Stock Indexes. Precious Metals and Inflation, AUD, GBP, HK Economy, Oil and Iran

Rarely has in the past have you seen so many anomalies in the market, look no further to interest rate rise hypes vs a softening US economy, a still rising HK housing market after new measures to dam the rise by govt vs fast softening of the retail, tourist market and even the export sector as well, Bank of England saying it may raise rates soon vs a fast weakening GBP [which means a weak economy].

Dow
As said earlier in this blog, fluctuations and closings in the range of 300 points difference happens only in a very low and stabling market or when market is topping out, at this index level now or earlier, it must be topping out and would go lower by 5-8% from the top of 18300. Expect further easing or delay of any rate rise.


China A share market
The A-H share market gap has been closing in before the breakout in late 2014, this now widening gap is caused mainly by a highly geared market with people pouring in their savings and gear up for fast gains, but it's not going to last very long.

Imagine not look ago before the breakout, the turnover is less than 100B RMB, now it is 1000B, 10 times higher and a high of 1500B has been reached earlier.  Any rough turn can cause market to fall like dominoes. The further easing of qualified participants and the rules in the HK-Shanghai stock connect will pull more fund flows away from A share market esp the fund management industry looking for more stable gains though not by much as the limits set up in the stock connect is way below turnover in the A share market.

HSI
Back in late Feb / early March, I have discussed with friends over lunch and dinner that the market will go up slowly and sure it has, but how far? Now it looks the timing is once 257-26000 is reached, a deeper consolidation of also 5-8% can happen. This level at 26000 coincides with a resistance set up in 2007.

Inflation Precious Metals and Commodities
Gold has always in the past been lower than Platinum, why is Platinum now lower than Gold. Look at it two ways, first there is weak [global] demand for Platinum even at industrial levels while Gold is forecasting that QE will continue significantly because economies are hitting road blocks everywhere, this will boomerang back to US, the US economy is not immune to such attacks, soon it will show up in the profits of SP500 companies. The weak Platinum prices also points to low inflation because of weak global demand across the whole commodity industry not only Platinum alone.

AUD
AUD recently breaks lower than 0.76, as it is a mirror on the Chinese economy, expect further easing in bank lending and credit markets in China.

GBP
BOE may be surprised to know that recent weakness in GBP points to lower investment by Russians in UK and much slower outflow of funds to UK from Russia/ME. Its economy is buoyed in the past by ME countries and Russia, since the fall in oil prices, this hurts funds flowing into UK and its economy could weaken faster than expected. I do not think it can raise rates given much less investments in UK after oil prices drop, just remember UK relies also on oil revenue from North Sea for part of its economy.

Have you heard a recent saying about UK?  If UK is added as a state to the US, without London, it is the poorest state, with London it is second poorest. So can you imagine such a poor developed country raising rates while its economy is in such an unstable state!!!

Oil and Iran
Why is US in such great rush to ease sanctions? In the past she is holding up supplies of Iran with sanctions and stirring up unrest in ME so oil prices held up well, this will help shale gas exploration and production. Europe goes along with these measures and unrest hurting her petro industries and economies as the gap was once as wide as USD20 hitting a high at 130+ for Brent while only 110+ for Texas sweet.

Shale gas production needs at least 75 per barrel to break even, but after sunk costs, it needs much less to produce until oil dries up in those wells but the cut in expenditure for exploration is hurting employment, this starts to show up 3-6 months after oil price hit a low of 40+. The US will also soon face blowups in credit markets for shale gas industry as current revenues at recent oil prices can never support repayment and interest.

The easing of oil prices in the past year is a tactic to corner Russia interference in Ukraine, now that oil prices is stabilizing, the further supply of Iran after easing of sanctions will cause oil price to stay low and this will hurt Russia longer.

US is sacrificing the shale gas industry to target its rival - Russia.

HK Economy
The recent rise in USD hurts not only the US but HK as well since many EM countries' currencies fall, their outbound tourists are not visiting HK or they travel less, the slowdown in China and anti-corruption measures also is not helping HK's tourism, the blame on anti-China tourists protest is just a side issue.  Look further to the fall in gaming revenues of Macau, off 39% in March. A lot of the money laundering [underground funds outflow] is by UnionPay, this channel has now been under close scrutiny, thus the higher RMB rate recently, without further flows to the offshore Yuan market, the high RMB rate can hurt exports even more. The easing of HK-Shanghai stock connect and maybe the opening of the HK-Shenzhen stock connect could also provide more funds to the offshore Yuan market. Do not forget the largest offshore Yuan market is in HK which shrinks for 2 months in a row already.

For the real estate market, two forces - rising unemployment and QE overseas will counteract each other in the fall and rise of the market.

All these seems to fall in line with the 26000 HSI level that is within reach and correction after when a weaker economy is getting more entrenched.

