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

Key Events In The Coming Week: Trump Inauguration, Davos, Theresa May, ECB, China GDP

Courtesy of ZeroHedge. View original post here.

The week ahead promises to be a full one, with a plethora of events coming up. The Word Economic Forum in Davos could generate some headlines, with particular focus on Chinese President Xi Jinping, who will be the first Chinese president to attend. Tuesday brings Theresa May's long-awaited Brexit speech, while of course Friday marks the inauguration of Donald Trump as the 45th US president. We will also be keeping a weather eye out for the Supreme Court ruling on Article 50, although there is no set date for its announcement.

Central Banks: ECB and BOC...



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ValueWalk

Why Fractional-Reserve Banking Would Be Limited in an Unhampered Market

By Mises. Originally published at ValueWalk.

By Frank Shostak, Mises

The so-called multiplier arises as a result of the fact that banks are legally permitted to use money that is placed in demand deposits. Banks treat this type of money as if it was loaned to them, thus loaning it out while simultaneously allowing depositors to spend that money.

RELATED: “Austrians, Fractional Reserves, and the Money Multiplier” by Robert Batemarco

Photo by KJGarbutt

For example, if...



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OpTrader

Swing trading portfolio - week of January 16th, 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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Chart School

Weekly Market Recap Jan 15, 2016

Courtesy of Blain.

The week that was…

Bullish action continues as the market alternates between periods of rallying with periods of quiet consolidation.  This past week was a period of the latter.  It was a relatively quiet week other than a bit of a selloff right at the open Thursday.  Friday we saw some of the major U.S. banks report. There were a lot of Federal Reserve speakers trotted out – but markets are in more of a Trump Trance right now so most of it was ignored.  Still no close on the Dow Jones Industrial Average over 20K, although that level was tickled Monday.

That said we have seen a rotation from the winners of November & December (S&P 500 + Russell 2000), into areas that lagged ...



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Phil's Favorites

Trump Slams NATO, Blasts EU as "Vehicle for Germany", Seeks Deal With Russia, Threatens BMW

Courtesy of Mish.

In an amazing set of interviews that proves Obama to be the lamest of lame duck presidents, Trump Slams NATO, Slams Germany, and Floats Russia Nuke Deal.

Donald Trump called NATO obsolete, predicted that other European Union members would follow the U.K. in leaving the bloc, and threatened BMW with import duties over a planned plant in Mexico, according to two European newspapers which conducted a joint interview with the president-elect.

Trump, in an hourlong discussion with Germany’s Bild and the Times of London published on Sunday, s...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Stock market’s most unloved shares send worrying signal (Market Watch)

If you’re the pessimistic type looking for an excuse to sell stocks, it may be lurking in short interest numbers, according to Bespoke Investing Group.

The price of food in the UK is going up and it shows how Brexit will make all Brits poorer (Business Insider)

It's all to do with inflation. For the last year or so, the UK has had very little consumer price inflation (CPI). That means any extra pay earned was kept by work...



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Digital Currencies

China's Bitcoin Exchanges Suspend Margin Trading

Courtesy of Zero Hedge

China's bitcoin traders who use the most popular bitcoin exchange not only in China, but also the entire world, BTCChina, were met with an unexpected warning on Friday:

Starting from January 12th, 2017, BTCChina has suspended margin loan service. If you have any questions, please contact Customer Service: support@btcc.com.

BTCChina, which commands over 37% of global bitcoin trading...

... wasn't alone.

Fo...



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Kimble Charting Solutions

Regional banks; Breakout test in play, says Joe Friday

Courtesy of Chris Kimble.

Over the past 60-days, financial stocks have done well. Over the past 60-days, regional banks have been stellar performers, out producing larger banks and the broad market, by a large percentage. From a risk on stock perspective, seeing large and regional banks do well, has historically been a positive sign.

Below looks at regional bank ETF (KRE)_

CLICK ON CHART TO ENLARGE

K...



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Members' Corner

How To Poop On A Date?

Courtesy of Nattering Naybob.

Back for a brief respite, it's "in the Toilet Thursday" or "Thursday in the Loo". Our last episode The Best Thing To Happen To Pooping, Since Your Butt, laid down a historical perspective.  

This week in How To Poop on a Date? we are graced with a delicate shituation: when your finally back at her place, snuggling in for a little "brown chicken brown cow" and you get hit with "Love Potion #2".  Oh what to do...


...

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Mapping The Market

If we try it enough, it will work.

Via Jean-Luc

Brownback wants Trump to emulate what he did in Kansas because it worked so well:

Sam Brownback Calls on Donald Trump to Mimic His Kansas Tax Plan

By RICHARD RUBIN and  WILL CONNORS

Sam Brownback, the Kansas governor whose tax cuts brought him political turmoil, recurring budget holes and sparse evidence of economic success, has a message for President-elect Donald Trump: Do what I did.

In 2013, Mr. Brownback set out to create a lean, business-friendly government in his state that other Republicans could replicate. He now faces a $350 million deficit when the Kansas legislature convenes in January and projections of a larger one in 2018. The state’s economy is flat and his party is fractured...

...

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Biotech

The Medicines Company: Insider Buying

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

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene

 

 

 

Insider transaction table and buying vs. selling graphic above from insidercow.com.

Chart below from Yahoo.com

...

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Promotions

Phil's Stock World's Las Vegas Conference!

 

Come join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017.            

Beginning Time:  8:00 am Sunday morning

Location: Caesar's Palace in Las Vegas

Notes

Caesar's has tentatively offered us rooms for $189 on Saturday night and $129 for Sunday night. However, we have to sign the contract ASAP. We need at least 10 people to pay me via Paypal or we may lose the best rate for the rooms. (Once we are guaranteed ten attendees, I will put up instructions to call the hotel for individual rooms.)

The more people who sign up,...



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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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