Warning Signs 01 (Oct 08 - Feb 15)

[winston]

If you’re looking for a “sign of the top,” this could be it by Mike “Mish” Shedlock

New York Fed President William Dudley says “Dreary Days for U.S. Economy May Be Over.”

Despite some headwinds, Dudley is optimistic that America could grow closer to 2.5% to 3% in the coming year instead of the ho-hum 2% growth that has been a hangover of the Great Recession.

“The U.S. economic outlook looks brighter, with growth likely to be somewhat above the trend of the past five years,” Dudley said in a speech on Monday

In fact, Dudley thinks the economy could soon be healthy enough for the central bank to lift interest rates off the ground.

He’s signaling the Fed will likely be able to raise interest rates in 2015.

“While raising interest rates is often portrayed as a difficult task for central bankers, in fact, given the events since the onset of the financial crisis, it would be a development to be truly excited about,” Dudley said.

“When the [Fed] begins to raise its federal funds rate target, this would indicate that the U.S. economy is finally getting healthier,” he explained.

Dudley On the Economy

Fed governors tend to be among the best contrary indicators you can find, so much so that I have to wonder if a bell just rang.

William Dudley is ready to sell…

But I ain’t buyin’ it.

Source: Global Economic Trend Analysis

http://thecrux.com/if-youre-looking-for ... 37gMXBU%3D

[winston]

‘Near Perfect’ Indicator That Precedes Almost Every Stock Market Correction Is Flashing A Warning Signal By Michael Snyder

Are we about to see U.S. stocks take a significant tumble? If you are looking for a “canary in the coal mine” for the U.S. stock market, just look at high yield bonds.

In recent years, almost every single time junk bonds have declined substantially there has been a notable stock market correction as well. And right now high yield bonds are steadily moving lower.

The biggest reason for this is falling oil prices. As I wrote about the other day, energy companies now account for about 20 percent of the high yield bond market. As the price of oil falls, investors are understandably becoming concerned about the future prospects of those companies and are dumping their bonds.

What is happening cannot be described as a “crash” just yet, but there has been a pretty sizable decline for junk bonds over the past month. And as I noted above, junk bonds and stocks usually move in tandem.

In fact, junk bonds usually start falling before stocks do. So does the decline in high yield bonds that we are witnessing at the moment indicate that we are on the verge of a significant stock market correction?

Source: The Economic Collapse Blog

http://www.thetradingreport.com/2014/12 ... ng-signal/

[behappyalways]

Dollar surge endangers global debt edifice, warns BIS
http://www.telegraph.co.uk/finance/comm ... s-BIS.html

[winston]

Guess What Happened The Last Time Commodity Prices Crashed Like This?…

By Michael Snyder

Source: The Economic Collapse Blog

http://www.thetradingreport.com/2014/12 ... like-this/

[winston]

Income Inequality: More Skewed Than Ever

One of the clear historic signs of debt and of financial bubbles is that the rich get richer… at least until the bubbles finally burst.

Janet Yellen recently commented on concerns about rising income inequality and said that it was impeding America’s economic mobility. Ironically, it’s the very Fed and central bank policies around the world that tend to drive and exaggerate that inequality.

The top 10% control more than 90% of the wealth and financial assets in the U.S. today. The top 1% controls 42% and the top 0.1% an astounding 22%.

So who gains the most when you have a weak recovery generated largely by monetary injections and zero interest rate? The rich, and even more so — the ultra-rich.

During fall bubble seasons, like in the Roaring ‘20s and Roaring 2000s, it’s a natural occurrence that the rich will get richer…

Financial assets bubble and they also represent much of the new entrepreneurial class that booms unbelievably when major new technologies and companies move into the mainstream landscape on the S-Curve.

But in this bubble boom, the Federal Reserve and central banks around the world have increasingly amplified the natural bubble and haven’t stopped feeding it since the financial meltdown of 2008.

A case in point is looking back at the top of the last major debt and financial asset bubble in 1929. The top 1% controlled 52% of the wealth in the U.S. Once that bubble burst that number fell to 35% in 1942 (winter season) and ultimately to 23% in 1978 (near the end of the summer season).

That’s a 56% drop in relative wealth.

The free market capitalist system has its own natural dynamics and one byproduct is that it promotes the rich getting richer when major new technologies are moving into the mainstream for the first time during the fall bubble boom season. It’s at that time when the economy needs investors and entrepreneurs to take major risks and then, it rewards them handsomely for that.

