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The Issues On The Headlines

Posted on February 10, 2016

The Issues On The Headlines

Posted on February 10, 2016

The Issues on the headlines:

  1. Growing concerns over China's growth and global consumption.

  2. Europe's ECB cut interest rates from -0.2% to -0.3% last month in order to spur demand.

  3. Japan's BoJ has cut interest rates on deposits of excess reserves of cash from its member banks to negative in order to spur the lending of that money for interest rather than the member banks hoarding it at the BoJ. This, amidst its recession given the last few years of the Abenomics stimulus regime.

  4. Whether or not the Fed will raise rates in 2016 or go negative with them as well like Japan.

What's really going on: Deflationary concerns are on the rise and the Fed is the last one in question as to whether they'll follow suite with negative interest rates.

What's telling us there's higher levels of doubt?

  1. The rise in US Treasuries along with Gold in recent weeks have signaled the market's flight-to-safety amidst the unraveling of the stock market in the last two months closing in the red.

  2. Treasuries diverging from trading in the same direction as the stock market. This is a warning signal that heightened concern is on the rise.

  3. The fact that central banks have been stimulating or pushing their interest rates to negative levels is not something to be happy about but rather should be interpreted as a problem. If consumers aren't naturally pulling demand up, then central banks have been trying to push it up by their stimulus measures, which history proves will not end well.

  4. Commodities prices have been in a long-term downtrend since the Summer of 2011 and no one has brought this to light. It was further exacerbated by the oil market falling off a cliff come the Summer of 2014.