Posts Tagged ‘Richard Fisher’

REVISITING RICHARD FISHER’S “DARKEST MOMENTS”

REVISITING RICHARD FISHER’S “DARKEST MOMENTS”

Courtesy of The Pragmatic Capitalist 

It’s been less than two weeks since I first discussed Richard Fisher’s “darkest moments”, but the markets have made some incredible moves since then so I wanted to revisit the piece.  After the FOMC meeting yesterday Ben Bernanke released an op-ed for the Washington Post.  His comments were incredibly important.  Not only did he say that he was directly attempting to prop up equity markets (that’s right America – we have resorted to officially admitted that our central bank is running a ponzi scheme), but he also admitted that the Fed’s actions are not inflationary.  Why you ask?  Because, as I’ve emphasized in recent weeks this operation does not add net new financial assets to the private sector.  It does not boost lending.  It does not create jobs.  It does not boost wages.  Bernanke essentially admits as much:

“Although asset purchases are relatively unfamiliar as a tool of monetary policy, some concerns about this approach are overstated. Critics have, for example, worried that it will lead to excessive increases in the money supply and ultimately to significant increases in inflation.

Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation. We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable.”

He’s hoping to create an equity market “wealth effect” that is unsupported by the underlying fundamentals – Greenspan 101.  So, we’re in this situation where end demand remains very weak in the United States.  But Mr. Bernanke knows this operation is unlikely to result in any real lasting inflationary impact.  But his commentary alone is having an astounding impact on markets.  In essence, he is herding investors into equities and commodities as investors believe that the policy is inflationary.  Unfortunately, the assets that have rallied the most since August are important inputs in every day products:

  • Cotton + 68%
  • Sugar +66%
  • Soybeans +23%
  • Rice +29%
  • Coffee +15%
  • Oats +31%
  • Copper +16%

Some people are
continue reading


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




WELCOME TO RICHARD FISHER’S “DARKEST MOMENTS”

WELCOME TO RICHARD FISHER’S “DARKEST MOMENTS”

Courtesy of The Pragmatic Capitalist 

I wish I could say that I am surprised that Ben Bernanke’s policies are failing, but quite frankly nothing this Fed does ceases to amaze me any longer.  His latest folly of QE2 is having profound effects already and it hasn’t even started yet!  Unfortunately, it is having its impacts in all the wrong places.  The other day, Richard Fisher remarked:

“In my darkest moments, I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places.”

Welcome to your darkest moments Mr. Fisher. The one thing we can positively confirm about QE2 is that it has not created one single job. But what has it done?  It has caused commodities and input prices to skyrocket in recent months.  Reference these 10 week moves that have resulted in the Fed already causing “mini bubbles” in various markets:

  • Cotton +48%
  • Sugar +48%
  • Soybeans +20%
  • Rice +27%
  • Coffee +18%
  • Oats +22%
  • Copper +17%

Of course, these are all inputs costs for the corporations that have desperately cut costs to try to maintain their margins.   With very weak end demand the likelihood that these costs will be passed along to the consumer is extremely low.  What does this mean?  It means the Fed is unintentionally hurting corporate margins.  And that means the Fed is unintentionally hurting the likelihood of a recovery in the labor market.


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




THE UNINTENDED CONSEQUENCES OF QE2

THE UNINTENDED CONSEQUENCES OF QE2

Courtesy of The Pragmatic Capitalist 

It looks like the Fed is already beginning to worry about the unintended consequences of QE2.  In a speech earlier this week Richard Fisher discussed an important consequence of QE.  He said:

“In my darkest moments, I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places.”

It certainly is working in the wrong places.  While the Fed creates paper profits in stocks and bonds QE appears to also be influencing the price of commodities.  Commodity prices have surged in recent weeks as the Fed has driven the dollar lower.  What’s so pernicious here is the margin compression that Gaius discussed the other day.  This is crucial because the margin recovery has been the single most important component of the equity market recovery.

What’s so interesting here is that Ben Bernanke might actually be creating a double headwind for the economy in the coming quarters.  Not only is he reducing margins for many corporations, but because quantitative easing is inherently deflationary (because it replaces interest bearing assets with non-interest bearing assets) it is not helping aggregate demand. From the perspective of a corporation this means stagnant revenues and higher input costs.  That will only increase the reluctance to hire.

Of course, the Fed thinks they can prop up particular markets and generate a “wealth effect” that is unsupported by the underlying fundamentals.  Interestingly, in the long-run, Mr. Bernanke might be creating more damage than he even understands.  But at least someone at the Fed is beginning to wonder if this strategy is viable.


