Monday, November 4, 2019

Dow Hits Record High; Now Up Nearly 18% on the Year

So much for the Austrian-lites who have been forecasting an imminent stock market crash since the Federal Reserve first raised rates in December 2015.

The Dow Jones has just hit a new record. The S&P 500 and the NADAQ Index are also at new highs.

Monday’s rise brought the Dow’s year-to-date gain to nearly 18%. The S&P 500 is up more than 22% for 2019 and is on pace for its biggest one-year gain since 2013, when it rallied nearly 30%. The Nasdaq is also up more than 27% this year.

Here are some of the things Austrian-lites wrote in the comments back in December 2015:

Robert, you live in San Fran where everything is booming. In middle America things are slowing down. My brother just got laid off from his job at Volvo Powertrain. Almost all shipping and freight related companies and going into a slowdown. That may have something to do with lack of demand for company inventories which statistics show are very high. Do you not see that the stock market is also very overvalued and ready to roll over. There is no energy to push the market past the May highs. Time wise, the multi year market rally is long in the tooth.

Robert how can you not look at manufacturing and bulk dry shipping and every single commodity and retail sales and not think recession hasn't begun?

 Raising to 1% would gouge the bubble and all hell would break loose in financial markets heavily addicted to free money. The bust cycle would erupt in earnest. Can't imagine them being so stupid (as manipulators) to actually go that far. Even if they happen to be stupid enough to start the process tomorrow. 
(RW note: The current Fed funds rate is 1.50% to 1.75%)


This a day before the first rate hike:
 Significant rate raising at this juncture will rapidly and obviously lead to economic collapse in a way that will not allow them to evade being seen as personally responsible. That hot water will burn them. When it comes to personally getting burnt I believe they rapidly become just as smart, perceptive, and realistic as you and I. That’s why I’m betting against a rate raise.


Dow, S&P 500 and Nasdaq all close at records on the Day 


  1. It is true that some Lites were saying in 2015 that the Fed couldn't raise rates even 25 bps without crashing the markets. However, as I recall, the more reasoned and prevalent assertion was that the Fed couldn't materially raise rates, say to approach the mean of 5-6% of years past without crashing the markets. The last comment you posted today gets at that. The market downdraft in December 2018 following the last hike and the subsequent panicky Fed reversal gives validity to that view. To point out the market being at all time highs now following 3 consecutive rate cuts at or near highs after December 2018 seems a little odd vis-a-vis your theory that the Fed "can raise rates without markets crashing."

    1. You have no idea what you are talking about. You need to subscribe to the EPJ Daily Alert

    2. Is that not what happened December 2018? This from EPJ Daily on Jan 7, 2109:

      Greenspan Again Gives Stagflation Warning

      Former Federal Reserve Chairman Alan Greenspan appeared on CNBC this morning and for the second time in recent weeks gave out a warning that stagflation may be ahead.

      "This is an economy which is reminiscent of the 1970s, which was a period of inflation and economic slowdown. That's the type of system we're dealing with unless we can confront the issue of entitlements," he said.

      My thinking is, of course, pretty much in line with his on this point. Government spending is out of control and the Fed will monetize some or all of the growing deficit.

      But Greenspan made the further observation that this growing deficit will crowd out private sector investment which will cut down on productivity gains.

      Productivity gains have had a lot to do with the relatively slow price inflation that we have had.

      I also want to point out, as I have before, Greenspan does not apply Austrian school business cycle theory to his analysis and his comments during the interview were a bit off on current Fed monetary policy but he does watch data very closely, so he will always be among the first to spot trend changes.

      Previously, he has indicated that 4th quarter GDP will be lower than most other forecasters expect.

    3. The current environment is nothing like what the next recession is going to look like. We will not have to debate whether there is a recession or not when it hits.

      Further, if you recall, at the time of the Greenspan comment, money supply growth was slowing but I hesitated to call a recession at that time becasue all the pieces were still not in order, (unlike Austrian-lites who are always predicting imminent recession). And then money supply exploded after the first of the year which has taken recession of the table for the time being.

    4. True. And I certainly recall, to my profit. But the FED quit tightening and opened the spigots -- which, of course, EPJ Daily called in real time each Friday. The FED, I gather, could have chosen to engineer a "correction."

  2. IS it just me or do fundamentals just no longer apply? If You want to ignore transportation volume in bulk dry shipping and commodity and retail sales as red flags that indicate something isnt right, you would really have to be daft to ignore that the Idiocracy is the highest leveraged debt holder per capata in the history of the demographic.

    With that said how well do you think things will go with economic morons in power who still think the consumer can be juiced to save their ass again?

    When I see the market and precious metals climbing at the same time my first question is who is lying ... and knowing what real money is it seems pretty clear.

    Anyone who isnt out of the market better start sliding to the door because you and your profit are on short time.