The amount of negative issues the markets are ignoring is staggering.
1. Italy’s banking system is on the verge of collapse. Nearly 20% of loans are non-performing (meaning garbage). This is not Greece. We’re talking about a €2 trillion banking system.
2. The US is in recession. Consensus is that all is well, but industrial production, labor market conditions, the corporate bond market, C&I Delinquencies, the Conference Board Leading Indicator, Inventory Accumulation and ISM are screaming “RECESSION.”
3. China continues to devalue the Yuan at an annualized pace of 12% year to date. This is exporting a massive wave of deflation to the West.
4. The US Dollar has begun the next leg up in its bull market. The first leg crashed Oil, commodities, and emerging markets. This leg will crater US corporate profits and stocks as well.
5. Corporate are more leveraged than they were in 2007. Meanwhile, earnings are at 2012 levels while stocks flirt with their all-time highs.
The whole mess is just like late 2007/ early 2008 all over again. Brexit was the Bear Stearns moment. Italy or Spain will likely be the Lehman moment.
The big difference between now and 2008? Central Banks have already spent $14 trillion propping the system up. And they’ve created the single biggest financial bubble in history.
H/T Jesse Felder
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Chief Market Strategist
Phoenix Capital Research