The Wall Street Examiner http://wallstreetexaminer.com Get the facts. Sat, 30 Apr 2016 00:52:07 +0000 en-US hourly 1 Why Carl Icahn’s Apple Stock Dump Is a Red Flag for All Investors http://wallstreetexaminer.com/2016/04/carl-icahns-apple-stock-dump-red-flag-investors/ http://wallstreetexaminer.com/2016/04/carl-icahns-apple-stock-dump-red-flag-investors/#respond Fri, 29 Apr 2016 19:57:40 +0000 http://moneymorning.com/?p=216115 The extra slam that Apple stock got from Carl Icahn's surprise announcement that he had dumped all of his AAPL shares proves again why activist investors can be dangerous.

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This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here. Reposted with permission.

The extra slam that Apple stock got from Carl Icahn’s surprise announcement that he had dumped all of his AAPL shares proves again why activist investors can be dangerous.

While many investors believe they can glean actionable tips by following the likes of Carl Icahn, people can never forget that these folks are in the game to maximize their own profit.

A step-by-step deconstruction of what Carl Icahn did to Apple over three years illustrates why we all need to be wary of activist investors…

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The gut punch Carl Icahn delivered to Apple stock on Thursday makes it abundantly clear why activist investors can be hazardous to your portfolio.

When former Apple Inc. (Nasdaq: AAPL) cheerleader Icahn announced in a CNBCinterview that he had unloaded all 45.8 million of his remaining shares, AAPL stock dipped 2.5%.

And that was on top of an awful week for Apple stock that had already sheared 8% from theAAPL stock price. As of midday Friday, Apple stock was trading near $93.

It was a great trade for Carl Icahn, who claimed on CNBC that he made a profit of approximately $2 billion. This is why he’s one of the most famous activist investors in the world.

But the episode illustrates why the Carl Icahns of the world represent a threat to retail investors like you and me…

How Carl Icahn and His Ilk Can Cost You

This is especially true in Icahn’s case, because his reputation gives stock-moving power to his public statements.

The trouble comes when ordinary investors incorporate the statements of heavyweights like Icahn into their investing decisions.

“Studies show that raider activists work their magic over the short term, typically anything from a period of months to right about three years. What everyone needs to understand is that they are usually not aligned with long-term value, let alone your interests as an individual investor,” said Money Morning Chief Investment Strategist Keith Fitz-Gerald.

While activist investors may buy a stock because they truly believe it’s undervalued – or short it because they believe it’s truly a dog – it’s vital to remember they have a vested interest in moving a stock in the direction they want it to go.

To see how tricky this can be, let’s dig into the details of how Carl Icahn created his Apple position, what he did to drive the Apple stock price higher, and the real reasons he sold when he did…

Apple Stock Was a Target Ripe for Carl Icahn

Icahn started to accumulate Apple stock back in August of 2013. That alone was a smart move, as the AAPL stock price had tumbled about 40% from the fall of 2012 to the spring of 2013.

Icahn continued to make large purchases into 2014, at one point buying $1.65 billion worth of Apple stock in one swoop. He eventually accumulated about 53 million shares.

The day Icahn first announced he was buying Apple, the stock spiked about 5%. Initially, he agitated for a stock buyback program. Although he lost a proxy fight in 2013, Apple did launch such a program along with a dividend increase that year.

After that victory, Icahn embarked on a campaign to drive up the AAPL stock price by making the case that it was drastically undervalued.

An open letter to Tim Cook in October 2014 praised Cook’s leadership and Apple’s prospects, not just for the iPhone, but for the iPad, the Mac, the as-yet-unreleased Apple Watch, and even a mythical Apple UltraHD television.

The real point of the letter, however, was to publicize an outlandish $203 Apple stock price target. At the time, AAPL stock was trading at just over $100 a share. The most bullish analyst Apple stock target price was just $139. Suspicious, no?

Why Carl Icahn Put Sky-High Targets on AAPL Stock

Here’s what I wrote on Money Morning that day: “Apple doesn’t need to get anywhere near $203 for Icahn to score huge profits. But more people are likely to buy AAPL when Icahn says it’s really worth $203 than if he says it’s really worth $125. Who doesn’t want to miss out on an opportunity to double their money?”

Icahn’s strategy was obvious. And if there were any doubt, he wrote anotherletter to Cook in May 2015. Like the October letter, it heaped praise on Cook and Apple’s products.

The May letter also included a detailed valuation of Apple stock. But this time, Icahn ludicrously concluded that AAPL shares were worth – ta-da! – $240 a share.

