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A Pessimists' Guide To 2016: When Everything That Can Go Wrong, Does Go Wrong
There’s a lot to be worried about going into 2016 both in terms of financial markets and in terms of geopolitical concerns.
We outlined the risks that pervade capital markets earlier today on the way to noting that the sellside penguin brigade seems to believe that somehow, nothing can derail the market’s momentum going forward. Here are the potential landmines investors face going into the new year:
- soaring junk bond redemptions;
- rising investment grade (and high yield) yields pressuring corporate buybacks;
- record corporate leverage and sliding cash flows;
- Chinese devaluation back with a vengeance;
- capital outflows from EM accelerating as dollar strength returns;
- corporate profits and revenues in recession;
- CEOs most pessimistic since 2012,
- oh and the Fed's first rate hike in 9 years expected to soak up as much as $800 billion in excess liquidity
As ominous as all of that most assuredly is, the geopolitical outlook is even scarier. Here’s a rundown of some of the key issues politicians will need to grapple with in 2016:
- Syria’s seemingly intractable civil war
- the still simmering conflict in Ukraine
- Brazil’s political crisis which threatens to keep one of the world’s most important emerging markets mired in a stagflationary nightmare
- a migrant crisis that threatens to tear Europe apart at the seams
- the resurgence of the far left and far right as voters lose faith in the political status quo
In fact, we've already seen quite a few black swan landings in the past several months. Here's our black swan map (click the image to read the background):
Those who frequent these pages likely recall that both SocGen and Citi were out recently with their take on the risks that lie ahead (here and here). We encourage you to review their respective analyses in their entirety, but below, find two graphics which summarize a few key points.
From Citi:
From SocGen:
For those who can't get enough black swans, we present excerpts from a new infographic put together by Bloomberg, who outlines 10 "worst case scenarios" for 2016 as dreamed up by "dozens of former and current diplomats, geopolitical strategists, security consultants, and economists" ("Scenario #3 is priceless):
* * *
Scenario #1: Oil climbs to $100 barrel


Scenario #2: The UK leaves the EU



Scenario #3: Banks hit by cyber attack


Scenario #4: The EU crumbles over anti-migration fears


Scenario #5: China's economy falls, military rises



For the entire list, including "Putin sidelines America," and "Trump wins the White House," see the full infographic here.
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It's beginning to look a lot like a shitstorm
Ev'rywhere you go...
#7 Millions of Americans march into Washington D.C. with AK's and erect gallows, holding signs such as
"WE DEMAND JUSTICE NOW"
the million erection march
how ' bout 170 millions?
~"Chinese devaluation back with a vengeance"~
I'm sorry, did I miss when it had gone away? Seems to me its been as regular as clockwork lately.
And closer to home, don't look now, but Canada, Oh Canada! is having a small economic implosion of its own as oil bites the dust And their socialist PM has decided to import a 25,000 strong "Muslim Problem".
New quote of the day, (by yours truly):
"Multiculturalism is a motherfucker."
Black swans circling above, canaries dropping like flies, turkeys running the governments, and vultures
running the banks. Looks like the world is about to get the 'bird'
Yellen's job is to get through Obama's term with the fake economy plugging along. That's the only consideration.
Leftist group unveils disturbing anti-Trump ad
http://tinyurl.com/jhdxecq
Why would Russia and Iran make a cyber attack on America? If they were to, it would clearly be in response to some horrible action Washington makes at the behest of their owners in Israel.
Trump's not going to win the White House - he's working to secure it for his long time ally Hillary.
The author is an idiot for implying expelling migrant invaders is xenophobic. It's just common sense.
The sky finally falls in 2016 !!!
If *you're* calling it, it's really happening. Shit.
Really Tyler??? Like if we need more BS escenarios to be worried. Some of the Scennarios must be meant to be comical. One scenario does look pretty hopeful though, scenario #7
$15/barrel oil. "Wise" investors keep financing the oil extraction industry...for some unknown reason.
So, should I move to a nice safe gun free zone, before things get too crazy?
Russia, Iran, Venezuela and others won't be able to survive very long on $22.00/bbl oil.
Sumthin gotta give... likely their ability to repay their debts. Whoops. Those who have nothing have nothing to lose.
I would love to see a domino effect precipitated by organized multilateral default.
how can anyone but the myopic contest that this country is on the same trak as rome? it's mirror image. any hope lays in imploding right now and learnin' lessons.
Murphy junior's law: My father is too optimistic...
I have a plaque next to my work station that simply states: "I'd like to be an optimist...but I doubt it would work out."
Mine says..."Always borrow from a pessimist...he never expects it back."
By definition, none of these are black swans. So this is just the bad shit we can expect. There's other bad shit we don't even know about that's going to happen, and those are black swans.
Correct, its not a black swan if you can predict it, just a very dirty white swan.
Long Swans!
They are African-American swans! What's wrong with you people tonight?
Swans of color? Can we create a safe space for them? Wait, please stop, I'm feeling oppressed here.
3b" manipulate overnight electronic trading settlement"
That is done now by every major US Bank, how would we be able to tell the difference?
5a....we already know that China's economy is going to be revealed to be in worse shape than anticipated, as we are all aware that 99% of the economic facts and figures presented by the Chinese Government have been massively manipulated. You would have to be living under a rock not to know that.
2016 will turn out just fine - with the proviso that one sells his irrational gold investments and goes long equities.
Is it just me or does Bloomberg's pessimists' guide for 2016 read like an optimist's guide for everyone else?
UK leaving EU, oil back to fair value, Putin sidelining Uncle Sugar, President Trump...bring it on!
Actually i think that list was pretty Rosy... I can think of a lot worse things, and don't forget they come in threes
Hell nuclear Flash off in the distance false flag was not even on the list, Presidential candidate assassination anybody. Carrier hit by an unknown, but quickly pointed out for us Nation, Anybody seen Ebola around lately? No Mention of California Drying up or washing away.. and Hey alot of Americans still have Jobs of some sort.. that can change quickly Internet and power go down for a Week, then call me.. Oh wait nothing will happen if the phones and Net are down.. we won't even know the other 10 bad things that are going Down.
Scenario #6: CabalA$$LiickerPervertLiarObamma declares emergency & becomes perpetual US Prez
'Hey hey ,eef it kan happan in Africa why not in amreeka , I hav deir blood, besides I have already created all de nesessary condishanz '
Some say that Murhphy was an optimist....