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"We're Now Just One Big Shock Away From A Global Downturn"

Tyler Durden's picture




 

Submitted by Bill Bonner via Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

Big Shock

The financial news continues to confound and confuse investors. The Fed is telling one story. The world economy is telling another.

What happens next?

The Fed is talking about increasing the federal funds rate – eventually getting rates back to “normal” – because the U.S. economy is so healthy. Meanwhile, the world heads toward deflation.

Says Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management:

“We are now just one big shock away from a global downturn, and the next one seems most likely to originate in China, where heavy debt, excessive investment, and population decline are combining to undermine growth…”

But it looks to us as though the global downturn is already here. First, the Baltic Dry Index is at a record low.

 

BDI

The Baltic has been hung out to dry – click to enlarge.

 

Here’s Bloomberg with the full story:

“The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes.

 

The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985.”

And falling shipping costs aren’t the only sign of global deflation…

In October, construction and mining equipment maker Caterpillar posted another month of falling sales – making it 35 in a row.

The latest figures reveal something new, too. Sales are now dropping in the U.S. as well as overseas.

U.S. corporate profits have also begun falling.

And earnings per share (EPS) – a key measure of profitability that looks at the portion of companies’ profits allocated to each outstanding share – are falling too.

 

Non-fin corporate debt

US non-financial corporate debt issues plus US sourced bank loans (foreign loans not included) – a page from the new “Spot the Great Credit Crisis” game – click to enlarge.

 

Average third-quarter EPS for S&P 500 companies has fallen by over 2% from the same quarter last year. And this figure would be even more disappointing if it weren’t for their massive share buyback binge (which, by reducing the number of outstanding shares, increased the earnings that accrue to each share).

According to Citi Research, since 2004, S&P 500 companies have spent 2,848% more money buying their own shares than investors have moved into the stock market.

With corporate debt levels now more than double their pre-crisis levels, this all could have a big impact on corporate bond default rates… especially if the cost of carrying all that debt goes up.

Fed policy rates, back to “normal”?

Not likely…

 

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Tue, 11/24/2015 - 16:18 | 6834197 BandGap
BandGap's picture

Like a Bo Schembechler lit fart, no one will see this coming.

Burnt astroturf and a cloud of dust.

Go team!

Tue, 11/24/2015 - 16:22 | 6834199 nope-1004
nope-1004's picture

The Fed only has one story, period.  When your public policy is "full employment and price stabilization", yet your private policy is "bank enrichment and inflationary stealing", you will always publicly lie about the state of the economy.

The casino owner who fixes all the games and slowly syphons winnings would never, ever, admit a deficiency in his system.  The Fed is no different.

 

Tue, 11/24/2015 - 16:19 | 6834202 DC Beastie Boy
DC Beastie Boy's picture

I'm shocked at traffic today, no recession today in DC. Where the fuck is everyone going?

Tue, 11/24/2015 - 16:22 | 6834219 DC Beastie Boy
DC Beastie Boy's picture

Well I'm going to Philly tonight to fuck my stripper friend. Happy Thanksgiving Bitchezzzz

Tue, 11/24/2015 - 17:11 | 6834566 rpboxster
rpboxster's picture

DC: Turkey and stuffin.  Let's hope you're not getting leftovers.

Tue, 11/24/2015 - 18:27 | 6834948 Sudden Debt
Sudden Debt's picture

I see a connection to that traffic line...

Tue, 11/24/2015 - 18:12 | 6834888 divingengineer
divingengineer's picture

Give her a donkey punch for me!!

Tue, 11/24/2015 - 16:27 | 6834258 FreeShitter
FreeShitter's picture

AS long as CTRL P is up, the shitshow will go on...even a few fucking thermonukes are irrelevant to algos.

Tue, 11/24/2015 - 16:29 | 6834283 TuPhat
TuPhat's picture

I like reading Bill Bonner's stuff but he has been out of touch with reality lately.  Everything the Fed does is part of the new normal.  Just ask them.  Bonner seems to think he can keep on investing like it's 2006 and expect it to work.

Tue, 11/24/2015 - 16:32 | 6834298 DC Beastie Boy
DC Beastie Boy's picture

Nov 30th Fed meeting they buy the world. I'm certain there's few people here that understand how long this shit show will go on. The whole objective is to buy the world they have quite a ways to go.

Tue, 11/24/2015 - 17:14 | 6834585 Bemused Observer
Bemused Observer's picture

Buy the world, huh? Well, that might be their desire, but don't assume 'the world' is for sale.

These folks might not realize this, but there is a lot that money can't buy, no matter how much of it you offer.

Here in their little US terrarium, it does seem as though there's no stopping them. But there are 350 million here, on a planet with over 7 billion and counting. Do that math.

And keep in mind that many, many of those 7 billion really don't like us, or what we stand for.

Tue, 11/24/2015 - 16:34 | 6834311 hangemhigh77
hangemhigh77's picture

The rich are not rich enough. Warren Buffet needs another yacht. How many have to die for a $250 million yacht? Jamie Dimon needs another mansion, how many will die? That's right scum, build your mansions here on earth because after this life you spend eternity separated from God, you will be consumed by fire for eternity. Build them big because time is running out for you scum.

