DEC
13 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
BANKERS,
POLITICIANS, & ANGRY CITIZENS: NOMI PRINS EXPOSES A WORLD THAT IS THE
PROPERTY OF 'THE 1%' MUST READ!
"If the global economy
really is booming, as many politicians claim, why are leaders and their parties around the world
continuing to get booted out of
office in such a sweeping fashion?"
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This is
the 5th "sell the f**king rip" day in a row...
See Chart:
Bank stocks resumed their downtrend
after a brief respite yesterday...
See Chart:
FANG stocks sold off...
See Chart:
The Dollar managed gains on the day
retracing yesterday's losses...
See Chart:
Finally, we note that The Fed is back in the position of being more
hawkish than The ECB... just barely...
See Chart:
….
SOURCE: https://www.zerohedge.com/news/2018-12-13/draghi-dud-banks-break-trannies-tumble-cryptos-crash
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[[ This art use diff variable
& acronyms: CLO for instance ]]
The
leveraged loan market just broke.
While floating-rate loans tend to
track bonds, they are often slower to react both to the upside and downside.
Since Oct. 1, loans have lost about 2%, including a 1% drop this month, while
both high-yield and investment grade bonds rose
slightly. In fact, since we last checked in on the S&P/LSTA lev loan
index last
week it has fallen another full point, and is
now down to 95.4, its lowest price in over two years.
See Chart:
Citi said that "despite the deep sell-off, we expect further weakness
ahead. Recent outflows represent a
small fraction of the inflows that occurred over the prior two years."
Adding to the pricing pressure, demand from collateralized
loan obligations CLO, the biggest and until
recently most reliable buyers in the $1.3 trillion leveraged loan market, is rapidly slowing.
"The market is turning for
loans and CLOs," said Maggie Wang, an analyst at Citi. "Both
markets have struggled as people think the upside is now less because the
Fed is getting close to the end of its rate hiking cycle."
The difference between the interest rates on the
highest-rated CLO tranches and three-month Libor has hit 121 basis points — the
biggest risk premium since February 2017. As recently as November 2017, the
spread was 90bp, according
to the FT.
SEE Chart:
Collateralized loan obligations CLO suffer as rate rise
forecasts fall
But as the FT
notes, the current tremors in the CLO market seem more related to
diminishing investor appetite than a deterioration of underlying credits. CLO
issuance this year has hit a record $125 billion, officially eclipsing the
all-time record of $124.1 billion set in 2014.
See Chart:
The last
time the leveraged loan market saw such large outflows was three years ago.
“The appeal of floating rate
instruments has become less attractive,” said Tracy Chen, head of
structured credit at Brandywine Global Investment Management. "The late-cycle credit concern, as
well as the Fed’s more dovish tone, may weigh on both leveraged loans and CLOs
going into 2019."
Meanwhile, leveraged loans prices continue to slide: as
shown above, the S&P/LSTA Leveraged Loan Price index has lost roughly 2 per
cent this year and now sits at its lowest level since 2016. The price of
Invesco’s Senior Loan ETF, by contrast, has declined 3.5 per cent. Meanwhile,
the percentage of leveraged loans trading above par - an indication of demand
in the secondary market - has collapsed to almost 0%, down from 70% as recently
as two months ago according to Citi.
See Chart:
But the most vivid example of the freeze in the loan market
came late on Thursday,when Bloomberg reported that in a flashback to the events that culminated
in the 2008 financial crisis, Wells Fargo and Barclays took the rare step of
keeping a $415 million leveraged loan on their books after failing to sell it
to investors.
The loan market froze for at least this one deal after fund
managers were reluctant to buy the loans after oil prices had fallen by around
a third since early October, and resulted in the first
major E&P bankruptcy in years, when Parker Drilling filed for bankruptcy
yesterday as oil prices had fallen too far for its business model to remain
viable, sending its bonds crashing.
See Chart:
With the leveraged loan market freezing up - as outflows
accelerate to record levels - the recent weakness has
raised concerns that other debt sales currently in the works may be sold at
discounts that are so deep underwriters may have to book a loss if they
can be sold at all, leading to
strong pushback on new debt issuance. This is
precisely what happened in late 2007 and early 2008 when underwriters found
themselves with pipelines of debt sales that suddenly got blocked, and were
forced to take massive haircuts to keep the credit flowing.
…
…
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The "widowmaker" trade has been flipped on its
head, as global investors just can't get enough of Japanese bonds...
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"It isn’t a crash in the financial markets that is the real
problem, but the ongoing structural
shift in the economy that is depressing the living standards of the
average American family."
