"Janus' Bill Gross warns risk taking time is past...When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over," he wrote.

More at link

He maintains that we should expect a structural growth rate of 2% in the U.S..   Which is is no real growth.  He actually suggests low yielding bonds and unleveraged dividend paying corporations with global diversification (reach) are your best bet.   This would seem to indicate he believes we're in for deflation.  In any case, it's an interesting piece, take for what you will.  

Seven Reasons To Be Fearful

 

10 Key Events That Preceded The Last Financial Crisis Are Happening Again

 

I'm not sure I agree with some of his correlations.  For example oil plummeted after the financial crisis came into full bloom.  It didn't precede the collapse.  Also it was fully a product of the downturn in our economy.  This current decline in oil is pretty simple, it's the busting of production bubble.  Supply increases have outpaced demand.  But I agree that the slump in energy consumption is disturbing (as I wrote above).  

The other thing that concerns me is the Fed's belief that they might be able to tighten at a measured pace.  The truth is interest rates are set by the market, and while the Fed may want to move at measured pace the market may decide it wants to get there in 5 minutes.   So, a change in direction if it comes could get out of hand...fast.  

I guess at the end of the day I feel like the economy has been very sick for quite a long time.  I think this era began more then a couple of decades ago.  I think the first leg was masked by the "tech bubble" of the 90's, which burst, and was followed by the real estate bubble which masked iti in the 00's.  The "collapse that wasn't" in 2008 was masked by unprecedented global monetary policy actions.   This has caused numerous distortions in our economy that will have to work themselves out (like what's going on in oil).

I think the "oil production" bubble is part of this.  Increased oil production fueled by cheap money, outpacing global demand.  Basically the same thing that happened with housing.  The next bubbles to burst will probably occur in the financial markets themselves.  

But I'm an outlier here.  I think we are in, and have been, a heavily distorted global depression.  In the United States I think the middle class is rabidly becoming obsolete, and believe the value of human labor is on the decline.  Quite frankly I believe this is the end of epoch of human civilization.  I think many of our institutions and systems are obsolete but will use the force of government to fight for their survival.  

Long-term I'm very optimistic....but the transition concerns me.  

Technology gives me hope.

I think over the next 20-30 years we will see some amazing transformative technologies, greater even than what we've seen over the last 20 years.  For those of us with a little age, and memory you have to admit it the last couple of decades has been amazing.  

With that said, I think a lot of systems and institutions will fight to conserve themselves and their outdated and obsolete modes of operation, and I think their response will be (as it has always been) to use the force of government.  So THAT part concerns me.  

Our entire political, legal, monetary, and financial system at its core is "conservative", and I mean that in the true meaning that word.  All of politics, including both of the primary political parties are "conservative" in this respect.  They use the force of government to fight to maintain the status quo.  If you've noticed, especially over the last 20 years, both have stepped up their game in their use of the force of government.

We don't have a million years to wait.

Every new technology, has been capitalized on, by the oppressors...

To do just that.

Wishful thinking run amuck.

Ah, come on EXPY, you know that's not true.  

For example, do you have to spend your days hunting and gathering enough food to eat?   Do you have to build your own tools?   What about transportation?  Communications?  I can remember a time when going to the library was the only option to learn about something.  A time when the big news networks or daily newspaper were my only option for news. (not all that long ago)  I can remember when computers, televisions, video and audio recorders where either nonexistent or priced out of reach for most people.  When design and CAD systems didn't exist, when there weren't forums like this one you could go to and share ideas, informations....and useless entertainment with people from all over the country.

Now we have cheap energy on the horizon, new reactor technology and alternatives that is slowly working their way off the drawing board and into application.  Self-driving cars, 3-D printers, cheap(er) automation and robotics to make ideas a reality.  I could go on and on.  

Don't get me wrong this is an upheaval, and the old systems and entrenched institutions will use government to defend themselves.  But technology isn't the enemy.  It will be the liberator.

Back to your regularly scheduled, economically distorted, depression.  

http://www.cnbc.com/id/102314927

Supply may not be oil's only problem: Lloyd Blankfein

It may be more than to much supply, maybe the oil price is telling us there is demand side problems.  In other words, demand is down and supply is up.  But it ain't just supply.  Hmmmmmm....

Great observation Goldman Sachs.

Doing 'God's work'...right?



I wonder how low everything goes after these Pimps all realize there's a Global Demand Problem?



