iftttwall

After refusing to even consider the possibility of a recession in the US for over a year, the first cracks in Goldman’s armor are starting to appear. Over the weekend chief equity strategist David Kostin said that while the probability of a recession according to GS economists remains low, saying that “their model suggests the US has an 18% probability of recession during the next year and 24% likelihood during the next two years”, Goldman’s clients and investors “continue to inquire about the impact a contraction would have on the US equity market.”

Displeased with this inquiry into the worst case scenario, one which nobody at Goldman predicted as recently as a few months ago, Kostin is forced to present Goldman’s sensitivity “of our existing earnings and valuation forecasts to a US recession scenario.” Here is Goldman’s take of what may be the worst case scenario for stocks in a recession:

We estimate the S&P 500 index will generate $117 in EPS in 2016, a rise of 11% from last year, although EPS growth excluding the Energy sector will equal just 5%. Our baseline earnings forecast assumes the US economy expands by an average of 2.0% in 2016 while world ex-US growth averages 3.6%. We forecast sales, margins, and earnings for each sector of the S&P 500 based on assumptions for US GDP growth, global GDP growth, inflation, interest rates, crude oil, and the US Dollar. 

 

From a sensitivity perspective, we estimate a 100 bp shift in US GDP growth will affect our S&P 500 EPS forecast by roughly $5 per share. For example, holding other macro variables constant, if US GDP growth averages +1.0% then EPS would equal approximately $111.

And here the humor begins:

However, if the US falls into recession and GDP actually declines by 1.0% (300 bp below our baseline forecast) then EPS would equal just $100 per share, a decline of 6% from last year and a 13% drop from the recent EPS peak of $115 in 2014. Coincidentally, the median  peak-to-trough fall in EPS around the 13 recessions over the past 80 years equals 12%. Most investors find the sensitivity of our EPS forecast to shifts in GDP growth much smaller than they expect.

Perhaps it has something to do Goldman’s absolutely abysmal forecasting track record – as we reported before, 5 of Goldman’s top 6 trades for 2016 – all of which were bullish – were closed out at a loss just 6 weeks into 2016.  Maybe “investors” are finally warming up to Goldman’s “predictive” powers.

That however doesn’t faze Kostin who says that “simply put, many sectors have low economic sensitivity. The profits for Telecom, Utilities, Health Care, and Consumer Staples firms are relatively immune to swings in GDP.”

Right, and just exclude energy, materials, and everything else that is nearing the biggest default wave since 2008, then just apply Tesla’s Non-GAAP adjustment, and all shall be well.

It gets better: apparently not only are investors overly worried about GDP growth, they are also panicking about EPS:

As is the case for changes in GDP growth, the EPS sensitivity to interest rates is much smaller than most investors expect. While the sensitivity of profits of Financials stocks to interest rates is high, with each 100 bp change in bond yield affecting the sector’s EPS by roughly 4%, the impact on EPS of other sectors offsets about 60% of the Financials’ change (see Exhibit 3). The sensitivity of our 2016 S&P 500 EPS forecast to changes in crude oil price has a similar offsetting impact between profits of the Energy sector and earnings of the other nine sectors. We estimate that every $10 shift in the average price per barrel of crude oil has a 29% change in Energy EPS but just a 0.8% or $1.00 per share impact on overall S&P 500 EPS. Our baseline assumption is that Brent averages $44 per barrel (18%  below last year). If oil averages $34 per barrel, our EPS estimate would be $116.

We are #timestamping that and we promise to revisit in one year what EPS will be if (and when) oil averages $34 (or less).

And while we are amused by Goldman’s relentless optimism according to which even a recession will barely impact the US economy, we were truly amazed by the following:

If the US falls into recession and GDP actually declines by 1.0% (300 bp below our baseline forecast) then EPS would equal just $100 per share, a decline of 6% from last year and a 13% drop from the recent EPS peak of $115 in 2014. Coincidentally, the median peak-to-trough fall in EPS around the 13 recessions over the past 80 years equals 12%.

