Bear Markets, Recessions and the Bewildered Fed

Submitted by Michael Pento – Pento Portfolio Strategies

A popular Wall Street myth is that bear markets are caused by recessions. The contention is as long as the economy isn’t in a recession stock prices won’t drop by more than 20 percent. And since the cheerleaders who dominate Wall Street never predict a recession, it should come as no surprise they never foresee the bear market that always precedes two negative quarters of GDP growth. The truth is Bear markets and recessions do not occur simultaneously, bear markets both predict and help engender a recession to occur.

Typifying this myth is Capital Economics’ Chief Economist John Higgins as he recently argued, “Major declines in the S&P 500 — that is to say, bear markets in which prices drop by at least 20%, which is roughly twice the drop that occurred between 10th and 24th August–have only tended to occur in, and around, recessions…And we doubt very much that one of those is around the corner.” 

But the truth is bear markets always precede a recession–those who argue otherwise have it exactly backwards. The stock market is a forward looking indicator: it anticipates economic activity yet to come, it doesn’t report on economic conditions that are occurring.   Continue reading

Fed Cred Dead

Submitted by James Howard Kunstler  –  www.kunstler.com

The economy is a two-headed monster. One head is the trade in real goods and real services. The other head is the financialized traffic in swindles and frauds that surrounds banking. There is some deception and overlap about which is which. For instance so-called health care might be perceived as a real service. In fact, it’s a hostage racket, designed to victimize “patients” at their weakest, with a “protection” premium that easily runs to $12,000-a-year for a married couple, even when they aren’t sick, and vulnerable. Just see what happens if you go to an emergency room with an injury that requires six stitches. Next stop: re-po land.

Most of the remaining on-the-ground economy consists of people merely driving their cars absurd distances, burning gasoline, between exquisitely-tuned giant warehouse store operations that were designed to destroy local Main Street trade — and accomplished that, by the way, to the applause of the local citizens whose towns were destroyed (“We want bargain shopping!”).

Now, of course, even WalMart is looking over its shoulder at the collapse of the complex arrangements that allowed it to metastasize across North America like some cancerous fungus. Globalism is winding down as the gargantuan matrix of Ponzi schemes based on owed money dissolves debt by debt. It isn’t long before nobody is a credit-worthy borrower, and no transaction in real goods can be risked unless cash hits the barrelhead — which turns out to be a very awkward way of doing business. Continue reading

Tell us Ron, What’s the Plan, What’s the “Austrian” Plan?

Submitted by Pater Tenebrarum  –  The Acting Man Blog

What? No Austrian Prescription? Bloomberg Reporters Cannot Believe It

This is truly funny. Ahead of the FOMC decision, Ron Paul, who is well-known as an an implacable critic and enemy of the Fed and a fan of the Austrian School of Economics, was interviewed at Bloomberg as to “what the Fed should do”.

What makes it so funny is that the Bloomberg reporters seemingly cannot believe that Austrian economists simply have no “prescriptions” for the Fed. They keep pushing Ron Paul for giving them some advice. “But wedo have a Fed…given that the institutional set-up is what it is and we cannot change it, what should they do? What’s the “Austrian” prescription?”

Dear Dr. Paul, please tell the Fed what to do! :)

Photo credit: Sean Gardner / Reuters Continue reading

Yellen Says There Is No Economic Problem While Describing A Serious Economic Problem

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

When the difference between your rhetoric and your actions is wide, inconsistency is pretty much axiomatic. However, Janet Yellen’s press conference was much more than that. I understand it’s a lot to charge blatant dishonesty, but almost everything she said is cow manure. And I make that assertion not on my own reading of the situation, but onhers.

The FOMC itself decided against exiting ZIRP in September, leaving little room for a policy shift in 2015. Does anyone remember March 2014 and her “six months” remark? In other words, for the FOMC to be so far off track there has to be some reason. Instead, she said this:

You know, I want to emphasize, domestic developments have been strong. We see domestic demand growing at a solid pace, the labor market continuing to improve. Of course, we will watch incoming data to confirm our expectation that that will continue. And we of course will watch global financial and economic developments.

