Market-based Credit is unstable. This remains the fundamental issue – the harsh reality – that no one dares confront. Long-term stability in a Capitalistic system requires sound money and Credit (hopelessly archaic, we admit). Over the years, we've tried to differentiate traditional finance from unfettered “New Age” finance. The former, bank lending-dominated Credit, was generally contained by various mechanisms (including the gold standard, effective currency regimes, bank capital and reserve requirements, etc.). This is in stark contrast to the current-day securities market-based global financial “system” uniquely operating without restraints on either the quantity or quality of Credit created. There’s no precedence for such a globalized monetary fiasco, though there are a number of historical episodes that provide valuable insight.
"If, as seems possible, the ECB will increase, in H1 2016, the scale of its monthly asset purchases from €60bn to, say, €75bn, and if these additional purchases are concentrated on public debt, the euro area will benefit from a ‘backdoor’ helicopter money drop –something long overdue."
We apologize, but 2015 had so many negatives that we’re having trouble seeing the positives. It’s like we’re on the Titanic, and it’s tilting at an 85-degree angle with its propellers way up in the air, and we’re dangling over the cold Atlantic trying to tell ourselves: “At least there’s no waiting for the shuffleboard courts!” Are we saying that 2015 was the worst year ever? Are we saying it was worse than, for example, 1347, the year when the Bubonic Plague killed a large part of humanity? Yes, we are saying that.
With EU inflation still stuck in Japan mode and with GDP bumping along at the "new normal" pace of what might as well be 0%, the market expects more from Draghi going forward. Need proof? Just look at yields.
At 23-years old, Pete Seeger was an Army Private anxiously awaiting the opportunity to be deployed to fight fascism in the midst of World War II, when he became outraged by injustice in his own backyard. As such, he wrote the following letter to the California chapter of the American Legion. For this thoughtful expression of his First Amendment rights, Pete Seeger ended up on an FBI watch-list; a place he would remain for the next thirty years. Following a Freedom of Information Act request, we now have access to his shocking 1,800 page file...
As SOE profits continue to deteriorate at the expense of maximizing jobs and employment (recall the biggest threat facing China is a working class insurrection, or simply said, "lower and middle-class revolution") debt at these same SOEs just hit a new record high: according to the same FinMin numbers, total SOE debt rose by CNY393 billion to CNY78.3 trillion, or over $12 trillion - well above 100% of total Chinese GDP.
There’s only one investment we can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions - especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum, or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are signs of a hidden agenda, or perhaps a psychological aberration. So, let’s take some recent statements, assertions, and opinions that have been promulgated in the media and analyze them.
Goldman, Decembert 20, 2015: "We think the BoJ is closer to easing further to attempt to achieve a successful reflation than it is to giving up altogether, and so we continue to expect $/JPY higher. We recommend being long $/JPY as part of our 2016 top trade recommendation (along with short EUR/$) and forecast $/JPY at 130 in 12 months"... Three days later, the USDJPY is 100 pips lower.
This won't end well... On Tuesday, Gov. Issei Nishikawa approved the restart of the No. 3 and No. 4 reactors at the plant in Fukui on the Sea of Japan, defying an injunction by the prefecture’s District Court that had been sought by residents living within about 60 miles of the nuclear facility.
China Proposes A Fix For Its Crashing Housing Market: "Transplant" 100 Million Farmers Into Its CitiesSubmitted by Tyler Durden on 12/24/2015 07:46 -0500
There is just one very big problem with this "solution"...
After a furious three day "dash for trash", no volume, no breadth, commodity-driven rally, even Santa is now exhausted and overnight US equity index futures were little changed with European and Asian shares mixed. The dollar has declines as gold, silver gain, with WTI initially continuing its recent meteoric rise (up over 8% in the past three days, nearly hitting $38), only to reverse and give up all overnight gains moments ago. Copper falls after Chinese stocks see a second day of weakness, down 0.7% while an unexpected tumble in the USDJPY to 7 weeks lows has dragged the Nikkei (-0.5%) and its futures down.
Rather, economic collapse is the greatest weapon at the disposal of globalists. National panic, riots, looting, starvation, magnified crime: All of these things result in mass die-offs and desperation. Desperation leads to calls for "strong leadership", and strong leadership usually results in totalitarianism. It might seem sensationalist to tie all of these possible outcomes to the Fed rate hike decision, but give it a little time. Those who make accusations of sensationalism and “fear mongering” today will be asserting tomorrow that such developments were “easily predictable.”
The market is well aware the price of risk is not correct, but they can’t fight it, and everyone is forced to crowd into the same trade by central bank (CB) intervention. By manipulating markets they have also reduced investors’ inherent conviction by rendering fundamentals less relevant, creating a highly unstable (fragile) situation that breaks violently when a sufficient catalyst causes risk to rise – overly crowded positioning meets a market with little conviction. Catalysts From BofAML's global equity derivatives desk's vantage point, it becomes clear that the biggest visible risk to financial markets is a loss of confidence in this omnipotent CB put.
"The most important channel through which the Dragon's Tail scenario can affect other markets is trade, although financial linkages and market contagion could also have a significant impact on some markets and asset prices."