As liquidity dries up in the global financial system, investors need a wake-up call. I have been running Stock Traders Daily, a proactive financial newsletter offering trading strategies, since the internet bubble in 1999, and I communicate with investors regularly. I’m hearing that investors do not respect the changes in liquidity that are coming……This brings us to a very important point: Artificially abundant liquidity is the driving force behind global asset rallies. Without central banks’ “help,” the S&P 500 Index would not be anywhere close to being valued at 24 times earnings, where it is today. Historically, that multiple is 14.5.
The speed of their downfall was reflected in debt markets, where Toys ‘‘R’’ Us bonds that traded at almost par on Sept. 1 plunged to as low as 18 percent of face value this week. The upfront cost to insure $10 million of debt against default skyrocketed from about $300,000 on Sept. 5 to $2.5 million at the end of last week. By Monday, the eve of the bankruptcy filing, it was $7.7 million.
No one really cares about the U.S. federal debt,” remarked a colleague and Economic Prism reader earlier in the week. “You keep writing about it as if anyone gives a lick” We could tell he was just warming up. So, we settled back into our chair and made ourselves comfortable…..
Last week, Senator Rand Paul (R-KY) reminded Congress that in matters of war, they have the authority and the responsibility to speak for the American people. Most Senators were not too happy about the reminder, which came in the form of a forced vote on whether to allow a vote on his amendment to repeal the Afghanistan and Iraq war resolutions of 2001 and 2002.It wasn’t easy. Sen. Paul had to jump through hoops just to get a vote on whether to have a vote.
In the seventy years since, the CIA has committed a wide variety of misdeeds, crimes, coups, and violence. Here are seven of the worst programs they’ve carried out (that are known to the public).
We’re finally here. About nine years after quantitative easing (QE) began, quantitative tightening (QT) is about to start. On Wednesday, after the Federal Open Market Committee releases its statement, Janet Yellen will follow with a press conference that she will do her best to make as boring as possible. Every Fed member I suppose is praying for boring because of the epic bubbles that QE and seven years of zero interest rate policy (ZIRP) has created in just about everything. They want this to unfold as orderly and as quietly as possible. Wishful thinking I believe. I also expect the FOMC to lay the groundwork for a December rate hike with the market currently 50/50 on that.
At one time, almost all black families were poor, regardless of whether one or both parents were present. Today roughly 30 percent of blacks are poor. However, two-parent black families are rarely poor. Only 8 percent of black married-couple families live in poverty. Among black families in which both the husband and wife work full-time, the poverty rate is under 5 percent. Poverty in black families headed by single women is 37 percent. The undeniable truth is that neither slavery nor Jim Crow nor the harshest racism has decimated the black family the way the welfare state has.
The period July to November this year marks the centenary of the Battle of Passchendaele. In a war already overflowing with misery, Passchendaele remains a byword for unspeakable suffering; it was one of the most appalling campaigns of the First World War, claiming almost half a million casualties and inflicting lifelong physical and psychological damage on the survivors. It’s also a gruesome example of the human costs of war and the evils of war-making.
The charts above illustrate that central bankers have been desperately trying to use liquidity to offset the prior excesses. However, this is not a liquidity problem it is an insolvency problem. Egregious improper use of their balance sheets has only made the prospects for resolution worse as zombie banks, companies, and consumer debt that should have been liquidated are imprudently allowed to survive. It is just an eventuality that the Minsky moment will arrive – the time when extensive amounts of debt must be written off, losses taken and financial institutions re-capitalized.
The National Flood Insurance Program (NFIP) Melanie praised came into existence in 1968 after most commercial insurance companies pulled out of the market following record-breaking claims from Hurricane Betsy. The handful of companies that stayed charged such high premiums that few homeowners in flood-prone areas could afford coverage. To deal with what critics of insurance companies called a market failure, Congress decided that the federal government would be the flood insurer of last resort. The NFIP gave property owners the ability to purchase taxpayer-subsidized flood insurance. Currently, you can buy total coverage up to $350,000 – $250,000 for the home itself and $100,000 for personal possessions. About five million Americans now have NFIP-subsidized policies. To keep costs under control, Congress passed a series of amendments to encourage policyholders to build more flood-resistant homes and give states incentives to not build in flood zones. Unfortunately, it hasn’t worked.