Market Crash

China Threatens Its Economists And Analysts To Only Write Bullish Reports, Or Else

While in the US and the rest of the free world, anyone who holds a less than bullish view of things is simply marginalized as a conspiracy theorist, ridiculed by establishment economists and pundits, is the recipient of mainstream media hit pieces, or denigrated by the president as "peddling fiction", China has decided to take a more blunt approach: "securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements."

"A 2015-like Market Crash In Chinese Commodities Is Inevitable"

Is Everyone Wrong On The "Causation" Of The Commodity Bubble? While it appeared 'retail' was responsible for the panic-buying chaotic volume surge in Chinese commodities, Axiom Capital Management's Gordon L Johnson points out that in fact... China Bank Special Interest Vehicles' "Bold" Commodity Speculation Is The Real Budding Black Swan

Why Is JPM's "Quant Guru" Suddenly Worried About The "Endgame"

"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 Most Dangerous Divergence

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.

Pimco Economist Has A Stunning Proposal To Save The Economy: The Fed Should Buy Gold

"In the context of today’s paralyzed political-fiscal landscape how silly is it to suggest the Fed purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce?  Admittedly, this suggestion is almost too outrageous to post under the PIMCO logo, but NIRP surely would have elicited a similar reaction a decade ago. But upon reflection, it could be an elegant solution since it flips the boxes on a foreign currency “prisoner’s dilemma”. Most critically, a massive gold purchase has the potential to significantly boost inflationary expectations, both domestic and foreign."

"Swimming Naked" - Chinese Corporate Bond Market Worst Since 2003

A week ago we highlight the "last bubble standing" was finally bursting, and as China's corporate bond bubble deflates rapidly, it appears investors are catching on to the contagion possibilities this may involve as one analyst warns "the cost has built up in the form of corporate credit risks and bank risks for the whole economy." As Bloomberg reports, local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003. Simply put, the unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel.

Standing At The Crossroads

The market is standing at the proverbial “crossroads” of bull and bear. From a “fundamental” perspective there is not much good news. The past week we saw numerous companies beating extremely beaten down estimates. However, while JPM and C got a boost to their stock price, the actual earnings, revenue and profits trends were clearly negative. But that is the new normal. We live in an environment where Central Banking has taken control of financial markets by leaving investors “no option” for a return on cash. Therefore, the “hope” remains that asset prices can remain detached from underlying fundamentals long enough for them to catch up.

The Tragedy Of America's Bull Market Culture

The middle class in America forgot all about the importance of savings and frugality and instead bought into the lie that one’s future would be “taken care of” if only it threw its money into the stock market.

"Last Bubble Standing" Bursts - China Junk Bond Risk Soars

In January we pointed out "the last bubble standing," as China's crashing equity market had spurred massive inflows - directed by a "well-meaning" central-planning committee's propaganda - sparking a massive bubble in Chinese corporate bond markets (in an effort to enable desperately weak balance-sheet firms to roll/refi their debt and keep the zombies alive). That has now ended as China's junk bond risk has soared to 5-month highs with its worst selloff since 2014. As HFT warns, "we should avoid junk bonds."