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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Phil's Favorites

It's almost as if the rally made sense

 

Image via Pixabay

It’s almost as if the rally made sense

Courtesy of 

Apple is the largest corporation on earth and, in the last quarter, their profits doubled versus the same quarter during the prior year. As my partner Barry likes to say, “Stop and think about it!”

Indeed, that’s f***ing bananas....



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Zero Hedge

Sydney Lockdown Extended For At Least A Month Stoking Fears Of "Double-Dip" Recession

Courtesy of ZeroHedge View original post here.

Sydney has been locked down for nearly a month now, and it looks like its residents and business owners will need to hold on for just a little bit longer, because the lockdown is being extended once again.

While restrictions have been eased in Melbourne and Adelaide - practically all of Australia's state capitals have been locked down to combat the delta variant, which has infected...only a few hundreds people across the entire country - authorities in New South Wales officially extended the lockdown in Greater Sydney for at le...



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Biotech/COVID-19

What is a breakthrough infection? 6 questions answered about catching COVID-19 after vaccination

 

What is a breakthrough infection? 6 questions answered about catching COVID-19 after vaccination

Vaccines don’t ward off every single infection but they do massively lower the risk. Education Images/Universal Images Group via Getty Images

Courtesy of Sanjay Mishra, Vanderbilt University

If you’ve been fully vaccinated against COVID-19, maybe you figured you no longer need to worry about contracting the coronavirus. But along with the rising number of new COVID-19 cases globally and growi...



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Digital Currencies

Is Amazon About To Start Accepting Crypto?

Courtesy of ZeroHedge

For the first time ever, Amazon has shown itself to be interested in crypto with a new major hire within its payments-focused team.

Posted on Thursday, the new role seeks an experienced product leader with expertise in blockchain, central bank digital currencies and cryptocurrencies to “develop the case for the capabilities which should be developed” and drive overall product vision.

The Payments Acceptance & Experience team is seeking an experienced product leader to develop Amazon’s Digital Currency and Blockchain strategy and product roadmap

The Amazon Payment Acceptance & Experie...



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Chart School

Investing with Channels - Review

Courtesy of Read the Ticker

The US has a lot of debt, to sell more units of the debt to non US buyers the FED and Treasury must get the unit price of the debt down.



This video assumes a 'risk on' bullish bias into the Nov 2022 US mid terms. The bias assumes a US dollar trending down from it current high price of $93 on the DXY.






 


 




Chart 1 - US Dollar Channels




 

Click for popup. Clear your browser cache if image is not showing.


 



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Politics

New York defines illegal firearms use as a 'public nuisance' in bid to pierce gun industry's powerful liability shield

 

New York defines illegal firearms use as a ‘public nuisance’ in bid to pierce gun industry’s powerful liability shield

Illegal gun use is now a public nuisance in New York. AP Photo/Bebeto Matthews

Courtesy of Timothy D. Lytton, Georgia State University

Could calling the illegal use of firearms a “public nuisance” bring an end to the gun industry’s immunity from civil lawsuits? ...



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Promotions

Free Webinar Wednesday: July 7, 1:00 pm EST

 

Don't miss Phil's Webinar on July 7 at 1:00 pm EST. It's FREE and open to all who wish to join.

Click here: 

https://attendee.gotowebinar.com/register/6552545459443187211

Join us to learn Phil's trading tactics and strategies in real-time!

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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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