MAULDIN: The Dire Economic Sea Change Is Finally Here

BI ^ | 10-14-2014 | John Mauldin

[blam]

John Mauldin
October 14, 2014

You don’t need a weatherman
To know which way the wind blows.

– Bob Dylan, “Subterranean Homesick Blues,” 1965

Full fathom five thy father lies.
Of his bones are coral made.
Those are pearls that were his eyes.
Nothing of him that doth fade,
But doth suffer a sea-change
Into something rich and strange.

– William Shakespeare, The Tempest

Did you feel the economic weather change this week? The shift was subtle, like fall tippy-toeing in after a pleasant summer to surprise us, but I think we’ll look back and say this was the moment when that last grain of sand fell onto the sandpile, triggering many profound fingers of instability in a pile that has long been close to collapse. This is the grain of sand that sets off those long chains of volatility that have been gathering for the last five years, waiting to surprise us with the suddenness and violence of the avalanche they unleash.

I suppose the analogy sprang to mind as I stepped out onto my balcony this morning. Texas has been experiencing one of the most pleasant summers and incredibly wonderful falls in my memory. One of the conversations that seem to occur regularly among locals who have a few decades under their belts here, is just how truly remarkable the weather has been. So it was a bit of a surprise to step out and realize the air had turned brisk. In retrospect it shouldn’t have fazed me. The air has been turning brisk in Texas at some point in October for the six decades that my memory covers, and for quite a few additional millennia, I suspect.

(snip)

[Diana in Wisconsin]

Well, THIS was nice news to wake up to! Battening down the hatches, today! :)

[SatinDoll]

SUBTLE?! Hell no, it wasn’t ‘subtle’.

Someone dumped three-quarters of a billion dollars notional of US equity market exposure in 1 second. This happened yesterday, on Columbus Day, at 1532ET with half the market absent. The result was a complete collapse of all liquidity in the S&P 500 e-mini futures contract - the world’s most liquid equity exposure vehicle...

This Is What Happens When Someone Is Desperate To Sell $750 Million Of Stocks

http://www.zerohedge.com/news/2014-10-13/what-happens-when-someone-desperate-sell-750-million-stocks

[3Fingas]

I shifted most of my of out of stocks a couple of weeks ago.

[Beagle8U]

“What happens if unemployment continues to fall toward 5.5% and inflation drops below 1.5%? Can this Fed – not you or I, but the aggressively Keynesian members sitting on that board – justify raising rates if inflation is only 1.5% and falling? Which is the more important data number, unemployment or inflation? Or do they both need to click into place?”

That puzzle is pretty easy to solve, both numbers have been fudged to the point of being meaningless.

Real inflation is already about a point higher than that, and unemployment is double that.

I hope his entire theory wasn’t based on that.

[glorgau]

> “What happens if unemployment continues to fall toward 5.5% and inflation drops below 1.5%?

Nothing. They’ll just re-jigger the calculation of whatever statistics are used to justify the desired policies.

Unemployment is NOT 5.9% and inflation is NOT 1.5%