Can The Fed Prevent The Next Recession?
by James Picerno
...This article first appeared in The Capital Spectator on 26 July 2013
MIT economics professor Rudiger Dornbusch famously observed in 1997 -
'None of the U.S. expansions of the past 40 years died in bed of old age. Every one was murdered by the Federal Reserve.'
Researchers
tend to agree, as shown by numerous studies that link inverted yield
curves with economic contractions. But does the history of the business
cycle and monetary policy in the decades prior to the Great Recession of
2008-2009 still resonate today? In other words, what are the odds that
the next recession will be a byproduct of monetary policy decisions,
intentional or otherwise?
I've been running such questions around
in my head for a while, pondering why and how the business cycle could
make another trip to the dark side. There's minimal risk on that front
at the moment, as last week's review of indicators suggest. But assuming
that the business cycle hasn't been repealed (a reasonable assumption, to say the least),
we'll see another downturn one day. But given the Fed's extraordinary
efforts of late in keeping that risk to a minimum, is the probability of
a new recession lower than it might otherwise be?
What We Read Today 05 August 2013
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has
two articles which show that Reinhart and Rogoff had correlation and
causation backwards regarding increasing debt and slowing growth
........ and the last article discusses how to invest in bonds when
interest rates are rising.
Hindenburg Oman Prediction As Volume Hit Lows For 2013
Closing Market Commentary For 08-05-2013
The averages never reached the morning
highs but stayed in a respectable distance. Volume remained light up to
the last half hour of trading where the was a minor sell off.
No clues from Mr. Market on the market
direction today, but I would remain wary and have a finger on the
trigger just in case the Hindenburg Oman is true.
Prometheus: The Stock Market Bubble Cycle
In late 1999, our Secular Trend Score
(STS) issued a secular trend sell signal, indicating that the stock
market was on the verge of entering a long-term bear market that would
likely last from 10 to 20 years. Following the peak in 2000, the secular
bear market began as expected and it continues today. Secular [...]
Averages Taking the Day Off As Volume Slides Lower
Midday Market Commentary For 08-05-2013
Not much has changed since the morning
report and the volume has fallen to very low. The current indicators are
swing towards the negative side of things and perhaps we could see the
averages dip somewhat by the closing bell.
Generally speaking, the markets are quiet
with investors sitting this one out. The HFT computers are providing
the action going into the afternoon session.
Trading today, nah that isn't going to happen.
Blogger Sentiment Bullish Entering August 2013
Econintersect: The Blogger Sentiment Poll released by Ticker Sense shows the bloggers have a fairly bullish market sentiment.
This blogger poll is very noisy.
Gang of Asteroids: Russian Meteor May Have Followers on Same Path
The
havoc in the Russian Urals last winter when a meteor the size of a
house exploded in the skies, may be set for a repeat. Scientists say the
huge rock might not have part of a group of asteroids which still pose a
threat to Earth.
Markets Opens Down Now Recovering - Somewhat
Opening Market Commentary For 08-05-2013
Premarkets were down around -0.16% and fell off sharply at the opening where some indices dropped to a -0.30%.
At 10 am the ISM Non-Manufacturing
Composite for July came in at 56.0 rising from 52.2 helping the averages
melt back up flat status on low to moderate volume. This could turn out
to be a day for narrow trading ranges. I expect the afternoon session
to remain in a narrow band until towards the session closing where it
might fall off - hate this guessing.
July 2013 ISM Services Index Well Above Expectations
Written by Steven Hansen
The
July 2013 ISM non-manufacturing (aka services) index continues its
growth cycle, improving from 52.2 to 56.0 (above 50 signals expansion) -
and the internals were even stronger.
Read more >>
July 2013 Conference Board Employment Index Sees Constant Employment Conditions
Written by Steven Hansen
The Conference Board's Employment Trends Index - which forecasts
employment for the next 6 months - rose moderately in July 2013.
Read more >>
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Treasury Yield Rise in Historical Perspective
by Tobias Adrian and Michael Fleming - Liberty Street Economics, Federal Reserve Bank of New York
Long-term Treasury yields have risen
sharply in recent months. The yield on the most recently issued
ten-year note, for example, rose from 1.63percent on May2 to
2.74percent on July5, reaching its highest level since July2011.
