History Repeating

Your Trip on My Time Machine

"How fast and how far could interest rates rise? How soon would they impact other sectors of the economy? How can you profit from this powerful megatrend? On a quest for the answers, I invite you to a voyage through time: We will visit five critical — and incredible — periods of the past. We will return for a reality check of the even more incredible present-day reality. And then, we will take a quick trip into the future to see, first hand, a scenario that we believe is absolutely unavoidable. Our first stop is over a half century ago." Continue reading →

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‘I can’t look at myself in the mirror’: Hendry reveals he has turned bullish

"Eclectica hedge fund manager Hugh Hendry has said he has been forced to leave his bearish outlook behind as he faces up to a market 'which only makes sense through the prism of trends'. Hendry said he is no longer fighting the 'two-way feedback loop' which is continuing to boost risk assets. That centres on the currency war being played out between the US and China, in which US QE prompts dollar-denominated investment to head to China, and China fights the resulting upwards pressure on its currency by manufacturing an investment boom - leading to falling US inflation expectations, which in turn prompts the Federal Reserve to loosen policy once again." Continue reading →

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Ukraine protests increase risks of currency crisis

"Massive protests against Viktor Yanukovich hammered Ukraine's financial markets on Monday, increasing the risk of a currency crisis as the president tries to hold on until an election in early 2015. Ukraine's debt insurance costs jumped and currency traders increased bets on a devaluation after 350,000 people protested on Sunday against Yanukovich's decision to ditch a trade pact with the European Union. Central bank Governor Ihor Sorkin backed up foreign exchange intervention by vowing to do everything needed to uphold financial stability. In an online video message, he urged savers 'to be confident in the banking system' and not to withdraw their deposits." Continue reading →

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Nobel Prize winner warns of US stock market bubble

"At the ceremony in Sweden, Schiller told Reuters news agency that the Federal Reserve's economic stimulus and growing market speculation were creating a "bubbly" property boom. 'This financial crisis that we've been going through in the last five years has been one that seems to reveal the failure to understand price movements,' Shiller told Reuters. The S&P 500 Index is now higher by 26.6 percent since the start of the year, logging its longest weekly winning streak since 2004 on Friday. Both the Dow and the S&P 500 are regularly breaking fresh new all-time highs and the Nasdaq is trading at levels not seen since the Dotcom boom went bust in 2000." Continue reading →

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Nobel Prize winner warns of US stock market bubble

"At the ceremony in Sweden, Schiller told Reuters news agency that the Federal Reserve's economic stimulus and growing market speculation were creating a "bubbly" property boom. 'This financial crisis that we've been going through in the last five years has been one that seems to reveal the failure to understand price movements,' Shiller told Reuters. The S&P 500 Index is now higher by 26.6 percent since the start of the year, logging its longest weekly winning streak since 2004 on Friday. Both the Dow and the S&P 500 are regularly breaking fresh new all-time highs and the Nasdaq is trading at levels not seen since the Dotcom boom went bust in 2000." Continue reading →

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“Everyone Is Holding Cash; They Know When It Ends It’s Gonna Get Ugly”

"'The Fed is playing a very dangerous game,' Starwood Capital's Barry Sternlicht warns,'and they need to stop.' Sternlicht has quadrupled his firm's net worth in this time and, to the incredulity of the CNBC anchors, warns, 'this is bad, this is a heroine addiction.. and now they are printing more money than the deficit.' The outspoken CEO of the $29 billion fund, noted 'all my friends who are money managers.. are much closer to the sell button than they ever were before,' adding that 'everyone's holding cash,' since if they start to get nervous 'volatility will come back instantly.' Simply put, he concludes, 'you know when this ends, it's gonna get ugly.'" Continue reading →

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Monetary Madness, Part II

"Like today, the Fed helped create a bond market bubble in the 1970s … but then began a panicky retreat in 1979 that helped drive T-bond yields to 13%, T-bill rates to 17% and the prime rate to 21%. Like today, the Fed kept the lid on short-term interest rates in the early 1990s … but then was forced to unleash them in 1994, causing the largest calendar-year decline in bond prices in modern history. And like today, in the first half of the 2000s, the Fed papered over every financial disaster it ran into — only to beat a sudden retreat by letting Lehman Brothers fail. They will do the same thing again — not because of any particular plan, but because they will have no other choice." Continue reading →

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Meet Two Economists Who Can Ruin Your Retirement

"Messrs. English and Wilcox are two of the most important economists at the Federal Reserve. Their work greatly influences the Fed’s policies … and they recently presented their latest findings at the International Monetary Fund’s annual research conference. Essentially, English and Wilcox’s new research argues that the Fed should start reducing the size of its money-printing programs in the next few months. But at the same time, the economists recommend that the Fed should offset that tapering with extremely dovish guidance on interest rates. More specifically, they suggest that the Fed should promise to keep rates close to zero until 2017!" Continue reading →

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Bill Bonner: Paddywhacking

"Last week, Janet Yellen told the Senate what everyone wanted to hear: that the Fed would continue to support asset prices. With the 'Yellen put' in their pockets, investors bid up the Dow to over 16,000 by the end of the week. What to make of it? Although we have no doubt that Fed policies will prove disastrous, we have nothing but doubts about what form the disaster will take. John Williams of ShadowStats.com recalculates the Consumer Price Index, official unemployment rates and GDP figures based on more honest data and alternative methodologies. What he discovers is that the CPI is higher, unemployment is higher and the GDP is lower than the feds would have us believe." Continue reading →

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Yellen Signals Continued QE Undeterred by Bubble Risk

"'I don’t see evidence at this point, in major sectors of asset prices, misalignments,' she said during her confirmation hearing to be the next Fed chairman. 'Although there is limited evidence of reach for yield, we don’t see a broad buildup in leverage, where the development of risks that I think at this stage poses a risk to financial stability.' Yellen signaled her determination to use bond buying to strengthen the economy and drive down the nation’s 7.3% unemployment rate. As benchmark U.S. stock indexes rose to records, she sought to dispel concerns from senators that the central bank’s policy is pumping up the values of equities and housing to an extent that jeopardizes market stability." Continue reading →

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