“Every man has a right to his own opinion, but no man has a right to be wrong in his facts” ― Bernard M. Baruch
“The main purpose of the stock market is to make fools of as many men as possible.” ― Bernard M. Baruch
As the market drops 200 to 300 points daily on a fairly frequent basis these days, and has now dropped 13% in the last four months, John Hussman’s valuation analysis based upon historical facts is proving to be accurate. He’s not an “I told you so” type of person, but I am. The MSM stories follow the same old storyline – this is just a correction, time to buy the dip, stocks are undervalued, the Fed won’t let the market fall. We’ve been here before, twice in the last fifteen years. Wall Street and their media mouthpieces attempted to spread misinformation about the nature of the markets in 2000 and 2007, as epic bear markets were just getting underway. John Hussman cut through their crap then and he is cutting through it now.
“Is our profession really so lazy that we would advise people to risk their financial security based on tinker-toy models and pretty pictures that we don’t even have the rigor to test historically? Investors appear eager to ‘scoop up’ so-called ‘bargains’ on the belief that stocks are ‘cheap relative to bonds.’ All of this is predicated on the belief that profit margins will remain at record highs, that the Fed Model is correct, and that P/E ratios based on extremely elevated measures of earnings should be evaluated based on norms for much more restrained measures of earnings. Based on daily closing prices, the S&P 500 has not even experienced a 10% correction, yet the recent decline has been characterized as if investors are acting ‘like the world is about to end.’ This is not the pinnacle of human irrationality, but in fact, quite a shallow selloff from a historical standpoint. The fact that Wall Street is branding it otherwise is evidence that investors have completely forgotten how deep the market’s losses can periodically become.” Continue reading
While central banks would prefer to isolate oil prices as if in their own world with nothing at all to do with finance and economy more generally, it is oil prices that continue the disappointment connecting the “dollar” to the growing market (and therefore economic) wreck. Front month and spot crude prices had bounced around more favorably since the August 24 low, but the rest of the curve has been far less responsive. The outer maturities for oil prices remain seriously depressed without any visible means to correct that no matter what Janet Yellen declares about 2% inflation anchors.
With oil liquidating again, the outer end of the futures curve participated as strongly (if not more so: futures price for November delivery was down $1.22 while the December 2017 price was off $1.47; December 2018 -$1.36) as the front, which means again the economic foundation of that part of the curve is more validating of the “dollar” to its downside rather than the rebound since late August.
Copper prices in the past week are clearly running in that direction, too. The October futures price settled at $2.251 which actually makes a new multi-year low closing price. The low trade for the day of $2.236 was only pennies above the August 24 extreme.
Cacophony of the Clueless?
A friend just mailed us a few items that were posted at Zerohedge today as they came over the wire services. As is by now a well-worn tradition, individual FOMC board members (both members of the board of governors as well as district presidents) are delivering speeches and interviews galore in the wake of the most recent rate non-decision.
The shadowy Mr. Evans
Photo credit: Sukree Sukplang
Superficially one gets the impression that they aren’t really trying to “explain” anything to the hoi-polloi, since it all sounds remarkably uncoordinated. Today Bill Dudley (GS emissary at the NY Fed) and Charles Evans (Chicago Fed überdove) piped up, which reads as follows in the above mentioned summary by the wire services:
DUDLEY: HE EXPECTS FED PROBABLY WILL RAISE RATES LATER THIS YEAR
DUDLEY: THAT’S NOT CALENDAR GUIDANCE, THAT’S DATA-DEPENDENT
DUDLEY: FED RATE PATH WILL BE SHAPED PARTLY BY MKT REACTION
*EVANS: BEST APPROACH IS FOR LATER LIFTOFF, GRADUAL TIGHTENING
*EVANS SAYS `EXTRA-PATIENT APPROACH’ TO TIGHTENING IS WARRANTED
*EVANS SAYS `THERE IS NO PROBLEM IN MODERATELY OVERSHOOTING 2%
*EVANS: APPROPRIATE TO RAISE RATES VERY GRADUALLY AFTER LIFTOFF
*EVANS SAYS HE SEES SUBSTANTIAL COSTS TO PREMATURE RATE LIFTOFF
I first posted the attached three weeks ago, and here we are again, knocking on the door of the Bullard Rip low of last October 15th. While we will know soon enough whether this battered and bloodied bull will give up the ghost on this trip down and slice through 1867 on the S&P 500 or stage another half-hearted rebound, one thing cannot be gainsaid.
To wit, all the reasons for a deep correction ahead—–not merely the perennial Wall Street hyped “retest”—— remain in tact; and a passel of new ones have appeared, too.
In addition to the global deflation waves lapping ever closer to these purportedly decoupled shores, we now have a Fed that has decisively rendered itself into a evident state of indecision and cacophonous gibberish.
In Yellen’s case, the actual thing.
^SPX data by YCharts
In the interim, the global commodity collapse has gathered force, and is now spilling over into financial market mechanics in the form of the Glencore meltdown and CDS blowout. Continue reading
Submitted by Mark O’Byrne – GoldCore
This is a very important story that shows how China and Russia are becoming increasingly close and strong allies who are flexing their muscles and asserting themselves as rival superpowers to the U.S.
The Chinese are very aware of the importance of symbolism and this appears to be a subtle show of allied force and underlines the strength of their deepening alliance with Russia.
The Waldorf Astoria New York (Commons.wikimedia.org)
Xi Jinping & President Obama (Reuters)
Chinese President Xi Jinping leaves the White House, where he discussed the theft of commercial secrets, and heads to New York to check in tonight at the Waldorf Astoria, where his privacy is sure to be guaranteed by the hotel’s new Chinese owners.
On Sunday, Xi will be joined by Russia’s Vladimir Putin, who also picked the Waldorf for his first stay in Manhattan in a decade, according to diplomats preparing for the Eurasian leaders’ address to the annual seven-day session of the United Nations General Assembly.
Read the full story on Bloomberg