“Corporate activists frequently take their case to the public by ‘talking up their book’ – a derogatory Wall Street term meaning they make public commentary on things intended to increase the value of their own holdings,” Fitz-Gerald said.

apple stock

Apple stock was then trading near its peak, at about $130 a share. Icahn was seeking to milk the trade just a bit more by luring gullible investors into driving the AAPL stock price still higher.

Alas, reality intervened shortly afterward. By mid-summer, Apple stock had begun to fall again.

As it tried to recover in the fall, Icahn tried one last time to wring some extra value out of his trade.

“Apple, even in a bear market – it may get hurt, it may go down – but I think Apple is still ridiculously underpriced,” Icahn said in a Sept. 30 CNBC interview. He added that Apple was “misunderstood by most of Wall Street” and that he was “seriously considering” buying more shares of Apple.

But by then the narrative that the iPhone 6S was failing to sell as well as the iPhone 6 had already taken hold, in addition to concerns about sales in China. Not even Carl Icahn could prop up AAPL stock.

At some point in April, as AAPL stock recovered from the general December-January sell-off, Icahn decided to cash out. Apparently Apple stock isn’t worth $240 a share, after all, eh, Carl?

Icahn’s Excuse for Selling Apple Is Weak

When Icahn returned to CNBC to confess that he’d sold his entire remaining position in Apple stock, the reason he gave was economic weakness in China. It’s unlikely he believes it.

Apple’s horrible earnings report Monday, in which sales in China declined 26%, gives Icahn cover. But he knows this is a bump in the road and that iPhone sales will almost certainly grow in 2017.

“I simply think he couldn’t get what he wanted: more leverage, a short-term boost in share prices based on the financial engineering that would have come with a more aggressive buyback program, and the opportunity for even more ginormous profits. So he hit the road like a five year old taking his toys out of the sandbox because the other kids won’t play with him,” Fitz-Gerald said.

But while Icahn’s strategy was a stunning success, it’s not something retail investors can emulate.

“Corporate activists are not in it because they believe in the goodness of their actions. They’re in it for the profits – pure and simple,” Fitz-Gerald said.

Read the rest of this post Why Carl Icahn’s Apple Stock Dump Is a Red Flag for All Investors  where it appeared first on Money Morning – We Make Investing Profitable.

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Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Gold Prices Will Receive a Boost in 2016 from This International Event http://wallstreetexaminer.com/2016/04/gold-prices-will-receive-boost-2016-international-event/ http://wallstreetexaminer.com/2016/04/gold-prices-will-receive-boost-2016-international-event/#respond Fri, 29 Apr 2016 18:54:30 +0000 http://moneymorning.com/?p=216103 Gold prices have rallied higher this week, nearing their highest level in 15 months.

The gains are all thanks to the U.S. Federal Reserve and U.S. dollar.

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This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here. Reposted with permission.

Despite negative sentiment toward the metal recently, gold prices have seen a huge rally this month.

The biggest drivers for the gold price this past week have been the U.S. Federal Reserve and the U.S. dollar.

We now know the Fed didn’t raise rates at its April meeting but is setting the stage to do so in June.

gold pricesLow interest rates have weighed on the dollar, which supports the price of gold. But as investors brace for a possible June rate hike, the dollar may gain back some strength.

That would likely lower the gold price in the near term, but I expect that to be temporary.

In fact, I’d see that as a great opportunity to invest in this promising sector.

Before we get to that, here’s a recap of the incredible week for gold prices…

Gold Prices Rocket Higher This Week

Once markets opened for the week, the gold price moved higher and never looked back. On Monday, April 25, prices jumped 0.5% to close at $1,238.

The two sessions during the FOMC meeting gave meager gains to gold prices. On Tuesday, gold gained 0.4% to settle at $1,243. The next day, Fed officials announced they would not raise rates – no real surprise – but indicated they’re considering a June rate hike. That pushed the price of gold up 0.2% to $1,246 on the day.

On Thursday, the gold price surged thanks to the declining U.S. Dollar Index (DXY), which dropped below 94. Prices added 1.6% to close at $1,266.

And the gold price today (Friday, April 29) is on track for another session of gains. As of 1:40 p.m., it’s up 2% to $1,292.10 – the highest level in nearly 15 months – while the dollar hovers near 93.18.

