Investment/Trends

Carney Gets Ready to Blow Up the World

"This article is truly scary. Like a bullet across the bow, or the crack of a whip, it announces with certainty that the world's top bankers intend to blanket the world with faux currency. Carney was said by his central banking peers to be the 'best' central banker of his generation and his recent choice to head the Bank of England was therefore preordained. In fact, we figured that was a bit like being the 'best' used car salesman. But we were wrong. It's worse, much worse. What this article in the Financial Times tells us is that Carney was brought in not just to glad-hand the media and put a sympathetic face on this bloody and miserable facility, but his real brief is to use its powers to the utmost." Continue reading →

Continue ReadingCarney Gets Ready to Blow Up the World

Economy Coming in High and Hard

"We're not certain that this bull market – if they manage to ignite it, and it looks like they will – is going to act like a normal market from a historical perspective. We figure the elements are in place for them to boost averages powerfully but this is still a kind of pre-op coronary patient ... being kept alive by big infusions of adrenaline. The JOBS Act is in place and the product is in the pipeline. The small cap and IPO markets are primed. Fracking promises cheap and plentiful energy – that's what they say, anyway. Somebody's going to make an awful lot of money – and fast – if this market goes up as planned. But it could go down again fast and hard. Timing will be important." Continue reading →

Continue ReadingEconomy Coming in High and Hard

Guy Who Predicted Lehman Brothers’ Fall Sees Big Trouble for China

"The next financial crisis will not come from the United States. All of my systemic risk indicators are clearly pointing at Asia. Asia is back where we were in 2007; they have a trillion dollars of toxic assets off the balance sheets -- hidden. If you look at interbank lending, we meticulously measure every day how much banks trust each other, and that is a phenomenal leading indicator. If you take summer 2011, the S&P dropped 20 percent in about 35-45 days. And sure enough, right before that, the interbank trust in Europe in May and June was completely breaking down because some banks in Europe, France and Germany own a lot of Greek bonds and the Greek bonds were in flames." Continue reading →

Continue ReadingGuy Who Predicted Lehman Brothers’ Fall Sees Big Trouble for China

Bill Bonner: The Fed Was Right…

"Corporate earnings rose. But behind that story lurked another sordid tale. Since the March 2009 low, nearly two-thirds of the rise in operating earnings for S&P 500 companies has come from neither higher sales nor increased productivity. Instead, it has come from lower interest expenses on corporate debt. Corporate America is a debtor. It benefits from lower interest rates, while savers lose. Second, as the so-called “risk free” return on bonds falls, future earnings streams from stocks look more attractive on a relative basis. Third, by evaporating the yields off bonds, the Fed has forced investors to 'reach for yield' elsewhere. An obvious place to look is stocks." Continue reading →

Continue ReadingBill Bonner: The Fed Was Right…

What the Fed Can Learn From the McDonald’s Dollar Menu

"We live in parallel universes. Federal Reserve Chairman Ben Bernanke is said to have a healthy concern about deflation. McDonald’s franchisees, on the other hand, not so much. The chain of Golden Arches fame will give up its Dollar Menu after 11 years, renaming it 'The Dollar Menu & More' next month. It turns out you simply can’t make a buck selling burgers for a buck. It must be hard to give up on such an amazing marketing gimmick, generating one-seventh of all sales since its inception. If Ben Bernanke is paying attention, he is no doubt thrilled to hear about rising price pressures." Continue reading →

Continue ReadingWhat the Fed Can Learn From the McDonald’s Dollar Menu

No Dorothy, US Capital Controls Haven’t Been Imposed

"It's true that the US government could impose capital controls almost instantly. All it would take would be a flick of President Obama's pen. The bigger question is 'why?' Governments have imposed capital or "foreign exchange" controls for more than 2,000 years, starting with the ancient Greeks. The reason has always been the same—to maintain the value of a declining currency. On the other hand, if a country's currency is going up in value, or at least stable, there's no reason to restrict the flow of capital across borders. So will the USA impose capital controls? I think it's extremely unlikely—at least in the next few years." Continue reading →

Continue ReadingNo Dorothy, US Capital Controls Haven’t Been Imposed

Do QE Markets Validate A Buy And Hold Strategy?

"Classical measures of value have been destroyed. It is very difficult to find true price discovery or a reasonable degree of certainty about these markets except that they are artificial and fragile, susceptible to infection from myriad sources. Though equity trends strongly ascend, the ascent is not based on increasing revenues but liquidity that equals debt. In this context, if one 'buys the market' one is betting on continuing QE and an absence of crises that have lingering effects. While QE is likely to continue so long as policy-makers prefer to keep the markets climbing, geopolitical, fiscal or economic crises are nascent, ready to burst into flame." Continue reading →

Continue ReadingDo QE Markets Validate A Buy And Hold Strategy?

In Fed and Out, Many Now Think Inflation Helps

"Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment. Economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers’ wages. Retailers including Costco and Walmart are hoping for higher inflation to increase profits. The federal government expects inflation to ease the burden of its debts. Yet by one measure, inflation rose at an annual pace of 1.2 percent in August." Continue reading →

Continue ReadingIn Fed and Out, Many Now Think Inflation Helps

How to Make $15.6 Million, Risk-Free

"You can buy CDSs without owning the underlying bond, which is essentially a speculation that McDonald's will default on that bond. Unless, of course, you have influence over the fast-food giant's management. Then it's not a speculation at all. It's a can't-lose trade. That's what Blackstone did. It took out an insurance policy on Codere, persuaded it to default, then collected $15.6 million in payouts. There was never a chance Blackstone would lose money on this arrangement. It was literally a risk-free trade." Continue reading →

Continue ReadingHow to Make $15.6 Million, Risk-Free