Sure, if one assumes that the recession will be just an “average” one, then Goldman is spot on. What however Goldman ignores is that every single recession since the 1981 one has been the result of the Great Moderation’s kicking the can even farther with monetary policy, resulting in declines as follows: 11%, 21%, 32% and 57%. The trend here is obvious, and for an obvious reason: each prior recession was the bursting of a Fed-induced bubble, one which was planted to supplant the prior burst bubble, and as a result each subsequent recession was more violent and more acute than the prior.

As a result, we wonder if instead of an average recession, the next one won’t be the most violent one yet, one in which the faith of central banks themselves is wiped out, and leading to a near complete decimation in profits. As such the question for the chart below is: the median line or the progression arrow?

And then this:

The US has experienced 13 economic recessions since 1937 with the average downturn lasting four quarters (see Exhibit 4). The EPS  peak and trough are typically within one quarter of the start and end of the recession. The median S&P 500 index decline around recessions equals 21%. The minimum drop was 4% during the 1945 downturn while the maximum occurred in the 2007-09 financial crisis when EPS plunged by 57%. The index typically peaked nine months before a recession started and bottomed six months before it ended. S&P 500 peaked at 2131 in May 2015 (nine months ago). A 21% fall from the peak implies a level of 1680, 12% below today.

 

Once again: average or progression, because if extrapolating the trend from the past 4 recessions is any indication, then the 2016/2017 recession will see a collapse of roughly 75% peak to trough, putting the S&P somewhere just around 500.

Finally, it wouldn’t be Goldman if the bank wasn’t desperate to unload some terribly underperforming product to go alongside its rose-colored glasses sunshine call, and sure enough it is.

Stocks with the highest combined price sensitivity to the US economy and the S&P 500 have sharply underperformed the broad market YTD. Our “Dual Beta” basket has dropped by 17.1% YTD versus 5.9% for the S&P 500, a gap of 1,130 bp in just seven weeks (Bloomberg ticker: GSTHBETA). The plunge in share prices of the 49-constituents in the sector-neutral basket reflects investor fears of a recession and negative EPS revisions greater than the market. The basket is specifically constructed to have high sensitivity to changes in economic growth and now trades at a P/E discount of 2 multiple points (14x vs. 16x for the median S&P 500 stock). The typical stock has 26% upside to the GS analyst price target compared with 9% upside to our year-end S&P 500 target of 2100. Investors who subscribe to our view that a US recession in the near-term is unlikely should focus on this basket from a macro and micro perspective (see Exhibit 5 for list of constituents).

And here, dear investors who subscribe to Goldman’s view that “a recession in the near term is unlikely”, is what Goldman is desperate to sell to you. In fact, Goldman’s prop desk has a whole lot of this GSTHBETA to sell to any remaining clients, which of course assumes that Goldman still has clients who are still alive after the “Top 6 trades of 2016″ fiasco.

We, for one, would take the other side, just as we would take the other side of that other collapsing product which Goldman is so desperate to offload to muppets, one which as we reported last week it is even making into an ETF to assist its hedge funds’ offloading it to clueless retail investors: the GS VIP basket.

We wonder which of Goldman’s prime brokerage clients are so desperate to unwind their top hedge fund positions to anyone, that Goldman was forced to make this index into an ETF to “make it easy” for retail investors to load up.

via Zero Hedge http://ift.tt/1QTHgta Tyler Durden

Just as the government did in the lead up to The Scottish Referendum in 2014, it appears David Cameron is already unleashing resorting to the so-called Project Fear. As The Telegraph reports, following Boris Johnson's lack of acquiescence to Cameron's call for no Brexit, more than a dozen of the country's most senior military leaders will argue that Britain should vote to stay in the European Union because of its importance to national security.

The Daily Telegraph understands that Downing Street is organising a letter stating the importance of the EU to Britain's national security to combat the growing threat of Isil and increasing Russian aggression.

Those likely to sign the letter include Admiral Lord Boyce, General Lord Stirrup and Field Marshal Lord Bramall, three former Chiefs of the Defence Staff, and General Sir Peter Wall, a former Chief of General Staff.

 

Lord Stirrup told The Daily Telegraph: "I don't carry a torch for the European Union at all but one has to look at the realistic alternative not just the World as we wish it to be. In light of the current threats like Isil, Russia and other threats that might emerge you have to think about how we secure our society."

