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  • Finance 0

    Federal Reserve’s Plan “Won’t End Well” For The Markets

    At a meeting with Congress on Wednesday, U.S. Federal Reserve Chairwoman Janet Yellen reiterated the Fed’s plan to raise interest rates in the months ahead. But her words seemed to come with a hint of doubt… Yellen discussed several concerns about the economy that could make the Federal Reserve hesitate on the timing of rate hikes. Yellen admitted that growth was slowing in the United States due to declines in stock prices, higher rates for risky borrowers, and the appreciation of the U.S. dollar. With many analysts concerned that another economic recession could be coming, lawmakers asked whether the Fed would consider controversia...
    On February 11, 2016 / By
  • Finance 0

    The Game Is Over – Market Perspective

    The fuse has been lit. The world economy is in serious trouble and we have the worst possible people at the helm. You have Obama who wants to double the funding for the SEC and CFTC to go after the banks because he smells blood. He also wants to add a $10 tax to oil just because he sees it as something else he can tax. The question becomes, just how long can we try to climb out of this mess before it consumes the entire rope? It does appear that the greatest period of turmoil will be 2017 moving into 2020. Whatever can go wrong, will go wrong. We have everything culminating from a sovereign debt crisis to the War Cycle intermixed with politic...
    On February 11, 2016 / By
  • Finance 0

    Greece And The Eurozone: An Update

    Introduction From reading the media, one gets the impression that bailing out its banks is the most serious economic problem the Eurozone faces. This problem could easily be avoided. As I have explained elsewhere, not allowing banks to sell off loans they make would resolve this problem. But bank problems aside, the Eurozone countries appear to doing better. According to FocusEconomics (Table 1), the aggregate GDP growth rate for the region was 1.5% in 2015 and is projected to increase to 1.7% in 2016. Of course, this is hardly impressive as compared to the US with an actual and projected growth rate of 2.4% for both 2015 and 2016. But kee...
    On February 11, 2016 / By
  • Finance 0

    HCP: Is The Dividend Safe?

    HCP (HCP) released its 4th quarter and full year results on February 9th. The market did not like the results. HCP stock fell from $34/share down to $28/share in one day. The company’s stock has declined ~28% over the last week. Source: Finviz The company’s stock has a dividend yield of 8.5%. If HCP can pay steady or increasing dividends it is an absolute bargain. If it doesn’t, it is a ‘yield trap’ – a stock or REIT that lures in income investors with its high dividend – only to slash the dividend later. HCP’s price decline is a result of its post-acute/skilled nursing segment posting poor results. Specifically, the segm...
    On February 11, 2016 / By
  • Finance 0

    E Yen Rally Threatens To Derail The Abe Government Economic Program

    We have made no secret of the fact that the entirety of the Japanese Prime Minister Abe economic recovery program is predicated on the foundation of a weak currency. The effectiveness of that program has now become suspect mainly due to an 8% increase in the value of the Yen against the US Dollar since the beginning of this New Year. Both Prime Minister Abe and his counterparts over at the Bank of Japan are attempting to push Japan out of its deflationary spiral by generating an annual rate of inflation of 2%. That cannot happen if the Yen keeps moving relentlessly higher. Keep in mind that this upward movement in the Yen is also taking place...
    On February 11, 2016 / By
  • Finance 0

    Central Banks Didn’t Eat Your Lunch

    One of the consistent trends you’ll find in my econ and finance work is that I don’t think much about Central Banks. In other words, I think mainstream macro puts far too much emphasis on the efficacy of things that Central Bankers do. This is why I said QE wouldn’t do much back in 2009 and it’s also why I’ve consistently argued that the Federal Reserve wasn’t the primary cause of the stock bull market of recent years. Of course, none of this means Central Banks have no impact at all. That would be wholly naive. I know that Central Banks have powerful policy levers and can influence the economy in significant ways. But I think mai...
    On February 11, 2016 / By
  • Finance 0

    T2108 Suggests There Is More Room To The Downside

    Alright – it is time to post another update on the T2108 – what is it you ask? (in the case you haven’t been following this blog for very long). It is the percentage of stocks trading above their 40-day moving average.  This is probably the single best predictor I know when it comes to finding market bounces. And by the looks of it, the bounce isn’t happening just yet if history is any indication. It used to be that a move into the teens was a great opportunity to get long on the market for an anticipated market bounce right around the corner. But lately that has not been the case, instead driving the T2108 into insan...
    On February 11, 2016 / By
  • Finance 0

    Yellen Discusses Negative Rates In Congressional Testimony, Gold Responds

    Negative rates have not worked for the ECB, Sweden, Japan, or Switzerland. Nonetheless, Fed Chair Janet Yellen is back on that idea today in Congressional testimony. Specifically, Yellen Says Fed Evaluating Possibility of Negative Rates in US. “We had previously considered them and decided that they would not work well to foster accommodation back in 2010,” Yellen said Thursday, answering questions during a second day of testimony before Congress. “In light of the experience of European countries and others that have gone to negative rates, we’re taking a look at them again because we would want to be prepared in the event that we ne...
    On February 11, 2016 / By
  • Finance 0

    The Feckless Fed And Path Of The Dollar – Euro In Overshoot Territory?

    So what was new yesterday that drove the dollar in the dirt against the new safe haven stars (euro, yen, and gold)? I would have to say Yellen’s feckless performance in front of the cameras during here congressional testimony. The more she defended the Fed view, the more everyone realized there is no view. This shouldn’t be a big revelation over educated economists are confused about the direction of the economy and markets; but the degree of explicit confusion is higher than ever and rising. [I would add though Greenspan proved his cluelessness, in spades, he at least faked it much better than Yellen does.] It seems anyone who had some r...
    On February 11, 2016 / By
  • Finance 0

    China Navigates The Trilemma (And Slowing Growth)

    Benn Steil and Emma Smith at the Council on Foreign Relations present an interesting picture of Chinese reserves. They write: The People’s Bank of China has been selling off foreign currency reserves at a prodigious rate to keep the RMB stable. At $3.2 trillion, China’s reserves still seem enormous. But they are down $760 billion from their 2014 peak, and $300 billion in just the past three months. As shown in the figure above, at the current pace of decline China’s reserves will, according to the IMF’s framework for reserve adequacy, actually fall to a dangerously low level in the spring. This means that China would be at risk of a...
    On February 11, 2016 / By