Recovery Summer VII

[Smaulgld]

As the U.S. economy continues to decelerate, the Fed and main stream financial media continue to insist the slow down is “transitory” and weather related.


This week’s podcast discusses the absurdity of the wishful economic thinking that predominates among policy makers their media mouthpieces.

https://smaulgld.com/recovery-summer...-june-21-2015/

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[Madison320]

[B]As the U.S. economy continues to decelerate, the Fed and main stream financial media continue to insist the slow down is “transitory” and weather related.

I've never heard them give an actual reason for the recovery. I can think of lots of reasons why we won't have a recovery. We've borrowed and printed about 12 trillion
and had rates at 0% since 2009. It's impossible to have that much stimulus without negative consequences. Basically you're moving future consumption into the present. Eventually you have to under consume. On top of that we've added Obamacare and steadily moved towards socialism.

[Smaulgld]

Madison
the reasons they give for recovery are
1."robust" labor market as measured by non farm payroll "growth" and declining unemployment rate
Never a mention of declining labor force participation rate among those 25-54
2. Rising real estate prices - but dismal sales
3. Rising stock prices (mostly due to company stock buy backs,central banks purchases and social media and biotech bubble stocks
they tout this as evidence there is a recovery

[willwash]

Where's Zip? He'll straighten it out for you!

[Zippyjuan]

Madison
the reasons they give for recovery are
1."robust" labor market as measured by non farm payroll "growth" and declining unemployment rate
Never a mention of declining labor force participation rate among those 25-54
2. Rising real estate prices - but dismal sales
3. Rising stock prices (mostly due to company stock buy backs,central banks purchases and social media and biotech bubble stocks
they tout this as evidence there is a recovery

Central banks don't own US stocks.

Ah- yes, the Labor Force Participation Rate. More stay at home parents (Moms and Dads) as well as students and retirees. How dramtic has been the decline in that rate (which is actually unchanged over the last two years)? Plus the fact that it has been a trend for 40 years and that was not changed by the economic crisis. It is people who CHOOSE not to work for various reasons.

[Madison320]

Madison
the reasons they give for recovery are
1."robust" labor market as measured by non farm payroll "growth" and declining unemployment rate
Never a mention of declining labor force participation rate among those 25-54
2. Rising real estate prices - but dismal sales
3. Rising stock prices (mostly due to company stock buy backs,central banks purchases and social media and biotech bubble stocks
they tout this as evidence there is a recovery

Right but none of those are future indicators. Suppose a basketball player shoots 50% for his career. If he makes 10 shots in a row, what are the odds that he'll make the next shot? Is he on a hot streak so the odds are higher? Or is he more likely to miss since he needs to come back to his average. That's the kind of data that the "experts" are looking at to predict the future. Just because data is rising doesn't mean it will keep rising. If we elected a free market president and we slashed government spending, removed regulations, then THAT would be a good indicator of future economic growth. But all I see is a steady trend towards more socialism, spending, debt and money printing. I don't see how that's positive for growth in the future. If you own a business, especially a large business, the US is way down on the list of places you'd want to locate to and it's getting worse.

[Smaulgld]

You are correct Madison320,the three legged recovery stool is not indicative of a current or future economy that is healthy

[Smaulgld]

Zippy-central banks DO own stocks


From the Wall Street Journal:

Swiss Central Bank Expands U.S. Stock Holdings

Swiss National Bank Owns Shares in More Than 2,500 American Companies


http://www.wsj.com/articles/SB100014...60360374891986
and they play the futures markets with a special discount from the CME group

Here is some language from the CME group 10K:
Customer Base
Our customer base includes professional traders, financial institutions, institutional and individual investors, major corporations, manufacturers, producers, governments and central banks.
Our revenue is substantially dependent on the contract volume in our markets. Our contract volume is directly affected by domestic and international factors that are beyond our control, including:
•
changes in government monetary policies, especially central bank decisions related to quantitative easing
We believe that intervention by the Japanese central bank to control the yen foreign exchange rate beginning in mid-2011 through 2012 caused market participants to reduce their trading in Japanese yen contracts and to focus on higher yielding currencies, such as the Australian and Canadian dollars.
http://www.sec.gov/Archives/edgar/da...013123110k.htm

[Zippyjuan]

Interesting. I was aware that Japan recently had announced they were buying into their stock market but obviously had not heard about Switzerland. However, the Swiss holdings are very tiny compared to the US stock market- not enough to have any impact on stock prices. Their total holdings are worth about $26 billion as of September. http://www.bloomberg.com/news/articl...art-of-the-day

From the Wall Street Journal:

The Zurich-based bank has used some of the additional currency to buy equities, which represented about 70 billion Swiss francs at the end of 2013. The SNB doesn't reveal the countries in which it holds stocks except for Finland and the U.S., which both require disclosures by large investors.

The Swiss central bank declined to comment on its equities portfolio other than to say its investment strategy follows a broad index of countries.

Analysts said the central bank was unlikely to affect equity markets when it adjusted its holdings.

"The SNB is...a passive investor," said Alessandro Bee, an economist at J. Safra Sarasin in Zurich. "Its buying or selling of individual shares is unlikely to trigger large market moves."

http://www.wsj.com/articles/SB100014...60360374891986

They have 18% of their total foreign currency holdings in equities (not just US equities).

The US Federal Reserve does not buy or own any stocks. Total Swiss foreign currency holdings (including equities) was $480 billion at the end of 2013 (WSJ) of which $26 billion was US stocks in over 2,500 companies.

The US Stock Market as a whole is worth about $18 trillion (as of 2012). https://www.quandl.com/collections/e...ion-by-country

[Smaulgld]

Zippy its not just the SNB-many central banks are heavily invested in the equities markets

This Bloomberg article from 2013 http://www.bloomberg.com/news/articl...ll-bond-yields


This 2014 Marketwatch article talks about "central banks becoming major players in equity markets"
http://www.marketwatch.com/story/cen...ets-2014-06-16

This CNBC article talks about $Trillions and China's central bank involvement in the equities markets
http://www.cnbc.com/id/101762401

and as I mentioned above the CME group give central banks volume discount to play the futures markets where they clearly can influence the markets

[Zippyjuan]

This CNBC article talks about $Trillions and China's central bank involvement in the equities markets
http://www.cnbc.com/id/101762401

Does not say they have $trillions of US stocks. It, for example, says China's holdings are mostly European stocks. Italy's holdings are in Euros which also means European stocks. Japan's purchases have been in their own stock market. Switzerland reports $26 billion in US stock holdings but does not say when they were purchased or over how long a period of time. Total global stocks are valued at about $55 trillion according to one of your links.

The think tank also said the People's Bank of China has been buying "minority stakes in important European companies" in what the OMFIF describes as a "new development".


In Europe, the Italian and Swiss central banks are among those bolstering their equity holdings. Of the $480 billion in Swiss foreign exchange reserves at the end of last year, 15 percent was in equities.

Meanwhile, the Italian bank, Banca d'Italia has gradually built up a 6 percent allocation to equities in its euro-denominated financial portfolio.

The report groups central banks, sovereign funds and public pension funds together as "global public investors". Together they have upped their allocations to shares by at least "$1 trillion in recent years."

Figures also include public pension funds and sovereign funds- not just Central Bank purchases.