But it’s not just the Fed and the dollar moving gold prices today. In fact, there’s one event in the world’s second-largest economy that will move gold prices in 2016

This International Event Will Move Gold Prices in 2016

It’s no secret the price of gold has steadily moved higher since consolidating near $1,220 in late March. That’s when the U.S. Dollar Index peaked around 96.5 and has headed south ever since.

The market was baking in expectations that the Fed wouldn’t hike rates at its April meeting.  And it was right. In fact, the Fed didn’t raise rates, and a June hike is now looking possible but less likely than previously.

I believe that’s what the gold market is sensing and therefore pricing in.

Meanwhile, there’s some big news on the gold front coming out of China…

On April 19, China launched the Shanghai Gold Fix, the country’s own gold exchange that prices the metal in yuan. Some believe it could challenge the centuries-old London gold price fix, currently settled by the London Bullion Market Association (LBMA).

The big – and crucial – difference is the gold fix on the Shanghai Gold Exchange (SGE) requires purchasers of gold futures to deposit physical gold at the exchange. Observers expect this to support SGE pricing, favoring higher levels than in London since contracts are backed by physical metals.

The Shanghai Gold Fix will surely bring increased influence to China with respect to the global gold markets. Being the largest gold producer and importer, a yuan-priced fix will help China have more say.

And with China’s significant position in this market, gold prices are likely to be very positive as we go forward.

 

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Disclaimer: © 2016 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

 

The post Gold Prices Will Receive a Boost in 2016 from This International Event appeared first on Money Morning – We Make Investing Profitable.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Gold Breaks Out Again http://wallstreetexaminer.com/2016/04/gold-breaks-out-again/ http://wallstreetexaminer.com/2016/04/gold-breaks-out-again/#respond Fri, 29 Apr 2016 13:31:22 +0000 http://wallstreetexaminer.com/?p=293783 Gold has surged to an area of multiple resistance lines around 1280. The 9-12 month cycle projection has widened. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition Precious Metals Pro Report risk free for 90 days. Click here for more information or join now! Enter your email address in…

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Gold has surged to an area of multiple resistance lines around 1280. The 9-12 month cycle projection has widened.

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Lebowski Achiever Award: The First President In Modern Times Without 4% Real GDP Growth, But Whopping Debt http://wallstreetexaminer.com/2016/04/lebowski-achiever-award-first-president-modern-times-without-4-real-gdp-growth-whopping-debt/ http://wallstreetexaminer.com/2016/04/lebowski-achiever-award-first-president-modern-times-without-4-real-gdp-growth-whopping-debt/#respond Fri, 29 Apr 2016 13:02:34 +0000 http://confoundedinterest23.wordpress.com/?p=1006 President Obama may go down in history as the only President in modern time to not have a single quarter of real GDP growth of 4% or higher.

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This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

President Obama may go down in history as the only President in modern time to not have a single quarter of real GDP growth of 4% or higher. In fact, there was only one quarter where real GDP growth barely exceeded 3% (Q3, 2010).

And this is in spite of (or because of) the unprecedented zero interest rate policies (ZIRP) of Bernanke and Yellen. Not to mention the enormous fiscal stimulus which helped Q3 2010 real GDP growth barely stagger above 3%.

obamafed

Here is a chart of “Stimulato,” The Federal Reserve’s unprecented intervention into financial markets.

stimulato16

But at least The Federal Reserve was able to blow bubbles — asset bubbles, that is, like the stock and housing market.

bubblesassets

Wage growth has been stagnant since 2009 with real median household income lower in 2014 than it was in 2007, before The Great Recession.

rmincrealgdp

And we have declining labor force participation and homeownership rates.

hownlfp

Of course, regulatory overburden isn’t helping. Under the Obama Administration, around 28,000 new Federal regulations have been added, including the dreaded Consumer Financial Protection Bureau-related governance.

So, between The Federal Reserve’s massive distortion on the financial markets and the wage-crushing policies of the Obama Administration, they should share the sub-4% Real GDP growth award. Or at least a Lebowski Achiever Award.

b0db1030-dfc7-11e4-815c-331c740b8969_big-lebowski-man-of-year-time-mirror-movie-

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Chart Of The Day: Remind Me Again How Low Rates Stimulate Housing http://wallstreetexaminer.com/2016/04/chart-day-remind-low-rates-stimulate-housing/ http://wallstreetexaminer.com/2016/04/chart-day-remind-low-rates-stimulate-housing/#respond Fri, 29 Apr 2016 08:30:19 +0000 http://davidstockmanscontracorner.com/?p=102159 Since the bottom of the housing crash in 2009, the Fed has pushed mortgage rates down by 26%. That has “stimulated” new house sale prices to inflate by 40.4%. At the March 2009 median price of $205,100 and the then current mortgage rate of 5.0%, the monthly payment was $1,101. At the current median price of $288,000…

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This is a syndicated repost courtesy of David Stockman's Contra Corner » Lee Adler. To view original, click here. Reposted with permission.

