You know what negative rates are? They are the final stripping away of the illusion that central bankers somehow exist above and separately from domestic politics, that they are wise and able stewards of financial stability. Nope.
“If you run out of chips, you are out of the game.”
This is the first meeting we can remember where serious and important market participants differed so strongly on the issue of what they ought to do. It’s not just hold or raise, cut is very much in the mix.
Gold futures just broke out of their recent range, pushing well above the key 100-day moving average and testing towards $1120 - the highest since early November. It appears precious metals are signaling - as they have done since mid-December - that The Fed will be forced to admit it is wrong - just as Jeffrey Gundlach warned.
In just 44 somewhat anger-and-frustration-filled seconds, DoubleLine's bond guru Jeffrey Gundlach unleashes some very uncomfortable truths on Janet Yellen and the "idiots" at The Fed... "they have got to dial this [hawkish] rhetoric back or the markets are going to humiliate them."
"You get the sense that there is a broader market issue here...Complacency about the risks of contagion from the weakest segments of high yield is reminiscent of sentiment regarding subprime debt in mid-2007."
Last week we asked (and answered) whether capitulation was close (the answer - no). Earlier this week, we noted that the equity market remains stubbornly in denial that things could get much worse (even as credit and eurodollar markets suggest otherwise). Today we get a double whammy of confirmation as Goldman warns that the current drawdown could be significantly worse than August's (and markets are not pricing in the risk) and then DoubleLine's Jeff Gundlach warning that "this is not stopping any time soon."
“Fed Chair Janet Yellen will be forced to either acknowledge labor market tightening as reason to continue with the four-hike schedule for 2016 or risk her credibility, belittle job market stability and sound a warning about the risks of lower oil prices and cheap gasoline (sacrilege to regular Americans) by slowing the hiking pace after a single 0.25 percent increase last month. If she gets it wrong, things could get ugly fast."
"Stay out of the bathroom."
After all, in yesterday’s oil trading there were over 600,000 contracts trading hands on the Globex exchange Tuesday with over 1 million in estimated total volume at settlement.
"Oil goes below $40, it’s frightening for geopolitical behavior. Guess what, folks? It’s below $40 and this frightening political behavior is upon us.... We could be looking at a really ugly situation during the first quarter of 2016... I think we're going to take out the September low of the S&P500."
Gartman Now Says Crude Has Bottomed Hours After Warning Of "Egregiously Lower" Prices And "Panic Selling" To $15Submitted by Tyler Durden on 01/13/2016 08:16 -0500
"Crude oil prices, finally, have stabilised, and we shall go our far upon a limb here this morning suggesting very strongly that when nearby February WTI traded to $29.93 at its low yesterday amidst a great deal of very vocal consternation on the national business television channels that crude had “TRADED BELOW $30 PER BARRELL” that that was what we in the past had referred to as the “obscene number” and may well have been the low."
China = Japan: China, like Japan in the early-1990s, has entered a secular period of significantly slower economic growth, compounded greatly by debt deflation; like Japan in the 1990s, Chinese asset prices, currency, banks (Chart 5) and capital flows will periodically cause severe disruptions to global financial markets, even if China does not itself cause a global recession.
In yet another hit for the energy complex, EIA just cut their global oil demand forecast to 95.19 million barrels a day this year (down from 95.22 million in December’s outlook). The energy agency also increased its forecast for global production to 95.93 million barrels a day (up from 95.79 million last month). This pressured WTI Crude back off a brief bounce and pushed it to a 20-handle at $29.97 for the first time since December 2003.
“To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything.” ~Edward Abbey