Meltdown

Norway's $860 billion sovereign wealth fund (tasked with managing the country's vast oil wealth) just had its worst quarter in 4 years and its first back-to-back quarterly loss since 2009 after an array of EM bets went awry. Meanwhile, the government is set to start making withdraws from the fund as slumping crude prices have effectively reduced inflows to zero. 

It's not a good time for this. 

Can the stock market completely ignore these five key changes and keep powering higher on the fumes of Mario Draghi's promises?

The powers that be have lost control. After almost a century of playing the Wizard of Oz, the curtain is disintegrating. Institutions to ensure control, stability and prosperity are failing. People and markets were not to be trusted and most of these institutions were established to protect against such freedom. Bureaucrats, central planners and big governments were to be the answers for a better world. The damage of nearly a century of this nonsense is suddenly becoming evident. Things fall apart is characterized by institutions that no longer are trusted or believed in.

The previous Bubble was of the Fed’s making, and our central bank lost control. It became a Hobson’s Choice issue in the eyes of the Fed, and they fully accommodated the Bubble. These days, the Fed and global central bankers face a similar but much more precarious Bubble Dynamic: The Fed specifically targeted higher securities market prices as its prevailing post-mortgage finance Bubble (“helicopter money”) reflationary mechanism. This ensured that the Fed would again be unwilling to impose any monetary restraint before it would then become too risky to remove accommodation (Einstein’s definition of insanity?). In concert, global central bankers now aggressively accommodate financial Bubbles.

Like medical chemotherapy, Iceland's economic chemotherapy was horrible, but the cancer of debt-deflation was eradicated and the system made whole.

Roughly ONE THIRD of the advisory firms the SEC examined failed to meet custody rule requirements.

From the bowels of Australia’s iron ore mines to the top of Dubai’s pointless 100 story office towers, the entire warp and woof of the global economy has been distorted and bloated by the central bank money printing spree of the last two decades, led by the red credit machines of Beijing. Everywhere economies have succumbed to over-building, over-consumption, over-financialization and endless dangerous, unstable speculation. Stated differently, China’s red capitalism is the new black swan. There is nothing rational, stable or sustainable about it.

"Then tell me, future boy, who's President of Brazil in 2016? Then who's vice president?"

"There are so many fault lines that the nation seems consumed by a conflict of all against all... there is an inevitable “revolution” coming because our politics, culture, education, economics and even philanthropy are so polarized that the country can no longer resolve its differences."

First The Bank of Japan destroyed the Japanese bond market, and then, back in May we warned that The Bank of Japan had 'broken' the stock market. Now, it appears the all too obvious consequences of being the sole provider of buying power in an antirely false market are coming home to roost as Nomura reports the "temporary suspension" of new orders for 3 leveraged ETFs - the largest in the world - citing "liquidity of the underlying Nikkei 225 futures market."

Never in history has the US entered a recession when rates were this low. And it spells serious trouble for the financial system going forward.

This. Will. Not. End. Well. As WSJ reports, "retailers such as Kmart and Office Depot this week are starting to roll out cards that give the recipients small amounts of stock in some of the country’s best-known companies." "I have always wanted to get into the stock market business, but I honestly don’t have the time to explore what’s going on in the market trends of the day"...