Showing posts with label World Bank. Show all posts
Showing posts with label World Bank. Show all posts

Thursday, October 17, 2019

IMF Warns Pension Funds, Insurers, Shadow Banking On Overvalued Stocks

At last, some honesty.

The International Monetary Fund (IMF) and World Bank, holding its week-long annual meeting in (where else?) Washington, DC from October 15-20, has issued a report about stock valuations and the dangers faced by pension funds, insurers, and institutional investors.

Because low interest rates in many parts of the world are cause investors to reach for yield, the IMF sees inherent risk of overvaluation and imprudent borrowing as potential pitfalls should an economic downturn occur.

Their solution would be for more stringent regulation and closer monitoring of large institutional investors and so-called "shadow banking" outlets like insurers and non-bank financial companies. Obviously, the chiefs at the IMF have not read their history well enough, as there's ample proof that during ties of loose monetary policy, central bankers have a tendency to look the other way, fall suddenly into deep sleep, or simply miss obvious signs of trouble developing.

Famously, leading up to the Great Financial Crisis, then-chairman, Ben Bernanke, dubiously opined on May 17, 2007, "The subprime mess is grave but largely contained." A year later, the global economy was in tatters, fending off complete collapse.

While there are certainly signs that stocks are overvalued, and those signs have been apparent for a long time, years, in fact, the conceptual framework currently in use by investors is that the Fed and other central banks, fully in control of markets, will not allow any serious decline in equities, particularly in developed nations, and especially int eh United States.

That's the kind of certitude and unabashed frothiness that leads not-so-directly to insolvency, like trying to catch a falling knife.

It's laudable for the IMF to issue such a report and offer potential solutions to problems which may arise, but who's listening?

At the Close, Wednesday, October 15, 2019:
Dow Jones Industrial Average: 27,001.98, -22.82 (-0.08%)
NASDAQ: 8,124.18, -24.52 (-0.30%)
S&P 500: 2,989.69, -5.99 (-0.20%)
NYSE Composite: 12,994.89, -11.15 (-0.09%)

Friday, January 3, 2014

Reinhart and Rogoff Return: Debt Overhang, Financial Repression, Inflation and 'Saver's Tax'

Forgetting the day-to-day action of the stock market for a moment to focus on the really, really larger issue of macro-economics, comes this daft little piece of literature from the infamous duo of Carmen M. Reinhart and Kenneth S. Rogoff, prepared for the IMF, entitled, boorishly, "Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten," as though the central bankers of the world have forgotten their purposes in life, which would be, in no particular order:
1. Create and control all of the world's currency;
2. Put governments, businesses and individuals in debt;
3. Act like you're doing everyone a favor.

The authors of this [PDF] 21-page memo to the IMF bring up some old tomes familiar to those in the central banking business, which, more likely than not, they have NOT forgotten, not at all, such as financial repression, inflation (the central way central banks enrich themselves and impoverish the rest of the world), and outright debt defaults, this final theme one which the central banks will encourage sovereigns to pursue, in the best interest of everyone.

When one reads this little write-up and thinks it through, a couple of ideas immediately sprout forth from the pages.

One, inflation, the central banker's ally in its never-ending quest to eventually destroy the value of all currencies, has been latent and absent for some time, something the Fed head, Ben Bernanke, has openly whined about, and probably privately been chastised by his handlers in the global banking cartel. Inflation will have to make a big comeback, soon, lest the Fed and fellow central banks lose out on massive profits from the ongoing, recent economic crises gripping all nations.

They have the means to do so, and they certainly will, now that they've successfully re-capitalized their member banks (all the biggest ones, which were insolvent in 2008), through various means, the most obvious being the "taper," or winding down of their balance sheet, and higher interest rates, making money more expensive and credit all-but-impossible to get, which will have the desired result of pushing prices skyward while crashing the stock markets and making most citizens, now already poorer due to the stealth tax of low interest rates over a prolonged period, severe debt slaves.

The central banks, through their conduits in central sovereign governments, will also encourage defaults on massive amounts of debt, causing even more panic and a rush of cries from governments to individuals for the central banks to "save us," when in reality, it is they who are causing the pain.

While Reinhart and Rogoff are surely on the right track - though a bit opaque in their language - they are telegraphing the next moves for central bankers, who will, soon enough, declare that all their efforts have not succeeded in creating economic prosperity, so they will embark on, sorry, more austere measures. Governments will overtax and overburden their citizens (to some degree this is already occurring in Europe and Japan), but eventually - maybe in five years, or ten, or more - there will at last be a period of economic "normalcy" with interest rates on, say, 10-year notes at about 5%, inflation raging along at 5-8% (payback for the years of no or low inflation) and employment (with associated confiscatory taxes and fees) steadily declining for some countries, still high for others.

For most people and businesses, surviving this period will be tantamount to picking up nickels in front of a runaway steamroller: barely profitable, but highly risky. Many will be crushed; others wounded, the steamroller that is the Fed, the ECB, the IMF, World Bank and the BIS will grind nations, businesses and individuals into wretched little nothings.

