Economic Blogs

Time to make it easier for people to get loans with lower credit and lower down payments: FHFA looking seriously at making it easier for cash strapped Americans to take on mortgages.

Dr. Housing Bubble Blog - Tue, 21/10/2014 - 22:52
If you had to write two chapters on the housing market between say 2000 and 2007 and one between 2007 and 2014 both would look incredibly different. One was guided by massive exuberance and a populist movement of giving money to anyone with a pulse. The latest chapter is one guided by big investors and […]
Categories: Economic Blogs

In the Year 2024

The Daily Reckoning - Tue, 21/10/2014 - 21:01

[Editor's Note from Jim Rickards: The following article describes a fictional dystopia in the spirit of Brave New World or 1984. It is not a firm forecast or prediction in the usual analytic sense. Instead, it's intended to provide warning, and encourage readers to be alert to dangerous trends in society, some of which are already in place. Thank you.]

As I awoke this morning, Sunday, Oct. 13, 2024, from restless dreams, I found the insect-sized sensor implanted in my arm was already awake. We call it a “bug.” U.S. citizens have been required to have them since 2022 to access government health care.

The bug knew from its biometric monitoring of my brain wave frequencies and rapid eye movement that I would awake momentarily. It was already at work launching systems, including the coffee maker. I could smell the coffee brewing in the kitchen. The information screens on the inside of my panopticon goggles were already flashing before my eyes.

Images of world leaders were on the screen. They were issuing proclamations about the fine health of their economies and the advent of world peace. Citizens, they explained, needed to work in accordance with the New World Order Growth Plan to maximize wealth for all. I knew this was propaganda, but I couldn’t ignore it. Removing your panopticon goggles is viewed with suspicion by the neighborhood watch committees. Your “bug” controls all the channels.

I’m mostly interested in economics and finance, as I have been for decades. I’ve told the central authorities that I’m an economic historian, so they’ve given me access to archives and information denied to most citizens in the name of national economic security.

My work now is only historical, because markets were abolished after the Panic of 2018. That was not the original intent of the authorities. They meant to close markets “temporarily” to stop the panic, but once the markets were shut, there was no way to reopen them without the panic starting again.

My work now is only historical, because markets were abolished after the Panic of 2018.

Today, trust in markets is completely gone. All investors want is their money back. Authorities started printing money after the Panic of 2008, but that solution stopped working by 2018. Probably because so much had been printed in 2017 under QE7. When the panic hit, money was viewed as worthless. So markets were simply closed.

Between 2018–20, the Group of 20 major powers, the G-20, abolished all currencies except for the dollar, the euro and the ruasia. The dollar became the local currency in North and South America. Europe, Africa and Australia used the euro. The ruasia was the only new currency — a combination of the old Russian ruble, Chinese yuan and Japanese yen — and was adopted as the local currency in Asia.

There is also new world money called special drawing rights, or SDRs for short. They’re used only for settlements between countries, however. Everyday citizens use the dollar, euro or ruasia for daily transactions. The SDR is also used to set energy prices and as a benchmark for the value of the three local currencies. The World Central Bank, formerly the IMF, administers the SDR system under the direction of the G-20. As a result of the fixed exchange rates, there’s no currency trading.

All of the gold in the world was confiscated in 2020 and placed in a nuclear bomb-proof vault dug into the Swiss Alps. The mountain vault had been vacated by the Swiss army and made available to the World Central Bank for this purpose. All G-20 nations contributed their national gold to the vault. All private gold was forcibly confiscated and added to the Swiss vault as well. All gold mining had been nationalized and suspended on environmental grounds.

The purpose of the Swiss vault was not to have gold backing for currencies, but rather to remove gold from the financial system entirely so it could never be used as money again. Thus, gold trading ceased because its production, use and possession were banned. By these means, the G-20 and the World Central Bank control the only forms of money.

Some lucky ones had purchased gold in 2014 and sold it when it reached $40,000 per ounce in 2019. By then, inflation was out of control and the power elites knew that all confidence in paper currencies had been lost. The only way to re-establish control of money was to confiscate gold. But those who sold near the top were able to purchase land or art, which the authorities did not confiscate.

