As in 2008, it was not defaulting mortgages but rather the enormous gambling LEVERAGED bets placed atop all that junk which almost ended the fiat monetary system itself.TSJones wrote:from zero to .25 per cent, it's still cheap.
Banks are more rigged now.Gyan wrote:I think 100 bps rise in 2016, and another 100 bps rise in 2017 will not rock the boat but will slowly diffuse potential bubbles. The massive crash of commodity prices which has not even raised an eye brow in the banking world, shows that Banks are more careful now.
.No one seems to notice that the Chinese aren't doing great, or as good, now when oil is below 40$ per gallon than 130$ per gallon earlier. Demand destruction seems to have hit the ones directly buying oil from same sellers, however the Saudis must have used monies to build war chest unlike Russians or Iran/Iraq.Austin wrote:^^ Fun Time for Stocks , Indian Stock Market too fallen 500 points and they say its China effect , APAC markets are also fallen.
This year we might see Chinese Stock Bubble blow up and will take every other stock market down the drain
The Romans gave their Plebian citizens a day at the Coliseum, and the French royalty gave the Bourgeoisie a piece of figurative “cake”, so it may be true to form that in the still prosperous developed economies of 2016, we provide Fantasy Sports, cellphone game apps, sexting, and fast food to appease the masses. Keep them occupied and distracted at all costs before they recognize that half of the U.S. population doesn’t go to work in the morning and that their real wages after conservatively calculated inflation have barely budged since the mid 1980’s. Confuse them with demagogic and religious oriented political candidates to believe that tomorrow will be a better day and hope that Ferguson, Missouri and its lookalikes will fade to the second page or whatever it’s called these days in new-age media.
Meanwhile, manipulate prices of interest rates and stocks to benefit corporations and the wealthy while they feast on exorbitantly priced gluten-free pasta and range-free chicken at Whole Foods, or if even more fortunate, pursue high rise New York condos and private jets at Teterboro. It’s a wonderful life for the 1% and a Xanax existence for the 99. But who’s looking – or counting – even at the ballot box. November 2016 will not change a thing – 8 years of Hillary or 8 years of a non-Hillary. Same difference. Central bankers, Superpacs, and K street lobbyists are in control. Instead of cake, the 49.5% (males) will just have to chomp on their Carl’s Jr. hamburger and dream of a night with 23-year-old Kate Upton lookalikes that show them how to eat it during Super Bowl commercials. And if that’s too sexist, then Carl’s is substituting six-pack hunks instead of full-breasted models to appease the other 49.5% (females). It’s a Xanax society. We love it.
But I kid my readers – (that’s what comedians say on TV when they approach an edge). Kidding aside, however, if the 99 think they’ve got it good (bad) now, just wait 10 or 20 more years until their bills really come due. Of course by then, the 1% likely won’t be doing so well either, but there’s the hope that each and every one of them (us/me) can sell before the deluge. I speak specifically though to liabilities associated with the Boomer generation: healthcare, private pensions, Social Security and the unestimable costs of global warming, but let me leave the warming of the planet out of it for now. Let me try to convince you with some hard, cold facts, many of which are U.S. oriented but which apply as well to much of the developed world, because we’re mostly all getting older together. Demography rules.
Explaining this demographic countdown requires an impolitic concession that the world’s population is gradually aging, some at a faster rate than others (Japan, Italy, Taiwan!) but mostly in developed vs. undeveloped countries.
We are broke and don’t even know it, or to return to my opening analogy, we are having our cake, eating it at the same time and believing that a new cellphone app will be invented in the near future to magically deliver more of the same. Not gonna happen folks.
And it is the elderly that require more services and expenses than newborns, although at first blush it would seem that an infant in diapers requires more attention and healthcare than a 70-year-old retiree. Not really. To focus on some U.S. centric mathematical realities, several years ago Mary Meeker in a 500 page, softbound edition entitled “USA Inc.” put together a series of U.S. Treasury and other government reports that outlined just how dire America’s future demographic is in terms of financial liabilities. It is one thing to put readers to sleep with a 2030 forecast for aging boomers, as shown in Chart 1 but another to use the government’s own present value of these debts as of 2016. If financial market observers seem aghast at current Greek or Puerto Rican debt traps, they would surely take a double dose of Xanax when confronted with this: Fact – The U.S. government has current outstanding debt of approximately $16 Trillion or close to 100% GDP. The present value, however of Medicaid ($35 trillion), Medicare ($23 trillion), and Social Security ($8 trillion) promised under existing program totals $66 trillion or another 400% of GDP. We are broke and don’t even know it, or to return to my opening analogy, we are having our cake, eating it at the same time and believing that a new cellphone app will be invented in the near future to magically deliver more of the same. Not gonna happen folks.
