Why you should stay away from limelight?

Because the society has changed . Martin Armstrong beautifully explains the current state of society by taking an example of US supreme court Justice Brett Kavanaugh.

He writes….
https://www.armstrongeconomics.com/international-news/politics/the-cost-of-a-political-divide/

Impeachment occurs when someone does something while in office. It is not based on what they did before. All the stuff they bring up from his past, such as tax returns to pictures with Epstein, are all an attack upon his character in hopes that it will persuade some to vote against him, but they are preaching to the choir. Both Republicans and Democrats bash the opposition to keep their constituents happy, for they are just biased and would never vote for the other party because they lack any ability to think objectively. I get emails that are always claiming Trump is a prior crook or something and how he should be impeached, but that only reveals their bias.

They are going after the Supreme Court Justice Brett Kavanaugh again. This is a pointless effort and highly damaging to the entire political system. What he did or did not do in college 40 years ago is absurd. No one’s entire life should be judged based on an incident they were involved in at a drunken party in college. It is rare to find someone who can even believe what they once did back in their school days.

Brett Kavanaugh cannot go to many places in Washington, according to the Washington Post. He is isolated by these personal attacks to this day. The allegations have scarred him and his family for life. As reported, at the La Ferme restaurant in Chevy Chase, a woman yelled at him and his wife insulting him in public, and on a different night, one customer stood to applaud him. He simply cannot go out in many parts of Washington for people are no longer respectful or civil.

The Democrats want to hold impeachment proceedings to try to remove him from the Supreme Court. Good luck with that. Again, you cannot impeach someone for what happened 40 years before. Only a fool does not learn from their mistakes. We all change as we mature. It is called wisdom.

Christine Blasey Ford who made the unsupported allegations that Kavanaugh had sexually assaulted her and in the process destroyed him and his family’s life forever, has herself been subjected to the new world where respect has vanished and people are no longer civil in public. She relocated four times and has been unable to return to teaching. She too cannot go out to dinner without being harassed. Welcome to the new world of political fragmentation. What she has experienced is not much different from the person she accused. Making such public accusations that are exploited for political purposes is something that will change your life forever. You will never convince the core of the opponent so your life will be destroyed in the process. You might as well move out of the country.

Worse still, Ford’s testimony exposed a gender war simmering below the surface. There were women who supported Ford ONLY because she was a woman. Their position was that women tell the truth and all men were scum and should not be believed. That was a raw feeling which also emerged in addition to the political divide. I am sure Ford would never testify if she knew the real cost of what has truly changed her life. This is society. There is no changing the way people will react in such a politically charged environment. Some women will say she has a right to tell her story. The difference is only between a local setting and one that will be plastered on the front pages of the entire world. Life is not fair — we just have to get used to that.

The fallout has been seriously damaging to the point that this will impact people who would normally be willing to take positions in government. There are people I know who would have been interested in being president, but they have no desire to put their family through such an ordeal.

The same is now true about any position from Federal Reserve to Supreme Court. What was done to Kavanaugh was such a violation of personal dignity that NOBODY who is qualified will want to subject their family to such nonsense. And as for Trump, he is probably the PERFECT person for president BECAUSE he has thick skin. It takes a rare person to be able to handle such personal attacks constantly.

He concludes “This is the destruction of our government. All this hatred and demands to go after anyone you disagreed with defeats the very purpose of civilization. Years ago, if the opposition won you simply moved on. Today, they spill out such hatred there is no longer any point to being one nation under God. Divide the country, build a wall down the center, and FORCE everyone to move to the side where they politically agree or just leave. The day is coming when there will be no returning to normal“

Don’t fight the Fiscal- India

Macro tourist writes in his blog…

“India is taking a page out of Trump’s play book and dramatically cutting corporate taxes. My favourite part? When asked about the deficit, India’s finance minister said, “We are conscious of the impact all this will have on our fiscal deficit.” In essence, we hear your concerns about balancing the books, but we are ignoring them.”

with monetary policy becoming impotent, the focus is now on fiscal policy to revive growth.