 

Lord Bramall said: "I have always felt that a strong Europe in political terms is infinitely stronger if it has Britain inside it.

 

"If Britain left it would be a much weaker Europe and therefore it would affect the whole balance of power and equilibrium in the Western World.

 

"That affects not just security, but the political side. The negotiations. It is important to have a match for the various power blocs – China, Russia – it's complementary to Nato. I am sure America would very much want us to be in."

However several other former military chiefs are struggling to reach a decision because they are weighing their concerns about national security against their instinctive euroscepticism.

General Sir Mike Jackson, a former head of the army, is among those who are undecided about whether to sign the letter.

He said: "Yes there is a security dimension to the EU but in my mind it is more of a policing and judicial matter rather than a military matter. The military dimension is provided by Nato."

The letter is likely to be published this week and comes as both David Cameron and Michael Fallon put Britain's national security at the heart of their arguments for remaining in the European Union.

However it is likely to lead to accusations from eurosceptic campaigners that the Prime Minister is resorting to "Project Fear" to make the case for staying in the European Union.

Michael Fallon, the Defence Secretary, said in an article for The Sunday Telegraph that Vladimir Putin, the Russian President, wants Britain to leave the European Union.

 

He said: "It is not scaremongering to ask which result Putin would favour. If we left, the European Union for the first time in its history would be smaller and weaker. That's obviously in Russia's interests."

 

The challenges of Russian aggression and international terrorism are global and transnational and Britain "cannot afford" to be alone, he said.

So be afraid Brits, without the help of your Brussels-led 'comrades' you are a defenseless, weak island nation facing the threat alone of ISIS and Russia. We sure have come a long way from "we'll fight them on the beaches…"

via Zero Hedge http://ift.tt/1SLfTaP Tyler Durden

It appears it’s time to teach Hillary’s old lap dogs a new trick…

 

 

Source: Investors.com

via Zero Hedge http://ift.tt/1RgNpT5 Tyler Durden

Via NorthmanTrader.com,

Nice rally off the lows in the past week just in time for OPEX. Yes the OPEX game is back in full swing and brought back hope amongst signs of bullish capitulation everywhere. Market bulls had gotten so clobbered that Morgan Stanley even felt compelled to admit their calls had been horrendous. In addition, 2016 end of year price targets just issued in late 2015 had to be dialed back rather dramatically by major Wall Street firms (by 10% in some cases) only a few weeks into the year:

Barely a month into 2016 Bank of America Merrill Lunch on Friday cut its full-year S&P 500 forecast from 2,200 to 2,000. Wells Fargo on Tuesday followed by slicing its range from 2,230-2,330 to 2,000-2,100, a 10 percent reduction.

Wall Street is not alone in big U-turns as plenty of Fed speakers are also back peddling on the 4 rate hike pace they had planned for 2016. All in all a very rough start to the year with the average investor’s portfolio down over 10% in just a few weeks, not to mention hedge funds getting severely pressured.

The OECD’s assessment this week was quite sobering:

The world economy is likely to expand no faster in 2016 than in 2015, its slowest pace in five years. Trade and investment are weak. Sluggish demand is leading to low inflation and inadequate wage and employment growth. Financial instability risks are substantial, as demonstrated by recent falls in equity and bond prices worldwide, and increasing vulnerability of some emerging economies to volatile capital flows and the effects of high domestic debt.

Bottom line: Unless people are effective in trading this action their net worth is getting eroded which could quickly spill over into consumer confidence and the Fed knows this and Janet Yellen pretty much admitted it.

It is then with this backdrop I wanted to provide an update to the 2016 technical outlook  from January 2nd where I had outlined many of the downside risks.

Reviewing charts this weekend a story containing 3 distinct themes is emerging: The good, the bad and the ugly:

Let’s start with the good:

If anything positive can be gleaned for investors it’s the fact that support held again near 1810 $SPX forming what can be construed as a double bottom:

Certainly the price reaction, so far, supports this notion or at least made for a good long trade.

And principally the rally was no surprise as it fit again with the so often seen pre-OPEX rally pattern:

The Januarys of 2015 and 2016 had no such magic OPEX ramps, neither did last August, but the trend of pre-OPEX ramps remains strong.

