“Dead Money” About To Come Alive? Is A Market Sell-Off Imminent? Druckenmiller: The Fed Has Cancelled All Market Signals And Manipulating The Most Important Price In All of Free Markets. It Will End Badly!!
Last week’s release of personal spending data revealed that spending rose 0.2 percent in February, at the same pace as in January.
When adjusted for inflation, though, the data are less encouraging.
In a note to clients, JPMorgan economist Robert Mellman declares that the “consumer spending slowdown is here,” saying consumers are beginning to feel the effects of the payroll tax cut expiry and rising gas prices.
Slowdown in consumer spending has arrived: The first-round effects of the tax increases should mainly affect consumer spending, and the forecast looks for real consumer spending to slow to only 1.0% growth at a seasonally adjusted monthly rate this quarter. This forecast appears to be tracking. Real consumer rose only 0.1% at a seasonally adjusted annualized rate in January following a downward-revised 0.1% increase in December as well.
from Gregory Mannarino:
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Back in the mid-1960’s the popular investment theme was….”buy and hold the “NIFTY 50!” Investors were encouraged to buy & hold 50 quality growth stocks and they would be fine in the years to come! If you bought the Nifty 50 in 1966 what would your portoflio look like by the early 1980’s? Pretty much “Dead Money” and investors would have lost a great deal of capital… plus even more to the high inflation period of the 1970’s!
When even Home Depot’s Ken Langone is questioning the reality of this rally (CEO of one of the best performing stocks since the Dow last traded here), you have to be a little concerned. However, it is Duquesne’s Stanley Druckenmiller’s point that with QE4EVA it is impossible to know when this will end but warns that “all the lobsters are in the pot” now as he notes that “if you print enough money, everything is subsidized – bonds, stocks, real estate.” He dismisses the notion of any sell-off in bonds for the same reason as the Fed is buying $85 bn per month (75-80% all off Treasury issuance). The Fed has cancelled all market signals (whether these are to Congress or market participants) and just as we did in the 1970s, we will find out about all the mal-investments sooner or later. “This is a big, big gamble,” he notes, “manipulating the most important price in all of free markets,” that ends one of only two ways, a mal-investment bust (as we saw in 2007-8) or full debt monetization and “off we go into inflation.”