Keynesian Shangri-La From Myth To Reality

Authored by Mark St.Cyr, In less than the time it takes for a chrysalis to release one of life’s remarkable transformations, many once called “capitalists” woke to find the world they once new changed into something only dreamed or told in folklore. Where business models resembling unicorns abounded along with rainbows in their resembling equivalent of over-arching ETF’s. All available in a multitude of hues and proportions so plentiful: It was hard for one not to well up when contemplating. For in this new fairytale land there must certainly be a pot of gold at the end of every “rainbow.” However, one would be mistaken. For one must remember this is a “Keynesian Shangri-la” and gold here is useless. (insert choir music here) Today, at the end of these self propagated rainbows lies a Central Bank ready and willing to print as much money as one needs to see […] Read More

Calling The Fed’s Bluff

Via ConvergEx’s Nick Colas, If U.S. stocks have stabilized – granted, a big “If” – you can thank the fact that markets don’t believe the Federal Reserve’s outlook on interest rates.  According to the latest CME Group’s contract pricing, Fed Funds rates will end 2015 at 43 basis points. That essentially signals a less-than-100% chance of being at 50 bp in 14 months; the Fed’s own estimates are for Fed Funds to reach 127 basis points by that time. Only three of 17 Fed officials who submit estimates for inclusion in the now-famous “Dot Plot” are lower than the market’s own estimate of future monetary policy.  Looking at 2016, the disparity between market expectations and Fed estimates is even broader.  Policy makers at the Fed believe rates should be at 2.17%; the Fed Funds futures contract sits at 1.27%. In the everlasting debate about whether markets want good or […] Read More

Alarm Bells Ringing: Behind The Smoke And Mirrors Of The European Banking System

Submitted by Erico Matias Tavares of Sinclair & Co. Alarm Bells Ringing – Behind the Smoke and Mirrors of the European Banking System Alarm bells in the European banking system have been ringing for quite a while but nobody seems to be listening. The roaring capital markets are just too loud. But we have been keeping track of a few things. Private sector lending is dropping sharply in the Eurozone. The latest figures have just been released and the picture is not at all encouraging. Total private sector credit by Eurozone monetary financial institutions has accentuated its negative trajectory last June, with lending to households seeing the largest monthly decline since the height of the great financial crisis in late 2008. Uh-oh. Periphery back in play? Very recently the second largest private bank in Portugal was caught in the bankruptcy of the Espirito Santo conglomerate, reporting the largest ever […] Read More

Why One Big Bank Is “Worried That The Market Is Stretched And Could Correct Rapidly”

Aside from a relentless barrage of deteriorating geopolitical updates almost on a daily basis, which have led even the “very serious thinkers” to pull up comparisons to the days just before World War I, it has been smooth sailing for global capital “markets” which merely continue to follow the path of least central bank balance sheet resistance. It is this relentless melt up which has seen what was once a market and is has for the past 5 years become a policy vehicle to boost confidence (for whom, it is unclear: the vast majority of the population no longer cares what rigged stocks do, as for the trickle down wealth effect, 5 years of deteriorating real incomes for the middle class have promptly put an end to that fable) alongside a slow-motion LBO of the entire S&P 500, as companies repurchase trillions of their shares using ultra-cheap credit, bask […] Read More

David Stockman On ‘The QE Follies’: Bernanke’s Swell Gift To The Big Four Banks

Submitted by David Stockman via Contra Corner blog, I recently pointed out that the Fed’s 5-year campaign to drive the 30-year mortgage rate from 6.5% to 3.3% had accomplished nothing except to touch off another of those pointless “refi” booms which enable homeowners to swap an existing mortgage for a new one carrying a significantly lower interest rate and monthly service cost. Such debt churning exercises have been sponsored repeatedly by the Fed since the S&L debacle of the late 1980s. I further noted that this time the Fed had really outdone itself: During some periods upwards of 80% of new originations were not money purchase mortgages to finance a new home, the declared purpose of interest rate repression, but just refis of existing debt. By resorting to this maneuver to leave more money in the pocket of borrowers each month, our monetary central planners undoubtedly hoped that America’s flagging consumers would buy […] Read More

2014: The Market Is Not The Economy And The Winner-Takes-All Society

You hear that old saw that “the market is not the economy,” a lot these days, and for good reason. As ConvergEx’s Nick Colas notes, the S&P 500 breaks to record highs – but U.S. labor markets remain sluggish; investor portfolios do well – but over 47 million Americans (more than 15% of the population) are still in U.S. food stamp program – the same as August 2012. The important question now is: “Is the market TOO different from the economy?” Record corporate profits – the reason for all-time highs in U.S. equities – come with little hiring or wage gains.  The hottest growth stories are business models with lots of customers but very few employees. The recently purchased WhatsApp – for $19 billion – has 55 employees. Investment payoffs – and increasingly social outcomes as well – are technology-enabled, asymmetric and sporadic. How soon before we reach a […] Read More