Big Anomalies - Crude, Gold, Platinum, Silver, Stock prices

We have recently seen a big drop in crude prices and there are talks of 30/40 dollars of crude prices.

Did the US govt engineer the move to hurt Russia? Most people think so and she might have sold reserves in the spot market to push down futures.

Silver has been below the $19/20 level a long way and that level is considered the threshold for a weak economy and sure it is now for Japan and Europe, but stocks keep on rising.

Look at crude prices vs gold, gold has been unusually strong, if there is no inflation, who would buy gold, but the $1200 level seems to hold.

So which is right, gold holds at this level and crude going up soon or crude holds  at current level and gold declines?

Another strange factor is platinum [$1193 current price], it has always been more expensive than gold [$1198], why is it now in the same ballpark with gold or even lower in terms of prices.

Many conventional relationships are challenged at the same time, is it because of serious manipulation that past relationships will eventually resurface or this is a new norm for all these metals, commodities and stock prices!

Dow has also been in extra volatility, falling 300 points and rising 300/400 points, is this getting close to the peak as volatility happens at low and high points, rarely in the middle.

Time will tell, but meantime we must caution ourselves to take less risk and patiently wait for more signals to confirm the truth.

With so many anomalies happening, the chance of a 2015 recession or stock pull back becomes not so remote except in the event of a large QE by EU.

Bust of US Shale production?

further article from outsider club
guys who want to also read the chart or tables which are a bit out of bound here can email me.

The Coming Bust of the U.S. Shale Oil & Gas Ponzi

In just the past four years, oil production in the U.S. has grown a staggering 46%, adding 2.5 mbd — all due to shale oil production.
With this huge uptick in domestic oil production, there are an increasing number of reports stating that the U.S. will become energy independent.
According to the article, "The Energy Revolution 'Made In America'":

• Citibank -- U.S. independence from energy imports could even begin at the end of this decade.
   
• NIC -- National Intelligence Council -- U.S. could become a significant energy exporter from 2020 on.
   
• IEA -- International Energy Agency -- U.S .could become a net exporter of gas beginning in 2020, and practically develop into a complete self-sufficient energy provider by 2035.

So there we have it... three official organizations with forecasts of U.S. energy independence by 2020 or complete self-sufficiency by 2035.
These forecasts provide a very optimistic outlook for U.S. energy production far into the future... so why should we worry?
The Coming Bust of the U.S. Shale Oil Boom
With all booms comes the inevitable bust. This is no different with shale oil. The majority of shale oil production in the U.S. comes from two fields — the Bakken & Eagle Ford. While production has increased significantly in these two fields, it comes at a huge cost.
The typical Bakken oil well declines approximately 40% per year. That's right — oil wells in the Bakken are declining nearly ten times faster than the global 4-5% average discussed previously.
The chart below shows that the Bakken is losing an amazing 63,000 bd (barrels per day) of production as of December 2013. The trend remains unbroken through today.

This means the oil companies drilling in the Bakken had to add more than 63,000 bd in December if they wanted to increase production... and they did. According to the U.S. Energy Information Administration (EIA), the Bakken added 89,000 barrels of new production in December 2013. If you look at the chart below, you will see the +89,000 bd of new production minus the 63,000 bd of declines to equal a net increase 26,000 bd in December.

You will notice on the left side of this chart that in November, the Bakken was producing a total of 976,000 bd. When we add the 26,000 bd of net new production for December, the new overall total is 1,002,000 bd, or over 1 million barrels a day.
Even though the Bakken is now producing over 1 million barrels of oil per day, take a look how much worse the declines in oil production will get in the next few years. If we assume the current trend will continue, we can see how much production will decline by the end of 2015:

Bakken Oil Production Decline Rate:              

• Dec 2009 = -13,000 bd
• Dec 2010 = -20,000 bd
• Dec 2011 = -30,000 bd
• Dec 2012 = -47,000 bd
• Dec 2013 = -63,000 bd
• Dec 2014 = -80,000 bd (estimated)
• Dec 2015 = -97,000 bd (estimated)

The Bakken is currently losing about 17,000 bd each year of production. So by 2015, the oil companies in the Bakken will have to drill even more wells to surpass that 97,000 bd estimated decline rate if they want to increase production. This is exactly what they have been doing ever since they started drilling the Bakken oil field.
I don't want to get into too many numbers here, but the graph below shows how many new wells have been added in the Bakken since 2007. The total well figures below are for the North Dakota portion of the Bakken, which produces +90% of Bakken oil. A small portion of the Bakken is located in Montana, but the state does not publish monthly updated information.

