Juggling Dynamite

Danielle was a guest today on Talk Digital Network with Jim Goddard, talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

Merry Christmas.  Here is a dollop of Stephen Roach with that free range turkey.  See:  The Fed sets another trap for some useful perspective on the mess the Fed has made.

Economic barometers oil and copper falling.  Stock prices way up.  Willing buyers low.

S&P forward earnings estimates still high but following oil prices lower.
Rate of decline in forward earnings estimates catching growth bulls by surprise (encore). 2015 looking very interesting…Remember, no one gets it all their way forever.

Sell side commentators are busy assuring us that plunging energy prices are positive for the economy. But then they say that about everything…For a more useful overview of the good, bad and ugly of falling oil prices see Gary Shilling’s, Who gets hurt when oil falls.

The U.S. stock market, while pointing up now, may yet have a negative response to declining energy costs, suggesting that the financial risks from falling oil prices may outweigh the benefits to consumers.

If a full-blown global financial crisis unfolds, along with an accompanying worldwide recession, investment strategy will no doubt shift from the current “risk on” stance to “risk off.” In that scenario, you would expect to see a rush into the safety of Treasury bonds and the U.S. dollar and a stampede out of commodities and stocks globally.

Interestingly, most of this is already in tow. Treasuries are rallying as Americans and foreigners pour in; yields recently hit 2014 lows. The dollar has been robust against the deliberately devalued yen and euro, as well as the currencies of commodity exporters Australia, New Zealand, Canada and Russia. And commodity prices, from oil to copper to sugar, are falling.

Only stocks remain to turn down decisively, and even that could change if oil prices keep sinking.