Those who never owned gold in the first place saw their savings, retirement incomes, pensions and insurance policies turn to dust once the hyperinflation began. Now it seems so obvious. The only way to preserve wealth through the Panic of 2018 was to have gold, land and fine art. But investors not only needed to have the foresight to buy it… they also had to be nimble enough to sell the gold before the confiscation in 2020, and then buy more land and art and hang onto it. For that reason, many lost everything.

Land and personal property were not confiscated, because much of it was needed for living arrangements and agriculture. Personal property was too difficult to confiscate and of little use to the state. Fine art was lumped in with cheap art and mundane personal property and ignored.

Stock and bond trading were halted when the markets closed. During the panic selling after the crash of 2018, stocks were wiped out. Too, the value of all bonds were wiped out in the hyperinflation of 2019. Governments closed stock and bond markets, nationalized all corporations and declared a moratorium on all debts. World leaders initially explained it as an effort to “buy time” to come up with a plan to unfreeze the markets, but over time, they realized that trust and confidence had been permanently destroyed, and there was no point in trying.

Wiped-out savers broke out in money riots soon after but were quickly suppressed by militarized police who used drones, night vision technology, body armor and electronic surveillance. Highway tollbooth digital scanners were used to spot and interdict those who tried to flee by car. By 2017, the U.S. government required sensors on all cars. It was all too easy for officials to turn off the engines of those who were government targets, spot their locations and arrest them on the side of the road.

In compensation for citizens’ wealth destroyed by inflation and confiscation, governments distributed digital Social Units called Social Shares and Social Donations. These were based on a person’s previous wealth. Americans below a certain level of wealth got Social Shares that entitled them to a guaranteed income.

Those above a certain level of wealth got Social Donation units that required them to give their wealth to the state. Over time, the result was a redistribution of wealth so that everyone had about the same net worth and the same standard of living. The French economist Thomas Piketty was the principal consultant to the G-20 and World Central Bank on this project.

By 2017, the U.S. government required sensors on all cars.

To facilitate the gradual freezing of markets, confiscation of wealth and creation of Social Units, world governments coordinated the elimination of cash in 2016. The “cashless society” was sold to citizens as a convenience. No more dirty, grubby coins and bills to carry around!

Instead, you could pay with smart cards and mobile phones and could transfer funds online. Only when the elimination of cash was complete did citizens realize that digital money meant total control by government. This made it easy to adopt former Treasury Secretary Larry Summers’ idea of negative interest rates. Governments simply deducted amounts from its citizens’ bank accounts every month. Without cash, there was no way to prevent the digital deductions.

The government could also monitor all of your transactions and digitally freeze your account if you disagreed with their tax or monetary policy. In fact, a new category of hate crime for “thoughts against monetary policy” was enacted by executive order. The penalty was digital elimination of the wealth of those guilty of dissent.

The entire process unfolded in small stages so that investors and citizens barely noticed before it was too late. Gold had been the best way to preserve wealth from 2014–18, but in the end, it was confiscated because the power elites knew it could not be allowed. First, they eliminated cash in 2016. Then they eliminated diverse currencies and stocks in 2018. Finally came the hyperinflation of 2019, which wiped out most wealth, followed by gold confiscation and the digital socialism of 2020.

By last year, 2023, free markets, private property and entrepreneurship were things of the past. All that remains of wealth is land, fine art and some (illegal) gold. The only other valuable assets are individual talents, provided you can deploy them outside the system of state-approved jobs.

Regards,

Jim Rickards
for The Daily Reckoning

P.S. Sign up to receive the Daily Reckoning email edition for free. It’s now the official way to stay up to date on Jim’s new writings and any developments in his newsletter, Strategic Intelligence. Sign up for FREE, right here.

Categories: Economic Blogs

Our Ebola Stocks Could Double Overnight

The Daily Reckoning - Tue, 21/10/2014 - 19:12

I believe we are in the midst of one of the greatest profit opportunities you’re ever going to see in your lifetime.

Stop listening to what the government is telling you. Turn off CNN. Forget what you see on the news. And for God’s sake, forget about the market crashing.

