Financial Markets

[LibertyTurns]

Last several months have been extremely interesting & for those of you with sizable portfolios I recommend the following sites as being extremely informational. Run by a GT grad, it's obviously very analytical but I've found it immensely helpful. I don't normally plug advisory type services as they're normally fixated on selling you something as opposed to helping you make good decisions. In my opinion, that's not the case here.

Enjoy.

https://mobile.twitter.com/ciovaccocapital

http://www.ciovaccocapital.com/

 

[GTNavyNuke]

Market only has 35-50% further to fall to be in line with historic downturns. http://hussman.com/wmc/wmc150824.htm

Problem with any analysis is that the Central Banks are targeting asset (stock) prices like they never have in the past. So this time will be different. As I said a month or two ago, I think we are more likely to see QE4 than a rate hike. The Fed talks about supporting the economy, but at the end of the day it is a private entity as Federal Reserve BANK and they will protect the monied interests. No matter that the $4T they have committed hasn't done squat for the economy. http://www.cnbc.com/2015/08/18/st-louis-fed-official-no-evidence-qe-boosted-economy.html

If I sound pissed, I am. My parents and the rest of the country sacrificed so much to build a great economy. And the Fed has basically pissed it away with QE which only brought demand forward a bit and allowed companies to buy stock back at low interest rates for some short term stock gains. And that hasn't been effective for the real economy.

But who cares about economic policies that will help the working people? Not the Fed (or Republicans or Democrats IMHO).

 

[buzz_wiser©]

Market only has 35-50% further to fall to be in line with historic downturns. http://hussman.com/wmc/wmc150824.htm

Problem with any analysis is that the Central Banks are targeting asset (stock) prices like they never have in the past. So this time will be different. As I said a month or two ago, I think we are more likely to see QE4 than a rate hike. The Fed talks about supporting the economy, but at the end of the day it is a private entity as Federal Reserve BANK and they will protect the monied interests. No matter that the $4T they have committed hasn't done squat for the economy. http://www.cnbc.com/2015/08/18/st-louis-fed-official-no-evidence-qe-boosted-economy.html

If I sound pissed, I am. My parents and the rest of the country sacrificed so much to build a great economy. And the Fed has basically pissed it away with QE which only brought demand forward a bit and allowed companies to buy stock back at low interest rates for some short term stock gains. And that hasn't been effective for the real economy.

But who cares about economic policies that will help the working people? Not the Fed (or Republicans or Democrats IMHO).

what would be the best way to deal with it? Eliminate QE? The fed only wants to support the part of the economy which provides for special interest i.e.. bailouts.
Im with you on having no support from either party..These people seem to forget, we DO pay the salaries they are hardly taxed on..

 

[LibertyTurns]

Maybe this latest bump in the road will drive us back to the fundamentals which would drive an economic resurgence:
a. Reduction in the growth of government spending- need to stop what's the major cause of our troubles. We're spending more than we can afford & much of it is wasteful, misappropriated and/or inefficiently applied. You don't necessarily have to cut anything as you can actually increase benefits (and significantly to those in need), just waste less & grow slower than the rate the economy is expanding.
b. Reduction in marginal tax rates for both income and capital- the free market will function effectively if government is not trying to influence outcomes. Too much of our policy is directed at redestribution (on both sides spending on where the payola is being targeted) and not enough on economic stimulants
c. Reduction of government regulations strangling business- there's no clearer example of negative legislative effects on the economy than what's transpired recently. Quite frankly, major overhauls are required not just desired. There's so many patchworks the unintended consequences are immense & unpredictable and hard to understand until after the thieves have run off with the booty.
d. Control the money supply- Uncle Milty had it right. There's no "new economics". Monetary velocity needs to be managed in a disciplined manner.

 

[buzz_wiser©]

Government spending should most definitely be curbed and there needs to be some accountability. These blank checks that are being written need to have an audit trail in place to eliminate spending.
Im all for the Fed being ran as a business, knowing where each dollar goes.
We need to reform the social insecurity Ponzi scheme that is taking more and more money and isn't being used as it was intended.
Welfare and medicaid/care a other issues that lie in front of us.
How soon will it be before China comes calling our debts because their monetary system is going in the tank? Do we need to revalue our currency to compete?
elimination of capital gains?
Im curious as to what others think should be done.

 

[TechnicalPossum]

what would be the best way to deal with it? Eliminate QE? The fed only wants to support the part of the economy which provides for special interest i.e.. bailouts.
Im with you on having no support from either party..These people seem to forget, we DO pay the salaries they are hardly taxed on..

QE never should have been started and the economy should have been allowed to recover on its own. This would have caused a slower, but more sustainable recovery.

