Submitted by Olivier Blanchard via The World Economic Forum,
The stock market movements of the last two weeks are puzzling.
Take the China explanation. A collapse of growth in China would indeed be a world-changing event. But there is just no evidence of such a collapse. At most, there is suggestive evidence of a mild slowdown, and even that is far from certain.
Earlier today, the Baltic Dry Index hit a new all time low.
This is not new: we have been tracking the collapse of the Baltic Dry - aside for the occasional dead cat bounce - to all time lows, a proxy of global shipping and thus trade, for the past 7 years.
To be sure, for staunch goalseeking Keynesian the collapse in Baltic Dry rates had little to do with actual demand for this services, and everything to do with the alleged supply of drybulk shipping, which was the stated reason for the collapse in costs.
In other words, "trade was fine."
Submitted by Rakesh Upadhyay via OilPrice.com,
Warren Buffett has been consistently wrong on oil, but many experts are calling a bottom on oil prices now that the investor extraordinaire has upped his ante in Phillips 66, betting that he can’t be wrong three times in a row.
A wide range of stock market and sector indices appear to be forming large and menacing topping-patterns.
To quote Jason Zweig’s “The Devil's Financial Dictionary”, he reminds us that "technical analysis is a method of predicting the future price of a financial asset by looking at its past prices". So far so good, it is doubtful that anyone would disagree with this description. However, the entry goes on to say that technical analysis "is about as reliable as attempting to forecast tomorrow’s weather by studying yesterday’s".
I see a decline in inflation breakevens and the continuing flattening of the yield curve as being a very worrisome signal about the FOMC’s credibility.
There is distinct lack in the Fed’s ability and/or willingness to achieve its mandated objectives.