"Janet Yellen Sounds Like A Fumbling Idiot No Matter What She Does"
By Tyler Durden
Via FinancialRepressionAuthority.com,
FRA Co-Founder Gordon T.Long and Jeffrey Snider, Head of Global Investment Research at Alhambra Investment Partners discuss earnings, the Chinese Yuan, Japanese Yen and the falling credibility of central banks.
EARNINGS
“It is no doubt that earnings have been under-performing.”
What’s even more concerning is that not even is the top line falling off, but the cash flow is falling dramatically and this impacts credit along with everything else. With no earnings and no cash flow it puts us in a high risk environment. The only thing that has been holding up the market has been excessive corporate buybacks which has come out of cash flow, and to a lesser degree, borrowing. But to borrow is tough when you don’t have the cash flow to justify the credit ratings.
“How long can buybacks continue to support a market which is standing on a fundamentally flawed premise?”
We have had 4 to 5 quarters of falling revenue but the US market seems to ignore it. At some point reality has got to set in. But it is also important to note that trade problems are a systemic factor to the decline in earnings. China’s imports are down 17% year over year, but these imports are coming from basically the emerging markets and commodity markets. They have also borrowed upwards of 9 trillion USD in the last 7 years that has suddenly gotten very expensive for them, I think there is more pain to come.
CHINESE YUAN
“The health of the Yuan is tied into the global economy and the fact that the global economy is stumbling.”
Less growth in China combined with less growth around the world again increases financial risk which fuels more reluctance to funnel dollars into China; it has become a vicious cycle. The Chinese have no choice but to continue going in one direction, they are in a rock in a hard place. As the Chinese Yuan has been falling, the Yen has been rising in strength. This has become a huge issue for Japan to add to their already lost list of issues to deal with. A fracture is likely around the corner, China and Japan cannot go long without devaluing the Yen.
The markets are reassessing what central banks can actually do. And what markets found was that central banks aren’t actually as powerful as everyone believes them to be and Japan is a perfect example of that. No matter what the BOJ does that Yen continues to move on up. It fits into the paradigm of the economy, the financial risk, everyone reevaluating what central banks are capable of etc. The markets are reevaluating central banks because they see that a tight money environment despite efforts from central banks to fuel stimulation.
“Some major European bank stocks are indicative of an incoming banking crisis. We see already low interest rates around the world getting lower with each passing day; this is indicative of …read more
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