Higgenbotham wrote:
> Good earnings reports - Stocks are getting hit hard on great
> earnings - example - DPZ.
> Low interest rates - Rates are going up - example - a 3 month
> t-bill now pays 1.1% from close to zero for most of the past 8
> years.
> Low unemployment - It was just reported manufacturing companies
> can't find workers because there has been a marked increase in
> candidates unable to pass a drug test. Companies are telling the
> local placement offices, "Send us all the refugees you have."
> The first day to day canary in the coal mine I noticed was when
> Costco stock got hit about 20% on the news Amazon bought Whole
> Foods.
Greenspan: Bond bubble about to break because of 'abnormally low'
interest rates
Former Fed Chief Alan Greenspan said "abnormally low" interest
rates will break a bubble in the bond markets.
Greenspan is famous for warning markets about "irrational
exuberance" and the consequences it can bring.
Former Federal Reserve Chairman Alan Greenspan issued a bold warning
Friday that the bond market is on the cusp of a collapse that also
will threaten stock prices.
In a CNBC interview, the long-time central bank chief said the
prolonged period of low interest rates is about to end and, with it, a
bull market in fixed income that has lasted more than three decades.
"The current level of interest rates is abnormally low and there's
only one direction in which they can go, and when they start they will
be rather rapid," Greenspan said on "Squawk Box."
That low interest rate environment has been the product of current
monetary policy at the institution he helmed from 1987-2006. The Fed
took its benchmark rate to near-zero during the financial crisis and
kept it there for seven years after.
Since December 2015, the Fed has approved four rate hikes, but
government bond yields remained mired near record lows.
Greenspan did not criticize the policies of the current Fed. But he
warned that the low rate environment can't last forever and will have
severe consequences once it ends.
"I have no time frame on the forecast," he said. "I have a chart which
goes back to the 1800s and I can tell you that this particular period
sticks out. But you have no way of knowing in advance when it will
actually trigger."
One point he did make about timing is it likely will be quick and take
the market by surprise.
"It looks stronger just before it isn't stronger," he said. Anyone who
thinks they can forecast when the bubble will break is "in for a
disastrous" experience."
In addition to his general work at the Fed, which also featured an
extended period of low rates though nowhere near their current
position, Greenspan is widely known for the "irrational exuberance"
speech he gave at the American Enterprise Institute in 1996. The
speech warned about asset prices and said it is difficult to tell when
a bubble is about to burst.
Those remarks foreshadowed the popping of the dotcom bubble, and the
phrase has found a permanent place in the Wall Street lexicon.
"You can never be quite sure when irrational exuberance arises," he
told CNBC. "I was doing it as part of a much broader speech and
talking about the analysis of the markets and the like, and I wasn't
trying to focus short-term. But the press loved that term."
https://www.cnbc.com/2017/08/04/greensp ... rates.html