They were easily made out to look like Geniuses & now reality sinks in; Supply & Demand/Free-Markets determine values.
The funny thing is, with the Globe on fire, I actually think before the end of this year the DOW might get close to 20,000; A bold prediction



Russia Imploding.



Europe about to really start imploding; Euro collapsing early warning sign.



China Competing, but still has a long way to go, especially convincing a Billion people to start consuming 'Crap' & that Communist thing.



India...



America still leading the way, as screwed up as things appear.






WE can find ourselves living with an extremely Strong Dollar, low interest rates & deflating prices.



Those 'relaxing' at home collecting 'early retirement' will miss out, so stay focused/productive & position yourselves to take advantage of the coming opportunities.



Real, long-term, wealth can be realized in this kind of environment.



This is the time people, i.e Moms/Dads, reminisce about the time 'I should have...'; WE have learned from their mistakes, correct?
 
 

 

Supply outweighs demand  more support for deflation story

One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.

"If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years," Johnson said. "Meanwhile, store square footage has kept expanding." ...more at link

It's no surprise, nor is it even controversial at this point, to say that "retail" has been dramatically affected by technology, the internet, and automation (technological unemployment).  We shop online.  Online retailers need fewer people, less real estate overhead, and more efficient delivery systems.  So the we need fewer people to make goods and services, fewer people to deliver those goods to market, less overhead requiring fewer people to construct and maintain that overhead.  And technology is moving faster and faster to reduce the need for more people.

What is our economy based on?  ....consumption.  At it's base is the production and delivery of goods to market.  Retail, is at it's base.  

Vanguard Group execs say deflation a real risk for global economy

"Most people say, 'Hey, deflation, falling prices, isn't that great!"' Vanguard Chief Investment Officer Tim Buckley said during a live webcast. But as he explained, falling prices are not something to be celebrated, especially in a developed economy that relies on consumption to fuel gross domestic product growth...".

"Once you're in the cycle, it very difficult to get out," Vanguard Chairman William McNabb added...."

Clearly, the dramatic reduction in refiner's gasoline sales says something, well, um, dramatic. Going from a nominal 60k per day output to 20k per day output is a massive reduction. From the EPA, average US mileage has "only" improved 25% since 2005. While there has been some importing of refined products, since 2010 we've also been exporting those same refined products, something we never used to do. So, that means that the real domestic consumption is either wildly under reported or it's imploded since the Great Recession. I suspect the latter. Since we have several million people no longer in the work force, those people likely do not consume gasoline as prodigiously as they used to (they don't need to drive to work for one thing and/or might not be able to afford it any more if they're unemployed).

As for the rest of the gas guzzling population, there are several factors at work. First, one might recall that one of the supposed triggers of the GR was gas hitting an average selling price of $4/gal. There is no way that didn't cause a dramatic decrease in everybody's discretionary driving. We've danced with $4/gal 3 times since then and have had $3+/gal the majority of the time. This is in contrast to the ~$2/gal we used to have. Strained budgets cause people to cut back in odd ways. With food costs gobbling up a larger percentage of take-home pay and health insurance/care costs rising 10-15% per year, this too is eating into what's left for people to spend. If you have a choice of getting some new iGadget or wasting money driving to a vacation spot you can't afford anyway, consumers seem inclined to pursue the former. Also, since the population of young people not being able to enter the workforce, they are driving less and less as well - again owing to lack of discretionary income (as in none) and not having a job that they're forced to drive to (and since they are mostly living at home, they may be riding with parents).

While the price of oil certainly could be somewhat influenced by the shale boom, it is often driven more by geo-political events. We usually blame a big spike in oil prices on some new conflict flaring up (or threatening to) in the Mid-East. Similarly, my contention is this recent cliff dive is being orchestrated by the Saudis to punish the Russians for intervening in Syria. Dropping oil from $120 to $40 cuts virtually all of Putin's available resources to stir up $hit. They know this, they know we in the US wanted sanctions on the Ruskies for invading Crimea, and the Saudis saw this as a great time for a two-fer. Drive the price below what the shale producers can stay solvent with -AND- poke Putin in the eye. In their minds, Russia gets put back in its box and SA eliminates a whole class of competition from the world marketplace.

