This is just the beginning. The bond bubble will take months to completely implode. And eventually it will consume even sovereign nations.
If you believe the global economy is doing great and stocks are cheap, stop reading now; this post is not for you. We promise to write one for you at some point when stocks are cheap and the global economy is breathing well on its own - we just don’t know when that will be. But if you believe that stocks are expensive - even after the recent sell-off - and that a global economic time bomb is ticking because of unprecedented intervention by governments and central banks, then keep reading.
The World Economic Forum in Davos is submerged by a tsunami of denials, and even non-denial denials, stating there won’t be a follow-up to the Crash of 2008. Yet there will be. And the stage is already set for it.
Markets need to retreat from dependency on central bank stimulus which they falsely believe provides the magical elixir that fixes all economic and financial market woes.
We are told bank earnings and revenue are under pressure from a slew of “tough markets” but what makes those markets so untenable in the first place?
When the FOMC is deliberately manipulating asset prices and credit spreads... collateral damage is inevitable.
According to stocks, a half-recession is precisely where the US was as of roughly noon yesterday, when the S&P touched an intraday low of 1812. This represents a 15% drop from the all time high close of 2,131 last summer. It also represents half the post-World War II average peak to trough decline around recession, which amounts to roughly 30%.
"I don't think China's economic slowdown is that severe to threaten the global economy."
"China has managed debt restructurings superbly."
Faber warns that the S&P 500, which fell to 1,881 on the 19th of January, could drop to its 2011 low below 1,200.
In the end we all know that “informal central bank cooperation” doesn’t really amount to anything. That lesson could be applied to the Bundesbank “selling dollars” in 1969, the PBOC “selling UST’s” in 2015 or the worthless, useless Federal Reserve RRP in 2016. They really don’t know what they are doing, they never have and it truly doesn’t matter fixed or floating. Adjust accordingly because we know how this ends; we’ve already seen it.
"The world at an unprecedented moment in history where the interconnected nature of the global economy makes all players vulnerable to the mind-boggling volume of outstanding derivatives, which makes the sum of all world equity and debt look tiny in comparison..."
“They need Iran to avoid overreliance on Saudi Arabia, and they need Saudi Arabia to avoid overreliance on Iran. It’s all about diversifying risk. It’s less about picking winners and more about modern portfolio theory."
Call it whatever you like,blame whoever you want...but Houston,we have a problem....
One place where not even the IMF can in good conscience predict a hockeystick-like rebound in growth, is China, where the IMF now expects GDP to grow only 6.3% in 2016, dropping to an even lower 6.0% in 2017.