Japan negative interest rates & The Race To The Bottom

Japan negative interest rates 

Japan negative interest rates

Negative rates are not an issue in Japan,  Europe is being plagued with the same disease and eventually, it could infect the whole plant.  However, before we get there let’s look at who stands to benefit in this environment that punishes savers and rewards speculators.

The Corporate world will embrace Negative rates with gusto as it will be akin to a crack addict being given a new dose of super crack. History does not change, only the outfits change, but the con is always the same and the ones left holding the empty bag are the sheep (otherwise known as the masses).

The Fed is trying to put on a brave act, but you can already see them backtracking from the strong stance they took last year. Now they are stating that all is not well, and the economic outlook is weaker than expected. They will have no option but to join the rat pack, however, that was their intention all along.  Moving slower than the rest of the world creates the illusion that the dollar is stronger and in the race to the bottom, the objective is to finish last instead of first.

Central banks declare war on Citizens

Japan negative interest rates: Interest Rates Are Manipulated

The markets are totally controlled and manipulated; every boom and bust cycle was planned in advance of the event.  The chart below illustrates that the economy is far from healthy, in fact, it appears to be almost in a coma and is being forcefully kept a life through immense injections of hot money. Take away the hot money and this illusory economic recovery crumbles; if a market is healthy the velocity of money increases and vice versa. Look at the chart below, the velocity of money is dropping like a falling dagger.

Share buybacks setting new records every year

Last year share buybacks and dividends payments surpassed the one trillion dollar mark, this year they will probably surpass that level.

Companies in the S&P 500 Index are poised to purchase over $165 billion of stock this quarter, bringing them dangerously close to taking breaking the 2007 record.  We are only talking about the S&P500 and not the entire market. Last year share buybacks totalled $1 trillion. This year they will probably surge beyond that mark and congress is not going to do anything to stop this as they are making a boatload of money too.

“Anytime when you’re relying solely on one thing to happen to keep the market going is a dangerous situation,” said Andrew Hopkins, director of equity research at Wilmington Trust Co., which oversees about $70 billion. “Over time, you come to the realization, ‘Look, these companies can’t grow. Borrowing money to buy back stocks is going to come to an end.”’

 “Corporate buybacks are the sole demand for corporate equities in this market,” David Kostin, the chief U.S. equity strategist at Goldman Sachs Group Inc., said in Feb. 23 Bloomberg Television interview. “It’s been a very challenging market this year regarding some of the macro rotations, concerns about China and oil, which have encouraged fund managers to reduce their exposure.”  Full story

Negative rates have already fuelled a property bubble in Switzerland and this bubble will spread everywhere

Fed’s out to destroy Middle Class with negative rates

However, the biggest bubble will probably be corporate debt as U.S corporations will go on feeding binge once rates turn negative.

Japan negative interest rates  may have backfired

When the Bank of Japan announced its plan to move to negative policy rates in 2016, inflation expectations actually fell rather than rose as policymakers had hoped, researchers at the San Francisco Fed wrote in the bank’s latest Economic Letter.

Although the decline might have been a response to the deteriorating economic conditions that prompted the BOJ’s move rather than to the move itself, “the reaction stresses the uncertainty surrounding the effectiveness of negative policy rates as expansionary tools when inflation expectations are anchored at low levels,” they wrote.

Fed policymakers have struggled with low U.S. inflation, cited as one of the reasons why they cut rates last month for the first time in more than a decade. Monday’s research may add to arguments for “preemptive steps” to avoid allowing rates to fall near-zero levels in the first place, the economists wrote. Full Story

Random Thoughts on The Stock Market  Sept 2019

Market Timing works, but what most people label as Market Timing we would label as insanity. Experts are hoping to identify the exact top or bottom, and this is precisely why market timing does not work. Emotions cannot be timed using mathematical models or theoretical constructs, as they are not based on logic. The focus should be on identifying topping and bottoming action and not trying to determine the exact top or bottom. Only fools attempt to do what history has proved over and over again as being impossible

Long Term Outlook Unchanged

This market correction should be a short term aberration unless we have a black swan type event and nobody can predict those, hence the title. However, even if that were to occur (black swan event), we would view it as a fantastic buying opportunity the markets were pushed to even lower levels. Why would we take this stance? The trend is still positive, and until it changes, corrections should be embraced.  The only change in strategy is that we would use our technology tools and risk to reward models to fine-tune our entry points.

Neutral sentiment is close to hitting 50, and on the monthly charts, our technical indicators for all the major indices are trading in the extreme to insanely oversold ranges.  These two developments signal that the Dow could strike 30K a lot faster than even the bullish dreamers could envision.

Other Articles of Interest:

Current Stock Market Trends: Embrace Strong Deviations  (Oct 2)

Market Insights: October Stock Market Crash Update  (Oct 1)

BTC Update: Will Bitcoin Continue Trending Higher  (Sept 17)

Stock Market Forecast For Next 3 months: Up Or Down? (Sept 16)

Stock Market Crash Date: If Only The Experts Knew When (Aug 26)

Nickel Has Put In A long Term Bottom; What’s Next?  (July 31)

AMD vs Intel: Who Will Dominate the Landscape going forward (June 28)

Fiat Currency: Instruments of Mass Destruction     (June 18)

The Retirement Lie The Masses Have Been Conned Into Accepting (June 15)

Stock Market Bull 2019 & Forever QE  (June 13)

Forever QE; the Program that never stops giving    (May 31)

Trending Now News Equates To Garbage; It’s All Talk & No Action  (April 24)

Americans Are Scared Of Investing And The Answer Might Surprise You  (March 9)

Experts Finance Predictions for 2019