The oil price drop is a big problem - not just for Russia, or for the other over-levered emerging market currencies that stand to be traumatized by a rising dollar, but ultimately even for the US itself
Lots of old market hands are talking about how its similar to the Russia default and crash of ‘98 all over again.. Actually... its worse. Much worse.
Last weekend’s election in Japan was the opposite of exciting. The upcoming elections in Greece, however, are another matter entirely. What’s really different about the Greek elections now and the Greek elections in 2012 is the lack of a Oh-My-God-Look-At-Greece media Narrative today, particularly in the US. Here it’s all oil, all the time, which means that any power transition in Greece will come as a big negative “surprise” to US investors and US markets. What we can tell you with confidence is that the Common Knowledge of the market today is that Greece is “fixed”, which means that any un-fixing will hit markets like a ton of bricks. It’s an asymmetric risk/reward profile – in a bad way – for global markets in general and European markets in particular.
One sign would be for non-energy junk bonds to begin dropping in price. That would mean large holders are exiting from all junk bonds, not just those companies affected by low oil prices.
Another sign would be sudden drops in share prices for banks or insurance companies that hold small amounts of energy-related bonds or bank loans, a clue that some market participants think they have derivative exposure.
A third sign to look for would be the rumors or news that the big, investment-grade energy companies are having trouble renewing their Commercial Paper, bank loans or maturing bonds (the Exxon-Mobils and Shells of the world).
Overnight the bank with the $58 trillion in derivative exposure issued a note "From GRecovery to GRelapse" which is quite absent on the usual optimism, cheerfulness and happy-ending we have grown to expect from the bank whose former employee is in charge of the European printing press. Here is the punchline: "In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point." Dear Greeks, you have been warned, and "don't vote wrong" as EU's Juncker urges the Greeks.
But the market acts deaf, dumb and blind...
"My Helicopters Are Ready. You Will All Be Trillionaires." Must see chart of gold in German marks from 1918 to 1923. The Fed - "Silently robbing your purchasing power since 1913 ... "
The Federal Reserve and its owners print and party, while the rest of us work and weep..................
THE bubble, the biggest bubble in financial history: an incredible $100 trillion monster that is now growing by trillions of dollars every few months.
Confused why in the lack of any horrible economic news (unless of course someone leaked a worse than expected November payrolls print which would put QE4 right back on the table) futures are higher, especially in the aftermath of yesterday's disappointing ECB conference? Then look no further than the Yen which has now lost pretty much all control and is in freeplunge mode, rising some 25 pips moments ago on no news, but merely as wave after wave of momentum ignition algos now make a joke of the Japanese currency, whose redline of 123 (as defined by SocGen)is now just 240 pips away. At this pace, Japan's economy, which as reported yesterday has just seen a record number of corporate bankruptcies due to the plummeting yen, may well be dead some time next week. Which, with Paul Krugman as its new and improved economic advisor, is precisely as expected. RIP Japan.
The ECB left its policy rates unchanged at today’s meeting and made no announcement of further non-conventional measures. The main innovation in today’s press conference was the shift in the language regarding the expansion of the ECB's balance sheet: an increase towards the size of its balance sheet at the beginning of 2012 is now “intended”, rather than simply an “expectation” of the Governing Council (as in the November statement). We read this as implying a higher degree of commitment to balance sheet expansion and thus as a further signal towards additional asset purchases. As made clear by ECB President Draghi, some members of the Governing Council remain sceptical about the introduction of further measures. An assessment of whether further stimulus is needed will be made “early next year”. Having emphasised that he does not need to achieve unanimity on the Governing Council to proceed with further easing (including purchases of sovereign debt), we expect Mr Draghi to announce and implement a sovereign debt QE programme during the first half of next year.
Who could have seen that coming!!??? Apparently Draghi could not clarify exactly what he meant in 90 minutes, 3 hours ago!!!!
*ECB SAID TO PREPARE BROAD-BASED QE PACKAGE FOR JANUARY MEETING
So, despite telling us earlier than not January and not ready, we get this spurious headline just as EURUSD crossed 1.2450... Fun-durr-mentals indeed. And now Bloomberg is retracting!!
"We all are in a Ponzi world right now. Hoping to be bailed out by the next person. The problem is that demographics alone have to tell us, that there are fewer people entering the scheme then leaving. More people get out than in. Which means, by definition, that the scheme is at an end. The Minsky moment is the crash. Like all crashes it is easier to explain it afterwards than to time it before. But I think it is obvious that the endgame is near."
"Today central banks give money to institutions, which are not solvent, against doubtful collateral for zero interest. This is not capitalism."
Goldman Sachs' 2015 global equity views and themes note is out and its title "The Long Grind Higher Continues" says it all... it's muppet slaughtering time...