Posts Tagged ‘risk assets’

Blah Blah Blah Quantitative Easing Blah Blah Blah – “I Want a New Drug”

Blah Blah Blah Quantitative Easing Blah Blah Blah – "I Want a New Drug"

Courtesy of KID DYNAMITE’S WORLD

Machine

Let’s step back into our time machine and travel alllllll the way back to the 2000-2009 decade – the one we just finished. We suffered a massive financial crisis because we, as a country and a world really, had borrowed and lent far too much money based on paper asset prices. The assets in question were homes, and the prices were inflated by a massive ignorance of risk on the part of all parties – borrowers, lenders, insurers, modelers, financial wizards, etc. When we borrowed money based on paper asset prices, we were totally hosed when the prices of those assets declined and we then couldn’t afford to pay back our loans.

Now press "live" on your remote, and return your DVR time machine to the present. The solution our fearless leaders at the Federal Reserve have chosen is to run this play again – quantitative easing is designed to inflate asset prices, which in turn will hopefully result in people feeling wealthier, borrowing more, and spending more – it’s a "virtuous cycle!!!"  Bernanke actually told us this, specifically, in an Op-ed today:

Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

Just to recap, the Fed’s basic goal (in my opinion) is to force capital into risk assets. The Fed buys treasuries, driving their yields to unappealing levels, until investors are forced to put their money into other asset classes: stocks, corporate bonds, commodities. As that happens, portfolio valuations increase, everyone is supposed to feel good again, and we go out and spend money, which flows through to the rest of the economy. Now get back in the time machine and crank it back just a handful of years. How did that work out last time? Of course it was great while the bubble was inflating – flat screen TVs and newly landscaped yards for everybody! – but reality is always a bitch, and bubbles…
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MORE BUBBLE TALK

MORE BUBBLE TALK

Courtesy of The Pragmatic Capitalist 

Oil being poured into water, studio shot

It’s becoming increasingly popular to describe the U.S. government bond market as a “bubble.” As I’ve previously explained, this strikes me as totally nonsensical for several reasons – the primary reason being that the term simply is not applicable to an asset in which you receive your entire principle back at maturity. The term “bubble” implies a grossly mispriced asset that is susceptible to substantial losses. If the instrument is used as intended there should be little to no risk of principal loss in a U.S. government bond.  And given the weak economy and constant need for government intervention it is no surprise that investors are seeking a safe haven such as bonds.

Aside from all that, Credit Suisse recently published an interesting piece of research arguing the same point – that the U.S. bond market is not a bubble.  They noted that the price action in government bonds is very different from historical bubbles:

“We note that the price action of bonds it is very different from the bubbles in other asset classes we have seen over the last 30 years. The six-month US bond return is 1.9 standard deviations above norm, compared to an average of 5.9 standard deviations during previous bubbles.”

So you can see the price action is not even remotely similar to the great bubbles in history.  If investors continue to use government bonds as they are intended (for instance, don’t make a 10 year loan with the intention of demanding your money back in 10 minutes), diversify across bond markets and generally allocate bonds as they are intended (as a hedge against other higher risk assets) then there should be very little risk of you ever experiencing a catastrophic loss such as those seen after many of the great bubbles of the last 30 years. 


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TALKING OURSELVES OFF THE EDGE OF THE CLIFF

TALKING OURSELVES OFF THE EDGE OF THE CLIFF

WSOP No-Limit Texas Hold 'em World Championship

Courtesy of The Pragmatic Capitalist 

Yesterday’s WSJ MarketBeat blog took David Einhorn to task for his op-ed in the NY Times titled “Easy Money, Hard Truths“.  They make the argument that Einhorn is simply pushing his massive gold position.  I fear Einhorn is doing something much worse – helping to scare us all into continued recession.

First off, I have no problem when someone talks their book.  In fact, I almost prefer for people to talk their book.  There’s a certain trust in someone who is willing to “put their money where their mouth is”.  It’s the primary reason why I believe the hedge fund business is such a wonderful advancement beyond traditional mutual funds – the manager’s interests are generally aligned with those of the investor.  If you can find a manager who is not only intelligent, but has a sound moral compass you’ve wandered upon quite a gem.  From all accounts David Einhorn appears to fit the mold.  But I take very serious issue with his recent comments which I believe are filled with half-truths and propaganda that we continually hear from the inflationistas (all of whom have been terribly wrong thus far in terms of their macroeconomic outlook) who are driving the country towards the edge of the cliff.

