If the American Dream depends on skyrocketing debt built on a weakening foundation of stagnant productivity and income, then it is indeed over. Voters sense this fragile, debt-dependent economy is one repricing away from implosion, and they're uneasy for good reason. Voters are rightly angry that the official statistics mask or manipulate this reality, for if we can't face reality then we have zero hope of solving any problems.
Oil tanker rates soared to the highest in seven years amid an acceleration in the number of bookings and signs that the ships are being delayed when unloading due to a lack of space in on-land storage tanks. This means that day rates for 2 million-barrel carrying ships sailing to Japan from Saudi Arabia, the industry’s benchmark route, surged to $111,359, the highest since July 2008,
The world doesn’t realize it, but record global silver coin demand is warning that big trouble is coming to the financial system
Less than two weeks after Guotai chief Yim Fung went "missing" amid Beijing's reinvigorated crackdown on market "manipulators," Citic Securities - China's largest broker - says it cannot find two of its most prominent investment bankers. Considering recent events, you don't have to be a detective to make an educated guess as to what might have happened to Jianlin Yan and Jun Chen.
So how do you grow household wealth by $18 trillion in the face of these dismal real world trends? In a word, with a printing press. But what happened today is that Draghi showed he is out of tricks and Yellen confessed she is out of excuses. Yes, this sucker is going down. And this time all the misguided economics professors turned central bankers in the world will be powerless to reverse the plunge.
"Like most turns in the credit cycle, it is uncertain exactly when the bottom will fall out of corporate credit markets, but the catalyst is likely to be an unexpected major event, perhaps even a single company getting into trouble. While we have been bearish on high yield for over a year now, we didn't think the conditions were yet ripe for a collapse. Now they're ripe."
- Ellington Management
- Yellen, in back-to-back appearances, could close out era of zero rates (Reuters)
- ECB stimulus hopes keep Europe stocks at three-month high (Reuters)
- ECB to Test the Limits of Its Bond-Buying Program (WSJ)
- Watch for U.S. recession, zero interest rates in China next year, Citi says (Reuters)
- Euro’s Loss Being Yen’s Gain May Be Headache for BOJ (BBG)
- Yahoo Board to Weigh Sale of Internet Business (WSJ)
- Islamic State Prevents Civilians From Fleeing Iraqi City of Ramadi (WSJ)
It is Pedro's "courage to write" what Bernanke conveniently forgot to add in his memoir, that makes this review so much more memorable than the generic sycophantic tripe written by his "access journalism" peers.
The game of enabling more debt by lowering interest rates and loosening lending standards is coming to an end. Debt is not a sustainable substitute for income, and households are increasingly waking up to this realization. Say good-bye to Christmas, America, and debt-based spending in general--except, of course, for the federal government, which can always borrow another couple trillion dollars on the backs of our grandchildren.
So now, here we are in the lull just as we were before that Sept. meeting, And what is happening this time? Well, don’t look now, but there indeed looks to be trouble brewing on the global stage (or should I say “international developments”) that could turn out to be just as big of a headache to the Fed’s reasoning’s on whether or not to “just do it.” Just one of those issues is – once again: China.
Wondering where the world's economies are in the leverage cycle? Well, wonder no more. SocGen is out with its updated "leverage clock" which shows you where the bank thinks everyone falls in terms of ticking debt time bombs. As you'll see, SocGen's assessment is quite generous...
As we noted recently, BofAML fears "a depeg of the Saudi riyal is the number one black-swan event for the global oil market in 2016," adding that it is "a highly unlikely but highly impactful risk." Given the recent action in Saudi Riyal forwards - the market's best guess at where the oil-ruch nation's currency will trade in the future - the chance of the black swan 'de-peg' is its highest since 2002. Besides this morning's "whatever it takes" moment, which oil markets quickly shrugged off, amid heavy subsidies to keep the people calm and the costs of wars in Yemen (and more in Syria), weak oil revenues leave The Sauds with few options (outside of the load the nation with ever more debt program): It's either stop it with the whole flooding an oversupplied market strategy, or let the peg fall before reserves runs dry.
There’s an old adage among veteran stock traders that goes something like his, “If I told you the news before it were made public – it’s still a 50/50 bet you would guess the market’s reaction correctly.” That was when the markets had some resemblance of normalcy. Today, normalcy has been replaced with sheer lunacy as to the speculation and interpretations for where these markets go from here.
“Brazil is confronting a toxic combination of a primary budget deficit, high public debt (relative to EM countries), very high real interest rates (the Selic stands at 14.25%), sluggish trend growth, a negative commodity price shock and potential contingent liabilities for the sovereign, which together spell trouble for public debt dynamics.”
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.