Since the bottom of the housing crash in 2009, the Fed has pushed mortgage rates down by 26%. That has “stimulated” new house sale prices to inflate by 40.4%. At the March 2009 median price of $205,100 and the then current mortgage rate of 5.0%, the monthly payment was $1,101. At the current median price of $288,000 and the current mortgage rate of 3.69% the monthly payment is $1,324. So remind me again how the Fed’s artificially suppressing mortgage rates stimulates housing demand when the monthly payment is now 20% higher?

New Home Sale Price and Mortgage Rates - Click to enlarge

 

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Cycle Screens Plunge Along With The Market Averages http://wallstreetexaminer.com/2016/04/cycle-screens-plunge-along-market-averages/ http://wallstreetexaminer.com/2016/04/cycle-screens-plunge-along-market-averages/#respond Fri, 29 Apr 2016 03:31:51 +0000 http://wallstreetexaminer.com/?p=293755 Cycle screening data weakened on Thursday. 8 of the 9 measures weakened. The aggregate measure fell back into negative territory after just touching its declining 29 day MA. This makes another lower high in a series going back to early March. The cumulative line also downticked and is on the verge of breaking the 29…

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Cycle screening data weakened on Thursday. 8 of the 9 measures weakened. The aggregate measure fell back into negative territory after just touching its declining 29 day MA. This makes another lower high in a series going back to early March. The cumulative line also downticked and is on the verge of breaking the 29 day MA, which would be an intermediate sell signal.

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Market Breaks A Key Support Level http://wallstreetexaminer.com/2016/04/market-breaks-key-support-level/ http://wallstreetexaminer.com/2016/04/market-breaks-key-support-level/#respond Thu, 28 Apr 2016 23:19:27 +0000 http://wallstreetexaminer.com/?p=293699 The customary Fed policy resubstantiation rally did not materialize. The market broke trend support but faces more. Daily Market Update Pro subscribers (Professional Edition), click here to download complete report in pdf format. The end of week report is available to Weekly Market Update subscribers. Click here to find the latest weekly report. Not yet a…

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The customary Fed policy resubstantiation rally did not materialize. The market broke trend support but faces more.

Daily Market Update Pro subscribers (Professional Edition), click here to download complete report in pdf format.

The end of week report is available to Weekly Market Update subscribers. Click here to find the latest weekly report.

Not yet a subscriber? Try the Market Update Pro risk free for 90 days If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Start your risk free subscription now and get instant access.

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Enter your email address in the form to receive email notification when Professional Edition reports are posted.

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What Comes Next——Krugman’s Fiscal Equivalent Of War http://wallstreetexaminer.com/2016/04/comes-next-krugmans-fiscal-equivalent-war/ http://wallstreetexaminer.com/2016/04/comes-next-krugmans-fiscal-equivalent-war/#respond Thu, 28 Apr 2016 20:06:56 +0000 http://davidstockmanscontracorner.com/?p=102596 Somebody must have reinstated Paul Krugman’s passport. He was recently back in Japan to meet with the world’s leading economy-wrecking triumvirate —-Prime Minister Abe, BOJ Governor Kuroda and Finance Minister Taro Aso—–to dispense some desperately needed advice. Japan is on the verge of a second recession during Abe’s tenure despite his plunge into full frontal Keynesian stimulus.  But since…

The post What Comes Next——Krugman’s Fiscal Equivalent Of War was originally published at The Wall Street Examiner. Follow the money!

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This is a syndicated repost courtesy of David Stockman's Contra Corner » Stockman’s Corner. To view original, click here. Reposted with permission.

Somebody must have reinstated Paul Krugman’s passport. He was recently back in Japan to meet with the world’s leading economy-wrecking triumvirate —-Prime Minister Abe, BOJ Governor Kuroda and Finance Minister Taro Aso—–to dispense some desperately needed advice.

Japan is on the verge of a second recession during Abe’s tenure despite his plunge into full frontal Keynesian stimulus.  But since March 2013 when Kuroda cranked up the BOJ’s printing press to white heat, two main things have happened. The BOJ’s already bloated balance sheet has exploded by 2X and the flat-lining Japanese economy has continued undulating to nowhere.