As you can see, there were only 479 wells producing in 2008. This nearly doubled in 2009 to 891 wells and by last count was 6,447. The total number of wells will have to keep increasing if they want the Bakken to continue to grow.
The huge fall in production that is taking place in the Bakken is also occurring in the other large shale oil field in the U.S. — the Eagle Ford.
The Eagle Ford shale oil field is experiencing an even higher rate of decline than the Bakken. According to the EIA, the Eagle Ford is estimated to have a decline rate of 83,000 bd in December. This is 20,000 bd more than the Bakken, and it will continue to fall even further in the next several years. This is the elephant in the living room that no one in the oil industry wants to talk about — the huge decline rates.
Shale oil fields only contain so many sweet spots and a certain amount of total drilling locations. Moreover, the farther out from the sweet spot the company drills, the less productive the well. So once the sweet spots are exploited and the best locations are drilled, production peaks and declines.
David Hughes, a geoscientist with nearly 4 decades of experience studying the resources in Canada, including 32 years at the Geological Survey of Canada, recently wrote a report titled "The Shale Revolution: Myth and Realities." Hughes forecasts that production from the Bakken and Eagle Ford will peak in approximately 2016. This is only a few years away.
So much for the notion that we are going to have decades of a cheap and abundant domestic oil supply.
Now that we know production from U.S. shale oil fields will more than likely peak within the next few years, keeping the country from achieving energy independence, what about that supposed 100-year supply of natural gas that the shale industry has been hyping in the media?
The U.S. Shale Gas Industry Has Been a Commercial Failure
The subhead line above is an actual statement from another excellent energy analyst that I will get to in a moment. However, I wanted to first list a few of the points as they pertain to conventional wisdom regarding the U.S. Shale Gas Industry from David Hughes' report:

• Shale Gas production will continue to grow for the foreseeable future (2040 at least) and prices will remain below $4.50 for the next 10 years and below $6.00 for the next 20 years.
• Shale Gas can replace very substantial amounts of oil for transportation and coal for electric generation.

Basically, the overall view concerning U.S. shale gas by the industry is, "We got lots of it at real cheap prices."
While I see nothing better for the United States than to become energy independent with decades of cheap oil and natural gas, it looks like the shale gas industry is in much worse shape than its shale oil counterpart. This is according to our next shale-hype slayer and energy analyst, Art Berman.
Art Berman, Director of Labyrinth Consulting Services, is a petroleum geologist with 34 years of oil and gas experience, including 20 years with Amoco (now BP) and fourteen years as a consulting geologist. Art has been one of the most outspoken critics of the shale energy hype for the past several years.
Recently, Art gave a presentation to the Houston Geological Society called "Reflections of a Decade of U.S. Shale Gas Plays."
In his presentation, Art discusses the slides below, revealing the truth about the profitability of the Haynesville shale gas field. He says that with natural gas at $4.00 (as they were at the time) there are no commercially viable areas in the Haynesville.

Art shows that at $6.00 natural gas, only 6% of the Haynesville (in yellow) is commercial. This data is significant because the price of natural gas has been trading at a low range of $2-$4.50 for the past three years.
Basically, the companies drilling and extracting shale gas in the Haynesville have been losing their shirts... selling their product for less than it costs to produce
Furthermore, what is taking place in the Haynesville is also occurring in the majority of the other shale gas fields in the country.
The Barnett shale gas field was the first to be exploited in a large way in the United States. Labyrinth Consulting Services did an in-depth study of Barnett, which Art included in a presentation titled "Shale Gas - Abundance or Mirage." In this report, it stated that of the 9,100 wells surveyed (between 2003-2009) of the total 15,000 wells in the Barnett, less than 6% met minimum economic threshold levels.
Moreover, Mr. Berman believes the average break-even price for the shale gas industry is somewhere between $6-$7. This proves that the so-called conventional wisdom that the U.S. will produce natural gas for 10 years below $4.50 and for $6.00 for the next 20 years is pure nonsense.
You see, this is the common theme in the shale gas industry — a reality not understood by the American public. Shale gas wells are suffering the same, or even higher, annual decline rates as shale oil wells. This means the shale gas drillers have to continue to drill more wells each year to keep overall production from declining. By doing so, the industry has brought on a great deal of natural gas supply that has depressed the price.
This is known as the "Drilling Treadmill." Once you start, you can't get off or else gas production falls off a cliff. Interestingly, this turns out to be the brontosaurus in the living room that the shale gas industry doesn't want to talk about.
So how is this non-commercial shale energy disaster impacting the largest shale gas companies? A great deal, as you are about to find out.
The Great Shale Gas Ponzi Scheme
Those in the energy industry probably wouldn't use a term like "Ponzi Scheme" to label what is occurring in U.S. shale gas production; however, I believe it is a perfect description of what is taking place. Because the shale gas companies have to spend an increasing amount of money on capital expenditures to keep production from falling, they are swimming in debt.
The data below also comes from Mr. Berman's most recent presentation. Here we can see that the major shale gas companies — Chesapeake, Southwestern, Devon and EOG — are spending a great deal more money on capital expenditures than they are receiving in cash flow from operations.