Einhorn is a great investor and clearly a brilliant man, but for two years I have watched policymakers and fear mongerers misdiagnose the problems that we confront and this is, in my opinion, why we are still wrangling with these issues. In 2008 I wrote a letter to the Federal Reserve saying that this was a classic “balance sheet recession” with problems rooted in the private sector – specifically the consumer.  I told them that saving banks was not the solution and that monetary policy would prove as fruitless in the U.S. as it has in Japan.  I was shocked to receive a friendly response to my letter but not shocked to see Mr. Bernanke implement his Friedman-like monetarist campaign of “saving the world”.  Obviously it hasn’t worked (unless you’re a banker) as we sit here two years later still discussing this wretched credit crisis and the ranks of the unemployed continue to climb.  If we cannot properly diagnose the problems we cannot find a proper cure.  Thus far, we have failed.…
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Phil's Favorites

What kind of Brexit will Britain now 'get done' after Boris Johnson's thumping election win?

 

What kind of Brexit will Britain now ‘get done’ after Boris Johnson’s thumping election win?

Courtesy of Tom Quinn, University of Essex

The Conservatives’ victory in the UK general election is at once a decisive moment of clarity and a harbinger of uncertainty. Prime Minister Boris Johnson called the election with a pledge to “get Brexit done”, and with his newly-won parliamentary majority, he is now in a position to do just that.

The shape of Brexit has already been defined by the withdrawal agreement Johnson negotiated with the EU in October. It en...



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Chart School

Funds are getting ready to move out of USA

Courtesy of Read the Ticker

Just before the hang over in the US equity markets, money will move and take their well earned gains else where. Here is why.

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Charts in video.

US is in the late cycle boom.

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US stock market with the US dollar, they have risen together from 2012. A change of this will force money to move.


Cli...



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Zero Hedge

Bianco: Mom-And-Pop Aren't The Ones Getting Suckered By FOMO

Courtesy of ZeroHedge View original post here.

Authored by Jim Bianco via Bloomberg.com,

The current bull market is historic. According to Goldman Sachs Group Inc., it’s been 10.7 years since the last 20% correction, the longest such run in more than 120 years. In 2019 alone, the S&P 500 Index has surged more than 25%, with recent gains being attributed in part to investors chasin...



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Kimble Charting Solutions

Euro Breakout In Play? Gold Bulls Sure Hope So!

Courtesy of Chris Kimble

The Euro has spent much of the past 2 years trading in a down-trend.

Though precious metals like Gold have fared well, this has been a bit of a headwind because it means that the US Dollar has remained firm.

Big Test In Play for the Euro

The Euro is testing a confluence of important support just as the downtrend is narrowing and ready for a “break”. That support includes lower falling wedge support and the Euro’s long term up-trend support line (see points 1 and 2).

If the Euro can succeed in breaking out at (3), it would be bullis...



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Insider Scoop

8 Healthcare Stocks Moving In Friday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Sarepta Therapeutics, Inc. (NASDAQ: SRPT) stock surged 36.4% to $137.00 during Friday's pre-market session. The market value of their outstanding shares is at $6.1 billion. The most recent rating by Janney Capital, on December 13, is at Buy, with a price target of $175.00.
  • GlaxoSmithKline, Inc. (NYSE: GSK) shares surged 1.1% to $46.44. The market value of their outstanding shares is at $112.9 billion. According to the most recent rating by UBS, on November 21, the current rating is at Buy.
  • AstraZeneca, Inc. (NYSE: ...


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Digital Currencies

Three Men Arrested In NJ For Running Alleged $722 Million Crypto Ponzi Scheme

Courtesy of ZeroHedge View original post here.

Authored by Kollen Post via CoinTelegraph.com,

United States authorities in New Jersey have announced the arrest of three men who are accused of defrauding investors of over $722 million as part of alleged crypto ponzie scheme BitClub Network, per a Dec. 10 announcement from the Dep...



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Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



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Members' Corner

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

 

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

By Matt Wilstein

Excerpt:

Sacha Baron Cohen accepted the International Leadership Award at the Anti-Defamation League’s Never is Now summit on anti-Semitism and hate Thursday. And the comedian and actor used his keynote speech to single out the one Jewish-American who he believes is doing the most to facilitate “hate and violence” in America: Facebook founder and CEO Mark Zuckerberg.

He began with a joke at the Trump administration’s expense. “Thank you, ADL, for this recognition and your work in fighting racism, hate and bigotry,” Baron Cohen said, according to his prepared...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

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

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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