts show that 'while the total net worth of U.S. households has more than quadrupled in nominal terms since 1989, that increase accrued more to the top than the bottom.'"

    A recent report from BCA Research confirms the same showing the increase in wealth of the top 10% as compared to everyone else.

    Lack Of Capital

    The current economic expansion is already the longest post-WWII expansion on record. Of course, that expansion came from artificial interventions rather than stable organic economic growth. As noted, while the financial markets have soared higher in recent years, it bypassed a large portion of Americans. Such was NOT because they were afraid to invest, but because they had NO CAPITAL with which to invest.

    The ability to "maintain a certain standard of living" remains problematic for many forcing them further into debt.

    "The debt surge is partly by design. A byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it. Companies increasingly can't sell their goods without it. And the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit." – WSJ

    I often show the "gap" between the "standard of living" and real disposable incomes. In 1990, incomes alone were no longer able to meet the standard of living. Therefore, consumers turned to debt to fill the "gap."

    However, following the "financial crisis," even the combined income and debt levels no longer filled the gap. Currently, there is almost a $2150 annual deficit facing the average American. (Note: this deficit accrues every year, which is why consumer credit keeps hitting new records.)

    The Rest Have Debt

    The debt-to-income problem keeps individuals from building wealth, and government statistics obscure the fundamental reality. We discussed this point in detail in the " Illusion Of Soaring Savings."

    " The median net worth of households in the middle 20% of income rose 4% in inflation-adjusted terms to $81,900 between 1989 and 2016. That is the latest available data. For households in the top 20%, median net worth more than doubled to $811,860. And for the top 1%, the increase was 178% to $11,206,000.

    The value of assets for all U.S. households increased from 1989 through 2016 by an inflation-adjusted $58 trillion. A full 33% of that gain -- $19 trillion -- went to the wealthiest 1%, according to a Journal analysis of Fed data." – WSJ

    Of course, if the Fed's actions to inflate asset prices worked, then wealth distribution would be more even. Importantly, we wouldn't see more than 50% of Americans unable to meet a $500 emergency.

    The single truth of a decade of monetary and fiscal interventions is this:

    "The top 10% of the economy has assets, the bottom 90% has the debt."

    The Fed Does Have A Choice

    The Fed does have a choice that could alter the current wealth inequality dynamic:

    1. Allow capitalism to take root by allowing corporations to fail and restructure. A needed process after spending a decade leveraging themselves to the hilt, buying back shares, and massively increasing executive wealth while compressing workers' wages. Or,

    2. Continue to bailout "bad actors" and further forestall the "clearing process" that would rebalance the economy and allow for increased future organic economic growth.

    As the Fed's balance sheet rises past $7-Trillion, they chose to impede the "clearing process" once again. By not allowing for debt to fail, corporate restructuring, and "socializing the losses," they removed the risk of speculative practices.

    Such has ensured the continuation of "bad behaviors."

    Unfortunately, given we have a decade of experience watching the "wealth gap" grow, the next decade will only see the "gap" worsen.

    The obvious question we should be asking is:

    "If we are in a booming economy, as supposedly represented by surging asset prices, then why are Central Banks globally acting to increase financial stimulus for the market?"

    The trap the Fed has fallen into is that markets are predicated on ever-cheaper cash being freely available. Even the faintest threat that the cash might become more expensive or less available causes shock waves.

    Such was seen in late 2018 when the Fed signaled it might increase the pace of normalizing monetary policy. The markets imploded, and the Fed halted its plan of shrinking its balance sheet. Then, during the pandemic, the Fed flooded the system with liquidity to halt a market crash.

    Equality In Misery

    The reality is the Fed has left unconventional policies in place for so long after the "Financial Crisis," the markets can no longer function without them. Risk-taking, and the build-up of financial leverage, have removed any ability to "normalize" monetary policy. At least not without triggering violent market convulsions.

    Given there is too much debt, too much activity predicated on ultra-low interest rates, and confidence hinging on inflated asset values, the Fed has no choice but to keep pushing liquidity until something eventually "pops."

    Of course, it will be the bottom 90% that absorbs the losses. As noted by Sven Henrich previously:

    "In a world of measured low inflation and weak wage growth easy central bank money creates vast price inflation in the assets owned by the few making the rich richer, but also enables the taking on ever higher debt burdens leaving everyone else to foot the ultimate bill."

    " That is the measured outcome of the central bank easy money dynamic. After decades, it has now taken on new obscene forms in the past 10-years with absolutely no end in sight."

    For the world's elite, their view of the world is far different than the reality the rest face.

    Of course, this also explains much of the recent election outcomes.

    When "capitalism" isn't allowed to work for the "equality" of the whole, the populous will "vote" themselves "equality in misery."


    Lordflin 11 hours ago remove link

    The so called market has become nothing more than an open vein... draining the life's blood of civilization down the maws of lifeless parasites...

    They are killing the host...

    2banana 11 hours ago

    In the era of insanely cheap and easy money, those closest to the money spigot get insanely wealthy for doing nothing.

    Those in the back of the line get $75,000 communications degrees, and 27% credit cards.

    Nothing explodes "wealth inequality" like cheap and easy money.

    TreeTopSlick 11 hours ago remove link

    The Cantillon Effect in action. Never been so obvious in America than today.

    2banana 10 hours ago

    Great analogy.

    Cantillon's original thesis outlines how rising prices affect different sectors at different times and suggests that time difference effectively acts as a taxing mechanism. In other words, the first sectors to receive the newly created money enjoy higher profits as their pay increases, but general costs are still low. On the other hand, the last sectors in which prices rise (where there is more economic friction) face higher costs while still producing at lower prices.

    Alice-the-dog 11 hours ago

    The "monetary policy that created a feedback loop between the Fed and the elite" isn't a by product, it's a design feature.

    Crow-Magnon 11 hours ago

    "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

    ~ Thomas Jefferson

    Famous Quote by Thomas Jefferson - Liberty Quotes (libertytree.ca)

    GSD 11 hours ago remove link

    The elite literally have their own $$ printer

    Shemp 4 Victory 11 hours ago remove link

    Here are the political affiliations of America's 50 richest families

    You've both been bamboozled. The richest people in the country may pretend to have political affiliations, but it's just a distraction. The Capitol Hill Whores are bought off very cheaply, which is why the wealthy spend their money on both D-whores and R-whores.

    It is in the interest of the very wealthy to keep the D/R, left/right, red/blue charade going because it keeps peoples' anger focused on the paid actors instead of looking for who is really screwing the country. They've got nothing to worry about as long as they can keep the unwashed rabble fighting against each other.

    Mary Jane 10 hours ago remove link

    99% of Americans can't hold that thought in their heads. They can only hold the left/right, red/blue understanding in their heads. One is their team, just as in Sports, and their team must win. It doesn't matter that they just shelled out money to the owner of the stadium, and the franchises, who could care less who won as long as the money keeps coming in. Very similar, to the bread and circus routines of the Roman Empire's Coliseum, no one ever looked at the wealth of the Emperor.

    Apocalypse2020 8 hours ago

    "The super-rich will have to keep up the pretense that national politics might someday make a difference. Since economic decisions are their prerogative, they will encourage politicians of both the Left and the Right, to specialize in cultural issues. The aim will be to keep the minds of the proles elsewhere – to keep the bottom 75 percent of Americans and the bottom 95 percent of the world's population busy with ethnic and religious hostilities, and with debates about sexual mores. If the proles can be distracted from their own despair by media-created pseudo-events the super-rich will have little to fear."

    Richard Rorty, 1998

    Sound of the Suburbs 7 hours ago remove link

    What has happened to inequality?

    Pretty much what you would expect really.

    Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.

    "a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped"

    With the capital accumulation of neoclassical economics wealth concentrates at the top.

    A few people have all the money and everyone else gets by on debt.

    Keynes added some redistribution to stop all the wealth concentrating at the top, and developed nations formed a strong healthy middle class.

    The neoliberals removed the redistribution.

    With the capital accumulation of neoclassical economics wealth concentrates at the top.

    A few people have all the money and everyone else gets by on debt.

    It wasn't even hard.

    Let it Go 10 hours ago

    Things are really messed up. This gives credence to the idea we might soon be witness to the first global inflationary depression. As investors shift into assets that do well during times of inflation, it is possible they may set in motion a self-feeding loop or cycle. More about this in the following article.

    https://The First "Global Inflationary Depression" Is Very Possible.html

    [Mar 05, 2021] The Feedback Loop Between The Fed The Elite - ZeroHedge

    Investing lemmings are lured into energy stocks as a counterbalance to singing bond funds. It would be interesting to see how this will play out.
    Mar 05, 2021 | www.zerohedge.com

    takeaction 11 hours ago (Edited) remove link

    I just closed EVERY position at open except for Energy.

    My holds....XOM...MRO...VET....GTE.....OXY.....

    And then for the Roll of the dice 2 million shares of CBDL just for the dream.

    This Bond s&^t is going to get real ugly....and in my opinion...the inflation play is in Energy.

    Crow-Magnon 11 hours ago

    all have negative earnings but at least XOM has a decent dividend

    Apocalypse2020 7 hours ago

    Small oil companies are drowning in FCF right now.

    TreeTopSlick 10 hours ago

    Long Oil and/or commodity fund

    [Mar 04, 2021] The next commodity supercycle

    Mar 04, 2021 | finance.yahoo.com

    Commodities have seen four supercycles over the past 100 years. The last one peaked in 2008, after 12 years of expansion.

    Last month, two of the biggest banks on Wall Street - JPMorgan Chase and Goldman Sachs - joined others predicting a new commodities supercycle as economies reopen and the risks of the pandemic subside.

    The expectation is for a long-term boom spanning oil, metals, and agricultural material prices. JPMorgan's head of oil and gas, Christyan Malek, recently offered one of the most bullish forecasts for oil, suggesting international crude prices could rebound to US$100 per barrel.

    [Mar 01, 2021] What -Normal- Are We Returning To- The Depression Nobody Dares Acknowledge - ZeroHedge

    Mar 01, 2021 | www.zerohedge.com

    What "Normal" Are We Returning To? The Depression Nobody Dares Acknowledge BY TYLER DURDEN MONDAY, MAR 01, 2021 - 17:21

    Authored by Charles Hugh Smith via OfTwoMinds blog,

    Perhaps we need an honest national dialog about declining expectations, rising inequality, social depression and the failure of the status quo.

    Even as the chirpy happy-talk of a return to normal floods the airwaves, what nobody dares acknowledge is that "normal" for a rising number of Americans is the social depression of downward mobility and social defeat .

    Downward mobility is not a new trend--it's simply accelerating. As this RAND Corporation report documents, ( Trends in Income From 1975 to 2018 ) $50 trillion in earnings has been transferred to the Financial Aristocracy from the bottom 90% of American households over the past 45 years.

    Time magazine's article on the report is remarkably direct: The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90% -- And That's Made the U.S. Less Secure .

    "The $50 trillion transfer of wealth the RAND report documents has occurred entirely within the American economy, not between it and its trading partners. No, this upward redistribution of income, wealth, and power wasn't inevitable; it was a choice--a direct result of the trickle-down policies we chose to implement since 1975.

    We chose to cut taxes on billionaires and to deregulate the financial industry. We chose to allow CEOs to manipulate share prices through stock buybacks, and to lavishly reward themselves with the proceeds. We chose to permit giant corporations, through mergers and acquisitions, to accumulate the vast monopoly power necessary to dictate both prices charged and wages paid. We chose to erode the minimum wage and the overtime threshold and the bargaining power of labor. For four decades, we chose to elect political leaders who put the material interests of the rich and powerful above those of the American people."

    I've been digging into downward mobility and social depression for years: Are You Really Middle Class?

    The reality is that the middle class has been reduced to the sliver just below the top 5%--if we use the standards of the prosperous 1960s as a baseline.

    The downward mobility isn't just financial--it's a decline in political power, control of one's work and ownership of income-producing assets. This article reminds us of what the middle class once represented: What Middle Class? How bourgeois America is getting recast as a proletariat .

    This reappraisal of the American Dream is also triggering a reappraisal of the middle class in the decades of widespread prosperity: The Myth of the Middle Class: Have Most Americans Always Been Poor?

    Downward mobility excels in creating and distributing what I term social defeat : In my lexicon, social defeat is the spectrum of anxiety, insecurity, chronic stress, fear and powerlessness that accompanies declining financial security and social status.

    Downward mobility and social defeat lead to social depression . Here are the conditions that characterize social depression:

    1. High expectations of endlessly rising prosperity instilled as a birthright no longer align with economy reality.

    2. Part-time and unemployed people are marginalized, not just financially but socially.

    3. Widening income/wealth disparity as those in the top 10% pull away from the bottom 90%.

    4. A systemic decline in social/economic mobility as it becomes increasingly difficult to move from dependence on the state or one's parents to financial independence.

    5. A widening disconnect between higher education and employment: a college/university degree no longer guarantees a stable, good-paying job.

    6. A failure in the Status Quo institutions and mainstream media to recognize social depression as a reality.

    7. A systemic failure of imagination within state and private-sector institutions on how to address social depression issues.

    8. The abandonment of middle class aspirations: young people no longer aspire to (or cannot afford) consumerist status symbols such as luxury autos or conventional homeownership.

    9. A generational abandonment of marriage, families and independent households as these are no longer affordable to those with part-time or unstable employment.

    10. A loss of hope in the young generations as a result of the above conditions.

    The rising tide of collective anger arising from social depression is visible in many places: road rage, violent street clashes between groups seething for a fight, the destruction of friendships for holding "incorrect" ideological views, and so on.

    A coarsening of the entire social order is increasingly visible: The Age of Rudeness .

    Depressive thoughts (and the emotions they generate) tend to be self-reinforcing, and this is why it's so difficult to break out of depression once in its grip.

    One part of the healing process is to expose the sources of anger that we are repressing. As psychiatrist Karen Horney explained in her 1950 masterwork, Neurosis and Human Growth: The Struggle Towards Self-Realization , anger at ourselves sometimes arises from our failure to live up to the many "shoulds" we've internalized, and the idealized track we've laid out for ourselves and our lives.

    The article The American Dream Is Killing Us does a good job of explaining how our failure to obtain the expected rewards of "doing all the right things" (getting a college degree, working hard, etc.) breeds resentment and despair.

    Since we did the "right things," the system "should" deliver the financial rewards and security we expected. This systemic failure to deliver the promised rewards is eroding the social contract and social cohesion. Fewer and fewer people have a stake in the system.

    We are increasingly angry at the system, but we reserve some anger for ourselves, because the mass-media trumpets how well the economy is doing and how some people are doing extremely well. Naturally, we wonder, why them and not us? The failure is thus internalized.

    One response to this sense that the system no longer works as advertised is to seek the relative comfort of echo chambers --places we can go to hear confirmation that this systemic stagnation is the opposing ideological camp's fault.

    Part of the American Exceptionalism we hear so much about is a can-do optimism: set your mind to it and everything is possible.

    The failure to prosper as anticipated is generating a range of negative emotions that are "un-American": complaining that you didn't get a high-paying secure job despite having a college degree (or advanced degree) sounds like sour-grapes: the message is you didn't work hard enough, you didn't get the right diploma, etc.

    It can't be the system that's failed, right? I discuss this in my book Why Our Status Quo Failed and Is Beyond Reform : the top 10% who are benefiting mightily dominate politics and the media, and their assumption is: the system is working great for me, so it must be working great for everyone . This implicit narrative carries an implicit accusation that any failure is the fault of the individual, not the system.

    The inability to express our despair and anger generates depression. Some people will redouble their efforts, others will seek to lay the blame on "the other" (some external group) and others will give up. What few people will do is look at the sources of systemic injustice and inequality.

    Perhaps we need an honest national dialog about declining expectations, rising inequality and the failure of the status quo that avoids polarization and the internalization trap (i.e. it's your own fault you're not well-off).

    We need to value honesty above fake happy-talk. Once we can speak honestly, there will be a foundation for optimism.

    * * *

    If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com .

    [Feb 28, 2021] How will a surge in bond yields affect your mortgage, car loans and 401(k)

    S&P500 gain are driven by Internet companies and those companies can be valued at half of their current stock prices quite easily.
    SPDR Portfolio S&P 500 High Dividend ETF (SPYD) might be a better bet.
    Feb 28, 2021 | finance.yahoo.com

    Rising yields will likely inject more volatility into financial markets as investors debate when the Fed will be forced to tighten monetary policy, though that doesn't appear to be anytime soon.

    Fed chair Jerome Powell downplayed concerns this week about potentially higher inflation and signaled that the central bank sees no need to alter its ultralow rate policies for the foreseeable future. The Fed projects that inflation will remain at or below the central bank's 2% target through 2023.

    Despite conventional thinking that rising long-term rates are bad for stocks, historical data show that the broad S&P 500 has actually posted strong returns.

    The S&P 500 has averaged an annualized total return of 13% and increased 81% of the time during rising rate periods (13 out of 16), according to data from Truist Advisory Services.

    [Feb 28, 2021] Is Buffet bluffing again luring 401K lemmings into stock when most stocks are in a bubble?

    Buffet repurchased its own stock. Which means he does not see attractive investments. But his advice as for searching for yield and moving to junk bonds is a valid one.
    Feb 28, 2021 | finance.yahoo.com

    Originally from Warren Buffett- Bond investors world-wide 'face a bleak future'

    Insurance represents the largest of Berkshire Hathaway's four "family jewel" businesses. Though unlike other insurance companies, Berkshire takes a more equity-heavy approach when investing its insurance float.

    According to Buffett, Berkshire's insurance fleet has more capital deployed than any of its competitors thanks to the financial strength of the operation and the "huge cash flow" generated by the non-insurance businesses.

    This combination allows Berkshire's insurance operation to "safely follow an equity-heavy investment strategy," something that's "not feasible for the overwhelming majority of insurers," Buffett wrote. For regulatory and credit-rating reasons, a lot of insurers have to focus on bonds.

    He noted that some insurers and bond investors "may try to juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers." In other words, they may allocate more of the portfolios to financial instruments like leveraged loans and high-yield bonds, aka junk bonds.

    "Risky loans, however, are not the answer to inadequate interest rates," he added. "Three decades ago, the once-mighty savings and loan industry destroyed itself, partly by ignoring that maxim."

    [Feb 27, 2021] Poofing money into existence has serous consequences

    Feb 27, 2021 | www.nakedcapitalism.com

    Mansoor H. Khan , February 27, 2021 at 9:02 am

    Poofing money into existence has serous consequences: Eventual Economic Depression:

    Here is my prediction (it is actually very positive ultimately).

    1. Stock market is way, way, way too high for the underlying profitability of companies and underlying demand (capacity to spend/budget/money in the pocket) from consumers.

    2. FAATMAN companies' valuations are way to high. FAATMAN = Facebook, Amazon, Alphabet (google), Tesla, Microsoft, Apple and Netflix. But this can be fixed. Keep reading!

    3. I am expecting a Titanic level Market slide within 0-3 years. Down 70%. Great Depression level. But much faster due to electronic age we live in.

    4. I will go in with both feet with ALL my cash into the stock market at that time. My jump-in level is 70% down from peak.

    5. Interest rates tell you 90% of the story. This low of rates means DEMAND is very, very weak compared to capacity (I refinanced my 15 year fixed rate mortgage at 2.2% APR). Which means that average Joe does not have sufficient income to borrow and spend. Yes capacity to produce in our beautiful god given economy is huge and ever expanding. That part is correct!

    6. Capacity of the economy is stupendously high due to extreme automation. Again, this is the good part. Of course. Thanks to the IT guys like me.

    7. Federal Reserve cannot do much at this point. Federal Reserve would be pushing on a string and they know it.

    8. One way to balance capacity and demand in our economy is through UBI (Universal Basic Income). Otherwise known as John Maynard Keynes' helicopter cash or Clifford H. Douglas' social credit.

    9. If we don't do UBI we will at least need to do continuous stimuluses by the federal government. Every six months.

    10. UBI is better, simpler, more comprehensive, fairer way to stimulate the economy continuously. I would called it: AUTOMATION DIVDEND. That is what it really is.

    11. How long will it take for Americans to realize how economy really works (i.e., Keynesian economics). Don't know. But there is hope. Bernie Sanders and the Democrats in general are not too far from seeing past the scarcity paradigm which conservatives (Republicans) live in. It took me probably 2000 hours of intensely scouring the web to figure out what is going on. Reading books and reading all kinds of blogs and comments in blogs to figure out the truth about our modern credit based economy. By the way in my heart I am a conservative (Republican). But I cannot vote for them because they (Republicans) are clueless about how the economy really works.

    12. It took elderly dying in the streets in the 30's for FDR to realize we need a social security program.

    13. A future UBI program should be simple in implementation. All who have SSN should get non-taxable UBI (no exceptions). Babies and Billionaires included. I would start with $500 per month per SSN. This can be implemented very easily through a partnership between the Social security administration + the Bankers. Very similar to how my mom's social security benefits are deposited in her Wells Fargo bank account every month seamlessly.

    14. Why pay billionaires UBI. Because it is only fair. Money printed is not the same as money spent. If the billionaire does not spend it. The extra money does not "cost" any resources from within our economy. Cool. Isn't it.

    15. If inflation ensues I would implement a consumption tax (a national sales tax) to tone down consumption and balance capacity and demand. By the way I would completely eliminate all federal income taxes including social security taxes. If inflation ensues again raise the national sales tax to balance capacity and demand. State and local taxes have to stay since state and local governments can't print money.

    16. If something like the above is not done. Capitalism will be destroyed completely. How ironic, by conservatives themselves because they don't understand (Keynesian) economics.

    17. Capitalism was rescued after the great depression by world war II spending, GI bill spending, Marshall Plan spending, the space program spending, the welfare and food stamp programs spending, the korean war spending, the vietnam war spending, the Reagan's star wars defense programs spending and defense budget and other budget items spending in general. If these "spendings" were not there than capitalism would have collapse by now due to deflation.

    18. Capitalism is too much focused savings and dies of deflation eventually when consumers cannot borrow anymore!

    19. This (Keynesian) economics only works because of automation and availability of relatively cheap abundant energy supplies which power our machines and our computers.

    20. If we ever cannot get cheap energy supplies Well back to few hundred million people on earth total and scarcity!

    I am praying for a UBI outcome.

    JBird4049 , February 27, 2021 at 4:30 pm

    In Western society, especially in American society, money equals status. The more money you have the the more esteemed you are; I don't particularly care to have money except for some of the nice things I can get like books, but then my ego or sense of self worth is not tied to money, whereas for too many of the higher classes it is tied to a sense of personal value; it also means political as well as social power. The wealthiest Americans are treated like gods in our nation merely because they have wealth.

    Having seen middle class customers lording themselves our my fellow employees was an interesting experience. It convinced me that the money they had made them feel good; it will take force of some kind to get a more equal and just society that does not depend on raw wealth for a good life.

    [Feb 25, 2021] This Obscure Energy Treaty Is the Greatest Threat to the Planet You've Never Heard Of -

    Feb 25, 2021 | www.nakedcapitalism.com

    This Obscure Energy Treaty Is the Greatest Threat to the Planet You've Never Heard Of Posted on February 25, 2021 by Yves Smith

    Yves here. An ugly trade treaty that included corporate-profit guaranteeing "investor-state dispute settlement" mechanisms is again getting the bad press it deserves. We mentioned the 1994 Energy Charter Treaty in our 2013-2015 opposition to the TransPacific Partnership and its Atlantic sister, the TransAtlantic Trade and Investment Partnership because it had become notorious in Europe for undermining clean energy initiatives. From a November 2013 post, quoting Public Citizen :

    Vattenfal, a Swedish company, is a serial trade pact litigant against Germany. In 2011, Der Spiegel reported on how it was suing for expected €1 billion plus losses due to Germany's program to phase out nuclear power:

    According to Handelsblatt, Vattenfall has an advantage in seeking compensation because the company has its headquarters abroad. As a Swedish company, Vattenfall can invoke investment rules under the Energy Charter Treaty (ECT), which protect foreign investors in signatory nations from interference in property rights. That includes, according to the treaty's text, a "fair and equitable treatment" of investors.

    The Swedish company has already filed suit once against the German government at the ICSID. In 2009, Vattenfall sued the federal government over stricter environmental regulations on its coal-fired power plant in Hamburg-Moorburg, seeking €1.4 billion plus interest in damages. The parties settled out of court in August 2010.

    These treaty terms are designed to erode national sovereignity and establish supra-national mechanisms to make corporate profits senior to national laws. I'm not making that up. Again from that 2013 post:

    Word has apparently gotten out even to Congressmen who can normally be lulled to sleep with the invocation of the magic phrase "free trade" that the pending Trans Pacific Partnership is toxic. This proposed deal among 13 Pacific Rim countries (essentially, an "everybody but China" pact), is only peripherally about trade, since trade is already substantially liberalized. Its main aim is to strengthen the rights of intellectual property holders and investors, undermining US sovereignity, allowing drug companies to raise drug prices, interfering with basic operation of the Internet, and gutting labor, banking, and environmental regulations.

    Or as Public Citizen put it :

    It's not really about "trade", but a system of enforceable global governance that is not designed for modification by those who will live the results.

    The only good news about the Energy Charter Treaty, compared to its later versions of investor-state dispute settlement provisions, is that signatories can withdraw. And that might actually happen with the Energy Charter Treaty.

    By Fabian Flues, an adviser on trade and investment policy at Berlin-based PowerShift, Cecilia Olivet, project coordinator with the Economic Justice Programme at the Transnational Institute, and Pia Eberhardt, a researcher and campaigner with the Brussels-based campaign group Corporate Europe Observatory. Originally published at openDemocracy

    On 4 February the German energy giant RWE announced it was suing the government of the Netherlands . The crime? Proposing to phase out coal from the country's electricity mix. The company, which is Europe's biggest emitter of carbon, is demanding €1.4bn in 'compensation' from the country for loss of potential earnings, because the Dutch government has banned the burning of coal for electricity from 2030.

    If this sounds unreasonable, then you might be surprised to learn that this kind of legal action is perfectly normal – and likely to become far more commonplace in the coming years.

    RWE is suing under the Energy Charter Treaty (ECT), a little-known international agreement signed without much public debate in 1994. The treaty binds more than 50 countries, and allows foreign investors in the energy sector to sue governments for decisions that might negatively impact their profits – including climate policies. Governments can be forced to pay huge sums in compensation if they lose an ECT case.

    On Tuesday, Investigate Europe revealed that the EU, the UK and Switzerland could be forced to pay more than €345bn in ECT lawsuits over climate action in the coming years. This amount, which is more than twice the EU's annual budget, represents the total value of the fossil fuel infrastructure that is protected by the ECT, and was calculated using data gathered by Global Energy Monitor and Change of Oil International.

    With ECT-covered assets worth €141bn (or more than €2,000 per citizen), the UK – which in 2019 became the first major economy to pass a net zero emissions law – is the country most vulnerable to future claims.

    In 2019 the European Commission called the ECT "outdated" and "no longer sustainable", and more than 450 climate leaders and scientists and 300 lawmakers from across Europe have called on governments to withdraw from the treaty.

    But in response, powerful interests have mobilised to not just defend the treaty, but to expand it to new signatory states. These interests include the fossil fuels lobby keen to keep its outsized legal privileges ; lawyers who make millions arguing ECT cases; and the Brussels-based ECT Secretariat, which has close ties to both industries and whose survival depends on the treaty's continuation.

    A Bodyguard for Polluters

    Supporters of the ECT make a number of controversial claims to prevent countries from leaving the treaty and persuade new countries to join. But their myths and misinformation are easily debunked .

    For example, ECT supporters say the treaty attracts foreign investment, including into clean energy. However, there is no clear evidence that ECT-style agreements do this: a recent meta-analysis of 74 studies found that investment agreements' effect on increasing foreign investment "is so small as to be considered zero".

    And while ECT supporters claim the treaty protects renewable investments, in reality it predominantly protects and prolongs the fossil-fuel dominated status quo. In recent years only 20% of investments protected by the ECT covered clean energy, compared to 56% for coal, oil and gas.

    By protecting the status quo, the ECT acts as a bodyguard for polluters . As the RWE example shows, when a government decides to phase out coal or cease oil and gas operations, fossil fuel companies can demand steep compensation via the ECT. So with no public benefits and clear risks for climate action, why are countries hesitant to leave the treaty? Two more myths are preventing them from taking action.

    Firstly, ECT proponents claim that an ongoing process to 'modernise' the treaty will fix its flaws. But modernisation has proceeded at a snail's pace since 2017, and is unlikely to succeed given resistance from powerful ECT members like Japan , whose companies have used the ECT to take legal action against other governments. Leaked reports show that the talks are stalled due to the requirement to take decisions unanimously.

    No signatory state has proposed removing its dangerous corporate courts, which take the form of arbitration tribunals run by three private lawyers. No state has proposed a clear exemption for climate action. No ECT member wants to exclude protection of fossil fuels from the modernised treaty any time soon.

