The Good News In All The Bad Data

A rare convergence of confidence in future developments
Friday, June 13, 2014, 12:14 AM

Today's financial markets make a mockery out of sanity and logic. The difference between what SHOULD happen and what IS happening is perhaps the greatest it has been in our investing lifetimes.

If you're perplexed, flummoxed, frustrated, stymied, enraged, bored, irritated, insulted, discouraged -- any or all of these -- by the ever-higher blind grinding of asset prices over the past several years, despite so many structural reasons for concern, you have good reason to be.



Peak Cheap Oil Rears Its Head

Oil majors throw in the towel
Monday, March 24, 2014, 7:31 PM

This is a critical update on the Peak Cheap Oil front. 

Yes, I am talking about that tired old concept that was allegedly slain by American drilling ingenuity. It's back in the news... if you know where to look.

I remain steadfastly interested in the oil outlook because everything, and I do mean everything, in our exponential monetary and associated economic system is hinged upon there being more cheap oil next year than last. » Read more


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The Time For Shorting the Market Is Approaching

The dashboard of warning signals is getting bright
Wednesday, February 26, 2014, 7:55 PM

Executive Summary

  • Why stocks may average 0% return (!) for the next decade
  • The depressing data in
    • Retail sales
    • Housing
    • Manufacturing
    • Consumer confidence
  • Why the time to short the market is looking near

If you have not yet read The Stock Market's Shaky Foundation, available free to all readers, please click here to read it first.

To be sure, there is one piece of fundamental information that has supported equity prices; and that’s corporate earnings.

Those have vaulted to new highs, despite the weak economic recovery, on the back of ultra-cheap borrowing (which reduces interest costs which are deducted from earnings), government deficit spending, and low household savings:

While the parabolic rise in corporate earnings is quite impressive, they are also historically unprecedented and certainly unsustainable. 

When we look at the same chart seen above but on a percent change yr/yr basis we see that they have been slowing down remarkably and aren't that far above the zero mark... » Read more



Here We Go (Again)

We've seen this movie before
Tuesday, January 7, 2014, 1:12 AM

One of the things I am fond of pointing out is that it seems like nobody in high finance or the central banks learned anything from the great crisis of 2008.  The very same excesses that created the prior crises are being committed again.

I know...maybe this time it will turn out differently. » Read more


Our "As You Wish" Markets Have Reached the Cliffs of Insanity

Next stop: the Pit of Despair?
Friday, July 19, 2013, 11:41 AM

In the classic fantasy rom-com The Princess Bride, the beautiful maid Buttercup orders the farm boy Westley to perform numerous tasks to test his servitude. No matter the magnitude of the request, Westley simply answers "As you wish" and makes it so. Buttercup eventually comes to view Wesley with similar devotion, and true love is born.

Similarly, investors have fallen back in love with the capital markets, whose continual response their increasingly irrational hopes has been "As you wish." » Read more


Off the Cuff: Cognitive Dissonance

These are trying times for the prudent
Wednesday, April 3, 2013, 2:23 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • Europe Worsens
    • Even Germany is showing signs of weakness now
  • David Stockman
    • Everyone's trying to shoot the messenger
  • Cognitive Dissonance
    • It feels like we're taking crazy pills

Time to Choose

A fundamentals-driven breakout seems imminent. But which dir
Friday, February 8, 2013, 6:44 AM

Whether you're aware of it or not, a great battle is being waged around us.

It is a war of two opposing narratives: the future of our economy and our standard of living.

The dominant story, championed by flotillas of press releases and parading talking heads, tells an inspiring tale of recovery and return to growth. 

The other side, less visible but with a full armament of high-caliber data, tells a very different story. One of growing instability, downside risk, and inequality.

As different as they are in substance, they both share one fundamental prediction and this is why you should care: This battle is about to break. And when it does, one side will turn out to be much more 'right' than the other. The time for action has arrived. To position yourself in the direction of the break you think is most likely to happen.

It's time to choose a side. » Read more



Where Stock Prices Are Headed Over the Next Year

The battle between the real economy and asset prices
Tuesday, October 16, 2012, 10:12 AM

Executive Summary

  • Why household balance sheets are worse off than advertised
  • Why the recent rosy BLS jobs numbers actually mean bad news
  • How the Fed is squeezing investor capital out of other traditional asset pools and into the stock market
  • Expect to see the stock market moving higher in 2013; that is, until QE3 fails
  • What to expect if QE3 fails sooner than anticipated

If you have not yet read Part I: The Future of Gold, Oil & the Dollar, available free to all readers, please click here to read it first.

Market historians have recently started to point out that the current advance in the S&P500 is now 40 months old and has made gains of over 115% since the March 2009 lows. In other words, the doubling from the lows in price and the duration of the advance now late in its third year together suggest that a cyclical top is near. Furthermore, despite some noise in U.S. macro data – which has been briefly more hopeful, yet remains well within the phase of stagnation – earnings estimates have been coming down as the world economy continues to shift into lower gear.

Perhaps for the first time in a while, we can actually say that the Fed's decision to start QE3 was moderately anticipatory, in contrast to its ad-hoc and reactive policymaking over the past five years. It is not merely that the Fed soberly accepted that the economy was not getting better. The stagnant, tractionless macro data over the past year has spoken quite loudly to that fact. Indeed, the U.S. economy is merely treading water, and the Fed's move to QE3 serves as a sharp retort to those who would relentlessly attempt to portray stagnation as recovery. » Read more