These fake rallies will end in tears

New York Stock Exchange 1963 (Photo: Wikimedia; US News and World Report; Library of Congress)

Investors and speculators face some profound challenges today: How to deal with politicized markets, continuously “guided” by central bankers and regulators? To what extent do prices reflect support from policy, in particular super-easy monetary policy, and to what extent other, ‘fundamental’ factors? And how is all this market manipulation going to play out in the long run? It is obvious that most markets would not be trading where they are trading today were it not for the longstanding combination of ultra-low policy … [Read more...]

Are central bankers losing control?

money symbols getting sucked into a vortex

The last couple of weeks have been very interesting. Remember that, certain regional differences aside, Japan has, for the past two-plus decades, been the global trendsetter in terms of macroeconomic deterioration and monetary policy. It was the first to have a major housing and banking bubble, the first to see that bubble burst, to respond with years of 1 percent interest rates, then zero rates, then various rounds of quantitative easing. The West has been following Japan each step on the way – usually with a lag of about … [Read more...]

Financial markets still don’t get it

Picture of shares

 Apologies if the title of this Schlichter-file sounds somewhat arrogant but after the events of the past three weeks I may perhaps be forgiven for feeling a bit emboldened in my views. Of course, this is often the point at which the pendulum swings in the other direction and developments take a slightly different turn, if only for a short time. After all, big trends almost never go from A to B in a straight line. So let's stay modest and nimble. But there can be no denying that the events of that past two to three weeks … [Read more...]

Why We Are Facing an Inflationary Depression

Zimbabwe Hyperinflated bank notes, 2008

Is the global 'recovery' faltering? Is the United States economy heading for a 'double-dip'? These are the headlines after recent disappointing economic data releases, in particular the weak employment report last Friday. Truth be told, there never was a proper 'recovery', if the term is to denote a process of true healing, of fundamental betterment. Recessions occur because of economic imbalances - and the imbalances that caused the financial crisis and the following recession are predominantly still with us. The few … [Read more...]

Billionaire Defender of the Statist Quo

Buffett & Obama

Psychologists should have no problem explaining our tendency to readily attribute success in investing or trading to skill and not luck. This tendency is rather pronounced and one of the reasons behind the now frequently decried 'bonus culture' in the finance industry. I remember many instances where one or two good years in the markets were enough to elevate a young trader in the eyes of his bosses, his peers and most certainly himself to the status of certified market genius whom the firm had to stop from defecting to the … [Read more...]

U.S. Government Bankruptcy – The Finance Establishment Is Getting Nervous

screenshot of Bill Gross on TV

No, dear reader, I am not developing an obsession with Bill Gross, America's most prominent bond manager. I know I wrote about him just recently but this morning I already received a number of messages from friends in the bond business alerting me to another missive from the famed 'bond-king'. Here it is. So this Schlichter File deals again with the views of Mr. Gross but I hope to put a different spin on things. In his latest investment outlook Mr. Gross tells us that the U.S government is bankrupt and will most likely … [Read more...]

Mr. Gross Is Right – And Wrong At The Same Time.

Bill Gross photo

The United States government is bankrupt. Not the country. Not the people. Not the private sector, at least not all of it. But the U.S. state is finished. Most of the individual states are probably bankrupt, too, but the federal government for sure is. When the market and then the broader public wake up to this fact things will get very interesting. There will be loads of turmoil. But on a longer time scale everybody who loves liberty, prosperity and capitalism should rejoice at this development. Government is the … [Read more...]