    In short: the negotiations around ECT 'modernisation' will not bring the treaty in line with global climate commitments.

    Secondly, ECT supporters claim that leaving the treaty offers no protection against costly lawsuits. The ECT's sunset clause – which allows investors to sue a country for 20 years after its withdrawal from the treaty – makes a unilateral ECT exit useless, it is claimed.

    In practice, however, withdrawing from the ECT significantly reduces countries' risk of being sued and avoids carbon lock-in from new fossil fuel projects. The ECT's sunset clause only applies to investments made before withdrawal, while those made after are no longer protected.

    At a time when the majority of new energy investment is still in fossil fuels, not renewables, this is important. The sooner countries leave, the fewer new dirty investments will fall under the ECT and be 'locked-in' by its legal status.

    Italy took the necessary step of withdrawing from the ECT in 2016. Going forward, if multiple countries decide to withdraw together – say, the EU bloc, supported by allies such as the UK or Switzerland – they can further weaken the sunset clause. Countries that withdraw could adopt an agreement that excludes claims within their group, before jointly leaving the ECT at the same time. That would make it difficult for investors from those countries to sue others from the group.

    This week a European-wide petition has been launched so that citizens can call on their governments to end the ECT madness.

    Leaving the outdated, climate-killing ECT is a no-brainer. It is not just good governance, but the logical step for all who take global warming seriously.


    The Rev Kev , February 25, 2021 at 3:27 am

    Those "investor-state dispute settlement" mechanisms are nuts and I can see a rush for the door if one or two countries pull out of the Energy Charter Treaty. There has to be a point where they realize that the Energy Charter Treaty is not in fact a suicide pact. Good thing that there is not an equivalent in the medical industry or else healthcare companies would be suing nations for giving their citizens vaccines on the grounds that it is robbing those companies of future income from treating them during the present pandemic.

    Unknown Unknowns , February 25, 2021 at 5:24 am

    "not an equivalent in the medical industry or else healthcare companies would be suing nations for giving their citizens vaccines on the grounds that it is robbing those companies of future income from treating them during the present pandemic"

    Are you sure?

    They have been given a non-liability clause for side-effects. The EU has ordered more vaccine in spite of not knowing if the vaccines will stop the transfer of the disease. If that doesn't sound like an equivalent, what does?

    Yves Smith , February 25, 2021 at 6:30 am

    No. that's quite different. The governments under an ISDS type of regime would be required to buy or to compensate for non-purchases.

    Here, they are competing with each other to try to get supplies. The liability waivers are in a completely different economic category and result from governments being so eager to get the vaccines that they were released without going through the normal approval process (and the drug companies as a result having an upper hand in bargaining).

    Olivier , February 25, 2021 at 9:50 am

    It was the governments themselves who enjoined the pharma companies to rush vaccine development and who then also rushed the approval process. Thus in this case (and only in this case) I think that a waiver of liability (maybe with some residual liability for gross negligence) is entirely appropriate.

    vlade , February 25, 2021 at 7:14 am

    I believe the EU contracts kept at least some liabilities, which was one of the reasons why it took so long to get it.

    Dave in Austin , February 25, 2021 at 7:32 am

    The ECT mechanism is a reasonable response to a question: "If a company in good faith follows a nation's laws and invests money in a long-term, legal project, who should pay for the stranded costs if the nation decides to change the law to make the project illegal?" This is about who should pay for stranded assets.

    Legislators naturally are looking for someone else to pick up the bill and the "someone else" is often a foreign company because domestic companies have to much political power to be messed with and the company shareholders are often local people.

    The Canadian gas pipeline to the US gulf coast is an example. More than two billion dollars were invested, the proper permits were gotten and the pipeline was built- all except a five mile stretch now held up in the usual creative American litigation machine. So who should pay for the two billion invested- half of which came from the Alberta provincial government? Alberta has already filed the arbitration claim and I support their position; if a country encourages a legal investment and then changes the rules the country can do it- but the country should pay for the loss.

    When American assets are confiscated overseas using the same sort of creative legal reasoning the US investors are rightly up in arms. I'm specifically not including the all-to-common cases of fraud and political payoffs by foreign investors. In the cases Yves cites there are no allegations that the contracts were tainted by fraud.

    A well known modern historian has pointed out that if the American abolitionists wanted to end slavery they should have campaigned to do what the British did- buy all the slaves, set them free and compensate the owners for the "taking" of the property. In the 1830s the British spent the money and freed the slaves. In the U.S., on the other hand we had a civil war, more than half a million young men killed- and the cost of the war was five times what it would have cost to purchase and free all the slaves. I use this example because there were clearly both moral and economic issues involved in slavery, just as there are in the fight to limit air pollution and stop climate change.

    Not only is there no free lunch, but there is always a fight about who should pay for the lunch.

    Susan the other , February 25, 2021 at 11:41 am

    This sets the stage to rethink contracts of all kinds. If the Energy Charter Treaty (basically contracts to protect vested interests for profits and against liabilities) is breached by a country simply leaving the organization it makes all those contracts worthless. And it explains why the TPP and the TAP don't have a get-out clause. I think the question of stranded assets is being mishandled too. Especially because we will need fossil fuel for many decades to come. At this point it is a question of what do we sacrifice to protect the atmosphere? It looks like gasoline-cars and maybe home heating fuel. But not electricity. RWE AG is a huge generator and provider of electricity. Asia Pacific as well as the EU. So taking Texas as a good example, what happens to RWE if they are faced with any number of problems and need to generate electricity fast? Their best backup is oil and natural gas. And it's gotta be a no-brainer that they are seriously involved with Nordstream-2, and something similar in eastern Siberia (?), to supply fuel and back-up fuel for their operations. ECT is an old agreement. TPP is a newer one. Neither one of them are looking at the downside to the environment. So they should both be rethought and re-construed. Because, for more accurate consideration, fossil fuels are not so much a stranded asset as an asset that must be carefully conserved to last us through a long transition period.

    Michael McK , February 25, 2021 at 12:02 pm

    Given that industries spend as much effort lobbying for the environmental disasters our leaders (they paid to get elected) approve I don't think they deserve to earn back the expense of their investments, let alone the theoretical profit that that stupid, immoral investment could have generated
    I think this sort of situation shows how important it is for governments to be the investors/owners of critical infrastructure instead of capitalists (paid for by asset taxes, transaction taxes and MMT).
    At this point I can think of no wealthy person who's fortune is not built on the misery of our grandchildren (Oh no! It's us, now, not our grandkids at the edge of the abyss) and we need a massive asset tax on top of huge lifestyle changes. An asset free, radically different life is coming soon for us all whether we choose it or not and putting the decision off is only making the looming reality worse..

    [Feb 20, 2021] The USA is the only large oil producer which consumes more than it produces and the only one of the three that favors lower prices

    Feb 20, 2021 | peakoilbarrel.com

    SHALLOW SAND IGNORED 02/15/2021 at 8:49 am

    There are a few factors at play IMO.

    One factor is a change in one of the three large producer's policies. This large producer is also the only producer that consumes more than it produces and therefore the only one of the three that favors lower prices. I'm referring to USA, of course.

    USA shale (and to a much lesser extent GOM) growth kept a lid on prices. Where would prices have been 2010-19 without USA adding 7 million BOPD?

    USA growth doesn't appear to be headed toward adding 1 million BOPD or more per year in the future. USA companies are all being pressured to pay dividends. To cover dividends, USA companies need much higher prices. USA companies aren't forecasting growth like past years.

    For the first time ever, the USA government is not making oil production growth, either domestic or foreign, a priority. I am not making a "political" statement here trying to rile up the left on the board. Just look at oil prices since the USA election on 11/3. Not a coincidence. Not likely USA will be intervening anytime soon in the ME to protect oil supplies. At least not in a big way.

    I have no idea how high oil prices will go. I wonder what happens politically in USA with $3 gasoline? $4 ? Are high gasoline prices no longer a political liability? They weren't for Obama in 2012. But USA was drilling like crazy in 2012. Not sure what happens this time if that occurs, given clear desire of Biden Administration to discourage USA oil production growth.

    Another factor is the Western European producers have told the market recently in a very straightforward manner that their oil production is past peak. The CEO's of both BP and RDS have stated this. Total is also transitioning away from oil. Equinor also, it changed its name to remove the word oil.

    Next, even though total worldwide demand will still be below a record, demand growth from 2020 to 2021 worldwide will be big, much bigger than from 2009 to 2010 after GFC. What did prices do from the depths of GFC to 2011? Compare GFC stimulus to COVID stimulus.

    Last, how many paper barrels are traded per physical barrel? With the increase in paper barrels (I would call them more accurately day trader barrels) volatility in the oil market has grown. The price went negative big time one day last April. It was purely a day trader phenomenon.

    Just my thoughts. Feel free to disagree. REPLY HICKORY IGNORED 02/15/2021 at 11:28 am

    Everyday you can find headlines that point to a huge transition underway in the world energy scene.
    For example today-
    -Exclusive: Equinor considers more US asset sales in global strategy revamp, and
    -Ford bets $29B on leading the 'electric vehicle revolution'

    There is a huge scramble underway to adapt to the conditions these big companies now see coming to be over this decade.
    In the meantime, I think that oil demand growth will be very strong over the next 18-24 months.
    And as the price of gas in the USA goes up in this rebound phase, the great difference in travel cost/mile between plug-in vehicles (like a Ford mustang) and ICE vehicles will become a widely known fact. Ford (and the other manufacturers) all know that now, even if they were slow on the uptake.

    This world is going to change rapidly this decade in so many ways. REPLY ALIMBIQUATED IGNORED 02/15/2021 at 11:34 am

    I think a general feeling of optimism that there is light at the end of the Covid 19 tunnel is helping as well. REPLY SURVIVALIST IGNORED 02/15/2021 at 12:23 pm

    " For the first time ever, the USA government is not making oil production growth, either domestic or foreign, a priority."

    Great observation. I recall when GWB2 went to KSA to 'kiss the ring' and ask for more oil production. I wonder how it will play out next time. REPLY HICKORY IGNORED 02/15/2021 at 12:33 pm

    "" For the first time ever, the USA government is not making oil production growth, either domestic or foreign, a priority."

    Of much greater impact- For the first time ever, the major oil companies are not making oil production growth, either domestic or foreign, a priority. REPLY SHALLOW SAND IGNORED 02/15/2021 at 1:11 pm

    Both are happening simultaneously.

    Both are making a big impact. REPLY SHALLOW SAND IGNORED 02/15/2021 at 1:12 pm

    Trump jumped on KSA when oil prices went up during his admin.

    Will Biden? REPLY PAOIL IGNORED 02/15/2021 at 1:57 pm

    The Biden administration is under pressure to see oil prices rise. The green agenda of wind, solar and EV's is only cost competitive with fossil fuels in two ways: 1) green subsidies; or 2) higher oil prices. Until high oil prices threaten the economy, the Biden administration will enact policies that gladly see oil prices rise. And with the oil price experience of 2009 to 2014 still relatively fresh in people's minds, the Biden administration is not afraid of $60, $70, or even $90 oil. They are hoping for it. REPLY HICKORY IGNORED 02/15/2021 at 2:13 pm

    "$60, $70, or even $90 oil. They are hoping for it."
    As are the people working in the oil industry. REPLY STEPHEN HREN IGNORED 02/15/2021 at 4:59 pm

    As far as anyone on this board is considered, the higher the price of oil the better. Let's phase out oil production in the US over the next three decades and keep the price high the entire time so the producers make money and people are incentivized to switch to less polluting EVs. It'll be like the TRC for the whole country but heading towards a bottleneck. Auction drilling rights so only the best wells get drilled. Keep restricting drilling in a phased manner, enact a gradually lower cap on the number of wells that can be drilled until it goes to zero in twenty years and then maintain these stripper wells until they are empty. REPLY PAULO IGNORED 02/15/2021 at 6:33 pm

    Can you imagine any US party that would actually dare to promote a higher cost for gasoline? Personally, I think there should be a big carbon tax and fuel tax surcharge imposed to fix infrastructure, but whatever.

    Confession: I am not anti oil. My son works in the Cdn industry. I just think people drive more than they should and that energy should be priced higher. Win win. LLOYD IGNORED 02/16/2021 at 3:55 pm

    So $90 oil is good for:
    -Saudi
    -Democrats
    -Shallow
    -Tesla
    -Renewables

    But not for:
    -Rednecks with huge vehicles

    The election calculus gets tricky here. REPLY ALIMBIQUATED IGNORED 02/16/2021 at 4:09 am

    PAOIL-
    I disagree that high oil prices are needed to make green energy competitive, because oil is already very expensive energy, which is why it is rarely used to generate electricity. Wind and solar compete against coal, nuclear and gas, not oil.

    Oil shines as a way to store energy in a moving vehicle and power internal combustion engines. As such, it really competes with batteries, not with the rest of the energy market at all. And batteries still have a tiny impact on oil markets.

    So higher oil prices might be useful for the EVs, but not particularly useful for wind and solar. But in reality, the EV market is suffering from chronic battery shortages as manufacturers struggle to build factories fast enough to meet 20% or more annual demand growth. The oil price really isn't an issue, and raising oil prices wouldn't help.

    If Biden's goal was to make EVs more competitive, the government has an easy way to raise oil prices, which is to raise taxes at the pump. This would be more or less neutral to the oil price from the producer point of view. It would just encourage exports and discourage imports, improving America's balance of payments. But it hasn't worked in Europe, where taxes are over 60% of the price at the pump. The most effective way to promote EVs is subsidizing the purchase price of the vehicle. That has been very effective.

    Hoping that the American consumer will keep oil demand up internationally no longer makes sense, as America's relative economic importance has been falling since 1945. I'm not sure what the previous administration was trying to accomplish by talking down the price. REPLY JEFF IGNORED 02/16/2021 at 5:13 am

    "But it hasn't worked in Europe, where taxes are over 60% of the price at the pump. "

    So average fuel economy in Europe and US is the same? REPLY EULENSPIEGEL IGNORED 02/16/2021 at 8:47 am

    I have driven a Toyota Corolla on an 4 week US trip.

    With an engine for the US market – you can't buy this modell in Europe. It was very steady going – and thirsty. At least for european thinking, we used 7-8 litres / 100 km by mostly driving country roads in cruise control at the given speed (didn't wanted to deal with US police). Slow for my feeling, I'm driving faster in Germany.

    And use only round about 6 litres with a car of similar size, which is a bit faster than this Corolla – with this lazy slow driving I would use below 5 litres with my car (and get a lot of flashing).

    So there is a difference in fuel economy. ALIMBIQUATED IGNORED 02/16/2021 at 5:55 pm

    Jeff –
    That was a little unclear on my part. I meant high gasoline prices haven't gotten people to buy, EVs, but direct subsidies seem to work.

    It's also worth mentioning that $120 oil didn't really dent consumption much, and certainly didn't inspire many to buy EVs.

    In my opinion liquid fuel is cheap. I mean I think that consumers aren't willing to make significant changes in behavior even if prices increase significantly. S IGNORED 02/17/2021 at 3:05 am

    Alimbiquated, as an European in a well-to-do country, the matter of car buying is somewhat more complicated than just gasoline price. E.g. fully electric car availibily, their price, distances that need to be travelled (range anxiety in other words) are still important. Hybrid cars are also rather expensive. Here it seems that these two car groups are selling better and better, public charging points are increasing etc so we will see what happens. As I have a full electric car I got relatively cheaply (still a bit of ouch ) I think I will not get a petroleum or diesel car ever J HOUSMAN IGNORED 02/18/2021 at 4:08 pm

    "The green agenda of wind, solar and EV's is only cost competitive with fossil fuels in two way" Three ways, actually. The third is when we finally start to realize the actual cost of destroying the environment by burning fossil fuels REPLY MATT MUSHALIK IGNORED 02/15/2021 at 10:01 pm

    Global crude oil may have peaked 2018-19 before Covid

    https://pbs.twimg.com/media/EsHyv1FVQAIDRAd?format=jpg

    If ever we come out of the Covid tunnel, there could be surprises ahead REPLY POLLUX IGNORED 02/15/2021 at 5:30 am

    Strike threatens shutdown at Norway's giant Johan Sverdrup offshore oilfield

    A dozen workers that are members of the Safe union are threatening to down tools at the Mongstad terminal from midnight on Monday if talks with the industry body aimed at breaking an impasse over a 2020 wage settlement with Equinor fail.

    Other fields that could be impacted include Kvitebjorn, Visund, Byrding, Fram and Valemon, with gas output exports from the Troll area also in danger of being hit. REPLY MATT MUSHALIK IGNORED 02/15/2021 at 8:05 am

    With an excursion to Gabon and Azerbaijan

    15/2/2021
    Exxon-Mobil's refinery closure in Australia: peak oil context
    https://crudeoilpeak.info/exxon-mobils-refinery-closure-in-australia-peak-oil-context REPLY TULSAGEO IGNORED 02/15/2021 at 9:37 am

    An interesting scenario showing what happens when demand outstrips supply due to lack of investment is playing out right now in Oklahoma and Texas. There has been a lack of investment in the region last year due to the drop in prices, and in Oklahoma, the slowing of investment has been happening for a few years. The massive cold snap that descended on the region made spot prices (not the futures price you can look up on Bloomberg etc) rise from $2 an MMBTU, to $5, to $9, to $300, to $600, all in the course of a week. It is currently higher. The cold weather has caused shut ins of wells, and processing plants. You have a situation where demand is increasing but supply cannot keep up. I know this is a micro problem that will resolve itself as temperatures increase, in the coming weeks, but this could be an example of what oil prices might see in the near future. There has been a lack of investment for years in large projects, if demand rebounds quickly as vaccine roll out continues, we will not be able to turn back on new production fast enough to keep prices from running higher, resulting in some temporary ridiculous price spikes. REPLY SHALLOW SAND IGNORED 02/15/2021 at 10:31 am

    I saw this resulted in a lot of wells that have been shut in for 5-10 years being reactivated. REPLY GREENBUB IGNORED 02/15/2021 at 8:25 pm

    Shallow, are you affected by the cold snap or power outages? REPLY SHALLOW SAND IGNORED 02/16/2021 at 12:41 am

    Yes. We have about 10% frozen off. Our pumpers decided what to drain and shut in, and what to keep on. They are real pros. You can't find better.

    Our people are the key. We owe them bigtime. They have been out there in this stuff keeping the rest from freezing.

    We will be good soon, temps will come up.

    Keep in mind, with one exception, our pumpers are 50+ years old.

    Are there millennials that are going to keep the strippers going 24/7/365?

    Takes special people. REPLY STEPHEN HREN IGNORED 02/16/2021 at 4:33 pm

    No. I work in construction biz. 90% of twenty somethings can't work five minutes without looking at their phones. They are useless. All my buddies have the same complaint. REPLY OVI IGNORED 02/15/2021 at 9:49 pm

    An interesting clip from this article:
    "This isn't a consensus view yet but it's quickly coming. Two heavyweights in the past week have stepped up and called out the problem.

    The first was Goldman Sach's Jeff Currie, who called the bull market in the early 2000s.

    "I want to be long oil and hang on for the ride," Currie said in an interview with S&P Global Platts on Feb. 5, warning "there is a lot of upside here."

    "Is it back to $150/b? I don't know as it is a macro repricing we are talking about and everything needs to reprice."

    The other is JPMorgan and Marko Kolanovic, who said Friday that oil and commodities appear to be entering a supercycle.

    "We believe that the new commodity upswing, and in particular oil up cycle, has started," the JPMorgan analysts said in their note. "The tide on yields and inflation is turning."

    "We believe that the last supercycle peaked in 2008 (after 12 years of expansion), bottomed in 2020 (after a 12-year contraction) and that we likely entered an upswing phase of a new commodity supercycle."

    https://www.forexlive.com/news/!/what-an-incredible-turnaround-for-oil-prices-20210215 REPLY RON PATTERSON IGNORED 02/16/2021 at 2:31 pm

    WTI hit $60 today. How come high oil prices seem to be doing nothing for the shale business.

    Anyone? Anyone? Bueller? Dennis? 😉

    REPLY STEPHEN HREN IGNORED 02/16/2021 at 4:34 pm

    They're too busy spending all their earnings REPLY OVI IGNORED 02/16/2021 at 6:45 pm

    Drillers Trying New Pricing Structure

    Shale driller bases rig lease costs on well performance

    Rigs are typically rented out at a daily rate for a period of a few months, which has meant less money for oilfield service providers as drilling becomes quicker and more efficient. So Helmerich & Payne Inc. is touting a new pricing model based on overall well performance, and almost a third of its U.S. rigs are now being leased on that basis, CEO John Lindsay said Wednesday on an earnings call.

    In the Permian Basin of West Texas and New Mexico, home to the busiest shale patch in North America, operators are now drilling the same number of wells with 180 rigs as they were with 300 rigs a year ago, according to industry data provider Lium.

    https://www.worldoil.com/news/2021/2/16/shale-driller-bases-rig-lease-costs-on-well-performance REPLY RON PATTERSON IGNORED 02/16/2021 at 8:45 pm

    Yeah okay. That's all great. But what I was looking at was oil production. It's going down, not up. With these prices oil production should be increasing, not decling. Why is that? After all, that's really all that matters.

    [Feb 10, 2021] Are educational disparities a main driver of economic inequality?

    Notable quotes:
    "... The lower 95 percenters would be better off under the policies of Roosevelt, Truman, Eisenhower and Kennedy. ..."
    Feb 10, 2021 | economistsview.typepad.com

    Are "educational disparities a main driver of economic inequality"?:

    Rethinking the Rise of Inequality, by Eduardo Porter, NY Times : In a poll conducted last month by the College Board and National Journal : ... "It is absolutely clear that educational wage differentials have not driven wage inequality over the last 15 years," said Lawrence Mishel, who heads the Economic Policy Institute, a liberal-leaning center for economic policy analysis. "Wage inequality has grown a lot over the last 15 years and the educational wage premium has changed little."
    The standard analysis of the interplay between technology and education, developed by economists like Lawrence Katz and Claudia Goldin..., and David Autor..., suggests that improvements in technology -- coupled with a college graduation rate that slowed sharply in the 1980s -- have been principal drivers of the nation's widening income gap, leaving workers with less education behind.
    But critics like Mr. Mishel point out that this theory has important blind spots. For instance, why have wages for college graduates stagnated over the last decade, even as innovation continues at a breathtaking pace? ...
    Most notably, the skills-and-tech story leaves aside one of the most perplexing and important dynamics of the last 30 years: the rise of the 1 percent, a tiny sliver of the population that last year took in almost a dollar out of every $4 generated by the American economy. ...
    Mr. Mishel's preferred explanation of inequality's rise is institutional: a shrinking minimum wage cut into the earnings of the nation's least-skilled workers while falling trade barriers, deregulation and the decline of labor unions eroded the income of the middle class. The rise of the top 1 percent, he believes, is mostly about executive pay and the growing footprint of finance. ...

    My view is that both the technology and institutional forces are at work, and the question is not which of the two explains growing inequality -- they are not mutually exclusive -- but rather how much each contributed to the growing disparity.

    Posted by Mark Thoma on Wednesday, November 13, 2013 at 08:43 AM in Economics , Income Distribution | Permalink Comments (57)


    DrDick -> Second Best... , November 13, 2013 at 12:48 PM

    Actually, the problem was created by Reagan's union busting and slashing taxes on the wealthy.

    ilsm -> DrDick... , November 13, 2013 at 03:38 PM

    And spending the SS surplus on star wars, hiding deficits from too much of GDP going to the pentagon trough.

    If the SS surplus were "savings' they were "invested" in war welfare.

    ilsm -> Second Best... , November 13, 2013 at 03:39 PM

    Note FDR died 3 months after his 4th inaugural. We will never know how he would have managed the peace.

    Michael -> Second Best... , November 13, 2013 at 06:16 PM

    Actually, That started with the passage of the Great Society program of 1965, under President Johnson. With Great Society, welfare became official, hip, and institutionalize, with the worst affects being the break-up of black and inner city families, and a doubling to tripling of the out-of-wedlock birthrate. The lower 95 percenters would be better off under the policies of Roosevelt, Truman, Eisenhower and Kennedy.

    reason -> Michael... , November 14, 2013 at 01:31 AM

    Read the book "The Truly Disadvantaged" about how the break up of inner city families was not to do with welfare but with the lack of jobs for working class men.

    The right lives on myths, unsupported by data.

    reason -> reason ... , November 14, 2013 at 05:14 AM

    That doesn't mean by the way that I am against better micro-economic design of the social security system. A citizen's income (c.f. Friedman's negative income tax) is my preferred welfare system design.

    Michael -> reason ... , November 14, 2013 at 08:36 PM

    Thomas Sowell has stated that the black family made more progress during the 20 years before Great Society, as opposed to the 20 years after Great Society. Great Society was the first opportunity for mommas to afford to have children, without the benefit of a husband and father to the children, on the taxpayers' dime. Where a birth of a human baby should be a blessed event, it's be cheapened to included the Dept. of Social Services. In my state, in the bigger cities, the out-of-wedlock birthrate pre Great Society was 25%, then by 1975 to current times, the out-of-wedlock birthrate hovers around 75- 80 percent. Black on black crime went up, number of black victims went up, and drug use increased. I don't disagree with the point you are trying to make, but it got much worse at the time of the introduction of Great Society.

    Matt Young , November 13, 2013 at 09:37 AM

    When we say yields equalize across assets prices, this is natural over the whole economy, including government, given sufficient time to equalize. If rates are low, and price to earnings high, then you can bet your booty that government yields are low also.

    And this will be true of any complete, bounded economic model, it is really basic to the concept of a model. So ask youself who or what has driven yields lower over the 40 year period and you can win a banana.

    Michael , November 13, 2013 at 09:53 AM

    Second Best has it completely backwards! The post-New Deal period saw the strongest economy and most prosperous middle class in American history!

    The New Deal came about because the real takers (the wealthy) were taking too much of the pie. Same thing is happening today! But unfortunately we don't have an FDR around to stick up for working men and women. We have the pro-corporate party (Dems) and the ultra-pro-corporate party (GOP).

    Darryl FKA Ron -> Michael... , November 13, 2013 at 10:56 AM

    Second Best is just pretending to be a reactionary for amusement. Unfortunately some bloggers roll in here occasionally that make roughly the same comments, but are serious. I keep telling him to use emoticons :<)

    Michael -> Darryl FKA Ron... , November 13, 2013 at 12:15 PM

    I should have known! But so many actually think that way (looking at you, Romney) it's not always easy to spot irony these days.

    Watermelonpunch -> Michael... , November 13, 2013 at 01:55 PM

    "it's not always easy to spot irony these days"

    Very true.
    Poe's Law is an epidemic.

    LangfordPO -> Watermelonpunch ... , November 13, 2013 at 03:29 PM

    So true! The 1st time I saw Anne Coulter on TV I thought she was a comedienne poking fun at the right!

    Michael -> Michael... , November 13, 2013 at 06:22 PM

    Elizabeth Warren for president. Bill and Hillary are part of the Wall Street crowd.

    Michael , November 13, 2013 at 09:59 AM

    I wouldn't put any of the blame for rising inequality on technology. We've been replacing workers with machinery for over 200 years!

    I think the two principle reasons are low tax rates and low union membership.

    Contrary to popular belief, there is very little correlation between tax rates and growth. But there is a very high correlation between low tax rates and increased income inequality.

    http://democrats.waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/Updated%20CRS%20Report%2012%3A13%3A12.pdf

    DrDick -> Michael... , November 13, 2013 at 12:46 PM

    Pretty much grand theft by capital. Wage theft on an economy wide scale.

    Perspective -> Michael... , November 13, 2013 at 02:40 PM

    Anecdotal but, when you look at typical office-type work, it's hard to not conclude that technology (computers/software) has killed a ton of middle-income office jobs.

    e.g. The typical law firm 10+ years ago might have had 3-4 support staff (secretaries, paralegals, filing clerks) for every attorney. Today, it's more typical to have 2-3 attorneys for every support staff employee. Technology allows this.

    cm -> Perspective... , November 14, 2013 at 08:51 AM

    I easily believe this for the secretaries and clerical staff, but what happened to the paralegals? Similar trends can/could be observed in other professional fields, but there too, while the clerical and admin staff was trimmed (and to an extent management hierarchies but lately it looks like they have come back), subject matter (of the variety that cannot be automated) work has not been cut a lot. OTOH IT/internet allowed a lot of "commodity" tasks to be outsourced and offshored.

    Is it possible that the (newer generation?) attorneys had to take on paralegal tasks as part of their job? That would be in line with other fields where in reality a lot of the "low level" and clerical work that has been ostensibly automated was pushed onto the professional staff. For example, in many places you are supposed to arrange your own business travel (hotel, flights), order office materials, do print/copy work etc. that used to be done by now "automated" clerical staff up to 10-15 years ago. Also when it comes to subject matter work, a lot of work formerly done by techs and other support staff (who were often hourly) has been transferred to the professionals (who are generally salaried and "exempt" from overtime pay), while it is generally swept under the rug in performance evaluations which are about subject matter achievements (research pubs, delivered product features etc.). On the flip side there is now probably more nominally professional staff, some of whom (esp. juniors) are loaded with more tech/support content - but then a lot of them are hired offshore too.