Right now, we are in the early innings of the greatest profit opportunities of the 21st century. A biotech boom that’s about to hit epic proportions thanks to Ebola.

If I’m right, we are going to see Ebola in New York, Los Angeles, San Francisco and Miami. And when this happens, every single stock that has anything to do with Ebola is going to soar.

Let me explain to you how I believe this huge Ebola bubble is going to unfold.

Ebola is as easy to catch as a cold. Touch your eye. There, you just infected yourself. Stick your finger into your mouth. There, you just infected yourself. Pick off that scab on your arm. There, you infected yourself.

Right now, we are in the early innings of the greatest profit opportunities of the 21st century. A biotech boom that’s about to hit epic proportions thanks to Ebola.

For about a month, our government has been acting as if Ebola is the common cold. But here’s the truth. Ebola is a killing machine. Ebola is terrifying. You keep vomiting because the virus acts like a blender, liquefying your organs. Until you drown in your own blood. Even in the United States, odds are you’ll die if you get Ebola.

And we recently learned that Ebola has gone wild in Dallas. This means that more people are going to get infected with Ebola. And more people are going to die of Ebola. Right here in the United States.

Once people start dying, our government is going to act. The first thing they’ll do is give billions of dollars to Ebola drug companies. The government is going to order these companies to make anti-Ebola drugs ASAP. And vaccines. All rules and regulations are going to be set aside so that these companies can start making these medicines immediately.

Remember Hurricane Katrina hitting New Orleans in 2005? The government did not lift a finger until the TV cameras showed people starving and dying. Ebola is going to be another Hurricane Katrina. And just like with Hurricane Katrina, the government is miles behind on preparing and getting ready for Ebola.

Here’s what’s going to happen:

As Ebola spreads from one place to the next, people are going to get scared. And as the fear builds, every stock that is associated with Ebola is going to skyrocket. Once the Ebola panic sets in, these stocks could see gains of 300%. In the worst-case scenario, where we have over 100 Ebola cases in a big city like New York, we could even see gains of 1,000%.

Remember, this is a prediction, not a guarantee. I want to make sure you understand that you’re only going to see these kinds of gains if my scenario comes true.

What about timing? How long is this going to take? When exactly is this going to happen? When? I can’t give you a precise date. But I can show you one scientifically tested scenario under which I can see Ebola stocks doubling instantly.

Ebola in New York City

A scientific study conducted by MIT (Massachusetts Institute of Technology) showed that JFK airport in New York is the most likely place for Ebola to get into the U.S.

Here’s why this is important:

You see, scientists have known for decades that Ebola was going to come to the United States through our airlines. This study rates Los Angeles as the No. 2 airport in terms of its ability to spread Ebola. Honolulu, San Francisco, Newark (New York/New Jersey), Chicago and Washington, D.C., are also on the list of cities with risky airports.

If the next case of Ebola shows up in New York, Ebola stocks are going to double overnight. Yes, overnight. You know, I lived in New York for 16 years. I know New York City as well as anyone who lives there today. Ebola is going to be a nightmare in New York. Truly, I pray that Ebola bypasses New York. But Ebola in New York is going to make someone rich. Let it be you.

Some of you think that making money from Ebola stocks is bad. That’s just ridiculous. If you get Ebola, drugs are your only real chance of surviving it. And if Ebola hits New York, our only chance of stopping Ebola is a vaccine. The right Ebola stocks are going to be lifesavers.

Now let’s make one thing clear here. I can’t tell you exactly where Ebola is going to show up next. And it’s possible I could be wrong about everything.

But look at what’s going on. Look at the government’s track record of being wrong and clueless. They’ve gotten just about everything wrong. It’s clear to me that our government has no real plan on what to do. If this isn’t clear to you, look at what they are saying after the second case of Ebola in Dallas was found…

“We do not today have a number of such exposed people or potentially exposed health care workers. It’s a relatively large number, we think… We have not identified a specific problem that led to this infection.”

Got that? They have no idea how many people could be infected. And they have no idea how the Ebola spread. These are quotes from Thomas Frieden, director of the Centers for Disease Control and Prevention (CDC). The CDC is the part of the U.S. government responsible for stopping Ebola. Just understand that a month ago, Frieden was telling everyone…

“We are stopping Ebola in its tracks in this country… Ebola poses little risk to the U.S. general population.”