Maybe she means “strong” in the same way she used to talk about the “strong dollar.” In that case, as has been once more proven, she was sorely mistaken. There is no possible way in which the “strong” or even “solid” should accompany her inaction. If the economy were truly that, then the rate hike would have been on schedule within that six-month ideal. Continue reading

All Republican Presidential Candidates Stand For War

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

There is not a peaceful person among the Republican candidates. Even the female is heartless. Carly Fiorina positioned herself along side the macho men as a warmonger. She let the military/security complex know that she, too, was for sale. Send in the campaign donations, and she will see that the money flows back to the military/security complex in the buildup of fleets and armaments that will send the Russians a message.

Alas, the only message US politicians want to send to the Russians is a war message. The Pentagon has upgraded the newly orchestrated “Russian threat” to “potentially aggressive” and is updating its plans for war with Russia.

What has Russia done to cause Washington to plan war with Russia? Don’t you know? Russia invaded Ukraine, just like Saddam Hussein had weapons of mass destruction and al-Qaeda connections. Continue reading

Russians Buy Gold Bars – 1 Million Ounces In August Alone

Submitted by Mark O’Byrne  –  GoldCore

Russia’s gold reserves rose to 42.4 million troy ounces as of September 1 compared with 41.4 million troy ounces a month earlier, the Russian central bank announced on Friday.

GoldCore: Russian Central Bank Gold Reserves

The monthly accumulation of 1 million ounces in just one month was one of the more sizeable monthly purchases by China and equates to 31.1 metric tonnes in August alone.

The value of the bank’s holdings rose to $47.68 billion from $44.96 billion a month earlier, Russia said in a statement on its website.

The amount bought was more than the 30.5 metric tons that Russia purchased in March, then the highest amount in six months.
Russia is now the seventh biggest holder of gold reserves after the U.S, Germany, the IMF, Italy and France and the rising gold power China. Russia has more than tripled its reserves since 2005 and holds the most gold bars since at least 1993, International Monetary Fund data shows. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

The Least-Believed Recovery And The Least-Believed Bull Market (Bloomberg)
Yellen Is Trapped in the Worst Nightmare Ever (Martin Armstrong)
Yellen Pause Ups Pressure on Draghi as Global Pessimism Mounts (Bloomberg)
Fed’s Lacker Says Economy Strong Enough For Higher Rates (Reuters)
Fed’s Williams Still Sees 2015 Rate Hike After ‘Close Call’ (Reuters)
Volkswagen Plunges 25% After US Emissions Cheat Scandal (Bloomberg)
Greece’s Year Of Tumult Enters New Chapter As Tsipras Dominates (Bloomberg)
Debt Relief Tops Tsipras Agenda, Party Official Says (Reuters)
EU’s Schulz Says Cannot Understand Tsipras’ Greek Coalition Choice (Reuters)
A Frontline Solution to Europe’s Refugee Crisis: Remember Ellis Island (WSJ)
Central Europe Gives Up On Holding Refugees Back From Austria (Guardian)
We Must Act Together, Says Merkel Ahead Of Refugee Summit (Guardian)
Merkel Coalition at Odds Over Proposal to Cap EU Asylum Places (Bloomberg)
15,000 More Refugees To Be Resettled In US Next Year (WaPo)
UN Meets To Fight Poverty, Europe Puts Up Razor Wire To Keep Poor Out (Guardian)
Why China Is Turning Back to Confucius (WSJ)
Was Standard Chartered Flouting US Iranian Sanctions? (FT)
Nine On Lagarde List Being Probed For Money Laundering (Kath.)
The Massacre Of The Kurds And The Silence Of Europe (M5S Lower House)
Safe Assets In A World Gone Mad (Chatham)
People Have No Idea How Money Is Created (PM.org)

Read much more here: Debt Rattle September 21 2015 – TheAutomaticEarth.com