Still, just because gas is cheaper now doesn't necessarily mean that people will suddenly double or triple their driving. I think we've seen a systemic change in driving habits, one that is unlikely to be reversed by a temporary reprieve from the high cost of gasoline. I also think the economy is in such a state that there is structurally less demand. That, too, will not change with a dip in gas prices.

Just my $0.02

When gas is cheap,we can buy more $40 lowers!

Greeks Stop Paying Taxes Ahead Of Elections As Central Bank Scrambles To Halt Bank Run Rumors

 

If you want to kill a government, or control it, cutting off it's revenue is the way to do it.  That's why I've maintained the ONLY tool we have left in our own arsenal is the Public Debt Act.  The only problem is, we need a President with the resolve to use it.  A President that won't sign a debt ceiling increase.

Stagnant middle class incomes: The political fallout ...

"The political debate over raising middle class incomes is gathering momentum, with significant potential consequences for Wall Street and Main Street alike..."Link

This is what concerns me. As this process continues the political class will become more and more involved in the process.  Government will grow.

I think it would be more accurate to say that the American middle class is shrinking.  We used to have the largest middle class in the world but now it's down to #16 (or less).  After the dollar dies (gets dumped as the world's reserve currency), most of the American middle class will all but vanish.  We are returning to a feudal system with less than 1% rich, 1 to 5% middle class and the remainder peasant tenant farmers/renters/indentured servants (student loan folks).

BTW, here's something I posted in another thread. Amusing, but I think it's true.

4v50, that's pretty funny. Did you come up with it?

I have to slightly disagree with labelling our monetary policy Keynesian.  I know I've done it.  I've described it as Keynesian.  But really our current monetary policy is at best an aberrated partial implementation of Keynes's theories.  They seem to have his theories expressed in his Treatise on Money down...to some degree. But they've ignored aggregate demand almost entirely.  

Don't get me wrong, I don't think Keynes's theories would work, and I think you know where I stand on the subject.

Seems I've heard this phrase somewhere's, well continuously the past 5 or so years...    

"The Engineered Destruction of the Middle Class"

[Ps, don't mention this to Gasdoc, it upsets him]  

Artificial Demand = Real Deflation

The Achilles Heel Of The Global Status Quo: Deflation

 

Thanks Glock0.  I'll watch it later.
Qweevox - the Kenynesian stuff came from Irwin Schiff.

Here's an explanation by Charles Hugh Smith and Gordon T. Long of the deflation that will precede the inflation that we will suffer later this year.  https://www.youtube.com/watch?v=wavdtsfiSXA

Maybe some haven't noticed, we've been in deflation for years now.


Folks predicting 'inflation', I don't know what they're smoking.

Reduction in the buying power of the dollar ---for other reasons, that 'feels' like inflation, sure.

With incomes collapsing, and our economy held together by phony and extreme .gov DEFICIT spending of $$$ that never existed... [Sort of like the bit coin Ponzi]

We aren't going to see INFLATION in the ordinary sense.


No matter how much lint these 'experts' pick out of each others' navels.  




ETA--- to fix 'deflation to 'inflation' above

Inflation in things we need, deflation in things we want.

I'm somewhat in agreement with the video discussion in that rising productivity SHOULD cause deflation in those areas where more goods can be produced at a lower cost to the consumer. Where I see that breaking down is that to get that rising productivity, somebody has to make a capital investment in the technology and in the production capabilities. I'm not seeing companies doing that. Instead, I'm seeing companies eating their seed corn by throwing money at the stawk market and/or buybacks because they can make a much higher ROI much faster doing that than investing in future production capacity or cost cutting technologies. Until that changes, we'll have more of the same.

Correct

There will be no demand driven inflation.  Not with real wages, at best, stagnant.  Not with workforce participation declining.  There is no aggregate demand.  There is no inflation.  

All we have are economic distortions, malinvestment, asset bubbles, and a growing disparity of wealth.  Oh sure, you might get a hike in a particular commodity due to some environmental shock, or cyclical activity...but there can be no real inflation without aggregate demand rising and no monetary velocity.  

So the only option you have left for inflation is monetary collapse, a currency collapse.  Which might happen, but I don't believe it's likely to happen in the foreseeable future.. But hell...who the fuck knows?  We could get a black swan event, and it could all change tomorrow.  But you're not getting inflation through increases in aggregate demand.  

That's not happening.

I love it when we agree!  

Does this mean I should significantly limit my contributions to my 401k?

Also, I've asked this before, but what do you suggest for a potential first-time homebuyer?  Is now the time to buy, or ride it out and rent a few years?