Meanwhile, the CDC’s own website states that Ebola is a biosafety hazard level 4. That’s the highest rating a biosafety hazard can get. The CDC website says that to handle Ebola safely:

“Lab workers should change clothing before entering. Shower upon exiting. Decontaminate all materials before exiting. Any person working with Ebola must be wearing wearing a full-body, air-supplied, positive pressure suit.

“Any building that handles Ebola is supposed to be isolated or be in a restricted zone of the building. The building should have its own separate air supply, as well its own independent air exhaust lines that suck the air into a decontamination systems before releasing it into the atmosphere.”

There are just four hospitals with in the United States that meet these requirements. Four! And the biggest of these four hospitals has only 10 beds in these Ebola-ready wards. And the hospital in Dallas where both Ebola patients went to get treated did not meet the CDC’s standards. Who knows how many people both of these patients infected?

Things You Can Do to Avoid Ebola

What can you do to avoid Ebola? Wash your hands every single time after you are in public place where Ebola could be. You know, airplanes, airports, etc. If you’re taking a flight, carry sanitary wipes with bleach. Wipe down the hand rests and the serving tray these wipes. Why? Because bleach kills the Ebola virus. Finally, if you live in Dallas or a place with Ebola, stay out of public places till it’s clear that Ebola is gone.

Regards,

Paul Mampilly
for The Daily Reckoning

P.S.: Imagine if you said to somebody before the Internet: “you know, one day, you’re going to hold a sleek magazine-like rectangle in your hands… and you’ll be able to connect to anybody in the world instantaneously.” Would you have believed them? Probably not. So it is with countless other events and technologies we analyze and forecast – with a healthy dose of satire – in our FREE e-letter, Tomorrow in Review. Each day, we shine a light ahead of the curve to put you on top of the markets – helping you get more of those two extremely valuable currencies: time and money. You don’t deserve to miss another issue. Sign up for the FREE TIR e-letter when you click on this sign-up page.

Categories: Economic Blogs

Why We Hold Hard Assets II

The Daily Reckoning - Tue, 21/10/2014 - 18:00

Jim Grant is the publisher and editor of Grant’s Interest Rate Observer, a bi-monthly newsletter that he founded in 1983, around the time when bonds were considered some of the worst investments – when they yielded 13 to 15 percent.

Rick Rule, Chairman of Sprott US Holdings Inc., often quotes Jim Grant’s description of government bonds as ‘return-free risk.’ (Rick sees US Treasuries as the ‘anti-gold’).

Mr. Grant took my questions on interest rates and the bond market – including Bill Gross’ recent departure from PIMCO – via phone from his Manhattan office.    

Mr. Grant, you argue that companies whose share prices are rising should be becoming more efficient – hence driving down the costs of consumer goods and services.

The Fed is succeeding in keeping both stock market prices and consumer goods prices moving higher – which look like contradictory goals. Do you think this situation is sustainable going forward?

Many years ago, falling prices were a sign of improved efficiency and expanding wealth, and of widening consumer choice. Thanks to the spread of electricity and other such wonders in the final quarter of the 19th century, prices dwindled year by year at a rate of 1.5% to 2% per year. People didn’t call it deflation – they called it progress. Similarly, in the 1920’s there were advances in production techniques. The prices didn’t decline and didn’t rise. They were stable. Looking back on the 20’s from the vantage point of the 30’s, many people wondered why prices had not fallen. They concluded that it was because the central banks were emitting too much credit, and that credit had served to inflate asset values. It had also pushed the world into a very imbalanced credit and monetary situation towards the close of the 20’s.

