In the news today…
Last update 12:48, 12 minutes to close DOW down a staggering 358 374 points! We were at 15,300 2 days ago, now we’re down to 14,750? Yikes! Gold is taking a huge hit today, well over 7%. Market is in total retreat today.
From market Watch – There is now growing concern that the ultra-low yield environment will come to an end soon, as the Fed has hinted at a tapering off of bond purchases, leading many investors to reevaluate yield-centric portfolios. While many investors have focused in on the worrying situation brewing in the real estate market, another high yield space, the BDC world, could also be in trouble.
And this proves once again, that a recoverying American economy is a false perception. The economy was being proped up by artificial government spending, much like the credit card economy that helped bring on the Great Recession. Obama’s financial recovery policies have been a total disaster. They have caused the longest recovery period from recession in the history of the United States, much like FDR’s New Deal extended the Great Depression. -Jack
Reuters – The Federal Reserve will eventually stop its $85 billion-a-month bond-buying program, an economic lifeline aimed at getting the country back on its feet after the financial crisis. No one knows when the central bank will start winding down the quantitative easing that has pushed down interest rates, Fed Chairman Ben Bernanke hinted last week that the taps may start running dry sooner rather than later – perhaps as early as this summer. The very thought sent a shiver through world stock and bond markets.
The DOW has lost over 400 points in two days, that’s the shiver part. Obama’s bond buy-back policy has created a massive bond bubble, and at the same time it’s been a bailout bonanza for America’s largest financial institutions who helped to create the real estate bubble, (see derivitives). And just where does the federal reserve get the $85b per month buy bonds? Why they just print the money of course! If it wasn’t for this underlying stagnant economy we would be experiencing hyper-inflation, instead we’ve been flirting with stagflation, a big red flag, an economy killer, suggesting that the worst may be yet to come. We are very close to the bond bubble bursting,,, and if that happens Katie bar the door. -Jack
From Seeking Alpha - Federal Reserve Chairman Ben Bernanke is on the way out the door, but the consequences of the bond bubble that he has helped to create will stay with us for a very, very long time. During Bernanke’s tenure, interest rates on U.S. Treasuries have fallen to record lows. This has enabled the U.S. government to pile up an extraordinary amount of debt. During his tenure we have also seen mortgage rates fall to record lows.
All of this has helped to spur economic activity in the short term, but what happens when interest rates start going back to normal? If the average rate of interest on U.S. government debt rises to just 6%, the U.S. government will suddenly be paying out a trillion dollars a year just in interest on the national debt. And remember, there have been times in the past when the average rate of interest on U.S. government debt has been much higher than that. In addition, when the U.S. government starts having to pay more to borrow money, so will everyone else. What will that do to home sales and car sales? And of course we all remember what happened to adjustable rate mortgages when interest rates started to rise just prior to the last recession.
We have gotten ourselves into a position where the U.S. economy simply cannot afford for interest rates to go up. We have become addicted to the cheap money made available by a grossly distorted financial system, and we have Ben Bernanke to thank for that. The Federal Reserve is at the very heart of the economic problems that we are facing in America, and this time is certainly no exception.
I wrote the comment above response before I read this one. Nuff said. -Jack
From the Telegraph – Two weeks ago, I suggested that the bond market was caught up in a serious bubble and that its potential bursting represented the greatest threat to financial stability. Since then, bond markets here and abroad have indeed been weak. But you ain’t seen nothin’ yet.
True, this isn’t a bubble in the classic sense of markets holding unrealistic expectations (as they did, for instance, during the dotcom boom). It arises as a result of the correct perception of official policy. But the extent of the distortion this has caused in the bond markets is quite remarkable. Roger Bootle
Mercury News – Orchard Supply Hardware Stores, spun off by Sears Holdings less than two years ago, has filed for Chapter 11 bankruptcy protection, partly blaming hefty dividends paid out to its former parent. Rival retailer Lowe’s Companies said it would buy at least 60 of Orchard’s 91 neighborhood hardware and garden stores in California for about $205 million and also assume payables owed to nearly all of Orchard’s suppliers.
Orchard shares were up 22 percent at $2.30 in early trading on Monday. The stock had fallen about 50 percent from early June up to Friday’s close. San Jose-based Orchard said in a court filing that it was carrying a high debt load and that it may not be able to make payments when the first tranche matures in December. The company, which generated revenue of $657 million in fiscal 2012, listed total liabilities of $480.1 million and total assets of $441 million. “The company’s substantial debt due, in part, to significant recapitalization dividends paid to Sears, made it difficult, if not impossible for the company to right itself,” Orchard said.
It was something to watch…I noticed a lot of nervous nellies on the business shows. Baton down the hatches the swells in this administration have created the perfect storm.
3.5 years and counting. Do we need a a replacement at the top in America or what!?!!!!!?
Well there’s no question about that from me. I can’t stand him..if he dropped ove dead (on the golf course naturally) it would ONLY be a bad thing because we would get idiot Joe Biden in as President. Obama is a spendthrift! He’s a reckless liberal who should never have been elected to the Senate let alone President. He’s proven beyond any doubt he is prejudiced, he’s a total partisan and incompetent to boot. It makes me sick to see him and Michelle living it up on the taxpayers dime. How many millions have they spent now on vacations?