China's hard landing has already begun, warns economist Richard Duncan as the nation's credit-fuelled economic boom ended in 2015 and a protracted slump lies ahead. He has published a series of videos explaining why China’s economic development model of export-led and investment-driven growth is now in crisis leaving "China’s economy resembles a spinning top that is running out of momentum. It is wobbling and gyrating erratically."
Pity the poor petro-states. Once so wealthy from oil sales that they could finance wars, mega-projects, and domestic social peace simultaneously, some of them are now beset by internal strife or are on the brink of collapse as oil prices remain at ruinously low levels. At the peak of their glory, the petro-states played an outsized role in world affairs. That, of course, was then, and this is now. While these countries still matter, what worries these presidents and prime ministers now is the growing likelihood of civil violence or even state collapse.
Over the past few years, we have written many strange stories about China's often-ridiculous, perpetually-bubbly, always on the precipice financial system. The story about China's literal "cash cows", however, is by far the strangest.
Overnight the Commerce Department escalated its trade war with China when it implemented the latest clampdown on a glut of steel imports, when it announced that corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450%. China's Commerce Ministry said it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries. "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating.
As we approach the anniversary of last year's oil - and gasoline - price lows and the base-effect goes away, the sharp pick up in gas prices is set to have a sharp upward impact on Consumer Price Inflation. It will also wreak havoc on the Fed's strategy of playing possum and not hiking as long as inflation remained "stubbornly low."In short: the Fed suddenly has a problem. Here's why.
"Buying Here Is Like Picking Pennies In Front Of A Steamroller" - 10 Reasons To Be Bearish From Credit SuisseSubmitted by Tyler Durden on 05/26/2016 13:17 -0400
Little margin for error. Multiples are elevated and the economic/earnings cycle is aging – this means the margin for error is small and shrinking and thus chasing the SPX at 2100+ is akin to “picking up pennies in front of a steamroller”.
The Fed’s paint-by-the-numbers Keynesian incrementalism leaves it blind to the underlying rot in the US economy and to drastically over-estimate its capacity to maintain a stable growth equilibrium. In fact, corporate America is being strip-mined by Fed-fueled financial engineering and flyover America is sinking irretrievably into debt, dependency and shrinking living standards.
As we warned previously, the devaluation, or breaking of the Saudi Riyal peg to the dollar, could be the black swan event for crude oil and the recent weakness in SAR forwards - while not as violent as Nigeria's Naira - certainly signals a renewed market fear that breaking the peg is imminent. It appears Saudi officials are none too pleased with the free markets speculating on this devaluation and as Bloomberg reports, banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter, which were supposedly banned in January.
- Wall Street Crime: 7 Years, 156 Cases and Few Convictions (WSJ)
- Japan's Abe points to 2008 crisis as G7 leaders debate global risk (Reuters)
- Brent Crude Rises Above $50 a Barrel (WSJ)
- New York financial regulator gearing up to probe online lenders (Reuters)
- At Swinging Wall Street Parties, the Feds Are Now on the Prowl (BBG)
A buck’s a buck, or is it?!
In what has been another quiet overnight session, which unlike the past two days has not seen steep, illiquid gaps higher in US equity futures (the E-mini was up 3 points and accelerating to the upside as of this writing so there is still ample time for the momentum algos to go berserk), the main event was the price of Brent rising above $50 for the first time since November with WTI rising as high as $49.97.
How many “emergency” “secret” meetings do the central planners around the world need to have before the citizens of the respective countries begin to fully understand and take notice that something is very, very wrong?
Now that all eyes have turned on China eager to find how it will react to a potential Fed rate hike in June or July, the question is whether the sharp Chinese devaluation unveiled overnight, which sent the Yuan to fresh 5 year lows, will be a one-off event, and whether the PBOC will intervene far more aggressively in the offshore CNY market to keep FX market turmoil to a minimum. According to at least one person, the answer is no.
Continuing deceleration of population growth offset by rate cuts incentivizing ever greater debt loads (with continually underperforming GDP) was the central banks only play. And now as population growth and decelerating demand really begin to wane...the playbook is basically exhausted save for one play...simply print money with which to buy and "permanently retire" those assets. Think Treasury's, think MBS, think equity's...think anything that can be digitally created and digitally destroyed all to perpetually shrink the outstanding float (think perpetual short squeeze). How long this can maintain asset values northward march in the face of the populations southward divergence is anybody's guess.