Fast forward many generations and here we are today with a world-wide labor market linked through digital technology. We are the beneficiaries of Moore’s law. Nearly every day we see new, wonderful, labor-enhancing machinery coming into the workplace – including new software. And yet, prices don’t fall. They tend to rise, albeit by 1% or 2% per year. Central banks seem to want more than that. You do wonder – I wonder – what would be wrong with what Wall Mart calls ‘everyday low and lower prices.’ People seem to rather relish that – certainly when shopping on the weekends. Central banks want no part of it. So, I see that as a contradiction. What central banking policy has done is to inflate consumer prices that, if the laws of supply and demand were properly functioning, would have tended to fall. At the same time, central bank policy has tended to inflate the prices of stocks, bonds, and income-producing real-estate. Why it is that these immense emissions of new credit by the central banks have not been inflationary? Well, it seems to me that they have been inflationary, because prices are rising not falling.

Do you think that the situation will continue going forward – rising consumer prices along with rising stock prices?

What I don’t know about the future, we don’t have the time to go into. I dare say that stock prices will not continue to rise uninterrupted at the same pace. That’s not a very interesting prediction, but the stock market is certainly a cyclical thing. Stock prices will pull back in the fullness of time, whether it starts 5 minutes, 5 months, or 5 years from now. I think it’s fair to observe that today’s ultra-low interest rates flatter stock market valuations. Stock prices are partly valued based on a discounted flow of dividend income. To the extent that the discount rate you use to value that stream of dividend income, which depends on interest rates, is artificially low, stock prices are artificially high. I think that the burden of proof is on anyone who would assert that we are in a new age of persistently and steadily rising stock prices.

On the subject of bond markets, you’ve said: “does it not seem incongruous to chase low-yielding fixed-income securities denominated in a currency that the central bank is vowing to inflate?” Why do you think that investors go into bonds despite the Fed’s intention to devalue them over time?

Well, I can’t explain it. I can try to piece together what might be driving people to do that, but, to me, it’s a mystery. One thing to bear in mind is that bond prices have been rising and yields have been falling since fall of 1981. That’s a long time and there’s something in financial markets that we might call ‘muscle memory.’ Long-running trends tend to gather force, just as a rock rolling down a hill tends to pick up speed. There’s something about the persistence and age of this bull market that leads more people to think that it will continue. That said, fixed-income investors are intelligent and reasoning people. That can’t be the entire explanation. I see that in Europe money market interest rates are trending below zero. You have to search long and hard over the globe to find government securities in developed countries yielding more than 2%. In Ireland, some short-term securities are yielding less than 0%. Why would people buy them? I simply don’t know – I can’t fathom it –, but they certainly are, hand over fist.

You’ve also said that Treasury investors may ‘repent at their leisure’ for buying US Securities, and that corporate investors will one day wish they had not invested so heavily in corporate bonds. Do you see a bear market coming imminently for bonds?

Yes – starting about 2002…

Henry, now, that’s meant to be a laugh line.

I have wholly been way out of step with the bond market for a long time, and everything that I say with regards to the future of interest rates deserves to be written in something like invisible ink. You know, in a work entitled ‘Security Analysis,’ a work about value investing written by Benjamin Graham and David Dodd, this approximate phrase appears: “bond selection is a negative art.” Well, what Graham and Dodd meant by that is that, because the buyer of a bond at par can do no better than getting his money back and earning some interest along the way, the prospect for gain is inherently limited. Risk ought to be at the front of the mind of the creditor. There are no 2 or 3-baggers in investment-grade bond investing. You have to be mindful of what can go wrong, and it seems that the world over, thanks to these policies by central banks, bond investors are not looking at risk, or feel they can’t afford to look at risk. Rather, they are grasping at the few straws of yield that remain and I think that posterity will look back at this with wonder.

“Think of it” – I’m now putting words in posterity’s mouth. “Think of it, people were buying as if the supply were limited. They were buying government securities, which yielded practically nothing. They were buying bonds denominated in currencies that the central banks explicitly vowed to depreciate. Why did they do that?”

So, I think posterity will ask that question. Certainly I am asking that question now, and I can’t come up with a really persuasive answer.

What would a bear market in bonds look like? Would it be accompanied by a bear market in the stocks?

