• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Albert Edwards

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Meanwhile, Traders Are Getting Angrier With Every Passing Day





"We’re condemned to serial bouts of severe volatility having been trained to dismiss real and knowable risks as just improbable black swans....  Central banks can’t keep giving markets everything they want, or the volatility in the end will be catastrophic"

 
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In 1 Out Of Every 5 American Families, Nobody Has A Job





If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told.

 
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Albert Edwards Finally Blows Up: "I'm Not Really Sure How Much More Of This I Can Take"





"I'm not really sure how much more of this I can take. So here we are 5, 6 or is it now 7 years into this economic recovery and it still remains pathetically weak. And so it should in the wake of one of the biggest private sector credit bubbles in history. The de-leveraging hangover was always going to be massive and so it is. Quick-fix monetary QE nonsense has made virtually no difference to the economic recoveries other than to inflate asset prices, make the rich richer, inequality worse and make Joe and Joanna Sixpack want to scream in rage."

 
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US Economy - Ongoing Distortions





The economy’s capital structure remains imbalanced as a result of the enormous amount of monetary pumping since 2008 (total TMS-2 growth since then: approx. 128%). There is a limit to this though, even if it cannot be quantified. What can be stated though is that the greater the boom, the greater the eventual bust usually is. There are now more and more indications that a decisive inflection point may be quite near.

 
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"This Is Where The Good News Ends" - JPM Says All Margin Subcomponents Are Rolling Over





In the past 60 years, there has never been a recession starting before the peak in profit margins. However, once margins have peaked, the likelihood of a downturn increases materially... We believe that the rollover in profit margins will be a constraint for equities, as profits have tended to drive most economic variables, capex and employment in particular. It will also likely have negative implications for corporate activity, especially as M&A, buybacks and dividends are at cycle highs, and US financing conditions are deteriorating.

 
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For Albert Edwards, This Is The "One Failsafe Indicator" Of An Inevitable Recession





Despite risk assets enjoying a few weeks in the sun our failsafe recession indicator has stopped flashing amber and turned to red. Newly released US whole economy profits data show a gut wrenching slump. Whole economy profits never normally fall this deeply without a recession unfolding. Historically all recessions are effectively caused by slumps in business investment driven by a profits downturn.

 
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Japan Braces For A "Turbulent, Volatile" 10-Year Auction With First Ever Negative Yield On Deck





"We expect the10y JGB auction on the 1st to be a new issue with a 0.1% coupon, but auction yields are likely to go into negative territory. We do not expect the bank sector to buy, and demand from dealers and foreign investors is unlikely to provide sufficient support. We expect the auction to be turbulent given investors are also unlikely to short futures and the possibility of a tail. "

 
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Albert Edwards Is In Love With This Asset That Hasn't Had A Losing Year Since 2007





"Name me a major asset that has not seen one single yoy decline since the start of 2007? Clearly not equities or commodities. What about bonds? Again clearly not corporate bonds. What about 10y government bonds? I?ll give you a clue. It?s not the US, UK or Germany, all which saw negative yoy returns, most notably in 2013."

 
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Maybe Albert’s Crazy Forecast Is Not That Crazy After All





"Albert Edwards sees the possibility of a 75% decline from the peak if all his fears were to manifest themselves. Now many view this as an incredible and somewhat outlandish forecast, yet it is not that unreasonable in our view.... These types of declines would leave indices down rough 60-65% from peak, and would send leverage ratios skyrocketing."

 
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"A Key Technical Indicator Just Rang The Bell On The Cyclical Bull Market"





"If one is looking for key technical indicators to ring the bell on the cyclical bull market- maybe it has just rung loud and clear. A renminbi devaluation will only sever an already badly frayed safety rope..."

 
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Citi On Why Negative Rates Are Like Potato Chips: "No One Can Have Just One"





"Experience in other countries that have entered into this territory should sober you up on the likely economic and inflation impact. No country that has gone into negative rates has experienced major shifts in its growth and inflation profile – minor, yes; major, no. As a consequence every dip into negative rates has been followed by additional moves."

 
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"Fundamentals Don't Matter Right Now, It's Panic On The Way Down," Trader Warns





We’re experiencing wealth-destruction due to asset-price dynamics alone. The negative moves will stop only when excess leverage is trimmed and not just when prices return to “fair value.”

 
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Albert Edwards Hits Peak Pessimism: "S&P Will Fall 75%", Global Recession Looms





"To bottom on a Shiller PE of 7x would see the S&P falling to around 550. I will repeat that: If I am right, the S&P would fall to 550, a 75% decline from the recent 2100 peak."

 
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Frontrunning: January 13





  • China trade surprise brings relief (Reuters)
  • Obama knocks Trump, voices optimism (Reuters)
  • Republican Candidates Criticize Obama’s State of the Union Address (WSJ)
  • Republicans and Democrats Agree: We Hate Wall Street (WSJ)
  • Oil rises for first time in eight sessions on China, U.S. stocks draw (Reuters)
  • U.S. Exports First Freely Traded Oil in 40 Years (WSJ)
  • China Imports Record Crude as Price Crash Accelerates Buying (BBG)
 
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Has The Great Carry Unwind Arrived: Yen Surges After Warning USDJPY 100 Coming





Goldman, Decembert 20, 2015: "We think the BoJ is closer to easing further to attempt to achieve a successful reflation than it is to giving up altogether, and so we continue to expect $/JPY higher. We recommend being long $/JPY as part of our 2016 top trade recommendation (along with short EUR/$) and forecast $/JPY at 130 in 12 months"... Three days later, the USDJPY is 100 pips lower.

 
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