Japan Central Bank Balance Sheet

Japan GDP Constant Prices

Professor Krugman was naturally at the ready with a solution. He recommended his hosts take a lesson from the America’s World War II playbook and declare “the fiscal equivalent of war”.

Well, the US actually didn’t borrow its way out of the Great Depression; itsaved its way out. As I documented in The Great Deformation, total public and private debt at the end of 1938 amounted to 210% of GDP, but by the end of 1945 it had dropped to 190% of GDP.

That’s right. The hoary Keynesian mantra about the fiscal stick save of WWII is a complete myth.

What happened is that the US economy was entirely regimented for war mobilization.There were few consumer goods on the shelves and business had no need to borrow for working capital or equipment because financing was supplied by Uncle Sam. So private sector savings soared to nearly 20% of GDP and combined household and business debt dropped from150% of GDP on the eve of war to 60% by the end.

In short, Washington’s great war spending binge between 1941 and 1945 did not prove in the slightest that you can borrow your way to prosperity. Federal debt rose temporarily to 125% of GDP for the last year of the war only because bountiful private savings and the wartime liquidation of business and household debt left massive financial headroom to accommodate Federal borrowing.

Even then, 80% of the entire wartime cost was funded with emergency taxation, which soared to 40% of GDP and net private savings. The Fed’s printing press was used only sparingly.

In any event, the Japanese triumvirate needed no history lessons about the fiscal equivalent of war——-even one where they had been on the receiving end of the alleged borrow and spend. They have already accomplished it, having taken their debt ratio to 230% of GDP or virtually double the peak US war level.

Japan Government Debt to GDP

Moreover, the next chapter is always completely ignored by the Keynesian storytellers. After August 1945, a war-wary nation in American demanded rapid demobilization of the war machine, causing annual Federal outlays to plummet from $95 billion in 1945 to only $37 billion in fiscal 1947. At the same time, the regime of heavy wartime taxes was only modestly reduced, permitting the Federal budget to swing into surplus—where it remained until the Korean War.

In short, the US undertook at massive fiscal swing into surplus within two years of the war’s end, and thereby reduced the public debt ratio from 125% of national income to less than 80% by 1950.

Oh, yes. Notwithstanding all this fiscal contraction, between the beginning of 1947 and the on-set of the Korean War in June 1950 real GDP expanded by 24%!

Needless to say, Japan is pursuing just the opposite game plan. It’s fiscal deficit remains wide open, causing its debt ratio to continue to climb into historically uncharted waters.

At the same time, the BOJ is destroying Japan’s famed savers. Indeed, given Japan’s rapid demographic lunge toward the status of an old age colony, its households should be salting away extra-ordinary amounts of savings, but just the opposite has occurred. By 2015 Japan’s household savings rate, which had been nearly 20% in the early 1980s, had hit the zero bound.

Needless to say, Japan is a lost cause. It is only a matter of time before the triumvirate of madman running its machinery of state blow its financial system sky-high.

Still, it would appear that Professor Krugman’s crackpot preaching is never done. As Lakshman Achuthan describes below, he apparently has persuaded Prime Minister Abe to take the fiscal equivalent of war doctrine to the up-coming G-7 meeting in Japan.

….the “international community must coordinate in the fiscal space and the countries which are able would spend fiscally. … After all, this is off the record, Germany has the greatest space … I will have to … persuade them how they will come along with the policy for further fiscal mobilization.”

At least the idea of carrying coals to New Castle will be given a splendid outing.

 

 

By Lakshman Achuthan at BusinessCycle.com

In the wake of the Bank of Japan (BoJ) decision to stand pat, Japan looks to be in ever more desperate straits, given the growing danger of sliding into its second recession since Abenomics was introduced. Such a recession would be the nail in the coffin of Abenomics, launched with high hopes and much fanfare three years ago. It made sense, therefore, for Prime Minister Shinzo Abe to seek the advice of Paul Krugman, who has been one of the chief cheerleaders for Abenomics, in a private meeting last month meant tolay the groundwork for the G7 Summit at Ise-Shima next month.

Although it was evidently supposed to be confidential, we recently chanced upon a rather revealing transcript of that meeting, which also included BoJ Governor Kuroda and Finance Minister Taro Aso.

Mr. Krugman began by declaring that “we are now in the world of pervasive economic weakness. In many ways, we are all Japan.”

 

Second, he noted “that the linkages among major economies are strong … largely … because of capital flows.”