Well, we have a pretty good historical record of what a bear market in bonds would look like. We had one in modern history, from 1946 to 1981. We had 25 years’ worth of persistently – if not steadily – rising interest rates, and falling bond prices. It began with only around a quarter of a percent on long-dates US Treasuries, and ended with about 15% on long-dated US Treasuries. That’s one historical beacon. I think that the difference today might be that the movement up in yield, and down in price, might be more violent than it was during the first ten years of the bear market beginning in about 1946. Then, it took about ten years for yields to advance even 100 basis points, if I remember correctly. One difference today is the nature of the bond market. It is increasingly illiquid and it is a market in which investors – many investors – have the right to enter a sales ticket, and to expect their money within a day. So I’m not sure what a bear market would look like, but I think that it would be characterized at first by a lot of people rushing through a very narrow gate. I think problems with illiquidity would surface in the corporate debt markets. One of the unintended consequences of the financial reforms that followed the sorrows of 2007 to 2009 is that dealers who used to hold a lot of corporate debt in inventories no longer do so. If interest rates began to rise and people wanted out, I think that the corporate debt market would encounter a lot of ‘air pockets’ and a lot of very discontinuous action to the downside.

Is it possible for the Fed to ‘lose control’ of the bond market and yields?

Absolutely, it could. The Fed does not control events for the most part. Events certainly will end up controlling the Fed. To answer your question – yeah. I think the Fed can and will lose control of the bond market.

So no matter how many bonds the Fed buys, it eventually won’t be enough to keep yields low?

Well, let’s try to imagine a case where the Fed proposed to buy every single bond in existence. To do that, it would undertake to print more money than we – even us hardened veterans of the QE era – could imagine. If the Fed undertook to print the money necessary to buy all the bonds on offer, it would spook at least the more thoughtful investors, who would see that the Fed would certainly be undertaking a truly radical program of inflation.

It seems like the Fed is doing almost exactly that today – and we’re still waiting to see the adverse effects.

Well, yes indeed. I think this is a time where people will look back on us and see it as a period of practically central bank worship. The central bankers – Draghi, Yellen, Bernanke – have become almost celebrities in America. People have invested unreasonable hopes in what these central banks can know, and what they can do. I think that, sooner or later, the investing public will become disillusioned of these ideas.

What are ‘safe haven assets’ if you believe that a bear market in bonds is inevitable?

Well, if we believe that financial markets are cyclical, then bear markets are inevitable — just as bull markets are inevitable. I wish I could tell you when these will happen – I can’t. I think that the nature of a safe haven will depend on the type of bear market and the reason for that bear market. You can imagine a bear market in bonds where the reason was an unscripted burst of prosperity. Let’s say that the indestructible American economy, for whatever reason, got back its mojo, and the Fed seemed to be way behind the curve. Interest rates would go up for the wholesome reason that things were looking better. At that point, you could make a very good case for common stocks.

If the bond market sold off because of a sudden and unscripted loss of confidence in the currency, that would be a different matter altogether. I think that ‘safety’ is not inherent to any asset – rather, ‘safety’ is a function in large part of valuation. Towards the tail end of the great bond bear market of 1946 to 1981, people were fed up with fixed-income securities. They only seemed to go down in price –investors were always disappointed. They slapped various labels of scorn on the entire asset class. That was when people first called them ‘certificates of confiscation’ – and that was when they yielded 13%, 14%, or 15%. They certainly were not certificates of confiscation as events revealed. Today, when bonds yield a great deal less than 13, 14, or 15%, most investors regard them as intrinsically safe assets. Well, they are not intrinsically safe. They are popular – that’s a very different matter.

At Grant’s, we try to look for assets that are castoff, unpopular, out-of-favor, and value-laden. We have been looking at common stocks in, for example, Argentina and Russia. These are places that would appear to be inherently unsafe. We’ve of course been looking at gold and gold mining shares for a long time too. What gold, Argentina, and Russia have in common is that people are, by and large, going from them rather than towards them. If you asked the average person on the street whether securities relating to those three areas were safe or unsafe, I think that 99 out of 100 would say ‘unsafe.’ There is a great deal to be said for the ultimate safety that low valuations afford. That’s how we approach the situation. A little bit less exotically, we’ve been looking at business development companies generating attractive cash flows in this time of ‘yield famine.’ ‘Safety’ is a tricky and paradoxical concept. The safe assets are often the ones that people regard as hopelessly risky.

