Basically Biderman provides a list of data points subject to varying amounts of interpretation. Some numbers are straight forward like money coming in and out of mutual funds and some maybe less so like pension fund activity.
I obviously have no idea whether there is anything to this or not. Biderman concludes that if true it "could trigger a major equities meltdown when the government stops buying and even worse, starts selling." Obviously this sort of buying is done in the hope of stimulating natural buying. One part of this that sticks out as being particularly unhealthy (although there are many things) is that if successful it would stimulate natural buying at high prices. This ties in to the emotional response that causes people to buy in heavy after a big move up or sell out heavy after a big decline.
Bruce Krasting has a very detailed breakdown of the latest Social Security data and it is not good. While you need to read the post in full the key take away, IMO, is that in 2009 income was less than outgo which wasn't supposed to happen until 2016. The reason for this seems reasonably clear, there was a huge drop in the number of employed which results in a reduction in what the program takes in. Should there be some sort of huge gain in the number of employed (which would be a very difficult thing to pull off) then this could reverse but either way it is eye popping.My take on the future of social security has been the same for a while which is simply not to rely on it being there. Krasting notes his opinion that anyone with over $100,000 in income should not get paid and he also talks about the inevitability of higher payroll taxes and reduced benefits. It seems like these sorts of thing will have to be implemented to salvage it but I would focus more on saving more, spending less and working longer.
Earlier this week Art Hogan from Jeffries was on CNBC talking about the new Jeffries Global Industrial Metals ETF (CRBI). He made a comment about it being the only industrial metals ETF. While I am sure that the comment can be spun to be accurate, like maybe it is the only fund whose name specifically includes the words industrial and metals but it is a tad misleading.
CRBI has six of its top ten in common with the iShares S&P Global Materials ETF (MXI) and many big ETF providers have some sort of global or international materials fund (either broad sector fund or narrower theme fund) that is heavy in Rio Tinto, BHP Billiton, Vale, Anglo American and Arcelor Mittal and these funds all tend to trade very closely together. The composition of CRBI could be slightly different but it will look like the other funds in the space the vast majority of the time. Any of them could lead for a short time or lag for a short time but over a stock market cycle the difference would be very difficult to spot. Client holdings mentioned above are MXI, VALE, and Anglo American.
ETF marketing may now be moving into the realm of hairsplitting if it hasn't done so previously.
WisdomTree has filed for a commodity currency ETF. The company has had some success with some of its currency products and this would be an attempt to build on that success. I have picked on them a lot for filing for a fund for just about every single currency but not following through with too many funds but the commodity currency fund seems like a good idea and I think they are motivated to make this one happen.
According to IndexUniverse the currencies included will probably be Australia, Brazil, Canada, Chile, Indonesia, Mexico, New Zealand, Norway, Russia and South Africa. As highly as I think of New Zealand it is not really a commodity country it is more of an agricultural country. They export things that come from farms not things that are mined but maybe that is a po-tay-to po-tah-to thing.
18 comments:
I know that the Italian Central bank has been purchasing stock securities since march/09. It has been in the Italian news. So, I think that this has been a concerted effort from all central banks to do such, including the USA central bank (Fed). To know if the Fed has been purchasing stock issues for sure is to audit the fed. Warren Buffett said that this was a pearl harbour of finance and to use all tools to fight this war. Well they all headed to this call. The Italians have been more transparent and have informed the public, the gov. of rest of the world have done it secretly. Everyone was worried of a meltdown, however this has been a dis-service to those that held cash and wanted to purchase at a lower price. Now the governments are hoping that this will turn around for good. To all cycle evidence we have had a depression and still in it. This time the governments have played differently. I guess that this Kondratieff cycle came at 78years interval. But we also have Kuznets and Kitchin cycles come all at the same time. The impact has been incredible. If there is someone that feels this has not been a depression then look at the prices of AIG from top to bottom. 99% diff. These numbers where seen only during the 29-30 depression. Since we have taken a different path where the central bank purchased securities we not only taken Keynes path, but have taken have gone beyond. The Austrian school with Schumpeter would disagree with such government interventions. The Austrians regard depressions as a cleansing process that the governments should not interfere. However, government interventions are here for a long while, and now we will have to outguess what the fed is buying. We better start reading Carl Max Manifesto and start having a party membership. Good by freedom, let's bring in the wars.
Best,
Jeff from Milan, Italy
"Krasting notes his opinion that anyone with over $100,000 in income should not get paid and he also talks about the inevitability of higher payroll taxes and reduced benefits."
