Nov 21 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
At this close, The Dow was
smacked into the red (-0.95 pts)...
See Chart:
As one would expect on the day
before Thanksgiving, equity volumes were well below average...
See Chart:
And here's what the corporate
bond volume as reported by Trace looks like compared to the average at time of
day
See Chart:
Stocks caught down to bonds
into the close...
See Chart:
High yield bonds record losing
streak is over...
See Chart:
The Dollar limped back lower
after tagging Friday's highs...
And then there's this...
See Chart:
See more charts at:
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Neoliberal collapse was PREDICTED:
"We
see further downside potential to global equity indices for the next 12 months.
The spectre of a US recession in early/mid-2020 would impact equity markets in
2H19."
Almost exactly one year ago, we
reported that SocGen's equity strategist Roland Kaloyan predicted -
correctly- that with bond yields rising, there was effectively no upside left
in stocks, which coupled with the prospect of a US economy recession in 2020
would "crimp returns in 2019" Furthermore, in light of what then was
a record short in various volatility products, SocGen predicted that vol positioning
could "strongly deteriorate the risk reward profile of equity
markets."
Kaloyan also warned that upside on the
S&P 500 was limited as "the US equity market
is already pricing in a rebound in growth and inflation. The rise in bond
yields and Fed repricing should be a headwind against further US equity
rerating."
Furthermore, in a stroke of
serendipity, Kaloyan also correctly predicted the February VIX termination
event:
Equity
volatility, both realised and implied, has been edging ever lower for quite
some time now. Being invested in a simple systematic short VIX future
volatility has been strongly rewarding: +290% over the last two years. However, when the tide turns (i.e.
VIX spikes), the drawdown can be significant. The quantity of short positioning
on VIX open in the market (see right chart) would potentially amplify any spike
of the VIX.
The "challenging" theme
continues in the last region, because whereas Kaloyan expects Asia equities to
recover in 2020, "2019 could be another challenging year due to an
extended growth slowdown in China, a bear market in tech hardware and a
correcting US equity market." That said, a ceasefire in the US-China trade
conflict is the upside risk.
The bank's global equity
forecasts are summarized below:
See Graph
Focusing on the US, like last year, Kaloyan believes that the year ahead will be one of
risk for US stocks, among which:
1.
Risk of political gridlock in the US. As SocGen preciously noted, the results
of the US midterm elections have changed the political picture in the US as
Congress is now split, wiith the House of Representatives now having a majority
of Democrats, while the Senate remains controlled by Republicans. Why is this important:
this could
have serious market and economic consequences, such as potentially more
frequent government shutdowns, impeachment
considerations and general uncertainty. At this late stage in an already
lengthy expansion period, uncertainty could be more damaging. The growing US deficit does not leave much room in the event
of an economic slowdown.
See Charts:
2.
More restrictive US monetary policy.
Here too, things are changing: US
financial assets benefited from an ultra-accommodative monetary policy for a
decade, with Fed funds below the core inflation rate, since 2008. That is now over.
Our
scenario assumes three more rate hikes, lifting the Fed funds to 3% by June
2019, putting pressure on equities through three channels:
1)
it would push higher the WACC (weighted average cost of capital) and thus
lower the valuation of equities (see below);
2) flow
wise, investors would reallocate into cash in USD out of other assets
(including equities);
3)
the Fed funds rise is a typical sign of the end of the cycle
(flattening/inversion of yield curve…).
See Charts:
3. US
recession in early/mid-2020.
As a consequence, markets should price in the
recession a few months ahead of time. This suggests that cyclical concerns could be a major market driver in
the 2H19, when GDP growth is already expected to decelerate (1.6% in 3Q19 and
1.1% in 4Q19). The jump in productivity in mid-2018 contained unit labour costs
and raised margins, but looking forward, tight labour, rising wage costs and the difficulty
of passing on these costs to consumers should narrow margins and reduce
incentives for investment and hiring.
See Charts:
4.
Avoid the Russell 2000: On a more granular
level, while SocGen is not too crazy about either the S&P or the Dow, it
hates the Russell, which "would
be of the worst performers in the event of a US political gridlock, as US small
caps would not benefit from the potentially weaker USD."
US small caps are more at risk from the rising cost
of debt (higher rates or higher credit spread – or both) and asset rotation
(illiquid segment).
See Charts:
5.
S&P 500 to 2,400pts by end-2019.
While Kaloyan sees the prospects for the
S&P 500 as slightly better than for the Russell, it's not much: the
assumption underlying his year-end 2019 target for the S&P
500 of 2,440 points is a decline
in sales growth in 2019, and a mild contraction of 5.0% in 2020e.
