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Business/Finance See other Business/Finance Articles Title: Yen Soars, Stocks & Bonds Go Bonkers as Central Bankers Lose Control Yen Soars, Stocks & Bonds Go Bonkers as Central Bankers Lose Control Mike Larson | Wednesday, February 3, 2016 at 4:20 pm The illusion of control. Can we all admit that’s what it was now? After all, does it make sense to anyone that a handful of unelected bureaucrats and economists … holed up in gilded conference rooms in Washington, Frankfurt, Tokyo or anywhere else … could artificially prop up markets and economies forever? Sure, they could goose asset prices for periods of time. Sure, they could temporarily inflate a handful of credit-sensitive sectors. But when you think about it, the massive amounts of easy money pumped into global markets, the negative interest rates proliferating in more and more countries, and the impoverization of savers worldwide didn’t change the underlying problems faced by our economy or anyone else’s. They just papered over the problem. Worse, those measures ensured we would remain caught in the boom/bust credit-cycle trap that has plagued the economy since the late 1990s. And arguably, this last bout of aggressive policy measures created the biggest batch of bubbles yet: In junk bonds. Emerging-market bonds and stocks. Commercial real estate. Mergers and acquisitions. Stock buybacks. Initial public offerings. Artwork, collectibles, and trophy Manhattan condos. The list of wildly inflated assets goes on and on. The ‘stress points’ in the markets are increasing. But with each passing day, it becomes clearer that central bankers are losing whatever control they had — a trend I warned was coming all the way back in July 2015. Take the Japanese yen. The Bank of Japan managed to crush its value on Friday by cutting one key benchmark rate into negative territory. But a mere three trading days later, that entire move has been vaporized. The yen soared today as investors came to appreciate the BOJ’s “bazooka” is nothing more than a pea-shooter. Or how about the bond market? I flagged the weakness in Treasury yields and the surge in Treasury prices yesterday, and those trends gathered even more steam earlier today. The 5-year Treasury yield sank as low as 1.2%, threatening the original upside breakout level that dates all the way back to the summer of 2013. As for stocks, all the “stress point” names I’ve been monitoring and warning about — banks, real estate, you name it — swung all over the map. “Central bankers are throwing new measures out there more and more frequently.” The Financial Select Sector SPDR Fund (XLF) of major banks, brokers, and insurers briefly took out the low from a week and a half ago, while major European financials cratered across the board. The XLF is now down almost 14% year-to-date. The First Trust NASDAQ Global Auto Index Fund (CARZ) just sank to its lowest level since April 2013 (excluding the August 24 crash day), putting its YTD losses at a shocking 16%. I think part of it is that central bankers are throwing new measures out there more and more frequently. They’re also hitting the speaking circuit almost every day, trying to “clarify” how markets should interpret and react to what they’re doing. To me, that smacks of panic. Another reason for the loss of control? The markets know this stuff doesn’t work. Inflation breakeven rates. Treasury-yield spreads. Commodity prices. High-risk bond prices. Currencies. The economic data, itself. They’re all signaling a global economy that’s facing a widespread downturn and widespread deflationary pressures … DESPITE six-plus-years of so-called “stimulus.” Just today, we saw job growth decelerate to 205,000 in January from 267,000 a month earlier, according to the ADP Research Institute. That’s still a decent number, but other forward-looking indicators are in much worse shape. We also learned that the Institute for Supply Management’s service sector index dropped to 53.5 in January from 55.8 a month earlier. Not only did that miss economist forecasts, but it was also the worst reading in 23 months. The ISM’s manufacturing index is mired at six-and-a-half-year lows. Bottom line: Wild volatility and crazy swings in everything from stocks to bonds to currencies make it abundantly clear that the illusion of market control is getting thrown out the window. That means you simply must take steps to adjust your portfolios, and protect your wealth – before it’s too late! Subscribers to Safe Money Report have been prepared and positioned for this kind of chaos since last summer. In the meantime, what do you make of this cross-market volatility? Is the world spinning off its axis? Or is this just a temporary bout of madness that central bankers will succeed in tamping down very soon? What about the economic data? Do they confirm the U.S. is heading toward recession … or do they just indicate a short-term blip in the economic expansion? Hit up the comment section and share your insights. Poster Comment: It is impossible to prop up markets forever. Do they think we are stupid? We keep falling for it anyway. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: BTP Holdings (#0)
"It does not take a majority to prevail, but rather an irate, tireless minority, keen on setting brush fires of freedom in the minds of men." -- Samuel Adams (1722-1803)‡ "Resistance to tyrants is obedience to God." -- Thomas Jefferson
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