In a shorter term, QE money should have been eased out starting in January and the interest rate bumped mid-spring. This likely would have caused a market correction, but it would be a correction with a discernible cause. Now we have a market correction with no change in US monetary policy driving the the correction, a market flooded with overvalued currency, and near zero interest rates. This means that more QE would have diminishing returns and a cut to the interest rate is not possible to stimulate the economy if this turns into a recession the at feds feel compelled to screw around with and not just a market correction.

 

[buzz_wiser©]

slower is good..no matter how many times you read the story.. Mr. Tortoise always wins the race.
under current situations, would it be beneficial to raise interest rates to stifle deflation of the dollar?

 

[TechnicalPossum]

slower is good..no matter how many times you read the story.. Mr. Tortoise always wins the race.
under current situations, would it be beneficial to raise interest rates to stifle deflation of the dollar?

If you track the deflation against commodities (oil, gold) or secondary reserve currencies (Euro, Pound Sterling, Swiss Frank), there is some deflation. But, I do not think it is a sustained deflation based solely on the Dollar. I think that currency manipulation in China and the instability of Greece could be driving the deflation more than US monetary policy.

To answer your question, I would raise the rate 1/8% or 1/4% if it was my show just go get all the bleeding done at once and to throw a bone to the bond market in hopes of stabilizing that market while the stock market corrects. Raising the rate would likely cause a further downward correction in the stock market short term though.

 

[buzz_wiser©]

A 1/4 % raise wouldn't force a volatile downward turn in lending on the home front?
Or would some interest gains on earnings even that out.

 

[TechnicalPossum]

A 1/4 % raise wouldn't force a volatile downward turn in lending on the home front?
Or would some interest gains on earnings even that out.

I'm not a financial planner by any means, but I wouldn't think it would. It would likely bump the rates up on home mortgages and other lending to include the yield rate on municipal bonds. But, it shouldn't to an extent that home sales are screwed down on too hard.

For example, figure if the prime interest rate was raised 1/4% then the rate for a homeowner may go up 1/2%. This equates to $30 per month per $100k borrowed or so increase on a 30 year mortgage based on current interest rates (4% to 6%). Some people may get squeezed or have to buy smaller houses, but logically I cannot see how it would be catastrophic to homeowners unless you have an adjustable rate mortgage and are severely over leveraged.

The second part is that if money becomes more expensive (higher interest rates), borrowers are more cautious in what they borrow money for due to cost of borrowing. The theory is that this causes a slow down of the economy since businesses will not expand/retool/hire more due to this increase in cost of capital. The part that is discussed less is what happens to debt laden businesses who borrowed heavily to expand during a period of low interest rates when the market goes through the standard cycles of recession/correction. For my opinion, it will make the peaks higher, but will make the recessions more painful.

 

[GTNavyNuke]

I've got a great idea: the Fed should sell some of their bonds (at a profit) and invest in stock indices. That will support the stock market and increase the wealth of the rich so they can spend more; who needs capitalism anyway? (tic; intense sarcasm through out)

That is only a slightly different step than what they have done already by buying bonds and then rolling them over when they mature. Effectively having "created" money.

I believe that the Founding Fathers set up the three branches of Government to serve as checks and balances on each other. There was never the intent for a quasi Governmental agency to be able to "create" money like the Fed has done. Plus it is awful policy for bureaucrats to "create" that kind of money without authorization. That's why we have budgets created by Congress and approved and executed by the President. These absurdly low interest rates prevent people from make any return on savings and were intended to force people to take more risk. That is going to bite us very badly (in my opinion) at some point. And I put the blame entirely on the entire Congress and Presidency (both parties) for allowing it to happen.

The solution is to have someone like Volker as Fed chairman and enough people on the Fed to support him. But the only politician who is saying that is Trump. Wow. I believe that the Fed is probably more important than the Supreme Court - certainly now with how the Fed is abusing their "power". The only person who might become a candidate I'd gladly support right now is Elizabeth Warren.

