Tuesday, August 25, 2015

Green Heat

Following extreme volatility in recent days, where many forecasters called the Dow drop of 1,000 plus points the start of a major breakdown in the economy, probably a  world collapse---- everything is turning up green today,

Here's the current heat map for the S&P 500, nearly all green:

This is not to say that we have green fields ahead for US markets, they are extremely vulnerable, especially right now, given the recent slowdown in US money supply growth. However, yesterday's decline was not the start of some kind of biblical financial judgement day. It is just typical business cycle action caused by the great cycle maker, the Federal Reserve.

The crises are likely to be more volatile and intense as time moves on, but we are years away from a potential crackup of the entire US economy, if, indeed, one ever occurs. The Fed does enough damage with the current roller coaster rides, it needs to be stopped because of this, regardless of whether a crackup of the entire economy occurs. And, note well, when I refer to  crackup, I am not talking about stock market and economic crashes caused by Fed policy, These will occur from time to time. When I think crackup, I am thinking price inflation at double digits rates of 20% or more. This can not be ruled out in the future, but it is not going to occur this year and it is not going to rage that strongly in 2016,

Keep things in perspective here.


1 comment:

  1. RW-

    Bravo. The potential for a black swan that REALLY screws us will not likely emerge from the stock market.