Posted on 06/30/2014 5:24:17 AM PDT by blam
Jim Edwards
June 30, 2014
The Bank for International Settlements — the Swiss-based financial institution that acts as a counterparty to national central banks — has declared that stock markets are currently in a "euphoric" state and has urged central banks globally to begin tightening interest rate policies now while economies are growing rather than wait for another recession, when it will be too late.
Those are scary words, coming from a set of economists whose job it is to monitor how capable central banks are of responding to economic conditions with flexible monetary policy.
The subtext (and not-so-subtext) of BIS's annual report is that because many central banks have reduced interest rates to zero — the U.S. and Japan included — they are currently without weapons to boost the economy should another crisis hit. You can't go lower than zero, basically.
These words from the BIS ought to terrify anyone who thought central banks were unprepared for the last recession in 2007, when U.S. interest rates were "high" at about 5.3%:
Financial markets are euphoric, but progress in strengthening banks’ balance sheets has been uneven and private debt keeps growing. Macroeconomic policy has little room for manoeuvre to deal with any untoward surprises that might be sprung, including a normal recession.
And that crisis looks set to arrive any day now because stocks are at a peak. Bloomberg underlined the point at the weekend:
(snip)
(Excerpt) Read more at businessinsider.com ...
GDP sucks and the housing market is still in the doldrums.
(ahem) You're in the recovery.
Why not? Seems to me it is all relative.
If cash is losing value in the mattress, say, at 25% per year, all other factors equal, I'd gladly pay 5% per year TO the bank to hold that money.
No one, or at least hardly anyone, expects the U.S. economy is sliding into a recession, which would require two straight quarters of negative growth.
I wonder how badly retirees living on the interest and dividends from the retirement plans will be hit.
To paraphrase my thought...... recovery is a process, not an event.
In spite of the nay sayers, corporations have achieved a level of profitability from earnings. Although the Fed cheap money is said to be the driving force for the markets, earnings growth must not be discounted.
We learned recently that the rise in price for megahouses has recently changed the real estate markets in formerly depressed areas of California and Florida.
It would seem the recovery process is not uniform, but is in effect
I learned yesterday of a couple being paid $7500 a month to live in their RV home and serve as 24/7 gate keepers at an drilling project in Texas. That indicates at a very minimum a spot recovery process
No they aren't. People are pouring money into stocks because it's the only game in town. Banks and bonds pay < 1%, real estate is stagnant (unless you're Trump) so where does the average person put their 401k money?
My own view is that stocks are benefiting from a run to yield. Many blue chip stocks dividends are larger than long-term (10 to 30 year) T-Bond yields, and they have the added possibility of future appreciation.
However, if inflation picks up—and the FED want some inflation—and bond yields go up, that argument will be gone, and stocks will take a tumble.
Obama said you ARE better off today, you just don’t know it.
Sounds like they're saying we should sell, and that pretty much goes along w/ the doom'n'gloom we're getting everywhere:
Gov't Econ. Fixes Create LT Instability - Robert Samuelson, Washington Post
Do Econ Fundamentals Support Today's Market? - Trish Regan, USA Today
This Hot Stock Market Is a Lot of Bull - Jonathon Trugman, New York Post
Are Markets Really Efficient As They Say? - Jeff Sommer, New York Times
Watch out! The Stock Market is Slow Jun 25 by Chad Karnes
CNBC Is low volatility a sell signal?
Usually, wide spread doom'n'gloom means a lot of folks are waiting on the sidelines, and that's a good buy signal.
There are no good ways out of this global mess. If the global monetary/banking system collapsed, us "little folk" will go through a transition, for sure. It's the global elites who will lose out....and I'm all for that.
Well, the 2nd quarter ends today. Do you want to bet the first GDP figure is +0.1% or higher? Two consecutive quarters with negative GDP would definitional a recession - and Obama and the Rats will own it.
We’re in a depression.
It'll (ahem) 'rebound' from the bad weather to 3-5%. Just watch.
If cash is losing value it would lose value in a bank or in a mattress.
The stimulus they’re talking about is the ability to offer loans cheap. The only way that could be changed is if they offered to pay people to borrow money... ah... is that what you’re talking about? That if money’s NOT borrowed it losses more value?
Not with a Democrat president. The all-knowing cycle-deciders are the NBER people, and back during the '08 election they sold out completely as a Dem tool and reaped huge benefits in '09 with your tax dollars.
I think stocks are overvalued right now but then again I could be wrong.
Then you'd be losing 30%. Negative interest only makes sense in a deflationary environment wherein money is gaining value, i.e. less money has more purchasing power.
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