JUN
22 18 SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social
+ Capit-compet in Econ
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they
documented with graphics
“Risks are tilted to the
downside for coming months. Business expectations about the year
ahead have dropped to a five month low, led by the weakest degree of optimism for nearly one and a half years in
manufacturing..."
See Chart:
More worrisome is that Stagflation is here -
New Orders tumbled to the lowest since September and inflation spiking with
input costs at their highest since Sept 2013.
US continues to outperform according
to the soft data surveys...
See Chart:
So surging prices are crushing
orders and production is continuing to ignore it.. for now. THAT WON'T END
WELL.
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The first US’ enemy are our big Corp.. They’re breaking
Tramp initiative to protect US cars
US protectionism is obsolete.. we’re part of the global
system.. if we get out.. quick collapse come
The company
said it will move ahead with plans to build the SUV in Mexico despite recent
complaints from President Trump...
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So yes, the
system is safe at the bottom of a 2007-style crack. But what if the recovery is
much slower? Since the Fed assumes a “V”, what happens if it is an “L”. We don’t
know; they don’t include that possibility.
It’s difficult not
to gasp a little when you look at the “Severely adverse” scenario the Fed used
in this year’s review:
- A 7 quarter recession that leaves GDP 7.5% lower than prior highs
- Unemployment rises to 10% over the same period
- Inflation drops to 1% and short term Treasuries yield close to zero
- At the same time, investors shun long term Treasuries and yields there remain unchanged
- Investment grade and mortgage yield spreads blow out to 5.75% and 3.5% respectively
- US stocks drop by 65% in early 2019, and the VIX goes over 60
- House prices drop 30% and commercial real estate by 40%
I don’t know about
you, but to me that looks like the recipe for
revolution more than a regulatory what-if scenario, but let’s go with it.
Two points:
#1) If the US banking system is really as robust as the Fed’s
analysis indicates, doesn’t that merit a higher multiple on domestic stocks
than historical norms?
Now, there is a
headwind to this positive case: the Financial sector is
14% of the S&P 500, and the regulatory process that makes them
systematically safe also reduces their structural return on capital. So
we’re unlikely to see much P/E expansion in the group, but every other sector -
consumer or industrial - should get an uptick. A robust
financial system should make the next recession easier than most previous ones
by limiting any shock to the supply of credit, after all. Trough earnings will
be higher than expected, and valuations should expand.
This is ultimately a
cyclical argument, which means we’ll have to see it
work in the next downturn before investors are willing to pay higher multiples.
#2) If the Fed’s stress tests have a fatal flaw, it is that they
assume a “V” bottom from the near-death levels they outline in their
requirements. This doesn’t
get much attention in the Fed’s document (link at the end of this note) but as
near as we can tell, this is what they assume in the “Severely
adverse” scenario for a recovery:
- Unemployment improves in the 6 quarters after the peak by almost 2 points
- GDP growth turns positive 4 quarters after its trough
- US equity markets recover almost all their losses in the 2 years after the bottom
- Corporate bond spreads recover to near 2014 levels 7 quarters after they peak
- The VIX breaks below its long run average (20) just 2-3 quarters after the Dow trades at 10,000
Some of those – GDP and unemployment – we can see; the Dow’s recovery,
bond spreads tightening and the VIX seem fanciful at best. We
understand the Fed’s intent is to model another 2007-2008 scenario, but perhaps
the next downturn will be different. For example:
- The next recession, even a garden-variety contraction,
will come just as artificial intelligence, robotics, drones, and other
technologies hit their strides. All those advances have been
invisible in the unemployment data because the US economy is growing.
Take it from an old cyclicals analyst: companies do their big restructurings in economic downturns, not expansions. The next period of contraction is when capital will substitute for labor at an accelerating rate.
- At the start of 2007, US public debt-to-GDP was 63%; it is now 106% (yes, we include Social Security). There will potentially be less root For example:
- The
next recession, even a garden-variety contraction, will come just as
artificial intelligence, robotics, drones, and other technologies hit
their strides. All those advances have been invisible in the unemployment
data because the US economy is growing.
