What Could Possibly Go Wrong

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 →

Continue ReadingNobel Prize winner warns of US stock market bubble

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 →

Continue ReadingNobel Prize winner warns of US stock market bubble

“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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15 new UK banks in five years, predicts Metro founder

"Mr Thomson, backed by US banking entrepreneur Vernon Hill, launched Metro Bank in 2010. It was the first award of a new full banking licence since the 19th Century, underlining the barriers to entry that new competitors face. New entrants to the market have failed to loosen the grip of the 'Big Five' banks, which includes the taxpayer-owned Lloyds-Halifax brands and RBS-NatWest. It was announced in March that new applicants for UK banking licences would face more 'relaxed' demands on the amount of capital they hold as part of plans to reduce barriers to entry and stimulate competition." Continue reading →

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Banks Warn Fed They May Have To Start Charging Depositors

"A less discussed issue was the Fed's comment that it would consider lowering the Interest on Excess Reserves to zero as a means to offset the implied tightening that would result from the reduction in the monthly flow once QE entered its terminal phase (for however briefly before the plunge in the S&P led to the Untaper). After all, the Fed's policy book goes, if IOER is raised to tighten conditions, easing it to zero, or negative, should offset 'tightening financial conditions', right? Wrong. As the FT reports leading US banks have warned the Fed that should it lower IOER, they would be forced to start charging depositors." 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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ECB Said to Consider Minus 0.1 Percent Deposit Rate

"The European Central Bank is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative for the first time, according to two people with knowledge of the debate. Policy makers would reduce the rate for commercial lenders who park excess cash at the ECB to minus 0.1 percent from zero, said the people who asked not to be identified because the talks aren’t public. It would be the first time the central bank has adjusted interest rates by less than a quarter of a percentage point. The concept, which has been discussed by Governing Council members, doesn’t yet have a consensus, the people said." 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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The Manufacturing Index Reverses, Falls

"The New York Federal Reserve Bank’s latest survey indicates a slowing of the regional economy. This was not expected by economists. This is a major reversal. It took place across the boards. This could be a temporary fluke. But this is November. This is the month preceding the Christmas season. This should be a time of increasing demand. It isn’t in the New York City area — the heart of America’s financial center." Continue reading →

Continue ReadingThe Manufacturing Index Reverses, Falls