Just trying to listen and learn while the big boys talk

NO one knows the answer to your question.

If they did they'd be rich.

Oh, wait...  

We don't have a 401k.  Worst investment ever.

Whether it's a poor investment or a great one can depend greatly on whether there are employer matching funds being contributed. That, and whether your money can evaporate ala MF Global...

Why? How do you save for retirement ?

Gallup CEO Jim Clifton has some sobering observations on our economy.

American Entrepreneurship: Dead or Alive?



More at the link

I read the Gallup CEO article. The problem is that this administration has done its level best to create an environment as hostile as possible towards businesses, especially small ones. Remember, to a communist, it's much easier to control a few very large businesses than millions of small ones. So, destroy all small businesses and all that will be left is the crony large businesses that make massive campaign contributions (bribes) and get special favors and access to the top levels of government.

I've been saying small businesses are the engine of growth forever. They are the point guard in any recovery. And, until recently, they were usually the last to give in to recession. Between an order of magnitude more regulations now than a decade ago and much of the available capital being pi$$ed away into insolvent bank sinkholes and the rigged-casino stock market, the ability of entrepreneurs to get capital to start and/or expand their business is severely curtailed. With the cost of doing business expanding so rapidly, it is likely that the birth-death deficit will also expand, particularly in the next 2-5 years, making the economy more and more hollow.

We do have inflation. There are 2 kinds of inflation.

1. Demand driven inflation, increasing demand allows prices to increase, supply and demand. this is due to the velocity of money. Profits are made, wages go up.
2. Currency dilution. Prices increase because more money is in circulation. Even though demand goes down, prices go up because there is more money among the people that have it that causes prices to go up. It generally starts with commodities due to investment and then makes things more expensive to service and produce, so prices go up, but they go up slowly because there is little velocity. Profits stay the same or go down the driving factor is increased cost, not demand.

# 2 is what we have, and if the velocity takes off due to an increase in demand across sectors, then inflation really takes off. Right now we have decreasing demand and very thin margins, causing prices to go up as volumes go down.

The threat is deflation, which is exactly why we have a huge budget deficit and QE, trying to create velocity and stimulate demand to effect a recovery.  All it does is dig a deeper hole and forestall the inevitable.

Exactly.  And the whole myth that deflation is so bad, is just that -- a myth.

Of course it's going to be bad for the people who have mismanaged their financial lives to date.  Unsustainable debt loads driven by malinvestment and greed (at both the individual levels -- e.g. housing, cars, boats, etc. and business levels -- e.g. banks, real estate, solar, etc.) become even more crushing when true deflation occurs, as they should.

Deflation needs to occur.  The system needs to purge itself of all the bad "money" and "investments".

This continual effort by central banks to fend off the inevitable is going to result in a disaster of epic proportions.  My guess is either some kind of black swan financial event far worse than 2007 - 2009...or war.  It's one of the two.  The whole notion of "muddle through", (which BTW I haven't heard in a while) is nothing more than positive propaganda spin by the people who have something to gain from the current misery.

Deflation is good for the consumer. The deflation we are experiencing is only temporary. It will be replaced with hyper-inflation. Andy Hoffman (and others) suggested this scenario a few years back.  The dollar is strong only because the others are weakening themselves (Yen, Euro, Yuan) through money creation.  They die first, dollar dies last.

I think we are seeing the beginning of a new cycle developing to push money back to Main Street, in America.





The United States seems to be the most Stable Country, even with OUR Weak-Assed Leadership Pimps.
The EU is imploding & the Swiss might be signaling they have lost faith in the ECB & the Euro, i.e. A Swiss bombshell: Why the franc soared 30%





America used QE to recapitalize its banks, while ECB can't get the support needed to start their own; All talk, no action.





When individual, EU Nations start moving on their own, no meaningful economic policy can, confidently, be implemented, i.e. Undecided voters remain Samaras’s best hope of victory





One Nation leaves, the Union will be left Bankrupt & the entire thing breaks up.
Wall Street will soon be funded by the rest of the Globe's Wealth & America, with a Strong Dollar & Lower Cost of Living will fuel the real demand an economy needs to flourish by doing what WE do best...Spend Money & Buy Stuff
This could last 5-10 years easy, in my opinion of course, which isn't worth much
I'm more confident than ever that those who stayed productive & didn't 'give up' will soon be given enormous opportunities to earn real, long-lasting wealth.