He further writes

But this move poses a real dilemma to traditional economists. Surely India should not be cutting taxes and increasing their deficit at this time of growing global indebtedness. Don’t they know that all that debt needs to be paid back and that they should be trying to decrease it, not increase it?

Yet at the same time most of those traditional economists sure do like tax cuts, and it seems they often especially like it when they are given to corporations, so many of them are flummoxed by recent developments.

I have no such worries. Moribund economic growth with millions under-and-unemployed is far more concerning. Maybe at some point fiscal policy will cause inflation, but the world is so far from this point, it’s laughable to worry about.

Now I have concerns about India’s external debt – you know, the kind denominated in another currency. However so far, the fiscal stimulus has caused no weakening of the currency. Absent any major decline in the Rupee, I view fiscal stimulus as a good thing.

I agree with above view and believe that unless bond yield spikes or Rupee takes a dive ( not slow and steady depreciation) this is worth the risk

His conclusion is BUY INDIA and SHORT US..…

Read full article below

https://www.themacrotourist.com/posts/2019/09/25/india/

China’s Other Trade Imbalance- India

Via The Sounding line

The United States is not the only country grappling with a massive trade deficit with China. As the following chart from Statista shows, China’s neighbor India is running a startlingly large deficit as well.

Despite having significantly lower labor costs than China, India imports more than four times more from China than than it exports ($68.8 billion of Chinese exports compared to $14.8 billion of Indian exports). Chinese exports to India are primarily manufactured goods while Indian exports to China are primarily raw materials and resources.

While size of the trade between the US and China is an order of magnitude larger than China’s trade with India ($179 billion in US exports and $557 billion in Chinese exports), the US-China trade ratio is actually more narrow (about 3.6 times more Chinese exports than US exports). It’s a reminder that labor costs are only one part of what drives trade imbalances. Equally important are regulatory hurdles, market access, tariff levels, and overall economic competitiveness.

Gold Price Forecast: The Path To New All-Time Highs

Once in a while you come across an article which is purely logical especially because GOLD is bought and sold on emotions and not on reasons…

By Lynn Alden

I’m not a perma-bull on gold, and I invest in a variety of asset classes depending on where value is in the market.

For example, I sold my gold and silver coin collection at high levels in 2011 because there was so much enthusiasm in the space and started buying back in 2018 with a long-term bullish outlook when gold touched $1,200. After an initial large investment in 2018, I’ve been dollar-cost averaging into gold and golds stocks over the past year.

Although we may have pullbacks along the way, and gold may retest its previous resistance level in the high $1,300’s as support at some point, my base case is for gold to reach or at least test new all-time highs in dollar terms as the rest of this business cycle plays out into the early half of the 2020’s decade.

How I Value Gold

Gold is challenging to value because it doesn’t produce cash flows, so discounted cash flow analysis and other valuation methods are out the window. I treat it as a currency, but I cannot use most of the same metrics that I value other currencies with (such as foreign-exchange reserve levels, current account balances, purchasing power parity vs exchange rates, and so forth).

Therefore, I use a combination of two primary methods to value gold, along with a set of secondary metrics for confirmation.  

read full article below

https://news.gold-eagle.com/article/gold-price-forecast-path-new-all-time-highs/1166

Lessons in Value Investing- Farnam Street

Letter Summary: https://farnam-street.us12.list-manage.com/track/click?u=21e20539cc1dfbff0f9025100&id=afa76a73ef&e=6d0bb2ebf3

• Even if you knew the best performing stocks ahead of time, the patience required makes it difficult to execute.

• All investing involves some form of faith. Value investors place their faith in mean reversion.

• This includes both reversion for the market’s sentiment about a specific security, as well as reversion in the underlying business results.

• Capital cycle theory is a natural phenomenon which explains mean reversion.

• The glacial pace of change makes it next-to-impossible for us mortals to recognize and capitalize upon.

• It’s quite probable that value investing is not a good strategy for most people. That’s part of the reason we’re so picky about adding new clients to the Farnam Street Family.

