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Posts Tagged ‘zero interest rates’

Debating the Flat Earth Society about Hyperinflation

Debating the Flat Earth Society about Hyperinflation

Courtesy of Mish 

Anglo-Saxon map of 900s showing a flat earth and the ocean that was thought to surround it. British Museum

Over the past few weeks, many people have asked me to comment on John Hussman’s August 23, 2010 post Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar.

Most wanted to know how that article changed my view regarding deflation. It didn’t.

Several others went so far as to tell me that Hussman was calling for hyperinflation. They were point blank wrong.

Here is the pertinent section from Hussman’s September 6, 2010 post The Recognition Window.

A note on quantitative easing

One of the things I’m increasingly dismayed to learn is that no matter how much detail, data, and qualification I might include in these commentaries, my conclusions will often be summed up by writers or bloggers in a single sentence that often bears no relation to my point. For instance, my view that quantitative easing will trigger a "jump depreciation" in the dollar has evidently placed me among analysts warning of hyperinflation and Treasury default (a club whose card is nowhere in my wallet).

To clarify once again – I emphatically do not anticipate inflationary pressures until the second half of this decade. As I’ve repeatedly emphasized, the primary driver of inflation – historically and across countries – has been growth in government spending for purposes that do not expand the productive capacity of the economy.

Quantitative easing does not pressure the dollar by fueling inflation. It has a much more subtle effect (but one that can be expected to be amplified if fiscal policy is long-run inflationary as it is at present). Normally, equilibrium in capital flows between countries is achieved through changes in interest rates. As a result, countries with greater capital needs or higher long-run inflation tendencies also have higher interest rates. If interest rates can adjust, exchange rates don’t have to. But notice what quantitative easing does: by sitting on long-term bond yields (and creating a negative real interest rate differential versus other countries), quantitative easing prevents bond prices from acting as an adjustment factor, and forces the burden of adjustment on the exchange rate.

While some observers have noted that the value of the Japanese yen did not deteriorate dramatically over the full course of quantitative easing by the Bank of Japan – from its beginning until it was finally wound down


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US Economy: That’s How I Roll…Over

US Economy: That’s How I Roll…Over

Courtesy of Joshua M Brown, The Reformed Broker 

Although the data doesn’t necessarily indicate that a double dip is here (just a slowing of the expansion so far), there is no doubt that mentally, we’re collectively urging it on.

Stocks suck, commodities have all been schmeissed (even gold last week), housing is going through another leg down (yanking the $8,000 tax credit sure didn’t help), the bond market is screaming (under 3% yield on the ten year!) and everyone is getting themselves liquid again.

While I understand that it’s only natural, at least historically, for the expansion to cool off from the initial rip-roaring pace, it is impossible to ignore how pathetically quickly we’ve lost what little momentum our trillions of dollars have gotten us.

Zero percent interest rates forever, tax credits for cars and homes, infrastructure spending, stimulus after stimulus – and it’s starting to feel like we fired a cap gun at a charging elephant.

Here’s some reading on the latest in Double Dip-ology.  Hopefully they’re wrong, but the stock market doesn’t seem to think they are…

Barton Biggs Cuts Stock Portfolio in Half  (BusinessWeek)

Double Dip Search Trends (Calculated Risk)

Karl Denninger’s Half-Year Checkup (Market-Ticker)

The ECRI Points to a Real Slowdown (The Pragmatic Capitalist


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Where Have All The Divvies Gone?

Where Have All The Divvies Gone?

Courtesy of Joshua M Brown, The Reformed Broker

Mark Cuban once remarked something to the effect of "stocks that don’t pay dividends are like baseball cards – only worth what you could convince the next guy to pay for them."

Floyd Norris looks at some statistics on dividend declarations last year:

Divvies

Will stock investors who like receiving quarterly dividends have better news this year? S&P thinks yes, according to the article:

“The fourth quarter was in no way a good period for dividends, but compared to recent history it marks a significant improvement, and when added to the stabilization in increases, supports our belief that the worst is over for dividends,” said Howard Silverblatt, the senior index analyst at S.& P.