Further potential good news for markets it that sentiment not only stinks but in fact is commensurate with previous, at least short term, lows:

And investors have pulled a lot of bullish allocated cash out of the market and that is reflected in the allocation data:

The implication: A lot of fluff has come out of this market, a meaningful correction has taken place, in fact on many levels this has been the worst start to any trading year on record. The damage has been so deep that despite a strong rally into OPEX markets remain far from medium term overbought:

Also potentially further supporting the “good” is the $BXSPX which continues to follow the script seen in September/October last year and has proved to be a great guiding post for us in supporting our recent trade buy weakness strategy:

Were it to continue on the same path plenty more upside could be seen in this market in the weeks to come.

Keep also in mind the context in which recent lows were made: Key long term moving averages were tested while positive RSI divergences were put in place in many cases while support has held across the board:

This not only applies to US charts, but key MA tests can be seen in international charts, take the German #DAX or the global Dow Jones Index as examples:

In summary, many charts show deep corrections having taken place with investor sentiment extremely poor and lots of cash either taken out of markets or now allocated bearishly as opposed to bullish.

Historically the combination of these factors could form the basis of a much larger rally yet to come.

But then there are the bad factors to consider:

Despite popular belief this correction did not start in January 2016. It started much, much earlier and it was largely ignored by all the bullish narrative on Wall Street and much of the financial media aided by $FANG stocks pretending to hold up what was already breaking down.

Ponder this:

The last time more than 50% of $NYSE stocks were above their 200 day moving average was in late June of 2015:

Here too we can observe a recent potential double bottom, yet 76% of $NYSE stocks remain below their 200 day moving averages. In summary: A lot of technical damage has been inflicted with much overhead supply presenting a major challenge to future rallies.

The picture is not much prettier on the $SPX:

How bad has 2016 been so far? This bad:

The internals have been so poor that the $NDX not once saw new highs exceed new lows this year. Not once:

The $SPX hasn’t even managed to tag its 50MA in all of 2016:

Also bad: Equal weight as expressed in the geometric index below remains a dreadful picture, in fact the chart is eerily commensurate with the action in 2008:

We’ve been talking a lot about 2008 lately as the price structure indeed has been following the 2008 script very closely. It still does in principle, but we have also observed even more volatility in 2016 compared to 2008:

This analog structure remains valid until it deviates which it could at any time, or it could continue for months to come.

What does the structure suggest going forward? Well, it introduces our 3rd character in this story, the ugly:

The fact that the recent correction has been so deep and persistent has technical consequences. The most pronounced is that this correction can not easily resolve positively like previous larger corrections.

The reason for this is the threat of long term moving averages at risk of crossing over each other. History suggests that these crossovers are rare, but when they happen they have deep and meaningful consequences suggestive of much more downside to come:

The $SPX still has more time before such a crossover will occur compared to other indices hence one could easily imagine a massive rally yet to come aiming to prevent such a cross over.

However, note that the turn has already started to happen which makes this correction different than previous ones. Take 2011 as an example. It was actually steeper and faster in price correction but its major moving averages stayed generally positive and did not cross over each other. This correction here suggests that such a repeat will be extremely difficult, if not impossible.

Take the $RUT for example. The crossover is indeed coming in the next few weeks and hence the structure is very different than 2011:

No, even if you zoom in on the $SPX it should be clear structurally so far this is not a 2011 repeat, but very much like 2008:

Another very big difference to corrections like 2011: The trend in key monthly moving averages has fundamentally changed. For years the monthly 5 EMA and 8MA were key support averages. So far in February we haven’t even touched them from the downside:

The ugly reality is that the $SPX is faced with a multi-year rounding top structure with the 1810-1820 area presenting a major support line, neckline if you will. Many of us technicians have identified the .382% fib zone at 1574 as a potential technical target which represents convenient confluence with the 2007 highs. Hence it remains an attractive target on a break of support.

However the topping structure also offers something more sinister: Taking the distance from the 2015 highs (2135) to the support line (1810-1815) and subtracting it from the support line you end up with a technical downside target as low as 1486.

Ugly enough? Such a move would represent an almost 30% correction off the highs.