Weekly Commentary: Resurrecting M2

Doug Noland writes

This week’s disappointing ISM reports dominated business headlines: “US Manufacturing Survey Shows Worst Reading in a Decade.” “U.S. Factory Gauge Hits 10-Year Low as World Slowdown Widens.” “U.S. Manufacturers Experience Worst Month Since 2007-2009 Great Recession.” “ISM Services Index Hits Three-Year Low, Missing All Estimates.” “Services Survey Shows Economy is Weaker Than Expected Amid Slowdown Fears.”

A Google news search for recent “money supply” articles yields slim pickings: Apparently, China’s Xinhua news agency is now the go-to source for U.S. money supply insight: “U.S. Fed’s M2 Money Stock Rises as Market Bets Another Rate Cut.” Other top results included, “Egypt’s M2 Money Supply Rises 11.78% Year-On-Year in August,” and “Serbia’s M3 Money Supply Grows 12.3% y/y in August.”

Not that many years ago economists and market analysts followed weekly money supply data with keen interest. Rapid monetary expansion was, after all, indicative of excessive Credit growth and attendant inflationary pressures. Slowing money growth would indicate a tightening of lending conditions or waning demand for Credit. The Federal Reserve and global central bankers duly monitored the monetary aggregates as an indication of the appropriateness of monetary policies. Indeed, money and Credit had been a prime focus since the establishment of central banks. Throughout its history, the Federal Reserve was expected to prudently manage the “money” supply to ensure stable prices.

Let’s focus on the extraordinary $575 billion M2 expansion over the past 22 weeks (that receives zero attention). This was the second strongest (22-week) monetary expansion in U.S. history, trailing only 2011’s “QE2” period (Fed expanded holdings by $600 billion) where M2 expanded as much as $616 billion over 22 weeks. M2 growth peaked at $530 billion (over 22 weeks) in February 2009 during the Federal Reserve’s inaugural QE operation.

Breaking down the recent $575 billion M2 expansion, Currency gained $44 billion and Total Demand Deposits rose $21 billion. Meanwhile, Savings Deposits at Commercial Banks surged $332 billion (Total Savings Deposits up $346bn), with Total Small Time Deposits rising $8 billion. Over this period, Retail Money Fund deposits (included in M2) jumped $103 billion.

M2 “money” supply surged $70.2 billion last week, the strongest advance since the week of January 11, 2016. Notable to be sure, but apparently not worthy of a headline or article. Moreover, M2 was up $262 billion in 10-weeks and $575 billion over 22 weeks. The Fed’s weekly H.6 “Money Stock and Debt Measures” report presented a 13-week seasonally-adjusted M2 growth rate of 8.5%.

Let’s focus on the extraordinary $575 billion M2 expansion over the past 22 weeks (that receives zero attention). This was the second strongest (22-week) monetary expansion in U.S. history, trailing only 2011’s “QE2” period (Fed expanded holdings by $600 billion) where M2 expanded as much as $616 billion over 22 weeks. M2 growth peaked at $530 billion (over 22 weeks) in February 2009 during the Federal Reserve’s inaugural QE operation.

Breaking down the recent $575 billion M2 expansion, Currency gained $44 billion and Total Demand Deposits rose $21 billion. Meanwhile, Savings Deposits at Commercial Banks surged $332 billion (Total Savings Deposits up $346bn), with Total Small Time Deposits rising $8 billion. Over this period, Retail Money Fund deposits (included in M2) jumped $103 billion.

The Fed some years back discontinued tabulating a broader “M3” aggregate. It does, however, report Institutional Money Fund deposits, previously a key component of M3. It’s certainly worth highlighting that Institutional Money Funds expanded $256 billion over the past 22 weeks, a 32% annualized growth rate. Combining M2 and Institutional Money Funds, growth in this aggregate reached $831 billion over the past 22 weeks (to $17.666 TN), a blistering 11.9% annualized growth rate.

In last week’s analysis of the Fed’s Q2 Z.1 report, I noted the strong pickup in Bank lending (Q2 6.8% annualized) along with the notable $710 billion nine-month surge in the “repo” market (Federal Funds and Securities Repurchase Agreements). It’s no coincidence that these developments corresponded with rapid growth in both commercial bank savings deposits and institutional money fund assets, along with the collapse in Treasury and corporate bond yields (surge in prices).

