Thanks to the Federal Reserve. Before this Massive Distortion ends, many many government bureacrats will be going to prison and join our Illinois Governor, Rod Blagojevich.
Common sense. The FED distortion of "Free Markets" has to come to an end. This is going down as the BIGGEST DISTORTION in history. The consequences are enormous. The Descending Triangle of interest sensitive asset are ominous.
Gross believes policymakers are deluding themselves into thinking that currency devaluation and negative interest rates are paving the way toward lasting economic riches.
"Lower yields make sovereign and corporate debt burdens more tolerable and their exports more competitive," he said. "But common sense would argue that the global economy cannot devalue against itself."
"A more serious concern however, might be that low interest rates globally destroy financial business models that are critical to the functioning of modern day economies. Pension funds and insurance companies are perhaps the most important examples of financial sectors that are threatened by low to negative interest rates," he added.
You fail to identify the problem correctly, TOO MUCH DEBT cause the bank meltdown. The problem was TOO MUCH DEBT.......the solution was not five times more debt......hence, the problem was never corrected, it was a bear market in 2008, in is a stealth bear market from 2010 - 2015 and will be for another 10 year or more. THE MORE DEBT you throw at the problem, just makes the problem bigger and bigger. GET PREPARED.....have an exit strategy and a strategy to make small low risk profits at the top, on the air gap down and the gut wrenching nauseus slow slide down. BE SMART.....ANALYZE THE PROBLEM CORRECTLY.....be on top of everything all the time.
Most troublesome, in my eyes, comes from the rapid decline in forward earnings expectations as illustrated by Societe Generale's global quantitative strategist, Andrew Lapthorne. That's because, unlike metrics such as payroll gains or the unemployment rate, corporate earnings tend to be a leading indicator for the economy. After all, as profits decline businesses are less willing to spend on capital investments, hiring and advertising.
In this cycle, stocks have been powered higher by debt-fueled share buyback programs which, as any corporate finance textbook will tell you, increases the "gearing" or operating leverage of a company. That means that not only could the economy be pulled down by the drop in earnings, but stocks could be more sensitive to the drop in profitability because of the higher fixed costs associated with servicing all that new debt.
As an example, consider that IBM (NYSE:IBM) has taken its debt load from $31.2 billion in 2011 to $45.6 billion now. Operating income, meanwhile, has declined slightly on a trailing twelve-month basis. It's a similar story with some other blue chip names as well.
In plain English: Should the earnings slide continue, it could have a bigger impact on the stock market than in the past.
Understanding the Three Phases of a Bear Market
Phase One of a bear market brings stock prices down sharply. That’s what happened when the Dow Jones Industrial Average fell from 14,164 in October 2007 to 6,440 on March 9, 2009—a tumble of 54%.
Phase Two of a bear market is when the bear lures investors back into stocks. The bear gives investors and analysts the false sense that the economy is improving and that it’s okay to own stocks again. The bear has done just that—a masterful job at convincing investors it’s a great time to own stocks again.
Once the vast majority of analysts and investors believe the stock market is safe again (that’s exactly where we are today), the final phase of a bear market,
Phase Three, gets underway and ultimately brings stock prices back down again.
Why did I leave out the so called "Rising Market" of the last 6 years? Analysts and financial reporters are calling it a "Bull Market". It isn't.....not even close. Bull Markets have real growth, jobs grow, wages grow, industry expands and is vibrant........NOT EVEN CLOSE.....more people have stagnated than ever, 1 in 4 are live in poverty now and growing. Debt has risen far faster than net worth or profits. The only thing inflated is the special few stocks in the DOW and S&P indices. Nothing is real anymore, suspension of mark to market makes balance sheets worthless, everything is inflated to extremes. Once the debt loads start to strangle corporations and individuals from just the slightest stress will unleash a SELLING WAVE never ever seen..
