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A Pessimists' Guide To 2016: When Everything That Can Go Wrong, Does Go Wrong

Tyler Durden's picture




 

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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Tue, 12/15/2015 - 19:36 | 6928064 813kml
813kml's picture

It's beginning to look a lot like a shitstorm

Ev'rywhere you go...

Tue, 12/15/2015 - 19:40 | 6928070 manofthenorth
manofthenorth's picture

#7 Millions of Americans march into Washington D.C. with AK's and erect gallows, holding signs such as

"WE DEMAND JUSTICE NOW"

 

Tue, 12/15/2015 - 19:47 | 6928086 bamawatson
bamawatson's picture

the million erection march

Tue, 12/15/2015 - 19:53 | 6928109 will ling
will ling's picture

how ' bout 170 millions?

Wed, 12/16/2015 - 00:15 | 6929041 Theosebes Goodfellow
Theosebes Goodfellow's picture

~"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."

Tue, 12/15/2015 - 19:56 | 6928126 zorba THE GREEK
zorba THE GREEK's picture

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'

Tue, 12/15/2015 - 19:58 | 6928131 Bloppy
Bloppy's picture

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

Tue, 12/15/2015 - 20:53 | 6928305 jaxville
jaxville's picture

  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.

Tue, 12/15/2015 - 21:23 | 6928402 fukidontknow
fukidontknow's picture

Trump's not going to win the White House - he's working to secure it for his long time ally Hillary.

Wed, 12/16/2015 - 12:14 | 6930713 markpower49
markpower49's picture

The author is an idiot for implying expelling migrant invaders is xenophobic. It's just common sense.

Tue, 12/15/2015 - 19:41 | 6928075 Chicken_Little
Chicken_Little's picture

The sky finally falls in 2016 !!!

Tue, 12/15/2015 - 22:06 | 6928547 Implied Violins
Implied Violins's picture

If *you're* calling it, it's really happening. Shit.

Tue, 12/15/2015 - 19:45 | 6928080 HopefulCynic
HopefulCynic's picture

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

Tue, 12/15/2015 - 19:45 | 6928083 Hohum
Hohum's picture

$15/barrel oil.  "Wise" investors keep financing the oil extraction industry...for some unknown reason.

Tue, 12/15/2015 - 19:48 | 6928089 Canadian Made
Canadian Made's picture

So, should I move to a nice safe gun free zone, before things get too crazy?

Tue, 12/15/2015 - 19:53 | 6928096 Mr.Kowalski
Mr.Kowalski's picture

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.

 

Tue, 12/15/2015 - 20:00 | 6928138 HopefulCynic
HopefulCynic's picture

I would love to see a domino effect precipitated by organized multilateral default.

Tue, 12/15/2015 - 19:51 | 6928101 will ling
will ling's picture

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.  

Tue, 12/15/2015 - 19:52 | 6928104 Martin T
Martin T's picture

Murphy junior's law: My father is too optimistic...

Tue, 12/15/2015 - 19:59 | 6928135 CHoward
CHoward's picture

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."

Wed, 12/16/2015 - 01:10 | 6929257 northern vigor
northern vigor's picture

Mine says..."Always borrow from a pessimist...he never expects it back."

Tue, 12/15/2015 - 20:01 | 6928139 seek
seek's picture

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.

 

Tue, 12/15/2015 - 21:43 | 6928462 Aussiekiwi
Aussiekiwi's picture

Correct, its not a black swan if you can predict it, just a very dirty white swan.

Wed, 12/16/2015 - 05:37 | 6929607 L_Estasi_dell_Oro
L_Estasi_dell_Oro's picture

Long Swans!

Tue, 12/15/2015 - 22:53 | 6928725 RafterManFMJ
RafterManFMJ's picture

They are African-American swans! What's wrong with you people tonight?

Wed, 12/16/2015 - 00:20 | 6929074 Theosebes Goodfellow
Theosebes Goodfellow's picture

Swans of color? Can we create a safe space for them? Wait, please stop, I'm feeling oppressed here.

Tue, 12/15/2015 - 21:47 | 6928456 Aussiekiwi
Aussiekiwi's picture

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.

Tue, 12/15/2015 - 22:12 | 6928569 PutinLover
PutinLover's picture

2016 will turn out just fine - with the proviso that one sells his irrational gold investments and goes long equities.

Tue, 12/15/2015 - 22:31 | 6928643 Niall Of The Ni...
Niall Of The Nine Hostages's picture

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!

Tue, 12/15/2015 - 22:41 | 6928676 Dragon HAwk
Dragon HAwk's picture

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.

Wed, 12/16/2015 - 01:43 | 6929323 onmail1
onmail1's picture

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 '

Wed, 12/16/2015 - 04:10 | 6929541 Joe A
Joe A's picture

Some say that Murhphy was an optimist....

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