    Peter K. , November 13, 2013 at 10:01 AM

    "Both sides agree that the overall weakness of the job market since the turn of the millennium is a prime culprit. As Professor Katz noted: "The only moments we've had of broadly shared prosperity have been in tight labor markets.""

    This is a problem of demand management policy. Demand can be managed via fiscal, monetary and/or trade/currency policies.

    It's also a problem of politics as Krugman says in that the powerful center-right has ignored the recent economic evidence, as have the center-right's academic/media message machine. The center-right has cried wolf over inflation and government deficits all in the name of preventing policies that would help the economy and tighten labor markets.

    cawley -> Peter K. ... , November 13, 2013 at 10:27 AM

    Nailed it. Can I add labor policy on the supply management side?

    Peter K. -> cawley... , November 13, 2013 at 12:18 PM

    Yes labor policy is very important as well. I would support pro-union policies - which help politically also - and work-sharing programs during downturns which Germany has and which Dean Baker recommends.

    Dan Kervick -> Peter K. ... , November 13, 2013 at 11:35 AM

    It's also a problem of a long term decline in federal government consumption and gross investment, and the willingness of macroeconomists to re-define "full employment" as a situation in which lots and lots of people are in fact unemployed. I don't think private enterprise alone will ever be capable of generating full employment and tight labor markets, demand stimulus or no demand stimulus.

    Beezer , November 13, 2013 at 10:04 AM

    When there is insufficient demand yields drop as capacity is idled. Under conditions of weak demand there is also a drop in investment as new entrepreneurs and established businesses know the deck is stacked against them.

    The low yields are a natural symptom of the deficient demand. If you're looking for who to blame, there are several likely suspects.

    One is a government indifferent to unemployment that caters almost exclusively to the super rich and the multi national, stateless corporations. The second is a government indifferent to unemployment that caters almost exclusively to the super rich and the multi national, stateless corporations. The third is see one and two.

    This is the beginnings of fascism, of course. All we need now is a strong authority figure and a good war.


    Peter K. , November 13, 2013 at 10:05 AM

    http://www.nytimes.com/2013/11/13/us/politics/republicans-target-health-law-before-it-takes-hold.html?ref=us&pagewanted=all

    Fighting to Stop an Entitlement Before It Takes Hold, and Expands by John Harwood

    November 12, 2013

    "WASHINGTON -- Underlying fierce Republican efforts to stop President Obama's health care law and the White House drive to save it is a simple historical reality: Once major entitlement programs get underway, they quickly become embedded in American life. And then they grow.

    That makes the battle over the Affordable Care Act more consequential than most Washington political fights. "If it's in place for six months, it will be impossible to repeal it or change it in ways that significantly reduce the benefits," said Robert D. Reischauer, a Democrat who used to lead the Congressional Budget Office.

    Douglas Holtz-Eakin, another former C.B.O. director, reflects the concern of fellow Republicans in framing the stakes more dramatically. Either the law's health insurance exchanges "can't cut it," he explained, or "it's Katie, bar the door -- we have an explosively growing new program."

    Ever since President Franklin D. Roosevelt's New Deal during the Great Depression, the dominant pattern for major entitlements -- the term for government assistance programs open to all who qualify and not subject to annual budget constraints -- has been durability and expansion. That is the record Senator Ted Cruz of Texas refers to in warning Republicans not to allow Americans to become "hooked on the subsidies" -- an argument Mr. Obama sarcastically recast as, "We've got to stop it before people like it too much."

    Congress enacted Social Security in 1935 to provide benefits to retired workers. In 1939, benefits were extended to their dependents and survivors. Later the program grew to provide disability coverage, cover self-employed farmers and raise benefit levels.

    President Lyndon B. Johnson's Great Society created Medicare and Medicaid in the 1960s to provide health coverage for the elderly and the poor. They followed the same pattern.

    In 1972, Congress extended Medicare eligibility to those under 65 on disability and with end-stage renal disease. In 2003, Congress passed President George W. Bush's plan to offer coverage under Medicare for prescription drugs.

    Lawmakers initially linked Medicaid coverage to those receiving welfare benefits, but over time expanded eligibility to other "poverty-related groups" such as pregnant women. In 1997, President Bill Clinton signed into law the Children's Health Insurance Program, which now covers eight million children whose families' incomes are too high to qualify for Medicaid."
    ...

    Matt Young -> Peter K. ... , November 13, 2013 at 11:14 AM

    The old canard, right out of Doonesbury cartoon sociology.

    The real issue is discretionary spending. It is gone mainly because of entitlement crowding. The thirty small hoover states find higher multipliers in discretionary spending. It is really a critical political issue, and the thirty hoovers will take the ship down unless they get their discretionaries.

    New York, Florida, California and Texas are united against discretionary spending. Both parties are having internal battles on the issue.

    Peter K. -> Matt Young... , November 13, 2013 at 12:22 PM

    "The real issue is discretionary spending. It is gone mainly because of entitlement crowding."

    lolwut?

    DrDick -> Matt Young... , November 13, 2013 at 12:48 PM

    I want some of what you are smoking!

    Watermelonpunch -> Matt Young... , November 13, 2013 at 01:59 PM

    Please do expound on this idea of "entitlement crowding".

    Because there's entirely not enough Poe's Law on the internet already.

    Matt Young -> Watermelonpunch ... , November 13, 2013 at 02:42 PM

    Listen to yellens statement on discretionary spending, she likes it. But listen to the House, they sequester it. Whyndid you and i just agree, via our representatives, to cut discretionary spending? Any clue? What did every red blooded american say about the entitlements? No, no.!!. What did we do? Cut discretionary spending to save entitlements. If anyone is capable of any news searching on the topic, i suspect you will find much talk about discretionary vs entitlement spending. We name that, give it an actual semantic. Crowding.

    Matt Young -> Matt Young... , November 13, 2013 at 02:52 PM

    Right. There wasno sarcasm, i must suddenly be in nutsville. A very good chunk of articles, right here, required reading was about cuts to discretionary spending and saving entitlements. Someone is not doing their homework.

    What the complaint was about, in the two posts above, was that the discretionary vs entitlement comment was not framed in some kind of simple minded 'evil tea party'. As if no actual thought may occur on the blog unless it passes some orwellian, straight jacket, nonesense. Seriously, crowding out occurs in the budget all the friggin time and mostly has little to with some bogus script of plastic political analysis.

    ilsm -> Matt Young... , November 13, 2013 at 03:49 PM

    Entitlement spending does not fund humbug factories. Or PAC's to make sure the pentagon has a 'strategic objective' to keep the defense corporations (aka troughers) healthy.

    Entitlements have had little 'crowding' effect on discretionary spending.

    Roughly, discretionary to entitlements used to be about 35:65 in 1999, today it is not that different, while the war half of discretionary (19% of outlays in 2012) is nearly 60% too large.

    When you take away war and corporate welfare entitlements should be 6 times discretionary spending.

    What matters is discretionary spending enriches a few a lot, while entitlements take care of many a little.

    Matt Young -> ilsm... , November 13, 2013 at 07:18 PM

    Well you have an opinion about entitlements and discretionary spending. You like the former, not the later. We have a name for people like you, Crowders, you crowd out one form of spending vs another form.

    So quit bitching and play the game. We are conducting a mass experiment, lead by researcher janet yellen. She is going to test your theory by attempting more discretionary spending. If she screws it up, you win a banana.

    Samuel , November 13, 2013 at 10:15 AM

    Repeat after me...Robber barons now own us and the economy.

    Matt Young , November 13, 2013 at 10:35 AM

    Ok, lets review the roosevelt thing.
    In 1928, investors believed we were head for a new productivity frontier based on the efficiency of the mass market. They predicted 4% non-inflationary growth for the horizon. What we got in 1948 was exactly that, high growth, low inflation, rising productivity. Between 1928 and 1948, we got social security, progressives taxes, off the gold standard, two major down turns, twenty million dead from WW2, and the cold war.

    Thats a twenty year wait, mostly the result of bad and good government depending on how one sorts the events. Ok, you all sort it all out, I am moving on.

    anne , November 13, 2013 at 10:44 AM

    http://www.census.gov/hhes/www/income/data/historical/household/index.html

    September 17, 2013

    Households with Householder 25 Years Old and Over by Median Income

    Median real incomes for those 25 years old and over from 1992 to 2012 increased from $50,667 to $52,119. *


    (Educational attainment of householder)

    Median real incomes for those with professional degrees from 1992 to 2012 declined from $135,836 to $129,588.

    Median real incomes for those with master's degrees from 1992 to 2012 declined from $92,593 to $92,362.

    Median real incomes for those with bachelor's degrees or more from 1992 to 2012 declined from $86,458 to $86,419.

    Median real incomes for those with bachelor's degrees alone from 1992 to 2012 increased from $79,179 to $80,549.

    * Income in 2012 dollars

    Darryl FKA Ron , November 13, 2013 at 11:35 AM

    The rapid transformation of business processes via the capital formation advantages of robust, diverse, and highly liquid financial markets made it all possible.

    Translation: If tax incentives are set to prefer trading equities (relatively low capital gains tax rate) over holding equities (relatively low dividends tax rate) then capital will flow to investments with the fast rather than longest duration returns. Fastest returns for capital will come from mergers and downsizing (i.e, layoffs), outsourcing (narrow specialization), offshoring of production (labor wage arbitrage), and technology asset capital expenditure (automation) will be the preferred uses of capital. With the short term emphasis then training, retention, maintaining internal competency succession, and operational process improvements will undesirable expenses. The preferences quickly become self reinforcing as workforce quality devolves and capital rewards itself more and more.

    Steve , November 13, 2013 at 11:53 AM

    Immigration is another of the oligarchs tools for suppressing labor.

    "do jobs citizens won't do(at the wage on offer)..."can't find skills (at the wage on offer).

    Why invest in social capital here when it can always be imported more cheaply?

    It is not the immigrants fault but the oligarchs who exploit them.

    "it is a real mystery why real wages for unskilled worker keep going down"

    bakho , November 13, 2013 at 12:47 PM

    These studies need to include interaction terms.

    Economic is a quantitative science and economists should understand the statistics and test for interactions. Sometimes, the interactive effects can be greater than major effects.

    Justin Cidertrades , November 13, 2013 at 02:03 PM


    "
    wages for college graduates stagnated over the last decade, even as innovation continues at
    "

    Tell me something! Does all of innovation come from humans? From Hunans? From automation? From computer hardware? Software? Software with a child process? A child process coded by the parent process? Do you see what is happening?

    We are now approaching the moment of singularity. A moment in history, or an epoch of history? Tell me something else!

    Do all boomer-s leave the work force simultaneously? Or during a poorly defined epoch? The singularity has already begun but will evolve slowly as the present SE, singularity epoch unfolds. Computer jockey-s first used the word processing feature of computer to code their human imagination. Later assemblers re-coded human source code, checked source for semantics and many other features. Supercomputers now work at unbelievable gigaflops. But if human brain is merely a biological gigaflopper, eventually all its functions will be replaced by semiconductor brains. But so what?

    RM, Reverse Migration! As mechanized innovation replaces Americans, Yankee-s will need to migrate to developing countries where the singularity process will be slower and with a phase shift, behind the American Curve.

    2 B continued
    !

    Matt Young -> Justin Cidertrades... , November 13, 2013 at 02:35 PM

    But,but...if the computers are smarter they will migrate to developing countries first, and get all the good jobs.

    Massimo Mediolanum -> Matt Young... , November 16, 2013 at 08:55 AM


    Grazie! Grazie per l'avvertimento! Noi abbiamo espulso i computer vinti. Grazie di nuovo! Distinti saluti, Massimo!

    http://www.reuters.com/article/2013/11/13/us-apple-italy-tax-idUSBRE9AC0RW20131113

    anne , November 13, 2013 at 04:03 PM

    http://www.census.gov/hhes/www/income/data/historical/household/index.html

    September 17, 2013

    Median real incomes for those 25 years old and over from 1992 to 2012 increased from $50,667 to $52,119. *

    Median real incomes for those with bachelor's degrees or more from 1992 to 2012 declined from $86,458 to $86,419.

    * Income in 2012 dollars

    anne , November 13, 2013 at 04:03 PM

    http://www.census.gov/hhes/www/income/data/historical/household/index.html

    September 17, 2013

    Median real incomes for those 25 years old and over from 2000 to 2012 declined from $57,707 to $52,119. *

    Median real incomes for those with bachelor's degrees or more from 2000 to 2012 declined from $95,789 to $86,419.

    * Income in 2012 dollars

    anne , November 13, 2013 at 04:05 PM

    http://www.bls.gov/webapps/legacy/cpsatab4.htm

    January 4, 2013

    Employment-Population Ratio, Bachelor's Degree and Higher, 2000-2013

    2000 ( 78.1) *
    2001 ( 77.1) Bush
    2002 ( 76.3)
    2003 ( 75.8)
    2004 ( 75.8)

    2005 ( 76.1)
    2006 ( 76.3)
    2007 ( 76.3)
    2008 ( 75.8)
    2009 ( 73.9) Obama

    2010 ( 73.1)
    2011 ( 73.1)
    2012 ( 72.9)

    October

    2013 ( 72.2)

    * Employment age 25 and over

    anne , November 13, 2013 at 04:16 PM

    "The standard analysis of the interplay between technology and education, developed by economists like Lawrence Katz and Claudia Goldin..., and David Autor..., suggests that improvements in technology -- coupled with a college graduation rate that slowed sharply in the 1980s -- have been principal drivers of the nation's widening income gap, leaving workers with less education behind...."

    -- Eduardo Porter

    I do not understand this assertion, since what is remarkable about the United States is that the portion of men and women 25 to 34 and 55 to 64 with college degrees is just about the same.

    July, 2013

    College or university degree attainment by age group, 2011

    ( Percent of population 25-34 and 55-64)

    OECD average ( 39) ( 24)

    United States ( 43) ( 41)

    anne , November 13, 2013 at 04:17 PM

    "The standard analysis of the interplay between technology and education, developed by economists like Lawrence Katz and Claudia Goldin..., and David Autor..., suggests that improvements in technology -- coupled with a college graduation rate that slowed sharply in the 1980s -- have been principal drivers of the nation's widening income gap, leaving workers with less education behind...."

    -- Eduardo Porter

    I do not understand this assertion, since what is remarkable about the United States is that the portion of men and women 25 to 34 and 55 to 64 with college degrees is just about the same.

    anne , November 13, 2013 at 04:17 PM

    http://www.oecd.org/edu/educationataglance2013-indicatorsandannexes.htm

    July, 2013

    Organisation for Economic Co-operation and Development Education Data

    College or university degree attainment by age group, 2011

    ( Percent of population 25-34 and 55-64)

    OECD average ( 39) ( 24)

    United States ( 43) ( 41)

    anne , November 13, 2013 at 04:23 PM

    http://g-mond.parisschoolofeconomics.eu/topincomes/

    September, 2013

    Top .1 Percent Income Share in the United States, 1980-2012

    (Including capital gains)

    1980 ( 3.41)
    1981 ( 3.57) Reagan
    1982 ( 4.18)
    1983 ( 4.62)
    1984 ( 4.98)

    1985 ( 5.32)
    1986 ( 7.40)
    1987 ( 4.90)
    1988 ( 6.80)
    1989 ( 6.00) Bush

    1990 ( 5.82)
    1991 ( 5.12)
    1992 ( 6.03)
    1993 ( 5.73) Clinton
    1994 ( 5.70)

    1995 ( 6.21)
    1996 ( 7.24)
    1997 ( 8.18)
    1998 ( 9.00)
    1999 ( 9.62)

    2000 ( 10.88)
    2001 ( 8.37) Bush
    2002 ( 7.34)
    2003 ( 7.87)
    2004 ( 9.46)

    2005 ( 10.98)
    2006 ( 11.59)
    2007 ( 12.28) (High)
    2008 ( 10.40)
    2009 ( 8.30) Obama

    2010 ( 9.66)
    2011 ( 9.27)
    2012 ( 11.33)

    -- Thomas Piketty and Emmanuel Saez

    anne , November 13, 2013 at 04:23 PM

    September, 2013

    Top .1 Percent Income Share in the United States, 1980-2012

    (Including capital gains)

    1980 ( 3.41)
    1981 ( 3.57) Reagan
    1982 ( 4.18)
    1983 ( 4.62)
    1984 ( 4.98)

    1985 ( 5.32)
    1986 ( 7.40)
    1987 ( 4.90)
    1988 ( 6.80)
    1989 ( 6.00) Bush

    1990 ( 5.82)
    1991 ( 5.12)
    1992 ( 6.03)
    1993 ( 5.73) Clinton
    1994 ( 5.70)

    1995 ( 6.21)
    1996 ( 7.24)
    1997 ( 8.18)
    1998 ( 9.00)
    1999 ( 9.62)

    2000 ( 10.88)
    2001 ( 8.37) Bush
    2002 ( 7.34)
    2003 ( 7.87)
    2004 ( 9.46)

    2005 ( 10.98)
    2006 ( 11.59)
    2007 ( 12.28) (High)
    2008 ( 10.40)
    2009 ( 8.30) Obama

    2010 ( 9.66)
    2011 ( 9.27)
    2012 ( 11.33)

    -- Thomas Piketty and Emmanuel Saez

    anne -> anne... , November 13, 2013 at 04:27 PM

    What is importance to notice about increasing income concentration is how much of an increase there has been above the top 1% of families. we find the share of income for the top .1% of families going from 3.41% to 11.33% between 1980 and 2012 for an astonishing gain.

    anne -> anne... , November 13, 2013 at 04:29 PM

    We find the share of income for the top .01% of families going from 1.28% to 5.47% between 1980 and 2012 for an even more astonishing gain.

    anne , November 13, 2013 at 04:24 PM

    September, 2013

    Top 1 Percent Income Share in the United States, 1980-2012

    (Including capital gains)

    1980 ( 10.02)
    1981 ( 10.02) Reagan
    1982 ( 10.80)
    1983 ( 11.56)
    1984 ( 11.99)

    1985 ( 12.67)
    1986 ( 15.92)
    1987 ( 12.66)
    1988 ( 15.49)
    1989 ( 14.49) Bush

    1990 ( 14.33)
    1991 ( 13.36)
    1992 ( 14.67)
    1993 ( 14.24) Clinton
    1994 ( 14.23)

    1995 ( 15.23)
    1996 ( 16.69)
    1997 ( 18.02)
    1998 ( 19.09)
    1999 ( 20.04)

    2000 ( 21.52)
    2001 ( 18.22) Bush
    2002 ( 16.86)
    2003 ( 17.53)
    2004 ( 19.75)

    2005 ( 21.92)
    2006 ( 22.82)
    2007 ( 23.50)
    2008 ( 20.95)
    2009 ( 18.12) Obama

    2010 ( 19.86)
    2011 ( 19.65)
    2012 ( 22.46)

    -- Thomas Piketty and Emmanuel Saez

    mrrunangun , November 13, 2013 at 05:51 PM

    Corruption of government at all levels produced a class of plutocratic rent holders in finance and other industries able to buy rents. Citi and Solyndra being outstanding examples on the D side and ADM and the oil companies on the R side.

    Abysmal social and economic conditions in African American urban ghettos. These conditions contribute much to the poor conditions in the schools that serve that population. The kids who attend school in these neighborhoods are really up against it. Social arrangements that sort the educated upper middle class into "their"towns by residential pricing and development patterns tend to limit highly advantageous educational opportunities to their children. In the big cities the upper middle class either uses influence to obtain places for their children in desirable public schools or use private schools.

    Pressure on wages and employment opportunities for people with low educational attainment due to the development of more efficient production technologies and low wage competition in the global trading system.

    Forgive my skepticism that a few billion more federal dollars of stimulus will correct these problems.

    anne -> mrrunangun... , November 13, 2013 at 06:49 PM

    http://www.census.gov/prod/2013pubs/p60-245.pdf

    September 17, 2013

    Household Median Income by Selected Ethnicity: 2012

    Combined ( 51,017) *

    Race and Hispanic Origin of Householder

    Asian ( 68,636)

    White, not Hispanic ( 57,009)

    White ( 53,706)

    Hispanic, any ethnicity ( 39,005)

    Black ( 33,321)

    * Income in 2012 dollars

    Matt Young , November 13, 2013 at 07:06 PM

    http://capoliticalnews.com/2013/11/12/jerry-brown-claims-californias-attractive-poverty-is-why-state-in-depression/

    Jerry Brown and California's "Attractive" Poverty

    Gov. Jerry Brown, whose pronouncements of California's economic recovery have been criticized by Republicans who point out the state's high poverty rate, said in a radio interview Wednesday that poverty and the large number of people looking for work are "really the flip side of California's incredible attractiveness and prosperity."

    The Democratic governor's remarks aired the same day the U.S. Census Bureau reported that 23.8 percent of Californians live in poverty under an alternative calculation that includes the cost of living.

    Asked on National Public Radio's "All Things Considered" about two negative indicators -- the state's nation-high poverty rate and the large number of Californians who are unemployed or marginally employed and looking for work -- Brown said, "Well, that's true, because California is a magnet.

    "People come here from all over in the world, close by from Mexico and Central America and farther out from Asia and the Middle East. So, California beckons, and people come. And then, of course, a lot of people who arrive are not that skilled, and they take lower paying jobs. And that reflects itself in the economic distribution."

    ----------------


    Hmmm. So my claim that the bankruptcy of America is caused by a negative growth black hole in Sacramento was just admitted as true by the Guv of California. Where is my banana?

    Gary Rondeau , November 13, 2013 at 08:48 PM

    Growing inequality is built into capitalism. There doesn't have to be evil intent, just complacency to do anything about it.


    http://squashpractice.wordpress.com/2012/01/01/wealth-and-inequality-pareto-gini-and-contingency/

    [Feb 10, 2021] Neoliberals are Enemies of the Poor by Paul Krugman

    Jan 13, 2014 | economistsview.typepad.com

    Will Republicans ever care about the poor?:

    Enemies of the Poor, by Paul Krugman, Commentary, NY Times : Suddenly it's O.K., even mandatory, for politicians with national ambitions to talk about helping the poor. This is easy for Democrats, who can go back to being the party of F.D.R. and L.B.J. It's much more difficult for Republicans, who are having a hard time shaking their reputation for reverse Robin-Hoodism, for being the party that takes from the poor and gives to the rich.
    And the reason that reputation is so hard to shake is that it's justified. It's not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor, and they would have inflicted vast additional harm if they had won the 2012 election. Moreover, G.O.P. harshness toward the less fortunate isn't just a matter of spite...; it's deeply rooted in the party's ideology...
    Let's start with the recent Republican track record.
    The most important current policy development in America is the rollout of the Affordable Care Act, a k a Obamacare. Most Republican-controlled states are, however, refusing to implement a key part of the act, the expansion of Medicaid, thereby denying health coverage to almost five million low-income Americans. And the amazing thing is that ... the aid through would cost almost nothing; nearly all the costs ... would be paid by Washington.
    Meanwhile, those Republican-controlled states are slashing unemployment benefits, education financing and more. As I said, it's not much of an exaggeration to say that the G.O.P. is hurting the poor as much as it can.
    What would Republicans have done if they had won the White House in 2012? Much more of the same. Bear in mind that every budget the G.O.P. has offered since it took over the House in 2010 involves savage cuts in Medicaid, food stamps and other antipoverty programs. ...
    The point is that a party committed to small government and low taxes on the rich is, more or less necessarily, a party committed to hurting, not helping, the poor. ...
    Republicans weren't always like this. In fact, all of our major antipoverty programs -- Medicaid, food stamps, the earned-income tax credit -- used to have bipartisan support. And maybe someday moderation will return to the G.O.P.
    For now, however, Republicans are in a deep sense enemies of America's poor. And that will remain true no matter how hard the likes of Paul Ryan and Marco Rubio try to convince us otherwise.

    Posted by Mark Thoma on Monday, January 13, 2014 at 12:33 AM in Economics , Politics , Social Insurance | Permalink Comments (69)


    elvis , January 12, 2014 at 10:26 PM

    GOP = Get Out, Poor!

    pgl , January 13, 2014 at 01:42 AM

    "We're Broke" is the mantra of the GOP. Yes, the nation with the highest GDP in absolute terms and a very high per capita level of income is "broke". You see this nonsense from Republican leaders at the beginning of a film called "We're Not Broke" which is devoted to the GOP push to have even less taxes on their base - the ultrarich.

    ilsm -> pgl... , January 13, 2014 at 01:59 PM

    US can afford to spend 4 times the part of GDP that Japan and German spend on warmaking. And a similar amount on crony capital.

    US can afford new ships that will not be equipped, star wars missiles that can hit nothing, and a $1500B fighter program which is failing its tests many of which cannot be performed because the thing is unreliable.

    Afford to strike Iran...............

    bakho , January 13, 2014 at 04:18 AM

    Republicans are out of touch. The MinWage is so far below Living Wage that the taxpayers have to subsidize MinWage workers so they can have enough to eat. This is wrong. The system and the employers are exploiting their labor.

    Medicaid and Obamacare are a subsidy to the poor workers who can't afford the costs of health care and don't have it provided by employers. A workforce that is not healthy is bad for business: more missed workdays, lower productivity, higher turnover, etc. The single minded focus on cutting social spending is completely wrong.

    The question that is not asked: "What services do people need to be functional in our modern economy? What mix of employer benefits, government benefits and wage contribution are required to deliver the services?" For many people, wages are too low to pay for the minimum basic goods and services. How do we make up the difference? Or do we have people do without and erode the health and potential economic output? Republicans have a short sighted focus on cutting spending and investment in the short run and are not considering the long run.

    Beezer , January 13, 2014 at 05:55 AM

    I don't have the source, but I believe our net worth, nationally, is just north of $74 trillion. And we added more than $1.3 trillion to that amount the past 12 months. This is the figure that deals in assets we know about. Given the loopholes in our tax code that allow the super rich to essentially hide much of their income, here and overseas, that net worth figure is certainly below the real number.

    So the statement 'we're broke' borders on the ridiculous. Our cash flow statement is less impressive, but certainly far above adequate. Even here, this is a choice. We could easily return to balance (although that's historically been a very bad idea) just by fixing our tax code so it become more progressive. Today's tax code over taxes the middle class in order to fund tax breaks for the super rich.

    EMichael -> Beezer... , January 13, 2014 at 06:02 AM

    Yep. The progressiveness of the tax code stops in its track at about the Top 2%. Right about the spot where hiding income becomes easy and makes economic sense.

    Someday we will figure out how much income never hits tax returns.

    Perspective -> EMichael... , January 13, 2014 at 10:05 AM

    It is not possible to hide W2 income (income earned from an employer), so I'm guessing you're talking about other sources of income and wealth.

    EMichael -> Perspective... , January 14, 2014 at 06:14 AM

    Really?

    IRAs?
    HSAs?
    Employer paid health insurance?

    My wife and I had over $30,000 of such income last year. Guaranteed the vast majority of the Top 10% had similar amounts.

    However, I really was not talking about W2 income, but rather things like Romney's $20 million IRA. Or hedge fund managers keeping earnings offshore to avoid any taxes (even the reduced scam they receive) and living by borrowing against their offshore holdings at ludicrously low interest rates.

    Course, it the case of Romney I repeat myself.

    DrDick -> Beezer... , January 13, 2014 at 07:33 AM

    Actually, most of us are broke. Almost all of those gains have gone to the top 1% (actually the top 0.01% seized much of that).

    DeDude , January 13, 2014 at 06:19 AM

    How exactly did we go from a war on poverty to a war on the poor.

    Darryl FKA Ron -> DeDude... , January 13, 2014 at 10:52 AM

    Maybe it was collateral damage since they live in the same neighborhoods? Probably though it was being fought as a limited war and then there was mission creep.

    An all out war on poverty would have transformed the economic battlefield in ways that very few actually wanted.

    anne , January 13, 2014 at 06:32 AM

    http://krugman.blogs.nytimes.com/2014/01/13/youre-all-losers/

    January 13, 2014

    You're All Losers
    By Paul Krugman

    The other day someone -- I don't remember who or where -- asked an interesting question: when did it become so common to disparage anyone who hasn't made it big, hasn't gotten rich, as a "loser"? Well, that's actually a question we can answer, using Google Ngrams, which track the frequency with which words or phrases are used in books:

    [Graph]

    Sure enough, the term "losers" has become much more common since the 1960s. And I think this word usage reflects something real -- a growing contempt for the little people.

    This contempt surely isn't limited to Republican politicians. Still, it's striking how unable they are to show any empathy for people who are just doing their best to make a modest living. The most famous example, of course, is Mitt Romney, who didn't just disparage 47 percent of the nation; he urged everyone to borrow money from their parents and start a business. I still think the most revealing example to date was Eric Cantor, who marked Labor Day by tweeting:

    "Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success."

