5 Things To Ponder: Salmagundi Introspections

3) So Much Inconsistency by Jeffrey Snider via Alhambra Partners

"The primary attempt at maintaining such an imbalanced status quo is the 'recovery.' An actual and sustained period of true economic growth would cover a lot of problems, which is why so many Keynesians long so fondly for the 1950’s that 'paid' off the huge debts of the 1930’s and 1940’s. That was always the plan even from the ashes of the panic, as “extend and pretend” was the proffered 'solution' not to the recovery itself but rather bridging the divide between heavy recession and its natural and organic appearance.

Unfortunately, seven years can no longer be called a 'bridge', as extending so long amounts to admissions of fecklessness. So QE was changed in the public mind from restoring 'normalcy' (market of last resort; backward redistribution) to an economic management tool via inflation expectations (forward redistribution)."

4) The Paradox Of Negative Interest Rates by Izabella Kaminska via FT Alphaville

"As Paul Krugman always likes to recount, strange things happen at the zero bound. Macroeconomics gets weird. Liquidity traps prevail. And a whole slew of paradoxes come into being.

And that’s largely because below the zero bound things get even stranger still.

What you think should happen, doesn’t, and what you think definitely won’t happen, does. Furthermore, negative interest rates don’t just kill off the traditional point of banking, they encourage bad incentives and dubious market practices for all purveyors of capital."

5) Equity Markets No Place For Long-Term Investors by John Hussman via Hussman Funds

"Last week’s advance had the earmarks of a short-squeeze, featuring a low-volume advance to marginal new highs on a number of indices including the S&P 500, on hopes that a Greek bailout and a firming in oil prices will put a floor under global economic deterioration. On factors that affect our estimate of the market return/risk profile, credit spreads remain broadly wider than they were a few months ago, and our primary measures of market internals remain unfavorable. Meanwhile, equity valuations – on the most historically reliable measures we identify – are now fully 117% above their pre-bubble norms, on average. As of Friday, our estimate of prospective 10-year S&P 500 annual nominal total returns has declined to just 1.4%, suggesting that even the dismal 2% yield-to-maturity on 10-year bonds is likely to outperform equities in the decade ahead."