September 30 – Financial Times (Joe Rennison): “Companies around the world sold a record amount of bonds last month, taking advantage of low borrowing costs fueled by investors’ frenzied search for yield. September tends to be a busy period for the bond market… That trend was amplified this year by a global rally in government bonds in August which lowered interest costs for a host of companies looking to sell debt. A total of $434bn of corporate bonds were sold globally in September, according to… Dealogic. That sum… was about $5bn higher than the previous high of March 2017. ‘It’s very attractive for issuers coming into the market right now,’ said Monica Erickson, a portfolio manager at… DoubleLine.”

October 1 – Bloomberg (Finbarr Flynn and Hannah Benjamin): “Companies globally sold a record amount of bonds in September as investors hungry for yield poured into debt, betting that major central banks can keep the global economy out of a recession… September’s new U.S. investment-grade debt supply reached $158 billion, making it the third-largest month ever for issuance. It was a month for the record books: an unprecedented 130 issuers tapped debt capital markets after a frenzied start that made the first week the busiest market participants had seen in their careers.”

September 30 – The Bond Buyer (Aaron Weitzman): “Municipal bond volume continues to accelerate, closing out the month of September 39.1% higher and the quarter 17.8% higher than a year earlier, as issuers flocked to market with taxable deals. September volume rose to $35.38 billion of municipal bonds sold in 894 transactions…”

I have posited that a bond market “melt-up” was instrumental in what has been a period of extraordinary Monetary Disorder. A weakening global economic backdrop along with escalating trade war risks and fragile markets spurred a dovish U-turn by the Fed, ECB and global central banks generally. The global yield collapse was largely fueled by a combination of speculative excess and risk market hedging. Such strategies have focused on safe haven sovereign and investment-grade corporate debt as instruments that would see inflating prices in the event of a “risk off” backdrop and resulting central bank rates cuts and QE.

The surge in speculative leverage – exemplified by enormous “repo” market expansion – created a self-reinforcing surge in marketplace liquidity, of which a portion flowed into the “money” supply aggregates (notably through the expansion of commercial bank saving deposits and institutional money fund assets). Moreover, it’s my view that the abrupt September reversal of market yields and the prospect of end-of-quarter liquidity challenges spurred a reversal of some levered holdings that quickly manifested into a liquidity shortage and spike in overnight funding costs.

Federal Reserve Credit jumped $83.9 billion last week to $3.893 TN, the strongest weekly Fed balance sheet expansion since March 2009. This pushed four-week Federal Reserve liquidity operations to $170.5 billion – taking Fed Credit to the highest level since the week of April 17th.

I’ll assume at least some of this expansion will be reversed as quarter-end positioning normalizes in the marketplace (leverage reversed for reporting purposes is reestablished). Yet I view the eruption of acute repo market instability as an urgent signal of mounting financial market instability. The Fed seemingly agrees.

October 4 – Financial Times (Joe Rennison, Colby Smith and Brendan Greeley): “The Federal Reserve Bank of New York will extend its intervention in the repo market into November…, soothing concerns about a re-emergence of the cash crunch that sent short-term interest rates soaring in September. The New York Fed first stepped into the repo market… after the cost of borrowing money overnight quadrupled to 10% last month. It intensified its efforts heading into the end of September to ward off potential strain at the end of the third quarter… The markets arm of the US central bank announced that it would continue to inject $75bn in overnight loans into the repo market every day through to November 4. In addition, it would conduct a series of term-repo operations — loans ranging from six to 15 days — to maintain an additional $140bn in the market until early November. The announcement has helped ease traders’ concerns of a potential shortage of cash re-emerging when close to $140bn in existing two-week term repo loans rolls off next week.”