    But Marco Rubio's latest speech deserves at least honorable mention, for the airy way he dismissed the idea of raising the minimum wage: "Raising the minimum wage may poll well, but having a job that pays $10 an hour is not the American dream."

    In a sense, he's right: if the American dream means getting rich, then $10 an hour isn't living that dream. But most people aren't and won't get rich. Raising the minimum wage would mean higher incomes for around 27 million people; in many cases the gains would amount to thousands of dollars a year, which is really a lot in low-income families. So what are all these people, chopped liver? Well, yes, at least in the eyes of the GOP -- or maybe make that chopped losers.

    OK, I know what the answer will be: conservative policies will lead to economic growth, and that will raise all boats, the way it did in the days of Saint Ronald. Except, you know, it didn't. Here's the real wage of nonsupervisory workers:

    [Real wage of production and nonsupervisory workers * ]

    Even if you give Reagan credit for the 1982-9 business cycle expansion, which you shouldn't, there's no way to claim that his policies led to higher wages for ordinary workers.

    So what is the GOP agenda to help people who aren't going to build businesses and get rich? There isn't one -- partly because they really can't reconcile any real agenda with their overall ideology, but also because, deep in their hearts, they consider ordinary people trying hard to get by a bunch of losers.

    * http://research.stlouisfed.org/fred2/graph/?g=q8T

    Julio -> anne... , January 13, 2014 at 08:41 AM

    "Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success."

    Correcting:

    "Today, we celebrate those who have taken a risk, worked hard, built a business and earned someone else's success."

    ilsm -> Julio ... , January 13, 2014 at 02:04 PM

    "Today, we celebrate those who have made a bet, exploited others' hard work, built a monoploy and earned someone else's sweat."

    That the franchisee can have his employees fed and cared for by the commonwealth is further plundering.

    bakho -> anne... , January 13, 2014 at 08:57 AM

    The agenda is to further the special interests of the wealthy. They are not interested in economics for the masses.

    anne -> O.D.K.... , January 13, 2014 at 07:27 AM

    Entitlement expansion. See Detroit and Scranton. Coming soon to Chicago.

    [ The term "entitlement" is used when a writer wishes to hide the fact the what is being talked about is Social Security or Medicare or a pension program that a worker has contributed to for years and years.

    As for the supporting of pension funds, all that has to be understood is how terrific stock and bond markets returns have been these last 30 and more years. Any pension fund manager who simply bought a mix of stock and bond market indexes would have done splendidly for workers and there would be no possible problem now. ]

    anne -> anne... , January 13, 2014 at 07:32 AM

    A portfolio 50-50 mix of American stock and bond market indexes since 1975 through 2013 would have yielded a yearly return over 9.5%.

    https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT#hist%3A%3Atab=1&tab=1

    Vanguard 500 Stock Index Fund

    Average annual returns as of 12/31/2013

    08/31/1976 ( 11.04)

    Vanguard Long-Term Investment-Grade Bond Fund

    Average annual returns as of 12/31/2013

    07/09/1973 ( 8.46)

    david -> anne... , January 13, 2014 at 07:53 AM

    The problem has not typically been fund returns. It has been underfunding of the programs by employers, on the assumption that magic market alpha will make up the difference (well, that's the happy spin on it, the truth is most of the funders didn't much care if the difference was made up or not so long as they got theirs.)

    The focus on pension fund investing strategies is an important one, but kept distinct from funding levels and political battles it's almost meaningless.

    EMichael -> david... , January 13, 2014 at 08:18 AM

    Exactly.

    Compound interest is a bitch.

    Same game played by the auto companies for decades and decades. By the same people.

    anne -> david... , January 13, 2014 at 08:46 AM

    This needs to be explained, keeping here to employer contributions by government employers.

    As to the mention of auto companies and pension contributions, there you have a problem in which employers can estimate a pension fund investment return and contribute according to the estimate so that a higher estimate will mean lower levels of contributions from employers for a time. Nonetheless, ordinary investment returns over long periods of time should have left no pension problem for workers.

    Beezer -> anne... , January 13, 2014 at 09:10 AM

    Once executives realized the raises they could gain by taking deferred comp. in stock, or even in guaranteed return special accounts (Jack Welch at GE-14% annual), corporations couldn't afford much of anything else. Today CEOs make 290 times the average pay of their employees compensation, so in order to cover those outsized gains and still report good profits, companies need to trim budgets anywhere and everywhere. Stable, defined benefit plans, paid for in addition to wages, got tossed and replaced by contribution plans funded by employees themselves.

    For more than 35 years in America it's been a time to strip corporate assets and pick the pockets of employees and shareholders in order to pay executives their gargantuan compensation packages.

    Thanks to our rigged tax code, ripping off the middle class has become a full time project of the super rich and their paid help in Congress and academia.

    david -> anne... , January 13, 2014 at 10:59 AM

    Same thing happened in the public as in the private sector funds. Look at Illinois or New Jersey or Detroit. Economic miracles or budget crises lead to underfunding, rolling the dice on investments, and appetites for silver bullet alternative investments that help explain the massive shift to PE and HF despite their fee structures (and can lead to alternatives managers the profits they took off the funds to help subvert the DB system). The push to alpha helps create instability and predation in the markets, goes the theory. But in any case, underfunding by the public sector leads to blame-shifting onto "those workers making bad investments" and leads to pernicious politics around retirement security.

    anne -> david... , January 13, 2014 at 11:52 AM

    PE = private equity
    HF = hedge fund

    http://en.wikipedia.org/wiki/Alpha_(investment)

    Alpha is a risk-adjusted measure of the so-called active return on an investment.

    "The push to alpha helps create instability and predation in the markets, goes the theory...."

    Meaning there is a push by employers or pension fund managers to take more risks for hopefully higher returns.

    DeDude -> anne... , January 13, 2014 at 10:52 AM

    Unfortunately the employers (including and perhaps worst public employers) used the upturns in the market as opportunities to reduce what they paid into the funds (as a way to fund tax cuts and get re-elected). Then after severe downturns in the market rather than increase the funding for pensions they argue to take away earned pensions from the workers (or leave the mess to be fixed by federal government).

    anne -> DeDude... , January 13, 2014 at 11:47 AM

    Nice set of explanations, which leads me to think in the case of public workers in unions there should be a yearly accounting by the union of employer pension contributions along with an allowing for quick contract redress should employer contributions fall short for a given length of time.

    James -> anne... , January 13, 2014 at 12:37 PM

    DeDude is not entirely correct. In the following example, the problem was powerful predators, fraud, and corruption, as there was plenty of money, and plenty of foresight.

    http://www.eastbayexpress.com/oakland/parskys-party/Content?oid=1083283

    Where was Union oversight in this fiasco? Or better yet, fiscal accountability on the part of the Regents for wrongful termination, theft, breach of fiduciary duty? I don't see much hope, because social memory is short, human nature is flawed, and dynastic wealth in the hands of sociopaths seeks to defend its economic position until the population rises up in revolt. Wash, rinse, repeat.

    mrrunangun -> James ... , January 13, 2014 at 07:53 PM

    In Illinois, public employee union leaders were probably paid off to keep silent about pension underfunding. A couple of union leaders benefited from special legislation that awarded them a nice pension for one day of substitute teaching. The special pension was in a well funded plan, not the state teachers' plan. The legislation doesn't spell out the quid pro quo, but experienced observers connect dots like these. The legislature takes care of public union officials who take care of them.

    DrDick -> O.D.K.... , January 13, 2014 at 07:36 AM

    Tax cuts for the wealthy, see the entire country. The problem is not excessive spending, but inadequate revenues. The latter as a consequence of unnecessary and destructive tax cuts for the rich. We already had the lowest effective tax rate on the wealthy in the developed world before that.

    bakho -> O.D.K.... , January 13, 2014 at 08:58 AM

    Not entitlement
    Decision was to raise the obligations to the wealthy above the obligations to the workers.

    Darryl FKA Ron , January 13, 2014 at 07:31 AM

    "...The most important current policy development in America is the rollout of the Affordable Care Act, a k a Obamacare. Most Republican-controlled states are, however, refusing to implement a key part of the act, the expansion of Medicaid, thereby denying health coverage to almost five million low-income Americans..."

    [That is sad on two levels. First it is sad that "The most important current policy development in America is the rollout of the Affordable Care Act" instead of robust policies for creating job and wage growth. Second then of course it is sad "Most Republican-controlled states are.. refusing to implement ... the expansion of Medicaid... denying health coverage to almost five million low-income Americans."

    And by sad I mean a sad sorry state of affairs that should have a big effect on the mid-term elections if we get off our duffs and take this to the voting booths.]

    EMichael , January 13, 2014 at 07:46 AM

    One day someone will point out that the value of a municipal bond or a treasury bond is an "entitlement", just like the value of a pension, SS or Medicare is an "entitlement".


    But not today.

    Julio -> EMichael... , January 13, 2014 at 08:43 AM

    Excellent.

    Beezer -> EMichael... , January 13, 2014 at 09:13 AM

    The coupon clipping class needs constant feeding. And the super rich coupon clippers need a deep pool of poor people to maintain their comfort. So simple, really.

    Perspective -> EMichael... , January 13, 2014 at 10:07 AM

    Wow, a post from EMichael I can support...

    Matt Young -> EMichael... , January 13, 2014 at 08:52 PM

    That has been pointed out many times in the book, This Time is Different where we see defaults on both entitlements. In fact, one of the biggest topics of the post crash era has been when the usa would default in its bond entitlements.

    Eric377 -> EMichael... , January 16, 2014 at 10:53 AM

    Not too accurate. Bonds and pensions are contracts and sort of can be thought of as entitlements since your benefits can be enforced in court. You are entitled to whatever your counterparty agreed to (so long as you did your part and your counterparty is solvent). SS and Medicare are not contracts. Treasury could have twice the funds needed to pay for SS forever and Congress could decide tomorrow to cut benefits 80%. Same with Medicare. The two programs on your list that people are probably most likely to think of as entitlements are probably the least like entitlements. Your counterparty can change the rules on you tomorrow.

    Darryl FKA Ron , January 13, 2014 at 07:53 AM

    Will Republicans ever care about the poor?:

    [Krugman answers:]

    "...The answer, I'm sorry to say, is almost surely no.

    First of all, they're deeply committed to the view that efforts to aid the poor are actually perpetuating poverty, by reducing incentives to work..."


    "...But our patchwork, uncoordinated system of antipoverty programs does have the effect of penalizing efforts by lower-income households to improve their position: the more they earn, the fewer benefits they can collect. In effect, these households face very high marginal tax rates. A large fraction, in some cases 80 cents or more, of each additional dollar they earn is clawed back by the government..."

    "...we could reduce the rate at which benefits phase out..."

    [Then Krugman slips away from reality to embrace center aisle politics.}

    "...Will this ever change? Well, Republicans weren't always like this. In fact, all of our major antipoverty programs -- Medicaid, food stamps, the earned-income tax credit -- used to have bipartisan support. And maybe someday moderation will return to the G.O.P..."

    {Yeah those were the good old days leading up to financialization for M&A anticompetitive consolidation of labor market arbitrage, globalization of wages backed by the abitrage of the exorbitant privilege of US dollar foreign reserves against rising trade deficits, stagnant wages from both consolidation and globalization, and a rising share of capital devouted to speculation on equities and derivatives (e.g, commodity futures bets ARE derivative contracts). Three cheers for center aisle politics. ]

    Darryl FKA Ron -> Darryl FKA Ron... , January 13, 2014 at 07:55 AM

    "devouted to speculation"

    [Was that a spelling error or devine inspiration?]

    Julio -> Darryl FKA Ron... , January 13, 2014 at 08:47 AM

    "40 million refugees with no place on this earth to call their home
    One for every aimless graduate with nothing else to show for it but loans
    And those of us who make a mark using someone else's blood
    Our western stain won't wash away, won't vanish in the flood
    It sets deeper with each hurricane and tidal wave and war:
    We want everything we see and once it's gone we just want more."

    Kevin Devine

    Darryl FKA Ron -> Julio ... , January 13, 2014 at 10:09 AM

    Young men without jobs living in the nation with the world's most powerful millitary establishment will not make the world a better place to live for anyone. Might not even make it a place to live.

    anne -> Julio ... , January 13, 2014 at 02:32 PM

    http://lyrics.wikia.com/Kevin_Devine:Refugees

    Kevin Devine – Refugees

    anne -> anne... , January 13, 2014 at 02:38 PM

    From -

    Put Your Ghost to Rest:

    The Burning City Smoking

    2006

    Antiderivative , January 13, 2014 at 08:16 AM

    "Republicans weren't always like this. In fact, all of our major antipoverty programs -- Medicaid, food stamps, the earned-income tax credit -- used to have bipartisan support."

    I agree and disagree to a point. While the Republican party used to be more moderate, as a whole, in the past, there was always a conservative wing in the GOP that opposed these programs.

    For example, in 1961, Reagan gave his famous speech on Medicare - declaring that it would be the end of America as we know it. One day we would be telling stories to our grandchildren how America used to be the home to free men.

    There has always been in element in the GOP to attack safety nets to the point of hysterical and absurd arguments. Over the years, the conservative wing has grew and become more vocal.

    One of the main differences between liberals and conservatives, is that liberals see our weak labor markets, poverty, eroding mobility, and increased economic inequality as a market failure. Conservatives view it as a moral failure.

    EMichael -> Antiderivative... , January 14, 2014 at 06:23 AM

    The Birchers. Now the Tea Party.

    Peter K. , January 13, 2014 at 08:33 AM

    It seems to me that the somewhat controversial programs of Obamacare and the Federal Reserve's policies of forward guidance and QE have helped the poor. If Republicans had successfully blocked them, things would be worse. It's difficult to defend these programs against critics on the left and right because of the inherent difficulty in defending public policies given the evidence. It isn't as clear cut as one would like.

    Likewise there are the Republicans' austerity policies like the sequester which Obama went along with.

    kthomas -> Peter K.... , January 13, 2014 at 08:42 AM

    "They both do it!" bs

    Peter K. -> kthomas... , January 13, 2014 at 09:50 AM

    Maybe I wasn't clear. I think Obamacare and the Fed have helped. I believe fiscal austerity has hurt. A number of smart people agree with these assessments.

    kthomas -> Peter K.... , January 13, 2014 at 10:40 AM

    much clearer, sir, thank you.

    Lafayette , January 13, 2014 at 04:48 PM

    INCOME FAIRNESS

    First LBJ then Feckless Ronnie, by means of their tax policy to reduce rates at higher levels, visited the present consequences upon the American poor. (See info-graphic here: http://upload.wikimedia.org/wikipedia/commons/9/97/Historical_Mariginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg )

    Meaning that reduced income taxation means lower overall government revenues, which means reduced means to aid the poor by, for instance, adequate HealthCare or the subsidized housing or paying for postsecondary education that will give them the means to obtain well-paying jobs.

    This sad fact is even more difficult to swallow given that DoD-expenditures have doubled in the 40 year period ending in 2012. See info-graphic here: http://www.washingtonpost.com/blogs/wonkblog/files/2013/01/defensechart.jpg . Do we really need all that spending to provide a defense of the nation now that the Cold War (extant in the 1960s) is over?

    The plutocrats erected a statue to Ronnie for having reversed the good that FDR had wrought by increasing taxation upon them to levels of around 65%, that crept up inevitably to around 90%.

    And, of course, the rich are still benefiting from the beneficial taxation (that peaks out at 30% in their level of income).

    Are they paying their "fair share"? It depends upon how you pose the question. The CBO shows that the top 20% pay as much as 69% of all taxation revenues. See info-graphic here: http://en.wikipedia.org/wiki/File:2010_US_Tax_Liability_by_Income_Group_-_CBO.png

    Yes, that's a lot of money they pay in taxes. But, given that their marginal rates do not exceed more than 30% of all revenues, then the answer seems to be "it's not enough". (See info-graphic here of top rates: http://en.wikipedia.org/wiki/File:U.S._Federal_Income_Tax_Rates_2013.png )

    Besides, if the generally recognized Gini Coefficient depicts Income Disparity across all levels of income, then the US is shown to be the developed country with the worst Income Fairness of any on earth. (See info-graphic here: http://en.wikipedia.org/wiki/File:Gini_since_WWII.svg )

    MY POINT?

    Which means, according to the World Top Incomes Database developed by the Paris School of Economics? the following: 10% of American households garner about 52% of ALL HOUSEHOLD INCOME whilst the rest of us 90Percenters scramble after the remaining 48%.

    Does that seem fair to you ... ?

    Matt Young -> Lafayette ... , January 13, 2014 at 08:56 PM

    No, the history says that reducing taxes on the rich allows you to borrow and spend, laying the cost on the middle class. Note, Clinton's tax hike came with budget cuts. Our 2013 tax hike, though meager, results in sequestering.

    The problem here is dumbass economists too stupid to come up with any theory of government that explains supply and demand for government services. So dumbass economists resort to name calling, blaming their own failure of analysis on the other side. Political scientists are much worse, all they do is name calling.

    Lafayette -> Matt Young... , January 14, 2014 at 04:40 AM

    SERFDOM

    {No, the history says that reducing taxes on the rich allows you to borrow and spend, laying the cost on the middle class.}

    Can't imagine where you've concocted this notion from my reply. I posited the premise of increasing taxes upon our upper-class financial nobility who have reduced 15% of our people to poverty and serfdom.

    {Note, Clinton's tax hike came with budget cuts. Our 2013 tax hike, though meager, results in sequestering.}

    Historical fact of no consequence whatsoever.

    The point about raising taxes on the rich is not just about reducing their far to easily-gained Net Worth. It is to teach that class a lesson about return-on-investment. For the moment, a level of taxation at only 30% allows them to accumulate vast Net Worth, which is simply reinvested in interest-bearing accounts for the most part.

    Increasing taxation on interest-bearing accounts would induce them to place their savings in more economy-friendly investments that create jobs. The revenues would also help reduce deficits and improve government financing of society-friendly policies like a Universal Public HealthCare Option and Tertiary Education for those who cannot afford it.

    These are both common policy rudiments of any modern society in this day and age. Except the US, of course ...

    Lafayette -> Lafayette ... , January 14, 2014 at 05:57 AM

    Moreover, the key point about taxation is this: Whilst an economy should reward risk-taking, there is no need whatsoever for the pot of Gold at the end of the rainbow to be unlimited and growing by leaps and bounds because it is too lowly taxed.

    Especially not when 15% of fellow Americans are incarcerated below the Poverty Threshold. That economic fact is unacceptable. And it did not occur because "people are either too stupid or too lazy".

    It occurred because of an inept policy as regards both educational level and our inability to prevent unskilled work from dislocation abroad.

    mrrunangun , January 13, 2014 at 06:12 PM

    The Republicans never did care about the poor and are not about to start. The question that bothers me is when the Democrats will resume working on behalf of the poor.

    Lafayette -> mrrunangun... , January 14, 2014 at 06:04 AM

    {The question that bothers me is when the Democrats will resume working on behalf of the poor.}

    Musing about whether that will or will not happen in a blog will certainly not assist in bringing it about.

    Only hard work militating for such an outcome will obtain the necessary results. Which can only happen if more progressives are voted into the HofR. And it will take a good ten years of well-considered legislation to right all the wrong that has occurred since the last War on Poverty in the 1960s.

    We are running presently on borrowed time ...

    [Feb 10, 2021] Hedge funds bet on oil's 'big comeback' after pandemic hobbles producers By Reuters

    Feb 10, 2021 | www.investing.com

    By Maiya Keidan and Rod Nickel

    TORONTO (Reuters) - Hedge funds are turning bullish on oil once again, betting the pandemic and investors' environmental focus has severely damaged companies' ability to ramp up production.

    Such limitations on supply would push prices to multi-year highs and keep them there for two years or more, several hedge funds said.

    The view is a reversal for hedge funds, which shorted the oil sector in the lead-up to global shutdowns, landing energy focused hedge funds gains of 26.8% in 2020, according to data from eVestment. By virtue of their fast-moving strategies, hedge funds are quick to spot new trends.

    ... Tawil predicted prices of $70 to $80 a barrel for Brent by the end of 2021 and is investing long independent oil and gas producers.

    ... ... ...

    Global crude and condensate production was down 8% in December from February 2020, prior to the pandemic's spread accelerating, according to Rystad Energy.

    North America's output was down 9.5% and Europe's production declined just 1% over the same time period.

    U.S. sanctions against Venezuela and declining oilfields in Mexico have kept oil output from Latin America sluggish.

    DarthSlack Ars Praefectus et Subscriptor REPLY FEB 8, 2021 2:57 PM Jamjen831 wrote: peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come with these features already baked in.

    I assume some of it is just old stuff people just re-download without thinking. Android hasn't always had a built in flashlight app (and am I crazy in that the early ones required root?). And I'm pretty sure that's the same with QR readers. I hadn't realized that Google Lens was a QR scanner until fairly recently.

    Count me in that boat. I just checked my phone and sure enough, Barcode Scanner was there. I'm guessing it's from 3-4 phones ago and just came along for the ride as Play autoloaded my apps on the new phones because I haven't used it in ages and ages. daggar Ars Tribunus Militum REPLY FEB 8, 2021 2:57 PM

    Jamjen831 wrote: peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come with these features already baked in.

    I assume some of it is just old stuff people just re-download without thinking. Android hasn't always had a built in flashlight app (and am I crazy in that the early ones required root?). And I'm pretty sure that's the same with QR readers. I hadn't realized that Google Lens was a QR scanner until fairly recently.

    It's more likely that it's stuff that gets re-downloaded without user interaction. When you set up a new Android, the phone will often re-download all the apps from the old phone. Unless you're going through to curate those apps, your 2021 new phone might be getting something that's gone through a succession of auto-downloads since the mid 2010's. everythingallatonce Smack-Fu Master, in training REPLY FEB 8, 2021 2:57 PM

    peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come with these features already baked in.
    I can't really speak for the barcode scanner, but given that a lot of Android phones are incapable of being updated there is a decent chance a lot of people with much older phones actually have to install a flashlight app.

    Google really needs to do something regarding the malware problem. I'm not going to pretend to know the answer, but for a company that made $15.23 billion in earnings last quarter and owns Project Zero you'd think they'd be able to protect a platform they have complete control over. Jamjen831 Ars Scholae Palatinae et Subscriptor REPLY FEB 8, 2021 3:02 PM Dr.Bananas wrote: peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come with these features already baked in.
    Not all phones. I haven't had an Android phone with a stock barcode scanner ever. Samsung Galaxy Ace, Galaxy Nexus, Moto G, Nexus 5X, Nokia 3 and my current Sony XZ2 Compact all came without one. It should be part of the default camera app, but sadly that's not always the case.

    As mentioned above, Google Lens is the defacto QR Scanner (it's part of the camera app). Do those phones have Lens? I've been on Nexus\Pixel for a long time so not too sure how Google has pushed that. Xavin Ars Legatus Legionis et Subscriptor REPLY FEB 8, 2021 3:03 PM

    marsilies wrote: So I use an app called "Barcode Scanner" that's not the malware app. However, the recent reviews blast it for adware, which I haven't noticed. I think having the exact same name has caused some people to post negative reviews on the wrong app:
    https://play.google.com/store/apps/deta ... nt.android
    That's correct, it's clean, people are just confused by the same names. The one with the malware was always a sad copy of the ZXing Team one you linked.

    Jamjen831 wrote: show nested quotes

    As mentioned above, Google Lens is the defacto QR Scanner (it's part of the camera app). Do those phones have Lens? I've been on Nexus\Pixel for a long time so not too sure how Google has pushed that.
    You need an internet connection for Lens to scan barcodes. Batmanuel Ars Tribunus Militum REPLY FEB 8, 2021 3:12 PM Ancan wrote: I've got a Galaxy S8+ and if there's a built in barcode scanner I must admit I haven't found out in the years I've had it.

    It's built into Bixby Vision. Jeff S Ars Praefectus et Subscriptor REPLY FEB 8, 2021 3:16 PM

    CrookedKnight wrote: show nested quotes

    And how many users know they can use an app called "Lens" to scan barcodes?

    Does Lens give you technical info about the type of a barcode (aka the Symbology)? Granted, most people don't have a need to know or care, but I have a job doing work with retail POS equipment, including hand and flatbed scanners. For my job, it's SUPER helpful sometimes to have a barcode scanner app that can tell me what type of barcode is being scanned - because sometimes scanners will scan all the barcodes, *except* this one type of barcode, and then I gotta find out what kind of barcode it is, so that I can enable that symbology for the scanner in question (or provide instructions to my customers on how they enable it for their POS).

    Or, I can scan the barcode to get the underlying text in the barcode, to compare with our app's logs, to make sure it's scanning correctly (e.g. not getting truncated or anything like that).

    That's why I have ZXing Team barcode scanner on my phone and recommend it to co-workers.

    1. AreWeThereYeti Ars Praefectus et Subscriptor REPLY FEB 8, 2021 3:16 PM Jamjen831 wrote: show nested quotes

      I assume some of it is just old stuff people just re-download without thinking. Android hasn't always had a built in flashlight app (and am I crazy in that the early ones required root?). And I'm pretty sure that's the same with QR readers. I hadn't realized that Google Lens was a QR scanner until fairly recently.

      It isn't just old people, as you admitted yourself practically everyone doesn't understand all the things their apps can do, especially when that changes over time. A big part of that problem is the appalling fact that most apps, even the most widely used and professionally developed, have basically no documentation, and no way of finding out what their features actually are.

      Developers have this fantasy in their heads that they don't document the programs because it's really hard to keep the documentation in-sync with a changing app, but the real reason is just a pervasive problem in development culture caused by the race to get things onto the market, and the convenient lie that developers tell themselves that their apps are "self documenting", as if everyone has the time or desire to play "app scientist" and experiment with the app endlessly to find out all its hidden, unobvious features.

      @dmccarty: Yeah, the "update or not" decision is tricky for apps. What I do, is turn off update only for apps that I have no desire for updates too and which shouldn't be doing any internet activity or only activity to a defined, trusted spot. Any other kind of app, especially ones that might be subjected to varying network input from undefined sources, gets updates. Up +21 ( +22 / -1 ) Down 3906 posts | registered 9/15/2009

    2. MikeSafari Wise, Aged Ars Veteran REPLY FEB 8, 2021 3:17 PM peachpuff wrote: Barcode scanners and flashlight apps... who installs these? Phones come with these features already baked in.

      I unfortunately didn't have a choice. I bought a Nokia 6.1 a couple of years ago and installed the official Google Camera app, which has a built-in barcode/QR code reader, but when Nokia pushed the Android 10 update, it broke the camera app completely. And Nokia's default camera app does *not* read barcodes or QR codes for some reason. So to read them, I had to install a third-party app.

      Not super thrilled anyway, but thankfully it was not this one.

    marsilies Ars Praefectus et Subscriptor REPLY FEB 8, 2021 3:20 PM Jamjen831 wrote: show nested quotes

    As mentioned above, Google Lens is the defacto QR Scanner (it's part of the camera app). Do those phones have Lens? I've been on Nexus\Pixel for a long time so not too sure how Google has pushed that.
    Lens looks like it was initially exclusive to the Pixel 2, and slowly expanded until it became its own Android app in June 2018:
    https://en.wikipedia.org/wiki/Google_Lens

    So all the phones listed peachpuff came without it, and you'd probably have to have an Android phone released in the last 2 1/2 years to even have it pre-installed.

    Then, as others have noted, one would have to know that Lens can scan barcodes, and if you have had Android phones for a while, the initial setup and migration may install their old barcode scanner app anyway.

    [Feb 04, 2021] Fund Your IRA, Cut Your Taxes - Kiplinger

    Notable quotes:
    "... If you're married and your spouse is covered by a workplace-based retirement plan but you're not, you can deduct your full IRA contribution as long as your joint AGI doesn't top $196,000 for 2020. You can take a partial tax deduction if your combined income is between $196,000 and $206,000. ..."
    "... Spouses with little or no earned income for 2020 can also make an IRA contribution of up to $6,000 ($7,000 if 50 or older) as long as their spouse has sufficient earned income to cover both contributions. The contribution is tax-deductible as long as your household income doesn't exceed the limits for married couples filing jointly. ..."
    Feb 04, 2021 | www.kiplinger.com

    There's still time to make a 2020 IRA contribution and lower your tax bill. by: Sandra Block January 13, 2021

    As you get ready to tackle your 2020 tax return, make sure you haven't overlooked one of the best ways to cut your tax bill and secure your future -- funding a traditional IRA. (There is no upfront tax break for funding a Roth IRA.)

    You can actually make an IRA contribution for the 2020 tax year up until the time you file your tax return, which is due April 15, 2021. But why wait? If you have some extra income – say, from a stimulus check – go ahead and deposit it into an IRA account now before you forget. You'll also give the money a little more time to grow, which you'll appreciate when you retire.

