Juggling Dynamite

Day after day, even the most polite company–even those who like to play along with the establishment–are having to admit what is glaringly obvious: the world’s QE Emperors are naked. This piece from the ECRI is the latest: Grand experiments are too big to fail.

“…after years of ZIRP and QE attempting to pull demand forward from the future, central banks are increasingly powerless when it comes to the economy itself. They can “print” money, but not economic growth. The world is watching, so those who are thought to walk on water cannot afford to be seen to have feet of clay.

If U.S. growth keeps slowing this year, recession risk will rise, and the Fed will likely revisit ZIRP, in one way or another. The failure of Abenomics is not inevitable, but appears increasingly probable. And while China is not yet facing a hard landing, growth continues to slow, raising legitimate concerns about its leaders’ capability to avoid one.

By clinging to unrealistic growth expectations, the economic establishment has effectively bet everything on the success of these grand experiments, and the risk of losing that bet is rising inexorably. Ultimately, only policies that genuinely address the challenges of demographics and productivity have a chance to succeed. It is high time for that discussion to begin.”

An aging and indebted world spending less, and a soaring greenback, have taken both boots to multinational sales and earnings trends since 2011. While stock prices always recognize such realities eventually, this cycle central banks have managed to inspire an unusually long period of willful blindness among participants.

Down just 11% since last July, the S&P 500 has levitated in a world of HFT dreaming even as other global markets have increasingly hit the skids. Far from getting off easy however, the S&P 500 now has the distinction of being one of the most precariously perched markets in the world today.   This chart of sales growth (in blue) versus the price of the S&P (in black) since 2000 paints the picture well.  See: Earnings take a dark turn as profits warnings, sales misses mount.

And of course, as shown next below, all the borrowing/buy back tricks the past 4 years, have only made the overshoot in share prices (black) versus earnings growth (in blue) even worse.

Trying to stop people from using solar energy for their own empowerment and financial betterment is a fool’s game that will serve to drive more families and businesses off conventional grids and on to self-sufficient home stored power systems.  Utility companies can either embrace evolution or be increasingly rendered superfluous. See this Bloomberg article:  Musk vs Buffett: who owns the sun.

First, NV Energy deployed its lobbyists to limit the total amount of energy homeowners and small businesses were allowed to generate to 3 percent of peak capacity for all utilities. Then it expertly argued its case before regulators, who rewrote the rules for net-metering customers. In December it scored a major win: Nevada’s Public Utilities Commission (PUC) imposed rules that not only make it more expensive to go solar, but also make it uneconomical for those who’ve already signed up. Similar regulatory skirmishes are playing out in dozens of other states, but no other has gone as far as Nevada to undermine homeowners who’ve already installed solar arrays.

All this has enraged independent, free-market, and environmentally conscious Nevadans:…“If it goes totally haywire, I’m going to look at batteries,” he says. “I’d love to just go off the grid totally, and tell them to f— off.”