Meltdown

By now, everyone knows Brazil is stuck in a stagflationary nightmare that's made immeasurably worse by the country's seemingly intractable political crisis. But what about the rest of Latin America? Goldman takes a close look at the regional outlook for the next four years and finds a decidedly unfavorable growth-inflation mix. 

At this week’s close, the FANG stocks were valued at just under $1.2 trillion, meaning they have gained $450 billion of market cap or 60% during the last 11 months - even as their combined earnings for the September LTM period were up by only 13%. In a word, the gamblers are piling on to the last train out of the station. And that means look out below!

The sums in play are so staggering (an estimated $11 trillion in emerging market debts denominated in other currencies) that even the Fed won't be able to stop the meltdown.

"Can the government maintain this strategy of flooding the oil market? In our view, it is unlikely that Saudi leaders would want to exacerbate its ongoing reserve drain by pushing prices below $40/bbl. After all, pressure will quickly build on the riyal’s 30 year peg to the USD if Brent crude oil prices keep falling."

"The reason for our recession concern is not so much because of what the Fed is about to do – likely embark on a slow hiking cycle beginning in December – but because it did not start the tightening much sooner."

"Federal Reserve officials meeting last month anticipated it “could well be” time to raise short-term interest rates at a December policy meeting after keeping them pinned near zero for seven years. Fed officials thus decided to change the wording of their Oct. 28 policy statement to ensure their options were open for a move in December, according to minutes of the October meeting released Wednesday with the regular three-week lag."

Editors Note: GoldCore believe that blockchain technology will revolutionise the world of finance, payments and money and may have an impact on the world on a scale of that of the internet. If you thought the “internet” was disruptive, well you ain't seen nothing yet ... the blockchain cometh!

The current world-system (call it whatever you like--cartel-crony neoliberal-state capitalism, etc.) is as doomed as the Titanic, for the same reasons: the design of the system is the source of its failure.

"My guess is that we will have negative rates in Norway before there will be any talk of QE"...

America’s next president will inherit more than a bitterly divided nation teetering on the brink of financial catastrophe when he or she assumes office. He will also inherit a shadow government, one that is fully operational and staffed by unelected officials who are, in essence, running the country. To be precise, however, the future president will actually inherit not one but two shadow governments.

There is little evidence currently that the rally over the last couple of months has done much to reverse the more "bearish" market signals that currently exist. Furthermore, as noted by Jochen Schmidt, the current market action may be more indicative of market topping process. Not unlike previous market topping action, the markets could indeed even register "new highs," as witnessed in both 2000 and 2007 before the major market correction begins. This is typically how "bull markets" end by providing false signals and sucking in the last of those willing to "buy the top." The devastation comes soon after.

Collapse begins when real reform becomes impossible.

"Absent the central banks, we would be in the later stages of a credit cycle," warns Principal Global Investors's David Blake as 2015 has now seen the most corporate debt downgrades since 2009 and the upgrade-downgrade ratio crashes to financial crisis lows. A lot of people are recognising we are closer to the end of the credit cycle than the beginning, and while stocks have bounced back dramatically as Dana Lyons' details, junk bonds have not; a combination normally associated with more extensive bear markets and recessions. As BofAML analysts warned "the slow moving train wreck seems to be accelerating."

“A predicted global meltdown passed without event. But there are enough warning signs to suggest we are sleepwalking into another disaster”.

Financial engineering scams like Tyco and Valeant would never happen in an honest free market. Short sellers would shut them down long before they reach egregious levels of over-valuation; and the cost of honest downside market insurance (i.e. S&P 500 puts) and market driven carry cost would dramatically reduce the profitability of speculation and the amount of punters and capital in the casino. In today’s broken markets and corrupt regime of central bank driven crony capitalism, however, bubbles inflate in individual securities, as well as in broad sectors and the market as a whole, until they reach egregious, self-correcting extremes. Then they violently implode, creating immense waves of collateral damage in the process. Perhaps then the American people will learn that Yellen & Co have actually been in the un-wealth effects business for way too long.