02-26-2013 07:13 AM
Good morning or buon giorno!
Boy, the Italians really put a scare in the market yesterday. The 'Fear Index" VIX popped last night from 14.17 to 18.99. That's a big percentage increase. It will come off today but proves how complacent these traders and customers have been lately.
As for the grains, beans are 5 cents lower with corn the leader of the morning up 4. Wheat unched to slightly higher.
Gold is up $1.34 with oil off about .59 cents.
Equities in Europe are lower but the U.S. is up with the SPX future trading 4.50 points higher after a small blood bath yesterday.
What does it all mean? I definitely think that the world was way too calm. Europe is still just as bad or worse off than they were last year. The fact that our government can't bring themselves to cut less than one quarter of one percent of the budget is embarrassing. All of this will lead to more volatility and a very difficult market.
Don't let anyone fool you. The only way out of this mess is GROWTH. And we have no growth on the way or in the very near future. We will have to go through more of these austerity measures to get to where we need to go.
02-26-2013 08:12 AM
Here`s the funny thing Scott, the fed is printing $85 Billion per month or about $1 Trillion a year. With a GDP of $15.6 Trillion, shouldn`t we be growing at the very least of 6% on "fed printing" alone? I would venture to say, it`s been a long time since our "growth" hasn`t been due to the Federal Reserve`s morphine program.
02-26-2013 08:20 AM
Here's the problem that I wrestle with in regards to growth:
Depending on how you do the math it takes something substantially more than $1 of additional debt to add $1 of GDP these days- that number has trended upwards ever since the WWII expansion began. How, exactly, is any real, organic growth going to occur in a sustained fashion while we're saturated with debt and in the throes of a broad deleveraging?
I know, I know, (in general, not putting words in your mouth) if we just cut government spending the confidence fairy will appear and we'll all buy things (off our higher stock and housing values, or just borrow betting on the come?) and invest in plant and equipment, create jobs etc. etc. in the virtuous cicle of consumer capitalism.
Of course this has been bulding for most of my adult life but was enabled and obfuscated by varous asset bubbles- bonds then stocks then homes- that permitted people to spend money much faster than actual growth would otherwise permit. Now any sort of growth is hard to conjure.
Over this lifetime lots of people have gotten very wealthy off the process that I describe. Now they're understandabley angry that the world as they thought they knew it no longer exists. Government has tried desperately to prop up the asset values of wealthy people and I guess you'd say so far has done magnificently- both stocks and bonds are near record levels. But I'm skeptical as to the sustainability of it all.
Anyway, one of the last asset bubbles has been done via the financialization of commodities but I have to regard it as even more extractive than than the other bubbles- basically a tax. How many people own a wheat field or oil well?
And back in full circle where I started, how does Walmart fare when gas in $4, the payroll tax goes back on and (in the hopes of many) food stamps get cut?
02-26-2013 08:20 AM
I can't agree more...
We are in trouble. It has simply come down to the fact that the Fed is continuing to print so that the congressmen can keep their jobs. That is it. They have ignored their constituencies at the expense of saving their hides.
02-26-2013 08:47 AM - edited 02-26-2013 08:51 AM
Hardnox- I agree with everything you have posted. The GDP is not growing because of FED money printing, because those funds are bieng used to purchase Junk from big banks and transfer it to the FED balance sheet and replace that Junk with U.S. Treasuries which is alleged to be a stronger investment for capital purposes.
The thing that is missing here is that, what happens when the FED after acquiring these Junk assets find that the cashflow is not there, and they are unable to send their annual check to the US Treasury and then have to print money to meet FED obligations.
I think the FED has real problems. The dollar is 81.7 this morning, it was 79 two weeks ago, that alone will drive down commoditiy prices in the US, because the FED is failing in driving down the value of the dollar in its "race to the bottom".
Of course the Dollar is the world currency and there is a race to buy dollars as other currencies are deteriorating, the problem arises when and if the dollar is replaced as the worlds reserve currency, that is when the bottom falls out.
The money being pumped into the banks by the FED 85 billion a month, is being done to keep the stock market assets from deteroriating, when that stops . . . and it will . . .you are looking at a major depression.
The feel good feeling by those who have witnessed their stock portfolio regain all of its losses are the ones who believe everything is great here in "fantasyland", if the FED had not intervened by pumping up the bank balance sheets and let keynesian economics work, and do what Iceland did, everyone's balance sheet would be smaller including the "Vampire Squid" Goldman Sachs and J.P. Morgan.
Iceland did it right, they were not going to perpetuate a bad economy by underwriting fraudulent documents and investments sold them by the Big Banks in the US and Europe. Today, Iceland has returned to economic growth because it refused to be held liable for the cost of Fraud which has now been passed on to the American taxpayer.
The U.S. is past the point of "no return", the financial consequences of allowing a private bank (aka FED) to print money at will, set interest rates that discouraged the accumulation of capital, and print money to save those who caused or was involved in the approaching disaster, and then getting the congressmen they own, to saddle taxpayers with those debts, so that the "too big to fail banks" could be saved at our expense, is criminal and all those carpetbaggers should be hanging from lamp posts or Cottonwood trees..
Boys and girls . . . we have all been "Corzined". Pass the popcorn and get me another Corona. John
02-26-2013 10:33 AM
We are not past a point of no return. In fact the government has a great amount of available money. Your retirement savings. It is summated that about 16 trillion dollars are in retirement saving. How will the government control it? Simply, with a plan to protect you from bad investments. The government with hold your money and paid you a small percentage in earnings. Your government too the rescue.
02-26-2013 11:22 AM
Iceland lost everything they thought they had but after going into the abyss they have 'growth'. How could it be otherwise until they reach the surface? Britain slashed budgets and have the poorest performance in western Europe. Bubble in grains? Explain that. Is every rise in price due to demand and production issues a 'bubble '? Not in my book. It's s/d.
Reminds me of the certainty that 'some' had of the imminent implosion of China. Not going to happen.