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"The Biggest Problems We Face Is That We’re All Flying Blind To A Large Degree" Warns Deutsche Bank

Tyler Durden's picture




 

For everyone confused about the current state of the global financial situation, you are not alone. To help, here is DB's Jim Reid with a pretty good summary of where we all currently stand.

From DB's Jim Reid

One of the biggest problems we face is that there is no historical template for current global market conditions so we’re all flying blind to a large degree. Never before have so many of the most important countries in the world printed so much money and left base rates at near zero for so long. Also never before has the largest economy in the world tried to start a slow process of reversing said extraordinary policy. So there is no road map for this journey, only educated (hopefully) predictions.

We continue to be bullish Euro and GBP credit mostly due to the fact that the global financial system is so fragile and the global economy so lethargic and asset prices generally so high (with exceptions) that it near forces central banks into a continuation of exceptionally easy monetary conditions. So we don't think this high liquidity era is over yet. Given the recent widening, in the three main currency blocks, only EUR BBBs have been tighter (just) than current levels for more than half the time through history.

So we still think very easy money is still going to be the dominant theme in financial markets. However our FX colleagues wrote an interesting report yesterday exploring their recent QT (quantitative tightening) theme. They think 2015 will mark the peak in global FX reserve accumulation following two decades of 'unremitting growth'. This is due to three cyclical drivers: China’s economic slowdown, impending US monetary tightening, and the collapse in the oil price.

They would argue that the implications of their conclusions are profound. Central banks have accumulated 10 trillion USD of assets since the start of the century, heavily concentrated in global fixed income. Less reserve accumulation should put secular upward pressure on both global fixed income yields and the USD. There are counter forces in the opposite direction (eg European current account surpluses and QE) but they'd argue that there is a change in the secular trend.

Our thoughts are that this will require the need for ever looser policy from Western nations to offset this impact. We're also still not sure the US will be able to tighten much in this cycle given all that's going on globally.

 

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Wed, 09/02/2015 - 08:12 | 6498967 VinceFostersGhost
VinceFostersGhost's picture

 

 

You know what that means right?

 

That's right....buy equities.

 

If you want to sell.....that's OK too.

 

Cause we're not China....yet.

Wed, 09/02/2015 - 08:26 | 6499004 Arnold
Arnold's picture

Circuit breakers are much less expensive in the long run.

Wed, 09/02/2015 - 10:07 | 6499351 mtl4
mtl4's picture

There are historical templates for what we are seeing today, problem is you need to go back much further than the usual 100 year chart most economists are looking at when writing this stuff.

Wed, 09/02/2015 - 08:21 | 6498971 JustObserving
JustObserving's picture

The Fed is flying blind and at the same time trying to crush its competitors for financial and economic power in this world. Was it a coincidence that Citadel, the unofficial arm of the Fed, was banned from trading in China?  This cannot but end badly:

Washington’s Financial Currency War on China: The Eclipsing of the US Dollar by the Yuan 

As the financial architecture of the world is being altered by China and  Russia, the US dollar is gradually being neutralized as one of Washington’s weapon of choice. Even the monopoly of Washington’s Bretton Woods system formed by the International Monetary Fund (IMF) and World Bank is being directly challenged. Although they do not constitute alternatives to neoliberal economics, the BRICS News Development Bank (NDB) and Beijing’s Asian Infrastructure Investment Bank (AIIB) are challenging the Bretton Woods system through a rival financial structure.

 The US Empire has been cognizant of the moves to establish a rival financial order. Policymakers in the Washington Beltway, the Pentagon, and Wall Street all watched the dual summits of the BRICS and Shanghai Cooperation Organization in the Russian city of Ufa with concern. Up to that point, they had been waging an information/propaganda, energy, financial market, currency war, and general economic war against the Russian Federation. Post-Ufa, they extended the financial market and economic war to China.

http://www.globalresearch.ca/washingtons-financialcurrency-war-on-china-...

Wed, 09/02/2015 - 09:06 | 6499146 eforce
eforce's picture

The bankers are eventually going to get 'thrown under the bus', so the peasants can tear them apart, thinking they are free, can then be gradually enslaved under Agenda 21/2030.

Wed, 09/02/2015 - 08:12 | 6498972 two hoots
two hoots's picture

Yep, they, including Yellen (et al), are just making stuff up trying to continue to appear relevant/necessary.