U.S. equities reversed higher on Friday’s “Goldilocks” jobs report. But the rally gained momentum on the New York Fed’s “repo” extension announcement. Late Friday afternoon, Cleveland Fed President Loretta Mester reiterated a comment made by her colleagues: “The Fed’s decision on reserve supplies isn’t about QE.” The problem is that Fed liquidity operations, and the resulting expansion in Fed Credit, is very much about backstopping the markets. Markets are not bothered by a “QE” or “overnight repo operation” label. Rather, the Fed’s aggressive measures further crystallize the market view the Fed (and global central bankers) has little tolerance for fledgling market instability. For good reason, markets expect central banks to respond with overwhelming force to any issue that risks unleashing latent Crisis Dynamics.

At 3.5%, the U.S. unemployment rate in September hit a 50-year low. Money supply is booming. It was the third-largest month ever for investment-grade debt issuance. The St. Louis Fed’s weekly forecast for Q3 GDP growth is up to 3.12%, which would be the strongest reading since Q3 ’18. With the tailwind of low mortgage rates, housing markets are gaining momentum. New Home Sales are running at the strongest pace since 2007. August Existing Home Sales were reported at the strongest pace since March 2018. Recent mortgage purchase applications have been running about 10% above the year ago level. And at a 17.19 million annualized pace, auto sales held up solidly in September. The consumer is working, earning, borrowing and spending.

This week’s ISMs – manufacturing and non-manufacturing – both significantly missed estimates. Manufacturing is undoubtedly weak, with attention focused on the much larger non-manufacturing sector for indications of a broadening slowdown. At 52.6, the ISM Non-Manufacturing index is still expanding.

The implied yield on January Fed funds futures declined 10.5 bps this week to 1.47%, boosting the two-week drop to 16 bps. This implies market expectations for 36 bps of additional rate cuts by January. Markets are now pricing in a 73% probability of a rate cut at the Fed’s October 30th meeting (down from Thursday’s 85%). Two-year Treasury yields sank 23 bps this week to 1.41%. European bank stocks were slammed 4.7% this week. Bank stocks were down 3.0% in the U.S. and 2.7% in Japan.

I would tend to somewhat downplay current U.S. economic weakness. These are clearly abnormal times, but it would be atypical for such loose financial conditions not to support economic activity (for now). Global markets are a different story. Myriad co-dependent Bubbles appear more vulnerable by the week – while monetary stimulus and prospects for additional QE only exacerbate excesses along with fragilities. Trade negotiations remain a major wildcard. Increasingly, impeachment proceedings and rancid Washington pandemonium add a layer of complexity upon a highly complex backdrop. Taking it one week at a time, there’s palpable pressure on the administration to make some headway with the Chinese.


http://creditbubblebulletin.blogspot.com/2019/10/weekly-commentary-resurrecting-m2.html

Globalisation is over and there will be no US China Deal

President Trump to an auditorium of world leaders recently at the UN.

“In 2001, China was admitted to the WTO. Our leaders then argued that this decision would compel China to liberalize its economy and strengthen protections to provide things that were unacceptable to us, and for private property and for the rule of law. Two decades later, this theory has been tested and proven completely wrong. Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers, and the theft of intellectual property and also trade secrets on a grand scale. As just one example, I recently met the CEO of a terrific American company, Micron Technology, at the White House. Micron produces memory chips used in countless electronics. To advance the Chinese government’s five-year economic plan, a company owned by the Chinese state allegedly stole Micron’s designs, valued at up to $8.7 billion. Soon, the Chinese company obtains patents for nearly an identical product, and Micron was banned from selling its own goods in China. But we are seeking justice. The United States lost 60,000 factories after China entered the WTO. This is happening to other countries all over the globe. The World Trade Organization needs drastic change. The second-largest economy in the world should not be permitted to declare itself a “developing country” in order to game the system at others’ expense. For years, these abuses were tolerated, ignored, or even encouraged. Globalism exerted a religious pull over past leaders, causing them to ignore their own national interests. But as far as America is concerned, those days are over. To confront these unfair practices, I placed massive tariffs on more than $500 billion worth of Chinese-made goods. Already, as a result of these tariffs, supply chains are relocating back to America and to other nations, and billions of dollars are being paid to our Treasury. The American people are absolutely committed to restoring balance to our relationship with China. Hopefully, we can reach an agreement that would be beneficial for both countries. But as I have made very clear, I will not accept a bad deal for the American people.”