Reality

Why Junk Bonds Will Sink Stocks

After the white-knuckle sell-off of global equities that was finally punctuated by a rally late last week, everyone wants to know: Was this the bottom for stocks? And now Moody’s weighs in with an unwelcome warning... "it’s hard to imagine why the equity market will steady if the US high-yield bond spread remains wider than 800 basis point."

With EMs And SWFs Pushing Markets Lower, Here Are The Three Dramatic Conclusions

Earlier today we showed an amazing schematic courtesy of Citi's Matt King: if one includes the reserve liquidation by various EMs and SWF, and nets it against liquidity injections by DM central banks (and the PBOC), one gets a perfect quantitative, not just qualitative, walk thru on how to trade markets: in other words one can measure, using high frequency data in real-time, just where markets should trade based on liquidity flows and promptly profit from any arbitrage opportunities. But aside from the potential for substantial profits, there are more profound implications. Matt King lays them out as follows..

Even Goldman No Longer Believes China's GDP Fiction

In China, the government reported 4Q GDP growth of 6.8%. However, during the same time period our China CAI (Current Activity  Indicator) expanded at an average of just 4.5%, 230 bp slower than the official measure. Earlier this week our December CAI reading suggested China economic growth has decelerated to just 4.2%.

The Bernie & Hillary 'Group Think' Show - Cynics, Cowards, Or Populist Propagandists

When Sunday’s Democratic presidential debate turned to world affairs, the NBC correspondents and both Sen. Sanders and ex-Secretary Clinton fell in line behind "group thinks" about Syria, Iran and Russia that lack evidentiary support. The two possibilities for such behavior are both scary: either these people, including prospective presidents, believe the propaganda or that they are so cynical and cowardly that they won’t demand proof of serious charges that could lead the United States and the world into more war and devastation.

"A Historic Wealth Illusion Built On A Foundation Of False Promises"

What began with Greenspan’s early-nineties covert bank recapitalization evolved into Bernanke’s foolish policy to openly inflate risk markets with new central bank Credit. Amazingly, U.S. inflationism took the world by storm. The issue today goes much beyond a stock market correction, a bear market or even global financial crisis. Contemporary central banking has failed. Theories have failed. Doctrine has failed. The inability to spur self-sustaining economic recovery has been a major issue.

The Real Enemy Of Investors

The real enemy of investors is not these fairly routine 10 or 20% downturns. The real enemy is the bear market that is associated with a recession or crisis, the one that knocks your equity block down by 40 or 50%. And actually it isn’t even the depth that is the real enemy. For most investors the enemy is time.

Energy Creditors Lucky To Recover 15 Cents On The Dollar In Bankruptcy

As part of its 363 Asset Sale, the 3rd largest bankruptcy of 2015 after Samson Energy and Sabine Oil, that of Quicksilver, the estate was only able to collect $245 million in cash proceeds from BlueStone Natural Resources. With $2.35 billion in debt, Quicksilver was one of the first casualties of the energy bust when it filed on March 17, 2015. Today's news means that the recovery for its creditors is a paltry 10 cents on every dollar of total debt.

The End Is Nigh For The Fed's "Bubble Epoch"

Over the short run, markets respond to myths. Investors are ready to believe almost anything... for a while. But over the long run, there is reality. No matter how badly investors want asset prices to go up, they don’t always comply. Greenspan, Bernanke, and Yellen are, after all, only human. They respond to myths as much as anyone... maybe more.

Square Holes And Currency Pegs

What will bring down the Chinese and Saudi pegs, along with a long list of other pegs, is, how appropriately, the very same markets they’ve been relying on to NOT function. The bets against Hong Kong’s ability to maintain its USD peg have already started, and China is next, along with the House of Saud (the latter two just take more fire-power). Which of course is exactly why they speak their soothing ‘confident’ words. Words that are today interpreted as the very sign of weakness they’re meant to circumvent.

"China 2016 Is US 2008" Felix Zulauf Warns "The Outcome Of A Major Yuan Devaluation Would Be Disastrous"

"China is to the current cycle what the US housing market was for the Global Financial Crisis in 2008. It will take years to correct the excesses that were built up in China... the consequences of a weaker yuan would be disastrous...If China devalues, all the other countries in the region will follow suit which will lead to a global deflationary shock. There is a real chance of a bigger correction than many investors realize..."

The Islamization Of France In 2015

The Muslim population of France reached 6.5 million in 2015, or around 10% of the overall population of 66 million. In real terms, France has the largest Muslim population in the European Union, just above Germany... "Those who denounce the illegal behavior of fundamentalists are more likely to be sued than the fundamentalists who behave illegally."

"Perma-bears" 1 - BofA Economist 0

Eight months ago, Bank of America chief economist Ethan Harris triumphantly declared victory over the "perma-bears." Today, the "perma-bears" get the last laugh.