tag:blogger.com,1999:blog-8078379512095504946.post1562351136338044707..comments2024-03-26T06:17:49.527-07:00Comments on Had Enough Therapy?: The End of the Era of Easy MoneyStuart Schneidermanhttp://www.blogger.com/profile/12784043736879991769noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-8078379512095504946.post-26758164801153739492018-02-09T02:30:19.666-08:002018-02-09T02:30:19.666-08:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/02909897180135228472noreply@blogger.comtag:blogger.com,1999:blog-8078379512095504946.post-57835279687633387972018-02-08T03:50:37.302-08:002018-02-08T03:50:37.302-08:00Jim Rickards is a consistent doomer and gold bug, ...Jim Rickards is a consistent doomer and gold bug, but he just covered the predicaments of unwinding QE, now 8 years too late apparently.<br />https://dailyreckoning.com/reality-returns-wall-street<br /><br />He say the expansion of the money supply (via QE and government debt) hasn't gone into core inflation but asset inflation. And so as the central banks try to start selling financial assets, rather than an increasing money supply, the money supply will be decreasing, and with that the "asset bubble" must deflate, as big investors reduce their own debt as well, due to increasing costs for borrowing.<br /><br />---<br />This will not be a soft landing. The central banks — especially the U.S. Fed, first under Ben Bernanke and later under Janet Yellen — repeated Alan Greenspan’s blunder from 2005–06. Greenspan left rates too low for too long and got a monstrous bubble in residential real estate that led the financial world to the brink of total collapse in 2008.<br /><br />Bernanke and Yellen also left rates too low for too long. They should have started rate and balance sheet normalization in 2010 at the early stages of the current expansion when the economy could have borne it. They didn’t. Bernanke and Yellen ... got an “everything bubble.” In the fullness of time, this will be viewed as the greatest blunder in the history of central banking.<br /><br />This conundrum of how central banks unwind easy money without causing a recession (or worse) is just one small part of a risky mosaic. For now, think of 2018 as the year of living dangerously. Smart investors should prepare now with reduced exposure to stocks.<br />----<br /><br />It makes sense that this is the time for individuals, especially if you're approaching retirement is to divest (buy low, sell high), and pay off debt. But if you still have "winnings" there's still no way to know where when will be the bottom of a bear market, or what the Fed can or will do about it.<br /><br />But others say we can still have Dow 30,000 (when the Fed chickens out again?), so why not keep gambling while we've given Wall street all the keys to the government? It's not like insiders know how to time their exit better than the rest of us, right?<br />Ares Olympushttps://www.blogger.com/profile/09726811306826601686noreply@blogger.comtag:blogger.com,1999:blog-8078379512095504946.post-43761029170163004882018-02-08T03:47:08.341-08:002018-02-08T03:47:08.341-08:00There is a serious problem with the article. In t...There is a serious problem with the article. In this environment cash is king. Investing in bonds when interest rates are rising is much more risky than investing in stocks. Long term government bonds could lose 30% or more of their value in the next year or two. This risk shows up more in bond funds than for those who own individual bonds since the bond funds are prices every day so that the investors can see real time what is happening to the investment. Illuninatihttps://www.blogger.com/profile/11423190828865695564noreply@blogger.comtag:blogger.com,1999:blog-8078379512095504946.post-52852948197125365272018-02-07T09:16:06.291-08:002018-02-07T09:16:06.291-08:00I favor default. It will piss off a lot of people,...I favor default. It will piss off a lot of people, but we will not be saddled with a punishing debt. Then maybe investors will think twice about buying our bonds and financing our wild spending sprees. It will necessitate a much needed frugality in the area of government spending. OTH, many times after a person declares bankruptcy, creditors are there to offer new credit because the bankrupt individual is not saddled with debt and can afford to incur new debt.Bizzy Brainnoreply@blogger.comtag:blogger.com,1999:blog-8078379512095504946.post-44258593774118662852018-02-07T06:04:28.038-08:002018-02-07T06:04:28.038-08:00It