BIS: All Asset Prices Elevated

In its quarterly review, released Sunday, the Bank of International Settlements (BIS) stated that the Central Banks have elevated prices of all asset prices. As reported by Reuters-

In its quarterly review, the BIS said financial market volatility spiked higher in August on the back of geopolitical concerns and worries over economic growth, but quickly returned to "exceptional lows" across most asset classes.

"By fostering risk-taking and the search for yield, accommodative monetary policies thus continued to contribute to an environment of elevated asset price valuations and exceptionally subdued volatility," the BIS said.

The comments echoed the institution's warning earlier this year that rock-bottom interest rates had led to "worrying" signs of unsustainable growth in property and credit markets in some countries.

At some point,  manipulating asset prices will lead to another downturn, and with all prices being manipulated the risks we see an event paling the 2008/2009 recession are increased. But similar to the Heidelberg Uncertainty principle, you can place a probability on what or when but rarely both. Historically, downturn has corresponded with a contraction in the central banks balance sheet and/or high powered money, but will this time be different? Will it be a change in the rate of change that sends events down?

The Dollar Is Not What It Used to Be

Via- The Burning Platform blog

Let Banks Fail!- Dr. David Howden

From the Mises Institute

The Dollar Rally Won't Give Up the Ghost

The rally in the dollar just won't give it up.

This is as the many of the technical measures are flattening on the momentum side, and have been, while flashing the recent price rise has moved to more extreme levels relative to the recent past. However, this move in the dollar makes sense in regards to the analogy of saying the ugly sister looks beautiful relative to her even worse off siblings. Just look at the price trends of the British Pound, the Euro, and the Yen.

Pound

Euro

Yen

A virtual litany of who's-who in money printing and currency debasement. By proxy, and despite the unlikely event the Fed will reduce an overly bloated balance sheet that stands leveraged over 50-to-1, the dollar is the winner. When seeing this dynamic, I am reminded of comments from many Austrians For instance, like the comments from Jim Roger's below. 

“Brazil, China and Russia could easily put something together to compete with the US dollar,” Rogers said, leaving out one component of the BRICs alliance. “The US dollar is a terribly flawed currency. I’m an American. I hate to say that. But the US has serious problems, the world has serious problems. We need something else” and potentially a competing world currency could be developed. If this were to occur, the US and its economy might be put in a straight jacket as the ability to engage in large deficit spending could be curtailed." 

For now, the ugly sister that is the dollar is winning, but that does not make her pretty.

An Argument for Behavioral Finance/Contrarian Investing

I was reading this article from the WSJ earlier today and it provides a very good, indirect argument for contrarian investing.

It happened last Sunday at football stadiums around the country. Suddenly, 50,000 individuals became a single unit, almost a single mind, focused intently on what was happening on the field—that particular touchdown grab or dive into the end zone. Somehow, virtually simultaneously, each of those 50,000 people tuned into what the other 49,999 were looking at. 

Becoming part of a crowd can be exhilarating or terrifying: The same mechanisms that make people fans can just as easily make them fanatics. And throughout human history we have constructed institutions that provide that dangerous, enthralling thrill. The Coliseum that hosts my local Oakland Raiders is, after all, just a modern knockoff of the massive theater that housed Roman crowds cheering their favorite gladiators 2,000 years ago.

(For Oakland fans, like my family, it's particularly clear that participating in the Raider Nation is responsible for much of the games' appeal—it certainly isn't the generally pathetic football.)

In fact, recent studies suggest that our sensitivity to crowds is built into our perceptual system and operates in a remarkably swift and automatic way. In a 2012 paper in the Proceedings of the National Academy of Sciences, A.C. Gallup, then at Princeton University, and colleagues looked at the crowds that gather in shopping centers and train stations.

Other social animals have dedicated brain mechanisms for coordinating their action—that's what's behind the graceful rhythms of a flock of birds or a school of fish. It may be hard to think of the eccentric, gothic pirates of Oakland's Raider Nation in the same way. A fan I know says that going to a game is like being plunged into an unusually friendly and cooperative postapocalyptic dystopia—a marijuana-mellowed Mad Max. 

The remainder can be found here.

Fed Haters vs. Fed Cheerleaders

I am siding the with Austrians on this debate.

How to Stay Disciplined in Investing

Some great advice here. Jives with an article I was reading earlier today about crowd following.