Monday, September 22, 2014

Marc Faber: If Economies Around The World Can’t Recover With The Fed & Other Central Banks Pumping Easy Money Into The System, That Would Send A Dire Message

Even after the Dow and the S&P 500 closed at new all-time highs, closely followed contrarian Marc Faber keeps sounding the alarm.
“We have a bubble in everything, everywhere,” the publisher of The Gloom, Boom & Doom Report told CNBC’s “Squawk Box” on Friday. Faber has long argued that the Federal Reserve’s massive asset purchasing programs and near-zero interest rates have inflated stock prices.
The catalyst for a market decline, as he sees it, could be a “raise in interest rates, not engineered by the Fed,” referring an increase in bond yields.

FT’s Wolf: Future Financial Crisis ‘Inevitable’
The global financial system hasn’t improved enough since the 2008 financial crisis to prevent another one, says Martin Wolf, chief economics commentator of the Financial Times.
“We really didn’t change our situation profoundly,” he told Yahoo. “We still rely strongly for growth on demand generated by further accumulation of debt. So the debt machine will have to be restarted.”
And that machine is a flawed instrument, Wolf said. “It depends on the creation of money and credit by financial institutions that are highly leveraged, highly integrated with one another and very complex,” he said.
Is that trader next to you flashing a sell sign?

“Okay thanks,” I said as I hung up. Then I said to myself — did he just say for sale?
I quickly called back and confirmed that in fact he did say for sale.
So I screamed, “I BUY.”
Proof “Deflation” is taking place at the Fed
In your opinion, does the Fed prefer “Inflation or Deflation?” The picture above proves that Deflation is taking place at the Fed.
On a more serious note regarding the Inflation/Deflation theme, many feel the Fed’s policies will lead to strong inflation. From a stock market persective, inflation is taking place, as the Dow and S&P 500 are at/near all-time highs.
Another asset class can’t say the same thing…see chart below
The Thompson Reuters Commodity Index a few months ago broke below a 13-year support line (left chart), then rallied to kiss old support as resistance and has fallen hard since.
On a shorter term basis (right chart) the index could be breaking support of this bearish descending triangle pattern.
I suspect that the Fed would rather fight excess inflation over deflation. In reality, none of has much control over inflation/deflation, other than we can make adjustments to our portfolios.
A further breakdown of support in the right chart would suggest that lower prices in commodities will be the trend. Understanding this trend could be important as Gold & Silver could be breaking 13-year support and Crude Oil is testing a 5-year support line.
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