Monday, October 28, 2013

Miscellaneous Monday

I've had a couple of interesting things hanging around for the past week so this seems like as good a time as any to share them.

The volume of bad news now piling up is just relentless, but the only thing more relentless is the upward march of stocks.  When investors that control enormous pension funds start telling me (as they did last week) that "Hey, if we get a few more good years of 15-20% jumps, we'll be in good shape" you know that the complacency is really setting in.

I love this quote which sums up everything I've been trying to say for the past 2 years - "Asset prices are higher than they should be based on fundamentals. Companies are making profits, but they're not making profits off of higher sales -- they're making profits off of constraining costs and particularly labor."

I'm more and more convinced that there is no exit plan for the Fed. They hinted at cutting back their QE3 from $85 billion to $70 billion a month and stocks fell 10% this summer and everyone panicked. How, in the world can they wind down to $0 in the next 6-9 mths? Stocks can't fall with the Fed in the market and the Fed can't leave the market for fear that a decline in stocks will cause another "crisis". Their plan has successfully increased asset prices, but to what end? If the end goal was to stimulate lending and growth, that has not occurred in any meaningful way. In much the same way that the White House claims not to have known about our spying on foreign leaders, I'm not sure the Fed understands the ramification of their actions.

Stat of the day:

"In 2010, the top 1 percent the US population accounted for 21.4 percent of total expenditures with an annual mean expenditure of $87,570. 

The lower 50 percent of the population ranked by their expenditures accounted for only 2.9 percent and 2.8 percent of the total for 2009 and 2010 respectively."


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