What’s the last big toy you buy when things have been good for a really long time and you already have all the other toys? An RV, of course. A dubious thing to own if you already have a house, but when the good times seem likely to roll on forever, why the hell not?…..Notice the mini-spike in the late 1990s and the major spike in mid-2000s, both of which were followed by corrections. Now note the mega-spike from 2010 and 2016.
Because about 10 years ago the Rise of the Machines (aka high frequency trading algorithms) completely altered the terrain of what we call the ‘capital markets.’ Let’s look at this as a before and after story. Before the machines, markets were a place that humans with roughly equal information and reflexes set the prices of financial assets by buying and selling. Fundamentals mattered. After the machines took over, markets became dominated — in terms of volume, liquidity and pricing — by machines that operate in time frames of a millionth of a second. The machines and their algorithms use remorseless routines and trickery — quote stuffing, spoofing, price manipulations — to ‘get their way.’
………dangers of ETFs and the risk that we’ve gone too far down the passive investing rabbit hole, that it would be next to impossible for me to catalogue every post….
Because the economy keeps alternating between near-recessions (2012, 2015-16) and shallow rebounds this is no economic expansion. Together with the initial recovery period that only partially offset the enormous contraction of 2008-09, the economy has gone nowhere despite the passage of a decade since trouble first erupted monetarily. Unfortunately, the latest GDP estimates and updates all merely confirm that through the middle of 2017 it isn’t likely to get somewhere anytime soon. The only aspect that seems to have changed is that in GDP terms the rebound this time after the near-recession quarters is considerably weaker and less convincing than the one in 2013-14. That would certainly fit curve comparisons from the UST yield curve to eurodollar futures and even WTI.
A new book by the famed historian Alfred McCoy predicts that China is set to surpass the influence of the U.S. globally, both militarily and economically, by the year 2030. At that point, McCoy asserts the United States empire as we know it will be no more. He sees the Trump presidency as one of the clearest byproducts of the erosion of U.S. global dominance, but not its root cause. At the same time, he also believes Trump may accelerate the empire’s decline. McCoy argues that the 2003 invasion of Iraq was the beginning of the end. McCoy is not some chicken little. He is a serious academic. And he has guts.
That Cohn wants the job of Fed Chairman is the surest sign that he, like Bernanke, wants to “accomplish things” while at the Fed. And that’s very dangerous. While the Fed’s relevance on a day to day basis is way overplayed, its role in the 2008 bailouts reminds us that on the odd days the Fed is capable of creating major damage. That Cohn plainly lusts for the job is a sign that he believes the Fed has expansive powers that need to be utilized. For that alone, Gary Cohn is the wrong choice for Fed Chairman.
Since 2016, McCain has become a poster boy for many liberals because of his implacable opposition to Donald Trump. Incredibly – and rather obscenely- bearing in mind the millions who have died in wars in global south countries that McCain has supported or propagandized; for ‘progressives’ have been lining up to praise a hard-right warmonger who makes the late Ronald Reagan look like a joss-stick waving peace-loving hippy……Most members of the human race think of sex (or going to the toilet) when they first wake up in the morning. But not John McCain. War is always on his mind. “When John wakes up in the morning the first thing he says is Air strikes!’’ his friend Sen. Dick Lugar once said. Do we think this is normal- and something to cheer? If so, heaven help us.
Before the financial crisis and the billions of dollars in corporate bailouts, and trillions more in central bank quantitative easing, the world of investing was simpler. Back then, markets moved in two directions, traders trusted their models, and hedge funds stacked with PhDs and top executives from well-respected bond trading houses were expected to make money hand over fist. And for three glorious years in the mid-1990s, Long Term Capital Management did exactly that. But when the fund suddenly imploded in 1998, stung by economic crises in Russia and Asia that caused it to lose $4 billion in a bizarre six-week stretch…
Stock and bond market leverage is everywhere. Some of it is transparent, such as NYSE margin debt which was $539 billion as of the June report. But the hottest form of stock and bond market leverage is opaque, offered by financial firms that usually don’t disclose the totals: securities-based loans (SBLs) — or “shadow margin” because no one knows how much of it there is. But it’s a lot. And it’s booming. These loans can be used for anything – pay for tuition, fix up that kitchen, or fund a vacation. The money is spent, the loan remains. When security prices fall, the problems begin.
As first reported yesterday, in his latest nearly-30 page memo, a distinctly less optimistic Howard Marks – hardly known for his extreme positions – “sounded the alarm” on markets by laying out a plethora of reasons why investors should be turning far more cautious on the risk, and summarizing his current view on the investing environment with the following 4 bullet points.