One more question – Bill Gross recently announced his departure from PIMCO. Is this a trivial event, or a sign of something more fundamental happening in the bond market?

I don’t know how to read it. Maybe after 40-odd years in the same place, Bill Gross deserved a change of scenery? I think he has enough money to retire – I dare say he could scrape by on a billion or so. He seems to want to continue to work – that’s laudable. Insofar as his exit having a deeper meaning, it may be to underscore the new illiquidity of the bond market. On news of his exit, a lot of different classes of fixed-income securities sold off, and I wouldn’t have expected Treasuries and mortgages to move the way they did. We at Grant’s think that the illiquidity of fixed-income securities might be one of the important themes of the coming autumn for the bond market.

By ‘illiquidity,’ you mean that investors are unable to buy and sell bonds easily?

It’s not difficult to buy them.

So it’s difficult to sell them.

Correct. What you want is a ‘greater optimist’ and it’s not clear that a ‘greater optimist’ will be available when you want to get out.

James Grant founded Grant’s Interest Rate Observer in 1983 following a stint at Barron’s, where he originated the “Current Yield” column.

His books include works of financial history, finance and biography. They are: “Bernard M. Baruch: The Adventures of a Wall Street Legend” (Simon & Schuster, 1983); “Money of the Mind: Borrowing and Lending from the Civil War to Michael Milken” (Farrar, Straus & Giroux, 1992); “Minding Mr. Market” (Farrar, Straus & Giroux, 1993); “The Trouble with Prosperity” (Times Books, 1996);  “John Adams: Party of One” (Farrar, Straus & Giroux, 2005); “Mr. Market Miscalculates” (Axios Press, 2008); and “Mr. Speaker! The Life and Times of Thomas B. Reed, the Man Who Broke the Filibuster” (Simon & Schuster, 2011).

Categories: Economic Blogs

The Fed’s New Labor-Market Measure

The Market Oracle - Tue, 21/10/2014 - 17:06
Economists at the Federal Reserve have devised a new indicator, which they hold will enable US central bank policymakers to get better information regarding the state of the labor market. The metric is labeled as the Labor Market Conditions Index (LMCI). Note that one of the key data points Fed policymakers are paying attention to is the labor market. The state of this market dictates the type of monetary policy that is going to be implemented.
Categories: Economic Blogs

Plunging Oil Prices a Game-Changer for Major Pipeline Projects

Financial Sense - Tue, 21/10/2014 - 17:00

Part of the impetus behind constructing new pipelines to carry bitumen from northern Alberta to the U.S. Gulf Coast, Kitimat on the Pacific, or even all the way across the country to Saint John, New Brunswick was to help close the substantial discount between Canadian oil and world prices.

Categories: Economic Blogs

New Tesla Model S May Have Us Rethink Electric Cars

Financial Sense - Tue, 21/10/2014 - 17:00

Tesla unveiled an all-wheel drive version of its Model-S on Thursday. The new car is an improvement over the two-wheel-drive version in almost every way, with increased efficiency, range, acceleration, top speed, and a slew of futuristic auto-pilot features.

Categories: Economic Blogs

Big Four Economic Indicators Near Stall Speed

Financial Sense - Tue, 21/10/2014 - 17:00

When looking at the four big economic indicators used by NBER for timing recessions, it appears the economy may be nearing stall speed. Here is an update using the latest release of Industrial Production...

Categories: Economic Blogs

Moving to a Different State May Significantly Improve Your Retirement Goals

Financial Sense - Tue, 21/10/2014 - 17:00

Housing prices have recovered from the prior downturn giving more homeowners a chance to take advantage of their equity. Furthermore, rates are at all-time lows, which makes it difficult for investors near or in retirement relying on fixed income investments. Rather than taking on higher amounts of risk...

Categories: Economic Blogs

The Long Awaited 10% Correction Just Happened; Cramer: No Bottom Until Ebola Contained

Financial Sense - Tue, 21/10/2014 - 17:00

The long awaited 10% correction that everyone was looking for finally took place. The S&P 500, Dow, and Nasdaq all hit record highs on September 19th before steadily falling to their most recent lows on Wednesday, October 15th...

Categories: Economic Blogs

How Will We Know That the Gold & Silver Price Bottom Is In?

