Tuesday, March 29, 2016


In case you missed it, yesterday was the day for the geniuses on the street and around the country to announce their bets on GDP for the 1st quarter.  Across the board the estimates were poor; some, like Goldman Sachs were down right awful.  The Atlanta Fed, which has been generally the most accurate as of late teed up growth of 0.7%.  The estimates were so bad that the administration's favorite economist and to-the-death Clintonista, Mark Zandi of Moody's even came close to suggesting that there was a conspiracy at work.  On whose part?  Goldman Sachs who predicted MINUS 1.2%?  Strange things are going on out there.

Anyway, everyone things the economy stinks which prompted the reaction on the street of, "let's see what Janet says tomorrow."  Well tomorrow is now today, Janet went to The Economic Club of New York and said that because things weren't so good in other places in the world the Fed would be careful in their program of normalization of interest rates.  The street's reaction was "Still free money for everyone," and the DOW was up over 90, the NASDAQ way up and nada in the bond pits.  What's important?  Nothing except the Fed.  Nothing except free money.  Nothing that in any way requires thought...or so it seems.

If you do stop and think, the first thing that comes into your mind might be the thought that with public sector debt approaching $20 trillion, it might really be difficult--given the mill stone around its neck--to get this economy off the bottom when in addition. the private sector is awash in debt as well.
Can it go on forever?  Well, if Janet keeps it free I suppose it could, but there are a lot of people out there (and more of them every day) like Mrs. James' little boy Charlie who are being killed by these policies in trying to keep the hamburger on the table or cat food for the less fortunate among us.  A lot of people are being force by circumstance into risk taking positions that at heir age, in past times, would be deemed unacceptable.  Worse yet, in the great scheme of things, relative value is vitally important to a well-functioning market but in what we see today the answer to a request for a valuation is very like to be, "Beats the hell out of me."  We just have to look back 10 years or so to discover in what the  improper pricing of risk can result when relative value is zero.  And now today there are signs...

Car sales are terrific.  Why not?  Five years, no interest loans (or close to it) are not unheard of.  Leasing is as cheap as can be.  Of course, foreclosures are also up and cars coming off lease are at record levels...Heck, just buy a new one, it's free.

Stopped into Best Buy the other day.  60 inch 4G Samsung--24 months no interest.  Gotta get me one of those.  It's free!

Some new luxury digs in New York or the west coast?  Great financing if you can beat a Chinese guy to it.  Boy are they going for hard assets!

And while the equities market and commodities and even emerging markets have made unbelievable come-backs, there is no volume, things are slipping again on remaining high inventories and places like Brazil are a shambles.  But Janet is going to keep it all free.  And THAT'S important.  Guess I've figured that one out.

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