It continues to amaze me when I hear comments like this. Where does it end? So if I pay into the system for 30+ years and ALSO diligently save money in a 401k, I will be penalized. Compare that with someone who saves nothing and spends every dollar they have. They get the money. It makes no sense.
Exactly the same issue as the home mortgage modification. If you bought a house you can't afford then you're rewarded. If you were responsible, too bad.
There is something seriously wrong with the way this country is headed.
bad or imprudent behavior being rewarded in the US? not likely. oh wait.
haven't benefits already been reduced? below a certain age the full benefit doesn't kick in until age 67.
obviously the original design assumed an average payout of zero or maybe a couple of years only based on life expectancy back then. as life expectancy evolved the program did not.
social security is becoming WELFARE whether you like it or not.
"bad or imprudent behavior being rewarded in the US? not likely. oh wait."
haha
you're right, that would NEVER happen
You're right, Roger, the SS program simply didn't evolve with life expectancy.
I didn't plan for SS, but I'm nearly there. I don't believe for one second that the program will go away, but I agree it must be modified. The decision I face is whether to take benefits early to ensure (hope?)I'm grandfathered in, or roll the dice on changes for a bigger payday at full retirement age.
it's not only SS. What about government employee pension plans? Mish talks about these frequently. There are MAJOR unfunding issues with these plans. With states/local muni's broke, where is this money going to come from? If I'm forced to give up some SS benefits because the system is broke, why should government employees continue to receive full pension benefits?
the municipal an other public pensions have prblems for growth assumptions that are not realistic. just read something that said they need 8% growth--oops
I try to smile at Social Security. Each quarter or whatever, we get a statement. When I get home, my wife opens it and says "Hey honey! Look what I get per month if you get injured!"
SD,
dd you buy and stocks at the start of the Yera?
roger - we're in the next greatest bull market of our lifetime! 8% returns should be EASY! (sarcasm)
Roger,
That article by Biderman is flawed from the very start by something John Hussman (who I know you read frequently) writes about often. Money doesn't "flow in to" or "out of" a secondary market such as the stock market. Many market commentators seem to think that the stock market is analogous to a balloon and that liquidity (i.e., money) must "flow in" in order for the S&P maket cap to increase. That's nonsense. Stock prices increase when buyers are more eager than the sellers. For every dollar that "flows in" to the market due to a buy order, one dollar "flows out" of the market due to a corresponding sell order. Rising asset prices do not require any increase in money supply.
As a matter of fact, the one place where Biderman discusses a situation where money actually does flow into the stock market, which is when companies raise capital by issuing new shares, he gets it completely backwards (i.e., he seems to think that issuing new shares represents an outflow of money and share buybacks represent an inflow of money, which is completely wrong).
Overall point: don't take what this guy says seriously - it doesn't seem like he knows what he's tallking about.
- AAG
I'm still rankled that my wife and I "contributed" a hefty six figures of cash into social security for almost 40 years and because of our public school retirement setup we can't recoup a dime.
Are those of us actually working and trying to make our (and other's) lives continually better, even in retirement,on the wrong side of this government's Fiscal Giveaway From Hell?
As they say in Chicago, where's mine??
T
"Mine" is all over the place. Good schools, great library, sewers, water, etc.
Anon 10:07am: I'm gonna add a bit more equity exposure this month. Which probably means you should be ready to sell!
SD,
I was looking for a tip.
Thanks on your info!!!
".....looks like it was manufactured" - Blade Runner
Govt. doing same thing in bond market? Easy, just print money and buy up treasury securities:
http://www.tradersnarrative.com/is-it-all-just-a-ponzi-scheme-3393.html
Doesn't it appear that, as a country, we've been making bad decisions for generations?
Bad decisions for generations?
You mean like the Declaration of Independence, Bill or Rights, abolition of slavery (albeit tolerated for far too long), gradual (albeit too slow) improvements in civil rights, a general (though not always genial) welcoming of immigrants. A general development of workers' rights (too slow, too) with a general encouragement of reasonably free markets. And so forth and so on.
But, if you are looking for utopia, financial or otherwise, good luck with that.
As for the conspiracy theories, I'll pass.
Yeah sure, they have been plenty of screwups along the way. But we're not living in caves, either.
Better to light a single candle than to curse the darkness. Sadly, that approach doesn't seem popular these days.
Call me naive or foolish. I'll just plug along, thank you.
BillM
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