Investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings. Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities.
- Stronger than expected decline in GDP Growth & weaker economic activity
- China in a major meltdown its government is not capable of stopping
- Major deflationary pressures forcing commodities down & credit spreads up
Is the economy as strong as some say it is?
There may be shallow lulls in the asset markets, nothing ever only falls down in a straight line in the real world, but the debt will and must come down and be deleveraged. The process will in all likelihood lead to warfare, and to refugee movements the likes of which the world has never seen just because of the sheer humbers of people added in the past 50 years. When your children reach your age, they will not live in a world that you ever thought was possible. But they will still have to live in it, and deal with it. They will no longer have the facade you’ve been staring at for so long now, to lull them into a complacent sleep. And the Kardashians will no longer be looking so attractive either.
It would be hard for a year to start any worse than 2016 has... "Prices are oversold and sentiment hasn’t been this despondent in a long time (even Aug/Sept wasn’t this palpably negative) but any bounce will not be particularly impressive and in a lot of ways that is the main problem as the upside just isn’t compelling enough to make a major stand...as Western central banks attempted to mollify sentiment with dovish rhetoric but to no avail."
A jump in the overnight cost for borrowing yuan in Hong Kong is "reflecting further PBOC efforts to stamp out speculation," according to Michael Every, head of financial markets research at Rabobank Group. Hong Kong-based Every told Bloomberg in an interview, following a massive spike in overnight borrowing rates for Offshore Yuan that "a 66% rate is murderous for others being swept up in this who are not speculating." PBOC advisor Han earlier warned that short selling the yuan "will not succeed," adding that "it is pure imagination that the Chinese yuan will act like a wild horse without any rein." But as Every notes, the unintended consequences could be a problem, "imagine you needed access to CNH for other purposes for a few days," concluding ominously that "in other EM crises we see that central banks usually win a round like this, but lose in the end."
RANsquawk Week Ahead Video: China likely to remain in focus given last week's volatility, while other highlights include the BoE rate decisionSubmitted by RANSquawk Video on 01/11/2016 10:45 -0500
Perhaps weak manufacturing, construction, and trade data are mere outliers. Maybe the Fed can see beyond the fog to clearly capture the big picture. Or maybe the Fed has lost its marbles. Their outlook doesn’t jive with that of the regular working stiff.
The half-life of the latest "market supporting" intervention by the Chinese government: just about 12 hours.
It's all up to China tonight.
China Suspends Circuit-Breaker Rule - "This Is Insane; We Were Forced To Liquidate All Our Holdings This Morning"Submitted by Tyler Durden on 01/07/2016 09:38 -0500
Update: *CHINA SUSPENDS STOCK CIRCUIT BREAKER RULE - In Q&A, CSRC insists circuit breakers didn't cause the China meltdown but admits they may have aggravated sell-off.
"It couldn't be worse," exclaims one manager who started his fund mid-year in 2015, blaming China's equity market carnage on its newly-created circuit-breakers (as opposed to the fact that the Chinese market trades at 64x P/E and there are sellers everywhere). "Panic will eventually turn into a buying opportunity," hopes one strategist while another proclaims "poorly-designed" circuit breakers need to be adjusted to 10% (seriously). Blame is everywhere, but it is Chen Gang who summed up the panic best, "this is insane... we were forced to liquidate all our holdings this morning."
Once China set the Yuan fixing some 0.5% lower, the biggest drop since the August devaluation, all hell broke loose and unleashed a global selling panic after China's stock market was promptly shut down less than 30 minutes into trading, then European shares dropped the most in more than 4 months as Asian equities plunges, as did US stock futures, the dollar weakened against the euro and the yen; crude plunged to fresh 12 year lows. Gold rose.
Nomi Prins' Financial Road Map For 2016: "The Potential For Chaotic Fluctuations Is Greater Than Ever"Submitted by Tyler Durden on 01/05/2016 18:15 -0500
We are currently in a transitional phase of geo-political-monetary power struggles, capital flow decisions, and fundamental economic choices. This remains a period of artisanal (central bank fabricated) money, high volatility, low growth, excessive wealth inequality, extreme speculation, and policies that preserve the appearance of big bank liquidity and concentration at the expense of long-term stability. The potential for chaotic fluctuations in any element of the capital markets is greater than ever. The butterfly effect - the flutter of a wing in one part of the planet altering the course of seemingly unrelated events in another part - is on center stage.
An 88-page "Research Note" from the SEC's Division of Trading and Markets titled "Equity Market Volatility on August 24, 2015," outlines the facts of that fateful trading day, discussing what went wrong, and which classes of securities were affected. The conclusions of the piece are purely factual, with little or no conjecture, and there's absolutely no policy recommendations. There are dozens of unintended consequences already baked into its proposed rulemaking. That's bad enough when you're talking about the inner workings of mutual funds and ETFs; it's a bigger deal when we're talking about the inner workings of the markets themselves.