Are low rates cyclical or structural?

With asset markets selling off across the globe this morning, the multi-trillion dollar question is whether US Treasuries (as a benchmark for other interest rates) are now breaking into a new cycle of higher rates, or whether yields will continue to be capped within a secular low rate theme caused by slow global growth after the credit bust. We are open to either outcome, but it seems most likely that low rates today are a secular theme that will be extended a while longer as the world languishes through this third global recession since 2000. We watch with great interest.


Source: Cory Venable, CMT Venable Park Investment Counsel Inc.

Pimco Co-Chief Investment Officer Bill Gross reacts to Ben Bernanke’s news conference and Fed statement Here is a direct link.

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Copper: a portrait of the boom and bust

This long-term chart of copper reflects the leverage-fueled boom and busts since our secular bear began in 2000. The latest “QE bubble” for copper peaked in 2011 and since then Dr. copper has been beckoning still over-priced stock markets lower towards long-term support levels.
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

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Is the Fed ready to acknowledge it is creating asset bubbles again?

Today the news is all a flutter about what the Federal Reserve may do and say about the path of its aggressive monetary program. Some talking heads are suggesting that the Fed will not pull back because the economy is not looking strong enough. Others are saying that if the Fed does signal a “tapering” that will be a good news confirmation that the economy has achieved some lift of its own. But there is another possible motive that may prompt the Fed to signal a pullback in its reckless herculean intervention: the recognition or fear that their repeated efforts have managed to re-inflate dangerous financial bubbles again just 5 years after the 2008 implosion. And the next big melt down will cost the Fed members their credibility and possibly their jobs.

In a recent market note, famed Nomura Strategist Bob Janjuah pointed out that the last Fed minutes showed signs that some committee members were worrying about the future of the Fed and the U.S. if they persist with treating emergency and highly experimental policy settings as the new normal. Janjuah now believes that a new bear market beginning this year is likely to knock 25-50% off of stock markets that soared on QE speculation.

“It depends on who says what, and on the levels of extreme speculation and leverage. In other words, did we collectively learn our lesson from the events leading up to and including the global 07/08 crash?” Janjuah said. “My 25-plus years in financial markets lead me to believe, sadly, that the answer is almost certainly NO.” See: Here’s the real reason the Fed will taper QE

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