Tags: , , , ,




3rd Quarter GDP +2.5% : Is That All?

3rd Quarter GDP +2.5% : Is That All?

cold water splashCourtesy of Mish

Yesterday Dallas Federal Reserve President Richard Fisher threw a little cold water on the V-shaped recovery madness everyone seems to be buying into these days.

Please consider Fed’s Fisher: GDP Growth In Third Quarter Likely Lower Than Reported.

Speaking at a conference in Tyler, Texas, Fisher said he was willing to venture that the increase would not be "as robust as originally reported."

He did say, however, that the growth rate would still be positive – though it would be closer to a rate of 2.5 percent – and that growth would also be positive for the fourth quarter.

Even though he said economic growth would be positive, Fisher cautioned that the high unemployment rates would cause recovery from last year’s financial crisis to be slow.

Managing Expectations

Got the idea the Fed is attempting to manage expectations? If so, that is precisely what the Fed is doing.

When asked about the dollar at a question and answer session following his speech, Fisher said that lower interest rates have not increased the risk of the dollar declining in value. Rather, he said, the weakening of the dollar was due to other major currencies entering the world’s economic system.

"You’d expect with more participants that there might be some kind of rebalancing," but such evolution would be orderly and gradual, he said.

Let me get this straight: The dollar is falling because "other major currencies [are] entering the world’s economic system".

Is he serious? What this proves is these guys absolutely cannot think beyond their prepared remarks.

The Effect of Stimulus

A $trillion in stimulus (not counting bank bailouts) and other stimulus measures not labeled "stimulus" because everyone is getting tired of the word, only got us 2.5%-3.0% of GDP growth.

Dave Rosenberg was talking about GDP in today’s Breakfast with Dave

Heightened appetite for risk does not mean that credit problems have gone away as we see the global speculative-grade corporate default rate rise 12 basis points in October, to 9.71%. And Fitch just published a report indicating that the U.S. banks can expect to see 10% of their $1.1 trillion of direct commercial real estate loans default and that the regional banks can expect to see “significant” cuts in their credit ratings.

DOWNGRADE TO GROWTH FORECASTS?


continue reading


Tags: , , , ,




 
 
 

Zero Hedge

World Trade War I: US Asks South Korea To Join Anti-Huawei Campaign

Courtesy of ZeroHedge. View original post here.

The bilateral trade war between the US and China is gradually becoming a global trade war of global geopolitical and commercial dominance between the US and Chinese spheres of influence.

Shortly after the two largest mobile phone companies in the UK decided against launching Huawei-built 5G phones this morning, and roughly around the time a bevy of Japanese tech and telecom companies including ARM Holdings, Panasonic and SoftBank all imposed a boycott on supplying Huawei with mission critical components joining Australia, and New Zealand as major US allies to end commercial relat...



more from Tyler

Phil's Favorites

Overpriced tech IPOs sell grand visions but aren't worth their valuations

 

Overpriced tech IPOs sell grand visions but aren't worth their valuations

rblfmr / Shutterstock.com

Courtesy of John Colley, Warwick Business School, University of Warwick

The year of the tech IPO is 2019. Uber went public on May 10 with a US$82.4 billion valuation. Fellow ride-sharing app Lyft floated in March with a U$24 billion valuation and Pinterest had a US$10 billion IPO in April...



more from Ilene

Kimble Charting Solutions

Emerging Markets About To Submerge If 3-Year Support Breaks?

Courtesy of Chris Kimble.

Are Emerging Markets about to “Submerge” and head a good deal lower? What they do at (3) will go a long way in answering this question!

Emerging Markets ETF (EEM) has been lagging the broad market for the past 15-months. They hit their 50% retracement level of the last year’s highs and lows and falling resistance at (2) recently. The weakness of last has EEM trading below its 200-MA line.

EEM has spent the majority of the past 3-years inside of rising channel (1), which reflects that this trend remains up. The weakness of late has it testing the bo...



more from Kimble C.S.

Insider Scoop

Amgen To Buy Danish Collaborator Nuevolution For $167M

Courtesy of Benzinga.

Amgen, Inc. (NASDAQ: AMGN) took a logical step forward in buying a preclinical biotech it has been collaborating with since 2016. 

What Happened

Amgen announced Wednesday an agreement to buy Copenhagen-based Nuevolution for $167 million.

Th...



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

Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

more from Chart School

Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



more from Bitcoin

Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



more from Biotech

ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



more from ValueWalk

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

Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



more from M.T.M.

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 ...



more from OpTrader

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 >>