That's the message from these authors, and, no, the central bankers of the world have not forgotten. It's coming. Not all at once, and not with any dramatic waving of wands or arms or hands, but slowly, gradually, eventually...

On the second day of trading for 2014, stocks took a bit of a roller-caster ride not dissimilar to those encountered during bear markets, but with a twist of day-trading irony, up at the open, crashing back to unchanged mid-day, rallying late before giving all of it back, the Dow being the only average on the positive side of the ledger today, the NASDAQ still down, the S&P marginally negative.

No, this was not a snap-back rally, and no, again, everybody's not waiting for Monday to "really" start trading. These first two sessions of 2014 were real and they count. Money is being pulled out of the market because money knows what's ahead, and it's seeking safe harbor.

Two things to note: the divergence of the a-d line from the headline close, and the continued low numbers of new highs and new lows.

Thanks for a week of hope and no change.

DOW 16,469.99, +28.64 (+0.17%)
NASDAQ 4,131.91, -11.16 (-0.27%)
S&P 1,831.37, -0.61 (-0.03%)
10-Yr Note 97.90, +0.60 (+0.62%) Yield: 3.00%
NASDAQ Volume 1.56 Bil
NYSE Volume 2.76 Bil
Combined NYSE & NASDAQ Advance - Decline: 3577-2094
Combined NYSE & NASDAQ New highs - New lows: 205-21
WTI crude oil: 93.96, -1.48
Gold: 1,238.60, +13.40
Silver: 20.21, +0.083
Corn: 423.50, +3.00

Thursday, January 2, 2014

January Barometer? Stocks Fall on First Trading Day of 2014


Stocks are only supposed to go higher, and the idea that we would begin the new year with a large selloff in stocks is a disturbing development to those in charge of propagandizing our glorious and ever-expanding economy.

The last time stocks fell on the first trading day of a new year was 2008, and, unless you've been living under a rock the past five years, you know what happened that year.

Not to say that a precipitous decline on the first trading day of the new year is a bad omen or a signal of a down year for stocks, but, referencing the January Effect, there's an 88% positive correlation between the direction of stocks for the entire month of January and the rest of the year, so, starting off with a sharp decline is not the best indication of general health, wealth and happiness going forward.

Obviously, it's too early to tell wither stocks go from here, but the apologists were out in force on CNBC, citing the fact that volume was on the very low side, something they neglected to inform upon during the late-year rally of the past two weeks, when trading volume was among the lowest of the year. Actually, Thursday's volume was higher than the average of the previous two weeks on a daily basis, and closer to normal than at any time since December 16.

With the major indices all up more than 25% in 2013, it would not come as a surprise to anyone should the market face some headwinds in 2014. It deserves mention that while the indices did very well, profits - as Larry Kudlow so often opines, "the mother's milk of stocks" - were higher by only six percent for the year, trailing paper gains by a margin wide enough to haul a bear trap through.

The bad news for holders of stock certificates (or the electrons which signify ownership in a brokerage account - not quite exactly the same thing) is that the selling was rather broad-based, as per the advance-decline line. The good news for the rest of us - those who own hard assets like land, gold, silver, machinery and vehicles - is that deflation seems to not want to go away. Gold and silver were higher, with silver shining at a nearly 4% gain on the day, and corn was down, so the price of corn in silver terms continues the trend lower, which, as our notes imply, according to Adam Smith, that is a deflationary trend of great significance. Crude oil also was off sharply.

Lower prices for all manner of consumer goods would be a definite boon for consumers and the general economy, though it's arguable that Wall Street and the international banking cartel headquartered at the Federal Reserve and World Bank might not be so pleased.

A sneaking suspicion that another grand transfer of wealth - on a scale beyond that of 2008-09 - is about to commence has been bandied about by skeptics of the recovery story. Maybe it's just a one-day trade and there's nothing more to it, though it needs to be pointed out that trades made today - especially those sales at a profit - won't necessarily be taxed for a very long time, around March 15, 2015, to be precise. Now, that could explain more about today's price action than just about any other macro or micro-economic factor present.

DOW 16,441.35, -135.31 (-0.82%)
NASDAQ 4,143.07, -33.52 (-0.80%)
S&P 1,831.98, -16.38 (-0.89%)
10-Yr Note 98.00, -0.03 (-0.03%) Yield: 2.99%
NASDAQ Volume 1.62 Bil
NYSE Volume 3.06 Bil
Combined NYSE & NASDAQ Advance - Decline: 1995-3764
Combined NYSE & NASDAQ New highs - New lows: 185-41
WTI crude oil: 95.44, -2.98
Gold: 1,225.20, +22.90
Silver: 20.13, +0.758
Corn: 420.50, -1.50

Wednesday, January 16, 2013

Markets Continue Dull Streak; Germany Slow Go on Gold Move

How dull is this market?

The Dow Jones Industrials hit their lows of the day just minutes into trading, losing 66 points, then rallied off that until stabilizing - though still in the red - around 11:00 am ET.

From that point until the close, the index traded in a range of just 25 points.