Supporting such a move? The inherent inverse structure of the $VIX, and here is a potential $VIX roadmap from Mella:

Her $VIX chart incidentally also aligns with her weekly $SPX chart which also supports the 1486 target:

But in order for this technical target to be eventually reached the neck/support must be broken first and so far sellers have failed in doing so.

So how will this fight turn out?

The good guy always wins right?

Sounds good until one realizes that even the good guy in this story is dangerous:

Here’s the problem with the good guy:

Even 2008 had a massive rally first. Referencing the analog structure we can see continued volatility, even a potential new low into March, before a move to rally into the open January gap and a tagging of the 200MA takes place. In 2008 it was this technical event that took place before the real carnage began:

And this is the fundamental problem investors face right now. Even the good guy scenario outlined at the beginning of this post may not provide a happy ending for investors.

Hey, even in the original movie “The Good, the Bad and the Ugly” the good guy was a robber after all 🙂

Hence a filling of the January gap may provide a great opportunity to raise more cash as the ONLY move invalidating these ugly set-ups is a sustained close above the January gap. But by the time markets fill this gap they will likely no longer be oversold, but vastly overbought. You get the drift.

Predictably in 2016 we see central banks extremely active again trying to save the day and preventing markets from finding their natural equilibrium. China is already flushing the system with liquidity, the BOJ went interest rate negative, the ECB wants to introduce more action at its March meeting and the US Fed is licking its wounds from the violent global reaction its rate hike has produced. See the financials:

So one has to recognize that while global GDP, earnings and revenue growth remain elusive central banks remain accommodative and highly active.

The message is clear: This will be a long battle:

And for this reason this market will remain an intense trading environment requiring a keen eye on technicals.

via Zero Hedge http://ift.tt/20OuTnz Tyler Durden

While MatlinPatterson’s Portfolio Manager Michael Lipsky can’t wait to enter the distressed junk bond space, thanks to “$74 billion in debt trading at under 25 cents on the dollar, and $205 billion trading at under 70 cents on the dollar”, he agrees with BofA’s Michael Contopoulos that it is still far too soon to buy. The question, according to Lipsky, is what capital structure works in the aftermath of several recent “bombs” such as Magnum Hunter which are trying to emerge from bankruptcy with negative EBITDA, and as a result both secured debt and the DIP are getting equitized.

The punchline of Lipsky’s speech was that due to the persistent collapse of oil prices, the bankruptcy process has been turned on its head: “we always assume that secured lenders would roll into the bankruptcy become the DIP lenders, emerge from bankruptcy as the new secured debt of the company. But they don’t want to be there, so you are buying the debt behind them and you could find yourself in a situation where you could lose 100% of your money.”

Which brings us to Lipsky’s moment of zen: “all these derivatives bets on oil, let’s just own oil; and on the other side we are actually short, focused more on the EM oil exposure.”

But that’s not what caught our attention.

Recall what Credit Suisse’s James Wicklund said one weeks ago in his weekly energy sector recap not:

Give and take between the Comptroller of the Currency and the Fed generated stories of big banks being a bit more lenient rather than swamping regional banks with failures. E&P companies had their borrowing bases upheld, for now, but were told to generate additional liquidity or have those bases cut in the spring.

What this means is that what we reported one month ago about the Dallas Fed “advising” banks to “not to force energy bankruptcies”, something which also spilled over in the Fed advising banks to limit mark-to-market on energy exposure and to use a generous strip pricing, was spot on.

Rumor Houston office of Dallas Fed met with banks, told them not to force energy bankruptcies; demand asset sales instead

— zerohedge (@zerohedge) January 11, 2016

A few days later, we reported the Fed’s prompt reply:

No truth to this @zerohedge story. The Dallas Fed does not issue such guidance to banks. https://t.co/rmE3Zul3PM

— Dallas Fed (@DallasFed) January 18, 2016

Now, thanks to Credit Suisse and Lipsky we have the full story: the meetings between the Dallas Fed and the banks did indeed happen, however, as we suspected, the Fed used a neat loophole.