Some politicians like Paul Ryan who argue for balanced fiscal budgets are intelligent sounding but relatively clueless. “Austerity – if not now, then when?”, he would argue in Reaganesque twitter. “Let’s slow down or even stop the inexorable clicking of the debt clock: 16 trillion, 17 trillion, 18 trillion”…he would add. Well yes, every little bit helps, Mr. Ryan, but the fact of the matter is (a great political phrase, is it not?) that reducing the growth rate of current government debt does little to help what in essence is a demographic not a financial problem: too few Millennials to take care of too many Boomers. Social Security “lock boxes” or Medicare/Medicaid “trust funds” which in essence represent “pre-funded” liability systems, cannot correct this demographic imbalance, because financial assets represent a “call” on future production. If that production could possibly be saved like squirrels ferreting away nuts for a long winter, then Treasury bonds or purchasing corporate stocks might make some sense. But they can’t. Future healthcare for Boomer seniors can only be provided by today’s Millennials and even doctors yet to be born. We cannot store their energy today for some future rainy day. Nor can we save food, transportation or entertainment for anything more than a few years forward. Each of those must be provided by a future generation of workers for the use of retired Boomers. And as Chart 1 points out, the ratio of retirees to workers – the dependency ratio – soars from .25 retirees for every worker to .35 over the next 10 years or so.
There’s your problem, and neither privatization nor any goodly number of government bonds deposited in the Social Security “lock box” can solve it. While these paper assets may “pay” for goods and services, their value will be market adjusted in future years to exactly match the quantity of things we buy, and that quantity will be substantially a function of the available workforce and the price they command for their services. This is another way of saying that the value of Treasury bonds and even private pension held stocks will be marked down in price as they are sold to pay for future goods and services, and that the price of these goods and services will be marked up (inflation) to justify their reduced demographic supply. Productivity gains are often advanced as a solution but productivity gains have been shrinking in recent years, and even so, employed workers cannot be expected to hand over future advances to retirees without a fight. Having more babies would also turn the trick, but at the moment, making fewer seems to be the going trend.
It’s also commonsensical that if higher Millennial wages are the probable result of a shortage of healthcare workers relative to Boomer requirements, then an investor should go long inflation and short fixed coupons.
Investment implications? Well it is true that if much of the developing world is younger demographically (think India), then developed nations could and should transfer an increasing percentage of their financial assets to emerging markets to help foot the demographic bills back home. Long-term then, as opposed to currently, think about increasing your asset allocation to the developing world. It’s also commonsensical that if higher Millennial wages are the probable result of a shortage of healthcare workers relative to Boomer requirements, then an investor should go long inflation and short fixed coupons. U.S. 10-year TIPS at 80 basis points seem like a good hedge in that regard. And of course in terms of specific equity sectors, healthcare should thrive, while liability handcuffed financial corporations such as insurance companies as well as the bonds of underfunded cities and states such as Chicago and Illinois, should not. Other countries have similar burdens. The Financial Times reports that the UK pension industry faces a 20-year wait until they might have enough cash to meet their liabilities in 2036. Until then, they cannot. In general, it seems demographically commonsensical that Boomers have in part been responsible for asset appreciation during the heyday of their productive years and that now, drip by drip, year by year, they will need to sell those assets to someone or some country in order to pay their own bills. Asset returns will therefore be lower than historical norms, especially because interest rates are close to 0% in developed countries.
Demographics may not rule absolutely, but they likely will dominate investment markets and returns for the next few decades until the Boomer phenomena fades away. The 1% – in addition to the 99 – will need extra doses of Xanax, or additional slices of cake, to cope in the next few decades. Let the games begin.
