Posts Tagged ‘Mean Reversion’

Rosie On The Fed’s Intent To Get Everyone Onboard Its All-In Bet On Stocks

Rosie On The Fed’s Intent To Get Everyone Onboard Its All-In Bet On Stocks

Courtesy of Tyler Durden at Zero Hedge

Just in case there is someone living in a cave who still doesn’t understand that the Fed’s one and only mandate (forget that crap about inflation and jobs) is to give everyone one last shove into the all inponzi before the diarrhea hits the HVAC, here is David Rosenberg explaining, for the cheap seats, what the Fed’s terminal intent is.

The Fed’s intent is not to create consumer inflation, but rather asset inflation — primarily in the equity market. By pulling longer-term bond yields lower, the Fed hopes that this will alter how investors value equities relative to the fixed-income market. Moreover, the Fed will be actively pushing up the value of bonds that exist in investor portfolios, and as such the intent is to induce these investors to rebalance their asset mix towards equities in order to maintain their current allocation. The Fed is also trying to incentivize fund flows into the equity market. This in turn would theoretically boost household wealth and as such make consumers, who now feel richer, to go out and spend more. So the theory goes — we shall see how it works in practice.

The Fed’s intent is also to lower both the debt and equity cost of capital so that companies will, at the margin, compare that to expected returns on newly invested capital and begin to spend more on new plant and equipment. The hope here is that the investment spending multiplier will kick in and that stepped-up job creation would occur in tandem with the renewed capex growth.

In essence, the Fed wants to avoid what happened in Japan over the last two decades — have a look at Japan Goes from Dynamic to Disheartened on the front page of the Sunday NYT. The comment in the article to the effect that back in 1991, the consensus was looking for the Japanese economy to begin surpassing the U.S. economy in size by 2010. Nice call. Instead, Japan’s economy has not expanded at all since that time whereas the U.S. economy, despite all its problems, has grown 65%.

That said, the U.S. has already experienced a lost decade in many respects, especially as it pertains to the labour market, while Japan has lost two decades. Also have a


continue reading


Tags: , , , , , , , , , , , ,




Tim Backshall On Europe: “Default Now Or Default Later” As EuroStat Complains That Greece Is Still Withholding Critical Data

Tim Backshall On Europe: "Default Now Or Default Later" As EuroStat Complains That Greece Is Still Withholding Critical Data

Courtesy of Tyler Durden

There is one major problem with putting houses of card back together – they tend to fall…over and over. And while abundant liquidity in May and June served as an artificial prop to return European core and PIIGS spreads to previous levels merely as mean reversion algos took holds, the second time around won’t be as lucky. CDR’s Tim Backshall was on the Strategy Session today, discussing the key trends in sovereign products over the past few months, noting the declining liquidity in both sovereign cash and derivative exposure (we will refresh on the DTCC sovereign data later after its weekly Tuesday update). Yet the most interesting observation by Backshall is the declining halflife of risk-on episodes, which much like the SNB’s (now declining) interventions, are having less of an impact on the market, as ever worsening fundamentals can only be swept under the carpet for so long before they really start stinking up the place, and indeed, as Tim points out at 5:30 into the interview, even the IMF now realizes that soon the eventual second domino will fall, and it is better the be prepared (via the previously discussed infinitely expanded credit line), than to have to scramble in the last minute as was necessary in May. In other words, the storm clouds are gathering and only fools will invest in risk asset without getting some additional clarity on what is happening in Europe. The bottom line as Backshall asks is: "do they default now or default later." And that pretty much sums it up. Buy stocks at your own peril.

Incidentally all this is happening as we read in an exclusive Bloomberg piece that "four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt" and that EuroStat still has not received the required disclosure about just how fake (or real) the Greek debt situation truly is. When one steps back and ponders just how bad (and unknown) the situation in Europe is, and that stocks are unchanged for the year, one must conclude, as Dylan Grice does every week, that the lunatics have truly taken over the asylum.


Tags: , , , , , ,




 
 
 

Phil's Favorites

Rogue science strikes again: The case of the first gene-edited babies

 

Rogue science strikes again: The case of the first gene-edited babies

Chinese scientists led by He Jiankui claimed they used CRISPR to modify human embryos that eventually were born as twin girls. AP Photo/Mark Schiefelbein

Courtesy of G. Owen Schaefer, National University of Singapore

The idea of scientists tinkering with the genes of babies was once the provenance of science fiction, but now it’s apparently entered the realm of reality: On Nov. 26, Chinese scientist He Jiankui reported the historic live births of ...



more from Ilene

Zero Hedge

Trump Administration Considering Issuance Of 50, 100-Year Treasuries

Courtesy of ZeroHedge View original post here.