“Standard & Poor’s believes that the dividend recovery will be slow, and that it will take until 2012 to 2013 to return to where we were in 2007 and 2008,” he added.

The dearth of positive dividend news becomes even more vexxing in the context of our zero interest rate environment so let’s hope the rebound in payout increases happens.

Source:

As Dividends Have Fallen, So May They Rise (NYT)

 


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Zero Hedge

Conrad Black: The Saudis Fear Western Alliance With Iran; Crashing Oil Is Their Retaliation

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Authored by Conrad Black via The National Post,

Responses to the decline in world oil prices have been mystifying — flummoxing, in fact. The secretary general of OPEC (the Organization of Petroleum Exporting Countries), Abdullah Al-Badri, said last week that speculation was to blame for the decline by 15% since the last increase in production. He ceremoniously denied that there was any attempt by the cartel to discourage production from shale or oil sands, or to put politi...



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Phil's Favorites

Maybe Oil Goes to $70 on its Way to $40

Courtesy of Charles Hugh-Smith of OfTwoMinds

A retrace that fills open gaps and kisses the 50-day moving average surprises everyone who was confident oil was heading straight down to $40/barrel.

When the conventional media ordains oil inevitably dropping to $40/barrel, I start looking for something else to happen--like oil going to $70/barrel. There are number of reasons this isn't as farfetched as it might seem at the moment.
  1. The huge gap begging to be filled on the chart of the Energy Select Sector exchange-traded fund XLE and a bunch of other energy-sector stocks and etfs. Gaps like this usually get filled sooner rather than later.
 

2. A bounce back to the 50-day moving average on the WTI oil index around $73 would be unsurprising. As the old sayi...



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Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Chart School

Can you make a living trading Springs and UpThrusts?

Courtesy of Read the Ticker.

We tell the truth about trading springs and upthrusts, no holding back!

More from RTT Tv

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 Investing Quote...

..“The market always tells you what to do. It tells you: Get in. Get out. Move your stop. Close out. Stay neutral. Wait for a better chance. All these things the market is continually impressing upon you, and you must get into the frame of mind where you are in reality taking your orders from the action of the market itself — from the tape.”…

Richard D. Wyckoff
.."Markets are constantly in a state of unce...



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All About Trends

Mid-Day Update

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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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Insider Scoop

#PreMarket Prep Guest List For The Week Of December 22, 2014

Courtesy of Benzinga.

Brian Kelly, Curtis Erickson and Jerremy Newsome will all be guests on this shortened week of Benzinga's #PreMarket Prep broadcast, sponsored by Nadex.

Be sure to tune in at 8:00 am EST Monday-Friday here to tune in to the exciting show.

Don’t miss our #FedForecast2015 event either!

You can learn more about that here.

Monday, December 22, 8:35 a.m.

Jonathan Corpina (...



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Digital Currencies

Chart o' the Day: Don't "Invest" in Stupid Sh*t

Joshua commented on the QZ article I posted a couple days ago and perfectly summarized the take-home message into an Investing Lesson. 

Chart o’ the Day: Don’t “Invest” in Stupid Sh*t

Courtesy of 

The chart above comes from Matt Phillips at Quartz and is a good reminder of why you shouldn’t invest in s...



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OpTrader

Swing trading portfolio - week of December 15th, 2014

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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Sabrient

Sector Detector: Energy sector rains on bulls' parade, but skies may clear soon

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

Courtesy of Scott Martindale of Sabrient Systems and Gradient Analytics

Stocks have needed a reason to take a breather and pull back in this long-standing ultra-bullish climate, with strong economic data and seasonality providing impressive tailwinds -- and plummeting oil prices certainly have given it to them. But this minor pullback was fully expected and indeed desirable for market health. The future remains bright for the U.S. economy and corporate profits despite the collapse in oil, and now the overbought technical condition has been relieved. While most sectors are gathering fundamental support and our sector rotation model remains bullish, the Energy sector looks fundamentally weak and continues to ran...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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