Fast forward to 2:17 into the clip for the answer on what it was (which is also the reason why banks don’t want to be at the top of the capital structure of energy companies any longer):

“The OCC is breathing down the neck of the large commercial banks to limit their energy exposure.“

Full clip below:

 

And there you have it: when the Fed responded that there was no truth to our story with the curious explainer that “the Fed does not issue such guidance to banks”, even as it did everything else we disclosed, it was actually telling the truth: because between Credit Suisse and MatlinPatterson we now know that the explicit guidance actually came from the Office of the Currency Comtroller, the regulator operating under the US Treasury umbrella which however is completely useless without Fed input.

From its description:

The OCC charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC is an independent bureau of the U.S. Department of the Treasury.

So here is what happened: everything we said about the Dallas Fed meeting with banks, going through bank loan books, and urging to limit bankruptcies, demand asset sales, as well as suspend mark to market in explicit circumstances, was true, however the explicit “guidance”, precisely for FOIA avoidance purposes, came not from the Fed but from the OCC.

Needless to say, we are immediately submitting a FOIA to the OCC next, demanding to know whether it was the Office of the Comptroller of the Currencywhich was the US government entity that advised US banks to do all those things which we revealed back in mid-January, and which the Fed desperately tried to deny.

Finally, we are certainly looking forward to the Dallas Fed follow up response to this post.

via Zero Hedge http://ift.tt/1QuDaxB Tyler Durden

As we detailed initially here, and followed here, there is a clear and present danger – no matter what the vareious Fed speakers say – that The Fed will be forced into negative rates sooner rather than later. The market appears to be losing complete faith in The Fed's current narrative as bets on NIRP have reached record levels – with 2017 now more likely than 2016 (QE first?).

As we showed previously, the overall bets on NIRP continue to soar to record highs…

 

[the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 – basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative]

When queried whether this is indeed a trade to bet on a market drop, Michael Green responded as follows:

[A reader] thought  this might be an attempt by hedge funds to hedge out their exposure to rising interest rates very cheaply.

 

My initial idea was that it actually could be a bet on negative rates (if for some reason the Fed had to come back into the picture with QE4).

 

The bottom line:

 

"Deep OTM puts on the S&P are very expensive while par ED calls are relatively cheap.

 

In my view, we are that inflection point where the Fed is going to start to waffle…the bear market beckons and they will not be able to stick with their interest rate guidance. Of course, markets tend to frown on Central Bankers revealed as less than omniscient…"

As the chart above makes clear, since the initial exposure of this trade, Open Interest has soared as market fragility, The BoJ's shift to NIRP (and Peter Panic Policy), along with various Fed speakers indirectly hinting at the possibility. However, as the chart below indicates, it seems 2017 is now the most likely for NIRP to be unleashed…

 

Which likely means The Fed tries QE in 2016 first, and/or increases its war on cash before negative rates are forced upon Americans.

via Zero Hedge http://ift.tt/1WBM1vy Tyler Durden

Submitted by Pater Tenebrarum via Acting-Man.com,

Should Recessions be Feared and Avoided?

Back in 1969, a monograph by Murray Rothbard was published as a small booklet. Its title was “Economic Depressions: Their Cause and Cure” (readers unfamiliar with the essay can download the pdf version below). The booklet achieved enormous circulation at the time and remains a timeless, trenchant and rigorous analysis of the essence of the business cycle accessible to everyone.

 

A photograph showing a man leaning against a wall next to an empty shopfront during the Great Depression of the 1930s.

A towering intellect, as gifted as an economist as he was as a historian and political and ethical philosopher, Murray Rothbard never lost sight of Ludwig von Mises’ famous admonition:

“Economics must not be relegated to classrooms an statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence.”

We may leave physics and chemistry to experts, but economics is a different matter. Every citizen should at least acquire passing knowledge of economic theory, so as to avoid being bamboozled by ideologues, politicians and their empty promises.

Unfortunately, today most of the economics profession itself has been bought off by the technocratic ruling elite and its central planning agencies. But the powers-that-be have underestimated the internet. Today it is possible for people to access information that has been repressed by the mainstream for decades. The intellectual heirs of Mises and Rothbard can once again make themselves heard.

