The meaning of Trumpism is that Americans want to rid themselves of the burden of empire. Trump’s rise augurs a seismic shift in the foreign policy debate in this country, marking the end of the interventionist consensus that dominates both parties. And it certainly means the final defeat and humiliation of the neoconservatives, who are busy spewing vitriol at him and his 'plebeian' supporters. And that alone is worth whatever price we have to pay for the triumph of Trump. For the neocons are the very core of the War Party: their demise as a politically effective force inside the GOP is an event that every person who wants a more peaceful world has been longing for and should celebrate.
Dow futures are down 100 points and Chinese stocks are pressing new 14-month lows, extending last night's carnage after Chinese Industrial Profits tumbled. With a dismal 4.7% drop year-over-year, led by a near 60% collapse in the mining industry, early strength (after some jawboning from Abe) gave way to fresh lows and US equity futures are also responding. Offshore Yuan refuses to drop since Xinhua wrote a 3rd hit piece against George Soros and his "speculative snap profits."
The financial engineering that has been made possible by zero percent interest rates is no longer available to paper over weak corporate results in the U.S. Our economy is addicted to QE and zero rates, and without those supports, we will spiral back into recession. This is the reality that the mainstream tried mightily to ignore the past several years. But the chickens are coming home to roost, and they have a great many eggs to lay. In the end, stimulus does not create actual growth, but merely the illusion of it.
After a day of exuberant hope from rumors of production cuts, WTI crude is plunging back to reality as API reports a stunning 11.4 million barrel inventory build. This is the biggest weekly build since May 1996.
“Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt. Reckless speculations and vicious shorting will face higher trading costs and possibly severe legal consequences. And just as proved in the yuan exchange rate case, the Chinese government has sufficient resources and policy tools to keep the overall economic situation under control and cope with any external challenges.”
"It's up to Turkey, the Turkish government, the Turkish leadership, to decide whether they want to be part of any kind of cooperation to fight terrorism. This is not the case so far.”
One glance at The Baltic Dry Index's collapse is all that most need to see the painful state of the global shipping industry. However, as gCaptain reports, reality is even worse as the boom in so-called "zombie ships" suggests there is no recovery in sight for the beleaguered containership charter market, which is facing its biggest crisis since the 2008 financial crash.
Everyone who isn't blinded by self-interest sees that the cost of higher education in America - and the way we pay for it, by turning students into debt-serfs - is unsustainable. Those benefiting richly from the bloated, ineffective bureaucracy see no alternative, of course; their self-serving handwringing would be laughable if it wasn't so destructive to the nation and the economy.
Americans across the country have been priced out of the U.S. housing market since the “recovery” began due to a combination of factors; stagnant wages, private equity purchases and money laundering foreigners. As such, many potential first time buyers have been sidelined despite the availability of meager 3% downpayment loans from the FHA as well as Fannie Mae and Freddie Mac. Fortunately for the U.S. ponzi scheme economy, the U.S. government has a solution. Lower mortgage insurance premiums.
“What The Fed did, and I was part of it, was front-loaded an enormous market rally in order to create a wealth effect… and an uncomfortable digestive period is likely now.” – Former Dallas Federal Reserve Governor Richard Fisher – January 5, 2016.
Deeply concerning to us, and apparently now to Mr. Fisher, is the degree of excessive optimism embedded in current prices.
Retail investors generally buy an off-the-shelf portfolio allocation model that is heavily weighted in equities under the illusion that over a long enough period of time they will somehow make money. Unfortunately, history has been a brutal teacher about the value of risk management.
Having briefly reached bull market status (ripping 20% off last week's lows), WTI crude oil is collapsing again this morning as the reality of excess supply and dwindling demand crash on the shores of manipulated futures and ETFs. However much hope was imbued into this rally as "setting the bottom" for oil, it seems the rally was used by 'investors' to hedge the downside as bets on a bearish plunge have soared to record highs.
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."
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..