 

Third, he emphasized “the difficulty in achieving goals through even very bold and unconventional monetary policy.”

 

He concluded “that monetary policy needs help from fiscal and possibly other policies [which] is … very much a global issue at this point.”

Recalling how World War II catapulted the U.S. economy out of the Great Depression, Mr. Aso then emphasized that they were looking for a similar trigger to make entrepreneurs abandon their “deflationary mindset” and “start making capital investments.”

Mr. Krugman responded that they were “looking for ways to achieve something like that without war” – what he subsequently characterized as the “fiscal equivalent of war.”

Then, regarding G7 countries with policy space for fiscal stimulus, he opined that, while Japan and Canada would go along, Germany, the U.S. and the U.K. were unlikely to “implement significant stimulus measures in coming months.”

In Germany’s case, it was “very difficult to make the argument” as “they simply live in a different intellectual universe.”

In the U.S., while President Obama favored major fiscal stimulus, it was not yet politically feasible, but at least, Mr. Krugman said, “we can blunt the push for fiscal consolidation.” Meanwhile, he said, “conventional wisdom [within] the policy community” had been shifting in favor of stimulus, “and it might be possible to move that along.”

Finally, he noted the likelihood that by year-end the U.S. would have a “significantly less obstructionist” legislature.

Around the end of the meeting, Mr. Abe concluded that

the “international community must coordinate in the fiscal space and the countries which are able would spend fiscally. … After all, this is off the record, Germany has the greatest space … I will have to … persuade them how they will come along with the policy for further fiscal mobilization.”

Good luck Mr.Abe

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Death Valley Days: US Homeownership Rate Falls To 63.5% As Home Prices Rise and Wages Stagnate http://wallstreetexaminer.com/2016/04/death-valley-days-us-homeownership-rate-falls-63-5-home-prices-rise-wages-stagnate/ http://wallstreetexaminer.com/2016/04/death-valley-days-us-homeownership-rate-falls-63-5-home-prices-rise-wages-stagnate/#respond Thu, 28 Apr 2016 19:42:05 +0000 http://confoundedinterest23.wordpress.com/?p=1001 The U.S. homeownership rate fell again on a YoY basis in Q1.

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The U.S. homeownership rate fell again on a YoY basis in Q1. That’s now 38 straight quarters, dating to 2006.

The current homeownership rate is now 63.5%, back near 1993 levels.

hownddd

The problem is that home PRICES are rising at a rapid pace, currently 5.38% YoY. Average wage growth YoY is 2.3%.

rentimn

Yes, it is Death Valley Days for America’s Middle Class.

Death_valley_days-1-550x301

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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This Indicator Is Still Flashing A Bear Market Warning http://wallstreetexaminer.com/2016/04/indicator-still-flashing-bear-market-warning/ http://wallstreetexaminer.com/2016/04/indicator-still-flashing-bear-market-warning/#respond Thu, 28 Apr 2016 19:18:11 +0000 https://www.thefelderreport.com/?p=10515 The NYSE just released the margin debt numbers for March and, considering the rally in stocks we’ve seen, it wasn’t much of an uptick. In fact, the nominal level of margin debt remains well below its 12-month average. The 12-month rate of change, which is pretty tightly correlated with stocks’ same rate of change, is also […]

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The NYSE just released the margin debt numbers for March and, considering the rally in stocks we’ve seen, it wasn’t much of an uptick. In fact, the nominal level of margin debt remains well below its 12-month average.

12ma

The 12-month rate of change, which is pretty tightly correlated with stocks’ same rate of change, is also still negative.

12roc

Now this sort of a downtrend in margin debt doesn’t always lead to a bear market but let’s put it into some context. Not only is margin debt now in a downtrend, it’s coming off of the highest absolute (top chart) and relative (chart below) highs ever seen.

MDGDP

And if you think if margin debt as a simple indicator of potential supply and demand for stocks (when borrowing is low there is great potential demand and vice versa), this should have you worried about another bear market. And the statistics bear this out.

When margin debt has reached relative extremes it has been a very good indicator of, in the words of Warren Buffett, broad investor, “fear and greed.” To demonstrate, when financial speculation relative to the overall size of the economy has been very low, forward 3-year returns have been very good and vice versa.

Forecast

What’s important to note today is that margin debt is now in a downtrend and its massive relative size suggests returns over the next 3 years will be very poor. In other words, based solely on this one measure, buying stocks today presents investors with a great deal of risk for very little potential reward.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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