The Global Central Bankers Christmas Gift to the Financial Gambler’s World! Liquidity Driven Mania: Global Stocks, Tesla and Bitcoin!

 

The Global Central Bankers Christmas Gift to the Financial Gambler’s World! Liquidity Driven Mania: Global Stocks, Tesla and Bitcoin! 

 

Federal Reserve Chairman Jerome Powell (December 16) Rev.com: If you look at PEs, they’re historically high. But in a world where the risk-free rate is going to be low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you’d look at. And that’s not at incredibly low levels, which would mean that they’re not overpriced in that sense. Admittedly, PEs are high, but that’s maybe not as relevant in a world where we think the 10 year treasury is going to be lower than it’s been historically from a return perspective. We also look at borrowing leverage of financial institutions. 

 

Rings a bell? 

 

This time is different, ala Irving Fisher? 

 

Again, from Charlie Bilello (December 19):  

 

Wall Street Week...  

 

1. Stocks: all-time highs  

2. Home prices: all-time highs  

3. Corporate bond yields: all-time lows  

4. Mortgage rates: all-time lows  

5. Jerome Powell @ FOMC Meeting: we need many more years of 0% rates and bond buying to juice the markets & increase inflation. 

 

In charts! 

 

 

The Global Central Bank liquidity Driven Bubbles 

 

 

Sources: Link, link, and link. 

 

Oh, Tesla! 

 

 

Source: Link, link, and link 

 

Bitcoin! 

 

Sources: Link, link, and link. 

 

The Global Central banker’s Christmas Gift to the Financial Speculator’s world! 

 

 

Sources: Hedgeye link and link 

 

 

Newton’s Law Aborts the Formative Nickel Mining Mania

Newton’s Law Aborts the Formative Nickel Mining Mania

The stock market’s breadth has so deteriorated such that even individual stock manias, expressed via price spikes and backed by tall tales, have become incredibly short-lived.

The upside spiral of nickel mining issues in September, mainly due to the ban on Nickel exports by the Indonesian government led to this conclusion.

To be clear, I am positive on the long term prospects of nickel mines, but current developments reveal the penchant of domestic markets to exaggerate pricing.

Most Local Mines Fail to Benefit from Soaring Global Nickel Prices as a Result of Supply Constraints Mostly From Domestic Politics September 8, 2019

Newton’s Third Law of Motion, “For every action, there is an equal and opposite reaction”, has aborted a developing mania in nickel mining favorites.

Aside from plunging global nickel prices, the tumbling marketplace liquidity or lackluster volume has weighed on domestic miners.

 

Aside from the partial reversal by the Indonesian government on the ban on exports last November, which allowed for select miners, the crucial issue may have been the perceived bottoming of nickel inventories that have spurred a plunge in global nickel prices.

 

Nickel prices have dropped even before inventories may have hit the floor.

Neither has the huge gain in global nickel prices in the 3Q have filtered into Nickel Asia Corporation or NIKL’s revenues nor margins.

While Global Ferronickel Holdings or FNI’s margins posted significant improvements in the 3Q, surging nickel prices haven’t inspired a boom in output.

As Warren Buffett aptly stated, only when the tide goes out, do you discover who’s been swimming naked.

Why Electric Vehicles Won’t Sell

It’s basic economics at work

Researchrecap explains, (bold emphasis mine)

A new survey from Deloitte shows that 78 percent of consumers in the United States would consider purchasing an electric vehicle (EV) when fuel prices reach $5.00 per gallon. The study, Gaining traction: Will consumers ride the electric vehicle wave?, surveyed 12,000 consumers globally, including more than 1,000 in the US, and finds that the higher the price of fuel, the more interested consumers are in EVs.

“Offsetting the fuel factor is the finding that the better the fuel efficiency of internal combustion engine (ICE) vehicles, the less interested consumers become in EVs,” said Craig Giffi, vice chairman, Deloitte LLP and U.S. automotive practice leader. “A total of 68 percent of consumers in the U.S. and 57 percent in China are less likely to consider an EV if they are able to find ICEs with a fuel efficiency of 50 miles per gallon.”…

More than half of U.S. consumers surveyed are not willing to pay any price premium for an EV compared to a regular car (ICE) while only 8 percent are willing to pay a price premium of more than $3,000.

Moreover, the overwhelming majority of these consumers (77 percent) expect to pay less than $30,000 net of government incentives. In Europe and China however, it becomes an even more significant challenge as the majority of consumers expect to pay less than $20,000 for an electric vehicle and more than 50 percent of consumers in these markets refuse to pay any kind of price premium for an electric vehicle.

Consumers have continually been weighing on the tradeoff between utility “better the fuel efficiency of internal combustion engine (ICE) vehicles” and prices “when fuel prices reach $5.00 per gallon”.

Currently, fuel prices have not been high enough to sway consumers towards Electric Vehicles (EV). And this has been happening in spite of US government’s interventions (via incentives).

That’s because prices determine people’s actions, as Friedrich von Hayek wrote, (bold highlights mine)

prices are signals which enable us to adapt our activities to unknown events and demands, it is evidently nonsense to believe that we can control prices. You cannot improve a signal if you do not know what it signals.

Bottom line: government intervention has failed to modify people’s behavior. Prices will.