    And what about those tax savings? Well, depending on your income, you may be able to deduct your IRA contribution on your 2020 return. To contribute to a traditional IRA, you or your spouse must have earned income from a job. But, otherwise, you may be able to deduct contributions to an IRA even if you or your spouse are covered by another retirement plan at work. Plus, starting last year, seniors age 70˝ and older with earned income can contribute to a traditional IRA, too.

    Here's some more good news: The IRA deduction is an "above the line" adjustment to income, meaning you don't have to itemize your deductions to claim it. It will reduce your adjusted gross income (AGI) dollar-for-dollar, lowering your tax bill. And your lower AGI could make you eligible for other tax breaks, which are tied to income limits.

    Who Qualifies

    If you're single and don't participate in a retirement plan at work, you can make a tax-deductible IRA contribution for 2020 of up to $6,000 ($7,000 if you're 50 or older) regardless of your income. If you're married and your spouse is covered by a workplace-based retirement plan but you're not, you can deduct your full IRA contribution as long as your joint AGI doesn't top $196,000 for 2020. You can take a partial tax deduction if your combined income is between $196,000 and $206,000.

    But even if you do participate in a retirement plan at work, you can still deduct up to the maximum $6,000 IRA contribution ($7,000 if you're 50 or older) if you're single and your income is $65,000 or less ($104,000 if married filing jointly). And you can deduct some of your IRA contribution if you're single and your income is between $65,000 and $75,000, or if you're married and your income is between $104,000 and $124,000.

    Spouses with little or no earned income for 2020 can also make an IRA contribution of up to $6,000 ($7,000 if 50 or older) as long as their spouse has sufficient earned income to cover both contributions. The contribution is tax-deductible as long as your household income doesn't exceed the limits for married couples filing jointly.

    Double Tax Break

    Some low- and moderate-income taxpayers get an extra break for contributing to an IRA or other retirement account.

    In addition to the usual IRA deduction, you may qualify for a Retirement Savers tax credit of up to $1,000 for contributions to an IRA or other retirement tax plan. (A tax credit, which reduces your tax bill dollar-for-dollar, is more valuable than a deduction, which merely reduces the amount of income that is taxed.)

    The actual amount of the credit depends on your income. It ranges from 10% to 50% of the first $2,000 contributed to an IRA or other retirement account. To be eligible, your 2020 income can't exceed $32,500 if you're single; $48,750 if you're the head of a household with dependents; or $65,000 if you're married filing jointly. The lower your income, the higher the credit. But you can't claim the Retirement Savers credit if you're under 18, a student, or can be claimed as a dependent on someone else's tax return. Skip advert Advertisement

    [Feb 04, 2021] The GameStop Rebels Vs. -Too Big To Fail- - ZeroHedge

    Feb 04, 2021 | www.zerohedge.com

    The GameStop Rebels Vs. "Too Big To Fail" BY TYLER DURDEN WEDNESDAY, FEB 03, 2021 - 6:10

    Authored by Ryan McMaken via The Mises Institute,

    Last week, a large number of small-time investors drove up the price of GameStop's (GME) stock a historic 1,784 percent . But this was no mere spike in some obscure stock. The stock's price spiked in part as a result of efforts by "an army of smaller investors who have been rallying on Reddit and elsewhere online to support GameStop's stock and beat back the professionals." These professionals were hedge fund managers who had shorted GameStop's stock. In other words, hedge funders were betting billions that GameStop's stock would go down. But the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took "a significant loss," possibly totaling $70 billion.

    There surely were plenty of insiders on both sides of this deal. Given the complexity of various schemes employed by seasoned investors, it seems it is very unlikely that this is just a simple matter of little Davids taking on Wall Street Goliaths.

    But it also looks like that's not all that was going on. Had this only been just another scheme by some Wall Street insiders against some other Wall Street insiders the story would probably have ended there.

    But that's not what happened. Rather, it appears that, for many of the smaller investors who were involved, much of this "short squeeze" was conducted for the purposes of throwing a monkey wrench in the plans of Wall Street hedge funds which exist within the rarified world of billionaires and their friends.

    Pro–Wall Street Fearmongering

    The reactions to the event from media pundits and other commentators were telling in that there was clearly fear and outrage over the fact that business as usual on Wall Street wasn't being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a "fiasco," " insanity ," and something sure to leave a " trail of destruction ." The important thing was to use words designed to make it all look like the threat to hedge funds represents some sort of grave threat to the overall economy. Jim Lebenthal at CNBC, for example, declared the "short-squeeze fiasco is a threat to the proper functioning of financial markets."

    The fearmongering went beyond even the usual places we hear about financial news. On The View , for example, Meghan McCain delivered the sort of status quo –defending bromides we've come to expect from her. She insisted the GameStop affair could spiral into an economy-killing disaster because

    If the stock ends up plunging because of this, because of GameStop and Wall Street loses billions, at a certain point, it will impact stocks like Apple and Disney and stocks that a lot of average Americans do invest in, and if that happens, average Americans will end up losing even more money.

    Her comment doesn't rally make any sense, and she doesn't seem to have even a rudimentary understanding of what happened. But her comment delivered the important point: namely, that anything that causes volatility in the market could be a disaster for every American household. Translation: and we should all be very, very afraid if something isn't done to keep these Reddit people -- whom she compared to the Capitol "insurrectionists" -- under control.

    Of course, in a functioning and relatively unhampered market, unusual, unexpected things happen all the time. Entrepreneurial actors do things the incumbent firms and "experts" hadn't counted on. This leads to "instability" and big swings in prices. This is actual capitalism, and it doesn't mean the marketplace isn't functioning properly. In fact, it probably means the marketplace is dynamic and responsive to consumers and other market participants.

    But that's not something Wall Street insiders or their pals in Washington like in the modern era. Although Wall Streeters love to portray themselves as capitalist captains of industry, the fact is they have very little interest in real, competitive capitalism.

    Rather, we live in the era of "too big to fail" (TBTF), when market freedom means nothing and preserving the portfolios of powerful Wall Street institutions is what really matters.

    Decades of "Too Big to Fail"

    It's based on the idea that Wall Street is just too important to the whole economy, and Washington must intervene to make sure rich guys on Wall Street stay rich. David Stockman explains this philosophy:

    [It is] the notion that the "threat of systemic risk" and a cascading contagion of losses form the failure of any big Wall Street institution would be so calamitous that it warranted an exemption from free market discipline.

    This goes back at least to the 1994 Mexican bailout -- which was really a bailout of investors, not of Mexico -- which solidified the process of normalizing huge transfers of wealth from taxpayers and dollar holders to the Wall Street elite. By then, the "Greenspan put" was already in place, with the central bank forever poised to embrace more easy money in pursuit of propping up stock prices. Then came the bailouts of 2008 and the covd-19 avalanche of easy money -- all of which lopsidedly benefited Wall Street over the rest of the economy.

    This "exemption from free market discipline" is what Wall Street is all about these days. The financial sector has become accustomed to enjoying bailouts, easy money, and the resulting financialization which puts ever greater amounts of the US economy into the hands of Wall Street money managers. The sector is now built on corporate welfare, not "free markets." No matter what happens, Wall Street expects the deck to be stacked in its favor.

    This is why "volatility" has become a bad word, and "stability" is now the name of the game. It's why Lebenthal thinks anything out of the ordinary is a threat to the "proper functioning of financial markets." If some free market innovation and inventiveness actually takes place in some small corner of the marketplace, well, then we're all expected to get very upset.

    That's the way Wall Street likes it. ay_arrow 1


    Kayman 8 hours ago

    The marketing slogan "Too Big Too Fail" conveniently presumed Wall Street was more important than the Real Economy. A fatal presumption.

    Wall Street is a Parasite, backstopped by the Fed, who, in turn, are backstopped by the Nation. A crumbling nation, where the Fed strangles lending/savings intermediation, and saves the blood suckers by bleeding the dying core of America.

    wmbz 8 hours ago

    "The sector is now built on corporate welfare, not "free markets."

    This is NOT a new thing. Corporate welfare has been in play for a long, long time. I am amazed how long it has taken otherwise "smart" people to grasp this fact.

    The only difference is, it is out in the glaring sunlight for all to see. TPTB are damn proud of it!

    junction 7 hours ago (Edited)

    Except for the involvement of WallStreetBets in temporarily blocking the hedge fund bear raid on GameStop using "naked" shorts, it is still business as usual on Wall Street. No one at the SEC does anything but collect a salary, issue press releases and go to lunch as the Mafia crime families. . . oops, hedge funds run "bust out" operations on businesses. The lapdog financial press cheered on the hedge funds as they demolished American businesses. The same gutter journalists who are not yet linking micro-manager Bezos giving up total control of Amazon right after his cloud service illegally de-platformed Parler for violation of bogus. made-up community standards. But then, bigger things are afoot. Bolshevik president Biden just approved deploying B-1 bomber to Norway for the first time. Nuclear bomb carrying B-1 bombers. Anything to distract people from how rotten things are.

    Cognitive rationalist 7 hours ago

    Banking financial sector: private profits for me, public losses for thee

    gladitsover 8 hours ago remove link

    "..the table is tilted folks. The game is rigged.."

    George Carlin

    Lokiban 8 hours ago

    I think it was all about showing to those unawares how corrupt and rigged Wall street truly is and they have gotten the message out bigtime.
    The only question to be asked is who became the proverbial bagholder when average people saw their 'Bitcoin-Tulipmania' chance to get out with amazing profits and with that breaking the promise to continue pumping gme till it hits $1500.
    One has always to be carefull if these kind of actions are true populism going against the controllers or is it controllers playing their hideous games again for a reason, like the great reset.
    Greed has never been a good advisor in these times, easy sheoplemoney. It works all the time..

    dustinthewind 9 hours ago

    " Curiosity v Manipulation"

    https://www.armstrongeconomics.com/armstrongeconomics101/understanding-cycles/curiosity-v-manipulation/

    COMMENT: Message: Re Reddit "WallStreetBets"
    Hi Marty,
    Thanks for this blog post but I think they are not trying to make money out of short squeezing GME really, they are trying to make a point. If you follow some of the posts you see many stories about how badly people and their families were hurt in 2008 when not a single banker went to prison. Stories of Fathers losing jobs and houses and descending into alcoholism in front of their children who now are part of WallStreetBets, others who had to live off of beans and rice or what Mama could grow in the garden and went hungry etc.

    So they are not buying GME to see it rise, though that is fine, they are spending money "they can afford to lose" to punish the hedge funds that have along with bankers hurt the little guy repeatedly. These same people IMO have bought off our politicians, removed regulations like Glass Steagal etc all to reap profits to the top while crushing everyone else.

    Listen in June 2008 I got laid off from Palm, in July I broke my arm ( badly ), in August some tenants left so I tried to put that property up for sale but in September Lehman fell and the real estate agent told me the market was OFF that I could not sell and needed to rent it with no one renting for 5 more months. At the same time in September I had a 100K home equity line I took out just for emergencies and since I was having one I wanted to use it – but then Wells Fargo pulled the whole thing.

    So there I was Marty, sitting on the couch with a cast from fingers to shoulder watching the world meltdown on a tiny TV set while on lots of pain killers
    I was forced to use my small 401K, and ended up using the whole thing through 9 months of disability, two surgeries and a job search that did not yield a job until the fall of 2011.
    So IMO these arrogant SOB cheating hedge fund guys should pound sand on GME for once because the casino is rigged, heads they win, tails they win, and the taxpayers lose their jobs, homes, and pay for their bailouts.
    I say give it to 'em.
    Off my soapbox

    REPLY: I fully understand that. I have fought against these people my whole life. I was more interested in learning HOW the economy functioned where they were only interested in guaranteed trades. I guess I was the Leonardo da Vinci of finance. Instead of digging up bodies to figure out how the anatomy functioned, I searched history and developed a computer model to try to ascertain what made the world economy tick.

    A professor from Princeton where Einstein taught said to me that I reminded him of Einstein. I was surprised, for I did not see myself as comparable to Einstein in any way. He then explained that what he meant was my curiosity which moved me to try to figure out what made it all function. I came to understand what he meant. If you are not CURIOUS and seek out knowledge, then you will NEVER discover anything new! I was not dealing with the physics of the world, but the finance. People are attracted by this blog and Socrates for that same reason. They have that spark of curiosity and seek to also understand what makes it all tick! We need to teach students to be curious. That is the key to all progress we desperately need to survive this never-ending battle of authoritarianism v independence and freedom.

    I have stated many times that I had discovered the 8.6-year frequency in my research I conducted at Princeton, University in the Firestone Library. Those were fond memories for it was an amazing resource back then as was the Royal British Newspaper Library, which I gathered my FOREX database by sifting through the largest newspaper collection in the world.

    This was the difference between me and the "club" where I tried to understand the movement of the ages that caused the rise and fall of civilization and therein the economy/markets, and the "club" which seeks to manipulate everything by sheer force armed with bribes. They own the Southern District of New York courts, the Second Circuit, and the Department of Justice along with the SEC and CFTC. Goldman Sachs has even stacked the SEC and CFTC with their former people. Nobody was prosecuted despite the fact that they were involved in the looting of capital in Malaysia and Greece. And people have the audacity to claim there was absolutely no election fraud? There is nothing we can trust that goes on in government anymore and it will only get far worse as we head into 2032.

    I am well aware of the sentiment behind this Reddit trend. My concern is simple. Don't put it past the "club" to be in there making this seem like a sure bet and then set everyone up for the big crash. Be careful here going into Feb/March 2021.

    [Feb 03, 2021] The GameStop Rebels Vs. -Too Big To Fail- - ZeroHedge

    Feb 03, 2021 | www.zerohedge.com

    The GameStop Rebels Vs. "Too Big To Fail" BY TYLER DURDEN WEDNESDAY, FEB 03, 2021 - 6:10

    Authored by Ryan McMaken via The Mises Institute,

    Last week, a large number of small-time investors drove up the price of GameStop's (GME) stock a historic 1,784 percent . But this was no mere spike in some obscure stock. The stock's price spiked in part as a result of efforts by "an army of smaller investors who have been rallying on Reddit and elsewhere online to support GameStop's stock and beat back the professionals." These professionals were hedge fund managers who had shorted GameStop's stock. In other words, hedge funders were betting billions that GameStop's stock would go down. But the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took "a significant loss," possibly totaling $70 billion.

    There surely were plenty of insiders on both sides of this deal. Given the complexity of various schemes employed by seasoned investors, it seems it is very unlikely that this is just a simple matter of little Davids taking on Wall Street Goliaths.

    But it also looks like that's not all that was going on. Had this only been just another scheme by some Wall Street insiders against some other Wall Street insiders the story would probably have ended there.

    But that's not what happened. Rather, it appears that, for many of the smaller investors who were involved, much of this "short squeeze" was conducted for the purposes of throwing a monkey wrench in the plans of Wall Street hedge funds which exist within the rarified world of billionaires and their friends.

    Pro–Wall Street Fearmongering

    The reactions to the event from media pundits and other commentators were telling in that there was clearly fear and outrage over the fact that business as usual on Wall Street wasn't being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a "fiasco," " insanity ," and something sure to leave a " trail of destruction ." The important thing was to use words designed to make it all look like the threat to hedge funds represents some sort of grave threat to the overall economy. Jim Lebenthal at CNBC, for example, declared the "short-squeeze fiasco is a threat to the proper functioning of financial markets."

    The fearmongering went beyond even the usual places we hear about financial news. On The View , for example, Meghan McCain delivered the sort of status quo –defending bromides we've come to expect from her. She insisted the GameStop affair could spiral into an economy-killing disaster because

    If the stock ends up plunging because of this, because of GameStop and Wall Street loses billions, at a certain point, it will impact stocks like Apple and Disney and stocks that a lot of average Americans do invest in, and if that happens, average Americans will end up losing even more money.

    Her comment doesn't rally make any sense, and she doesn't seem to have even a rudimentary understanding of what happened. But her comment delivered the important point: namely, that anything that causes volatility in the market could be a disaster for every American household. Translation: and we should all be very, very afraid if something isn't done to keep these Reddit people -- whom she compared to the Capitol "insurrectionists" -- under control.

    Of course, in a functioning and relatively unhampered market, unusual, unexpected things happen all the time. Entrepreneurial actors do things the incumbent firms and "experts" hadn't counted on. This leads to "instability" and big swings in prices. This is actual capitalism, and it doesn't mean the marketplace isn't functioning properly. In fact, it probably means the marketplace is dynamic and responsive to consumers and other market participants.

    But that's not something Wall Street insiders or their pals in Washington like in the modern era. Although Wall Streeters love to portray themselves as capitalist captains of industry, the fact is they have very little interest in real, competitive capitalism.

    Rather, we live in the era of "too big to fail" (TBTF), when market freedom means nothing and preserving the portfolios of powerful Wall Street institutions is what really matters.

    Decades of "Too Big to Fail"

    It's based on the idea that Wall Street is just too important to the whole economy, and Washington must intervene to make sure rich guys on Wall Street stay rich. David Stockman explains this philosophy:

    [It is] the notion that the "threat of systemic risk" and a cascading contagion of losses form the failure of any big Wall Street institution would be so calamitous that it warranted an exemption from free market discipline.

    This goes back at least to the 1994 Mexican bailout -- which was really a bailout of investors, not of Mexico -- which solidified the process of normalizing huge transfers of wealth from taxpayers and dollar holders to the Wall Street elite. By then, the "Greenspan put" was already in place, with the central bank forever poised to embrace more easy money in pursuit of propping up stock prices. Then came the bailouts of 2008 and the covd-19 avalanche of easy money -- all of which lopsidedly benefited Wall Street over the rest of the economy.

    This "exemption from free market discipline" is what Wall Street is all about these days. The financial sector has become accustomed to enjoying bailouts, easy money, and the resulting financialization which puts ever greater amounts of the US economy into the hands of Wall Street money managers. The sector is now built on corporate welfare, not "free markets." No matter what happens, Wall Street expects the deck to be stacked in its favor.

    This is why "volatility" has become a bad word, and "stability" is now the name of the game. It's why Lebenthal thinks anything out of the ordinary is a threat to the "proper functioning of financial markets." If some free market innovation and inventiveness actually takes place in some small corner of the marketplace, well, then we're all expected to get very upset.

    That's the way Wall Street likes it. ay_arrow 1


    Kayman 8 hours ago

    The marketing slogan "Too Big Too Fail" conveniently presumed Wall Street was more important than the Real Economy. A fatal presumption.

    Wall Street is a Parasite, backstopped by the Fed, who, in turn, are backstopped by the Nation. A crumbling nation, where the Fed strangles lending/savings intermediation, and saves the blood suckers by bleeding the dying core of America.

    wmbz 8 hours ago

    "The sector is now built on corporate welfare, not "free markets."

    This is NOT a new thing. Corporate welfare has been in play for a long, long time. I am amazed how long it has taken otherwise "smart" people to grasp this fact.

    The only difference is, it is out in the glaring sunlight for all to see. TPTB are damn proud of it!

    junction 7 hours ago (Edited)

    Except for the involvement of WallStreetBets in temporarily blocking the hedge fund bear raid on GameStop using "naked" shorts, it is still business as usual on Wall Street. No one at the SEC does anything but collect a salary, issue press releases and go to lunch as the Mafia crime families. . . oops, hedge funds run "bust out" operations on businesses. The lapdog financial press cheered on the hedge funds as they demolished American businesses. The same gutter journalists who are not yet linking micro-manager Bezos giving up total control of Amazon right after his cloud service illegally de-platformed Parler for violation of bogus. made-up community standards. But then, bigger things are afoot. Bolshevik president Biden just approved deploying B-1 bomber to Norway for the first time. Nuclear bomb carrying B-1 bombers. Anything to distract people from how rotten things are.

    Cognitive rationalist 7 hours ago

    Banking financial sector: private profits for me, public losses for thee

    gladitsover 8 hours ago remove link

    "..the table is tilted folks. The game is rigged.."

    George Carlin

    Lokiban 8 hours ago

    I think it was all about showing to those unawares how corrupt and rigged Wall street truly is and they have gotten the message out bigtime.
    The only question to be asked is who became the proverbial bagholder when average people saw their 'Bitcoin-Tulipmania' chance to get out with amazing profits and with that breaking the promise to continue pumping gme till it hits $1500.
    One has always to be carefull if these kind of actions are true populism going against the controllers or is it controllers playing their hideous games again for a reason, like the great reset.
    Greed has never been a good advisor in these times, easy sheoplemoney. It works all the time..

    [Feb 03, 2021] Biden DOJ Drops Yale Discrimination Suit After Trump DOJ Found Whites, Asians Treated Unfairly - ZeroHedge

    Feb 03, 2021 | www.zerohedge.com

    After the Trump Justice Department sued Yale following the results of a 2-year Civil Rights investigation which found "long-standing and ongoing" race-based discrimination, the Biden DOJ just dismissed the case without explanation .

    ... ... ...

    The Trump DOJ had argued that the Ivy League university had violated federal civil rights law for "at least 50 years," by favoring Black and Hispanic students over Whites and Asians, according to The Hill .

    The legal battle represented one of the Trump administration's moves to challenge affirmative action programs aimed at increasing diversity on campus, which some conservatives consider unfair and illegal.

    Yale, which staunchly defended its admission practices, praised the DOJ's decision to drop the case in a statement, saying it was "gratified" by the decision. - The Hill

    "Our admissions process has allowed Yale College to assemble an unparalleled student body, which is distinguished by its academic excellence and diversity," argued the university. "Yale has steadfastly maintained that its process complies fully with Supreme Court precedent, and we are confident that the Justice Department will agree."

    The Trump administration notably instituted several measures to prevent universities from considering race as a factor during admissions, even joining a similar lawsuit against Harvard University.

    [Feb 03, 2021] Naked Short Selling- The Truth Is Much Worse Than You Have Been Told

    Feb 03, 2021 | oilprice.com

    There is a massive threat to our capital markets, the free market in general, and fair dealings overall. And no, it's not China. It's a homegrown threat that everyone has been afraid to talk about.

    Until now.

    That fear has now turned into rage.

    Hordes of new retail investors are banding together to take on Wall Street. They are not willing to sit back and watch naked short sellers, funded by big banks, manipulate stocks, harm companies, and fleece shareholders.

    The battle that launched this week over GameStop between retail investors and Wall Street-backed naked short sellers is the beginning of a war that could change everything.

    It's a global problem, but it poses the greatest threat to Canadian capital markets, where naked short selling -- the process of selling shares you don't own, thereby creating counterfeit or 'phantom' shares -- survives and remains under the regulatory radar because Broker-Dealers do not have to report failing trades until they exceed 10 days.

    This is an egregious act against capital markets, and it's caused billions of dollars in damage.

    Make no mistake about the enormity of this threat: Both foreign and domestic schemers have attacked Canada in an effort to bring down the stock prices of its publicly listed companies.

    In Canada alone, hundreds of billions of dollars have been vaporized from pension funds and regular, everyday Canadians because of this, according to Texas-based lawyer James W. Christian. Christian and his firm Christian Smith & Jewell LLP are heavy hitters in litigation related to stock manipulation and have prosecuted over 20 cases involving naked short selling and spoofing in the last 20 years.

    "Hundreds of billions have been stolen from everyday Canadians and Americans and pension funds alike, and this has jeopardized the integrity of Canada's capital markets and the integral process of capital creation for entrepreneurs and job creation for the economy," Christian told Oilprice.com.

    The Dangerous Naked Short-Selling MO

    In order to [legally] sell a stock short, traders must first locate and secure a borrow against the shares they intend to sell. A broker who enters such a trade must have assurance that his client will make settlement.

    While "long" sales mean the seller owns the stock, short sales can be either "covered" or "naked" . A covered short means that the short seller has already "borrowed" or has located or arranged to borrow the shares when the short sale is made. Whereas, a naked short means the short seller is selling shares it doesn't own and has made no arrangements to buy. The seller cannot cover or "settle" in this instance, which means they are selling "ghost" or "phantom" shares that simply do not exist without their action.

    When you have the ability to sell an unlimited number of non-existent phantom shares in a publicly-traded company, you then have the power to destroy and manipulate the share price at your own will.

    And big banks and financial institutions are turning a blind eye to some of the accounts that routinely participate in these illegal transactions because of the large fees they collect from them. These institutions are actively facilitating the destruction of shareholder value in return for short term windfalls in the form of trading fees. They are a major part of the problem and are complicit in aiding these accounts to create counterfeit shares.

    The funds behind this are hyper sophisticated and know all the rules and tricks needed to exploit the regulators to buy themselves time to cover their short positions. According to multiple accounts from traders, lawyers, and businesses who have become victims of the worst of the worst in this game, short-sellers sometimes manage to stay naked for months on end, in clear violation of even the most relaxed securities laws.

    The short-sellers and funds who participate in this manipulation almost always finance undisclosed "short reports" which they research & prepare in advance, before paying well-known short-selling groups to publish and market their reports (often without any form of disclosure) to broad audiences in order to further push the stock down artificially. There's no doubt that these reports are intended to create maximum fear amongst retail investors and to push them to sell their shares as quickly as possible.

    That is market manipulation. Plain and simple.

    Their MO is to short weak, vulnerable companies by putting out negative reports that drive down their share price as much as possible. This ensures that the shorted company in question no longer has the ability to obtain financing, putting them at the mercy of the same funds that were just shorting them. After cratering the shorted company's share price, the funds then start offering these companies financing usually through convertibles with a warrant attachment as a hedge (or potential future cover) against their short; and the companies take the offers because they have no choice left. Rinse and Repeat.

    In addition to the foregoing madness, brokers are often complicit in these sorts of crimes through their booking of client shares as "long" when they are in fact "short". This is where the practice moves from a regulatory gray area to conduct worthy of prison time.

    Naked short selling was officially labeled illegal in the U.S. and Europe after the 2008/2009 financial crisis.

    Making it illegal didn't stop it from happening, however, because some of the more creative traders have discovered convenient gaps between paper and electronic trading systems, and they have taken advantage of those gaps to short stocks.

    Still, it gets even more sinister.

    According to Christian, "global working groups" coordinate their attacks on specifically targeted companies in a "Mafia-like" strategy.

    Journalists are paid off, along with social media influencers and third-party research houses that are funded by what amounts to a conspiracy. Together, they collaborate to spread lies and negative narratives to destroy a stock.

    At its most illegal, there is an insider-trading element that should enrage regulators. The MO is to infiltrate a company through disgruntled insiders or lawyers close to the company. These sources are used to obtain insider information that is then leaked to damage the company.

    Often, these illegal transactions involve paying off "informants", journalists, influencers, and "researchers" are difficult to trace because they are made from offshore accounts that are shut down once the deed is done.

    Likewise, the "shorts" disguised as longs can be difficult to trace when the perpetrators have direct market access to trading systems. These trades are usually undetected until the trades fail or miss settlement. At that point, the account will move the position to another broker-dealer and start the process all over again.

    The collusion widens when brokers and financial institutions become complicit in purposefully mislabeling "shorts" as "longs", sweeping the illegal transactions under the rug and off of regulatory radar.

    "Spoofing" and "layering" have also become pervasive techniques to avoid regulator attention. Spoofing, as the name suggests, involves short sellers creating fake selling pressure on their targeted stocks to drive prices lower. They accomplish this by submitting fake offerings in "layers" at different prices to create a mirage.

    Finally, these bad actors manage to skirt the settlement system, which is supposed to "clear" on what is called a T+2 basis . That means that any failed trades must be bought or dealt with within 3 days. In other words, if you buy on Monday (your "T" or transaction day), it has to be settled by Wednesday.

    Unfortunately, Canadian regulators have a hard time keeping up with this system, and failed trades are often left outstanding for much longer periods than T+2. These failing trades are constantly being traded to reset the settlement clock and move the failing trade to the back of the line. The failures of a centralized system

    According to Christian, it can be T+12 days before a failed trade is even brought to the attention of the IIROC (the Investment Industry Regulatory Organization of Canada)

    Prime Brokers and Banks are Complicit

    This is one of Wall Street's biggest profit center and fines levied against them are merely a minor cost of doing business.

    Some banks are getting rich off of these naked short sellers. The profits off this kind of lending are tantalizing, indeed. Brokers are lending stocks they don't own for massive profit and sizable bonuses.

    This layer of what many have now called a "criminal organization" is the toughest for regulators to deal with, regardless of the illegal nature of these activities.

    Prime brokers lend cash account shares that are absolutely not allowed to be lent. They lend them to short-sellers in order to facilitate them in settling their naked shorts.

    It's not that the regulators are in the dark on this. They are, in fact, handing out fines, left and right -- both for illegal lending and for mismarking "shorts" and "longs" to evade regulatory scrutiny. The problem is that these fines pale in comparison to the profits earned through these activities.

    And banks in Canada in particular are basically writing the rules themselves, recently making it easier (and legal) to lend out cash account shares.

    Nor do law firms have clean hands. They help short sellers bankrupt targeted companies through court proceedings, a process that eventually leads to the disappearance of evidence of naked shorts on the bank books.

    "How much has been stolen through this fraudulent system globally is anyone's guess," says Christian, "but the number begins with a 'T' (trillions)."