Wed, 09/02/2015 - 08:15 | 6498982 VinceFostersGhost
VinceFostersGhost's picture

 

 

Maybe we should finally kill the creature from Jekyll Island.

 

Wear earplugs......casue they're gonna scream like bitches.

Wed, 09/02/2015 - 08:19 | 6498994 JustObserving
JustObserving's picture

Too late to kill the creature from Jekyll Island without a catastrophic event such as a war or a revolution or other calamity as it runs this country now - a troika of Wall Street, MIC and spooks control the land of the free today

Wed, 09/02/2015 - 08:24 | 6499002 ramgold2206
ramgold2206's picture

your troika for your future ... war is peace and all that

Wed, 09/02/2015 - 08:27 | 6499005 VinceFostersGhost
VinceFostersGhost's picture

 

 

Too late to kill the creature

 

I'm willing to risk it.

 

Screw the false tribe....hows that for some inside baseball?

Wed, 09/02/2015 - 08:43 | 6499062 tc06rtw
tc06rtw's picture

 …  unfortunately, I believe you’re right because, unfortunately,  this is  Mutually Assured Destruction.

They won’t go unless we kill ’em, and if THEY can’t live, they’re gonna take us WITH THEM.

Wed, 09/02/2015 - 08:27 | 6499009 Dr. Engali
Dr. Engali's picture

All that you mentioned is coming regardless of whether we kill the beast or not.   

Wed, 09/02/2015 - 08:31 | 6499028 VinceFostersGhost
VinceFostersGhost's picture

 

 

I'm take that as a yes......and put words in your mouth.

 

If you don't mind.

Wed, 09/02/2015 - 08:30 | 6499025 Chupacabra-322
Chupacabra-322's picture

"Currency wars, trade wars & world wars."

"when all else fails, they take you to war."

-Gerald Celente

Wed, 09/02/2015 - 12:18 | 6499931 JR
JR's picture

How can the guy who wrote this stuff hold up his head or stomach his job, knowing Deutsche and et al are the perpetrators of this crime and now pretend to be “flying blind” with the rest of us? And, anyway, he stole his no historical template premise and much of what he said from Jim Sinclair. See:

http://usawatchdog.com/plunge-protection-team-losing-control-of-markets-jim-sinclair/

Wed, 09/02/2015 - 08:12 | 6498973 DirkDiggler11
DirkDiggler11's picture

Never before have we had to compete with the HFT bots to buy and sell stocks. That is the real story here. Until the HFT's are banned, I'm out.

Wed, 09/02/2015 - 08:20 | 6498995 Cognitive Dissonance
Cognitive Dissonance's picture

It's not just stocks that are HFT infected. Try FX and bonds as well. Thankfully the cure is easy. Pull the plug and dislocate the HFT servers.

Wed, 09/02/2015 - 08:26 | 6499008 Nothing Ever Happens
Nothing Ever Happens's picture

You mean wipe them with a cloth or something?

Wed, 09/02/2015 - 08:12 | 6498974 ramgold2206
ramgold2206's picture

could be summarised as follows "nobody has a fucking clue about what to do!"

 

www.teamramgold.com/about-us

Wed, 09/02/2015 - 08:15 | 6498977 buzzsaw99
buzzsaw99's picture

Our thoughts are that this will require the need for ever looser policy from Western nations to offset this impact...

require the need? with mad wordsmithing skilz like that he should go work at the fed.

Wed, 09/02/2015 - 08:15 | 6498981 adr
adr's picture

Well CBs fucked the world and they know it.

Somehow they are trying to undo what they did while keeping the spoils.

Kind of like juicing to hit more home runs, and keeping the record even after everyone found out you were cheating.

Keeping your Grammy even after people found out you were lip syncing.

A dollar you didn't earn really isn't yours.

Wed, 09/02/2015 - 08:19 | 6498985 Arnold
Arnold's picture

Should I sell the Van Gogh, Picasso or Pissarro?

I've got to cover a bit of margin.

 

--Banana Man

Wed, 09/02/2015 - 08:59 | 6499123 MSimon
MSimon's picture

A slice of your ear would be a good start.

Wed, 09/02/2015 - 08:19 | 6498992 Bill of Rights
Bill of Rights's picture

ADP 190,000 miss and Prior was +185K (revised down to +177K)

Wed, 09/02/2015 - 08:19 | 6498993 Atomizer
Atomizer's picture

02Sep/Mark Carney: Inflation in a globalised world 

 

Weeze gonna be monitoring the situation to getters done. 

