The single most important issue for understanding why the finacnial system is not healthy and why we’re set to have an even bigger crash than in 2008 has to do with one word…
For the US, it’s now shooting fish in a barrel – but just for now. The three-pronged plan the Fed has started to execute is plain for everyone to see... And it will have the rest of the world begging for mercy.
The Mindful one does not seek to change the world; he seeks to change himself.
Despite a low-volume melt-up in stocks off yesterday's European close lows, US equities closed lower on the week with small caps once again the laggards. Even as stocks closed red, the costs of protection in credit and equity markets tumbled as the last 2 days volumeless liftathon in stocks took place against the background of very modest Treasury selling - this has the stench of high-yield bond exposure being significantly reduced (and synthetic hedges being lifted) - something we saw Wednesday into the close. The USDollar rose the most in 15 months today (up for the 12th week in a row - longest streak since Bretton Woods) led by Cable and EUR weakness. Jobs data losses in bonds today were largely reversed with TSY yields ending the week down 7-9bps. Commodities were ugly with silver and oil (under $90) joined at the hip and gold closing below $1200 for first time this year. The Russell 2000 closed lower for the 5th week in a row, the worst streak since Aug 2011.
Amid the recent weakness in stocks and strength in the USDollar, we are constantly reassured by talking heads that major stock market declines only happen during recessions. While that may be technically correct, perhaps it is worth pondering: "Did a recession cause the correction, or did the correction cause the recession?"
We continue to be told that the US economy is in recovery and stronger than ever. The press trumpets heavily massaged data (GDP growth and the unemployment number) while ignoring data that clearly indicates the US economy is in the toilet (labor participation rate, median income, etc).
Carmen Segarra said, “I come from the world of legal and compliance, we deal with hard evidence. It’s like, we don’t deal with, you know, perceptions.”
How ironic. Segarra worked at the Fed.
In is only fitting that a week that has been characterized by deteriorating macroeconomic data, and abysmal European data, would conclude with yet another macro disappointment in the form of Markit's sentiment surveys, for non-manufacturing/service (and composite) PMIs in Europe which missed almost entirely across the board, with Spain down from 58.1 to 55.8 (exp. 57.0), Italy down from 49.8 to 48.8 (exp. 49.8), France down from 49.4 to 48.4 (exp. 49.4), and in fact only Russia (!) and Germany rising, with the latter growing from 55.4 to 55.7, above the 55.4 expected, which however hardly compensates for the contractionary manufacturing PMI reported earlier this week. As a result, the Composite Eurozone PMI down from 52.3 to 52.0, missing expectations, as only Germany saw a service PMI increase. And yet, despite or rather thanks to this ongoing economic weakness, futures have ignored all the negative and at last check were higher by 9 points, or just over 0.4%, as the algos appear to have reconsidered Draghi's quite explicit words, and seem to be convinced that his lack of willingness to commit is merely "pent up" commitment for a future ECB meeting. That or, more likely just another short squeeze especially with the "all important" non-farm payrolls number due out in just over 2 hours, which for the past 24 hours has been hyped up as sure to bounce strongly from the very disappointing, sub-200K August print.
Low interest rates are a direct cause of credit bubbles, and this is what is happening in Singapore
One thing we know from history is that people in power tend to become very paranoid about losing it. People who hold power based on fraud and deceit, and who start to lose the support of the masses, are particularly vulnerable to extreme paranoia. This is exactly what I think is happening to people in power throughout the world. From Hong Kong to Scotland. From Catalonia to the Middle East. All across the globe, young people are uniting in protest to achieve the same goal. They see a status quo in power that has destroyed their futures. They see centralized power far from where they live primarily being used by the super rich to become super richer. They are sick of it and they want something else. In fact, they are now beginning to demand something else.
It appears the ruling elite have finally woken up to the reality in which the rest of the world's laboring populace has been living. IMF head Christine Lagarde stated this morning she is "monitoring buoyant markets" with "lots of hesitation" while noting "weak economies." We have one simple question for the oompa-loompa-colored 'economic expert' - what took so long?
Bloomberg's Consumer Comfort gauge dropped to 4-month lows this week with across the board collapses in personal finance confidence, buying climate, and the state of the economy (78% not-so-good). However, it is under-the-surface data that exposes the sad reality of this so-called 'recovery'. For those earning over $100k, "comfort" nears record highs, for those earning below $40k, "comfort" plunged in the last few weeks to near 2-year lows. This has surged the rich-to-middle-class discomfort gap to near 4-year highs... thank you Ben.
"When Bad News Becomes Bad News" - Albert Edwards Presents His "Second Most Imporant Chart To Investors"Submitted by Tyler Durden on 10/02/2014 18:16 -0400
"amid the inevitable impending global economic and financial carnage, when people, like Queen Elizabeth ask, as she did in November 2008, why no-one saw this coming, tell them that many did. But just like in 2006, before the Great Recession, investors once again chose to tilt their ears towards the reassuring siren songs of the Central Bankers and away from the increasingly hysterical ramblings of the perma-bears and doomsayers."
Stop trying to predict what exactly the Black Swans will be (not likely), when a Black Swan will arrive at our doorstep (less likely), and start trying to be more antifragile