    The list of fines for enabling and engaging in manipulative activity that destroys companies' stock prices may seem to carry big numbers from the retail investor's perspective, but they are not even close to being significant enough to deter such actions:

    - The SEC charged Citigroup's principal U.S. broker-deal subsidiary in 2011 with misleading investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing market. Citigroup had bet against investors as the housing market showed signs of distress. The CDO defaulted only months later, causing severe losses for investors and a profit of $160 million (just in fees and trading profits). Citigroup paid $285 million to settle these SEC charges.

    - In 2016, Goldman, Sachs & Co. agreed to pay $15 million to settle SEC charges that its securities lending practices violated federal regulations. To wit: The SEC found that Goldman Sachs was mismarking logs and allowed customers to engage in short selling without determining whether the securities could reasonably be borrowed at settlement.

    - In 2013, a Charles Schwab subsidiary was found liable by the SEC for a naked short-selling scheme and fined $8.2 million .

    - The SEC charged two Merrill Lynch entities in 2015 with using "inaccurate data in the course of executing short sale orders", fining them $11 million.

    - And most recently, Canadian Cormark Securities Inc and two others came under the SEC's radar. On December 21, SEC instituted cease-and-desist orders against Cormark. It also settled charges against Cormark and two other Canada-based broker deals for "providing incorrect order-making information that caused an executing broker's repeated violations of Regulation SHO". According to the SEC, Cormark and ITG Canada caused more than 200 sale orders from a single hedge fund, to the tune of more than $660 million between August 2016 and October 2017, to be mismarked as "long" when they were, in fact, "short" -- a clear violation of Regulation SHO. Cormark agreed to pay a penalty of $800,000 , while ITG Canada -- one of the other broker-dealers charged -- agreed to pay a penalty of $200,000. Charging and fining Cormark is only the tip of the iceberg. The real question is on whose behalf was Cormark making the naked short sells?

    - In August 2020, Bank of Nova Scotia (Scotiabank) was fined $127 million over civil and criminal allegations in connection with its role in a massive price-manipulation scheme.

    According to one Toronto-based Canadian trader who spoke to Oilprice.com on condition of anonymity, "traders are the gatekeeper for the capital markets and they're not doing a very good job because it's lucrative to turn a blind eye." This game is set to end in the near future, and it is only a matter of time.

    "These traders are breaking a variety of regulations, and they are taking this risk on because of the size of the account," he said. "They have a responsibility to turn these trades down. Whoever is doing this is breaking regulations [for the short seller] and they know he is not going to be able to make a settlement. As a gatekeeper, it is their regulatory responsibility to turn these trades away. Instead, they are breaking the law willfully and with full knowledge of what they are doing."

    "If you control the settlement system, you can do whatever you want," the source said. "The compliance officers have no teeth because the banks are making big money. They over-lend the stocks; they lend from cash account shares to cover some of these fails for instance, if there are 20 million shares they sold 'long', they can cover by borrowing from cash account shares."

    The Naked Truth

    In what he calls our "ominous financial reality", Tom C.W. Lin, attorney at law, details how "millions of dollars can vanish in seconds, rogue actors can halt trading of billion-dollar companies, and trillion-dollar financial markets can be distorted with a simple click or a few lines of code".

    Every investor and every institution is at risk, writes Lin.

    The naked truth is this: Investors stand no chance in the face of naked short sellers. It's a game rigged in the favor of a sophisticated short cartel and Wall Street giants.

    Now, with online trading making it easier to democratize trading, there are calls for regulators to make moves against these bad actors to ensure that North America's capital markets remain protected, and retail investors are treated fairly.

    The recent GameStop saga is retail fighting back against the shorting powers, and it's a wonderful thing to see - but is it a futile punch or the start of something bigger? The positive take away from the events the past week is that the term "short selling" has been introduced to the public and will surely gather more scrutiny.

    Washington is gearing up to get involved. That means that we can expect the full power of Washington, not just the regulators, to be thrown behind protecting the retail investors from insidious short sellers and the bankers and prime brokers who are profiting beyond belief from these manipulative schemes.

    The pressure is mounting in Canada, too, where laxer rules have been a huge boon for manipulators. The US short cartel has preyed upon the Canadian markets for decades as they know the regulators rarely take action. It is truly the wild west.

    Just over a year ago, McMillan published a lengthy report on the issue from the Canadian perspective, concluding that there are significant weaknesses in the regulatory regime.

    While covered short-selling itself has undeniable benefits in providing liquidity and facilitating price discovery, and while the Canadian regulators' hands-off approach has attracted many people to its capital markets, there are significant weaknesses that threaten to bring the whole house of cards down.

    McMillan also noted that "the number of short campaigns in Canada is utterly disproportionate to the size of our capital markets when compared to the United States, the European Union, and Australia".

    Taking Wall Street's side in this battle, Bloomberg notes that Wall Street has survived "numerous other attacks" over the centuries, "but the GameStop uprising could mark the end of an era for the public short", suggesting that these actors are "long-vilified folks who try to root out corporate wrongdoing".

    Bloomberg even attempts to victimize Andrew Left's Citron Research, which -- amid all the chaos -- has just announced that it has exited the short-selling game after two decades.

    Nothing could be further from the truth. Short sellers, particularly the naked variety, are not helping police the markets and route out bad companies, as Bloomberg suggests. Naked short sellers are not motivated by moral and ethical reasons, but by profit alone. They attack good, but weak and vulnerable companies. They are not the saviors of capital markets, but the destroyers. Andrew Left may be a "casualty", but he is not a victim. Nor likely are the hedge funds with whom he has been working.

    In a petition initiated by Change.org, the petitioners urge the SEC and FINRA to investigate Left and Citron Research, noting: "While information Citron Research publishes are carefully selected and distributed in ways that do not break the law at first sight, the SEC and FINRA have overlooked the fact that Left and Citron gains are a result of distributing catalysts in an anticipation of substantial price changes due to public response in either panic, encouragement, or simply a catalyst action wave ride. Their job as a company is to create the most amount of panic shortly after taking a trading position so they and their clients can make the most amount of financial gains at the expense of regular investors."

    On January 25 th , the Capital Markets Modernization Taskforce published its final report for Ontario's Minister of Finance, noting that while naked short selling has been illegal in the United States since 2008, it remains a legal loophole in Canada. The task force is recommending that the Ministry ban this practice that allows for the short-selling of tradable assets without first borrowing the security.

    The National Coalition Against Naked Short Selling - Failing to Deliver Securities (NCANS), which takes pains to emphasize that is not in any way against short-selling, notes: "Naked short-selling transfers the risk exposure and the hedging expense of the derivatives market makers onto the backs of equity investors, without any corresponding benefit to them. This is fundamentally unfair, and must stop."

    Across North America, the issue is about to reach a fever pitch over GameStop. For once, regular retail investors have a voice to use against Wall Street. And for once, Washington appears to be listening. The House and Senate both have hearings scheduled over the GameStop saga.

    Paradoxically, the same company that basically started the retail investor coup -- zero-fee trading app Robinhood -- is now under fire for pulling the rug out from under the same democratic movement.

    After retail investors joined forces against Wall Street short-sellers to push GameStop stock from $20 to a high of over $480 in less than a week, Robinhood made the very unpopular move of instituting a ban on buying for retail investors. Under the rules, Wall Street could still buy and sell, but retail investors could only sell. This new band of investors -- which includes pretty much all of Robinhood's clientele -- are up in arms, with customers now suing. They won't go away, and they have Washington's ear and Twitter and Reddit's social media power. This is shaping up to be an uprising.

    What happens with GameStop next could end up dictating a new form of capital markets democracy that levels the playing field and punishes the Mafia-like elements of Wall Street that have been fleecing investors and destroying companies for years.

    Retail investors want to clean up capital markets, and they just might be powerful enough to do it now. That's a serious wake-up call for both naked short sellers and the investing public.

    Viva la Revolucion.

    James Stafford

    Publisher Oilprice.com

    More Top Reads From Oilprice.com:

    [Feb 02, 2021] We told the people who were already enjoying a prosperous situation that things would be much better for their children and that we would be able to solve the outstanding problems.

    Notable quotes:
    "... "We told the people who were already enjoying a prosperous situation that things would be much better for their children and that we would be able to solve the outstanding problems. [But the new situation] presents a much more difficult task to fulfill. Because from the moment there is no longer a constant surplus to be distributed, the question of distribution is appreciably more difficult to resolve." ..."
    Feb 02, 2021 | www.nakedcapitalism.com

    Left in Wisconsin , January 29, 2021 at 4:03 pm

    Highly recommend the Przeworski piece at Phenomenal World.

    Most of it is reflections on/by 3 European leftist leaders from the 1970s-80s (German Prime Chancellor Willy Brandt, Austrian Chancellor Bruno Kreisky, and Swedish Prime Minister Olof Palme) about how the oil shocks and associated economic changes of the era presented a challenge to social democrats – including ending the belief/fantasy that reformism could be system-changing – that they (we) were not then, and I would argue still are not, able to address.

    Palme spells out the difficulty:

    "We told the people who were already enjoying a prosperous situation that things would be much better for their children and that we would be able to solve the outstanding problems. [But the new situation] presents a much more difficult task to fulfill. Because from the moment there is no longer a constant surplus to be distributed, the question of distribution is appreciably more difficult to resolve."

    Brand echoes these concerns, noting that it is essential to prevent inequality from increasing as growth resumes. Eighteen months later, during another in person meeting on 25 May 1975, Kreisky makes the fiscal constraint even more explicit:

    "It is precisely now that reforms should be made. It is just a question which. If we strongly develop social policies, we will not be able to finance them."

    Also included an amazing graph of declining electoral support for left/SD parties in Europe.

    [Feb 02, 2021] Watching stock market moves is like watching Pulp Fiction: halfway through, the violence doesn t even bother you anymore

    Notable quotes:
    "... "It's like watching 'Pulp Fiction.' Halfway through, the violence doesn't even bother you anymore." ..."
    Jan 27, 2019 | www.zerohedge.com

    "Investors are becoming desensitized,"

    Bryce Doty, SVP at Sit Investment Associates, told Bloomberg, then continued the verbal poetry:

    "It's like watching 'Pulp Fiction.' Halfway through, the violence doesn't even bother you anymore."

    [Feb 02, 2021] The Importance of Usury Laws

    Notable quotes:
    "... Today's cultural dominance in much of the South and chunks of the Midwest by boobtoob preachers, Dominationists and the highly heretical oxymoronical "Christian" Zioni$ts can be seen as the afterbirth of cultural Calvinism. Calvinism is Talmudic in its essence and squats at the nexus of what they like to call "Judeo-Christian Civilization". ..."
    Jan 22, 2021 | www.unz.com

    Mefobills , says: January 22, 2021 at 2:34 pm GMT • 9.3 hours ago

    The author Jafee is confused on Bentham, because Bentham was confused himself, or was a Jewish agent of mammon.

    The highlighted terms accord with Benthamian Utilitarianism -- the greatest human happiness of the greatest human number.[1]
    Much (but surely not all) pertinent history suggests that Bentham's thinking influenced the construction of the Preamble

    The English philosopher Jeremey Bentham (1748-1832) was a defender of usury, which is the opposite of happiness for the greatest human number.

    In 1787 Jeremey Bentham wrote "In Defence of Usury." Bentham was the son of a rich lawyer, and a lawyer himself, not an economist, which is why he was confused. Bentham created the present mis-definition of usury which prevails to today, so he was very damaging. "The taking of grater interest than the law allows, or the taking of greater interest than is usual."

    Bentham ignored hundreds of years of the Catholic Scholastics work on usury, and also ignored Aristotle. Actually Bentham attacked Aristotle in order to spread his B.S. Bentham's father was Jewish, and Bentham also ignored the fairly strong Old Testament admonitions against usury.

    Bentham spread the same erroneous B.S. that Calvin did, and both men did enormous damage, and whether by design or confusion are NOT for the common good. Their connections to our (((friends))) is suspicious.

    A Persian Daric is a gold coin. Bentham said this: Though all money in nature is barren, though a Daric would not beget another Daric yet for a Daric which a man borrowed he might get a ram and couple of ewes and the ewes would probably not be barren (pages 98 to 101 of his screed)

    Aristotle and the Catholic Schoolmen clearly showed that it was the Ewes that were fertile, not the coins.

    Bentham or Calvin could not read with comprehension and twisted words into new meanings. This twisted language persists in the brains of modern humans as confusion.

    As if every Daric is going to buy an Ewe in order to reproduce.

    By 1850 John Whipple wrote "The Importance of Usury Laws – An answer to Jeremey Bentham."

    "The purpose of money is to facilitate exchange. It was never intended as an article of trade, as an article possessing an inherent value in itself, and further than as representative or test of the value of all other articles."

    It undoubtedly admits of private ownership, but of an ownership that is not absolute, like the product of individual industry, but qualified and limited by the special use for which it was designed.

    And

    The power of money over every other article, arises out of the artificial character given to it by the STATE , AND NOT OUT OF THE QUALITIES OF THE MATERIAL WHICH IT IS COMPOSED.

    Bentham also argued that anti-usury laws were due to prejudice against Jews. Whipple was not frightened by the Jew trick of anti-semitism claims. Whipple said this in reply, "The real truth is this feeling which he calls prejudice is the result of the moral instinct of mankind."

    Whipple wasn't afraid of calling out the Jew.

    In other words, Bentham did not have the moral instinct of mankind, but instead was a usurer, hiding behind his utilitarianism doctrine.

    My view is that the preamble general welfare clause is direct lineage that comes through Benjamin Franklin and his experiences in the Philadelphia Colony. Franklin was definitely NOT a usurer, and was not confused on money.

    Abdul Alhazred , says: January 22, 2021 at 3:01 pm GMT • 8.9 hours ago

    The Preamble of the constitution reflects a Liebnizian metaphysic reflected in the notion of the pursuit of happiness, were are not talking utilitarianism, but a recognition that man is made in the image of the creator, Imago Dei where happiness reflects an acknowledgement that we are actually creative beings where happiness is a reflection of such creativity, above mere acquisition of 'property' as the Confederacy devolved the phrase to "Life, Liberty and Property"

    Majority of One , says: January 22, 2021 at 7:45 pm GMT • 4.2 hours ago
    @Mefobills eply distorted by Calvinistic Puritanism and its "Chosen People" mythos.

    Much of the religious fervor which dominated the American frontier in the latter decades of the 18th Century and early 19th–they called it "The Great Awakening" -- was infused with the patriarchal form of religiosity as ignited by Calvinistic tropes and memes.

    Today's cultural dominance in much of the South and chunks of the Midwest by boobtoob preachers, Dominationists and the highly heretical oxymoronical "Christian" Zioni$ts can be seen as the afterbirth of cultural Calvinism. Calvinism is Talmudic in its essence and squats at the nexus of what they like to call "Judeo-Christian Civilization".

    My preference is to employ the more objectively truthful description: the "JudieChristie MagickMindfuck.

    Mefobills , says: January 22, 2021 at 11:20 pm GMT • 35 minutes ago
    @Leonard R. Jaffee Anti-semitism card. Bentham even attacked Aristotle for corrupting Christianity.

    In Bentham's book, Bentham associates some of the positive attributes of thrift with money lending. Money lending becomes on the same plane as thrift in his worldview. An here is the coup-de-gras: Compound interest was forbidden in Bentham's day, and Bentham urged its legalization.

    A compound curve for interest is outside of nature, as the claims on nature grow exponentially. Nature does not grow exponentially. Nature and labor cannot pay the claims, and society polarizes. Jesus started his mission on the Jubilee year, as Jubilees are coded in the Bible to prevent polarization.

    If Bentham wasn't a Jew, he certainly had the Jewish spirit. Bentham was not for the common good.

    [Feb 01, 2021] Many neoliberalized US universities and colleges are greedy and have become too dependent on international students and their superior fee-paying ability compared with domestic students to finance bloated administrative staff salaries

    Covid-19 exposed some warts of neoliberalism in higher education... They want to keep those lucrative international students flooding in, after all.
    Notable quotes:
    "... We align our identities with our institutions and think in very a short-term, metric-based fashion, seeing "success" (for instance) in terms of student recruitment (tuition fees paid in). Moreover, we're encouraged above all to be global in outlook: we look forward to our perennially "busy" international conference seasons and we emphasize the global and the transnational over the merely local or national ..."
    "... our identities as academics are unavoidably embedded in a form of neoliberal hyperglobalisation. We rely on unrestricted flows of (wealthy) bodies across borders. ..."
    "... We see this form of globalisation, and the benefits that accrue to us and our institutions from it, as a form of moral necessity : something it isn't possible even to argue against in good faith. Hence our loud assent to principles like open borders and always-on mass migration. ..."
    "... Our commitment to the global as a form of moral mission has left us completely unprepared for what's currently unfolding. We are utterly unused to considering the material constraints of the economy our livelihoods depend on; that globalisation might come back to bite us; that the very aircraft that carry us across the world to conference destinations and field work sites would one day turn off the spigot of endlessly mobile bodies our careers and identities depend on. ..."
    "... In this respect, I think of this post over at Crooked Timber, where John Quiggin (an economist I have a great deal of respect for) simply cannot bring himself to confront the possibility that the open borders dream might be dead. ..."
    "... But the fact that the "export education" model was a disastrous wrong turn will take much longer to be accepted, I think, because of the widespread commitment I've been talking about here to the principle of the global as a form of moral necessity. ..."
    May 22, 2020 | www.nakedcapitalism.com

    Musicismath , April 6, 2020 at 1:04 pm

    we've had a Minsky-like process operating on a society-wide basis: as daily risks have declined, most people have blinded themselves to what risk amounts to and where it might surface in particularly nasty forms. And the more affluent and educated classes, who disproportionately constitute our decision-makers, have generally been the most removed.

    I see something very similar happening in academia. We align our identities with our institutions and think in very a short-term, metric-based fashion, seeing "success" (for instance) in terms of student recruitment (tuition fees paid in). Moreover, we're encouraged above all to be global in outlook: we look forward to our perennially "busy" international conference seasons and we emphasize the global and the transnational over the merely local or national (denigrated as narrow, provincial, and ideologically suspect).

    We like to see ourselves as mobile subjects, bodies in constant motion, our minds Romantically untethered from the confines of any one nation state.

    So our identities as academics are unavoidably embedded in a form of neoliberal hyperglobalisation. We rely on unrestricted flows of (wealthy) bodies across borders. Our institutions (or many of them) have become dependent on international students and their superior fee-paying ability compared with merely "domestic students."

    We might agree in principle with ideas of a GND, say, or take an ecocritical approach to a novel or a play, but we're certainly not going to cut back on the number of international conferences we attend. Indeed, many of us go further.

    We see this form of globalisation, and the benefits that accrue to us and our institutions from it, as a form of moral necessity : something it isn't possible even to argue against in good faith. Hence our loud assent to principles like open borders and always-on mass migration. We have to keep those lucrative international students flooding in, after all. (Not that we'd ever put it in terms as crassly material as that; after all, we don't work in university administration .)

    Our commitment to the global as a form of moral mission has left us completely unprepared for what's currently unfolding. We are utterly unused to considering the material constraints of the economy our livelihoods depend on; that globalisation might come back to bite us; that the very aircraft that carry us across the world to conference destinations and field work sites would one day turn off the spigot of endlessly mobile bodies our careers and identities depend on.

    Hence the reason why a lot of my colleagues are so lost right now. They're so used to living on a purely symbolic (or moral-symbolic) level that the materiality of this virus and its consequences seems like a crude insult. Many stubbornly hold on to their old commitments, unwilling to admit that the world might have changed.

    In this respect, I think of this post over at Crooked Timber, where John Quiggin (an economist I have a great deal of respect for) simply cannot bring himself to confront the possibility that the open borders dream might be dead.

    Where we go from here, I have no idea. But the fact that international and Erasmus students might be gone for the foreseeable future, and the major implications this will have for the financial viability or our universities, seems to be slowly sinking in.

    But the fact that the "export education" model was a disastrous wrong turn will take much longer to be accepted, I think, because of the widespread commitment I've been talking about here to the principle of the global as a form of moral necessity.

    [Jan 29, 2021] The System Is Rigged - Episode 4537- Game Stop Corp

    Notable quotes:
    "... "I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I love the smell of burning Wall Street in the morning." ..."
    "... Back in the Oughts when the fraudulent mortgages were grossly inflating Real Estate Investment Trusts (REITs), there were many instances of naked short selling to keep honest REITs down, activities I learned firsthand. We formed a shareholders organization that lobbied the SEC to enforce its laws but to no avail--the regulators were well captured and did zip. ..."
    "... There's short selling, and then there's naked short selling. Why do the markets require naked short selling? If those hedge funds already owned the stocks that they are selling short, they would not be in such trouble now. ..."
    Jan 29, 2021 | www.moonofalabama.org

    psychohistorian , Jan 28 2021 18:47 utc | 6

    Early this week a few amateur stock trading nerds decided to promote a stock that was heavily shortened by certain hedge funds. The idea was to raise the stock price of Game Stop Corp., a vendor for computer games, by having lots of small stock traders to buy into it. The hedge fund that shortened the stock, and thereby bet on a dropping stock price, would then make huge losses while the many small buyers would potentially profit.

    These people, who had joined up in the sub-reddit /r/WallStreetBets, were not driven by greed but by rage against the financial machine :

    Instead of greed, this latest bout of speculation, and especially the extraordinary excitement at GameStop, has a different emotional driver: anger. The people investing today are driven by righteous anger, about generational injustice, about what they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later, and about lacerating poverty and inequality. This makes it unlike any of the speculative rallies and crashes that have preceded it.

    The movement was successful. The stock price of Game Stop Corp. rose from some $10 to over $400 within just a few days. The short seller had to take cover under a larger firm:

    Hedge fund Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses as a target of the army of retail investors. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances.

    I'm shocked! Absolutely shocked to see that the game of finance is rigged!!!!/snark

    There have not been market fundamentals since the beginning of financialization in 1971 when money became fiat instead of gold backed. I find it interesting that it has taken 50 years for the cancer of financialization to fully compromise the host. It will be interesting to see where this goes from here.

    I think the speed of decline of empire is speeding up as noted by the increase in international investment in China.

    I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I love the smell of burning Wall Street in the morning.


    Rutherford82 , Jan 28 2021 18:50 utc | 7

    @6 psychohistorian

    "I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I love the smell of burning Wall Street in the morning."

    Is Max Keiser going after the silver market again? I bet he was posting on r/Wallstreetbets to stir things up!

    karlof1 , Jan 28 2021 18:50 utc | 8

    Back in the Oughts when the fraudulent mortgages were grossly inflating Real Estate Investment Trusts (REITs), there were many instances of naked short selling to keep honest REITs down, activities I learned firsthand. We formed a shareholders organization that lobbied the SEC to enforce its laws but to no avail--the regulators were well captured and did zip.

    We even ran full pages ads in the NY Times and WaPost to add visibility to our justifiable outrage, which was well proven when the bubble burst.

    But Obama didn't do his job and enforce the law, and the entire mess is far worse now. This episode epitomizes the amazing amounts of corruption masquerading as well regulated markets and an equitable financial system.

    I support Hudson's debt forgiveness for the main reason it will bankrupt the debt holders--the Financial Parasites--who are also the beneficiaries of the corrupt system; and with their destruction, will allow for the rise of the Public Financial Utility that will restore law and order to that realm of the economy. Yes, this must be seen as yet another episode of the longstanding Class War, one of the most brazen ever.

    lysias , Jan 28 2021 19:41 utc | 18

    There's short selling, and then there's naked short selling. Why do the markets require naked short selling? If those hedge funds already owned the stocks that they are selling short, they would not be in such trouble now.

    Bemildred , Jan 28 2021 20:20 utc | 24

    It's not over yet:

    Triden , Jan 28 2021 20:55 utc | 29

    Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances.

    -b

    How Robinhood was rigged:

    Robinhood sells its orderflow to Citadel for execution. Citadel then chiselled the retail investor for pennies per trade by frontrunning (think high freq trading) before execution of retail order, inflating the price and cheating the customer. Citadel bailed out Citron, essentially inheriting the short position. Citadel then threatened Robinhood with refusing payment for orderflow

    [Jan 27, 2021] Why financial oligarchy loves neoclassical economics

    Jan 27, 2021 | www.nakedcapitalism.com

    Sound of the Suburbs , January 27, 2021 at 4:00 am

    The globalists found just the economics they were looking for.
    The USP of neoclassical economics – It concentrates wealth.
    Let's use it for globalisation.

    Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
    "a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped"

    This is what it's supposed to be like.
    A few people have all the money and everyone else gets by on debt.

    [Jan 26, 2021] Appeals to bring more young Russians to US as 'soft power' tool could backfire, there's no guarantee they will like what they see

    Jan 26, 2021 | www.moonofalabama.org

    vk , Jan 25 2021 17:23 utc | 130

    Trump's decoupling dream come true.

    --//--

    Appeals to bring more young Russians to US as 'soft power' tool could backfire, there's no guarantee they will like what they see

    McFaul says that "Biden's team should come up with new ways to grow these ties [with ordinary Russians] even over Putin's objections. In the long run, forging and sustaining links with Russian society will undermine anti-American propaganda as well as American stereotypes about Russia."

    To this, McFaul adds that, "The new administration should make it easier for Russians to study in and travel to the United States," and urges European states to do the same.

    My take on this is very simple: the West cannot even absorb their own youth anymore. What makes them think they can absorb Russia's?

    Besides, it's not so simple an operation to attract young people to your country to study. The logistics are very complicated, and it requires a lot of resources not even counting the promise of jobs within your own country (in the case of STEM students). Even the brain drain from countries with large populations such as China and India don't surpass much above the low to mid six digits. And those programs take time to gain traction - decades in most cases. And all of this already taking into account the fact that your country still has to be an attractive place.

    Discontent already exists in Americans with Indian STEM from H1B1 visa program. As the excess population rises, so will resistance to new influx of immigrants - specially high-skilled ones. This will snowball to a stage where Americans become second-class citizens in their own country (as you would have to guarantee the jobs for the foreigners in order to sweeten the deal).

    [Jan 26, 2021] How will the USA regain its advantage in this world?

    Decimation of education by neoliberalism and neoliberal brainwashing is the root of all evil.
    Jan 26, 2021 | www.moonofalabama.org
    uncle tungsten , Jan 26 2021 0:28 utc | 168

    How will the USA regain its advantage in this world?

    I was looking back at some earlier reports to gain an insight into the means by which the USA gave the game away and the means that might restore its place in the economic world. It has allowed itself to be completely captive to global private finance AND ownership of the keys to its salvation. If it dfoes not nationalise its key industries then it can rest assured of its doom. IMO it is now almost impossible for it to nationalise a pizza parlour let alone an education or engineering sector.

    This (posted here before) from Strategic Culture of November 2020 "How a Wise Decoupling May Be a Good Thing for Both China and the West". It is worth reconsidering from time to time.

    If the USA is to survive the oncoming collapse and break free of its apocalyptic war agenda, then certain realities WILL have to occur. These realities include (but are not limited to):

    1) Regaining its lost industrial potential, with an emphasis on the machine tool sector which the west once enjoyed as a world leader

    2) Regaining the lost scientific and technological capacities which the USA once had when it still valued productive thinking under the days of JFK and NASA

    3) Regaining a grasp of education which values productive citizens over consumer subjects

    4) Regaining control over national credit under federal banking, dirigisme and other long-term investment practices that rely on regulating Wall Street speculation and other unproductive forms of banking.

    How might these vital capacities be regained?....

    The USA is incapable of nationalising its education sector and is incapable systemically of having the patience to await the benefits. It will continue to sustain an education sector that is designed to transfer $$$ in taxation directly to private corporation pockets and to do so by reducing the the number of salary earners between the input $ and the $ that end in private corporation pockets. The private corporations will continue to perfect the swindle of returning the least possible effort in return for those $$$.

    Ditto for defence spending and every other sector.

    The USAi is hoist by its own petard and has a dull brained president surrounded by ideological obsessives, cultural paranoiacs, a narcissistic Congress and Senate. It will not be capable of restoring its real economy and will continue to imagine itself as a world leader. It will berate and negate and cancel all unorthodox thought from those that favour nation building.

    The rest of the world's nations had better take note. Clearly many have.

    [Jan 26, 2021] When guys like Michael Saylor put a half a billion into bitcoin they have done their homework. Seems to me a scam is an operation containing a lot of lies

    Jan 26, 2021 | www.moonofalabama.org

    uncle tungsten , Jan 26 2021 1:11 utc | 172

    c1ue #118
    I actually talked about this with Kuppy last week.

    He considers HFT a problem but not crippling; he says they cost him $10K to $25K a day but apparently this isn't enough to deter his hedge fund activities. He said that up to 70% of trading volume activity in any stock is HFT (!).
    As for scam: well - the value of the front running exists only so long as the herd is in the market. Every single market crash - whether bitcoin or the stock market or whatever - sees the vast majority of players exit (or bankrupt). At that point, the trading volumes and numbers of people participating plummet dramatically.
    How valuable do you think RH's model is then?

