Portugal

“I think 10-year USTs are quite attractive because of my outlook for the weakening economy. Actually I believe we’re already entering a recessionin the US. Given the weakness in the global economy and the deceleration of growth in the U.S., I would imagine that by next year the Fed will cut rates once again and launch QE4."

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.

Because the Novo Banco auction process went so smoothly, Portugal has decided to throw billions more in taxpayer dollars at a failed lender. This time it's Banif, which will be split into a "good" and "bad" bank just weeks ahead of new EU rules that would have seen uninsured depositors take a haircut as part of the wind down process.

"There no obvious solution. This is why we think that a second election around March 2016 is as likely as any of the alternatives. [In fact,] an early election in the short or medium term seems the most likely outcome."

This is where the Fed. now finds itself. Here they were. Just holding policy lines doing what they in their Ivory Tower contemplated and the so-called “smart crowd” insisted they do. And now the saying of “Between a rock and a hard place” might be an understatement. The world sits atop a tinderbox fueled by monetary policies that created them and awaits a match that could set it off in a blaze of who knows what. All in short order. Unless they don’t do anything except try their best Draghi impersonation and declare, “They too are once again at the ready to do what ever it takes!” Except – just not now.

"In the year ahead, geopolitics likely poses the greatest potential to disrupt markets in terms of event risk. There is also the potential for geopolitical risks to intersect with economic fragility in the event of a downturn, amplifying both."

Magic ‘Super Mario’, the ECB’s monetary magician, disappointed markets yesterday as continuing and unprecedented monetary easing failed to prevent a sharp sell-off in stock and bond markets yesterday which has continued today.

Optimism in US equity futures appears to have returned, and as of this moment US equity futures are higher by 9 points to 2060 as the attention shifts to what, according to BofA, is truly the most important ever. It is unclear just how the algos would take a second consecutive major disappointment in a row: should today's NFP print be well below the 200,000 consensus, December rate hike odd will tumble and the EUR will surge even more after declining modestly from overnight highs just below 1.10, leading to even more losses in European equities and spilling over to the US. 

The very first major economic collapse in recorded history occurred in 218-202 BC when the Roman Empire experienced money troubles after the Second Punic War. As a result, bronze and silver currencies were devalued. As HowMuch.net depicts in the video below economic collapses date back thousands of years. While many countries today still feel the effects of the most recent Global Financial Crisis, it is important to note that economic troubles are not unique to the present-day, but rather date back to some of the oldest civilizations.

“Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders.” - Buddha

The recent attacks in Paris evoke strong emotions for many people, but investors need to look through those feelings to the short, medium, and long-term implications. We believe Paris may mark an important turning point for Europe and the global business cycle... but for different reasons than you may think. There is a chance that the slow disintegration of Europe will drive more capital onto US shores, boosting valuations and fueling a blow-off top in the US equity market; but beware global shocks and take any rally as a chance to get defensive.

In a move that ends a weeks-long political stalemate, Portugal's President Anibal Cavaco Silva has named Socialist leader Antonio Costa PM. Due to Costa's alliance with the Left Bloc and the Communists, many worry the stage is now set for a showdown with Brussels, the IMF, and Berlin.

The Fed has conditioned investors to ignore fundamentals, valuations, and the business cycle. As a result, we are in another bubble that will burst as all bubbles do.