The new Incrementum chart book (which can be downloaded below) looks at the growing probability of a US recession and asks: how can we recognize whether a recession is likely well ahead of the belated official acknowledgments? Should we actually fear a recession? What, if anything should be done about it? And how can investors safely navigate it?

 

Investors cannot afford to wait for the government to declare that there is a recession; by the time it does, the recession is usually over, or almost over – click to enlarge.

As to the question “what should be done about it?” we will let Murray Rothbard speak:

“[Thus], what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, “ laissez-faire” policy.

 

Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

 

The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.”

(emphasis added)

Indeed, there is no reason to fear recessions or to intervene in them. They represent a healing process. Only by liquidating the malinvestments of the boom and rearranging the economy’s structure of production as quickly as possible to the actual wishes of consumers can a sound recovery be achieved.

Even if one knows nothing about economic theory and the debate between those advocating the free market approach and those in favor of central planning by the bureaucracy, one should by now have realized that the approach pursued by our vaunted policymakers has failed. In Japan this has been demonstrated for 26 years running: no amount of Keynesian deficit spending and monetarist money printing has brought about the desired results.

We believe the snake oil sellers should finally be forced to look for real jobs. We’d be very interested in seeing them serving consumers in the free market rather than forcing their failing prescription on entire populations. It is high time to try a different approach.

Here is a pertinent quote from the conclusion to Rothbard’s essay:

“The time is ripe—for a rediscovery, a renaissance, of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away, and we would see a massive retreat of government from the economic sphere.

 

But for all this to happen, the world of economics, and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years.”

Amen.

 

Murray Rothbard, the irrepressible champion of liberty

Complete Incrementum Chartbook below: Who is Afraid of Recession

via Zero Hedge http://ift.tt/1QTqnPB Tyler Durden

By EconMatters

 

 

 

API and Genscape providers are a slippery slope for financial markets and equal access to information by market participants. The CFTC needs to review the role that these firms play in providing market moving data to select market subscribers, especially since this opens up a whole bunch of issues regarding front running of markets around sensitive economic and market data releases.

 

 

 

 

 

 

 

 

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On Saturday night, all doubts about whether Donald Trump was a serious contender for the White House were erased.

That’s not to say he’s locked up the nomination.

But with last night’s decisive victory in South Carolina, Trump served notice that this is no longer a matter of whether he can make a serious run at the presidency, it’s now a matter of whether Ted Cruz or Marco Rubio can mount a serious challenge.

As was the case in New Hampshire, Trump came into last night’s primary as the runaway favorite. Still, the political punditry (not to mention the GOP establishment) was incredulous and seemed to think that the electorate would “come to its senses” at the last minute and cast their votes for Jeb Bush or Marco Rubio or at the very least for Ted Cruz who isn’t exactly popular with the GOP elite, but at least he’s not telling stories about executing Muslims with bullets dipped in pig’s blood.

(pig’s blood comments begin at 33:00)

No dice. Trump “schlonged” the rest of the field and it’s looking more and more like the unthinkable will soon become reality.

Donald Trump – with his Mexican border wall, Muslim ban, and red, “Make America Great Again” baseball cap in tow – is about to secure the Republican nomination, in what amounts to the surest sign yet that public sentiment no longer bears any resemblance to establishment politics.

Against that backdrop, have a look at the following graphic which shows that while nearly three quarters of GOP voters couldn’t see themselves supporting Trump for the nominaiton last March, the tables have completely turned with nearly the same number now saying they could indeed envision supporting the controversial billionaire. 

And make no mistake, Trump didn’t waste an opportunity to rub salt in the wounds of Megyn Kelly, Fox News, and the GOP establishment with this classic tweet:

“@mikeliberation: This is the best reaction shot I’ve ever seen lol #Trump2016” http://pic.twitter.com/jqxI7QoxEY

— Donald J. Trump (@realDonaldTrump) February 21, 2016

Finally, Trump retweeted the following from Matt Drudge:

OMG! Looks like the latest DRUDGE REPORT poll results! How can that be? ???? http://pic.twitter.com/PZ0CxiAh6O

— MATT DRUDGE (@DRUDGE) February 21, 2016

Get ready America. Your country is going to be “great again” in T-minus 9 months.

via Zero Hedge http://ift.tt/1Ooi6Ba Tyler Durden