[Home] [Headlines] [Latest Articles] [Latest Comments] [Post] [Sign-in] [Mail] [Setup] [Help]
Status: Not Logged In; Sign In
|
Business/Finance See other Business/Finance Articles Title: Fed’s Yellen Sees No Bubbles … But I’ve Seen Them All Over Fed’s Yellen Sees No Bubbles … But I’ve Seen Them All Over Mike Larson | Friday, April 8, 2016 at 4:30 pm Last night was a monumental one, at least for those of us students of monetary policy. Current Federal Reserve Chairman Janet Yellen joined former Chairmen Ben Bernanke, Alan Greenspan and Paul Volcker at a panel discussion in New York. It was held at the International House (with Greenspan chiming in via video connection), the first such gathering since the celebration in 2013 of the Fed’s founding 100 years earlier. There was the usual happy talk about unemployment, long-term growth, and the Fed’s plan to only raise rates gradually. That’s the same thing we’ve heard lately in speech after speech and interview after interview. But what I found more interesting was Yellen’s flat-out denial of financial excesses, including her argument that this is “not a bubble economy.” Bernanke also downplayed any talk of economic and credit cycles, saying expansions don’t die of old age. He added that he doesn’t “see any particular reason to believe a recession is any more likely in 2016 than it was in 2015 or 2014.” Greenspan and Volcker discuss the economy in a file photo. I could easily point out how truly ridiculous Bernanke’s argument was that the mortgage crisis was “well-contained” back in the mid-2000s. Or I could note that Greenspan only saw limited “froth” when he was at the helm. Those predictions failed spectacularly. But what’s more important for the here and now is that the easy-money cycle from 2009-15 has inflated TONS of bubbles. They’re not hard to spot at all. Indeed, as I noted in December when the Fed first hiked interest rates, “We’ve had a massive, easy-money-fueled rally in almost every asset on the planet.” Technology-sector unicorns. High-yield junk bonds. Debt-funded stock buybacks. IPOs of high-risk companies. Trillions of dollars of negative-yielding government bonds. An auto leasing boom and auto sales boom fueled by the riskiest lending in history. Commercial real estate (again). The list of wild excesses and risky behavior financed by the biggest flood of cheap, easy money in world history goes on and on. As for the economic and credit cycles, they’re no figment of my imagination. They are consistent, powerful forces that drive virtually every market move in history. Bernanke may think the economy can keep growing forever, despite multiple signs that credit is getting tighter and that growth is falling. But fund managers with $600 billion on the line disagree , and I do too. You can already see signs of weakness in everything from retail spending durable goods orders to auto sales. As a matter of fact, lousy inventory figures released this morning drove the Atlanta Fed’s “GDP Now” prediction of first-quarter growth even lower. It dropped to 0.1%, a massive cut from an estimate of around 2.7% several weeks ago. The economy may even have SHRUNK in the first three months of 2016 – something hardly any of the highly paid cadre of Ivory Tower economists on Wall Street (not to mention the Fed) saw coming. “Don’t look to this Fed leader, or her predecessors, for truth-talking about bubbles or the economy.” My advice? Don’t look to this Fed leader, or her predecessors, for truth-talking about bubbles or the economy. Follow the guidance of independent analysts with no ax to grind. Also make sure continue to stick with the investment strategies that I believe will work best in this environment. I highlighted several of them in my morning column today. One last thing: A potential “escape valve” for investors looking for protection and profit is gold. I don’t think it’s any coincidence that gold just notched its best quarter in decades at the same time several panicky central bank policy steps backfired. Nor do I think it’s a fluke that the Market Vectors Gold Miners ETF (GDX) … a diversified collection of mining stocks … just hit its highest level in 14 months today. I went into more detail about what’s driving gold, and where it’s likely to head next, in a timely, information-packed webinar on Monday. If you missed the session, called “The Next Phase for Gold, and How to Profit From It,” you can watch it in its entirety online here. I may be biased. But I think it’s worth your while to watch. Now, I’d love to hear your thoughts on the Fed-head confab in New York. Are Yellen and Bernanke correct, and the economy in good shape with nary a bubble in sight? Or are burst bubbles and recession major threats to the economy and the market? What do you think of the plunging GDP estimates? Or the Fed’s forecasting track record? Hit up the discussion section and let me know. Poster Comment: The economy is not a pin cushion. Links in text at source. Post Comment Private Reply Ignore Thread
|
||
|
[Home]
[Headlines]
[Latest Articles]
[Latest Comments]
[Post]
[Sign-in]
[Mail]
[Setup]
[Help]
|
||