South Korea Chip Exports Dive 21.8%
South Korea exports data for September so far, down 21.8% y/y https://t.co/kZEWHh3Wfc Chips exports were even uglier. This is not the direction the data are supposed to be heading in the global synchronized recovery meme…
— Danielle DiMartino Booth (@DiMartinoBooth) September 23, 2019
Corbyn Mocks Captured Troops
Jeremy Corbyn mocks captured British SAS Troopers & goes on to label their rescue from an Iraqi prison as “lawless” despite the fact both soldiers were facing execution.
Mocking captured British soldiers, that’s normal, right?https://t.co/Vn6MkzKuQw…#Marr #Ridge pic.twitter.com/zOHKYyd56t
— Brexit Tory #IStandWithJKRowling (@_BrexitTory) September 22, 2019
Coming China One Party Crisis
The Coming Crisis of China’s One-Party Regime by Minxin Pei – Project Syndicate “As its grip on power weakens, it will probably attempt to stoke nationalism among its supporters, while intensifying repression of its opponents” #Truth HT @PPGbites https://t.co/DKkZ1n5Ym3
— Danielle DiMartino Booth (@DiMartinoBooth) September 22, 2019
Going Nowhere in Interesting Way
“From a value-focused perspective, the only reason to hold equities here is because their risk-adjusted returns appear likely to exceed bond & T-bill returns at long horizons”
A polite way of saying I expect the SPX to lag T-bills for the next 20 years..https://t.co/45IP7VMCJu
— John P. Hussman, Ph.D. (@hussmanjp) September 22, 2019
Policies, Who Needs Em?
Nobody remembers Hillary’s slogan because Putin erased it from our collective memory
— Stacy Herbert 🇸🇻🚀 (@stacyherbert) September 22, 2019
Saudi Oil
Wait, what? … I thought this was fixed last week.
—-
ARAMCO’S REPAIRS COULD TAKE MONTHS LONGER THAN COMPANY ANTICIPATES –SOURCES
— Jim Bianco (@biancoresearch) September 22, 2019
Reflections on Negative Bank Rates
Danish and Swiss Banks to Charge Customers 0.75% Interest on Large Deposits.
This means 1) deposit flight 2) less money in circulation to finance the economy 3) real economy weakens.
Economy stagnates.
@MishGEA https://t.co/akUWf4M0cM
— Daniel Lacalle (@dlacalle_IA) September 22, 2019
Mike “Mish” Shedlock
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“”From a value-focused perspective, the only reason to hold equities here is because their risk-adjusted returns appear likely to exceed bond & T-bill returns at long horizons”
If this does not fit into the “no shit Sherlock” school of investing then I don’t know what could. Rates on debt are low and falling, especially relative to (real) inflation.
But, it should also be noted that trailing P/E’s of non bank corporations is now at the highest in history except for the dot.com bubble and 9/11 collapse period. Right around 32.5. (overall the forward 12-month P/E ratio for the S&P 500 is 17.0)
P/E is of course the (P)rice you are willing to pay for a share of (E)arnings of a company, and typically through history when making investment decisions you have a choice between debt and the interest that debt pays (renting your money to borrowers) and dividends/capital gains on equities, with the goal of getting the shortest doubling time. Investors who see that doubling time being too long given their risk aversion levels will hold cash, unless they also see inflation as a major future problem, then they are going to go to tangible assets like PM’s and real estate as a hedge, but, most see that as a last resort investing option. (Don’t yell at me, I know you mostly all see PM’s as the only way to go, but then Mish’s readers are not typical, we found our way to him BECAUSE we believe all other forms of investment are now junk).
The fact that debt prices are rising in a historic manner even as yield is cratering to an also historic level (negative rates mean we must now not think of doubling time but halving time) means that investors are betting returns on equities will be even worse. Either that or they are irrational, and according to the efficient-market hypothesis (the hypothesis in financial economics that states that asset prices reflect all available information) that is not possible. A person can be irrational, but not an entire market with millions of investors.
Yet, equities are also rising in defiance of an earnings recession underway, and this would indicate that all long-term yield has been abandoned in favor of short-term capital appreciation, something that all the players know is like musical chairs, betting that when the music stops they can beat everyone else to the chairs, a beggar thy neighbor investing plan that is risky in the extreme.
There are very few solutions to the financial spot we are now in, and just hoping things will get organically better without action is the lie so many tell themselves, the harsh reality is that major depressions do happen (1929-41) and so do world wars which cured that example. Basic human needs have not changed, basic human psychology is also the same, technology has improved, but then the stresses of human need for better technology have never been higher as well.
I guess the debate is really between preppers and non preppers. Preppers think they can isolate themselves in a catastrophic collapse and be entirely self sufficient, that the majority is going to die because the government/society can’t/won’t help them or deliver what is needed to survive. Non preppers say that need itself will force government/society to deliver, ration for the benefit of all.
That is a worthy debate I think. Something to pass the time while we wait for the trigger to the next collapse.
I think the mistake you make here is believing that all actors in the market are largely rational but there are structural issues to consider like: a bond fund manager has to invest in bonds and cannot choose equities just because he thinks they may be better value. In addition many are constrained by how much cash they can hold (3-7%) so it is simply a case of ‘ the money I’ve been allocated has to go somewhere’. The bottom line is that there is a glut of liquidity out there and it cannot earn nothing – it is chasing yield anywhere it can find it. In a world in which liquidity is genuinely scare your theory of a choice between asset classes becomes relevant, but right now any old dog will do.