The Market Oracle - Tue, 21/10/2014 - 16:55
Briefly: In our opinion speculative long positions (half) in gold, silver and mining stocks are justified from the risk/reward perspective. Yesterday, gold closed higher than it did in the previous several weeks, which seems like a very bullish development for the entire precious metals market until one realizes that miners are still close to their most recent lows. In short, in our opinion, the answer to the title question is that miners could rally some more in the short term, but we don’t expect the rally to be significant. We expect to see significant rallies after the final bottom is reached (in a few weeks – months), but not before that – at least not based on the information that we have available today. Furthermore, it seems that the next local top will be reached shortly, but that it’s not in just yet.
Categories: Economic Blogs

Is This Why Stocks Are Soaring?

Zero Hedge - Tue, 21/10/2014 - 16:50

October 16: "Buyers beware, the bear market has begun":

The selloff in global markets is set to continue as a bear market takes hold "for a long period of time," according to widely followed investor Dennis Gartman, who warned investors not to go long on stocks.

 

"This is the start of a bear market," Gartman, the founder of the closely watched Gartman Letter, told CNBC Europe's "Squawk Box" on Thursday. "You stay in cash and you stay in short term bonds and you don't move out, this is a very difficult period of time and I'm afraid - and

 

I don't like to think about it – but this might be the very beginnings of a bear market that could last some period of time," he warned.

And first thing this morning:

As noted in the chart of the S&P at the upper left of p.1 this morning we were swiftly approaching the bottom of “The Box” that marks the 50-62% retracement of the recent sharp decline from the interim highs forged earlier this month. Given the manner in which stock index futures are trading rather briskly lower this morning as we write, it does not appear that we shall see the S&P futures trade into “The Box,” and that makes us all the more suspicious of share prices generally, for a market than cannot even retrace 50-62% of its previous weakness is a market that is weaker, internally, than it might at first appear. Worse, failure here suggest that a fully-fledged bear market has begun, for this would be a clear failure well below the highs of the last interim rally, with the lows of the last interim break having already been taken out to the downside.

And in chart format:








Categories: Economic Blogs

Bitcoin Price Goes Up and Down

The Market Oracle - Tue, 21/10/2014 - 16:45
In short: no speculative positions. Coinbase’s co-founder Brian Armstrong has highlighted the difficulties in convincing the banks to work with Bitcoin businesses in a conversation with the Telegraph, we read on the paper’s website: Originally launched in the US, it [Coinbase] recently announced that it had secured banking and regulatory approval to launch in Europe, opening its services up to 18 new markets. But the UK was not among them.
Categories: Economic Blogs

Is Gold as Dead as Florida Hurricanes?

The Market Oracle - Tue, 21/10/2014 - 16:36
It’s been over 3,280 days since a hurricane hit Florida. As hurricane season comes to a close next month, only Mother Nature knows how long the streak will last. Like many Floridians, my wife and I stayed home and rode out a hurricane—once! We’d built a home on Perdido Key, a barrier island west of Pensacola. It was engineered to withstand 150-plus mph winds, and it was a beautiful home with a master bedroom spanning the entire third floor, looking out across the Gulf of Mexico.
Categories: Economic Blogs

NYSE Gives Up Trying To Fix Itself

Zero Hedge - Tue, 21/10/2014 - 16:20

The NYSE has given up on re-opening the following 150 symbols in cash equities trading today... (including AAPL, XIV, and TVIX)

 

 

and here are the affected symbols...

 

That's great news...

 

as XIV (inverse VIX) has soared since it was cloised to retail...

 

*  *  *

As an FYI - its only stocks that are buying this...








Categories: Economic Blogs

Stock Market Probable Pop-n-Drop

The Market Oracle - Tue, 21/10/2014 - 16:18
The SPX Premarket was “saved” once more by central bank intervention as it threatened to break its upward momentum at the 200-day Moving Average. It is currently resting just beneath its Daily mid-Cycle resistance at 1915.31. That is likely to be the final resistance to this retracement since it is just beneath the 50% Fibonacci retracement level at 1919.96.
Categories: Economic Blogs
Syndicate content