And curious group of markets - India, Indonesia, The Philippines and Vietnam - have been identified as the best investing opportunities by a group of leading Asia macro strategists, who think that Asia and the emerging markets will considerably outperform the developed world.
Does being the Managing Director of the International Monetary Fund mean never having to say sorry? As Christine Lagarde blunders on from one mishap to another with apparent insouciance, it would appear so.
These two nuclear options could strike the global economy even without any planning. Once the global economy tips into recession, oil may fall under its own weight and the dollar may gain ground as other currencies fall.
"Tuesday’s sell-off did look like liquidation rather than fundamentally warranted selling. This view is further supported by the fact that the open interest in the COMEX futures has fallen by more than 4% this week, suggestive strongly of forced liquidation and a throwing up of the hands… and of the stuff in one’s stomach."
At bottom, it is not central bank stimulus and intervention alone that drives equities and bond markets; it is the naive faith and willful ignorance of average market participants. There is a problem with this kind of economic model, however. Reality is never kept in check indefinitely. Fiscal truths will be exposed, one way or another.
The IMF sounded the alarm in its latest Fiscal Monitor report which revealed something disturbing: at 225 percent of world GDP, the global debt of the nonfinancial sector, comprising the general government, households, and nonfinancial firms, is currently at an all-time high of $152 trillion.
"In examining some of some of our favorite indicators’ recent trends, we did find evidence for an imminent recession. While the range of signals is wide, in aggregate they do suggest that, if data were to continue to weaken in line with the recent pace, history would point to a recession in the second half of 2017"
With China on holiday, overnight sessions remain relatively quiet: at this moment, S&P500 futures are little changed as European stocks fall for first day in seven, on yesterday's concern that the ECB is moving toward tightening monetary policy; Asian indices rose slightly for third day. WTI climbs to $49.40, the highest since June 30 after yesterday's surprisingly large API crude draw report.
Japan’s economy continues to be the most obvious and clear evidence of the truth in that statement, but it no less applies everywhere the monetary illusion was once accepted without question. They really don’t know what they are doing, and in 2016 it so much harder to hide.
For the hedge fund of Crispin Odey, the endgame may have arrived: his bets are predicated on a collapse of Japanese bond prices, a surge in the price of gold and immolation of equities. "If it works he may make hundreds of millions of dollars for his clients. If wrong his fund may not survive."
"Central bankers have fostered a casino like atmosphere where savers/investors are presented with a Hobson's Choice, or perhaps a more damaging Sophie's Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin' like mongrel dogs for tidbits of return at the zero bound. This cannot end well."
Having observed consensus economic growth expectations for the US tumble month after month, in its latest World Economic Outlook, the IMF decided to once again play catch down from its over-optimistic +2.2% outlook in July to just 1.6% now which still remains above consensus expectations of just 1.5% growth in 2016, pouring cold water on Obama's strategy to paint the economy as growing strongly.