Posts Tagged ‘economic cycles’

New Bubble Threatens Global Rebound

New Bubble Threatens Global Rebound

bubble economyCourtesy of Mish

Although Belief In Wizards Runs Deep there are a few free thinkers who don’t see it that way. Andy Xie is one of them. Please consider New Bubble Threatens a V-Shaped Rebound.

In a normal economic cycle, an inventory-led recovery would be followed by corporate capital expenditure, leading to employment expansion. Rising employment leads to consumption growth, which expands profitability and more capex. Why won’t it work this time? The reason, as I have argued before, is that a big bubble distorted the global economic structure. Re-matching supply and demand will take a long time.

The process is called Schumpeterian creative destruction. Keynesian thinking ignores structural imbalance and focuses only on aggregate demand. In normal situations, Keynesian thinking is fine. However, when a recession is caused by the bursting of a big bubble, Keynesian thinking no longer works.

The lifespan of a bubble depends on how it affects demand. The longest-lasting are property and technology bubbles. The multiplier effect of a property bubble is multifaceted, stimulating investment and consumption in the short term. The supply chain it impacts is very long. From commodity producers to real estate agents, it could stimulate more than one-fifth of an economy on the supply side. On the demand side, it stimulates credit growth and financial sector earnings, and often boosts consumption through the wealth effect. Because a property bubble is so powerful, the negative effects of a bursting are great. Excess supply created during a bubble’s lifespan takes time to consume. And a bust destroys the credit system.

A technology bubble occurs when investors exaggerate a new technology’s impact on corporate earnings. A breakthrough such as the Internet improves productivity enormously. However, consumers receive most of the benefits. Competition eventually shifts temporarily high corporate profitability toward lower consumer prices. Because the emergence of an important technology brings down consumer prices, central banks often release too much money, which flows into asset markets and creates bubbles. While an underlying technology leads to an economic boom, the bubble feels real. More capital pours into the technology. That leads to overcapacity and destruction of profitability. The bubble bursts when speculators finally realize that corporate earnings won’t rise after all.

The cost of a technology bubble is essentially equal to the amount of over-investment involved. Because a technological breakthrough expands the


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DEEP THOUGHTS FROM RICHARD RUSSELL

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DEEP THOUGHTS FROM RICHARD RUSSELL

economic cyclesCourtesy of The Pragmatic Capitalist

Regular readers know that I am a huge fan of Richard Russell’s work.  For those who aren’t familiar with Russell, he is the author of The Dow Theory letters.   Obviously, he is a student of Dow Theory (perhaps professor is more appropriate).  Most importantly though Russell is about as experienced an investor as you’ll find on the planet.  He has lived through cycles that no one else can even remember.

I like to think that the market works on a different clock from the rest of the world.  Economic cycles are often long and drawn out.  It can be hard for humans to comprehend economic cycles because the length of an economic cycle is not based in years or months.  It can literally work on its own clock.  The current deleveraging cycle is particularly frustrating for investors because these types of recessions tend to be long and drawn out unlike your average 8-16 month recession.  A full economic cycle can be anywhere from 5 years to 25 years from peak to trough.  Humans, particularly investors, have trouble seeing past the next 5 to 25 minutes.  It’s safe to say that Mr. Russell has seen more cycles than anyone and his educational and priceless commentary is evidence of this.  I’ve included some of his notes from this latest week and highly recommend his newsletter.  His ability to grasp the big picture is truly unmatched:

Question — Russell, you seem to think this is going to be a world-class bear market. Why do you think that?

Answer — The US and its people have been borrowing and leveraging for decades or ever since WW II. There’s never been a true correction in the economy, although there have been corrections in the stock market (1973-74 and 1957-58). Consumer buying makes up 70% of the Gross National Product of the US. For the first time in decades, US consumers are dealing with massive unemployment. This is scaring them and causing them to cut back in their buying and now they are actually saving. Fear is the strongest of all human emotions, and US consumers are finally dealing with naked fear. I believe this fear will bring on years of saving and a long period


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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga.