This is what happens when headline-scanning algos do 80% of the trading. When there's no news, nothing happens. So, if you're trading on fundamentals - things like price-earnings ratios, comparative advantage, free cash flow, etc. - you can just sit and wait until your particular stock of choice latches itself to a broad rally or makes some headline-grabbing news.

And, if that's what's become of our "free" markets, good luck, because the computers will beat you every time. They can find and scan a headline, react and trade in a matter of seconds, or, in much less the time an average web page takes to load.

Now, is there any reason at all for individual investors to trade stocks? One would believe no.

About all that was not moving the market today were a series of equally dull economic reports, like the CPI, at 0.0%. There's no inflation (really?) and no deflation, which, unless one knew better, would be defined as stagflation (or maybe lackflation).

The NAHB Housing Market Index remained steady at 47, whatever that means; industrial production bumped up 0.3%, which was down from last month's reading of an increase of 1.0%, and capacity utilization improved from 78.7% to 78.8%.

Outside of Goldman Sachs' (GS) huge earnings and revenue beat and JP Morgan's (JPM) narrow beat ex-one-time-charges (but of course), what may have put a pall over the session was the World Bank lowering its global growth (that's a joke, son) projection from 3.0% to 2.4%.

Seriously, the sloped-browed, slack-jawed dunces at the World Bank don't have a crystal ball, but, for some unholy reason, people believe they know what they're doing. Some of us are dubious. But, then again, some of us don't trust anything that comes out of the mouth of politicians or bankers or even stock analysts.

Ho-hum. It seems even the bright-minded Germans, who shook things up a little yesterday by wanting some of their gold back, really don't want it all that badly, after all. GATA reports that Germany will take all of seven years to repatriate some 300 tons of its gold from the Federal Reserve in New York. It will likely take a shorter period of time to remove all of its gold - 374 tons - from the vaults in Paris, but it plans on keeping whatever is in the London vaults there indefinitely, amounting of 13% of all its gold.

The plan is to hold 50% of its gold at home, the rest in London and New York. La-de-dah.

Dow 13,511.08, -23.81 (0.18%)
NASDAQ 3,117.54, +6.76 (0.22%)
S&P 500 1,472.57, +0.23 (0.02%)
NYSE Composite 8,710.22, -22.88 (0.26%)
NASDAQ Volume 1,648,059,375
NYSE Volume 3,198,232,750
Combined NYSE & NASDAQ Advance - Decline: 2775-3605
Combined NYSE & NASDAQ New highs - New lows: 263-10
WTI crude oil: 94.24, +0.96
Gold: 1,683.20, -0.70
Silver: 31.54, +0.013

Monday, June 22, 2009

Stocks Continue Relentless Decline

Without any prodding from economic reports or corporate catalysts, stocks began the day and the week on a lower footing and spent the entire session in a protracted, broad retreat. If there's any better signal that stocks are on a negative bias, it's a big down day in the absence of news.

Not surprisingly, energy stocks, financials and raw materials were the biggest losers on Monday. These are the same sectors which investors had pumped to extraordinary gains in recent weeks.

The major indices hit their lows of the day around 1:30 pm, but no serious attempt at a rally ever materialized as stocks drifted, closing at or near their lowest levels of the session. The broadest measures - the NYSE Comp. and NASDAQ - were the hardest hit, suffering losses in excess of 3%.

Dow 8,339.01, -200.72 (2.35%)
Nasdaq 1,766.19, -61.28 (3.35%)
S&P 500 893.04, -28.19 (3.06%)
NYSE Composite 5,725.07, -209.17 (3.52%)

The number of advancing issues was dwarfed by declining ones, 5526-961, and new lows surpassed new highs for the 7th straight session, 69-33. Volume was once again a non-factor, remaining at generally sluggish recent levels, though marginally better than last week's levels.

NYSE Volume 6,119,741,000
Nasdaq Volume 2,238,124,250

Commodities responded to the downturn in equities by selling off sharply. Crude oil contracts for July delivery were down $2.62, to $66.93, a two week low. Gold was off $14.70, to $921.50, while silver lost 50 cents, to $13.71.

The declines in both equities and commodities reflects a complete change of sentiment from just a week ago, when all the talk concerned inflation. It seems investors had gotten a bit ahead of themselves regarding not only prospects for a recovery, but for inflationary forces, as well. Deflation remains dominant, as businesses struggle for pricing power. Slack demand across the board, due to stagnant wages, generalized fear of the future and excess household deb burdens, has kept a lid on prices and will likely do so for some time, no matter how much money the Fed attempts to pump into the economy.

A report by the World Bank, which sees the global economy shrinking by 2.9% may have contributed to the dour tone on Wall Street, though european bourses were already trading lower prior to the release. The general mood is one of resignation that the recession will continue through most, if not all, of 2009, and recovery will be tepid, at best.

Noting that, prospects for individual companies are being reassessed. The process of unwinding the gains tacked on from March through June is now well underway. The Dow has shed 460 points since closing at 8799 on June 12, a span of just 6 sessions.