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Looking forward to Market Activity today, 2-11-16, and the "No-Name Collapse"
Bloomberg Futures are not reassuring given the earlier stock market performances in the orient and Europe.
Hong Kong's Hang Seng index was down 42 to 2,539; China's Straights Times was off 12.5 at 2,589. Since the high in the past 52 weeks of 3,507 last April 15th, that is a casual drop of 26%! Nothing to sneeze at.
Europe fares not much better. And, today, Bloomberg shows DJIA futures off in the high 3 digits, inching toward a 300 drop for the day within the realm of reality - or another drop of less than 100 points as recently noticed. Reuter's news leads ponder the resolve of the Fed in Yellen’s announcement yesterday. The new president of the Cleveland Fed, Loretta Mester, took a hawkish position, declaring the US would overcome this "soft Patch". So, to create a softer patch: oil drops further today; gold takes another leap to a position at 1242 about the time of the NY market’s opening; and the global markets toss a flippant glance toward Olivier Blanchard who was "puzzled" by the their movements about 4 weeks ago. He would be - (along with his compatriots such as Paul Krugman who touted the "Not-So-Bad Economy”, in a piece just two months ago, when he lauded Bernanke's courage and "willingness to step in and rescue the financial system") - if he and others stuck with their models and ignored the more honest updates in consumer markets.
This flippancy is not carried on in today's news where the dropping price of oil is still featured in assessing the inflation/deflation situation and the insistence on a low inflation index of 1.4% assuring us the household consumer is not in desperate straights. Again, we insist - Ask the housewife! She finds herself negotiating the turbulence between our modern day Charybdis and Scylla theory and reality – and that desperation carries over to the stock markets these days – our western pundits to the contrary.
A drop of 26% in the Chinese markets cannot be dismissed with a declaration that conditions do not warrant the drop, as Blanchard stated January 18th last. He advanced a couple of arguments protesting the connections, “neither of them convincing.” Conviction would depend on what is offered as a foundation for the rationale. Confusion does not serve in this instance. And, whether “stock market herding” has any place in the current penchant for explanation through “modeling” leads to another series of poorly defined puzzles.
It may seem unfair to separate Blanchard from the field of theoretical economists inasmuch as most of what he has noted in his writing during the recent past is not foreign from O&G’s thoughts. But, the weakness in the satchel full of “tools” today’s trained Economists carry is obvious: faced with melting economies confronting us currently, one attempt after another fall by the wayside and we continue to “slip sideways” with no promise of deliverance from disaster to be found. As a matter of fact, if we were to line up the outstanding papers assessing the situation since 2008 or 2009 Which I’ve attempted with the actual works, the confusion is compounded in the variety of assessments of causes and prognoses which have neither explained nor come to pass.
It’s also begging the question by insisting that we are in an expected situation when we introduce the concept of “secular stagnation”. The name does not competently define the ailment. The doubts that circle the globe dwarf the assurances expressed in economic theory causing a great deal of grief among the economists themselves, with their growing expression of dissatisfaction with the direction being taken – as evidenced in such pieces as the variety of names attached to our condition, in the “secular stagnation” of Larry Summers/Brad DELong/Paul Krugman, the “Balance sheet” disaster of Richard Koos, the ZLB economy, or any of the other descriptions.
We might eventually end up with an economic event being tabbed the “No Name Collapse” to avoid developing more confusion.