See Graph:
Amusingly, the French strategist here
notes that "we take into account in our forward P/E assumption the fact that the IBES
consensus usually never forecasts an EPS contraction. Indeed, since
1990, the 12-month forward EPS growth has never been below 5% except during the
worst of the 2008-09 crisis when it reached -5% (vs -30% looking at trailing
EPS)." As a result, SocGen expects the forward P/E to hit a low of
less than 14x by mid-2020, just as the next recession begins according to the
bank.
See Charts:
Finally, when looking at individual sectors, SocGen writes that while its
recession call is not for now, it is already gradually repositioning portfolios
for the end of the cycle. SocGen's analysis highlights which sectors appear
more at risk and which historically have proven to be more immune to the coming
recession. The bank also factors in the impact on sector allocation of last
quarter’s changes in the economic, rates and political backdrop. This leads SocGen to its our sector allocation as follows:
- Consumer Staples upgraded from Underweight to Neutral
- Consumer Discretionary switched from Overweight to Underweight
- Information Technology cut from Overweight to Neutral
- Overweight maintained on Healthcare, Oil & Gas, Financials and Basic Industries
- Underweight maintained on Industry, Real Estate, Utilities and Telecoms
In short, another bearish prediction, and while this one seems a little more
contained than SocGen's
2018 wildly contrarian forecast released exactly one year ago...
SEE
THE BIG PICTURE: TO BEAR or NOT
TO BEAR:
.. this time, the bear is now all grown
up.
See Picture:
…
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SOURCE: https://www.zerohedge.com/news/2018-11-21/get-out-now-socgen-releases-most-bearish-2019-forecast-yet
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"We’re looking at another debt crisis and
global financial panic. Only this
time it won’t come from mortgages alone but from all directions at once..."
One of the questions I am asked most
frequently in my global travels is what will be the cause of the next financial crisis. This question is asked by those who understand
that this crisis is coming but want to pin down the date or a specific turn of
events that will help them know when to react.
See Chart:
My answer is always the same: We can be
certain the crisis is coming and can estimate its magnitude, but no one knows
exactly when it will happen or what the specific catalyst will be.
Continue reading AT:
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US DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete;
it’s full of frauds & corruption. Urge cambio
thousands of migrants who have
now made their way to the U.S. checkpoint near Tijuana, Mexico, "may prompt incidents of violence and
disorder"
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Clothing, toys/video games and
electronics look to remain the top items consumers look to buy, consistent with
what consumers would like to receive. Older generations prefer to give gift
cards-likely out of convenience for both the gift giver and receiver.
See Chart:
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"The usual suspects are demanding government regulation of AI...
however, the only thing worse than
the government sticking its nose into AI is if we have AI learn by
mimicking the behavior of serial killers..."
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"...the Paradise area was a ticking time bomb...
if one analyzes the situation, it isevident
that global warming had little to do with the Camp Fire... "
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" It's always black people with
this President..."
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US-WW ISSUES (Geo Econ, Geo Pol
& global Wars)
Global depression is on…China, RU, Iran
search for State socialis+K-, D rest in limbo
"...subject to headline risk..."
See Chart:
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After
outperforming in the first half, Goldman's Hedge Fund VIP basket of the most
popular long positions has lagged the S&P 500 by 725 bp since mid-June (-9%
vs. -2%) alongside a downturn in growth and momentum stocks and rise in S&P
500 volatility."
See Chart:
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The news in Latin America this year has brought two
reminders that Latin America's
stringent gun controls have not stemmed the growing homicide problem in
many parts of the region...
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO ..Focus on neoliberal expansion via wars
& danger of WW3
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RT SHOWS
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NOTICIAS IN SPANISH
Lat Am search f alternatives to
neo-fascist regimes & terrorist imperial chaos
REBELION
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ALAI NET
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RT EN ESPAÑOL
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INFORMATION CLEARING HOUSE
Deep on the US political crisis:
neofascism & internal conflicts that favor WW3
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Trump's Saudi Support Highlights Brutality Of
'America By S Collinson
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Nothing In Any Conspiracy Theory Is As Bad As
Saudis. By Caitlin Johnstone
The world’s leading sponsor of terrorism
is Saudi A, along with Israel and US
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Trump’s Presidency: Results and Perspectives By James Petras
Trump’s policies are a continuation and
exacerbation of the Obama regime.
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We learn nothing if we only listen to
those who agree with us.
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Will the New House Dems Take on the War
Lobby? By Medea B n Nic Davies
Will they stand up on war if are still in
the pay of military-industrial interests?
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The Coming Bankruptcy of the American Empire By Hunter DeRensis
Better to bring the troops home now than
wait for a debt crisis to do it for us.
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that
leads to more business-wars from US-NATO
allies
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DEMOCRACY NOW
ND denounce Global-neoliberal debacle y
propone State-Social + Capit-compet in Econ
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PRESS TV
Resume of Global News described by
Iranian observers..
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