As bubbles expand and hot money starts burning holes in corporate pockets, merger and acquisition deal terms begin to leave reality behind. Often one deal of such breathtaking size, scope and hubris is struck that — in retrospect – it heralds the end of the era. The junk bond bubble of the 1980s, for instance, […]
Fake Markets Produce A Fake Economy
Automtaic Earth’s Raúl Ilargi Meijer just posted an essential essay on the world’s financial markets – or what used to be the world’s financial markets. Here’s an excerpt: “[Price discovery] is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers”, says Wikipedia. Perhaps not a […]
The Empire Strikes Back, Part 3: “Big Meat” Tries To Define Away The Competition
Silicon Valley is pouring venture capital into startups that use cultured animal cells to grow meat. The hope (now backed with hundreds of millions of dollars) is that they’ll someday replace corn fields, feedlots and slaughterhouses with football-field sized vats from which an entire city’s hamburgers and chicken nuggets emerge sans animal suffering or land […]
Walmart Giveth, And Walmart Taketh Away
Walmart made two announcements yesterday that perfectly illustrate the dilemma facing the developed world. First, the omnipresent retailer raised its minimum wage to a respectable-sounding $11/hr: Walmart is raising its minimum wage and handing out tax cut bonuses (WGNO) – Walmart is raising its minimum wage and handing out tax cut bonuses because of the […]
High-Profile Sectors Start To Roll Over
Long credit cycles like the current one always end with a crash. But first they deteriorate. The headline numbers remain positive while under the surface a growing list of sectors start to falter. It’s only when the latter reach a critical mass that market psychology turns dark. How far along is this process today? Pretty […]
What’s Left To Drive The Recovery? Not Much
US growth, such as it is, has lately been driven by a handful of hot sectors. Car sales have set records, high-end real estate is generally way up, and federal spending – based on last year’s jump in the national debt – is booming. But now the private sector part of that equation is shifting […]
Maybe The Recovery Wasn’t Real After All
For a while there it looked like the US and its main trading partners had finally achieved escape velocity. Growth was up, inflation was poking through the Fed’s 2% target, and most measures of consumer sentiment were bordering on euphoric. Then it all started to evaporate. Lackluster manufacturing and consumer spending reports sent the Atlanta […]
Warnings We’ll Wish We’d Heeded, Part One — Plunging Jobless Claims
It’s the same story every time: Imbalances build up during a recovery but most investors ignore them because good times have become the new normal and the uptrend seems bullet-proof. Then things fall apart and everyone wishes they’d paid attention to history. This series will cover a few of the more glaring examples of late-cycle […]
Don’t Sweat The Election. The Next Crisis Is Already Baked Into The Cake
Friday was one of those days where you walk away from the screen for a minute and come back to find a completely different market. All it took was the FBI finding a trove of new Clinton emails, thus breathing new life into the Trump campaign and throwing what was a foregone conclusion back into […]
Great Numbers, Curious Timing
Pretend you’re running a corrupt government and something big and scary happens in another part of the world. Brexit, for instance. You’re quite naturally worried about the impact on your local economy and political system. What do you do? Well, one obvious thing would be to call the statisticians who compile your economic reports and […]
2007 All Over Again, Part 5: Banking Crisis Imminent
Our good friend Michael Pollaro just sent a chart from the St. Louis Fed that shows the US drifting back into yet another banking crisis. The green line tracks fluctuations in the US yield curve, defined as the difference in yield between 10-year and 2-year Treasuries. When the yield curve is steeply positive, banks are […]
Macy’s Crushed By Amazon, Italian Banks Crushed By Euro
This is a tale of changing environments and the organisms that are, as a result, dying off. First, consider the bricks and mortar retailers. Amazon, the dominant online seller of virtually everything, reports a spectacular quarter with soaring sales and (fairly new for them) strong profits. But in a world of flat consumer spending, where […]
A Currency War Battle That Europe and Japan Can’t Afford To Lose
The dollar is tanking lately. From a high of around 100 in December, the dollar index — which measures USD against a basket of foreign currencies — is down about 8%, and the decline is steepening. In counterintuitive currency war terms, that means the US is winning the latest battle. After three years of the […]
Can We Grow Out Of Our Problems If We’re Not Actually Growing?
The rationale for today’s easy money policies is pretty straightforward: Falling interest rates and rising government deficits will counteract the drag of excessive debts taken on in previous stimulus programs and asset bubbles, enabling the developed world to create wealth faster than it takes on new debt. The result: a steady decline in debt/GDP to […]
Bad — But Better Than What’s Coming
Talk about diminished expectations. This morning’s estimate of 1.4% Q4 GDP growth is being hailed as a pleasant surprise. Which is odd, considering that for most of the past century a number this low would have been seen as weak enough to require emergency action. And that’s just the headline number. Dig a little deeper […]
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