seems even the economists are novices in the &q...It seems even the economists are novices in the "dismal science", and more wicked a problem than climate change, but this predicament has been known since they started QE and low borrowing rates to stimulate economic activity. <br /><br />And even Donald Trump was in on the scam when he accused the Federal Reserve of keeping interest rates low to help the Democrats win the presidency. <br />https://www.reuters.com/article/us-usa-election-trump-fed/trump-accuses-fed-of-keeping-rates-low-to-help-obama-idUSKCN0SS22A20151103<br />Of course when he was elected under promises of lower regulations, lower taxes, and higher debts, he happily took responsibility for the ever growing "Net household wealth"<br />https://www.bloomberg.com/news/articles/2017-12-07/u-s-household-wealth-hits-record-96-9-trillion-last-quarter<br /><br />Stuart: ...there are two obvious ways to deal with that much debt. We can inflate the currency or we can default on our obligations. If inflation is the more politically viable option, why are we assuming that the central bankers are trying to fight inflation?<br /><br />That's my understanding. Trump tried promoting the default approach, being an experts on negotiating with creditors when his businesses went bad.<br />https://www.forbes.com/sites/timworstall/2016/05/07/donald-trumps-glorious-threat-to-default-on-the-national-debt-is-just-the-conventional-wisdom<br /><br />But overall I think the strategy is "race to the bottom" and "last economy standing." And in this game the U.S. has a huge advantage as the world's currency of trade. And that's why we NEED to keep a high trade deficit, because the world has a huge appetite for dollars, at least as long as global trade keeps increasing.<br /><br />To me this means Trump is a LOSER when he suggests other countries are taking advantage of the U.S. in their trade deals with us. How do you take advantage of someone who pays for things with IOUs? They're the ones taking the risk that we won't be good for it.<br /><br />I don't know if the "Era of Easy Money" is ending, except in the sense that this round had to end, while we can't afford to stop it. David Stockman can't go wrong by calling it all a failure, if we can unwind.<br />http://davidstockmanscontracorner.com/good-riddance-janet-you-were-a-colossal-failure-part-1/<br /><br />OTOH, the Republicans claimed inflation would explode if the government borrowed more money back in 2009, but Krugman is right so far, inflation is only happening in assets - real estate and stocks, but thanks to imports, consumables (imported from China and elsewhere) keep the cost of living sort of inflation low. <br /><br />A falling dollar index is a sort of "slow default" against foreign creditors and it has fallen 15% since Trump took office, while its been strong since mid-2014. A weaker dollar is another way that we can screw foreigners who hold our dollars, but the cost is out imports will go up, which will raise regular inflation. <br />https://www.marketwatch.com/investing/index/dxy<br /><br />I also recall Martin Armstrong says the "Elites" use war to create inflation, but I don't get the logic, and he seemed wrong on his Oct 2015 "Sovereign debt big bang" date.<br /><br />Oh, and there was talk of "negative interest rates" in the next crisis which makes sense in some mathematical universe I don't understand, where your bank would start charging you for holding your money. But first they have to get rid of the paper cash I guess!?<br />https://www.bloomberg.com/quicktake/negative-interest-rates<br />Ares Olympushttps://www.blogger.com/profile/09726811306826601686noreply@blogger.comtag:blogger.com,1999:blog-8078379512095504946.post-11501347073260017942018-02-07T05:47:01.407-08:002018-02-07T05:47:01.407-08:00Personally, I expect a correction in leisure trave...Personally, I expect a correction in leisure travel stocks and brewers/distillers/luxury goods if the Republican student loan legislation is enacted into law.<br />;-)<br /><br />David Kelly, JP Morgan's chief global strategist, sees a more hawkish Fed with Powell's ascendance to the Chair and replacements on the Board of Governors. I see no reason to doubt that assessment. 'Bout time to end the helicopter loads of Obamabucks, IMO. Besides, tbe Iranians were paid in cash so we're square.Redactednoreply@blogger.com