China’s historic post-2009 debt binge flew largely under the radar - fooling most observers into thinking the global economy was recovering rather than just re-leveraging. Now Beijing is back at it, borrowing over $1 trillion in this year’s first quarter, buying up commodities and creating the illusion of global growth. But this time the scam hasn’t gone unnoticed. Reporters, editors and money managers seem, at last, to be catching on. So think of today’s relative calm as the eye of yet another storm, and what’s coming as a return to the hyper-leveraged new normal.
"Treasury is creating a new “Monitoring List” that includes these economies: China, Japan, Korea, Taiwan, and Germany. China, Japan, Germany, and Korea are identified as a result of a material current account surplus combined with a significant bilateral trade surplus with the United States. Taiwan is identified as a result of its material current account surplus and its persistent, one-sided intervention in foreign exchange markets. Treasury will closely monitor and assess the economic trends and foreign exchange policies of these economies."
"...there clearly is a Yellen put, but over the last two meetings it's been extended to include global risk markets... I think they're acknowledging that the Fed is the world's global central banker."
"Increased government spending, financed by central banks could indeed create inflation, but will further elevate the problem of debt viability. If investors lose confidence that the debt can ever be repaid, they will reduce their holdings, increasing the cost to governments or inviting more central bank buying. This can eventually result in the devaluation of all currencies against real assets such as gold, high inflation or even outright defaults (as was the case in Greece). If such a trend develops in one of the large economies, it could have far-reaching consequences."
The upper middle class is well and truly doomed by self-delusion and the pathology of entitlement.
Federal Reserve officials are virtually certain to hold interest rates steady when their meeting ends today but they could try to send a message to markets and outside observers about what likely comes next. With no press conference scheduled after this week’s meeting and no new economic forecasts to be released, all the attention will be focused on their words and the market is more aware than ever that the Fed doesn’t act in a vacuum. As Bloomberg's Richard Breslow notes, The Fed is hopeful (that their always-wrong forecasts come true this time) but they're also scared to death on the consequences.
Trading volumes in Chinese exchanges spiked exponentially, with SHFE rebar and DCE iron ore futures becoming the No.1 and No.3 most-traded contracts in the world, surpassing volumes of ICE Brent and NYMEX WTI contracts, which have been the most widely-traded and liquid contracts for three decades.
The gold market will soon be very different than from what we see today - largely due to the current developments in China. China’s influence will impact not just gold investors but everyone who has a vested interest in the global economy, stock markets, and the US dollar. After all, China will be a dominant force in all, as most analysts project. Here are the five trends in China that will change the gold market forever...
The dangerous divergence will then take a nasty turn. The bottom half of the 1% will now be as angry as the 99%. Any attempt by the establishment to further screw the nation by bailing themselves out will be met with violent disapproval. The country is a powder keg. The upcoming election is guaranteed to inflame opposing factions. A stock market crash in the next six months would sow the seeds of financial, political, and social upheaval not seen in this country since the 1960s. The established social order will be swept away in a swirl of chaos and retribution. The dangerous divergence will be resolved.
Yields on $7.8 trillion of government bonds have been driven below zero by worries over global growth, forcing investors looking for income to flood into debt with maturities of as long as 100 years. Worse still, as Bloomberg reports, central banks’ policy is exacerbating matters, as the unprecedented debt purchases to spur their economies have soaked up supply and left would-be buyers with few options. This has driven the 'duration' - or risk sensitivity - of the bond market to a record high, meaning, as one CIO exclaimed, even with a small increase in rates "the positions are so huge that the damage can be massive... People are complacent."
"Money was a lazy b*tch, until you put it to work! And look how it works! Look how it grows! Materializes out of nowhere! As leaders, innovators, captains of finance, you will always be subject of the jealous resentment, the petty tantrums of the unwashed masses, the insolvent, the irresponsible, the invidious, the losers. They will envy you, your successes, they will despise you, but they secretly want to be like you! Irresponsible single mothers, uneducated immigrants, lead-drinking ghetto-strutters, homeless, crying, babies, starving senior citizens, obnoxious, entitled African Americans who object to having bullets pumped into their bodies by police: all these people are angry, entitled, and making noise, and they are endangering our democracy and economy, our greatness."
Today, looking at the technical evidence that, so far, suggests that there is zero evidence to suggest that we are in a bull market. In fact it appears there is risk building that this is a completely broken market in its final inning. Yes we’ve had a massive rally off of the February lows, but the technical evidence is mounting that this may still be a bear market rally. Why? Because key charts remain decisively bearish and any sizable pullback could literally kill any notion of a bull market...
It's not just Halliburton ("What we are experiencing today is far beyond headwinds; it is unsustainable") and Intel (12,000 layoffs amid re-evaluation of programs) that are facing up to a new normal very different from expectations. As Avondale Asset Management notes, having poured over 100s of earnings transcripts, while most CEOs don’t see signs of an imminent downturn, the environment still feels a little fragile. It seems that almost everyone is on high alert for a macro curve-ball...
One day before Obama visits Angela Merke in Germany to pitch the TTIP trade agreement, thousands of German protesters have once again come out on the streets of Hannover to say 'No' to the controversial TTIP US-EU trade deal. Many in Germany fear it will reduce consumer protection and undermine workers’ protection. In an interview with Bild, Obama said that "the Transatlantic Trade and Investment Partnership is one of the best ways to promote growth and create jobs." Ironically, this comes just as support for the TTIP is tumbling on both sides of the Atlantic.