There’s really one supreme element of this story that you must keep in view at all times: a society (i.e. an economy + a polity = a political economy) based on debt that will never be paid back is certain to crack up. Its institutions will stop functioning. Its business activities will seize up. Its leaders will be demoralized. Its denizens will act up and act out. Its wealth will evaporate. Given where we are in human history - the moment of techno-industrial over-reach - this crackup will not be easy to recover from. Things have gone too far in too many ways. The coming crackup will re-set the terms of civilized life to levels largely pre-techno-industrial. How far backward remains to be seen.
My overriding theme and the central drama for the coming year is that unexpected events can take on greater importance as the Federal Reserve ends its near-decade-long Zero Interest Rate Policy. Consensus premises and forecasts will likely fall flat, in a rather spectacular manner. The low-conviction and directionless market that we saw in 2015 could become a no-conviction and very-much-directed market (i.e. one that's directed lower) in 2016. There will be no peace on earth in 2016, and our markets could lose a cushion of protection as valuations contract. (Just as "malinvestment" represented a key theme this year, we expect a compression of price-to-earnings ratios to serve as a big market driver in 2016.) In other words, we don't think 2016 will be fun.
Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer. Congress’ decision to lift the 40-year U.S. ban on crude oil exports reflects the same misinformed and distorted thinking that declares that the world’s highest cost producer - tight oil - can somehow also be the world’s swing producer.
According to WSJ, "the Obama administration pursued secret communications with elements of Syria’s regime over several years in a failed attempt to limit violence and get President Bashar al-Assad to relinquish power, according to U.S. and Arab officials. Early on, the U.S. looked for cracks in the regime it could exploit to encourage a military coup, but found few.”
It has been a seesaw session with U.S. stock index futures following their dramatic buying burst in the last half hour of market trading yesterday by first rising, then falling, then rising again alongside European equities both driven almost tick for tick with even the smallest move in the carry trade of choice, the USDJPY, even as Asian shares trade near intraday highs after China’s leaders signaled they will take further steps to support growth.
We now enter the “discovery” phase of financial collapse, where things labeled “capital” and “credit” turn out to be mere holograms. It’s not just the Federal Reserve; everything around us is backed into a corner as the rude discovery that capital is not what it has appeared to be is now underway, with the power to derail political systems and societies.
This weekend the force was strong with thirty (and forty, and fifty) year-olds, wishing to awaken memories of their youthful days with an admirable redo of the first Star Wars movie, first released nearly 40 years ago. But the force has never been stronger with Disney which is expected to rake in a record-breaking $238 million in opening weekend box office sales in the US and Canada, and a near-record $279 million overseas, a grand total of well over half a billion around the globe.
A world where money is decentralized means a world where nothing you’ve ever seen before will become the new norm and the new norm is unlikely to include a scrap of paper issued by a bankrupt government.
"The Vice President reaffirmed the United States' commitment to Iraqi sovereignty and territorial integrity and called on Turkey to do the same by withdrawing any military forces from Iraqi territory that have not been authorized by the Iraqi government."
Welcome to the future, ladies and gentlemen."A driver allegedly involved in two hit-and-run incidents was tracked down after her car alerted the police. As reported by local news outlets, an unusual 911 call to emergency services took place on Friday in Port St. Lucie, Florida. You would usually expect a human voice on the end of the line, but in this scenario, a Ford vehicle alerted the police to a collision."
Despite ongoing exuberance at auto sales in America (which disappointed) - as crashing credit standards enable every Tom, Dick, and Muppet to buy too much 'depreciating asset' for their incomes - there are numerous problems few are talking about for automakers worldwide. Aside from "plans to buy a car" tumbling in the latest confidence surveys, and inventories-to-sales surging, China just poured ice cold water on any hope of stability in that 'growth' market as auto dealers issue the highest inventory alert since June. November data from China shows demand plunging, sales collapsing, and inventories soaring - a triple whammy of "no, things are not 'stabilizing'."