/sarc

Wed, 09/02/2015 - 08:22 | 6498997 totemt
totemt's picture

What we do know is we are at the top of the debt supercycle and the top of a market peek.  What's next then? Hmmm.

Wed, 09/02/2015 - 08:22 | 6498998 taketheredpill
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"They think 2015 will mark the peak in global FX reserve accumulation following two decades of 'unremitting growth".

 

Forgot to mention debt accumulation by governments and households, so how much of this growth was borrowed from the future...


Wed, 09/02/2015 - 08:32 | 6499031 Arnold
Arnold's picture

As government is spending 140% of tax revenue, my best guess is:

All Your Future Is Ours, Bitchez.

Wed, 09/02/2015 - 08:42 | 6499064 Arnold
Arnold's picture

Good thing my EBT Black just arrived.

Wed, 09/02/2015 - 08:24 | 6499001 wmbz
wmbz's picture

As this unwinding gains speed, I can tell you who's fault it will not be...The un-fed and all CB's. They will lay the "blame" on any and everything else.

They are a very sick delusional group, who are never at fault. Even though the whole fucking mess is their doing.

 

Wed, 09/02/2015 - 08:28 | 6499013 withglee
withglee's picture

Never before have so many of the most important countries in the world printed so much money and left base rates at near zero for so long.

And no mention of the historical and current level of defaults.

When they're clueless about what money is and the process of managing any MOE (Medium of Exchange), mystics have a field day.

Wed, 09/02/2015 - 08:31 | 6499026 Dr. Engali
Dr. Engali's picture

It's not that damn hard to figure out. We have too much debt around the world and now the empire is issuing a global margin call. Same as it's always been, loose money to get as many people as possible leveraged, and then tighten credit to shake out the weak hands and eventually consolidate assets into the hands of a few.

Wed, 09/02/2015 - 08:52 | 6499103 Oldwood
Oldwood's picture

It is difficult to retain good repeat customer for your thriving illicit drug trade. You can extend them credit to keep their appetites alive in hopes they will pull that extra shift at work that can pay you back. Eventually of course the job fails and in these hard times it is not unusual to extend credit in hopes that your customers can find some old lady to rob to pay the bill. Unfortunately these customers play out as it is a rough life to be a drug addict. What is needed is NEW customers, but the problem is that you have burned through all of the truly productive ones and are forced into lower classes, those who have very little earning power, so they quickly revert to criminality to support their habits.

Credit IS this illicit drug. It is addicting and deliberately so for the purpose of incentivizing consumption, but demand is not infinite. There is no 12 step plan to end this. It will be cold turkey, ugly mean and violent.

Wed, 09/02/2015 - 08:33 | 6499036 Grandad Grumps
Grandad Grumps's picture

"Never before"?

According to Hayek, it was proven in the early 19th century (early 1800s) that Keynsianism does not work to accomplish its stated goals (other goals, yes; stated goals, no).

... and we are supposed to believe the bankers when they say, "this is all new", "we had no idea", "it is the perfect storm", "no one could have foreseen this" ... a "black swan".

Tell us another one, parasite!

The bankers are nothing if they are not lying bags of sh*t and lacking completely in constructive creativity.

Wed, 09/02/2015 - 08:33 | 6499039 Oldwood
Oldwood's picture

We may well be flying blind but we are told that it is fine to do so...that our government and our bankers have got our back.

We are driving in the dark at a high rate of speed, with our headlamps turned out deliberately, for if they were fully illuminated we might notice the hazards scattered along the roadway, including the dead carcasses of our fellow travelers and the steep cliff just to our left with a rotten guardrail. This would prove far too disconcerting for this to be visible and would definitely lead to a traffic snarl. Now we aren't stupid. We know bad things happen, but they are minimized and dismissed and we are told they are anomolies not to be concerned with. Stuff that always happens to other people.

So yes, full speed ahead with our lights out, oblivious to all dangers other than coming in last.

Wed, 09/02/2015 - 08:36 | 6499047 JailBanksters
JailBanksters's picture

This is just a nice way of saying, you can't taper a ponzi scheme. Maybe they should enlist Fed-Ex (that other Federal Agency) to use their Drones to drop bucket loads of Money anywhere there is a Bank. Because the only way out is too give Banks more FREE Money, while the rest of us have to earn it.

