Wednesday, 17 January 2018

Martin Feldstein On Stocks And The Financial Situation

"Year after year, the stock market has roared ahead, driven by the Federal Reserve’s excessively easy monetary policy. The result is a fragile financial situation—and potentially a steep drop somewhere up ahead...In short, an excessively easy monetary policy has led to overvalued equities and a precarious financial situation. The Fed should have started raising the fed-funds rate several years ago, reducing the incentive for investors to reach for yield and drive up equity prices. Since it didn’t do so, the Fed now faces the difficult challenge of trying simultaneously to contain inflation and reduce the excess asset prices—without pushing the economy into recession."  

Mark Spitznagel: "This Is An Age Of Massive Artificial Economic Imbalances And Systemic Risks"

"Thanks to almost a decade of unprecedented market interventions by global central banks (which have collectively acquired assets totaling over $20 trillion), everywhere you look there is repression of yields, repression of market volatility, and their side effects of exploding asset valuations (to heights not seen since shortly before past historic crashes), financial-engineered debt, leverage, stock-buybacks, cryptocurrency-insanity, “short volatility” and all manner of reckless yield-chasing investment schemes. This is an age of massive artificial economic imbalances and systemic risks."  
- Mark Spitznagel, 17 January 2018

Tuesday, 16 January 2018

The Bigger The Boom, The Deeper The Bust...

The ratio between stock market prices and personal saving has by now climbed vertically almost every single month for the past two years. As a result, the gap between the two has never been wider based on data going back to 1979.

And since the only way stock market prices can continuously outpace saving growth is by way credit expansion (see here for a detailed account), such rapid and continuous expansion of the ratio between simply are not sustainable.

The ratio may expand further still of course, but the eventual bust will likely be yet deeper. In any case, the current record high reading should be discouraging news for stock market bulls whom now appear to be participating in a U.S. stock market crack-up boom. And such a boom usually ends as it must; with a bust.

Stocks as of 15 Jan-18, Personal Saving as of Nov-17

For more charts demonstrating the current U.S. stock market euphoria, see:
11 Charts Exposing The Madness Of The Stock Market Crowd

Chart of The Day: The Crack-Up Boom In U.S. Stocks

Thursday, 11 January 2018

Sunday, 7 January 2018

A Stunning (and factually true) Statement By The Fed Chair Elect

Chart of The Day: Central Bankers' Boom Bust Cycle