In the following seasons (winter, spring and summer), the rich lose their wealth rapidly as they move into the winter season and then continue losing little by little after that. The everyday worker and middle class end up reaping some of the benefits of super innovative periods like from 1914 to 1929 or 1994 to 2007, but only in the decades to follow.

That is the epitome of “trickle-down economics.” It’s just that it takes a long time to filter down.

By looking at the chart below you can see that there’s a big difference in this bubble economy, since the late 1980s, and especially since 2008 when the Fed and central banks stepped in with their unprecedented stimulus.

You can see how the top 0.1% has taken most of the gains in this boom and took even more since 2002. The 0.1% has taken such a great share that the top 1% pales in comparison.

See larger image

Take note that in the 1923 to 1929 bubble, the 0.1% to 1% garnered a little more wealth than the elite 0.1% — 27% vs. 25%. Obviously, the 0.1% was still about eight times as rich as the 0.1% to 1%... which is still a huge divide. But the fortunes held by both groups rose together, it was just a little faster for the top 0.1%.

Let me also point out that during the bubble from 1994 to 2012 (it would be even more extreme if this study measured it through 2014) that the top 0.1% took the lion’s shares of the increase in percentage wealth rising from 7% to 22% while the 0.1% to 1% rose from 16% to 20%.

In this scenario, the 0.1% became 10 times richer than the 0.1% to 1.0%.

The whole point here is that the top 0.1% are doing exponentially better than the top 1% who are doing even better than the top 10% — and the top 10% are collectively the prime beneficiaries of the quantitative easing (QE) policies that have launched another huge bubble in an otherwise weak economy — as they own more than 90% of the wealth.

This is why Homer Simpson is taking it on the chin and seeing little or no recovery and those high on the wealth totem pole are doing better than ever.

History shows us why such vast extremes in wealth and income inequality are simply not sustainable. As I’ve written before, a revolution will come when the poor band together and rise up against the wealthy.

“Income inequality and special interests have created such an extreme situation today that everyday people will begin to revolt in developed countries. It won’t only be those in the dictator-driven economies of the emerging world trying to make themselves heard and force democracy for the first time.”

A reminder — during the French Revolution of 1789, royalty were sent out to the guillotines.

Don’t go off the deep end with worry because I see this extreme inequality changing in the decades ahead. Keep in mind that in the bubble of 1929, the top 1% dropped from a peak of holding 52% of the wealth to a bleak bottom when they held only 23% in 1978. That’s a massive 56% decline in relative wealth!

But it was the top 0.1% who took the greatest blow to their wealth. Just imagine a drop of 72%... the peak in 1929 was at 25% but by 1978, it had fallen to a paltry 7%.

The top 0.1% to 1% experienced an overall drop of 41% from their peak at 27% in 1929 to 16%.

What about that broad 90% of people at the bottom? They rose from 15% to 33% in that time period and then climbed to 36% in 1985 before falling again.

Here’s my message to you — the wealthier you are, the more you have to lose when this massive Fed-generated bubble bursts.

Don’t be complacent and get as liquid as you can, sooner rather than later… and please — don’t even entertain thoughts like “the most prime real estate in places like New York, Miami, San Francisco, Vancouver, Sydney or even London can’t go down.”

History is very clear on that point and it has shown us that such places fall the hardest and take a long time to come back.

Source: Economy & Markets

[winston]

Comment from a trader on CNBC:-

If you don't like money, then u should sell

=============

If the above is not a sign of euphoria, I don't know what is ...

[behappyalways]

The significant fall in oil prices and commodities might be telling us the state of the global economy. With oil and commodities prices adjusting to 'norm', maybe the next set of cards to fall is property( already falling a bit......maybe more to come) and global equities.......

Think about it ^^

[behappyalways]

Dread these headlines in 2015
http://www.cnbc.com/id/102303651

[winston]

Red Flags for Emerging-Market Companies:

A Focus on China

Source: Moody's

http://members.zkiz.com/storage/1610/6c2dPBC_134306.pdf

[winston]

TOL:-

I'm very surprised to hear the Premier of China talking about the HK-SZ Connect.

My conclusion is that things must be quite bad in China for the Premier to be personally trying to talk up something that is so insignificant as the HK-SZ Connect.

Be careful if you own Chinese shares.

I take this as a warning sign and will lighten up my position on China