Money For Nothing

Bill Bonner: Statistics show the fall of the US economy

"Good news is bad news. Bad news is good news. Up is down and backwards is forwards. Nothing is what it seems...or what it ought to be. If the economy really were doing better the Fed would have to follow through on its promise to 'normalize' monetary policy. That is, it would stop lending at zero interest rates and stop its $85 billion-per-month QE program. But those hocus-pocus programs - not a genuine recovery - are what keep stock prices going up. What this means is that there is no genuine recovery. It's all the smoke of ZIRP and the mirrors of QE. When the magic show ends...so does the illusion of recovery." Continue reading →

Continue ReadingBill Bonner: Statistics show the fall of the US economy

QE Exit to Rattle U.S. Bond Markets, Warns OECD

"'Exit from unconventional monetary policy, when needed, may be difficult to manage and less smooth than desirable, possibly leading to sharp rises in bond yields and serious negative consequences for growth in a number of advanced and emerging economies,' Pier Carlo Padoan, OECD’s deputy secretary-general and chief economist, said in the report. 'A leap in U.S. government bond yields would result in capital losses for investors, and prices on other assets would most likely follow suit, with mortgage-backed securities and corporate bonds most strongly affected. [..] In comparison with 1994, this could be more disruptive given current higher leverage." Continue reading →

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Caitlin Long: Vulnerability of Fed’s Balance Sheet

"Several companies have recently asked us for an analysis of the Federal Reserve tapering its quantitative easing programs. One factor that is not widely analyzed is the Fed’s own balance sheet, which could be a constraint on how far and how fast the Fed permits interest rates to rise in the US. We calculate that a 143bp parallel rise in the yield curve would cause a drop in the market value of the Fed’s assets that exceeds the Fed’s own equity capital (as of May 15). The Fed balance sheet’s capacity to absorb higher interest rates has deterioriated quickly, as the 143bp capacity is down from 185bp as of last October." Continue reading →

Continue ReadingCaitlin Long: Vulnerability of Fed’s Balance Sheet

Chinese Tourists with Pockets Full of Dollars

"Chinese tourists have become the highest-spending overseas visitors, reports LaTi. Chinese tourists spend an average of $2,932 per visit to California compared with $1,883 for other overseas visitors, according to the latest statistics by the U.S. Office of Travel and Tourism Industries. 'What we know about Chinese visitors is they don't like to lay on the beaches,' said Ernest Wooden Jr., president of the Los Angeles Tourism and Convention Board. 'What they do like is shopping.' The outpouring of Chinese money helped set a record for spending by foreign visitors to the U.S. — $168.1 billion in 2012, says LaTi." Continue reading →

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The deeper agenda behind Japan’s “Abenomics”

"The policy known as 'Abenomics' is a mix of monetary easing, stimulative spending and growth-inducing steps including deregulation in sectors such as energy. Some Abe allies worry that a hasty push for constitutional changes could upset voters who want the focus to stay firmly on the economy - repeating a mistake seen as a key factor in Abe's first failed attempt to govern. 'He wants to achieve what he left undone - to break free of the ‘post-war regime',' said Koichi Hagiuda, a lawmaker and special aide to Abe. 'What is most symbolic of that is the constitution that was drafted in one short week under (U.S. General Douglas) MacArthur's Occupation.'" Continue reading →

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Schizophrenic investors expect slump, bet on boom

"Some 57pc think there will be no escape from the 'twilight' conditions afflicting the western world, and 20pc expect an full-blown global recession. That is a remarkably bearish set of views. Yet the same investors are overwhelmingly bullish on stocks and property. This schizophrenic exuberance seems entirely based on the assumption that QE and central bank largesse will keep the game going, flooding asset markets with liquidity. Indeed, 80pc think the ECB will cut rates again, and half think it will have to swallow its pride and join the QE club in the end. Four fifths think equities will gallop on upwards over the next year. Complacency is rife." Continue reading →

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Peter Schiff: The Biggest Loser Wins

"Never in the course of history has a country's economy failed because its currency was too strong. It's a pathology that simply does not exist. On the other hand, the list of those ruined by weak currencies is extensive. The view that a weak currency is desirable is so absurd that it could only have been devised to serve the political agenda of those engineering the descent. A currency war is different from any other kind of conventional war in that the object is to kill oneself. The nation that succeeds in inflicting the most damage on its own citizens wins the war. The only real way to win is not to play." Continue reading →

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Japanese Stocks Plunge 1000 Points; Central Bank Injects 2 Trillion Yen

"Japan’s Topix index fell almost 7 percent, the most since the aftermath of the March 2011 tsunami and nuclear disaster, as financial companies plunged amid rising bond yields. The rout triggered a halt in Nikkei 225 Stock Average futures trading in Osaka." Continue reading →

Continue ReadingJapanese Stocks Plunge 1000 Points; Central Bank Injects 2 Trillion Yen

Is This the Best Time for Investors? Don’t Bet On It.

"The stock market is expecting a massive new economic boom, with accelerating growth, widening prosperity and expanding profit margins. Meanwhile, the bond market sees the economy remaining in a funk, with slow growth, widespread unemployment and low inflation. Obviously, they can't both be right. Ominously, though, they could both be wrong. For the first time in 50 years, U.S. investors in a balanced portfolio of stocks and bonds face the near-certainty that they will lose money on a large chunk of their investments, after accounting for inflation—and a significant risk that they will lose money on all of them." Continue reading →

Continue ReadingIs This the Best Time for Investors? Don’t Bet On It.

Bill Bonner: This is not a normal economy at all

"'Normal' is what you get when you don't experiment. So, how can you get to 'normal' from a 'Great Experiment?' We will leave that for the philosophers of tomorrow. Today, we'll merely suggest that maybe this economy isn't so normal. What's normal about an economy where the major financial institutions can borrow money at zero real cost? What's normal about an economy in which people who have run their businesses so recklessly that they had to be bailed out by the government are still running their businesses...and can now borrow at lower rates than good businesses?" Continue reading →

Continue ReadingBill Bonner: This is not a normal economy at all