    Sounds to me that HFT is a scam in itself. Am I to believe that algorithms trading against each other repetitively at high speed is anything other than machine driven gambling on one algorithm's interpretation of the behaviour of another algorithm, mostly outside of the human buy and sell in the market place. Are the humans just strapped on for the ride through a cabal of trading companies?


    psychohistorian , Jan 26 2021 1:29 utc | 173

    @ uncle t # 168 who wrote
    "
    I was looking back at some earlier reports to gain an insight into the means by which the USA gave the game away and the means that might restore its place in the economic world. It has allowed itself to be completely captive to global private finance AND ownership of the keys to its salvation. If it does not nationalize its key industries then it can rest assured of its doom.
    "

    I continue to posit that the key industry that needs to be "nationalized/made totally sovereign" is finance. If humanity can follow China's lead, the motivations in the other industries will revert to doing what is right, rather than what is profitable.


    In regards to your HFT comment in # 172, you have calling HFT a scam correct. It is programmed/manufactured theft under the guise of AI.

    Thanks for your comments.

    uncle tungsten , Jan 26 2021 1:32 utc | 174
    arby #110
    When guys like Michael Saylor put a half a billion into bitcoin they have done their homework. Seems to me a scam is an operation containing a lot of lies. I don't see how bitcoin falls into that category.

    As far as a Ponzi scheme I also do not see the connection. It is nothing like a Ponzi. There are no promises of big returns or large dividends.


    When people follow 'guys like Michael Saylor [and see him] put a half a billion into bitcoin they [think] have done their homework [and follow like fish chasing a lure] THEN they have been sucked into a ponzi scheme where the lure is a fast buck if they follow the (smart?) leader. Then the smart leader progressively sells out at a sweet peak and the chumps watch it dip for a month or two. Unless of course there are lots of paid journalists and bloggers and facebook praise singers pumping the lure of the endless profit of bitcoin.

    Sounds like rumours of gold in them thar hills.

    There are a large number of lies (or exaggeration?) in bitcoin and all spun within a sheath of mystery and complexity and even 'mining' to smear some credible lipstick on the scheme.

    There is a sucker born every minute and they invest in BS and love a veneer of mystique and bitcoin falls squarely into the category of lies and scams and fancy imaginings and the lure that suckers are forever chasing. Yes, people buy and sell and some make a profit - same as any ponzi scheme.

    While the BS is pumped the ponzi is inflated.

    [Jan 25, 2021] The Old Lady Who Swallowed a Fly

    Notable quotes:
    "... It's really quite simple actually. The same folks who did the 911 false flag attack crime are behind the virus hoax. Their ends have never changed; to acquire power and control (which they certainly already have) And to use any means no matter how ruthless and murderous to keep it. ..."
    "... When you control all the money in the world, even if you don't have truth on your side, you have immense power. ..."
    "... Forget the 99.99% Vs 00.01%. Imagine a few hundred who are running the Covid scam and vaccine poisoning programme and the couple of million opposing it. They are continuing. The opposition, in the meantime, is living on the internet posting 'truth's and pictures of Hitler. ..."
    "... Just caught some more mainstream pish on how Fauci blamed his "country's ineffective pandemic response on an American "anti-science bias." He called this bias "inconceivable," because "science is truth." ..."
    "... So Fauci stated "science is truth." – but that is what makes "Fauci" a charlaton in the eyes of real scientists; science is ever changing, evolving, ever questioned, enhanced and even proved incorrect. Today's theories (what he believes to be the truth), will be smiled upon in the future. ..."
    Jan 25, 2021 | off-guardian.org

    Off-Guardian commenter, Maribel Tuff, expands their comment Above The Line.

    Bringing together the US emergency bank lending crisis and the now massive Covid response, I've concluded that one of the main reasons it is happening, apart from the corporate looting, is because of a historic event, the USA's economic collapse and the dollar's demise, which started just weeks before this Covid operation kicked off, and has been put on hold by a world wide manufactured economic 'freeze'.

    THE END OF 'EXTEND AND PRETEND'

    A few months before Covid appeared, the Fed were busy pouring literally trillions of dollars into the US banks, to prevent inter-lending bank-runs which were starting to develop. These were the same tectonic fissures that developed prior to the 2008 crisis, where the banks became so distrustful of each other's solvency, that they massively increased interest rates to each other to factor in the risk. If unsuppressed the lending rates would continue to rise, laying a path to bank failures and a contagion which would eventually derail the economy and undermine the dollar itself.

    In September 2019 the Fed intervened in the repo. markets for four consecutive days, pumping $75 billion per day into the banks, as the inter-banking interest rate – the repo rate – peaked at a terrifying 10% [ 1 ]. If this level were allowed to contaminate regular highstreet lending, it would cause widespread debt defaults & insolvencies.

    The dangers are far greater today because, unlike in 2008, Quantitive Easing (QE) has pushed the Fed to the limits of its credibility, and are forcing them into causing some serious currency debasement. If they continue with the forms of QE they are shackled to, then dollar debasement becomes a certainty in a US economy that is far more fragile & indebted generally and less able to cope.

    The Fed must have known for a few years that QE was not returning the economy to economic normality, and that they were still trapped in the solvency crisis of 2008. Knowing this, the Fed were prepared for the latest crisis. They had made it possible to inject hundreds of billions of dollars into the banking system discreetly, unlike in 2008, without any additional Congressional fanfare, via the Financial Stability Oversight Council , formed in 2010.

    They had given themselves almost unlimited funds and the resources of the entire government if necessary, to reassure the banks that collapse was impossible. This 'rescue operation' was being played out, relatively unreported except in the financial press, only weeks prior to the Covid flu appearing on the world stage. Issuing

    .. cumulative repo loans totalling more than $9 trillion to the trading houses on Wall Street that the Fed had been making from September 17 of 2019 – months before the onset of COVID-19 anywhere in the world [ 2 ]

    Unlike in 2008, this second use or continued use of mass Fed stimulus is not a new untested idea and, by using it again or continuing to use it more intensely to stabilise the banks, it would eventually lead the markets to conclude that we are locked in a never ending cycle of stimulus, which will inevitably end in hyperinflation and dollar collapse.

    That is an uncontroversial economic fact, and will be the conclusion of the Fed's current policy. In that context, an external 'event' could be critical in taking the spotlight off US finance and its woes.

    The Fed will not want to exit repo operations until they are absolutely certain the market can stand on its own two feet. [ 3 ], [ 4 ]

    United States Overnight Repo Rate was at 0.11 on Friday January 15

    https://tradingeconomics.com/embed/?s=unitedstareprat&v=202101212300v20200908&h=300&w=600&ref=/united-states/repo-rate
    source: tradingeconomics.com

    But, as they well know given their experience over the past 10 years, the markets will never be able to stand on their own feet in the current economic model. Now not only companies are being kept afloat by low interests rates, the US itself is dependent and kept solvent by low interest rates.

    The fed has injected or made available over 9 trillion dollars to the banks in only 6 months leading up to March 2020, that is over 40% of the USA's GDP, prior to Covid and represents nearly a 40% increase in the USA's national debt!

    So it is becoming very obvious that we are at the end of this particular monetary road, the 'extend and pretend' policy is finished and there is nothing in the economic tool box that can stall the inevitable. Only an external 'divine' intervention could, even temporarily delay the dollar's collapse. As an aside, I should add, although they may be affected later, this is not happening in European or Asian banks, only in US banks.

    THE DIVERSION

    In my opinion, the US security agencies picked a scenario off the shelf, something they have been justifiably rehearsing for years, the response to a deadly virus, which would produce the required financial shutdown, suppress bank activity, and create a world crisis big enough to eclipse the US economic crisis and produce a 'flight to safety' into the dollar, facilitating an economic induced coma, allowing time, a breathing space and justifying massive emergency QE injections into the US and world economy.

    It could be sold as a period during which a restructuring of the world banking system could take place and perhaps reschedule debt as well as redefine the mechanisms of a new reserve currency.

    This is what I think 'The Great Reset' really is about. It is being painted as something intricate and nefarious on every level, but it's possibly more utilitarian than that, a necessary dialog, where the subject of that dialog is sealed from the public, justified by protecting our worried and panicky ears, and which concerns almost all western world leaders.

    I'm sure a major false flag terror attack would have been discussed as an alternative to Covid, but the US is in no fit position economically to respond militarily, and without a military response to a terror attack the US would fear looking weak. Although Wars have been thought to resolve many an economic crisis, it is just as likely, in this instance, that a proxy war with Russia or a direct war with Iran would precipitate a dollar collapse, rather than create growth and a flight to 'safety'. China would no doubt gleefully humiliate the US during such a conflict. So I speculate that major wars, as an economic solution, are off the table, at least until this crisis is resolved.

    Creating a virus out of thin air is a cruel and vicious deceit, but the Fed will no doubt have claimed to its allies that it is far less painful than the total economic implosion we will face in the brewing economic collapse, where financial contagion from the US would cause most western financial institutions to become insolvent, debt would remain unpaid, trade would cease, asset values would crumble, bank machines stop, riots start, martial law be declared, and in many ill-prepared, import-dependent countries like the UK, rationing and eventually hunger would begin.

    This is the threat the fed would have made to their allies, as we know for a fact they did in 2008, when asking for a united world central bank stimulus, making it appear vital to world economic survival.

    They would have claimed that this time around the economic dangers are of such a magnitude that they even persuaded their foes, Russia and China, to partake in the hoax, because they are also reliant on continued banking & economic stability, and would not be willing to risk political instability at home caused by a second world economic depression.

    By creating this suspension of an economic collapse, the US has cleverly turned the dominance of the dollar into a matter of international survival, effectively holding the world to ransom and blocking the baton of world reserve currency being dually transferred over to the next economic ascendant, China, and where the US has effectively engineered themselves a seat amongst the judges at their own bankruptcy hearing.

    Believing this to be the case, I am less confused as to why most of the USA's allies were so helpful and so consistent in making this Covid operation happen, and I have concluded it is their belief in the integrated nature of the financial & currency markets and the threat of economic collapse posited, as in 2008 by the Fed, that is causing their complicity.

    MUTUAL SECRECY

    As each irrational, destructive lockdown measure is implemented I am quite sure that our politicians, the very few that are in the know, say to each other: 'we are lucky because "lockdowns" are as nothing, compared to the calamity that would overtake us in the event of a dollar-induced economic collapse!' This, for me, explains their apparent insanity, lies and the internationally co-ordinated nature of their response. They too are acting out of fear, not for a virus, but for fear of anarchy and, by extension, the very real threat to their own lives that would result.

    The secrecy surrounding this operation is wholly consistent, because it is in nobody's interests to break ranks. If anyone exposes what is really happening to the US economy then it would precipitate the run on the banks, and then the dollar, that they are being told would lead to a world economic catastrophe.

    To explore this hypothesis, we can look at the varying responses of the world players, and measure their reluctance or complicity in the scam, because at this turning point in history, during these shifts of power, loyalty is not guaranteed.

    Japan has been strangely reluctant to take part, indicating to me their brooding irritation with US hegemony, which has been growing amongst their population for some years and expressed through the Osprey protests . It looked at one point like they were flirting with the idea of ignoring Covid altogether. Prompting the US to 'invite' Japan to join 5-eyes, perhaps to exert more direct control over them, via their security services?

    Russia and China are reluctantly playing along for obvious economic reasons, but again we see reluctance to go full hog, despite the attraction of introducing authoritarian measures at home under the cover of Covid. Russia has even invented a non-existent vaccine for the non-existent virus, giving themselves an instant opt-out when required. Whereas China is preferring to just stop testing, and ignore the 'crisis' altogether, except for the odd statement about how dangerous it all is.

    Non-western Africa, is not taking part at all, in Nigeria there are very few cases, probably because they are out of the loop on what is really happening, and see little evidence of a virus in their population.

    Germany although physically occupied by the US, like Japan, have a confidence and independence that marks them apart from other vassal states. Having 'found' far fewer cases of Covid, they have tried to preserve their precious economy from any serious harm for as long as possible, demonstrating a cheekiness, consistent with their building of the Nord-stream pipeline project to Russia, ignoring the US's repeated demands for them to stop.

    In contrast, the USA's closest, most supine of allies, & the 5 eyes states, are enthusiastically taking part, hyping the virus story to the n th degree of absurdity. Notably the UK, France and Australia, each week pushing yet another absurdly fascist response to a non-existent problem to scare their population stiff. In my view each allies' response is calibrated to their financial dependency on the US and how 'captured' their leaders are to US interests.

    On the political and media front, alternative media, doubtless spurred on by seeded stories and certain controlled opposition, unwittingly fans these flames by speculating on various kingpins and ideologues central to the plot, like Bill & Malinda Gates, and playing up fear stories of Marxist tyrannies, Communist takeovers, compulsory vaccines, tracking chips and various accusations against the dangers of 5G – targeted for being predominately European and Chinese technology.

    The end result is a population left either paralysed by fear of the flu, or in terror of a rising 'Marxist Fascist tyranny' run by 'jewish globalists' and oligarchs. Either way, everyone is in too fearful a state to logically assess what is really going on around them.

    I'm sure, in the dark bowels of Langley, Virginia, this scenario has been pre-rehearsed and stress-tested for years, and pieced together from a huge portfolio of coups and psychological terror operations from around the world.

    Perhaps with lessons learned from Climate Change where, as with the weather, the common flu can easily be weaponised. In the case of Covid via a swiftly implemented 'testing' regime, simply testing for the common cold and producing millions of false positives, and a hysterical, totally unquestioning mainstream media.

    COVID OPPORTUNISM

    International Covid panic created some short term, but worryingly for the USA, short-lived 'flight to safety'. 'International crisis' is the USA's traditional and most effective tool to protect the dollar: normally US/UK media-manufactured. It was used to bolster a flagging dollar via the media-created 'Euro crisis' or 'Greek debt crisis'. A series of hysterical panics made 'real' by US and UK financial press, quickly making the USA's economic woes old news, and reducing the world reserve holdings of the Euro in only a matter of months.

    Along with the 'flight to (dollar) safety', Covid has offered the opportunity to freeze the USA's banking collapse with massive injections of cash. $9 trillions was available to US banks up until March 2020, but in addition to this the Fed produced $5 trillion in economic stimulus to the wider economy and a further 5 trillions recently.

    Without this 'external threat' – a 'killer virus' – this amount of stimulus would have immediately caused panic and threatened dollar credibility. However, with the virus narrative and the world-unified stimulus response to the 'Covid pandemic', this modest flight to (dollar) safety, along with the massive cash injections, looked justified and sensible.

    It also looks to me like those in the 'dollar economic zone' – if there is such a thing – have gone along with their own impoverishment and have wrecked their own economies under the cover of Covid, to save themselves from a perceived greater economic catastrophe, bank contagion, on the basis of what I believe is being secretly told them by the USA, and based on what they have been witnessing in the US banking system prior to March.

    It could easily be argued that we are being unwittingly drawn into a conspiracy to protect the dollar and US hegemony, under the cover of Covid, that is not in our own best long-term interests at all (currently being called the 'great reset').

    Like Brexit and like the War on Carbon, I believe that if an operation or manufactured event seems to offer multifaceted advantages to the USA and their Corporate & military elite, then that operation has revealed its origins.

    As it is the case with Covid, not only is there a freeze on the US economic collapse, but US Corporations and Internet services are benefiting massively from the 'Covid illusion'. Something that must be getting more obvious by the day, and must be giving honest foreign leaders concerns as they see their retail sectors ravaged by Amazon and their cultural institutions replaced by Netflix, Apple TV and Amazon TV.

    And the proposed 'salvation' involves paying billions to US Pharma, for, at best, a very doubtful vaccine. The least-honest politicians can no doubt engineer their 'shutdowns' to preference US corporations, whilst acting as the viceroys of Empire.

    This looting could just be a side-show to the main event of dollar 'transition' or collapse, or it could be amongst the main aims of 'Operation Covid', it is difficult to tell, but it looks like the rest of the world is being looted by US Corporations and their home grown small-to-medium-size businesses bankrupted, with vast additional profits flowing to the USA's richest, where we see the stella rise in the wealth of America's robber barons.

    From renting taxis with Uber to replacing hotels with AirBNB flats, holding meetings on zoom, spending 'cash free' via Visa, MasterCard et al and the Paypal cartel, ordering food on-line with Uber eats and destroying local culture, all are being forced on a gullible world public during the Covid selective collapse. It should be dawning on everyone by now that Covid is a very, very Neoliberal Corporate virus, strangely working in the interests of a continued US Corporate neoliberal rollout against our own national geopolitical interests.

    It is not only the Corporates that benefit from US 'operations' like Covid, the security state also demands their share of the spoils for assisting in and facilitating much of the operation. US tracking apps, social media and communication platforms are being forced, as a parasitical middle man, into every walk of our lives, taking a thin slice off everyday activities, like an America tax.

    The details of the implementation of the Covid operation aside, it is possible that many inside the system regard the 'Great Reset' as not a conspiracy to oppress us, to exploit us and destroy our lives in a Marxist tyranny as many believe, but rather regard it as a necessary adjustment to an unbalanced economic system.

    To see it like that we must believe that the current system is fundamentally flawed and that good faith solutions are being sought. I think 'The Reset' is seen by many honest brokers around the world as a genuine platform to resolve flaws in the current world economy, and to manage a transition from the dollar, in a controlled fashion. We should not always think the worst motives of everyone involved.

    Having said that, I have no doubt that the US is busy trying to hijack the agenda to preserve its own supremacy, even during its climactic demise. The US Military industrial complex will be suspicious of any direction not determined by them, and I'm sure in Washington, Brussels and Beijing there is a battle over the measures and direction we need to take.

    Like it or not, there may be very good reasons for these discussions to be held in secret, and we are left with only secondhand hints of the battles being fought over our current economic future; like Universal income, a shared international reserve currency, digital currencies or a cashless society, perhaps required through exchange controls or price fixing, to fight coming hyper-inflation?

    Many US shills will be telling the world, that this is a 'crisis of capitalism', a crisis of western civilisation, and that we all need to preserve the US economy & dollar supremacy to save the world.

    I personally believe the US has set us up during this crisis, like they did in the last in 2008, where they dumped all their bad debt on European banks to 'share' the crisis out. Working on the principle that: a problem shared is a problem halved, perhaps. Even if we are in this crisis because of a US collapse, and the rest of us could survive relatively unscathed. A 'Reset' does appear to be one route that enables a slow deflating of the economic bomb sitting under the US and which may affect the rest of us badly, if it goes off.

    " SHE SWALLOWED THE SPIDER TO CATCH THE FLY;
    I DON'T KNOW WHY SHE SWALLOWED A FLY – PERHAPS SHE'LL DIE "

    I reference the nursery rhyme as a cautionary tail, because this all started with the relatively normal economic recession of 2007, which if the USA had allowed to burn through its economy, would have been resolved in only a few years, and we would be living in normal times now. But they didn't. The world's central banks were persuaded to take measures that caused greater long-term harm, which in turn has led, in my view, to the 'Covid solution', a provocation intended to temporarily justify even more of the poisonous QE and low interest rates that didn't work before.

    Whilst perhaps sold as a 'fire-break for a more long term solution to be found, I don't see much evidence that the 'fire-break' is being used well. It seems more like a pause for the always shortsighted American elites to loot as much as is possible from our states' coffers before an economic tsunami hits.

    A SELF-INFLICTED PROBLEM

    I also believe the US never needed to be in this grave position it is today. Its problems are very much self inflicted. Simply taxing its wealthy and cutting its outrageous military spending would have averted a dollar crisis, leading instead to a slow drift from the dollar over a few decades as China took up the strain. But that is another story related to America's ideological, political and philosophical bankruptcy and scleroses, that has increasingly driven them into an economic ditch over the past 45 years.

    The Covid operation itself is a beautiful metaphor for the original banking crisis, which triggered the Fed to use quantitive easing (QE) – a far, far more damaging response than the original crisis itself, just as the lockdowns are far, far more damaging than this strain of flu, naturally occurring or released deliberately as a marker.

    If a consensus resolution is not found quickly for the transfer or sharing of the world reserve currency, as the dollar is about to collapse, I have no doubt we will be required to 'swallow' a more drastic intervention than Covid to save the US economy and the dollar, each solution proving more damaging than the last And of course, as the rhyme goes, we will eventually swallow a 'horse' and be 'dead of course'.

    If I am right guys, in one respect you can breathe a sigh of relief: world tyranny, forced vaccinations with harmful DNA changes, sterilisations, and mass genocide are not the main aims of this 'operation'. They may be the end result of it, if we are not careful, but I don't think they are the main aims.

    The US is trying to stall dollar relegation using the Covid operation, and make it a major event, when previously the transition from old to new world reserve currency would have gone almost unnoticed by most of us. The British ceded the Pound's world reserve currency status relatively quietly after WWII, under US pressure to float the pound.

    It is perhaps a measure of the utility that is now offered by the world's reserve currency, to facilitate the uncontrolled looting of the rest of the world's economies, that it is now such a prize and so hard to surrender. Without the dollar and its world reserve status, enabling the US to print pieces of green paper in exchange for real goods, the US would certainly be bankrupt.

    But that is not our fault and it is not for us in the rest of the world to save them, especially since it is their ideology that has inflicted so much harm on their own people and the rest of world.

    What we are witnessing is an attempt, through foul means, by another once great Empire to postpone the inevitable. To fight off being consigned to obscurity.

    So we exist in that mad time, that time of collapse and chaos before a new order asserts itself, which could last a month or 100 years.

    You can view Maribel Tuff's original comment here . The author wished to remain anonymous.

    anti_republocrat , Jan 25, 2021 9:51 PM

    I was initially not very aware of the liquidity problem that developed in September, 2019, but I became aware of lots of weirdness quite early. Some examples are the FDA shutting down the testing Dr. Hlelen Chu was conducting on stored sample in January. I concluded that the federal government did not want her detecting SARS-CoV-2 in samples collected in 2019. Also, in mid-March, Ben Swann released a video discussing the invalid comparison of Covid's CFR with flu's IFR. If an apples to apples comparison had been made, people would have known that flu is far more dangerous than Covid-19. A third weirdness was the CDC's changes to death certificate criteria exposed by MN state senator Dr. Scott Jensen. He is now enduring harassment from the state medical board and has had to defend his license to practice in MN. About the same time, I became more aware of the liquidity issue and concluded that obscuring that was a prime motivator for hoax, but there were several other motivations. Not all participants in an event necessarily share the same motivation.

    It became obvious to me early on that the Gates/Fauci/WHO/HHS crowd was lying about Hydroxychloroquine in order to boost vaccine development. It was hard to link that interest to multiple state governors deliberately committing genocide, but a FB friend yesterday clue me into this article about the power and control of Anthony Fauci throughout the medical establishment: https://kevinbarrett.heresycentral.is/2020/06/mccarthy/ Fear of such power may also be the reason that the FLCCC Alliance affiliated Eastern Virginia Medical School has disfavored HCQ. They clearly believe, probably with good reason, that Ivermectin is better, so they don't want to get smeared with HCQ while they're pushing an even better alternative.

    The third motivation is the desire to be rid of Trump. Trump was many bad things, but he was also opposed to the US being controlled by an international globalist, technocratic Deep State. He thus had opponents all over the West, not just in the US. Members of the Deep State were in a perfect position to make sure the funders and controllers of the Democratic Party apparatus were aware how they could use a pandemic and lock downs against Trump.

    I'm sure individuals who participated in the hoax had varying levels of awareness, as Ken McCarthy explained when interviewed by Kevin Barrett in the link above. Some actually believed the Covid-19 narrative. Some were afraid to speak out, seeing the retribution faced by others. But many were well aware of what they were doing, even to the point of deliberate eldercide.

    It's a good thing most of my life has passed, because death is the only cure for me. No amount of de-programming or exposure to rats will make me unsee what I've seen.

    Soros , Jan 26, 2021 12:23 AM Reply to anti_republocrat

    The US with the largest military on the planet surrendering power to 'an international globalist, technocratic Deep State."? I don't see that as a choice any US president would make, or is making. Why would they, they hold all the cards and have created in their minds the greatest empire in History.

    If there are two alternative views of the future for America, one being pursued by Biden and an alternative by Trump, both will involve American supremacy and control.

    Norman E Anderson , Jan 25, 2021 8:34 PM

    The Solution: A Global Rush to BitCoin.. pump BitCoin to the Maximum.. then dump it all into their "LIBRA DIEM" just waiting to be offered at the right time.. all to Fund the "balanced ERA 56 Per Diem Stipend" of the New Global Serf Class

    Soros , Jan 26, 2021 12:25 AM Reply to Norman E Anderson

    Bitcoin will fail in the face of the e-yuan, following dollar collapse. China is way ahead in making their digital currency official.

    Lone Wolf , Jan 25, 2021 7:51 PM

    This article could portray the absolute reality of the world situation but it will only be read by 99.99999% of the world's population. Of that 0% will be capable of acting positively in support of it.

    This applies to every article that appears in OffGuardian. Words hold the ephemeral value of 'chip paper', they are incapable of effecting a solution to a problem that cannot be resolved by words alone.

    Understanding this lies at the root of the REAL solution.

    paranoid goy , Jan 25, 2021 1:20 PM

    You know a thing as a simple truth by it being simple without being simplistic. But the Bolsheviks never let a good crisis go to waste, so keep fighting Baal Gates' holy water!
    Excellent post.

    JdL , Jan 25, 2021 8:49 AM

    "Off-Guardian commenter, Maribel Tuff, expands their comment Above The Line."
    Who are "they" in this sentence? Please don't tell me this is some kind of genderless BS, using the plural to mean singular just to avoid – GASP! – implying whether someone is male or female.

    Fact Checker , Jan 26, 2021 12:13 AM Reply to JdL

    I took it to be a deliberate use of a gender-neutral pronoun not out of political correctness, but because it is an understood pen name and there's no reason to believe the writer is one sex or the other. (Of course, it is still confusingly plural.)

    Harry Rogers , Jan 24, 2021 11:29 PM

    A couple of notes from history.

    After the Vietnam War ended and a number of years later to buy anything in Vietnam you needed lots of the currency called the Dong.
    Gradually it wasn't called the Dong they were called "bricks". When you went to buy you would ask "How many bricks?". Now a brick was about 100 Dong notes.

    After the second world war in Germany some peole actually carried their Recih Marks in a wheelbarrow when they went to buy something like bread etc.

    Today the world debt is $57,917,909,049,231.

    The simple thing about debt and money is that its all an illusion created for the benefit of a robotic universe that needs to believe that the piece of cheap paper I hold in my hand is of some value.

    Also the US owes China owes Russia owes The EU owes Japan owes the UK owes ad infinitum. See the silliness of it! Ooh lets panic what if China wants it money back ? Um not possible and anyway its just numbers on a page.

    What has real value?? Find out when life becomes live or die.

    therevolutionwas , Jan 25, 2021 1:13 PM Reply to Harry Rogers

    gold and silver for one

    facts are fukt , Jan 25, 2021 2:20 PM Reply to therevolutionwas

    Precious metals are not edible or useful unless you consider jewelery and semi-conductors to be essential items.
    Why do gold and silver have "real value"?

    bypassing yr lame filter , Jan 25, 2021 2:22 PM Reply to therevolutionwas

    Precious metals are not edible or useful unless you consider ornaments and semi-conductors to be essential items.
    Why do gold and silver have "real value"?

    bypassing yr lame filter , Jan 25, 2021 2:25 PM Reply to bypassing yr lame filter

    The spam fitler (spelling deliberate) here is obviously written by a member of the Borg as you cannot even use words that contain the three letters j,e, and w in succession. Which is why I had to write "ornaments" instead of the more exact name for shiny things worn as ornaments.

    Soros , Jan 25, 2021 4:03 PM Reply to therevolutionwas

    Gold will be confiscated by your state as it was in the 30s, as soon as the currency crisis kicks off.

    Tony , Jan 25, 2021 4:15 PM Reply to Soros

    That's why you should own it in the form of legal tender, such as sovereigns and britannias.

    Tony , Jan 24, 2021 9:08 PM

    This is a crappy piece of writing which steals the correct economic analysis of people like Jim Sinclair, Bill Holter and others, and warps it into the jack/jim (and their one million aliases) trolling which has blighted OffG for months. This was obvious when it appeared as a series of btl's recently. If anyone wants the full picture, they just have to watch Bill and Jim's videos on youtube and elsewhere, where they make it abundantly clear that this is a globalist problem, the people behind it don't fly flags, and they are only interested in power through money and economic control.