Wed, 09/02/2015 - 08:37 | 6499049 Jason T
Jason T's picture

Simple!  Just transfre the debt to equity and ween culture back to working VS loaferism.

Wed, 09/02/2015 - 08:48 | 6499086 Able Ape
Able Ape's picture

They are not flying blindly, greedily for sure, but definitely NOT blindly....

Wed, 09/02/2015 - 10:19 | 6499431 Oldwood
Oldwood's picture

THEY are not. THEY are asking us to fly blind....and just trust them.

Wed, 09/02/2015 - 08:53 | 6499104 MSimon
MSimon's picture

China’s economic slowdown ?

 

I was under the impression that China's economy was shrinking. Not just slowing.

Wed, 09/02/2015 - 09:02 | 6499133 Wm the Shrubber
Wm the Shrubber's picture

"educated (hopefully) predictions" - Not possible in any sell-side shop where deeply embedded conflicts and systemic biases prevent any objective or even realistic assessment of the issues.  I respect Reid for trying to walk the middle ground, but in the end these "strategists" will always come down on the side of "stay fully invested with an overweight to equities" as they lead their clients into the wood chipper.  Its what they do!

Wed, 09/02/2015 - 09:29 | 6499226 Billy Shears
Billy Shears's picture

I would suggest dismantling and liquidating DB and distributing the resulting proceeds to all the serfs of the Earth except that there probably aren't any proceeds to disburse.

Wed, 09/02/2015 - 09:44 | 6499276 Arthur Schopenhauer
Arthur Schopenhauer's picture

I think the point of this article is when the man says we are all flying blind, what he means is that we are all flying blind.

Wed, 09/02/2015 - 09:49 | 6499294 All is chosen
All is chosen's picture

there is no historical template for current global market conditions so we’re all flying blind to a large degree.

 

"we're" - No sonny. We are the peasants - you are the banker. I hardly think the second person 'collective' is appropriate, but boy do you feckers love to use it when it suits you.

Wed, 09/02/2015 - 09:55 | 6499302 GotNuttin'todo
GotNuttin'todo's picture

Kind of a "filler" article. Reid has not done any of his homework. This sort of scenario has happened many times in the past including Rome and Constantinople. The scenario is super simple and goes like this: society does well -> society gets greedy and goes into debt -> debt becomes excessive and governments raise taxes, steal private property, impose excessive fines, debase what is money at that time, whatever, to increase revenues to pay that debt -> people get pissed -> crash and burn -> start all over.

Wed, 09/02/2015 - 09:57 | 6499328 PrimalScream
PrimalScream's picture

It's actually refreshing to see a remark like that from a major bank.

I would rather see a little bold-faced honesty, compared to the usual "extend and pretend".  I don't think that anyone knows where the global markets will eventually go.  But I do think tha the process of creating zero-interest credit for an extended period of time has been an enormous mistake.  It's not clear that the USA or Europe can "rescue" themselves from these policies now. 

Wed, 09/02/2015 - 10:38 | 6499510 Atomizer
Atomizer's picture

Bravo. They really fucked up on initiating this policy.  NWODead on Arrival - YouTube

Wed, 09/02/2015 - 10:13 | 6499390 starman
starman's picture

The final frontier; "to go boldly where no man has ever gone defore"!

Log; Captain Yellen

Wed, 09/02/2015 - 10:34 | 6499495 GRDguy
GRDguy's picture

And never before have so few been able to lie-to and steal so much from so many. And they call it "banking?"

Wed, 09/02/2015 - 10:39 | 6499503 Boxed Merlot
Boxed Merlot's picture

We're all flying blind?  I seriously doubt that.  He knows exactly what DB has in their records, up to the second.  As others have been saying, there is plenty of historical evidence and precedence to foresee how this plays out and this is a very lame attempt to try to prevent any personal liability he and his cohorts are guilty of foisting on otherwise trusting people around the globe.

It baffles the mind to think these “lenders” are so caught up in their deviousness and trickery to entangle others in their contracts to repay “in like kind” so as to think there will never be a day of reckoning for them.  If there’s going to be personal accountability for their patrons, then there must be personal accountability for each and every head and other responsible person directing these CB WMDs.

Just repeating the obvious.

 

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