Tag Archives: Economics

Alan Greenspan talks GOLD (UNCUT VERSION)

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“Look, remember what we’re looking at. Gold is a currency. It is still by all evidences the premier currency where no fiat currency, including the dollar, can match it. And so that the issue is, if you’re looking at a question of turmoil, you will find, as we always have in the past, it moves into the gold price. The ultimate test at the Mount Washington Hotel in 1944, between those who wanted to an international fiat currency which was embodied in John Maynard Keynes’ construct of a banker, and he was there in 1944, holding forth with all of his prestige, but couldn’t counter the fact that the United States dollar was convertible into gold and that was the major draw. Everyone wanted America’s gold.”

http://www.cfr.org/financial-crises/alan-greenspan-central-banks-stagnation-gold/p33699

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Greenspan Sees Turmoil as QE Boost to Markets Unwinds

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“Former Federal Reserve Chairman Alan Greenspan said he doesn’t think the Fed can unwind years of extraordinary stimulus without causing turmoil in financial markets. ‘I don’t think it’s possible,’ Greenspan said during an event today at the Council on Foreign Relations in New York, responding to a question about the likely market impact of the Fed’s exit.  The program ‘hasn’t been a success on the demand side for one fundamental reason,’ Greenspan said. ‘What you’re basically seeing is an explosion of assets, an explosion of reserve balances, and that’s the only two statistics that are moving.'”

http://www.bloomberg.com/news/2014-10-29/greenspan-sees-turmoil-as-qe-boost-to-markets-unwinds.html

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What Happens When the Surf Is Down: Contemplating Stocks without QE

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“Since the financial crisis of 2008 stock prices have only risen when the Fed is either expanding its balance sheet, hinting that it will soon do so, or actively recycling assets to hold down long term interest rates. Absent any of these aggressive moves, stocks have shown a clear tendency to fall. Curiously, while most investors now believe that QE is in the past, and that the Fed will not even be hinting at a restart, few would argue that the current bull market is in danger. But a quick look at how much influence the Fed’s operations have had on market performance should send a chill down Wall Street.”

http://www.europac.net/research_analysis/newsletters/global_investor_newsletter_fall_2014

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John Hussman: Do the Lessons of History No Longer Apply?

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“The market has re-established overvalued, overbought, overbullish conditions that mirror some of the most precarious points in the historical record such as 1929, 1937, 1974, 1987, 2000 and 2007. That syndrome is now coupled with continued evidence of a subtle shift toward more risk-averse investor psychology, primarily reflected by internal dispersion and widening credit spreads.  [..] We’ll continue to respond as the evidence changes, but under current conditions, we view the investment environment for stocks as being among a handful of the most hostile points in history.”

http://www.hussmanfunds.com/wmc/wmc141110.htm

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Losing Velocity: QE and the Massive Speculative Carry Trade

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“The narrative of overvalued carry trades ending in collapse is one that winds through all of financial history in countries around the globe. Yet the pattern repeats because the allure of ‘reaching for yield’ is so strong. To reach for yield, regardless of price or value, is a form of myopia that not only equates yield with total return, but eventually demands the sudden and magical appearance of a crowd of greater fools in order to exit successfully. The mortgage bubble was fundamentally one enormous carry trade focused on mortgage backed securities. Currency crises around the world generally have a similar origin. At present, the high-yield debt markets and equity markets around the world are no different.”

http://www.hussmanfunds.com/wmc/wmc141103.htm

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The Fed: Strangling the Saving Ethic and Values

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“Around the time Nixon was pulling the plug on what remained of the gold standard, the personal savings rate in America was north of 12.5%. These days, it’s 5.4%, and that’s up from 2.2% in the boom year of 2005. The 2008 crash tightened people’s belts. However, prudence is not bursting out all over. The WSJ says the personal savings rate has increased ‘in large part because it counts reductions in personal debt, such as mortgages and credit-card balances, as savings’, but that most debt reduction has been driven by defaults, rather than paying back.  It’s clear that since the last tethers tying the dollar to gold were cut, money production has soared, and a casualty has been the savings ethic.”

http://www.caseyresearch.com/articles/the-fed-strangling-the-saving-ethic-and-values

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There They Go Again: Fed Officials Give Rate Timetables

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“Federal Reserve officials insist that the outlook for interest rates depends on how economic data evolves and isn’t driven by the calendar. They are nevertheless offering various views on the probable timing of the first increase since 2006.  The Fed’s pledge that interest rates will stay low for a ‘considerable time’ could mean anything from two months to one year, Vice Chairman Stanley Fischer said today.  New York Fed President William C. Dudley said this week that forecasts for an increase in mid-2015 are ‘reasonable.’ Today, San Francisco Fed President John Williams said that timeframe is a ‘reasonable guess to my mind.'”

http://www.bloomberg.com/news/2014-10-09/fischer-says-considerable-time-is-2-months-to-a-year.html

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John Hussman: Air-Pockets, Free-Falls, and Crashes

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“Every 3-month period of additional zero-interest rate policy promised by the Fed is worth about a 1% premium over historical valuation norms. Another year would be worth a premium about 4%. But with the market more than double historical norms on reliable measures, the Fed would have to promise a quarter of a century of zero interest rate policy before current stock valuations would reflect a ‘reasonable’ response to interest rates. Stocks are not elevated because low interest rates ‘justify’ these prices, but because the risk premium for holding stocks has been driven to zero. We presently estimate negative total returns for the S&P 500 on every horizon shorter than 8 years.”

http://www.hussmanfunds.com/wmc/wmc141013.htm

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Bill Bonner: His New Book, ‘Hormegeddon’ and Other Insights

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“Some time in the next few months the authorities get a wake-up call. They are tapering off QE. This reduces the amount of excess liquidity driving up stocks. It is bound to increase volatility, too. It wouldn’t be too much of a surprise to see the Dow down 1,000 points in a day – or more. Then, Janet Yellen will panic, and it will be back to QE, and perhaps more. There have been several hints that the Fed and other central banks may be willing to go to direct money printing – something like dropping money from helicopters – as the next stage. When that comes it could mean fantastic increases in stocks – and who knows what else.”

http://www.thedailybell.com/exclusive-interviews/35718/Anthony-Wile-Bill-Bonner-His-New-Book-Hormegeddon-and-Other-Insights/

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Bill Bonner: A Secret Only a Tiny Number of Investors Understand

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“‘The last century was America’s century,’ says our Chinese colleague. ‘This is China’s century.’  ‘You know why America was such a success,’ he continued. ‘Because it was a fairly free market with massive domestic demand. Companies could scale up in the highly competitive US market. That would make them larger and more advanced than their foreign competitors. They could then enter foreign markets and easily beat the locals. China is full of new companies. Everything is new. And the internal market is fairly free compared to America. Talk about scale. These companies have massive domestic growth and learning capacity before they have to compete on the world markets.”

http://bonnerandpartners.com/secret-tiny-number-investors-understand/

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