Posts Tagged ‘contained depression’

New Job Opportunity – Spitting at the Moon

New Job Opportunity – Spitting at the Moon

Courtesy of Mish 

moon

In multiple posts Paul Krugman is saying "I told you so". For example, please consider Nobody Could Have Predicted

Pictures support the view that stimulus worked as long as it lasted, boosting the economy — which is the same conclusion Adam Posen drew from Japan’s experience in the 1990s: Fiscal policy works when it is tried.

But the stimulus wasn’t nearly big enough to restore full employment — as I warned from the beginning. And it was set up to fade out in the second half of 2010.

So what was supposed to happen? The invisible cavalry were supposed to ride to the rescue.

I never understood why the Obama administration thought this would happen so soon; history tells us that the effects of a financial crisis on private spending are normally protracted. And sure enough, the cavalry has not arrived.

Stimulus and Full Employment

The idea we can stimulate the economy to full employment is about as silly as silly gets. Krugman wanted double the stimulus we got. Well, we got zero benefit unemployment-wise from the stimulus and in my book infinity times zero is still zero.

Yes, unemployment fell from 10.1% to 9.5% but all of that decrease, if not more than all of that decrease, was a result of a falling participation rate. The bottom line is neither the Fed increasing its balance sheet by $trillions nor a $1.4 trillion deficit did a thing to lower unemployment.

Of course the Keynesian clowns will holler things would have been worse in the absence of stimulus. Really?! Would banks be lending more? Would small businesses be hiring?

Full Employment Made Easy

Krugman wants full employment. I suppose the government could easily employ everyone who does not have a job. Then again, didn’t we effectively do just that?

Here is a snip from "Contained Depression" that suggests we did.

We are certainly in a depression. However, 40 million people on food stamps as of August 2010, masks that depression. The cost of the food stamp program is on schedule to exceed $60 billion in fiscal 2010. For comparison purposes, there was just over 11 million on food stamps in 2005.

Please note there are 14.6 million unemployed, but of them 4.5 million of them are receiving regular unemployment


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“Contained Depression”

"Contained Depression"

Courtesy of Mish 

Deflated globe

Kevin Feltes, an economist for the Jerome Levy Forecasting Center, solicited my opinion on a couple of their recent articles.

Levy comes down on the side of deflation, as do I. However, the devil is in the details, as always. I will go through one of their articles in a point-by-point fashion, stating where I agree and disagree with their analysis.

This is a long post. Please give it some time.

Please consider Widespread Fear of the Wrong Kind of Price Instability.

Levy:

It is not inflation but more disinflation and ultimately deflation that lie ahead in the 2010s.

Inflation worries remain a major part of the market backdrop, and the past year has brought new price stability concerns to investors. During that time, we have written about inflation fears, deflation risks, and the relationships between price trends and monetary policy, fiscal policy, Treasury debt levels, foreign debt holdings, and various other issues. We have argued that rising inflation will not be a threat in the coming years and that disinflation and some deflation are the real worries. Our position remains unchanged.

1. Why It Will Be Very Difficult for Inflation to Accelerate in the Next Few Years

The dominant influence on price trends in the near future and for years to come will be the deflationary influence of chronically high unemployment. The economy not only has gone through a deep recession but also has entered a contained depression, a long period of substandard economic performance, chronic financial problems, and generally high unemployment. The contained depression is likely to last about a decade; it will end in the latter half of the 2010s at the earliest and could stretch into the 2020s

In the years ahead, chronic high unemployment will weigh heavily on labor costs; chronic economic weakness will tend to keep profit margins under pressure and firms focused on cost control; and global instability and large areas of depression (contained or otherwise) will reduce upward pressures on prices of imported commodities and are likely to cause these prices to fall much of the time.

Even if imported commodity prices, most notably oil prices, rise sharply at times, they will not have a large, lasting effect on inflation as long as labor costs are decelerating or actually falling.

Labor costs are the dominant inflation influence not only because


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GURU OUTLOOK: DAVID GERSTENHABER & THE “CONTAINED DEPRESSION”

GURU OUTLOOK: DAVID GERSTENHABER & THE “CONTAINED DEPRESSION”

Courtesy of The Pragmatic Capitalist 

guruDavid Gerstenhaber is a former Tiger Cub and President of Argonaut Capital Management. His distinguished pedigree is of the long line of successful traders that once traded under Julian Robertson (see Robertson’s guru outlook here).  His global macro strategy fund has never lost money since its founding in 2000 and has averaged an annual return of 19%.  What was a disastrous 2008 for most investors was another excellent year for Argonaut as Gerstenhaber guided the fund to a 12.3% gain.  In 2008 he bet big against high interest rates in the UK and shorted the British Pound in response.  Both were huge winners.  The pound alone fell over 25% in 2008.  He is well known for being a superb risk manager and has proven to be able to thrive in any market environment.

Although there have been signs of economic recovery Gerstenhaber hasn’t changed his bearish outlook all that much.  In a recent interview with CNBC he said we are in a “contained depression”.  He describes this as a period of very low growth and a jobless recovery.  Although it is not technically a depression it will feel very much like one.  He also believes the US consumer has been reset.  Thinking with regards to spending and speculation will never return to what it once was.

He reiterates a belief of our own that the problem of debt continues to hinder the global economy.  On the whole, the bailouts and government spending set a poor precedent.  He says this is particularly true in Greece.  While the bailout in Greece could be a near-term positive it is in fact a long-term negative and sets a very bad precedent.   I couldn’t agree more.  He says the Euro could remain depressed for an extended period of time due to this.  He also says the Eurozone is still suffering from a battle with deflation and it is likely to continue for the foreseeable future.

In terms of the U.S. equity markets Gerstenhaber now says the market is fully valued and that the easy money has been made.  He believes 2010 will be a very difficult year for equities as the U.S. government is making many of the same mistakes that were made in Japan.  He says that we settled for a “workout” period as opposed to taking our medicine or inflating our…
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Zero Hedge

UMich Confidence Collapses As "Hope" Crashes Most Since 2012

Courtesy of ZeroHedge. View original post here.

Echoing Bloomberg's sentiment indicator, University of Michigan's survey shows Americans' confidence collapsed heading into January with 'expectations' plunging to Oct 2016 lows.

The University of Michigan’s preliminary January sentiment index fell to 90.7 from the prior month, missing all estimates in a Bloomberg survey of economists. The measures of current conditionsand expectations both declined to the lowest since President Donald Trump's election in 2016.

...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Phil's Favorites

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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ValueWalk

The SEC's Unconstitutional Conditions Doctrine?

By Jacob Wolinsky. Originally published at ValueWalk.

Princeton, NJ – A new commentary by Crow & Cushing, the SEC’s Unconstitutional Condition, examines a lawsuit challenging the constitutionality of the SEC’s practice of prohibiting defendants who settle civil charges with the SEC from making any public statement, even an indirect one, which takes issue with the validity of the SEC’s charges.

By U.S. Government [Public domain], via Wikimedia CommonsAccording to one study, the SEC settles ...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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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

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

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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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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