The last time the US was seriously considering issuing ultra-long dated bonds - those with a maturity of 50 and 100 years - was back in late 2016 and early 2017, when yields were near the record lows hit in recent days. As we reported back in November 2016, shortly after Steven Mnuchin was confirmed as US Treasury Secretary, the former Goldman banker proceeded to roil the bond market when he told CNBC he would look at extending the maturity of future Tr...



more from Tyler

Insider Scoop

Heavy Volume Drives Low-Float Stock Plus Therapeutics Up 200%

Courtesy of Benzinga

Plus Therapeutics Inc (NASDAQ: PSTV) is the latest and one of the most extreme recent examples of the powerful combination of low float and heavy trading volume.

Plus shares traded higher by more than 215% on Friday. The biotech stock more than tripled after the company reported ...



http://www.insidercow.com/ more from Insider

Lee's Free Thinking

Long Term Stock Market Chart Perspective

Courtesy of Lee Adler

After a big day like yesterday, I like to get a little long term stock market chart perspective. (Yes, this stilted verbiage is for search engine optimization ).

We do that with a monthly bar chart, which I update when relevant in Lee Adler’s Technical Trader. That’s in addition to the regular daily bar/cycle charts covering the past year, and a weekly cycle chart covering the past 4 years.

I wrote on July 14, in reference to the price and indicator patterns on the weekly chart:

The market has overshot a 3-4 year cycle projection in terms of both price and time. There are no long term projections. A 4 year cycle high is ideally due now. A 4 ye...



more from Lee

Kimble Charting Solutions

S&P About To Decline 14%, Catching Up With The Crude Oil Declines?

Courtesy of Chris Kimble

This chart looks at the performance of the S&P 500, Crude Oil and the Yield on the 10-Year note over the past 4-months.

Crude Oil has declined around 14% more than the S&P during this time frame. Yields have declined, even more, around 36%. The is a huge spread between these assets over this short of a time period.

A few importa...



more from Kimble C.S.

Chart School

Bitcoin 2019 fractal with Gold 2013

Courtesy of Read the Ticker

Funny how price action patterns repeat, double tops, head and shoulders. These are simply market fractals of supply and demand.

More from RTT Tv

Ref: US Crypto Holders Only Have a Few Days to Reply to the IRS 6173 Letter

Today's news from the US IRS has been blamed for the recent price slump, yet the bitcoin fractal like the gold fractal suggest the market players have set bitcoin up for a slump to $9000 USD long before the IRS news hit the wire.

Get the impression some market players missed out on the b...

more from Chart School

The Technical Traders

Global Central Banks Move To Keep The Party Rolling - Part III

Courtesy of Technical Traders

This section of our multi-part article regarding current and past central bank actions, we are going to attempt to look at key elements of the past and present to highlight what we believe may turn out to be an incredible “setup” in the global markets. 

This setup is almost like a complex chess game where two skilled players battle for control and near the end of the game, one player is left with the King, a Rook, and a Pawn while the other player has a dramatic advantage with stronger chess pieces.  Yet, as the game continues, the weaker player is able to remove one or two of the stronger players key pieces and move his pawn to his opponent’s side to r...



more from Tech. Traders

Digital Currencies

New Zealand Becomes 1st Country To Legalize Payment Of Salaries In Crypto

Courtesy of ZeroHedge View original post here.

Bitcoin and other cryptocurrencies have been on a persistent upswing this year, but they're still pretty volatile. But during a time when even some of the most developed economies in the word are watching their currencies bounce around like the Argentine peso (just take a look at a six-month chart for GBPUSD), New Zealand has decided to take the plunge and become the first country to legalize payment in bitcoin, the FT reports.

The ruling by New Zealand’s tax authority allows salaries and wages to b...



more from Bitcoin

Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

more from M.T.M.

Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



more from Biotech

Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



more from Our Members

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

...

more from Promotions





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...

Learn more About Phil >>


As Seen On:




About Ilene:

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.

Market Shadows >>