No one seems to notice that the Chinese aren't doing great, or as good, now when oil is below 40$ per gallon than 130$ per gallon earlier. Demand destruction seems to have hit the ones directly buying oil from same sellers, however the Saudis must have used monies to build war chest unlike Russians or Iran/Iraq.[/quote]vishvak wrote:This year we might see Chinese Stock Bubble blow up and will take every other stock market down the drain
According to The International Spectator: Italian Journal of International Affairs (IAI), the average global cost of a metric ton of steel circa 2008 through 2015 has been reduced by 5/6th's of it's value:
Steel price. ($ per metric ton)
June, 2008: $1265
One year ago: $485
Current: $210
https://twitter.com/intlspectator/statu ... 2106272769
I still believe (in spite of his stellar credentials) Gross does not understand the brevity of what he has written because the outcome is far worse than what he makes it out to be. While I am no market maven, I am confident in the model (as I understand it) which has helped me figure out the outcome of this crisis. In the world today there are only three assets, gold, oil and currencies. The paper currencies, so long admired and accepted are now in a war of self destruction. They will consume each other in an end battle of "I'm the last man standing but have lost all use as a unit of value".Bill Gross wrote:If financial market observers seem aghast at current Greek or Puerto Rican debt traps, they would surely take a double dose of Xanax when confronted with this: Fact – The U.S. government has current outstanding debt of approximately $16 Trillion or close to 100% GDP. The present value, however of Medicaid ($35 trillion), Medicare ($23 trillion), and Social Security ($8 trillion) promised under existing program totals $66 trillion or another 400% of GDP. We are broke and don’t even know it, or to return to my opening analogy, we are having our cake, eating it at the same time and believing that a new cellphone app will be invented in the near future to magically deliver more of the same. Not gonna happen folks.
The Devaluation of Chinese will be gradual but certain , The Forex burning is just to make the landing soft than sharp.panduranghari wrote:The question is will China willingly accept devaluation of Yuan or keep burning forex reserves?
The question is, why would margin calls due to a rate hike be such an issue ? It's not like it was a surprise. It wasn't even touch and go. The futures markets were well in favor of a rate hike in November, and even more so in December.panduranghari wrote:The question is will China willingly accept devaluation of Yuan or keep burning forex reserves? Either way they are trapped. Rate rise in Dec and the one expected (but unlikely to be followed through in Feb) has caused numerous margin calls in emerging markets.
Austin wrote:
The Devaluation of Chinese will be gradual but certain , The Forex burning is just to make the landing soft than sharp.
The problem is extremely bad for dollar but worse for yuan. PBoC cannot print dollars. So most CB are clamouring for dollars. And this is the main reason for the dollar bull market. Chinese are using up accumulated forex reserves. They were hoping to use them for AIIB. But those dollars which PBoC thought were surplus for the use of AIIB are not really available. When PBoC sells the US treasuries, the yields rise. They must feel they are dying of thirst in a sea full of water.JamesGRickards wrote:Central banks don't have enough dollars to defend currencies, pay sovereign debt, & liquidate corporate debt. Things are starting to break.
finally Lord Keynes, yet again, has shown the way.........Very slowly - and primarily because of massive stimulus from the European Central Bank - the euro zone is showing signs of recovery. It is a dawn that policymakers are struggling to nurture into broad daylight.
It also may not be felt equally across the board, viz Spain and Greece's unemployed versus Germany's busy builders.
But putting aside for the moment that the euro zone's nascent recovery is happening just as China is wobbling and financial markets are unhinged, the numbers look generally positive.
Economic growth was running at an annual rate of 1.6 percent in the third quarter. While this may not seem robust, it is roughly twice the average annual growth rate between 2003 and 2014 (itself dragged down by the sharp contraction of 2009), and the equal highest rate since 2010.
So, for the euro zone, reasonably good. ECB forecasters and economists polled by Reuters expect it to grow at a slightly faster pace this year at around 1.7 percent.
Other data - though sometimes mixed - also points to a stronger-than-advertised economic performance.
You will have to wait for some time rate reversal or QETSJones wrote:......nothing from Schiffji about QE?
.......no reversal of interest rate hike?
I feel bereft of guidance from guru Schiff.....
