Off the Cuff: On the Knife's Edge

Options are running out across the board
Thursday, October 25, 2012, 10:11 PM

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

  • Phony employment
    • More workers being hired to do less work more poorly
  • Phony hopium
    • Despite QE3, over half the companies reporting Q3 earnings are under analyst expectations
  • Germany entering recession
    • The EU's only functioning economic engine is sputtering
  • Japan on the knife's edge
    • Between crushing deflation and currency destruction
  • Time for our politicians to clarify our priorities
    • What are we not going to do?

As we enter the fall and the upcoming elections, we find the status quo is becoming less and less sustainable on many fronts.

[Short summary tonight due to WS game 2. With all respect to Bob and Jim H -- Go Giants!!]



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


The Future of Gold, Oil & the Dollar

An outlook for the next twelve months
Tuesday, October 16, 2012, 10:12 AM

The ability of reflationary policy to mute the worst risks of debt deflation has been a source of enormous frustration for stock market bears ever since the 2008 collapse. Yes, the initial moderate rally out of the S&P500’s black hole was perhaps not so surprising in 2009. Bombed-out stock markets can always manage some sort of rally. But the ability of the rally to continue through 2010, and then 2011, and now 2012 has been quite vexing and painful for bearish investors.

Indeed, the entire post-2008 market phase has now produced an era of consistently poor performance for hedge funds. Recent data, for example, shows that an incredible 90% of hedge funds are underperforming the S&P500 through mid-September.

Will the pain continue? » Read more


Off the Cuff: When Trillions Aren't Enough

Our banks' bottomless need for capital
Thursday, October 4, 2012, 10:36 AM

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

  • No Joy on Wall Street
    • Banks cry poor despite record profits
  • The Invisible Recession
    • Hidden by faulty data
  • The Fallible Fed
    • It really doesn't know what's going on
  • Our Taxing Tax System
    • The case for simplification

It's clear to all that QE3 is a continued push by the Federal Reserve to rescue the banking system. But why is it necessary? » Read more


Off the Cuff: At the Boiling Point

Unrest is erupting around the globe
Wednesday, September 26, 2012, 10:02 PM

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

  • Unrest is breaking out around the world
    • When the populace has no options, it revolts
  • QE3 bang already a whimper
    • The impact of each successive easing is less than its precedent
  • Gold showing real strength
    • Support for the metal is going mainstream
  • Canadian coal-mine canary
    • Huge drop in housing sales

As predicted, as we head out of the slow summer, events are now beginning to unfold fast and furious. Renewed street riots in Spain and Greece show how disaffected the citizens there are from the failed policies that have been used to placate them to date. China and Japan seem to be inching further to potential armed conflict, as do Israel and Iran. The market is realizing that with open-ended money-printing now announced, there is no future "juice jolt" to anticipate, and so asset prices have already returned to pre-QE3 territory. With such uncertainty growing everywhere one looks, it's little surprise that more and more of those who once scoffed at gold are now recommending the precious metal.


Off the Cuff: Beggar Thy Neighbor

What happens to world currencies when everyone prints money?
Thursday, September 20, 2012, 6:17 PM

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

  • Asian saber-rattling
    • How serious is it?
  • From here to QE-ternity
    • And wither the dollar from here?
  • Leading indicators lose steam
    • The economy is slowing further.
  • Intervention in oil prices?
    • Recent trades look fishy.

Where to start this week?


DonkeyHotey on flickr

Understanding the Implications of QE3

How will the major asset classes react?
Tuesday, September 18, 2012, 6:06 PM

Executive Summary

  • We've now entered a new era of economic and fiscal descent; expect the next stage to be prolonged and bumpy
  • Why only two possible economic outcomes remain at this point (and one of them has a 90%+ chance of occurring)
  • How the recent liquidity measures announced by the world's largest central banks will impact:
    • stocks
    • bonds
    • gold & silver
    • other commodities
    • real estate
  • Why adopting a wealth preservation strategy is critical right now (and why so many will fail to do so)
  • Why this is not (yet) the moment to go "all in" in exchanging paper assets for hard ones (but do get started if you haven't already!)

If you have not yet read Part I: The Trouble with Printing Money, available free to all readers, please click here to read it first.

A Process, Not an Event

Okay, the ECB and the Fed are now in the game with unlimited, open-ended commitments to print as much money as necessary to get back to the same rates of GDP growth we had in prior decades. I should note that the ECB actions, at least, will be fully sterilized, meaning that they won't boost the money supply – at least that's the plan right now. Soon enough, Japan is going to have to join the fray simply because it cannot afford a stronger yen here; it will have to print because it is first, second, and last an export economy...

After that, it is anybody's guess as to how long China will put up with its massive $3.2 trillion in foreign exchange reserves being debased willy-nilly, but my vote is 'not long.'

These latest rounds of QE are certainly unnerving and may prompt many of you to want to accelerate your own private efforts at financial, emotional, and physical resilience. By all means, use these moments to focus your attention and efforts. But also be aware that we are experiencing what is certain to be a very long process rather than some dramatic event. » Read more


The Trouble with Printing Money

QE3 reflects a colossal failure to address our predicament
Tuesday, September 18, 2012, 6:04 PM

For a while now, I have been expecting a coordinated, global central bank action that would seek to print more money out of thin air, or "QE" (quantitative easing), as it is now called.  Now we have two of the most important central banks, that of the U.S. and in Europe (ECB) having committed to open-ended, limitless QE.

In Part I of this report, we analyze the actions themselves, and then in Part II we discuss the implications to individuals and those with responsibilities to manage money. » Read more


DonkeyHotey on flickr

Nowhere to Go

The Fed is almost certain to disappoint tomorrow
Wednesday, September 12, 2012, 11:09 AM

All eyes are on the Fed meeting and the almost fully expected (99% chance, already priced in) round of quantitative easing (QE) that will be announced upon the conclusion of the September 12-13 Federal Open Marked Committee (FOMC) meeting. Or not. » Read more


Off the Cuff: QE Blues

Odds of a downward market correction just increased
Thursday, August 2, 2012, 9:53 PM

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

  • Dashed hopes
    • What to expect now that the Fed and ECB have disappointed?
  • Growing signs of weakness in the economy
    • A strong defense is critical at this point
  • The continuing drought
    • ​More pain from the lack of rain

Now that the Fed has disappointed AND the ECB (after this recording) followed suit, the markets are asking where's my fresh, cheap liquidity? While Chris and Mish don't think that further quantitative easing will have any sustained or constructive impact, they do expect it is still coming. But it seems that greater pain in the financial markets is needed before action takes place. Chris, in particular, now warns of an impending market downdraft -- so a defensive position is highly advised. » Read more