The combined capital expenditures from these four major shale gas companies in the five-year period between 2008-2012 was $133 billion, while their operational cash flow was only $80 billion. Thus, their free cash flow was a negative $53 billion. Which means these companies had to acquire additional funds to continue the "Drilling Treadmill."
One of the major problems companies face with capital expenditures in the shale energy industry is that they can't sit back and reap the rewards by collecting a great deal of revenue for many years like companies in other industries are able to do. This is due to the rapid decline of the shale gas wells and the considerable loss of revenue as time goes by. Many of these shale gas wells could be capped and shut after 6-10 years of production.
Also, shale gas fields, just like shale oil fields, have only so many sweet spots and a finite number of drilling locations. So at some point in time (much sooner than later), these shale gas fields will peak and decline. And wouldn't you know it... that's exactly what's happening right now.Bill Powers (another top notch energy analyst), in his recent interview, "Give Up The Shale Gas Fantasy And Profit When The Bubble Bursts," had this to say about the peaking of several shale gas fields:

The facts are starting to show that declines for the older shale plays such as the Barnett, Haynesville, Fayetteville and Woodford are very serious.

This can be clearly seen in the chart below showing the peak of gas production from the Barnett Shale Field. Gas production increased steadily since 2000, peaking in November 2011 at 6.3 Bcf/day (billion cubic feet per day). It fell 24% to 4.8 Bcf/day by June 2013. This provides more evidence revealing just how dire the future energy predicament will be for the United States.

Very few Americans are aware that the production from these shale oil and gas fields will not continue to grow and last for several decades.
When we look at all the data presented here, it is clear to see that the shale energy industry in the United States is behaving more like a Ponzi scheme rather than a long-term viable economic energy system. Shale oil and gas companies have to spend more money each year to increase production or it will fall off a cliff.
While it is true that there is a great deal of supposed shale oil and gas resources in many countries around the globe, several of the analysts quoted in this report do not believe this short-term U.S. shale revolution can be replicated throughout the world. This is due to several factors, such as the lack of infrastructure, water, and technical expertise, and reduced property and mineral rights.
Once the U.S. peaks in shale oil and gas production in the next several years, there is no Plan B. Art Berman got it right when he made this remark about shale energy during his presentation: "Folks, this isn't a new Energy Revolution.... it's a Retirement Party."
The peak and decline of U.S. and global oil production will have a devastating impact on the world's economies and the majority of paper assets. While some individuals already see the writing on the wall, unfortunately the majority of investors have not yet connected the dots.

2015 Crash?

an article from outsider club

Get Ready for the 2015 Market Crash

Get Ready for the 2015 Market Crash
Over the past five years, we've enjoyed one of the longest, and most generous, bull markets in history.
But all good things must come to an end.
No bull market lasts forever, and this one has about run its course.
You don't have to take my word for it.
There's plenty of historical precedent to make the case for me...
You see, since 1928, the average duration of a bull market is 57 months. This one is now 68 months running. It's also returned 190%, compared to the average 165%.
Valuations have gotten so high that financial consultant Andrew Smithers believes we're in the third-biggest stock bubble in history.
Looking at key long-term measures, Smithers says U.S. stocks are now about 80% overvalued. And since 1802 (when data was first tracked), there have been only five times when stocks have been more than 50% overvalued: 1853, 1906, 1929, 1969, and 1999.
Each one of those years marked the peak of a massive, once-in-a-generation stock-market bubble. And only two of those bubbles (1929 and 1999) were bigger than today's.
Of course, historical precedent isn't the only headwind this market faces. Looking forward, anyone can see things are getting bad.

Global Economy Stalling

The engines of the global economy are stalling, one by one.
Mature economies, like Europe and Japan, are hardly growing at all.
The OECD predicts Eurozone growth will come in at 0.8% this year, and just 1.1% in 2015. Low inflation is a concern, as well, with prices expected to edge up just 0.6% next year.Worse, some countries in Europe have already seen deflation, forcing the ECB to rush to the rescue with stimulus efforts.
Things are even worse in Russia, which is lumbering under the weight of Western sanctions and cratering oil prices.
Russia's currency is at an all-time low vs. the dollar, and the country's own finance minister expects a 0.8% economic contraction next year.
Japan continues to languish in its decades-long malaise. And in China, the days of 10% and 11% growth are but a memory.
In fact, growth in China has been so sluggish that the country risks missing its 7.5% annual growth target year for the first time in 15 years.
And without China's sprawling manufacturing base, commodities-driven economies from Brazil to South Africa have lost the key export market that supported their growth for so long.
And the United States?
Well, we're doing better than most, but that's not saying much.

Damned If You Do...

