“We Frontloaded A Tremendous Market Rally” Former Fed President Admits, Warns “No Ammo Left”

“We frontloaded a tremendous Market Rally”

US stock prices have been inflated far above fundamental valuation

ISM manufacturing has now fallen below 50 for 2 months in a row.

Factory orders signal US economy in a recession.

 Gap between sales and inventories continues to widen to new record levels

No easy why out of the bank driven credit system

Investors need to focus on the risks to the banks once again

The Tragicomedy of the self defeating monetary policy of the Fed

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“We frontloaded a tremendous Market Rally”

Just in case it was not clear already, and apparently to most investors it still is not, the Fed has massively inflated stock prices in recent years. This comes out of an unsubstantiated “wealth effect” theory, that clearly can not be sustainable.

Richard Fisher was in the Fed meetings when they decided to elevate stock markets. His recent statements this week on CNBC should have removed any doubt about the Fed’s involvement in market engineering.

http://www.zerohedge.com/news/2016-01-05/we-frontloaded-tremendous-market-rally-former-fed-president-admits-warns-no-ammo-lef

 

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US stock prices have been inflated far above fundamental valuation 

We know that US stock prices have been inflated far above fundamental valuation over the last three years for 4 reasons we have described before:

1. GAAP earnings on the S&P 500 have been flat for 3 years and have now fallen for 2 quarters in a row.

2. S&P 500 revenues have been flat for 3 years and have now fallen for 3 quarters in a row.

3. Nominal GDP growth has continued to decline and has just fallen below 3% for the first time since the 1930s depression.

4. Real GDP has continued to decline and is ending 2015 very weak according to the most accurate forecaster who is a part of the Federal Reserve itself?

0116GDPnow0.7

 

 

 

 

 

 

 

 

 

 

 

ISM manufacturing has now fallen below 50 for 2 months in a row.

If that is still not enough the data out this week showed that ISM manufacturing has now fallen below 50 for 2 months in a row.

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Factory orders signal US economy in a recession.

No surprise as factory orders have never dropped this far for so long without the US economy overall being in a recession.

0116factoryorders

 

http://www.zerohedge.com/news/2016-01-06/us-factory-orders-deep-recession-tumble-yoy-13th-month-row

The non- manufacturing ISM is also weakening, hitting the lowest levels since early 2014.

http://www.zerohedge.com/news/2016-01-06/un-de-coupled-us-services-economy-tumbles-weakest-year-follows-manufacturing

 Gap between sales and inventories continues to widen to new record levels

The accelerating gap between sales and inventories continues to widen to new record levels, suggesting that industrial production will be very weak for some time into the future.

 

https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-inventory-overhang-looms-larger

Hedgeye are now calling for a US recession this year, and most of the accurate forecasters I follow are corroborating that, at the least, the risks of a recession have risen significantly for this year.

Even JPM is mentioning what we have shown before about the dangers being signaled by the credit markets.

http://www.zerohedge.com/news/2016-01-04/best-leading-indicator-recession-flashing-red-jpmorgan-warns

no easy why out of the bank driven credit system

According to Mckinsey there is even more debt this time around than there was in 2008!

http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging?cid=other-eml-ttn-mip-mck-oth-1512

Charles Hugh Smith explains why there is now no easy why out of the bank driven credit system.

http://www.oftwominds.com/blogjan16/debt1-16.html

Investors need to focus on the risks to the banks once again

If so investors need to focus on the risks to the banks once again. This could be even more devastating for depositors this time around than it was in 2008. Please pay attention!

 

 

Sovereign Man is also emphasizing that depositors need to take extra care at the current time. They advise making sure that depositors keep sufficient cash in hand.

https://www.sovereignman.com/trends/why-you-need-to-have-physical-cash-now-18523/

The Tragicomedy of the self defeating monetary policy of the Fed

The Tragicomedy of the self defeating monetary policy of the Fed just seems to deepen every week. In addition to the obvious failure of their models, both in terms of their ability to forecast as well as their intellectual premises, here is another perspective which strongly argues that the Fed’s policies are part of the problem not the solution.

http://www.zerohedge.com/news/2016-01-04/tragicomedy-self-defeating-monetary-policy

Unfortunately, there is still no sign that the Fed is rethinking its approach, so all the problems they have created are continuing to compound even as the economy continues to weaken.

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