Increasing yields result in realized or mark-to-market losses for
fixed-income investors.
Infographic of the Day: Expat Cost of Living Varies Widely Around the World
Mercer's
Cost of Living Survey provides an intriguing look at how the cost of
common items - such as a cup of coffee or a cinema ticket - varies
dramatically in cities around the world. The survey measures the
comparative cost of more than 200 items, including housing,
transportation, food, clothing, household goods, and entertainment.
Ben Bernanke vs. Rothschild's Obscure Clerk
Bullion Vault Article of the Week
Written by Adrian Ash, Bullion Vault
Does the Fed chairman really not understand what drives savers to gold...?
Ben Bernanke, today's most powerful
banker, said this week that nobody really understands gold prices,
including himself. Victorian Europe's richest man, and bullion broker to
the Bank of England, N.M. Rothschild at least took the trouble to
check.
Rothschild reputedly joked in the mid-19th century -
"
I
know of only two men who really understand the value of gold - an
obscure clerk in the basement vault of the Banque de France and one of
the Directors of the Bank of England.
Unfortunately, they disagree."
Collateral Damage: QE3 and the Shadow Banking System
by Ellen Brown, Web of Debt
Rather
than expanding the money supply, quantitative easing (QE) has actually
caused it to shrink by sucking up the collateral needed by the shadow
banking system to create credit. The 'failure' of QE has prompted the
Bank for International Settlements to urge the Fed to shirk its mandate
to pursue full employment, but the sort of QE that could fulfill that
mandate has not yet been tried.
Read more >>
Is 'Qualified Money' an Alternative?
by Dirk Ehnts, Econoblog101
Dirk Helbing from ETH Zurich has a paper out in which he describes a thing called 'qualified money'. What is it?
One
interesting - and somewhat speculative - question is what would happen,
if we applied the principles of reputation systems to money itself
(Moreton and Twigg, 2003), i.e. if each unit of money could earn a
reputation, depending on its origin and transaction history. Then, units
of money could be treated as separate stocks. Thus money would be
related not just with a quantity, but also with some qualities. This
would make money multi-dimensional, akin to feedback and exchange
systems in biological and ecological systems, or also social systems
(Fiske, 1993). I call this concept 'qualified
money'.
Muni Bonds: Shake Out Could be Coming
Money Morning Article of the Week
by Shah Gilani, Money Morning
Editor's Note: Detroit is more than a
sideshow. What's at stake here is bigger than most investors realize. It
could take a Supreme Court decision to determine the viability of many
municipal bonds. Regardless of whether you are a muni bond investor or
not, what happens in Detroit will affect you. Shah Gilani has the whole
story.
Success of Obamacare Comes in Two Colors, Red and Blue: Financial Times
Econintersect:
Anyone who reads the reports in the press about the implementation of
Obamacare may be confused. Stephanie Kirchgaessner has a short article
in the Financial Times that indicates reports of the success,
even the viability, of PPACA (the Patient Protection and Affordable Care
Act of 2010) vary widely depending whether reported by Republicans or
Democrats. The red assessments are uniformly negative and the blue
assessments the opposite.
Insider Trading 02 August 2013: Amazon Chairman Sells $185 million of Shares
by Asif Suria
Insider buying increased with insiders
purchasing $110.7 million of their stock last week compared to $30.91
million in the week prior. Selling also increased with insiders selling
$2.21 billion of stock last week compared to $2.02 billion in the week
prior.
Sell/Buy Ratio: The
insider Sell/Buy ratio is calculated by dividing the total insider sales
in a given week by total insider purchases that week. The adjusted ratio for last week decreased to 19.92. In other words, insiders sold almost 20 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 65.4.
Fewer Americans Exercising Frequently in 2013
by Felix Richter, Statista.com
After a very strong sporting performance
in 2012, Americans have become more lax when it comes to exercising
frequently, according to a Gallup poll. In comparison to every month in
2012, the percentage of people exercising for at least 30 minutes three
or more days a week has been lower this year.