The U.S. economy is on track to see 2.2% GDP growth this year, and optimistically, 3% growth in 2015.
But that still doesn't mean we're out of the woods.
Going forward, the United States can pursue one of two paths...
If growth remains resilient, the Federal Reserve will continue to rein in monetary policy and follow through with a rate hike.
The other possibility is that the U.S. economy succombs to weak global growth, and tumbles back into a recession itself.
Either way, stocks go down.
A severe correction is inevitable, and as I said earlier, long overdue.
Analysts can dress it up however they want but the truth of the matter is that ever bull market in history can be broken into just three phases:

• The Accumulation Phase: This is the period at the end of a downtrend when informed investors — hedge funds, money managers, politicians, etc. — start snatching up shares on the cheap.
• The Public Participation Phase: As the market bottoms and begins its rebound, public fear and apprehension towards investing subsides, and retail investors retest the waters.
• The Excess Phase: Finally, momentum picks up and exuberance takes over. When that happens, a bear market is born, as the informed investors from Phase 1 bail out and leave retail investors holding the bag.

We're in Phase 3 right now.
You saw what happened when the Dow plunged 1,100 points from September 19 to October 16. It was a blood bath.
Well guess what: Those weren't retail investors dumping their holdings, that was Wall Street.
And it's just the beginning.
Since that modest correction, stocks have bounced back, soaring to yet another record high.
That's totally unreasonable, and unsustainable, given the state of the global economy and the likelihood of a rate hike next year.
Even Federal Reserve Chairman Janet Yellen is calling it a bubble.
“Valuation metrics in some sectors do appear substantially stretched,” she said. “Moreover, implied volatility for the overall S&P 500 index, as calculated from option prices, has declined in recent months to low levels last recorded in the mid-1990s and mid-2000s.”
Translation: Stock prices are too high, and investors are too complacent.
Admitedly, that's a bit ironic considering it was the the Federal Reserve that opened Pandora's box by plying the markets with limitless, virtually free capital. But she's right. It's the end of the line.
The question is, then, what to do about it...

When All Else Fails...

One option is to buy gold.
There's always a flight to safety when things go south, and precious metals benefit. If you don't own gold — either physically or through an ETF — now is a good time to buy some.
Gold prices have withered over the past year, mostly because investors — large and small — pulled their money out of precious metals and put it in stocks to chase the bull market.
That's a decision they'll come to regret if they don't take the proper precautions now. Soon, the trend will reverse. Stocks will plunge and everyone who's caught off guard will suddenly storm back into gold.
Another thing you might consider is adding an inverse ETF to your portfolio.
There are plenty to choose from:

• Rydex Inverse S&P 500 Strategy Fund (RYURX): One of the more traditional bear funds, RYURX delivers a return opposite to what the S&P 500 does. So if the S&P 500 goes down 5%, it goes up 5%.
• ProShares UltraShort S&P 500 (SDS): This fund is leveraged to give you twice the return of any drop in the S&P 500. For example, if the S&P 500 loses 5%, this fund goes up 10%. Be warned though, if the market goes up 5% this fund goes down 10%.
• ProShares UltraShort Russell 2000 (SRTY): This is a more aggressive play. Small caps are more vulnerable to sell-offs, and this fund targets the sector by delivering a return that is three times larger than any decline in the Russell 2000 index.

Again, the thing to remember about these funds is that they'll lose value so long as the market keeps going up. But the potential rewards can be great if the market suffers a setback.
Used appropriately, even a small allocation of your capital could more than make up for any losses you sustain in a market crash.

Inflation, Rate Hike, Economy

recently when i meet friends, the topic is always when will rates go up in the states.

my forecast is one of the two below:

• no rate hikes for quite some time;
• even if there are hikes, it would amount to no more than two hikes of 0.25% each

inflation only occurs under the following conditions:

1. unrestrained money printing
2. a young population
3. a strong economy, local and worldwide

the logic behind is there is no inflation on a continuous basis.  yes there was quite serious inflation for a short one or two years back esp in food and fuel, condition 1, other than that price rises in goods are not easy to achieve and stay without significant impact on the sales volume.

in fact because of such low rates, those who live on their assets do not have much return [unless a high portion is in stocks] if they hold much of their assets in cash form for the past few years and it is hard for them to spend more without any investment gains or appreciation in their assets. asset appreciation esp property only happens in major cities where there are more immigrants.

the decline in unemployment you see in the us is mainly due to creation of part time and temp jobs that do not contribute much to spending for the economy, the labour participation rate stays low which means those who cant find a job could not afford to spend.

the haves and not haves are highly divided in their spending habits, the haves are still a minor segment of the population and could not cause significant inflation alone as a group. do not forget the bulk of the population are the not haves.

just look at wal-mart and mcdonald stock prices before the Mc food incidents recently, their prices are going no where as their profits are stagnant, this points to the fact that many in the population do not have the power to spend.

