default

"Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency."

"It seems to us that the government’s policy options are rapidly narrowing – one only needs to look at how difficult it has been for the government to hold up GDP growth since mid-2014. A slow-down in economic growth is typically a prelude to financial sector instability. Putting it all together, it seems to us that many of these conflicts may come to a head in 2016."

Bill Dudley and the Federal Reserve (Fed), in their efforts to influence economic growth may have created a speculative and consumption driven environment that is crushing productivity growth. Ingenuity, not debt, made America an economic powerhouse. If we are to resume down that path we need the Fed to end their “self-defeating” policies and in its place we must demand ingenuity from them. The Fed, along with government, needs to properly incent productivity. The Fed should start this arduous task by removing excessive stimulus which will take the speculative fervor out of markets and allow asset bubbles to deflate.

On the heels of a tumultuous weekend that saw Saudi Arabia cut diplomatic ties with Iran after the Saudi embassy was torched by protesters angry at the execution of a prominent Shiite cleric, CDS spreads for the kingdom have blown out to six-year wides while the implied odds of the riyal peg finally breaking are hitting new record highs.

The Oregon standoff potentially forces the hand of the Liberty Movement, not the hand of corrupt government - the exact reverse of what should be happening. Ammon Bundy and companions are not the tip of the spear.  Not even close.  What some fear is that they are cannon fodder beckoning a nationwide government crackdown to which others will then be forced to personally respond to with equal measure.  And all of this on the worst possible terms and at a very inconvenient time (executive actions on gun control mere weeks from now).

Status Quo means Hillary. Financial Mayhem means Bernie. Fear means Trump.

Saudi Arabia - that Western-backed bastion of human rights - executed 47 people on Saturday, including a top Shiite cleric whose death sparked protests in Eastern Province and inflamed sectarian tensions across the region.

Prepare to be taxed.

As 2016 begins, there are clear signs of serious debt/default squalls on the horizon. We can already see the first white-capped waves.

The latest Chinese company to mysteriously "misplace" its books and as a result be unable to make an upcoming bond payment is China Shanshui Cement: "a former director of Shandong Shanshui, together with a group of gangsters, barged into the Headquarters by force on 27 December 2015, destroyed the properties in the offices therein and assaulted the employees of Shandong Shanshui."

• Oil ends 2015 in downbeat mood; hangover to be long, painful (Reuters)
• Recession, retrenchment, revolution? Impact of low crude prices on oil powers (Guardian)
• Midwest Flooding Might Make the Oil Glut Worse (BBG)
• From Oil Glut to Shortage? Some Say It Could Happen (WSJ)
• Ten Years After Blowup, Amaranth Investors Waiting to Get Money Back (WSJ)
• China Fires a Warning Shot at Yuan Speculators With Bank Bans (BBG)

It has come down to this: a year in which the US stock market (led by a handful of shares even as the vast majority of stocks has dropped) has gone nowhere, but took the longest and most volatile path to get there, is about to close either red or green for 2015 based on what happens in today's low-volume session following yesterday's unexpected last half hour of trading "air pocket" which brought the S&P back to unchanged for the year.

The prospect that the leaders of our monetary politburo are about to be tarred and feathered by economic reality might be satisfying enough if it led to the repudiation of Keynesian central planning and a thorough housecleaning at the Fed. Unfortunately, it will also mean that tens of millions of retail investors and 401k holders will be taken to the slaughterhouse for the third time this century. And this time the Fed is out of dry powder, meaning retail investors will never recover as they did after 2002 and 2009.

“To make a total payment will be almost impossible. If a partial payment is made: what bonds should we pay? It is an assessment that is being done. It is highly unlikely that there will not be default, in whole or partially.”

Be careful what you wish for; you just might get it.