You spelled Klump wrong. Your Bizarro World alternate universe is actually our modern day US economy, with Zero Interest and Quantitative Easing, Zombie companies and individuals, instead of going bankrupt, actually went out and borrowed more money, including the government and their stock prices are hitting new highs. Those that did not use excessive debt or took risks ending up underperforming and getting dismal returns. Up is Down, Down is Up, everything has been distorted, just like in Bizarro World. I believe the "Bizaroo Code" can today be called the "FED Policy" of QE and Zero Percent Interest Rates.
Bizarro Code: US do opposite of all earthly things! US have beauty! US love ugliness! Is big crime to make anything perfect on Bizarro World!
FED POLICY: FED do opposite of common business sense, Keep borrow, borrow, borrow, never plan on paying back or make profit. FED pay zero or negative return on Treasury Securities, Investments earn nothing goooooood! IS big crime to make good business, IS good to fool people and let them go bankrupt!
I see your point, but it is misdirected........Yellen is very beautiful in FED WORLD. Stock Market is perfect in FED WORLD.
Klump World is just the opposite, it is a Universe of TRUTH and reality.
It is never too late to join the vast world of Star Trek. For those who feel they are behind the times or have journeyed off the beaten path, grab a chair, sit down, and lose yourself once again in the most magnificent world ever created…the world of Star Trek. This is a Tribute to Spock for his undaunted and steadfast loyalty to his friends and the role he played in the greater universe and a Tribute to Leonard Nimoy who brilliantly portrayed the character we have all grown to love and respect. For those who miss, you have my deepest sympathies. For those who have a huge void in their life now, I offer you the vast world of Klumps, I know it does not compare to Star Trek, I guarantee you I will take you off the beaten path, so grab a chair, sit down and lose yourself once again in the most magnificent message board world every created.....the world of Klumps.
With Deepest Sympathies.....
How is that, you beliefs seem to contradict our governments view, the government says there has been no inflation and that interest rates are 0% and in Europe interest rates are negative.
The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.
A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price. Or one may rationally have the expectation that the item can be resold to a “greater fool” later. - Wikipedia
Two strategies that seem very successful.
1. Move out of variable wealth assets into money like fixed value, like savings accounts, very short bonds maturities, etc.
2. Actively anticipate and trade market tops to capture some of the downward trends. I believe the next bear market will experience lots of "air gaps" and "crashes", learn how to trade these and capture 10-20%.
You knew this guy had more than two decades experience running Freddie Mac and Fannie Mae into the ground. Don't act surprised, I knew years ago this would be the outcome. Why don't you make money on the decline, 23 to 21, cover........22 to 20......cover........21 to 19 cover....... got the beat.....it is like dancing.
On a conference call today to discuss the mortgage-investment firm’s earnings, the chief executive officer talked about “blood-letting,” a “popular prescription for many ills” until the late 1800s, and the similarly abandoned view that life could be created by spontaneous generation to explain her “healthy dose of concern” over the potential results of all the stimulus.
“My hope is that as policy makers of the world continue to prescribe their remedies for the ailing economic patient, that they do not render it worse off,” she said. “As with their predecessors, I suspect there is no doubt in the minds of our central bankers that they are the smartest they’ve ever been. Yet, I fear they are not the smartest they will ever be.”
The unprecedented central bank actions and strange markets they’ve created that Denahan cited are no secret: Policy makers have been ballooning their balance sheets with asset purchases and regularly cutting their targets for short-term interest rates, leading to negative yields on trillions of dollars of government bonds and unusual support for stock markets.
Someone is going to be left holding the bag on this, M-REIT holders will be near the front of the line.
MY ALGORITHM FOR THE NEXT 12-24 MONTHS. I am still working on the dynamics of this equation, how it relates to time and sensitivity analysis and variance.
My study will be titled: The Elasticity of AGNC (M-REIT) Stock Price to the FIRST marginal increase in the FED FUND RATE of 1/4%.
That is not a likely outcome for many segments of the investing and saving public. Proof, gasoline costs dropped 50% over last 6 months leading to Christmas, and sales were actually down. Hence, more money available, more was saved to offset possible future lower safe rates of return.