Juggling Dynamite

China’s banks shouldn’t breathe sigh of relief. Here is a direct video link.

I disagree with his praise for Bernanke as a savior, as it ignores the reality that Bernanke was a member of the Greenspan-led Fed that helped inflate the very stock and housing market bubbles that he then had to “rescue” us from. But Bob Shiller offers some rare value in his humble measurements and honest admissions in this clip:

“Well, we have always had recessions, they come every 5 years or so and the last one ended in 2009, these things happen and economists are not very good at predicting them, they only start predicting them when they are actually happening…but I wouldn’t be at all surprised if we had another recession in the next year or two…that’s just par for the course.”

As a footnote as to why these facts are so critical to understand and prepare for, not only do recessions bring job losses, business losses and unexpected spending deficits, but stock and commodity markets typically lose 25-50% of their value heading into recessions. By the time the mainstream gets round to acknowledging the presence of a recession, the capital devastation is already largely done.

Thanks for the honesty Bob… Robert Shiller, a professor at Yale University and co-creator of the S&P/Case-Shiller home-price index, talks about the U.S. housing market. Here is a direct video link.

US Q1 GDP came in revised to 1.8% from previous dreams estimates of 2.4%. Stock algos are so far roaring out of the gate on the excited expectation that weakening growth and plunging capex and personal consumption expenditures will prompt still more and even more “QE” from the Federal Reserve. (Recall that the sequester cuts only hit in the last month of that first quarter, so Q2 GDP numbers will reflect a greater drag than Q1).

The US dollar, bonds and precious metals do not seem to agree however, as gold and silver continue to plunge (down a further 3 and 4% this morning) while bonds and the US dollar are catching a bid. In past episodes of QE hopium, bonds and the U$ sold off, while precious metals climbed…either this time is different, or the HFT algos are getting ahead of themselves again…

On a related note, I see that a group led by Royal Bank and 5 other partners has announced plans for a new stock exchange in Canada aimed at restricting the HFT abuse that has driven legitimate investors out of major markets over the past 4 years.

“Aequitas will compete with the largest stock market in Canada by bringing individual investors back into the market, Nick Thadaney, CEO of ITG Canada, said in a phone interview.

“The fastest marketplace in the world does nothing for long-term investors,” Thadaney said. “Someone who holds a stock for 12 seconds is not a real investor. If you feel the game is rigged and the market isn’t fair, you won’t want to play.”

Thadaney said Aequitas may try to thwart high-frequency firms by avoiding a pricing system used on many venues that pays rebates to traders for supplying bids and offers to buy and sell. Critics of electronic markets sometimes point to this practice, known as maker-taker, as encouraging excesses such as rapid-fire buying and selling of stocks.” See: Royal Bank takes on rivals

A business model that goes back to serving some legitimate economic function, providing some transparency and fairness to investors? What a concept!