Those dependent on Government Aid will miss out, unfortunately, but Money Motivates, maybe they will change their ways.





OK, that's all my Crystal Ball had to offer





Winners always Win!





ETA


'Like Christmas': Rush to cash in on soaring Swiss franc






 

 
 

I agree, But My opinion is worth even less than yours
I think that in spite of the socialist pimps trying to destroy the USA, Freedom & the Free thinking it inspires will prevail. Most of the brainwashed idiots the schools have put out are beginning to wake up & when they do they will become producers & consumers, not the socialist drones the pimps imagined. This coupled with Food & Energy independence will make the USA the place to be in the future.


Or WW3 will end it all for everyone!
Who really knows?    

Disagree.  Wall Street and the dollar will be funded by the rest of the world as the world seeks safer haven for its money.  This is why the dollar and US will be the last man standing.

However, we are going to fall too and after we do, it will take at least twenty years to recovery.

What did you disagree with?

You basically restated what I wrote

WE fall only if WE lose WWIII & that's been anticipated during every economic downturn since WWII





 

Nailed it



 

Any sort of upward movement in equities will only be temporary.  Then it falls apart.  Andy Hoffman and a few others stated this years ago.

It's all been bubbles.  Most intentionally engineered by the Fed and policy makers in Washington, and some unintentional like the oil and gas boom.  

From the New York Times 2002....

"The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." ...LINK

The dot com bubble was unintentional.  I don't believe it was intentionally "engineered" by the Fed or policy makers in Washington, it was the pure irrational exuberance of new technology, and automation efficiency rabidly being put to practical use.  But since its bust, everything else has been intentionally engineered.  You can read the Fed's own minutes discussing building a housing boom, and it most definitely had it's proponents in congress to help things along.  Shit the political class loved it.  The "bubble" we had in housing in the 00's is no different than the bubbles we're feeling now.

(I'll have to find the minutes and Greenspan quotes were the a-hole discussed inflating a housing bubble...to replace the dot-com bust)  

PS  Just to be clear, I am not suggesting a conspiratorial "lets plan the destruction of America" when I use the term "engineered".  I'm referring to "economic central planning", as in a few really smart guys can decide what's best, better then the dynamics of free market economics.  

 

I remember Greenspan not wanting to clamp down on the housing bubble.  He wanted that bubble.  MoFo!  What was worse was the loans that were bundled up into a package, were rated AAA and sold to retirement funds and investors worldwide.

All we have to do is get back to basics.

If you borrow money to buy goods and services today you are pulling from the future to consume today, and our entire culture has become comfortable with that.  Basically you're pulling future aggregate demand into the present.  When your whole fucking economic system is based on the necessity of growth, this practice is pure unadulterated folly. It's not sustainable.  

That's all we've been doing for decades.  We've pulled TRILLIONS of dollars from the future to spend today, and look around at what it's gotten us.  Our entire culture is predicated on consumption and growth.  Debt is an integral component to our covet culture.  This global economic system will eventually fail.  

Technology will continue to eliminate the need for human labor, Pandora's box is wide open.  How can we "create" aggregate demand when much of the population is already unemployable.  In 20 years MOST of the population will be unemployable, what then?

Stalking Wolf (an Apache) once said that we will starve our grandchildren to feed our children.  Recently there was an incident at Golden Corral (FL) where the parents went in to gorge themselves and their baby starved to death in their car.  They could have brought the kid in and given him applesauce but no.

Anyhow, you're right that our grandchildren's future has been spent by us.  The debt is mathematically impossible to be paid by their great-grandchildren.  This is just like a Turd World Nation that one generation saddles the nation in debt for over a century.  Heck, when I was in Egypt, they just paid off the party they threw to celebrate the opening of the Suez Canal.  F*ck parties.  Who wants to saddle the nation with debt?  Oh wait, we have. Nevermind.

ETA:  John Rubino (The Money Bubble and The Collapse of the Dollar) is interviewed http://ec.libsyn.com/p/6/5/9/659665fe61cf59a4/John_Rubino_14.Jan.15.mp3?d13a76d516d9dec20c3d276ce028ed5089ab1ce3dae902ea1d06ca8634d9cb58bc94&c_id=8193975

That's an interesting podcast, worth listening to.

The End Of Fed QE Didn’t Start Market Madness, It Ended It