"More monetary stimulus, wherever it is in the world, isn’t the answer for a global economy still trying to find a new growth path. Pay attention to bonds and ignore the sirens of the stock market."
It didn't take much to fizzle Friday's Japan NIRP-driven euphoria, when first ugly Chinese manufacturing (and service) PMI data reminded the world just what the bull in the China shop is leading to a 1.8% Shanghai drop on the first day of February. Then it was about oil once more when Goldman itself said not to expect any crude production cuts in the near future. Finally throw in some very cautious words by the sellside what Japan's act of NIRP desperation means, and it becomes clear why stocks on both sides of the pond are down, why crude is not far behind, and why gold continues to rise.
Ten years ago, all this would have been written off as the stuff of an insane mind or conspiracist. Now, it is just normal and economists would have you think it the only option. At what point do we accede back to logic and rational thought?
"There is some truth to the phrase that the stock market has predicted nine of the last five recessions... but that is a much better track record than the consensus of economists. Every time the financial markets get volatile and messy like this it deserves attention because the markets are trying to tell us that there is a severe issue out there."
While the economic implosion progresses this year, there will be considerable misdirection and disinformation as to the true nature of what is taking place. As I have outlined in the past, the masses were so ill informed by the mainstream media during the Great Depression that most people had no idea they were actually in the midst of an “official” depression until years after it began. The chorus of economic journalists of the day made sure to argue consistently that recovery was “right around the corner.” Our current depression has been no different, but something is about to change. Unlike the Great Depression, social crisis will eventually eclipse economic crisis in the U.S. That is to say, our society today is so unequipped to deal with a financial collapse that the event will inevitably trigger cultural upheaval and violent internal conflict.
Post-Baathist Iraq is rife with sectarian discord, a post-Assad Syria would likely be an even bloodier free-for-all than it already is, and post-Gaddafi Libya is a failed state with two governments each claiming legitimacy. These types of environments are exploitable by extremists eager to capitalize on the chaos by seizing resources and, ultimately, power.
Saudi Arabia’s deputy crown prince Muhammad bin Salman made headlines this week when he said that the kingdom was considering an IPO of Saudi Aramco, the nation’s state-owned oil company. But there are reasons to doubt that 1) the Saudi government will actually follow through on the plan, 2) even if some shares are listed, operations will change significantly, and 3) that such a move presents a huge opportunity for investors. Sure, Aramco might be worth trillions in theory. But returning cash to shareholders is not and will not be the top priority.
"Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and/or the listing of a bundle its downstream subsidiaries."
- U.S. jobs market seen fairly healthy despite slowing economy (Reuters)
- China State Funds Said to Buy More Shares After Market Rout (BBG)
- Global Stocks Gain Some Respite (WSJ)
- U.S. Jobs Data Take on Added Importance With Markets in Turmoil (BBG)
- GOP Health Plans Are Works in Progress (WSJ)
- For economy czar of crisis-hit Venezuela, inflation 'does not exist' (Reuters)
Earlier today everything changed when Saudi Arabia's unveiled what may be a stunning Hail Mary: one which is great news for the suddenly liquidity challenged Saudi government, and is very bad news for the future price of oil. According to the Economist, Saudi Arabia is contemplating taking Saudi Aramco - arguably the world's most valuable company - public. Here are the implications.
We have reduced our estimate of Q4 real GDP growth by one full percentage point to 0.5%, and this still might be too high in light of what could be much larger inventory liquidation than what we have assumed.
It has been a bloody year in Baltimore, that much everyone knows, but as The Economist shows, something changed dramatically after Freddie Gray's death in April...
"Security prices are not low. I wouldn’t say high, but full. So people are thinking cautiously but they’re acting bullish and they’re behaving in a pro-risk fashion. While investor behavior hasn’t sunk to the depths seen just before the crisis, in many ways I feel it has entered the zone of imprudence... The market is not an accommodating machine. It will not go where you want it to go just because you need it to go there."