Trying to make sense of the global capital markets.
The entire global financial system resembles a colossal spiral of debt. Just about all economic activity involves the flow of credit in some way, and so the only way to have “economic growth” is to introduce even more debt into the system. Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again.
We've long argued that the implications of the shift away from a global economic order that has prevailed since the end of WWII are far reaching and may include the demise of what has largely been a unilateral political and economic system characterized by the dominance of US foreign policy and Western notions of politics and capitalism. Now, it appears as though de-dollarization and the end of US hegemony may have gone viral because, as The NY Times reports, a US “retreat” from the world order it has largely shaped was the unspoken topic de jour at this year’s spring meeting of the IMF and World Bank in Washington.
"The last time China suffered such pace of capital outflows was during 2012 when $165bn of capital left during the last three quarters of that year. And before then it was during the Lehman crisis," JPM notes, in yet another sign that Beijing is stuck between a rock and a hard place as it battles to maintain the dollar peg in the face of slumping economic growth.
In yet another ripped from the movies-screen-esque event, Beijing was brought to a standstill today as a massive Interstellar-like sandstorm covered the Chinese capital in thick blanket of red dust, sparking social media discussions of the end of the world. As RT reports, The China Meteorological Administration issued a yellow sandstorm alert – the third-most serious danger level, which given the images below, makes us wonder just WTF it takes to get to a level 1 sandstorm...
“We absolutely think it is for military aircraft...the main question is, what else would land there? Unless they are planning to turn these into resorts..."
Central bankers in the U.S., Europe and Asia have created another massive bubble. This time it is a bubble in stocks, bonds and real estate simultaneously. There is no place to hide. But we’d put my money on war, chaos, and revolution. There will be no impunity for our gambling.
As noted earlier, while tens of thousands of Bloomberg terminal users were twiddling their thumbs during an outage that lasted several hours, China crashed. There was some confusion about the cause of the rapid move, but it appears the catalyst was an announcement by the China Securities Regulatory Commission in which it allowed fund managers to lend shares for short-selling, and will also expand the number of stocks investors can short sell, in a bid to raise the supply of securities in the market.
The following clip seemed to sum up perfectly just what The PBOC is attempting to do (and just exactly how it will end). With Chinese equities entirely decoupled from any sense of fundamentals, elementary-school-educated people piling their life savings into a market that is up 100% YoY amid the worst economic conditions in a decade or more, and margin trading that is surging (and now being probed - as Reuters reports, PBOC Shanghai has asked banks to check margin trading risks); how could anything go wrong?
The Asian Infrastructure Investment Bank will establish an AIIB currency basket with China set to push for the yuan to take a prominent role and for “special currency funds” to be established in order to issue yuan-denominated loans through the fund. "The AIIB's grand vision for infrastructure investment [comes] with challenges but China should do its best to establish the yuan as a currency for settlement and denomination," one analyst says.
* Fall 2015 turning point - civil unrest and riots globally says forecaster Armstrong
* European banks will collapse and “blood in the streets”
* Advocates diversification and holding bullion coins familiar to public such as $20 gold coins
* “Your portfolio has got to include everything … including bullion”
- Shale Oil Boom Could End in May After Price Collapse (BBG)
- Oil above $58 on U.S. shale output report, Mideast (Reuters)
- Ackman Says Student Loans Are the Biggest Risk in the Credit Market (BBG)
- Alibaba Disputes U.S. Group’s Claim it Tolerates Fake Goods on Taobao (WSJ)
- Petrobras takes steps to avert a technical default (FT)
- Yen’s Drop Is Approaching Its Limit, Says Abe Adviser Hamada (BBG)
- 'Slicing and dicing': How some U.S. firms could win big in 2016 elections (Reuters)
- Fed official warns ‘flash crash’ could be repeatedv (FT)
Everyone was shocked by yesterday's Chinese March trade update which showed that while imports slid largely as expected, it was the 15% drop in exports, the largest in over a year, that prompted many to wonder just how big the global trade slump really is, masked by what has now become pervasive, global QE. This was the worst performance, exports and imports combined, since late 2009. Below is a selection of responses by Wall Street analysts trying to justify how - with global equities, if only in local currency terms, at all time highs - China can be doing so badly.
- As reported here first a month ago: The $9 Trillion Short That May Send the Dollar Even Higher (BBG)
- As an instant target for foes, Clinton may struggle to get message heard (Reuters)
- Emerging Stocks Rally 11th Day as Aussie Weakens on China (BBG)
- Puerto Rico, Investors Enlist Ex-IMF Officials (WSJ)
- Dollar’s Rise Reshuffles Global Economy (BBG)
- Indonesia eyes regular navy exercises with U.S. in South China Sea (Reuters)
- Banca Monte dei Paschi Breaches Exposure Limits to Nomura (WSJ)
- European Bond Buyers Find Negative Doesn’t Necessarily Mean Bad (BBG)
Forget the weather, it must be the smog. China just announced total carnage in its trade data for March:
CHINA'S MARCH IMPORTS FALL 12.3% Y/Y IN YUAN TERMS; EST. -11.3%
CHINA'S MARCH EXPORTS FALL 14.6% Y/Y IN YUAN TERMS; EST. +8.2%
CHINA'S MARCH TRADE SURPLUS 18.16 BILLION YUAN; EST 250B YUAN
So what exactly was the Chinese stock market 'discounting'?