(By Mike)The evidence everywhere is unequivocal: Despite trillions in printed dollars, euros, pounds, and yen … despite the passage of almost four years since the heart of the credit crisis … despite all the proclamations of government bureaucrats and central bankers, the economy and capital markets remain on the ropes!
Take housing …
I told you last week about the almost-6 percent drop in housing starts — to the lowest level since October — we had in March. Well, now we've learned that existing home sales also whiffed!
Those "used" home sales fell 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March. That was a worse than expected result, and the third time in the past four months that sales fell. So much for the vigorous housing rebound we keep hearing about!
[Related -How to Tell False Hope From Rational Optimism]
New home sales also dropped 7.1 percent in March. Plus, the slump in April builder confidence and buyer traffic that I also told you about foreshadows even-weaker results in the future.
What about manufacturing?
Well, durable goods orders just imploded 4.2 percent in March. Not only did that miss forecasts for a 1.7 percent dip by a country mile, but it was also the worst decline in ANY month going all the way back to January 2009 when we were mired in a deep recession.
Things aren't getting any better overseas, either!
The U.K. economy just officially sank into its first "double dip" recession since the 1970s, slumping 0.2 percent in the first quarter. Spanish default insurance costs just hit a record high. European sovereign debt yields are continuing to climb in countries like France and Italy.
[Related -The US Macro Trend Holds Steady To Date Amid Market Turmoil]
Heck, even the relative cost of borrowing for the Continent's main bailout fund — the EFSF — hit its highest level in four months! How can the fund come to the rescue of indebted sovereign nations if its own cost of raising bailout funds rises sharply? Answer: It can't!
… everything looks like a nail!
So here you have rock-solid, irrefutable evidence that printing gobs of money and spewing untold hours of happy talk isn't working. You have undeniable proof that all it buys you is a few weeks or months of relief, brief bounces in a continued long-term slump lower for growth and asset values.
Yet what do the powers-that-be do? They call for more of the same failed medicine!
Uber-"doves" at the Fed, such as Federal Reserve Vice Chairman Janet Yellen and New York Fed President Bill Dudley, reiterate statements like "a highly accommodative policy stance is appropriate" virtually any chance they get.
|As long as Bernanke is at the Fed's helm, you can expect the nonstop money printing to continue. |
Adam Posen, an American economist on the Bank of England's monetary policy committee, claims the BOE "cannot take our foot off the pedal … the right thing to do now is engage in more monetary stimulus!" This despite the UTTER FAILURE of previous rounds of money printing to actually accomplish anything for the real U.K. economy.
And of course, Ben Bernanke said at his post-meeting press conference on Wednesday that "we remain able and willing to take further action" — meaning more money printing — if the economy weakens. This despite the fact we know that QE only gooses asset prices, while accomplishing little to nothing for the real U.S. economy.
The Bottom Line for
Investors Like You!
The Fed has nearly tripled the size of its balance sheet to almost 17 percent of GDP in the past few years. The ECB and Bank of Japan have ballooned their balance sheets to around 30 percent of GDP. We're talking about multiple trillions of dollars, euros, yen, and so on poured into the global economy — with little lasting, sustainable progress.
But when the only tool you have is a hammer — printing money — every problem looks like a nail! You can't do anything but print, print, print!
As an investor, your best course of action is to target select investment vehicles that will benefit from Bernanke's reckless monetary policy … because it's the policy we're stuck with until his term is up! Think higher-yielding alternatives to Treasuries like dividend-paying stocks or safer corporate bonds.
At the same time you want to avoid those investments that are more leveraged to the real economy. I've already warned about the risks to housing-related stocks. I would add many globally diversified manufacturers and technology companies to that list, given what we know about the state of affairs in Europe and the U.S.
Until next time,
P.S. In the April issue of my Safe Money Report, I told members that when it comes to the value of paper money, it's a global race to the bottom, and the only way to win is to buy protection. Then I gave them a recommendation on exactly how to do that.
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