There is an economic and financial trainwreck rumbling through the world economy. Namely, the Great China Ponzi. In all of economic history there has never been anything like it. It is only a matter of time before it ends in a spectacular collapse, leaving the global financial bubble of the last two decades in shambles. The resulting deflationary spiral will suck the global economy into its vortex. And Wall Street will go down for the count because this time the Fed will be utterly powerless to reverse the tide.
When China went the "nuclear" devaluation route earlier this week, everyone knew things were about to get a whole lot worse for an EM currency basket that was already reeling from plunging commodity prices, slumping Chinese demand, and the threat of an imminent Fed hike. With some Asian currencies already falling to levels last seen 17 years ago, some analysts fear that an Asian Financial Crisis 2.0 may be just around the corner. That rather dire prediction may have been validated on Friday when Malaysia’s ringgit registered its largest one-day loss in almost two decades, as stocks plunged and bond yields rose.
"It’s not how I want my epitaph to read, but it’s not a shameful thing helping people finance themselves. It’s not a bad thing."
In "historic step," Norway may be forced to tap into its $875 billion sovereign wealth fund to help make ends meet in the face of persistently low crude prices.
A Japanese citizens’ judicial committee has overruled government prosecutors and forced them to bring three former executives of the Tokyo Electric Power Co. (TEPCO) to trial on charges of criminal negligence for their inability to prevent the 2011 nuclear disaster at the Fukushima Daiichi nuclear power plant.
"It's all noise," squeaks Laszlo Birinyi, deflecting concerns about revenues, earnings, Europe, China, commodities, and rates as he unleashes his latest extrapolation. "If we continue to grow at 11bps per day, the S&P will be at 3,200 within 2 years," he warbles as he hopes his ruler - which missed its 2013 projection by 1100 points - is forecasting better this time.
The disconnect between economic underpinnings, market internals and "bullish" investor optimism leaves many investors/advisors "mentally conflicted." If they "sell" too soon, they might miss a further advance in the market. But if they wait too long, well, they have lived through that scenario previously. This week's reading list is a smattering of conflicting views about the markets and the economy.
Why are governments suddenly so keen to ban physical cash? The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape mechanism from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age — that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.
Everything... EVERYTHING... rests on one ephemeral thing – the market’s confidence in the power of Central Banks to ensure a good outcome no matter what. Anybody paying attention to the lesson should not just be thinking about what might happen when that fragile confidence evaporates, but taking steps to ensure they don’t get caught out when it does. The problem comes in leaving such precautions a day too long... Ask anybody who was considering selling their Chinese equities last Friday but didn’t...
If this is what is happening to a daisy now... good luck to the Olympic athletes in 5 years...
"They are going to be toast. It will be one of our first levels of shorting the moment we start to see cracks, because it’s ripe with retail, emotional investors."
What both Wall Street in general as well as the Federal Reserve has wrought is a market so adulterated, so anemic, and so mistrusted the euphemistic “money on the sidelines” has more in common with nursery rhymes than it does with anything reality based. There is no money on the sidelines. Nobody wants “in” to this market. Anyone with half a brain and a modicum of common sense wants out – and the outflow numbers show it still to be true.
How the intersection of Fed policy, the post-crisis regulatory regime, and illiquid markets turned ETFs into the new financial weapons of mass destruction.
"Moody’s, which in 2013 began using a lower rate than governments do to calculate future liabilities, has estimated that the 25 largest U.S. public pensions alone have $2 trillion less than they need", Bloomberg reports.