Posts Tagged ‘wealth effect’

“THE MOST IGNORANT REMARKS EVER MADE BY A CENTRAL BANKER”

“THE MOST IGNORANT REMARKS EVER MADE BY A CENTRAL BANKER”

the fed, bernanke Courtesy of The Pragmatic Capitalist 

As usual, the latest Hussman letter is an honest and realistic perspective on what is going on today.  This week’s letter is a scathing criticism of Federal Reserve policies and their blatant manipulation and counterproductive policy responses.  The primary target of this week’s letter is quantitative easing.  In discussing Mr. Bernanke’s Washington Post op-ed Mr. Hussman refers to the Chairman’s comments as “the most ignorant remarks ever made by a central banker”.  I entirely agree and believe that these same comments will forever haunt Mr. Bernanke.  Naturally, I think Mr. Hussman is right and it’s clear in my opinion that the Federal Reserve is becoming part of the problem and not the solution.

The most interesting part of the criticism is Hussman’s debunking of the “wealth effect”:

“Historically, a 1% increase in the S&P 500 has been associated with a corresponding change in GDP of 0.042% in the same year, 0.035% the next year, and has negative correlations with GDP growth thereafter (sufficient to eliminate any effect on the long-run level of GDP). Now, even if one assumes – counter to reasonable analysis – that the GDP changes are caused by the stock market changes (rather than stocks responding to the economy), the potential benefit to the economy of even a 10% market advance would be to increment GDP growth by less than half of one percent for a two year period.

Now, as of last week, the total capitalization of the U.S. stock market was at about the same as the level as nominal GDP ($14.7 trillion). So a market advance of say, 10% – again, even assuming that stock prices cause GDP – would result in $1.47 trillion of market value, and a cumulative but temporary increment to GDP that works out to $11.3 billion dollars divided over two years. Moreover, even if profits as a share of GDP were to hold at a record high of 8%, and these profits were entirely deliverable to shareholders, the resulting one-time benefit to corporate shareholders would amount to a lump sum of $904 million dollars. In effect, Ben Bernanke is arguing that investors should value a one-time payout of $904 million dollars at $1.47 trillion. Virtuous circle indeed.

So what have investors done to themselves?  They’ve added an excess risk to their portfolios purely based on Fed speak and manipulation:


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TrimTabs Asks: Who Is Responsible For The Non-Stop Market Rally Since March; Gives Some Suggestions

This is an interesting post from Zero Hedge which I’m reprinting to get into the Favorites. – Ilene

TrimTabs Asks: Who Is Responsible For The Non-Stop Market Rally Since March; Gives Some Suggestions

Courtesy of Tyler Durden at Zero Hedge

Male magician performing on stage, aided by young female assistant

Submitted by TrimTabs’ Charles Biderman

Are Federal Reserve and U.S. Government Rigging Stock Market?  We Have No Evidence They Are, but They Could Be.  We Do Not Know Source of Money That Pushed Market Cap Up $6+ Trillion since Mid-March.

The most positive economic development in 2009 was the stock market rally. Since the middle of March, the market cap of all U.S. stocks has soared more than $6 trillion.  The “wealth effect” of rising stock prices has soothed the nerves and boosted the net worth of the half of Americans who own stock.
 
We cannot identify the source of the new money that pushed stock prices up so far so fast.  For the most part, the money did not from the traditional players that provided money in the past:

  • Companies.  Corporate America has been a huge net seller.  The float of shares has ballooned $133 billion since the start of April.
  • Retail investor funds.  Retail investors have hardly bought any U.S. equities. Bond funds, yes. U.S equity funds, no.  U.S. equity funds and ETFs have received just $17 billion since the start of April.  Over that same time frame bond mutual funds and ETFs received $351 billion.
  • Retail investor direct. We doubt retail investors were big direct purchases of equities.  Market volatility in this decade has been the highest since the 1930s, and we no evidence retail investors were piling into individual stocks.  Also, retail investor sentiment has been mostly neutral since the rally began.
  • Foreign investors.  Foreign investors have provided some buying power, purchasing $109 billion in U.S. stocks from April through October.  But we suspect foreign purchases slowed in November and December because the U.S. dollar was weakening.
  • Hedge funds.  We have no way to track in real time what hedge funds do, and they may well have shifted some assets into U.S. equities.  But we doubt their buying power was enormous because they posted an outflow of $12 billion from April through November.
  • Pension funds.  All the anecdotal evidence we have indicates that pension funds have not been making a huge asset


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Phil's Favorites

What Doug Jones's win means for Mitch McConnell, Steve Bannon and the Democrats

 

What Doug Jones's win means for Mitch McConnell, Steve Bannon and the Democrats

Courtesy of David C. BarkerAmerican University

Senate Majority Leader Mitch McConnell calls for Roy Moore to step aside. He later said “let the voters decide.” AP Photo/J. Scott Applewhite

Here’s the thing about selling your soul: The devil had better deliver. It’s one thing to be damned; it’s another to be a damned loser.

This is the difficult lesson that the Republican National Committee and much of the GOP are learning right now, in the wake of Ro...



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Zero Hedge

Alibaba Launches Giant Car Vending Machines In China

Courtesy of Zero Hedge

Shares of Alibaba fell on Thursday morning, despite an exciting news story involving the Chinese e-commerce juggernaut, which is rushing to shake up the way people buy cars in China. Alibaba seems to be taking a page from Amazon’s acquisition of Whole Foods, with the continued push into physical retail. The plan outlined by Alibaba, is to open two giant car vending machines in early 2018, shaped like a futuristic tubular building with a giant cat’s head on top.

Having monopolized the online world, Alibaba continues to push offline with investments in Chinese bricks and mortar retailers.

Alibaba CEO Daniel Zhang said back in November, “physical store...



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Chart School

Tape Reading - Dow Jones Price Waves

Courtesy of Read the Ticker.

This is a continuation of price wave analysis.

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RTT Volume wave analysis like this helps the retail investor find price action that is true. The reference to 'tape reading' is by the definition of Richard Wyckoff (section 5M of the Wyckoff Course), you can learn more about RTT Volume Wave here.





NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net ...

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Insider Scoop

Attention Contrarians: This Analyst Says JD.com Set Up Could Be In Your Favor

Courtesy of Benzinga.

Related JD Want Some Exposure To China's Growth? Stifel Says Buy JD Or Alibaba Q3 13F Roundup: How Buffett...

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Biotech

Designer proteins that package genetic material could help deliver gene therapy

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Designer proteins that package genetic material could help deliver gene therapy

Courtesy of Ian HaydonUniversity of Washington

Delivering genetic material is a key challenge in gene therapy. Invitation image created by Kstudio, CC BY

If you’ve ever bought a new iPhone, you’ve experienced good packaging.

The way the lid slowly separates from the box. The pull...



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Digital Currencies

Not A Bubble?

Courtesy of ZeroHedge. View original post here.

Meet The Crypto Company - up almost 20,000% since inception in September...

To a market cap of over $12.6 billion...

Grant's Interest Rate Observer drew the world's attention to this 'company' yesterday.....



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ValueWalk

Tax Bill May Spark Exodus From High-Tax States

Courtesy of FinancialSense.com via ValueWalk.com

The following is a summary of our recent podcast, “Exodus – The Major Wealth Migration,” which can be listened to on our site here on on iTunes here.

It’s looking increasingl...



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Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



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Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!

...

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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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