EUROPE and the malaise
there isnt much ongoing in structural changes in europe which is why the economy stays low and it will stay low for a long while unless you could see euro reaches parity with usd which for the moment is fantasy.

with europe in danger of deflation, i dont buy the idea of rate hikes as us has to trade with europe and the us economy cannot grow at a fast pace. the only sectors in the states now growing at a frantic pace is the shale oil/gas exploration and some parts of manufacturing.

my friends and readers, are you convinced that rate hikes are very remote? if not, time will tell.

2030

care to know about 2030, check the link below:

http://www.dni.gov/index.php/about/organization/national-intelligence-council-global-trends

or download full document from

http://www.dni.gov/files/documents/GlobalTrends_2030.pdf

this is a document prepared by the us, so give it some doubt to whether it could be another form of ideology promotion.

CAPE, what's it about?

there are many arguments about the market top or close to top, now read an article from daily ticker of yahoo.

Major stock averages remain in earshot of all-time highs and this bull market has been nothing if not resilient, repeatedly defying predictions of its demise for five-plus years.

Still, Robert Shiller, Yale professor and Nobel prize winnner, is "definitely concerned" about the outlook for stocks based on the cyclically adjusted price-to-earnings ratio (CAPE) he created. At 26, the so-called Shiller PE is currently well above its long-term average of 17 and approaching levels that previously presaged doom for equities.

Shiller has plotted CAPE going back to 1881 and notes (with some alarm) it has only been higher than current levels three times: In 1929, 2000 and 2007.

"It looks to me like a peak," he says in the accompanying video. "I would think there are people thinking 'it's gone way up since 2009, it's likely to turn down again.' That's what people might plausibly think."

Anecdotal evidence does indeed suggest people are thinking "the end" of this bull run is nigh. But if the market "climbs a wall of worry," that's arguably a bullish sign as my colleague Michael Santoli describes here.

And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. "We don't know what it's going to do," he says. "Realistically, stocks should be in one's portfolio but maybe lighten up."

Stocks should be in one's portfolio in part because interest rates are so low and "the fixed income market just doesn't look very attractive," Shiller says.

As for the idea, proffered here by Citigroup's Tobias Levkovich, that CAPE is flawed because it doesn't "normalize" for interest rates (as it does for earnings), Shiller says the following: "He's right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn't mean the high CAPE isn't a forecast of bad performance."

So what does Shiller, whose books include Animal Spirits and Irrational Exuberance, make of the recent steep declines in trading volume and volatility? Watch the accompanying video to find out.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com.

WORKERS' SHARE IS DWINDLING, PROFOUND IMPACT ON JAPAN

i have always wondered why the so called recovery seems so weak, the reason now is explained in a elaborate manner in the article below, which i think in all, is due to the corp taking a bigger pie and government unwilling to take more welfare into their hands that they allow such transfer of wealth from the consumer layman to the corporates.

with lower real income, consumers can only borrow to spend or spend less, thus eventually denting corp profits in the future.

this trend will likely have a profound impact on japan as well since their corporations have even less to share with their workers as their balance sheets are in shambles. raising the inflation specter will only hurt the citizens of japan, will not heal the current ills of the jap economy and will lead to further distrust with the politicians in power and later maybe, social unrest.

April 18, 2014, 6:15 a.m. EDT

Why you can’t get a raise — it’s simple

You deserve it, but you can’t make your boss pay you more

By Rex Nutting, MarketWatch

MarketWatch

The share of current output that goes to workers as wages has fallen to a record low of 57%.

WASHINGTON (MarketWatch) — For 24 million Americans, the biggest economic question is: “Where can I get a decent job?

For 146 million Americans, the biggest question is: “How can I get a raise?”

Wages and salaries are stagnant, failing to keep up with the rising cost of living. And it’s been that way for years. Median weekly wages of full-time workers, after adjusting for inflation, are no higher today than they were in 2001, and are just $1 more a week than they were in 1979.

Why can’t I get a raise? Ask your boss and he’ll tell you one of three things:

• The company can’t afford it.

• You don’t deserve it.

• You can’t make me.

Takeaways from banks' first-quarter earnings

As we’ll see, only the third reason makes sense. Bosses have all the bargaining power when it comes to wages. As a worker, you’re competing against those 22 million Americans who want a good job, plus millions — perhaps billions — here and abroad who’d be grateful to do your job for less.

The company can’t afford it.

Maybe your boss tells you that he’d like to pay you more, but he just can’t afford it. Extreme global competition, and onerous regulations and taxes are eating me alive, he says. The bottom line? I’m paying you all I can.

While it’s true that there are many businesses that can’t afford to raise wages because they are on the edge of failure, most businesses are doing quite well.

For corporate businesses, after-tax profits are at record levels as a share of national income. Since the recession ended, profits are up 65% to $1.68 trillion last year.

Small businesses aren’t doing quite so spectacularly, but their income is up 13% and their net worth is up 33% to $8.7 trillion since the recession ended.

