"China is to the current cycle what the US housing market was for the Global Financial Crisis in 2008. It will take years to correct the excesses that were built up in China... the consequences of a weaker yuan would be disastrous...If China devalues, all the other countries in the region will follow suit which will lead to a global deflationary shock. There is a real chance of a bigger correction than many investors realize..."
"Away could yesterday mark the start of another plate spinning cycle from the central banks? The market chatter is now looking towards Kuroda to signal more action when the BoJ meet this time next week. Will Yellen also signal a more cautious and dovish stance at the FOMC next Wednesday? We continue to think central bank money printing globally remains in the early stages. Such policies could go on for several years yet even if there are periodic pauses."
"There is hope of more stimulus in March and potential for even more stimulus in Japan and China, so if we get concrete positive economic news the rebound could last into next week,” said John Plassard, senior equity- sales trader at Mirabaud Securities. “I told my clients to fasten their seatbelts and wait for better news, and this is finally happening."... "The turnaround in sentiment came amid signs central banks may be prepared to act after $7.8 trillion was erased from the value of global equities this year on China’s slowdown and oil’s crash."
It's official. More than 50% of the "wealth" effect created from the 2011 lows to the 2015 highs has been destroyed (despite the world's central banks going into money-printing overdrive over that period). Almost $17 trillion of equity market capitalization has evaporated in just over 6 months with over 40 global stock indices in bear markets...
"dip buying is officially dead and stocks (esp. US ones) are no longer impressed by promises of central bank largess. The reason the SPX has only witnessed insipid rally attempts during this weeks-long swoon is the absence of robust dip-buying."
Maybe this is it. Maybe the global financial system has truly reached its limit. Maybe the world has realized that the path to prosperity is not in conjuring money out of thin air, raising taxes, or going deeper into debt. Maybe people have finally figured out that an insolvent government and insolvent central bank cannot possibly continue to underpin the entire financial system. Or maybe not. But the incredible thing is how much panic there has been, particularly in banking and financial markets, just at the mere HINT of problems in the system.
Once a central bank program fails to generate a self-reinforcing rally, the mind-trick's power is broken. No one knows precisely how and when the global unraveling will impact their corner of the planet, but we do know one thing with absolute certainty: central banks are out of tricks.
In the most blatant and open admission of direct manipulation, China's Vice President Li told a room full of Davosian elites that China is willing to keep intervening in the stock market to make sure that a few speculators don’t benefit at the expense of regular investors. Following last night's largest liquidty injection in over 3 years (and subsequent plunge in Chinese stocks), it appears the Chinese economic/market "bucket" has more holes than the intervention 'hose pipe' can handle.
CNBC’s Andrew Ross Sorkin and Becky Quick, donning their finest goose down bubble coats to remind viewers they’re reporting live from scenic Davos, generously took some time out of their busy schedules to chat with Ray Dalio on Wednesday and unsurprisingly, the “zen master” again predicted the Fed will reverse course and embark on more QE.