Blame Bernanke! Blame of the Bank of Japan! Just don’t enjoy Dow 15,000.
Yesterday we pointed out that on the occasion of the Dow hitting 15,000, it was still clear that people still detested this stock market rally, based on the fact that everyone screams “RIGGED” or “PONZI” or “BERNANKE” on every uptick.
But it’s not just mouth-breathing comment-section trolls who do this.
The pros do too.
Josh Brown notes in a tweet:
— Downtown Josh Brown (@ReformedBroker) May 8, 2013
Indeed. So far at a conference devoted to investment ideas, it’s been obscure calls, and anger towards policy-makers. Singer hates the Fed. Kyle Bass hates Japanese policy-makers. Sill nobody is happy or enjoying the good times.
Ultimately he says, with regards to Abenomics, is that country is a Ponzi on top of a Ponzi. He says the country is on “tilt” and he added “You have to be sh**ing me.”
The question is when, and that moves to “qualitative aspects,” he added. What does that mean?
There’s a fatalism, he says, in everyone he talks to in Japan. Their thinking is changing, and the way they talk to him about debt is changing. They already spend 50% of tax revenue on debt service.
“If rates go up, it’s game over.”
As the Dow and the S&P 500 make new record highs, other global equities are also enjoying a run to the upside. Yet, many of these economies have little to no economic growth, government debt is rising and in some cases unemployment has hit record highs. Since when do equities rise in the face of dismal economic conditions? The answer is clear. It has happened ever since the US Federal Reserve as well as the other major banks have been printing more money. In other words the prices of global equities are been artificially propped up by this intervention by these central banks.
At the same time, these bankers have managed to supress the price of gold creating the illusion that it is good to invest in equities. After all, bonds yield almost nothing, and owning gold offers no return or any capital appreciation. And, having cash in a bank will simply result in depreciation of purchasing power. In other words, people around the world are being carefully manipulated into buying equities….
A panel of bankers warned the Fed in February that their extreme monetary policy is forcing institutions to “accept greater credit-risk” than “makes sense” and student debt and farmland prices are in a bubble. We first started to explain the bubble in student debt over two years ago and since then the bubble has become larger (and the underlying structure much more fragile as delinquencies soar). Farmland rose in price over 16% last year (according to the Chicago Fed) and has surged 8% per annum over the past decade. Credit risk is now at levels associated with the CDO-driven liquidity excess of 2006. “Further accommodation is not warranted,” the minutes of this meeting show - uncovered by Bloomberg via the FOIA. The comments should cause Bernanke and his merry men to pause for breath but of course it is likely what he wanted all along. “Growth in student debt… has parallels to the housing crisis,” and “agricultural land prices are veering further from what makes sense,” are just two of the bankers’ comments, adding that this “will ultimately result in higher loan losses,” which is odd since every bank is adjusting down its loan-loss-reserves and juicing earnings.
The credit bubble…
Gross: Central bank credit & hope for real growth drive risk markets. Both must continue to support current prices.
— PIMCO (@PIMCO) May 8, 2013
Singer made the point that quantitative easing has caused a “distorted recovery.”
He explained that this means people who own stocks and bonds — financiers, bankers, hedge funds— are doing fine.
“Most of the people in this room are doing just fine,” Singer said, adding, “The ordinary person is not experiencing the effective equivalent of Dow Jones 15,000….the average person is paying a lot of money…for the necessities of life is worried about his or her job or the job of his or her family…is experiencing an economy that has basically recession level employment.”
This distortion is helping to fuel class warfare, he added.
“I think that’s a poisonous atmosphere in which to rely upon the private sector to generate growth,” he said.
He concluded that he sees no “safe haven” in investing.
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