And the workers? Even after a big gain in the first quarter, median wages are down 3% since the recession ended.

At the same time that wages have been falling, productivity (output per hour) has been steadily rising. Labor is producing more per hour, but getting paid less.

The share of national income that goes to labor (including the CEO’s salary and his stock options) has plunged from about 63% to 57%. The 6% of national income that’s going to profits instead of wages amounts to nearly $900 billion a year.

He can afford to pay you more.

You don’t deserve it.

You’re working hard, your boss says, but you aren’t worth any extra pay. Maybe you lack some essential skills that would make you more productive, or qualify you for a job that’s higher paying.

Some experts, including some of the more conservative Federal Reserve presidents, put a lot of emphasis on the skills gap, not only as a cause of so much unemployment but also as a reason for stagnant wages.

Economic theory suggests that workers should be paid what they are worth and no more. And what are they worth? Theory says it’s the value that each hour of labor provides to the firm, or the marginal revenue product.

The more skilled a worker is, the more revenue she brings in, and the more she gets paid. At least, that’s the theory.

But something strange is happening in the real world. Companies say they can’t find enough skilled workers to hire, and they say it’s hard to retain the skilled workers they have.

The obvious solution is for them to offer a high enough salary to attract the skills they need. That’s just basic supply-and-demand economics. And, yet, companies are not offering higher pay for the skills they need. Wages are not rising much for occupations said to be in short supply.

It could be that higher pay would exceed the worker’s marginal revenue product, but in that case, the company didn’t really need the skills, because it couldn’t put them to use profitably.

They needed skilled workers the same way I need a free pony.

There may be another reason for companies’ reluctance to pay more for skills: corporate culture. Cost-cutting has become so engrained in management’s DNA that companies have become afraid to spend money to make money. Firms lay off skilled teams of workers, even though they could be redeployed in profitable pursuits. Firms refuse to pay more for skills, even though it means they are leaving revenue and profits on the table.

It makes no sense, but that’s management for you.

You can’t make me.

The real reason you can’t get a raise is that the boss doesn’t have to give you one. You might be “worth” it, and the company could “afford” it, but businesses pay only what they have to and not a penny more.

There are a billion reasons you can’t get a raise: That’s how many people are willing to do your job for the same pay.

Globalization is a big factor in keeping wages down, of course. But you’re also competing against a lot of people in the U.S.; some of them may be standing right next to you. Mass unemployment, job insecurity and weakened labor rights give the company all the bargaining power when it comes to setting wages.

It wasn’t always this way. In the 1950s, 1960s and into the 1970s, trade barriers, strong unions and discrimination gave workers (white male workers, that is) more bargaining power to get higher pay. It created the middle class.

Ultimately, however, it helped enable the great inflation of the late 1970s.

The 1980s changed all that. Wages stagnated, as the U.S. began running a large trade deficit, and the Federal Reserve worked hard to keep unemployment high in order to fight inflation. President Ronald Reagan delivered the fatal blow to union power.

And, then, in the 1990s, something strange happened: The Fed consciously decided to let unemployment fall to 4%. And wages rose for the first time in 20 years, because workers were no longer competing against millions of desperate job seekers.

Best of all, higher wages didn’t come at the expense of lower profits or higher inflation.

We’re a long way from 4% unemployment, especially considering the millions who might join the labor force if they thought there might be a job for them. Let’s insist that the Fed let us get there again.

It turns out that, if you want a raise, the best thing to do is get your neighbor a job. 

Cross Border Trading - Fortune or Curse

 HK/Shanghai Exchange Linked Cross Border Trading ELT

Only on Thursday have we heard the announcement of this ELT, HSI shot up right away but enthusiasm cool on Friday, why?

First of all, that is a short squeeze, timed with the announcement to make it more believable and short punters have no time to listen to others of their viewpoints of the scheme and many are frighten to close their positions.

Many fans of China opening up further on the financial front hurray this is a step in the right direction, but is it?

If you looked at the limits of Cross Border trading, it is not really opening up, it merely wants to attract further capital into China as the HK->Shanghai limit is 300b while the other way is 250b. Don't stop here, there is also a daily limit of about 13b vs 10.5b. That is to say if there is a crash, there is limit down ie once the limit is reached, you have to wait till tomorrow to sell. It will be a full 23 days before you can unload the full limit or load up the full limit.

If China is confident about her financial being, since her exchange reserves are way too high, it should allow the invest HK limit to be much bigger than the invest Shanghai limit.

How trustworthy are the financial accounts of listed companies in Shanghai and their shares in HK? No one really knows, but there is the belief that the Chinese knows better than the outside world and this is one reason for the low level of investors interest in China of A shares.

Many A/H shares have very high A share prices, but the China banking shares in HK are higher than those in China, while HSI is heavily weighted towards China Shares these days, we likely would see a southern drifting of the Shanghai market [sell those highly priced A share and buy H share in HK] and a lower HSI because China banking shares in HK will drift lower too.

