Even if Mohammed bin Salman’s plan succeeds, it may be too late, with further oil price declines in the cards and the accompanying negative effects on U.S. stocks. Here’s why: Cartels, including OPEC, only exist to keep prices above equilibrium, which encourages cheating as members exceed their allotted output and other producers take advantage of inflated prices. In the decade to November 2014, the cartel’s output was essentially flat while all the growth was mostly enjoyed by Russia, American frackers and Canadian oil sands producers.
Like the Scarecrow (Ray Bolger) in ” The Wizard of Oz,” investors and legions of self-confident perma-bullish talking heads need a brain. For if they don’t acquire a brain shortly, they may shortly lose their asses!
If you’re still on the fence about whether the auto market in this country is anything but a massive bubble being propped up by extremely loose credit underwriting standards, then we think we’ve just found some definitive evidence for you……..But, take a closer look and we think you just might find something rather disturbing…that’s right, a $1,500 discount offered only to people with “Low Credit Scores.”
With no material change to our investment outlook, I’ll keep this comment brief. On the basis of the most reliable valuation measures we identify (those most tightly correlated with actual subsequent 10-12 year S&P 500 total returns), current market valuations stand about 140-165% above historical norms. No market cycle in history, even those prior to the mid-1960s when interest rates were similarly low, has failed bring valuations within 25% of these norms, or lower, over the completion of the market cycle. On a 12-year horizon, we project likely S&P 500 nominal total returns averaging close to zero, with the likelihood of an interim market loss on the order of 50-60% over the completion of the current cycle.
The very sluggish recovery of the economy since the financial crisis — despite zero and near zero interest rates — presents the dominant school of New Keynesian macroeconomists with a conundrum. Many have attempted to resolve the riddle by arguing that such unprecedentedly low interest rates are not the doing of the Fed and therefore do not indicate an expansionary monetary policy.
Who needs Russia when the Tweety-Bird-in-Chief is hacking his own presidency into a global joke? Or at least it might be a joke if the USA weren’t such a menace to international order, and to itself, by the way. Interestingly, the 25th amendment allows for the removal of a president from office on account of incompetence or disability, but not for being an embarrassment to the nation.
According to the Institute of International Finance, global debt has now reached a new all-time record high of 217 trillion dollars……Never before in human history has our world been so saturated with debt. And what all of this debt does is that it funnels wealth to the very top of the global wealth pyramid. In other words, it makes global wealth inequality far worse because this system is designed to make the rich even richer and the poor even poorer.
Former FX trader and fund manager Richard Breslow is worried. Worried about investors’ level of delusion in the markets and worried that central bankers are so convinced of their own omnipotence, that they have become blind to any potential risks just out of their immediate sight. One glimpse at the following chart is all you need to know, Central Banks are the only game in town… and given their recent statements, they don’t know that (even though investors believe they do)…
Russia-gate, the sprawling investigation into whether Russia meddled in last year’s U.S. election, is often compared to the two big political scandals of the latter half of the Twentieth Century, Watergate and Iran-Contra. Sometimes you even hear that Russia-gate is “bigger than Watergate.” Yet what is perhaps most remarkable about those two Twentieth Century scandals is how little Official Washington really understands them – and how these earlier scandals significantly contrast, rather than compare, with what is unfolding now.
As for President Moon, he wants to negotiate, to engage the North economically, to invite its athletes to join South Koreans on joint teams for the Winter Olympics in 2018. Moreover, Moon is said to be willing to cut back on joint military exercises with the U.S. and regards the THAAD missile defense we introduced into South Korea as a negotiable item….But we should also tell South Korea that if she desires a nuclear deterrent against an attack by the North, she should build it. Americans should not risk a nuclear war, 8,000 miles away, to defend a South Korea that has 40 times the economy of the North and twice the population.