    Arby , Jan 24, 2021 1:26 PM

    "This is what I think 'The Great Reset' really is about. It is being painted as something intricate and nefarious on every level " The focus is narrow (but I appreciated the interesting information) and, it seems to me, the author is here expressing an awareness of that flaw. There's lots of speculation here as well and while I have no problem with that, a humble approach would involve the admission of that fact. Why was Japan reluctant to jump on the mankind-killing bandwagon? The author cites disaffection on the part of the Japanese population. That tracks. But we also know that Japan wanted to have their Olympics and thought that maybe they still could. Is Maribel certain that that wasn't the case? It wasn't the Japanese people who turned on a dime. It was the government. The Japanese government finally realized that the Olympics, which it wanted (for the prestige and the economic repercussions of that I suppose), were not going to go ahead. On a dime, it suddenly viewed corona as a super dangerous mankind-destroying bug and issued proclamation after proclamation in its sudden supercharged flight down the road of fascism. Until then, while it acknowledged the (non existent) Sars CoV 2 / covid 19 reality, it was not bothered by it.

    See "How is Japan Reacting to the Crisis? – Questions For Corbett #507"
    and "How is Japan Reacting NOW? – Questions For Corbett"

    messenger charles , Jan 24, 2021 11:24 AM

    Don't agree with everything you said, but nevertheless an informative article and firms up much of what Catherine Austin Fitts has been saying:
    https://www.bitchute.com/video/RpRAvjoxVDCQ/

    Tom , Jan 24, 2021 10:49 AM

    "Whereas China is preferring to just stop testing, and ignore the 'crisis' altogether, except for the odd statement about how dangerous it all is."

    Maribel, can you list a reference showing China has stopped or reduced testing?

    Z=Anon , Jan 24, 2021 2:09 PM Reply to Tom

    See comments below by others regarding PCR testing in China.

    Sarah Jones , Jan 24, 2021 10:27 AM

    They have prevented new relationships from beginning and erased those kids. It is genocide from the ground up. Even couples are not likely to have kids under such uncertainty. The very opposite of their claim of "saving lives". Those that do are being abused more than before with masks during child birth and keeping the father out. Their relationship being sabotaged with trauma from the beginning and then further trauma and destruction of the family with parents involved in assaulting kids with "vaccines".

    https://www.bitchute.com/video/q1jmVOMYPzpm/

    Sarah Jones , Jan 24, 2021 11:10 AM Reply to Sarah Jones

    Jeanice Barcelo explains how hospital birth is ritual trauma abuse to destroy the family and how ultrasound is to destroy the eggs inside those babies so they are targetting a generation ahead. It is satanists/ abortionists/ psychopaths behind covid not economists. It is trauma to harm love and damage those kids and their future relationships to induce further trauma. They said toilet paper was selling out as an inside joke about the young jerking off to porn during "lockdown" and "social distancing".

    https://www.youtube.com/embed/adsc3l3vwf8?version=3&rel=1&showsearch=0&showinfo=1&iv_load_policy=1&fs=1&hl=en-US&autohide=2&wmode=transparent

    bypassing yr lame filter , Jan 25, 2021 2:29 PM Reply to Sarah Jones

    Abortion is for each woman to decide on, not your false god and his pedo-satanic priests.

    messenger charles , Jan 25, 2021 4:34 PM Reply to bypassing yr lame filter

    Abortion is just fine if you want your ethnic group annihilated and erased from the face of the earth.

    Isaiah 3:12 (MCV) As for my people, children are their oppressors (infantile Cultural Marxists), and women (Marxist feminists) rule over them. O my people, they which lead thee cause thee to err, and destroy the way of thy paths.

    theobalt , Jan 24, 2021 4:22 AM

    China would "humiliate" the US in a war? That's just like a girl to worry about making a dent on ego and overlooking a few dents on the planet How's it going in your basement darling We're all suspended to your words and your little heart and your little brain all memory no processor

    Mention , Jan 24, 2021 9:37 AM Reply to theobalt

    " ..a proxy war with Russia or a direct war with Iran would precipitate a dollar collapse, rather than create growth and a flight to 'safety'. China would no doubt gleefully humiliate the US during such a conflict. "

    The war would not be with China. During a conflict with Iran or proxy with Russia the US is economically vulnerable to China's financial sabotage.

    theobalt , Jan 24, 2021 1:48 PM Reply to Mention

    No time for a war with anybody . time to stop buying slavery products from China. China and the cabal already humiliate everyone by corrupting our politicians. Not the US

    Z=Anon , Jan 24, 2021 2:04 PM Reply to theobalt

    The USA's Corporate elites, including Trump moved their manufacturing plant and expertise to China to exploit their cheap labour, nobody forced them.

    It was Corporate greed & vanity that caused the surrender of American manufacturing power to China. American's thought they were superior to China but they have made themselves her bitch.

    Not even a war could save them now, unless they intended to have their military's spare parts Fedexed over from China, during the conflict.
    Also if China's economy were switch to a war footing, like a sleeping giant, it would dwarf even the USA's military in a very short time, their capacity is the biggest in the world.

    David Homer , Jan 25, 2021 4:12 PM Reply to Z=Anon

    You are correct in everything except you have forgotten the fact that China imports most of its iron ore, copper, aluminum, coal, oil, etc. They would be in trouble in a world war situation.

    messenger charles , Jan 25, 2021 4:38 PM Reply to David Homer

    They will invade Australia and New Zealand first in order to secure those minerals and rely upon Russia for oil and gas.

    theobalt , Jan 24, 2021 3:51 AM

    What to do with our lives

    Find food eat the food when you feel pressure download the shit down

    Anyone trying to prevent you to do any of those things, murder them

    Tim Glover , Jan 24, 2021 3:35 AM

    I haven't read the 487 comments so apologies, but the author seriously undermines their argument by suggesting that the virus is a hoax. Exaggerated, yes, hoax, quite obviously not. I have no doubt that there is truth in this article, but claiming that the virus does not exist at all is untenable; the author should remove their blinkers and align their theory with reality.

    Kika , Jan 24, 2021 3:39 AM Reply to Tim Glover

    Evidence Tim?

    NickM , Jan 24, 2021 5:37 AM Reply to Kika

    Tim, I used to think like you, but the original evidence has been extrapolated beyond all reason by Con-19 artists. So now we must be pedantic and ask for evidence:

    a. That the RNA fragments originally sequenced by Chinese scientists in Wuhan (not from a virus but from patients bodily fluids) all belonged to a single strain of virus, putatively named Covid-19 but never isolated for sequencing of a complete viral genome?

    b. That the Covid-19 was exceptionally deadly; bearing in mind that the Chinese figures for death among severely ill patients were comparable to normal U$ figures for death among patients hospitalized with normal annual flu.

    c. That the original Covid-19 strain is still extant? (assuming there actually was a Covid-19 in Wuhan, which is not proven)

    d. Assuming the orriginal Wuhan strain has died out (mutated), where is the evidence that its mutant progeny are more deadly than the original Wuhan strain was ie, not much.

    e. Last and most important, where is the evidence that the Westminster con artists (Con-911, Con-WMD, Con-Viagra, Con-Sarin, Con-Novijoke) are not lying this time ? their lips are moving.

    Tim Glover , Jan 24, 2021 4:59 PM Reply to NickM

    I know from my personal experience that there is a new strain of virus, because I, and many of my friends were seriously ill with it and 2 people died. many of the people affected had no connection to each other. That this is not simply an unconnected anecdote is clear from looking at the data which show that across the world there was a clear spike in mortality in spring (The UK committed mass manslaughter in care homes but this is not the case in other countries). It does not matter where it originated, or whether the genome has been sequenced. I know the PCR test is useless. I know that there is hype, fear mongering and exaggeration. I know masks don't work and lockdowns will kill more than they save by a wide margin. Nonetheless, the virus is real.

    Mike Ellwood (Oxon UK) , Jan 24, 2021 8:43 PM Reply to Tim Glover

    Whereabouts do you liveTim? I still don't know anybody who has been ill with supposed Covid-19 ever since the "Pandemic" began, let alone, know anyone who died from it.

    Were the other people who were ill, and especially the 2 who died, particularly old, and/or did they have other serious health conditions?

    And how do you know what you had was the "new strain"? The "new strain" is fairly new, isn't it? Those poor souls must have died fairly quickly after contracting it.

    And how many is "many"?

    And how do you know that it wasn't "normal" flu? This is the flu season, after all, assuming you live in the northern hemisphere. Flu can be quite dangerous too.

    NickM , Jan 25, 2021 5:27 AM Reply to Tim Glover

    @Tim Glover: "I know from my personal experience that there is a new strain of virus, because I, and many of my friends were seriously ill with it".

    How do you know that the flu virus which made you and your friends "seriously ill" was Covid-19?

    I asked someone in England the same question at the start of the Con-19 hype last winter: How did she know that her friend in the countryside and her relative in London, both of whom told her they had it and it was their worst flu ever, had escaped death from a specific headline-news "novel virus Covid-19", when there was so much boring ordinary flu about?

    "Voila le Anglais avec son sang froid habituel (Here comes the Englishman with his usual bloody cold)" -- Fractured French.

    gary orlando , Jan 25, 2021 5:35 AM Reply to Tim Glover

    Tim, you have NO CLUE WHAT YOU'RE TALKING ABOUT. "i WAS SERIOUSLY ILL" is an extremely ignorant piece of so called evidence. there is NO NEW VIRUS. and virus DO NOT CAUSE ILLNESS AND contagion is a myth. it IS ALL A lie. you are brainwashed.

    therevolutionwas , Jan 25, 2021 1:23 PM Reply to Tim Glover

    Virus's are real and will remain real. They kill susceptible people all the time. And with the lock down there are more people not carrying on with their normal lives, not eat right, not getting enough sun, etc ..

    Binra , Jan 25, 2021 6:17 PM Reply to therevolutionwas

    Something is happening but you don't know what it is – do you, Mr Jones?
    – B Dylan
    You have a currently accepted narrative that saves you from questioning your current worldview.

    I don't think it helps to argue 'it is real!
    Or it isn't real!
    People are dying every day – and by far the most are dying in the ways they generally do. WHO benefits for the official narratives?

    That health as as joy in being as well as resilience to toxic stress and exposures, has an arena of personal and collective responsibility is of course true.

    So far you haven't felt to look into those who are offering excellent witness to the lack of established facts at the basis of an incomprehensibly disproportionate coordinated reaction that represents a hijacking of living selves – not cells.

    So you are confident that because Dr WHO and the whole pharmaceutical establishment back you up, you can state 'the virus is real', as part of an extremely invested establishment of social and corporate identity in its theory.

    A positive result and diagnosis for terminal cancer can operate a nocebo death sentence on its recipient even if the test is in error.
    This is similar to what is being perpetrated on the public mind – regardless whether for private reasons great or small.

    When dealing with the dissociated, one cannot simply tell them their experience is unreal. Thus no one can tell the so called sheep to 'wake up'. No can I tell such woke people to stop projecting and restore their recognition of another's presence – just because.

    Joel Walbert , Jan 24, 2021 5:54 AM Reply to Tim Glover

    Zero evidence anywhere in the world of sars-cov2 having been isolated. Claims of such are not evidence of it. Numerous FOIA requests in various places provided no evidence of isolation. A CDC document states there is no isolated virus and that is in fact a computer generation. People being sick and dying does not even almost prove a virus

    messenger charles , Jan 24, 2021 11:30 AM Reply to Joel Walbert

    What they have allegedly 'isolated' has not been purified, and THAT is the crucial element to this issue. All their 'papers' are a fraud.

    Joel Walbert , Jan 25, 2021 12:47 AM Reply to messenger charles

    That is precisely my point. The document I was referring to states clearly there are no isolates and that the testing is based off computer generated sequences. I generally would believe nothing from the CDC but when one of their own official documents admits fraud on a grand scale, I feel I must trust that one. Its all about discernment.

    The CDC document is titled,
    CDC 2019-Novel Coronavirus (2019-nCoV) Real-Time RT-PCR Diagnostic Panel.
    It is dated July 13, 2020. On page 39, in a section titled,

    "Performance Characteristics,"

    "Since no quantified virus isolates of the 2019-nCoV are currently available, assays [diagnostic tests] designed for detection of the 2019-nCoV RNA were tested with characterized stocks of in vitro transcribed full length RNA "

    Computer generated virus.

    Fred762 , Jan 25, 2021 7:55 PM Reply to messenger charles

    Agreed. My friend is COO of big US pvt hospital group..he told me last April that their hospitals(over 200) were near EMPTY and he was laying off staff left and right. Last Dec he said their census was .." about normal for a flu season"..ie, no piles of bodies, no over crowding.. ie, no real pandemic.

    Fred762 , Jan 25, 2021 7:48 PM Reply to Joel Walbert

    USmonthly death totals from all causes have been FLAT for 5 years . therefore, NO PANDEMIC

    Joel Walbert , Jan 26, 2021 12:46 AM Reply to Fred762

    Exactly. There are shockingly lower deaths from virtually all causes this past year though. Fraudulent death certificates are the pandemic, not a computer generated viral sequence.

    Jacques , Jan 24, 2021 6:04 AM Reply to Tim Glover

    The virus IS a hoax. Some people say that viruses do not exist at all. Dunno. Even if they do, the fairy tale of SARS-CoV-2 is complete bullshit.

    Nobody has ever been able to present the alleged virus in an isolated form. The alleged virus has never been proved to cause a disease. Period. If you or anyone claim that SARS-CoV-2 exists, let me fucking see it. If you or anyone claim that the alleged SARS-CoV-2 causes the alleged diseases COVID-19, prove it. There are procedures for that. Such as Koch's postulates.

    None of that is done, therefore SARS-CoV-2 & COVID-19 must be considered a crock of shit until proven otherwise. No data from the world over suggest that there is a pandemic. End of story. That's your reality. Period.

    Now, let's worry about what really is going on.

    Binra , Jan 25, 2021 6:18 PM Reply to Jacques

    worry question!

    messenger charles , Jan 24, 2021 11:19 AM Reply to Tim Glover

    The so-called virus has NOT been isolated nor has it, more importantly, been purified. Sars Cov 2 otherwise known as Covid19 is 100% a lie and a criminal hoax. Research doctors Tom Cowan, Stefan Lanka and Andrew Kaufman.

    Mike Ellwood (Oxon UK) , Jan 24, 2021 8:44 PM Reply to messenger charles

    Also check out the website TheInfectiousMyth.com .

    Dina , Jan 25, 2021 1:51 AM Reply to Mike Ellwood (Oxon UK)

    Yes, that man recently passed away but I leaned my foundational anti-COVID myth lessons from his site as early as March.
    Always knew pcr tests were BS.
    Never knew a lot of the other COVID info till later.

    messenger charles , Jan 25, 2021 4:15 PM Reply to Mike Ellwood (Oxon UK)

    From his web site or rather what was once his website:

    "This was a database and web server owned by David Crowe. From the family of David Crowe, we are sorry to share with everyone that David passed away on July 12th, 2020."

    Paul Vonharnish , Jan 24, 2021 2:42 PM Reply to Tim Glover

    Hello Tim Glover: I see you've received many down votes for suggesting that a (covid) virus does exist. Tsk, tsk, tsk I can only help you if you really want to be helped Just repeat after me:

    The Earth is flat.
    Gravity is an illusion.
    The Sun revolves around the Earth.
    The moon is hollow and filled with cheese.
    There's a white robed guy watching over everything .
    The (above) white robed guy – loves everyone equally

    You'll be better soon

    messenger charles , Jan 25, 2021 4:26 PM Reply to Paul Vonharnish

    Actually the earth is a fixed globe at the centre of the universe (the pinnacle of God's creation) with the sun and moon orbiting the earth.

    Geocentricism – Did The Sun Stand Still and The Moon Stay or Did The Earth Stop Spinning and Moving – Joshua 10:13:
    https://isthefathercallingyoutohisson.wordpress.com/geocentricism-did-the-sun-stand-still-and-the-moon-stay-or-did-the-earth-stop-spinning-and-moving-joshua-1013/

    There is no space and the stars move in the aether.

    However, you were correct by citing The Truth that The Father God is in the third heaven, with The Son, watching over everything.

    You were also correct is stating that gravity is an illusion – all there is, is pressure.

    Binra , Jan 25, 2021 6:25 PM Reply to Paul Vonharnish

    Crikey – with friends like you – who needs enemies!

    There are moments in life when a sense of lack can step forth in power and strut the stage of the world like a giant!
    (Yes sarcasm).

    You get to set the measure of your receiving but not the timing and the manner of your rewards. Life is meant to be a surprise!

    Do you know what love is?

    theobalt , Jan 24, 2021 1:52 AM

    Answer to Judith comment below, and my usual type of comment right on the head of that confusing and propagandist article

    You should blow your nose without a tissue. They are full of formaldehyde causes skin irritation and attacks the nervous system it's a carcinogen too and it comes mainly from China (and I believe Israel Chemicals is also mainly involved) also avoid bed sheets from Ikea and Amazon and any made in china (I tested them in TSP concoctions), any cheap furniture from the likes (fiberboards and pieces of wood stuck together with F. based glue offgasing like crazy, laundry detergents filled with them to replenish any garment, making sure the American population remains dumbed down and sick and dying. The US dollar doesn't exist, no more than the freakin' kopec.

    American people exists. American land exists. And they are fine.

    But they need to be taken down are they Don't worry people of Europe If it is crushed it is not to save you. It will go in the same pockets of the people who have been crushing you for quite a while.

    theobalt , Jan 24, 2021 3:55 AM Reply to theobalt

    Oh yeah, if you have a properly responsive immune system, your respiratory system will inflame and clog in a very alarming way from exposure to formaldehyde offgasing rings a bell?!?!

    Raymondo Don Sayo , Jan 24, 2021 1:42 AM

    The author was just short of calling opinions other than his own as conspiracy theories which is a base of ignorance. Too long of a rambling severely narrow minded road is this article. Lots of good thoughts within.
    Maybe you are the controlled op?

    theobalt , Jan 24, 2021 3:30 AM Reply to Raymondo Don Sayo

    define maybe

    David Macilwain , Jan 24, 2021 12:51 AM

    The case of Australia, the "Building 7" of the Coronavirus scheme, is a case in point that entirely supports the author's case, as before we had more than 1000 cases and a handful of deaths, the government declared it would pump $180 billion into the banks to stabilise them, including for the first time in history, QE. So it printed all the money and handed it around just as the graphs of infection were exponential, in mid-March. After that and the lock down another $130 Billion was laid out for "job keeper", which is only going to hit the fan in March as 500,000 workers find their jobs have actually disappeared.
    But now it's Vaccines that are the growth factory, and everyone is clamouring for them because otherwise we will remain locked in this prison for years. We can't leave as we won't be insured and there is no guarantee we'll be allowed to return.
    But meanwhile, along with the US, our stock market made record gains this last year. DYOC.

    Sadly I have to entirely disagree with the author when she writes that the Russians produced an imaginary vaccine against a non-existent virus. It's simply not true – have a look at this paper about the GE manufacture of SARS hybrid viruses, going on at the WIV since 2007, and of course in North Carolina under Ralph Baric:
    https://www.sciencedirect.com/science/article/abs/pii/S1931312820303024

    Grafter , Jan 24, 2021 12:30 PM Reply to David Macilwain

    " $130 Billion was laid out for "job keeper", which is only going to hit the fan in March as 500,000 workers find their jobs have actually disappeared."

    What is this end of March timeline even in Australia ? It's the same here in the UK when the furlough period ends ? Am I missing something ?

    Maggie , Jan 24, 2021 2:56 PM Reply to Grafter

    Hi Grafter Here's what most of us missed..
    Belarusian President Aleksandr Lukashenko said via Belarusian Telegraph Agency, BelTA., that World Bank and IMF offered him a bribe of $940 million USD in the form of "COVID RELIEF AID." In exchange for $940 million USD, the World Bank and IMF demanded that the President of Belarus:

    • imposed "extreme lockdown on his people"
    • force them to wear face masks
    • impose very strict curfews
    • impose a police state
    • crash the economy
    Belarus President Aleksandr Lukashenko REFUSED the offer and stated that he could not accept such an offer and would put his people above the needs of the IMF and World Bank. This is NOT a conspiracy. You may research this yourself. He actually said this!
    Now IMF and World Bank are bailing out failing airlines with billions of dollars, and in exchange, they are FORCING airline CEOs to implement VERY STRICT POLICIES such as FORCED face masks covers on EVERYONE, including SMALL CHILDREN, whose health will suffer as a result of these policies.
    And if it is true for Belarus, then it is true for the rest of the world! The IMF and World Bank want to crash every major economy with the intent of buying over every nation's infrastructure at cents on the dollar!!!

    Which would tend to confirm what the Article stated??

    Dina , Jan 25, 2021 1:55 AM Reply to Maggie

    Exactly what was running through my mind while reading this article

    j. d. , Jan 23, 2021 10:41 PM

    Your post is thorough and revealing – and counter-narrative, so it might get shadow-banned

    It is disappointing to realize that not only mainstream opinion, but also both sides of the political aisle have pushed the idea that the economy faltered after covid was declared an emergency. However, that's clearly not the case, as your article details.

    Coventry League Capital Partners, a finance firm, also posted a blog way back in April 2020 that included a mishmash of tweets/posts from throughout 2019 about a pending financial crisis given mass layoffs in some markets, an inverted yield curve, and bank liquidity issues. If interested, below is the address to the article:

    coventryleague dot com/blogentary/mass-layoffs-surge-343-percent-in-ohio/

    By September of 2019, the U.S. financial market was in full-blown crisis mode with massive "repo" operations initiated by the Federal Reserve Bank (FED). Another blogger that provided exhaustive detail in a series of real-time blog posts about the 2019 repo situation and financial crisis is "Wall Street On Parade."

    theobalt , Jan 24, 2021 4:00 AM Reply to j. d.

    Are you two living in the same house with ten others?

    Helen , Jan 23, 2021 10:41 PM

    Interesting but fails to account for the original Wuhan theatre where China, against all previously recognised pandemic planning, sold lockdown to the West. They did so restricting it to one city and limiting overall damage to their economy. A kind of "how to" demonstration. You also have their main western satellites, NZ and Australia the only ones to have followed the Zero Covid policy of the CCP – a technique of pure tyranny.

    Kalen , Jan 24, 2021 12:10 AM Reply to Helen

    China's CCP ended COVID charade in April by eliminating flawed PCR test as unreliable diagnostic tool for COVID infections in individual clinical diagnosis of COVID disease which definition was narrowed to initial interpretation as Unexplained (by long known before 2020 viral or bacterial presence), pneumonia for original interpretation as caused by long known local environmental factors including man made factors like deadly therapies, medical particle and wave diagnostic device malfunctions or inherent designer flaws as well as cases of immunodeficiency or autoimmunity in pneumonia patients.

    In other words COVID patient in China is not one who was PCR tested positive but one with a documented form of pneumonia-like damage to lungs.The seasonal increase in in flu and explained and unexplained pneumonia is behind recent new quarantine measures in China.

    and still China plays this COVID game as it is too desirable to hold big stick of COVID in their hands amid economic collapse programmed by reset.

    PCR and serology is being used in China for general Epidemiological models not specifically for COVID but for general epidemic situation assessment of all respiratory diseases flu, common cold and pneumonia that are at local epidemic levels throughout the year getting worse in winter season.

    Last year mild season in China 75,000+ people died of flu, 5,000 officially died of COVID. Do your math. It was much ado about nearly nothing, while real crisis of old people needlessly dying of poverty, lack of medical access driven flu is ignored as nobody among governments gives a damn as it cannot be sold as apocalypse to scare people into submission.

    Rumplestiltskin , Jan 24, 2021 3:09 AM Reply to Kalen

    Great comment Kalen, interesting info re China not using the PCR to diagnose CV, particularly since they sold an absolute shit ton of them to Australia via the mining magnate what's his name. If we can break the governments reliance on the PCR test, this whole charade collapses. Ive been saying this for months.

    theobalt , Jan 24, 2021 3:34 AM Reply to Rumplestiltskin

    Always remember we were not in the lab No "information" is relevant. We're in THIS lab,

    Maxwell , Jan 24, 2021 3:45 AM Reply to Kalen

    Superb comment- it is easier to point towards a bogeyman 'over there' or some exotic event (bat cave) than to face the hard fact that the daemon is in your house and staring you right in the face.

    Tom , Jan 24, 2021 11:09 AM Reply to Kalen

    Kalen could you provide a reference for the 75K flu deaths?

    Edith , Jan 24, 2021 1:48 AM Reply to Helen

    That wasn't followed in all of Australia really only Victoria and WA who got hyper excited after the initial burst of enthusiasm qld has been more damaged by the planes not arriving rather than any thing much needing locked up those important minerals we sell had to keep moving I suspect plus we had a looming election which seemed to put the breaks on too much enthusiasm so we just shut our border and went on with life until recently when we showed signs of wanting to play that rush to the head seems to have stalled in Brisbane.,,
    doesn't of course stop the believers carrying on around one .

    and in my opinion the whole wuhan thing was so staged to make me question of any of it was real,,,they either exported fear or thought they were actually under attack themselves given those war games were held in wuhan

    Paul , Jan 24, 2021 4:29 AM Reply to Helen

    Good comments.

    For 6 weeks since the alleged outbreak in Wuhan the residents of Wuhan were moving freely around the rest of China but this virus never really showed up anywhere else in China apart from Wuhan apart from the odd isolated outbreak that quickly vanished.

    This doesn't tie in with a super spreading infectious virus.

    Every so often the CCP will say there are small localised outbreaks and puff by magic they quickly disappear.

    It's just CCP propaganda and keeping their toe dipped in the water.

    rraa , Jan 23, 2021 10:11 PM

    I don't think the Chinese government is involved. People seem to think of China as one giant homogenous BLOB that moves like a well oiled machine. In fact, regions have a LOT of autonomy. I don't doubt that some individual Chinese scientists contributed to the Western narrative. Remember that China overhauled it's entire medical system after Sars 2003. It has a very modern and transparent pneumonia and respiratory illness surveillance system and all the alphabet agencies of the West know what is going on it.
    WHO published a notice on December 31 that was a very routine notice.
    The whole thing took a life of it's own after four cases were reported in one day around Dec 26. If you read the very first paper with the virus sequence on Jan 11, it only mentioned a novel coronavirus. But almost simultaneously a second paper was published with Edward Homes as a co-author, the one with the batwoman scientist. This was the one that made the wild claims about the virus being linked to bats and so on.
    No I am not a CCP troll, I've been following the medical and scientific articles from the beginning and trying to keep track of where the narratives emerged from.
    China only locked down about 4% of its population. They did so because it was just before the New Year and half a billion people were about to travel. Wuhan is a major rail hub. They didn't want a repeat of Sars 2003. Even the Chinese in Wuhan were terrified by the Western media. They don't live in some dark cave as the Western media would have you believe.
    Nor does Beijing control every research institute and every research project in China as some people seem to imagine it does. I don't think the virus "came from a lab" because if you read the actual papers, you find the "new" virus is nothing more than a statistical result. It's literally a software output, not something in a test tube.
    I don't doubt thought that Fauci and Co were funding projects at the Wuhan lab so they could scapegoat it for this theatre.

    Judith , Jan 24, 2021 12:42 AM Reply to rraa

    rraa – the actual papers that you write of that state a "new virus", are they the papers that Drosten based his papers on? And the subsequent pcr fiasco?

    The statistical result in the Chinese paper – was that based on the 4 cases?

    I find what you wrote very interesting. It never occurred to me that the virus did not come from the lab, but from just having been written about in a paper. I never believed it was a virus from nature. (Not looking for an argument here about virus/no such thing – just want some clarity from rraa)

    I heard Dr Tom Cowan talk about this Chinese paper and its trip to Germany. But at that point I thought it must have been the gain of function work in the US funded Wuhan lab.

    Thanks.

    Tomoola Sitchin , Jan 24, 2021 1:02 AM Reply to Judith

    The Chinese provided a computer model of the virus, which Drosten has supposedly used to configure his version of the PCR test, which is now used the world over.

    No one has yet proved that the Sars-cov-2 coronavirus actually exists, other than on a computer screen. For my money we are having a baddish flu, which has been conveniently repackaged as Covi-19.

    Maxwell , Jan 24, 2021 3:43 AM Reply to Tomoola Sitchin

    It is not even a bad flu season.

    If you take out the mass death event during the 6 week period in March/April that was brought upon the elders in care homes we are looking at one of the lower mortality rates of the past two decades.

    Those mass deaths were caused by pre-ordained policies, not a viral event, that were an aberration from past years and in direct opposition of how the medical science states how the viral season should be addressed for care homes, hospice etc.

    All of this was by design.

    Paul , Jan 24, 2021 4:46 AM Reply to Maxwell

    Completely agree.

    I believe the current slight spike in mortality in the UK had been caused by the huge uptake of flu shots.

    The BMJ posted an article recently that flu shots can be successful in protecting against one strain of influenza but they increase ones susceptibility to contracting other viruses.

    We are now in the middle of respiratory disease season.

    Covid has conveniently completely eradicated all other viruses.

    Judith , Jan 24, 2021 4:20 PM Reply to Tomoola Sitchin

    Thanks!

    Edith , Jan 24, 2021 1:56 AM Reply to Judith

    Yes it pays to go back and look at the original documents and who was involved there is a panel the WHO calls together and who was