News Commentary

John Hussman: Reversing the Speculative Effect of QE Overnight

"Last week, without taking any care to reduce the size of its balance sheet, the Federal Reserve instantly changed the monetary environment to one that is observationally equivalent to the one that prevailed in 2009. By raising interest rates artificially (through interest payments on reserves and reverse repurchases) and applying those payments to everything but currency in circulation, the Fed has neutralized the misguided speculative prop it created through 6 years of policy distortion, and it did so in one fell swoop. From the standpoint of investors, the overall effect is just as if the Fed had suddenly reversed every dollar of quantitative easing since 2009 ($1.7 trillion)." Continue reading →

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Bill Bonner: The First Shot in the War on Cash?

"Cash in hand is different. It is physical. Paper. You can do what you want with it. And you don’t pay a negative interest rate. Which is why the feds want to ban cash… They say it will make it easier for them to stimulate the economy. As long as you can hold physical cash, you have an easy way to escape negative interest rates: You just take the money out of the bank and put it in your home safe. But if physical cash is illegal, you have no choice. You have to keep 'your money' on deposit at the bank… and take whatever negative rate the bank imposes on you. Of course, the idea that taking away your money will stimulate economic growth is ridiculous." Continue reading →

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Here’s a risk to stocks you’ve likely overlooked

"Michael Milken, the creator of junk bonds, once remarked: 'Liquidity is an illusion.....It’s always there when you don’t need it, and rarely there when you do'. The problems with liquidity underscore the distorting effects of central bank intervention in financial markets. Official policies in the aftermath of the financial crisis have forced excessive risk taking in search of returns. Yet regulatory changes have contributed to a reduction in trading liquidity. Over time, investors can become increasingly exposed to ever more risky financial assets that in a crisis would be difficult to trade — triggering a major collapse in prices." Continue reading →

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Ron Paul: Greece Today, America Tomorrow?

"While most commentators have focused on Greece’s welfare state, much of Greece’s deficit was caused by excessive military spending. Greece’s military budget remains among the largest in the European Union. Despite all the handwringing over how the phony sequestration cuts have weakened America’s defenses, the United States military budget remains larger than the combined budgets of the world’s next 15 highest spending militaries. Little, if any, of the military budget is spent defending the American people from foreign threats. Instead, the American government wastes billions of dollars on an imperial foreign policy that makes Americans less safe." Continue reading →

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“It Could Never Happen Here”

"Of course, not everyone in Greece is hurting. Many people saw this coming and took action. They took all their money out of the banks, put it under the mattress, or maybe stored it in a safe. Maybe they bought gold, or diamonds, or something else. These people aren’t standing in lines at ATMs. They aren’t going to go homeless or hungry. But these people get a pretty bad rap—at least here in the US, where we call them 'doomsday preppers.' Or 'bunker monkeys.' Or 'conspiracy theorists.' Or 'gold bugs.' They take a beating. Jim Rickards tweeted the other day, 'I’ll bet there a lot of Greeks saying, ‘I wish I had bought some gold.’' Truer words have never been spoken." Continue reading →

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Bill Bonner: The Dumbest Investment Mistake You Can Make

"There could be a 15-day cooling off period… which could be extended by the Fed, in the interest of market stability. Economists don’t know what will work because no one can know what the future will bring. But we all know what won’t work: central financial planning. Likewise, investors can’t consistently choose good investments; because they don’t really know the future. All they can know is what isn’t true and, knowing that, avoid bad investments. That’s why investing is often called a 'loser’s game.' You don’t win by choosing winning investments; you win by not losing. You don’t win by pretending to know what is true; you win by knowing what is false." Continue reading →

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Bill Bonner: Is Ms Yellen making history?

"See how easy investment analysis is. Even a Fed chairman can do it. 'Get out of social media and biotech,' she practically urged investors. 'Buy blue chips and the broad market.' In this, Ms. Yellen is not just making headlines; she's making history. As far as we know, no other Fed chairman has ever offered sector analysis. We'd like to see her portfolio. Here is a woman who not only observes markets; she moves them. In the event, investors sold the sectors she warned against, and bought the broad market...sending the Dow back to record territory. What a fortune you could make if you knew what she'd say next! And what a dope you'd be if you believed her." Continue reading →

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Bill Bonner: The Greatest Fraud Ever

"Banks – with the happy connivance of the Fed – create new money. Corporations use it to buy their own shares. Central banks buy shares too. Besides, buying stocks seems to please everyone who matters. Investors are happy. Speculators are happy. Economists are happy. Politicians are happy, too. After all, a rising stock market means the economy is getting better, doesn’t it? But there is a heavy price to pay, dear reader. The financiers end up owning more of the real businesses… the real enterprises… the real houses… the real output of the real economy. Wall Street firms own more houses. And more stocks. All are bought with money that they – or their cronies – created." Continue reading →

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On The Fed’s (Tentative) End to Bond Purchases in October

"The current plan is that–so long as the economy doesn’t crash–the Fed will taper to $25 billion in August, then $15 billion in September, and then wipe out the remaining $15 billion in October. Here’s a chart showing the behavior of the S&P500 versus the monetary base. It used to be the case that the stock market bounced around with little relation to the Fed’s asset purchases. But since early 2009 and the introduction of QE programs, the stock market and the Fed’s bond buying have moved in virtual lockstep. Let me ask you this: Do you think the S&P should be hitting all-time highs because of how great the underlying economic fundamentals have been the last few years?" Continue reading →

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Corporate Bonds Are The IEDs Of Monetary Central Planning

"The Fed’s sustained, heavy-handed financial repression has generated the greatest ever scramble for yield, and it is now entering its seventh year. Consequently, speculators and bond fund managers are all in the same side of the boat. And all but the most intrepid traders are scared to death to short the Fed, fearing that any day it might uncork yet another round of bond market repression. So we have basically a highly artificial one-way market in corporate bonds—both investment grade and high yield. Very recently yields in the latter touched an all-time low of 4.87%, meaning that after inflation and taxes there is virtually no room for losses on securities that are called 'junk bonds' for a reason." Continue reading →

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