 

[LibertyTurns]

Maybe not the best article ever written on the Volcker legacy, but fairly accurate from what I remember. There was a great deal of sophisticated analysis conducted in this period- Friedman, Laffer were the two from that era I'd most trust with development of economic policies. They get it. Volcker had some nice theories but if not riding the coattails of Reagan he would have been just another disappointing Fed Chairman. There's more to economic policy that just expanding & collapsing the money supply & from what Volcker learned from his days at the Fed I'm not sure he ever got it. Greenspan atleast acknowlegded at the end his miscalculations & identified lessons learned, Volcker seemed to ignore them. At least that's my opinion.

http://www.realclearmarkets.com/articles/2008/02/the_paul_volcker_myth.html

 

[buzz_wiser©]

what does Warren have to offer besides bringing more of a liberal agenda to big government? (I. have read s few things, but im not as well versed on her as I could be).
I have a client who use to be the Head man over the LA ports Authority and thinks she is close to the second coming of Christ. I found out he and I differ on opinion somewhat

I think the evolution of cloward piven is happening right in plain view but no one wants to admit it. Overloading the welfare system by forcing a crash of the existing system to allow the implementation of guaranteed annual income to end poverty.
Who ever takes over a POTUS will have soo many targets on their it will be a daunting (but very do able) task to prop up this economy and jump start an ascension that will put us back in the game and become the world leader we once were.

By doing this, government needs to remove itself and let the private sector fix what they have screwed up.

I think Alan Greenspan truly got where things had screwed up, yet it was too late to repair..
Not sure what can be said about Ben Bernanke...another topic for another day.

I've got a great idea: the Fed should sell some of their bonds (at a profit) and invest in stock indices. That will support the stock market and increase the wealth of the rich so they can spend more; who needs capitalism anyway? (tic; intense sarcasm through out)

That is only a slightly different step than what they have done already by buying bonds and then rolling them over when they mature. Effectively having "created" money. <<this.....how can this even be legal to create money that doesn't exist?

I believe that the Founding Fathers set up the three branches of Government to serve as checks and balances on each other. There was never the intent for a quasi Governmental agency to be able to "create" money like the Fed has done. Plus it is awful policy for bureaucrats to "create" that kind of money without authorization. That's why we have budgets created by Congress and approved and executed by the President. These absurdly low interest rates prevent people from make any return on savings and were intended to force people to take more risk. That is going to bite us very badly (in my opinion) at some point. And I put the blame entirely on the entire Congress and Presidency (both parties) for allowing it to happen.

The solution is to have someone like Volker as Fed chairman and enough people on the Fed to support him. But the only politician who is saying that is Trump. Wow. I believe that the Fed is probably more important than the Supreme Court - certainly now with how the Fed is abusing their "power". The only person who might become a candidate I'd gladly support right now is Elizabeth Warren.

Our Founding Fathers set up the perfect checks and balances, this system was far more advanced than even they could imagine, yet our current admin seems to find it in themselves to drop a deuce on what the constitution and its meaning/purpose.

I feel we will soon see an economic collapse that will make 2008 look like a walk in the park. Does anyone on here invest in metals?

Im just learning more and more about how volatile our market is and can be, however, people walk around day in and day out as though nothing is wrong with our current sytem(s).
Thanks for the info being provided from each of you.

 

[LibertyTurns]

BW, you might be interested in reading Friedrich Hayek's the Constitution of Liberty and investigate the principles of the Mont Pelerin Society that he founded.

Back to the markets- who's thinking this is a dead cat bounce, a counter trend & who's in the V-bottom camp?

 

[buzz_wiser©]

Thankyou for the info. I will check into this tonight while the braves play ;-).
I'm not really sure...
Check out what I paid for file earlier today (and not in 1999). What are futures on oil saying?

 

[GTNavyNuke]

BW, you might be interested in reading Friedrich Hayek's the Constitution of Liberty and investigate the principles of the Mont Pelerin Society that he founded.

Back to the markets- who's thinking this is a dead cat bounce, a counter trend & who's in the V-bottom camp?

Not a dead cat bounce to me since didn't fall that far. The buy the dip crowd will keep doing the buy the dips till it doesn't work anymore (like it has the last 10 years). I KNOW that the equities will have a 50-60% pull back based on history. I just don't know if that big of loss is this year or 10 years from now...... but I'm holding onto 50% short S&P (SH) now hedged by high yield bond funds. Only my hedge has changed since high yield has pulled back so far.

I still expect QE4 before the Fed raises rates. The Fed will use any excuse they can not to raise rates; you'll hear a lot of talk from them but most know that QE didn't and won't help the economy. But to not do it now would get them the "blame" which is the last thing they want.

 

[LibertyTurns]

I don't believe they will act. Yellen is trying to find her way & the international situation is complicating matters.

Milton Friedman summed it up best: I think the government solution to a problem is usually as bad as the problem and often makes the problem worse.

 

[buzz_wiser©]

What are your opinions on the Trump tax plan?

 

[GTNavyNuke]

What are your opinions on the Trump tax plan?

The rich get richer.

 

[buzz_wiser©]

The rich get richer.

I think this would happen no matter what.
What are the opinions on no income tax or flat tax in consumption?