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.
"The market is moving so quickly, yesterday felt just like the stock market in June last year before the crash," warns one Asian trader reflecting on the chaotic rush of Chinese speculators into the industrial metals commodities market Echoing the frenzy that fueled China's parabolic stock market rise (and subsequent collapse), Bloomberg notes one local China broker admits "we’ve seen a lot of people opening accounts for commodities futures recently," adding rather ominously, "the great ball of China money is moving away from bonds and stocks to commodities." The spikes in everything from rebar to iron ore, however, according to Goldman "is not driven by a sustainable shift in fundamentals."
Mind the terminal growth assumption. The warning signs are everywhere that what lies on the other side is not a world of 24.3X valuations.
As expected today's ECB statements were a snoozer, and likely Mario Draghi's official statement will be too - "more of the same." However, the real fun and games will come as he combats questions on 1) the lack of effectiveness of QE so far (just wait, any day now it will work), and 2) helicopter money ("whatever it takes"). He better offer some hope for moar as EUR is surging into the meeting...
A market entirely supported by rumors and hearsay can rally quickly, but also lose all gains at the drop of a hat. What the Doha debacle represents is a signal that the establishment is incrementally abandoning support for market systems. This is translating to a loss of faith in central banks and major financial institutions. On top of this, look at the incredible amount of misinformation and misdirection that went into Doha, now completely exposed. The truth is crystal; the MSM lied and obfuscated helping the establishment to drive up oil prices and stocks, all for a mere six to eight weeks of market security. As soon as these lies were revealed, volatility began to return. If the oil market bubble can implode (as it already has) in such a way due to the striking of fundamentals, then stocks can also be destabilized as well.
The battle boils down to what controls the market: central banks or fundamentals.
Marc Faber has warned that a new financial crisis is coming and will be worse than the 2008 one and warned that the “messiah” central banks “helicopter money ” policies “will not end well ...”
"We’re in the terminal phase of the greatest debt bubble in all of human history... The crisis that happened last time around… it was just a warning signal of what would happen if we didn’t fix our problems... and of course we didn’t fix them. It’s not sustainable... There’s going to be a permanent, massive adjustment and a loss of faith in the current system..."
China is growing at 4% at best and likely flat-lining.
Are interest rates low because of the action of central banks or because of unresolved debt deflation?
On Sunday Toyota was one of many Japanese companies to announce that it will suspend most car production across Japan as a result of critical supply chain disruption caused by the recent destructive earthquake and numerous aftershocks. The earthquakes reflected the vulnerability of Japanese companies to supply chain disruptions caused by natural disasters, and also highlighted the "just in time" philosophy pioneered by Toyota and followed by many others.
Since modern-day “policymakers” are averse to allowing even the slightest bit of economic pain to materialize (except if the countries concerned are small and helpless, such as Greece), they have implemented unprecedented monetary pumping and debt expansion to hold recessions at bay. China’s planners have been especially diligent in this respect, misallocating resources in truly grand style and leaving the country buried in a pile of unsound debt. The combination of demographic and economic challenges the country now faces means that more than just a small hicc-up is probably in store, even though the timing of the denouement remains uncertain.
So what do you do? Play the short-term chase the market game or the longer-term wealth devastation game. The choice is yours to make, the consequences will be for all to share. “I will tell you my secret: I never buy at the bottom and I always sell too soon.” – Baron Nathan Rothschild
Any honest person working with such models know their gross limitations and how awful their track-records are. Still, these are the tools guiding the world’s central planners when they micromanage economies, be it fiscal or monetary expansion. They are obviously completely clueless, but still act with an extravagant level of hubris simply because they believe the scripture and their models.
Those that were hoping for an “economic renaissance” in the United States got some more bad news this week. It turns out that the U.S. economy is in significantly worse shape than the experts were projecting. Retail sales unexpectedly declined in March, total business sales have fallen again, and the inventory to sales ratio has hit the highest level since the last financial crisis. When you add these three classic recession signals to the 19 troubling numbers about the U.S. economy that we wrote about last week, it paints a very disturbing picture.