Take it from an old cyclicals analyst: companies do their big restructurings in economic downturns, not expansions. The next period of contraction is when capital will substitute for labor at an accelerating rate. - At the start of 2007, US public debt-to-GDP was 63%; it is now 106% (yes, we include Social Security). There will potentially be less room for fiscal stimulus in the next downturn, especially since every other developed economy has the same problem (which may be why the Fed’s assumptions include no change to long term yields).
- The upshot here is that the next recession – especially a severe one – may not be anywhere near as easy on the way out as the Fed’s scenarios portray.
So yes, the system is safe at the bottom of a 2007-style
crack. But what if the
recovery is much slower?
Since
the Fed assumes a “V”, what happens if it is an “L”. We don’t know; they don’t
include that possibility.
And what does
it mean that the most systemically important banks in the world are in a bear
market?
See Chart:
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The last
time we observed such sheer uniform panic to plow cash into tech names was just
before the dot com bubble.
See Chart:
What is odd, is that while traders, investors, algos and
passive capital allocators are flooding the FAANGs with money, virtually every
other sector is hurting, iin what BofA definies as "Risk-off flows"
after $12.9bn pulled out of equities, $5.9bn out of bonds, and $0.8bn out of
gold.
Adding to the bipolar nature of the market, amid this
"tech panic", we are observing an accelerating decoupling of the US
from the rest of the world, with the US seeing $5.1BN in stock inflows, offset
by outflows from all other regions, including a $5.1BN
redemption from Emerging Markets, the largest since November 2016...
See Chart:
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SOURCE: https://www.zerohedge.com/news/2018-06-22/its-anomaly-bofa-stunned-panic-scramble-tech-stocks
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US
DOMESTIC POLITICS
Seudo democ y sist
duopolico in US is obsolete; it’s
full of frauds & corruption. Urge cambiarlo
If we
"elect more Republicans in November...we will pass the finest, fairest and
most comprehensive Immigration Bills anywhere in the world."
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Staff at
the National Economic Council, which is led by Larry Kudlow, are pushing for a
trade detente from within the Trump administration.
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...and Trump would be just the President for the job.
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"..if these Tariffs and Barriers are not soon broken down and
removed, we will be placing a 20%
Tariff on all of their cars coming into the U.S. Build them here!"
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US-WW ISSUES (World & War): M-East .. plus
Global depression is on…China, RU, Iran search for State
socialis+K- compet. D rest in limbo
Moments ago OPEC reached a deal "in principle" to raise oil production by 1 million b/d on paper, and
in reality by 700 kb/d as many of the OPEC nations are
already tapped out and unable to produce more.
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An official increase of +1 million b/d may translate to +600k b/d in
actual barrels because several producers are already maxed out.
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"It is not written in stone that the trans-Atlantic bond will
survive forever,"
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Deutsche
Bank is suffering from a lack of
faith for a reason.
Gold could
put investors’ minds at ease...
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SPUTNIK and RT SHOWS
US inside GEO-POL n GEO-ECO ..News
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RT SHOWS
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NOTICIAS IN SPANISH
Latino America looking for alternatives to neoliberalism to
break with Empire:
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- FARC-EP: Somos orgullosamente guerrilleros
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INFORMATION CLEARING HOUSE
Deep on the US political crisis, their internal conflicts n
chances of WW3
Syria And Allies Prepare To Remove U.S.
Forces From Al-Tanf By Moon
Of Alabama Continue
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An Elite Coalition Emerges Against Trump-Kim
Agreement By Gareth Porter Continue
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Sexy Metal: The Missing Element in the Korean
Puzzle By Pepe Escobar Continue
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No More Blank Checks for War By Rep. Barbara Lee Continue
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Crimes Against Humanity. Washington Endorses
The State of Israel By Binoy
Kampmark
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US Body 'Laid Groundwork For Insurrection' In
Nicaragua By Max Blumenthal Continue
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We Are All Prisoners of the Surveillance
State By John W. Whitehead Continue
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Read Trump’s Proposal for Reorganizing the
Federal Government By Alayna
Treene Continue
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars: its profiteers US-NATO
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DEMOCRACY NOW
US politics crisis: Trump captured by Deep state to
reproduce old cronyism without alter-plan
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PRESS TV
Global situation described by Iranian observers..
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The
Debate: U.S. Trade
Wars
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