The Federal reserve raises the prospects because their backing off is the only stimulus they can provide besides lowering rates by.25%. The Fed is in a horrible situation if a cyclical downturn happens and given the cycle is 6 years old, it is coming. Sadly the Fed's extension of the cycle is priming us for a disastrous downturn potentially as bad as the last one caused by the Fed extending the cycle and being overly lax throughout the cycle. If that sounds familiar... it is.

Sadly, no one cares until they realize they should have cared. Worse yet, Puerto Rico is just the tip of the iceberg. Central banks were too busy passing out artificial liquidity to their banker friends they will have nothing available for dealing with real crisis like Puerto Rico, Argentina, India,or Greece's defaults. Worse yet, the easy money policies have gotten banks to overfund such spending to the point where it will be felt well beyond the country/territory directly affected.

Thanks for the comment. I have seen similar charts and agree with you that gold has risen for long periods in lockstep with the US dollar. I think many people's economic sensibilities are disoriented by the Federal Reserves absurd zirp, QE games that have turned the US economy into a zombie with TBTF banks dependent on the drug called artificial liquidity.

When assets are no longer something of value and saving is stupid, am I the only one who is saying central bankers are undermining capitalism? In reality, debtism is central planning and destroys individuals ability to control their destiny. No wonder there is no economic growth. It is a wonder there isn't sheer panic.

We continue to trade in a very wide trading range. Although the author is right that the trend is now down again, we will have to see if it breaks the bottom of the lower band by much. It is hard to break a long Federal Reserve inspired cycle. However, as we are about to find out, it is inevitable and that's why the Fed shouldn't blow asset bubbles in the first place.

It is becoming increasingly clear that without the Federal Reserve getting new powers to enrich bankers again without good or services rendered, a major run up from the previous high is almost impossible. That then leaves the bankers to wonder which daft one will hang themselves by holding the bag the next time the Federal Reserve says buy. I feel sorry for the dumb fool.

Although a downside will look brutal, it is much better than continuing on this managed economy track run by anti-capitalists against those who have money besides the bankers themselves. I've heard they are arguing now for taxing assets since they can't falsely tax assets with negative rates. That would be against the Constitution. The point is, the Federal Reserve isn't even part of the government and has no public elected representation. What right do they have to make deals behind the public's back that attempt to undermine and wrest control of assets the public holds? Politicians should disclose every meeting discussion they have lest they be complicit in the selling out of the American public.

Needless to say, the Federal Reserve looks desperate and is seeking even more abusive powers to undermine capitalism. That's because they should know another bad downturn at close to zirp rates will be blamed on them and their dissolution will be proposed by more than just Bernie Sanders.

And these numbers are the cost for living in a small rental space, not really living much at all. If you want to buy or rent a home there the price is even more ridiculous.

The discussion shifted to government taxing because the Federal Reserve has already gone to Washington and have been told that negative rates are an unrepresented illegal tax from a non-government organization that violates the Constitution. The simple fact is we must deal with economic cycles and stop playing let's follow Alice down the hole to Wonderland. As Japan has proved, it's far from wonderful. There is less and less growth, people get poorer and poorer, the government goes bankrupt making money to operate, and inevitably something worse happens.

The only real benefit is that banks slowly end up owning more of the country, the Federal Reserve gets more powers that belong to the government (and thus the people), TBTF banks make huge spreads on borrowing money at nothing or next to nothing, and TBTF banks get to gamble and not worry because taxpayers are the ones who will pay the price if they can make their losses big enough to get a bailout every time (they have to pay for small losses thus they prefer catastrophic events the Federal reserve is currently making).

Another reason why we don’t like Bank of America is because the company’s cost of capital exceeds its return on capital. This means that Bank of America destroys value with every new dollar it invests. Specifically, BAC’s weighted average cost of capital is around 5.9%, and its return on invested capital (using TTM of income statement data) is only 4.4%. This value destroying relationship is true of some other big banks (e.g. Citigroup), but not true of all of them (e.g. Wells Fargo). A similar value destroying relationship is true of BAC’s cost of equity (~11.3%) and its return on equity (3.4%).

This is a good enough reason in itself. The sad fact is many TBTF banks forgot how to do banking and would die if they couldn't get zirp or near zirp borrowings and loan out to the public at absurd rate differentials. They need to be dismantled or die like the dinosaurs.

Agreed. Deleveraging or pulling some out every year past 6 years is good, especially when you know the market is supported either by unsustainable government spending or artificially manipulated low rates by the Federal Reserve. The simple fact is that shorter periods between downturns usually mean smaller declines. The bad ones come from Federal Reserve manipulation like the last one as they try to prolong the cycle by making things much worse.

Sadly, I'm sure the Federal Reserve knows this, however, they get their power by artificially preventing the short normal course of downturns to please the politicians who give them and their member banks governmental power, protection, and wealth. It's a deal made in cold dark recesses of hell. Let capitalism function properly. The current Federal Reserve seems bent on extending a cycle out so long with so much low rates that it will cause massive debt accumulation that will create another Great Depression unless the Federal Reserve is given the power to issue more QE to their member banks to buy up the assets of those they disenfranchised with too much temporary cheap debt.

Fortunately China has used some of that money to buy US Treasuries and some to buy gold. They should be ok for the time being, however, the trend isn't good. The same could be said about the US or Japan as well who have a very bad and growing unsustainable debt trend.