Hyperinflation

Having told banks and investors "don't panic" in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank's decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) and CDS spiked to record highs implying drastic devaluations loom.

And with that we can finally close the book on slippery central bank semantics on what precisely it is that they do, and what it is they plan to achieve.

Just two weeks ago we warned of the looming "hyperinflation monster" in Africa with the continent appearing to be running out of dollars as some of Africa’s largest economies, including Nigeria, Angola, Ethiopia and Mozambique, are restricting access to the greenback to protect dwindling reserves. Specifically we warned of Angola's already-soaring inflation hampering its ability to 'adjust' its currency towards its black market 'reality'. But that did not stop the central bank devaluing Kwanza by 15% over the weekend - the most since 2001 - to record lows as crude prices crush their economy and the flow of USDs.

With markets wrapped up for 2015 now, reviewing the performance of asset classes last year shows that it was one where negative asset class returns were aplenty, while those finishing in positive territory were few and far between. Indeed, of the 42 assets we monitor in Figure 5, just 9 finished with a positive return in Dollar-adjusted terms over the full year.  At the other end of the scale there were some notable losers.

How did Venezuela stocks perform in the past year under the country's hyperinflation? The answer: using a meaningess exchange rate, they rose 4x and, as Handelsblatt incorrectly concluded, "were the best investment of the year"; on the other hand using an exchange rates that actually reflects the country's economic implosion, they lost just over 20% of their value in the past year.

America is being destroyed by problems that are unaddressed. Unbridled greed, short-term in nature, will continue to drive America into the ground.

It's that time of year again. When hindsight is 20/20 and coulda/woulda/shoulda gives way to reality. With the US equity market barely able to keep its head above green water, a look around the world shows investors could have done a lot better... (or not)

In 2013, Maduro’s first year in office, the government released a Christmas carol praising the Socialist utopia's dictator. Last year, Maduro debuted a “socialist Barbie” that almost bankrupted stores forced to sell it after the government forced the price down to a tenth of its value. And this year, as AFP reports, "Christmas is dead, there is not enough money," according to one resident, noting there is no Christmas decor anywhere and people do not have enough money to buy presents. Some cannot even afford the basic goods needed to put together a traditional feast of roast pork and assorted sides.

On Monday, Zimbabwe announced that this small, economically devastated country would officially make the Chinese Yuan its legal tender as it seeks to increase trade with Beijing. In exchange for becoming not only a military but also financial colony of China, $40 million of its debts to Beijing would be canceled.  China was delighted it cost it only a $40 million debt write off to acquire its first official African colony.

In an unexpected turn of events, the disappearance of not just synthetic but very physical dollars has hit one region much harder and much faster than we expected. Africa.

“To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything.” ~Edward Abbey

When the 'Land of the Rising Sun' jumps into the abyss...

Danish border guards may confiscate gold, jewelry, diamonds, and other valuables from refugees as they enter the country (though wedding rings are now off limits). The Danish government’s excuse is that they need to confiscate assets from refugees in order to pay for the services they’re providing to those same refugees. Having armed men indiscriminately seize refugees’ personal belongings doesn’t strike me as the best representation of a free society. Not that this matters anymore.

At this point, many readers may be thinking to themselves that it can’t get any worse. 

Hitler said often that the bigger the lie, the easier it would be [for the masses] to believe.  This is no where more true than Forex.