There is a wait period of six months to realize the scheme and we still haven't heard the details of how to trade aside from the limits and details of qualified investors in China, there should be no comparative qualification of investors in HK.

Once all the full details are out, the markets would have adjusted to more normalized levels ie only a 2-3% difference between A/H shares that are traded on both markets.

Yet this is on the assumption that investors from China still wants to own those China shares, who knows, they might choose to avoid China heavy shares altogether.

Do you hate the FED?

check this out

FORTUNE -- If you hate the Federal Reserve, you have a new hero.

A few weeks ago, Jeremy Grantham, the co-founder of money management firm GMO, called newly appointed Federal Reserve chairman Janet Yellen "ignorant" in the New York Times. He also said the reason for the slow recovery was not the severe financial crisis, continued high unemployment, or the many standoffs in Washington. Instead, he blamed the Fed for ruining the recovery it was supposed to stimulate. To someone who believes in the laws of economics, it's hard to overstate how odd that claim is. It's positively bonkers.

Low interest rates stimulate the economy. The Fed has done everything in its power to keep interest rates down, lower and longer than anyone can remember. That should have helped the economy. And yet the recovery has been just meh.

So, either Grantham is bonkers, or he is onto something. Fortune recently caught up with him to find out.

Fortune: You believe the Fed's policies, particularly quantitative easing, have slowed the recovery. What's your proof?

Grantham: It's quite likely that the recovery has been slowed down because of the Fed's actions. Of course, we're dealing with anecdotal evidence here ecause there is no control. But go back to the 1980s and the U.S. had an aggregate debt level of about 1.3 times GDP. Then we had a massive spike over the next two decades to about 3.3 times debt. And GDP over that time period has been slowed. There isn't any room in that data for the belief that more debt creates growth.

MORE: The Fed doesn't care about the unemployment rate anymore

In the economic crisis after World War I, there was no attempt at intervention or bailouts, and the economy came roaring back. In the S&L crisis, we liquidated the bad banks and their bad real estate bets. Property prices fell, capitalist juices

started to flow, and the economy came roaring back. This time around, we did not liquidate the guys who made the bad bets.

Can you really blame the Fed for the bailouts? That was an act of Congress.

I don't like to get into the details. The Bernanke put -- the market belief that if anything goes bad the Fed will come to the rescue -- has had a profound impact on people and how they act.

Okay, but that's still not proof that quantitative easing slowed the recovery.

There's no proof on the other side, that the economy is any stronger from quantitative easing. There's some indication that

the crash would have been worse and the downturn would have been sharper had the Fed not stepped in, but by now the

depths of that recession would have been forgotten, the system would have been healthier, and we would have regained our growth.

It's economic doctrine that lower interest rates boost the economy. Are you saying that's wrong?

Economic doctrine says the market is efficient. My view of the economy is not really principle-based. Higher interest rates would have increased the wealth of savers. Instead, they became collateral damage of Bernanke's policies. The theory is that lower interest rates are supposed to spur capital spending, right? Then why is capital spending so weak at this stage of the cycle. There is no evidence at all that quantitative easing has boosted capital spending. We have always come roaring back from recessions, even after the mismanaged Great Depression. This time we are not. It's anecdotal evidence, but we have never had such a limited recovery.

MORE: Janet Yellen: The Fed will steer clear of bitcoin

But the Fed does seem to have boosted stocks. Even if it did nothing else, doesn't a better market help the economy?

Yes, I agree that the Fed can manipulate stock prices. That's perhaps the only thing they can do. But why would you want to get an advantage from the wealth effect when you know you are going to have to give it all back when the Fed reverses course. At the same time, the Fed encourages steady increasing leverage and more asset bubbles. It's clear to most investing professionals that they can benefit from an asymmetric bet here. The Fed gives them very cheap leverage on the upside, and then bails them out on the downside. And you should have more confidence of that now. The only ones who have really benefited from QE are hedge fund managers.

Okay, but then I guess that means you think stocks are going higher? I thought I had read your prediction that the market would disappoint investors.

We do think the market is going to go higher because the Fed hasn't ended its game, and it won't stop playing until we are in old-fashioned bubble territory and it bursts, which usually happens at two standard deviations from the market's mean.

That would take us to 2,350 on the S&P 500, or roughly 25% from where we are now.

So are you putting your client's money into the market?

No. You asked me where the market is headed from here. But to invest our clients' money on the basis of speculation being driven by the Fed's misguided policies doesn't seem like the best thing to do with our clients' money. We invest our clients' money based on our seven-year prediction. And over the next seven years, we think the market will have negative returns. The next bust will be unlike any other, because the Fed and other centrals banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before.

Assets are overpriced generally. They will be cheap again. That's how we will pay for this. It's going to be very painful for investors.