  • Data on retail sales for November will be released at 8:30 a.m. ET.
  • Data on industrial production for November will be released at 9:15 a.m. ET.
  • The flash Composite Purchasing Managers' Index for December is schedule for release at 9:45 a.m. ET.
  • Data on business inventories for October will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the recent week is schedule for release at 1:00 p.m. ET.

Posted-In: Economic DataNews Economics ...



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The PhilStockWorld.com Weekly Trading Webinar - 12-12-18

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.

Major Topics:

00:00:22 Checking on Indexes Charts
00:12:49 EME
00:17:32 Euro Stocks
00:19:29 NLY
00:25:34 Compound Rate Calculator
00:35:48 Going through watchlist charts
00:42:07 FDX
00:47:00 Long Term Portfolio
00:48:38 Short Term Portfolio - MSFT
00:50:58 CELG

Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. Subscribe to our YouTube channel and vie...



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Zero Hedge

China Retail Sales, Industrial Production Growth Plummet In November

Courtesy of ZeroHedge. View original post here.

With yuan unable to sustain its PBOC-inspired squeeze higher and currency volatility at three-year highs, hopes remained high that some stability can be reasserted in China's macro-economic data tonight. Those hopes have been dashed.

...



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Kimble Charting Solutions

Regional Banks About To Send Important Message!

Courtesy of Chris Kimble.

Large and Regional banks have struggled this year, as both indices have declined nearly 15% in 2018.  These declines have taken place as interest rates have been moving higher, which historically is positive for banks.

The declines of late in Regional Bank ETF (KRE) has it testing 7-year rising support as well as the 2007 highs at (1).

The Power of the Pattern is of the opinion, what KRE does at (1), will send an important message to the banking industry and the broad markets.

Keep a close eye on KRE in the weeks ahead friends, this looks to be an important test of support!...



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Biotech

Those designer babies everyone is freaking out about - it's not likely to happen

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

 

Those designer babies everyone is freaking out about – it's not likely to happen

Babies to order. Andrew crotty/Shutterstock.com

Courtesy A Cecile JW Janssens, Emory University

When Adam Nash was still an embryo, living in a dish in the lab, scientists tested his DNA to make sure it was free of ...



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Members' Corner

Blue Wave with Cheri Jacobus (Q&A II, Updated)

By Ilene at Phil's Stock World

Cheri Jacobus is a widely known political consultant, pundit, writer and outspoken former Republican and frequent guest on CNN, MSNBC, FOX News, CBS.com, CNBC and C-Span. Cheri shares her thoughts on the political landscape with us in a follow up to our August interview.

Updated 12-10-18

Ilene: What do you think about Michael Cohen's claim that the Trump Organization's discussions with high-level Russian officials about a deal for Trump Tower Moscow continued into June 2016?

...

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Digital Currencies

How low will Bitcoin now go? The history of price bubbles provides some clues

 

How low will Bitcoin now go? The history of price bubbles provides some clues

The Bitcoin bubble is perhaps the most extreme speculative bubble since the late 19th century. Shutterstock

Courtesy of Lee Smales, University of Western Australia

Nearly 170 years before the invention of Bitcoin, the journalist Charles Mackay noted the way whole communities could “fix their minds upon one object and go mad in its pursuit”. Millions of people, he wrote, “become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first”.

His book ...



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Chart School

Weekly Market Recap Dec 09, 2018

Courtesy of Blain.

Bears are certainly showing the type of strength we haven’t seen in a long time.   A week ago at this time futures were surging on news of a “truce” for 90 days between China and the U.S. in their trade spat.  But the charts were still not saying lovely things despite a major rally the week prior.   And by Tuesday, darkness had descended back on the indexes, with another gut punch Friday.    A lot of emphasis was put on a long term Treasury yield dropping below a shorter term Treasury.

On Monday, the yield on five year government debt slid below the yield on three year debt, a phenomenon which has p...



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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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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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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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