Austin wrote:Panduranghari , Check this interview with NDTV's Prannoy Roy and Morgan Stanley's Ruchir Sharma on Global Economy and India
Global Recession Arriving? 10 Big Trends For Economy
http://www.ndtv.com/video/player/ndtv-s ... eststories
Its hard to disagree with anything really. Except the bit in red.Ruchir Sharma wrote:
-India can't grow at 8-9 per cent when exports at negative 5 per cent
-India has become most protectionist country
-India's increased protectionism troubling
-India took 2nd highest protectionist measures in 2015
-Corporate India reeling
the pool of vaulted gold in readily marketable form that supports paper/synthetic gold trading has all but vanished as Asian demand has drained inventories in London and other Western storage complexes.
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Quantities of synthetic gold sold are created out of thin air, with almost no connection to physical metal. The negative investment thesis seems to rest upon confidence that central bankers, and the Fed in particular, will steer a course away from radical monetary experimentation that will return to a normal structure of interest rates and robust economic growth. The fact that these expectations have not been fulfilled in the nearly nine years since the initiation of zero interest rates, notwithstanding the recent 25-basis-point Fed rate hike, leads us to believe that investor credulity in central bankers may be stretched about as far as it can go.
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In our view, the short interest in paper gold rests on a credit pyramid that is precarious. When a trend reversal occurs, we expect that machine-driven trading, which is agnostic as to investment fundamentals, will serve as a powerful accelerant to the upside, just as it has led to overshooting on the downside.
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Some (for example, Princeton Economics) argue that the decline in the price of oil will lead to forced divestment of gold holdings by sovereign wealth funds, estimated by The Wall Street Journal (12/23/15) to manage $7.2 trillion. Many of these funds are located in oil- or commodity-producing nations. However, the same article states, “many of the funds don’t disclose their size, holdings, or investment strategies, making it hard to gauge what risk, if any, they pose to the global financial system.” As to gold holdings, nobody can know for sure. However, based on our first-hand experience, admittedly anecdotal, the investment strategies of sovereign funds are conducted by managers oriented to the Western zeitgeist: They are designed to provide diversification away from commodities in the form of commonplace or exotic instruments that mimic “smart” hedge fund managers in the West. Lack of transparency notwithstanding, we believe that sovereign wealth funds hold very little physical gold.
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Synthetic gold traders appear to share three things in common: no gold, little or nothing in the way of margin requirements, and no knowledge of or interest in the fundamentals of physical supply and demand. In this synthetic world, gold is just another index that can be used by issuers of derivatives and risk managers seeking correlations across asset classes in a quest for risk protection, greater leverage, and trading profits.
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We have suggested over the past year, here and here, that a bear market in financial assets would lead to a loss of confidence in central bankers and an impulsive, uncontainable rise in the price of gold. To us, the dollar price of gold and confidence in central banking are inversely related.
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We believe that when clarity returns, the financial markets of recent years will be unmasked to have been a comprehensive manipulation made possible by the alchemy of transforming real assets into hyperactively traded derivatives, ETPs, and financial benchmarks.
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Much of what passes for financial wealth is in our opinion imprisoned in a matrix from which there is no easy exit. The return migration of capital to real assets promises to be disruptive. The misdirection of capital could well cause losses for many but opportunity for a few. The list of opportunities is short, limited in capacity, possibly complex, and difficult to access. Among the possible opportunities, gold is accessible and straightforward. Gold has a history of responding inversely to the direction of confidence. Gold ETFs, such as GLD, offer the best attributes of self-reflexivity from a bullish perspective. Outflows from the $3 trillion of equity ETFs seem likely to exacerbate downside market risk. The opposite is true for gold ETFs, which must respond to capital inflows by purchasing physical metal. The pool of liquid gold to meet that need has been severely depleted. We believe that the stage has been set for a significant repricing of gold in all currencies, including the US dollar. Ownership of physical gold outside of the financial system seems to make more sense than ever. Gold-mining equities, which have been severely depressed by the four-year decline in the gold price, should also participate. We believe that a trend reversal could prove explosive for the entire precious metals complex.
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This is what took place: the Dallas Fed met with the banks a week ago and effectively suspended mark-to-market on energy debts and as a result no impairments are being written down. Furthermore, as we reported earlier this week, the Fed indicated "under the table" that banks were to work with the energy companies on delivering without a markdown on worry that a backstop, or bail-in, was needed after reviewing loan losses which would exceed the current tier 1 capital tranches.
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