Are we (The Markets anyway) all slaves to central bankers?
- Thread starter kevsta
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PixyMisa
Persnickety Insect
No.
The Central Scrutinizer
Penultimate Amazing
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This.
The Central Scrutinizer
Penultimate Amazing
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Nutwad sites often disagree with me. I'm quite proud of that.
dafydd
Banned
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You seem to have made your mind up on this one, so a longer response would be of no avail.
kevsta
RBL CHeck Failed
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what is it about the charts you don't understand? maybe I can explain them in simple words?
one is crude oil vs the S&P, the other the S&P with the money printing overlaid, it doesn't really matter where the images are hosted.
I'd be interested in hearing differing opinions if anybody could manage a coherent one.
The Central Scrutinizer
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I invest in businesses, not charts.
Roger Ramjets
Philosopher
Yes, please explain in simple words how those charts prove that:-
1. We are absolutely slaves beholden to Central Banks
2. Markets are not driven by market forces
3. Markets only go up because Fiat currency is continually watered down
4. The FED is borrowing their way to false prosperity
5. Every Central Bank in the world has to devalue their currency
6. Free markets will fight back (against what?) and ultimately they'll win (what?)
kevsta
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yes of course you do, you just wont say which ones
any of these ones from a Goldman Sachs email last Friday?
The Central Scrutinizer
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yes of course you do, you just wont say which ones
Good investors never do. It's no one's business.
Maybe. Maybe not.
Death Blow
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To address one point, there are a number of reasons why central banks inflate the money supply. Here are a few:
1) The Ratchet Effect - The price of labor fluctuates (as any good in the economy), but workers expect only increases in wage (not decreases), so a small amount of inflation (2-3% is usually the target) allows firm operators to change the real wages of their employees (as labor prices fluctuate) without causing much fuss. The alternative typically ends up being layoffs which increase unemployment (especially unattractive in economic downturns).
2) It encourages consumer spending in the short term (which is desirable in an economic downturn).
3) It is believed to help avoid liquidity traps (which again is desirable in an economic downturn).
Central banks don't just inflate the money supply to help pay down government debts or raise nominal GDP without raising real GDP (which would be a nonsensical reason).
To address the video in general, it seems like a lot of people sitting around viciously agreeing with each other and spouting buzzwords while not really knowing what they're talking about. I don't know why you put any stock in this.
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stilicho
Trurl's Electronic Bard
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yes of course you do, you just wont say which ones
any of these ones from a Goldman Sachs email last Friday?
TCS has several times spoken about KO and I've copied drkitten and championed INTC. There are also six good Canadian banks that never fail to post record profits each year. (Sometimes they don't and everyone freaks out because we actually like our banks here in Canada). I am not saying that's precisely what TCS invests in but it wouldn't surprise me.
On the other hand, we have swarms of gold-bugs and Keen-onomists who apparently "invest" in the hopeless dream of a New Gold Order. Give it up.
BTW: Both Procter & Gamble and FedEx will outperform over the next two quarters. It's amusing that your source misspells "Procter & Gamble" so I'd say that's a fail right there.
stilicho
Trurl's Electronic Bard
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Wow, you're asking a lot. The simplest word that kevsta will provide is "gold".
As we all know, from the historical record, gold is utterly immune to market forces or price manipulation. As soon as we find out where the Jews buried it, that is.
psionl0
Skeptical about skeptics
No doubt, you will continue to shout "anti-semitism" right up until the "great reset" and afterwards, you will say that "anti-semitism" was the cause of the "great reset".
kevsta
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firstly, did you watch the video, or do you only half know what we're talking about? I ask because you only mention the six quotes worth approx 12 seconds of the 4minutes and 4 seconds clip? (in fact you would only know less than 1/20th of what you're talking about)
the "we" as per the title refers to investors and the market as per the title. In the "new normal" as per chart 1, it is plain to see the relationship between ZIRP, stimulus (or threat/hint) of and the stock market.
ZIRP distorts price and valuation across all asset classes, and encourages speculation (carry) in areas that would not otherwise be viable.
in the new normal, this fine "recovery" we find ourselves in, investors are forced to basically choose between the prospect of continual money printing (risk on) and impending deflationary collapse episodes (risk off)
this is driven almost entirely by what central banks say, do, or say they are going to do, the market lunges up and down like a crack addict being offered and then denied their next hit continually.
of course market forces are present at all times, however there is no doubt that the primary driver of direction is what the Bernank and his European counterparts say or do on a daily basis.
another part of the interview mentions the divergence between "non-protected" asset classes and equities which it is common knowledge the Bernank is trying to pump for feel-good-borrowy-spendy factor. (chart2)
have another chart from the WSJ
the relationship between price and CB expansion has not exactly gotten better since 2009 (chart 1)
ftfy
ok, exaggeration, not every, only every major CB in the developed world, barring those countries with no economic headwinds or debt problems.
yes, you're right, there's loads excluded, aren't there
against CB manipulation, ultimately, as always, it will be "squish like grape"
the "we" as per the title refers to investors and the market as per the title. In the "new normal" as per chart 1, it is plain to see the relationship between ZIRP, stimulus (or threat/hint) of and the stock market.
ZIRP distorts price and valuation across all asset classes, and encourages speculation (carry) in areas that would not otherwise be viable.
in the new normal, this fine "recovery" we find ourselves in, investors are forced to basically choose between the prospect of continual money printing (risk on) and impending deflationary collapse episodes (risk off)
this is driven almost entirely by what central banks say, do, or say they are going to do, the market lunges up and down like a crack addict being offered and then denied their next hit continually.
of course market forces are present at all times, however there is no doubt that the primary driver of direction is what the Bernank and his European counterparts say or do on a daily basis.
another part of the interview mentions the divergence between "non-protected" asset classes and equities which it is common knowledge the Bernank is trying to pump for feel-good-borrowy-spendy factor. (chart2)
have another chart from the WSJ
the relationship between price and CB expansion has not exactly gotten better since 2009 (chart 1)
ftfy
ok, exaggeration, not every, only every major CB in the developed world, barring those countries with no economic headwinds or debt problems.
yes, you're right, there's loads excluded, aren't there
against CB manipulation, ultimately, as always, it will be "squish like grape"
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kevsta
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no offence but I have zero interest in what would and wouldn't surprise you. and which 6 banks, for the record? it will be interesting to see the progression over the next couple of years.
are you betting on this in any way or is it just opinion?
source - David Kostin Goldman Sachs
I expect he'd appreciate a note pointing out his typo
kevsta
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BIS chimes in
how certain are you of this? GDP is a pretty nonsensical measurement anyway, and CBs certainly are inflating their balance sheets without raising real economic production
...often to buy crappy assets that are now decomposing on their balances sheets—”roughly 30% of global GDP.”
if this isn't attempting to "print your way to prosperity" I don't really know what is?
Death Blow said:
how certain are you of this? GDP is a pretty nonsensical measurement anyway, and CBs certainly are inflating their balance sheets without raising real economic production
...often to buy crappy assets that are now decomposing on their balances sheets—”roughly 30% of global GDP.”
if this isn't attempting to "print your way to prosperity" I don't really know what is?
psionl0
Skeptical about skeptics
Don't forget that the central banks' hands are tied by the reckless government borrowings. If these banks didn't turn on the printing presses the interest rates would have soared through the roof and choked businesses to death.