Tue, 11/24/2015 - 18:38 | 6834994 Sudden Debt
Sudden Debt's picture

I have a good friend who makes about 200K a month. He has a serious fleet of cars, a few houses and every week he has at least 1 binch drinking party.

He's so much in debt, you just can't believe it as he manages to spend about double of what he makes.

Personally I have no idea how you can spend money like that but all that matters is the show.

Rich is something that can change real fast and smart rich is a rare thing.

I also have another friend who also makes a shitload of money and who really has find the greatest nich in the market. He's making a shitloat and in just 4 years he increased his staff from 3 to 150 people. Then he started investing in other companies to get in the boardrooms to meet important people and become one himself. that has cost him a es amount and none of these companies make a profit and now he's also near bankrupt and needs to cut down in his profitable company to get by.

Rich people are just 1 bad investment away from being poor and these people don't really live the awesome life everybody thinks they do. Sure their stuff is expensive but mostly their lives suck because everybody wants something from you and everybody envy's you.

Money can't buy happyness just like having no money can make you unhappy.

Life is life. Money or not, it won't give you the happyness everybody thinks it will give you.

Tue, 11/24/2015 - 19:21 | 6835160 yogibear
yogibear's picture

"Money or not, it won't give you the happyness everybody thinks it will give you."

So true.

Tue, 11/24/2015 - 16:41 | 6834349 ejmoosa
ejmoosa's picture

While corporate profits have turned negative, my resarch shows that when it drops below 7%, the economy is in trouble.  So, things are even worse than one might imagine.

 

What is sad is that it has been so long that we had a consisntently good stretch of economic growth that we have forgotten what it feels or looks like,

 

Tue, 11/24/2015 - 16:42 | 6834362 Hubbs
Hubbs's picture

So what happened in  the FED'S "unscheduled"  meeting  yesterday?

Tue, 11/24/2015 - 16:44 | 6834385 FreeShitter
FreeShitter's picture

We saw it in the sky being blown up.

Tue, 11/24/2015 - 16:44 | 6834380 giggler321
giggler321's picture

Repeatedley pumping up bubbles and having them burst has gotta be one of the deflationary things one could do if they wanted deflation.  I don't buy their stated goals.  It's like we are trying to get to the moon on a push bike - never gonna happen

Tue, 11/24/2015 - 17:08 | 6834543 WTFUD
WTFUD's picture

One more SHOCK? That's a Shocker!

Tue, 11/24/2015 - 17:30 | 6834696 dreadnaught
dreadnaught's picture

I love how they quaintly term it a "downturn" more like a Global Financial Catastophe the likes of which we have never seen

You cant 'borrow and spend' (Republicans) or 'Tax and spend' (Democrats) forever and not have it come back to haunt you

 

Either way YOU and I are picking up the check

Tue, 11/24/2015 - 18:17 | 6834909 Youri Carma
Youri Carma's picture

'Global Downturn Is Already Here!' Would be a far better Headline in my opinion. Because Bill Bonner says it himself:

"But it looks to us as though the global downturn is already here. First, the Baltic Dry Index is at a record low ..."

Tue, 11/24/2015 - 18:45 | 6835023 Demdere
Demdere's picture

Gee, you mean they just started doing things and somehow built the most complex system ever, with positive feedback loops everywhere, military empires as the 'world policeman' in a world with bad governments and terrible economies and unbalanced societies filled with hungry and dissatisfied yount people whose lives are ruined because of one government or another?  You mean that might go wrong?

The question I now ask myself is whether there is an anfi-fragile strategy.  Can someone own a company, set of companies, military, ... that puts them into a position to take advantage of a world in catastrophy of enough different kinds to convince the kind of person who might think like that. A Trump, for example.

https://thinkpatriot.wordpress.com/2015/11/14/in-reality-everything-is-c...

It is guaranteed that new connections for contagion will be found in this new, more complex system of the world.

https://thinkpatriot.wordpress.com/2015/11/11/dynamics-of-national-colla...

https://thinkpatriot.wordpress.com/2015/11/10/a-measure-of-propagandas-p...

https://thinkpatriot.wordpress.com/2015/11/10/were-still-going-to-be-here/

https://thinkpatriot.wordpress.com/2015/11/09/oil-is-the-excuse/

https://thinkpatriot.wordpress.com/2015/10/27/ignoring-the-absolutely-in...

Nobody in their right mind would have a cent in any paper 'asset' at this time in history.  This is a time in history when people lose their $B fortunes. 1929 ** Dunning-Kruger morons on steroids and coke.

Turkey's is a 3rd world military screwing around with 1st world weapons and annoying a major neighbor.  In a world of electronics and software.

https://thinkpatriot.wordpress.com/2015/11/22/if-windows-crashes-wwiii/

Tue, 11/24/2015 - 18:59 | 6835077 rsnoble
rsnoble's picture

Everything is good because we say so!  And if you want to argue we hope you like jail!

Tue, 11/24/2015 - 20:07 | 6835329 maxamus
maxamus's picture

Just BTFD.  What part of that don't you understand?

Tue, 11/24/2015 - 23:50 | 6836353 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

And earnings per share are down even with all the share buy backs? Well, that can't be good. Let's get that new high on the S&P and then start the sh#t show!

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