Central Banks

The debt to GDP ratio for the entire world is 286%.  In other words, global debt is almost 3 times the size of the world economy.  Both public and private debt are exploding and - despite what mainstream economists think - 141 years of history shows that excessive private debt can cause depressions.

"The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface being balanced by very strong equity markets and upbeat employment picture. One of these sides has to be wrong..."

If you think you're fighting the market, or the banks, or the Fed, you're dead wrong!

The oil producers are rapidly learning from the central banks how to jawbone markets higher. With both Brent and WTI sliding as recently as ten minutes ago, suddenly a buying frenzy was unleashed following a Bloomberg headline which cited the Saudi Press Agency, according to which the world's largest crude exporter was ready to pull a Draghi and would do "whatever it takes" for a stable oil market, and that it would cooperate with OPEC and non-OPEC members for stable prices.

The Fed, in its reflexive attempt to boost confidence in the economy, is not only engaging in massive policy error, but is about to unleash a recession which will promptly force it to cut rates again (to negative) and start another episode of QE.

There’s an old adage among veteran stock traders that goes something like his, “If I told you the news before it were made public – it’s still a 50/50 bet you would guess the market’s reaction correctly.” That was when the markets had some resemblance of normalcy. Today, normalcy has been replaced with sheer lunacy as to the speculation and interpretations for where these markets go from here.

All great monetary fiascos are forged upon a foundation of misperceptions and flawed premises. There’s always an underlying disturbance in money and credit masked by supposed new understandings, technologies, capabilities and superior financial apparatus. The notion back in 2006 and 2007 that the world was at the brink of a major crisis was considered absolute wackoism. Incredibly – and well worth contemplating these days - virtually no one saw the deep structural impairment associated with the protracted Bubble in “Wall Street Finance.” An even more momentous monetary fiasco has been perpetrated since the 2008 crisis, constructed upon a foundation of even more outlandish misperceptions and flawed premises.

By now, everyone knows Brazil is stuck in a stagflationary nightmare that's made immeasurably worse by the country's seemingly intractable political crisis. But what about the rest of Latin America? Goldman takes a close look at the regional outlook for the next four years and finds a decidedly unfavorable growth-inflation mix. 

Courtesy of the Fed, the most bearish trade going into the year end period is to go long a handful of very specific stocks.

Liquidity in the junk (and all other markets) is evaporating, and according to Citi the spread between an illiquid and liquid junk bond portfolio just hit 100 bps, the most in the history of the series. Meanwhile according to Mohamed El-Erian "The market is comfortable that whenever we hit a hiccup, the Fed is going to come back in," he said. "It's very deeply embedded that central banks are our best friends forever."

Dear Mr. President, your country faces a stagnating economy... The truth is it is too late for our politicians to act, because the speculative peak that precedes the crisis is already upon us.

There is a widespread global campaign to eradicate physical cash. And we’ve now got a connected insider confirming it.

Importantly, while the "bias" of the market is to the upside, primarily due to the psychological momentum that "stocks are the only game in town," the mounting risks are clearly evident. From economic to earnings-related weakness, the "bullish underpinnings" are slowly being chipped away.

The sums in play are so staggering (an estimated $11 trillion in emerging market debts denominated in other currencies) that even the Fed won't be able to stop the meltdown.