Daily Reckoning - Something odd is happening
"Something very odd appears to be happening on Wall Street
this month," writes James Ferguson in tomorrow's MoneyWeek magazine.
Yes, dear reader, many financial services claim to be able
to provide you with tomorrow's headlines today, but only we
here at The Daily Reckoning can do so. (We peeked at James'
article before it went to press!)
What is odd, says James, is the U.S. bond market. Everyone
knew bonds peaked out last summer. And everyone knew yields
would rise from here to eternity. But recently, that is,
maybe until yesterday, bond yields went down and bond
prices went up - the very opposite of what they were
supposed to do.
What could it mean?
Well, it could be nothing more than "a giant fake-out," as Christopher Wood puts it, caused entirely by Asian and Chinese buying.
Then again, as tomorrow's headline suggests, it could be a
sign that "something evil this way comes."
"The jobless recovery is still largely jobless," James
points out.
"If the economy can't generate enough jobs, consumption
will falter and the recovery will stall."
"This is the first time since 1939," adds Christopher Wood,
"that employment has still not yet fully recovered 41
months after the previous business cycle peaked."
Yesterday, the government came out with a new figure for
GDP growth in the second quarter of this year - 3.3%, a
half of a percentage point greater than estimated.
Don't get too excited. The number is half fraud and half humbug. The fraud part jiggles the figures. The humbug part
misunderstands them.
Bill Gross addresses the fraud: "I am not a believer in
central bank intervention as a market mover past a short period... yes, they can move the markets in the short run, but eventually, if the market participants want to keep pushing, the central bank will lose."
How the bills get settled is the story behind the
headlines, not just for tomorrow, but for many years ahead.
James is nice enough to give us credit for worrying about a
"soft depression" a la Japan. "If the United States follows
[Japan's example]," he concludes, "there could be a very
nasty decade ahead." |