Nathan Vardi recently penned an article for Forbes
entitled “Surprise!
The Late-Year Bond Rally.”
“In August, Jamie Dimon, CEO of JPMorgan Chase & Co. and the
nation’s most prominent banker, predicted the yield on the benchmark 10-year
Treasury note could reach 4% in 2018. He cautioned investors to prepare for 5%
or higher.
Jamie Dimon wasn’t alone. There were many venerable Wall
Street veterans from Bill Gross, Paul Tudor Jones, Ray Dalio, and Jeff Gundlach
were also calling for higher rates. But, these calls for higher rates and
the “End Of The Great Bond Bull
Market” have been flowing through the media since 2013.
But what is it the mainstream
analysis continues to miss?
RATES
ARE LOW, SO THEY MUST GO UP
The general view as to why rates must rise is simply because
they are so low. Looking at the chart below, such would certainly make sense.
See Chart:
The second period
occurred post-World War II as America became the “last man standing” as
France, England, Russia, Germany, Poland, Japan and others were left
devastated. It was here that America found its strongest run of
economic growth in its history as the “boys of war” returned
home to start rebuilding the countries that they had just destroyed.
As shown below, the is a correlation between the three
major components of the economy (inflation, GDP and wage growth) and
the level of interest rates. Interest rates are not just a function of the investment market, but
rather the level of “demand” for capital in the economy. When the economy is expanding organically, the
demand for capital rises as businesses expand production to meet rising
demand. Increased
production leads to higher wages which in turn fosters more aggregate demand.
As consumption increases, so does the ability for producers to charge higher
prices (inflation) and for lenders to increase borrowing costs. (Currently, we do not have
the type of inflation that leads to stronger economic growth, just inflation in
the costs of living that saps consumer spending – Rent, Insurance, Health Care)
See
Chart:
The chart above is
a bit busy, but I wanted you to see the trends in the individual subcomponents
of the composite index. The chart below shows only the composite index and the
10-year Treasury rate.
See
Chart:
Let’s go back to
Jamie Dimon for a moment. He stated that interest rates should be 4% which
would align with economic growth rates earlier this year. However, that growth
was not driven by organic factors of rising wages but rather a confluence
of natural disasters. Furthermore, the increase in
deficit spending also helped boost economic growth.
See Chart:
Which is
exactly what has happened.
(The chart below shows the shortfall between the
inflation-adjusted cost of living and what wages and savings will cover. The
deficit is the difference that has to be made up with debt every year.)
See
Chart:
THE NEXT CRISIS
Just recently, Janet
Yellen discussed the issue of leverage in the economy stating
that companies are taking on too much debt and could be in trouble should some
unexpected trouble hit the economy or markets.
“Corporate indebtedness is now quite high and I think it’s a danger
that if there’s something else that causes a downturn, that high levels of
corporate leverage could prolong the downturn and lead to lots of bankruptcies
in the non-financial corporate sector.”
Yellen also warned
that the debt is being held in instruments similar to ones used to bundle
subprime mortgages that led to the financial crisis a decade ago. Importantly,
the investment-grade part of the bond market was $3.8 trillion at the end
of October which was 6% higher than a year ago, and BBB-rated bonds accounted for
58% of the total,
In other words,
with rates rising, economic growth slowing (debt is serviced from
revenues), and the health of balance sheets deteriorating (BBB is one
notch above “junk”) the risk of an “event-driven” crisis
is real. All it will
take is a significant decline in asset prices to spark a cascade of events that
even monetary interventions may be unable to stem. As stock prices decline:
- Consumer confidence falls further eroding economic growth
- The $4 Trillion pension problem is rapidly exposed which will require significant government bailouts.
- When prices decline enough, margin calls are triggered which creates a liquidation cascade.
- As prices fall, investors and consumers both contract further pushing the economy further into recession.
- Aging baby-boomers, which are vastly under-saved will become primarily dependent on social welfare which erodes long-term economic growth rates.
With the Fed
tightening monetary policy, and an errant Administration fighting a battle it
can’t win, the timing of the next recession has likely been advanced by several
months.
The real crisis comes when there is a “run
on pensions.” With
a large number of pensioners already eligible for their pension, the next
decline in the markets will likely spur the “fear” that
benefits will be lost entirely. The combined run on the system,
which is grossly underfunded, at a time when asset prices are dropping
will cause a debacle of mass proportions. It will require a massive government bailout to resolve it.
But it doesn’t end
there. Consumers are once again heavily leveraged with sub-prime auto loans,
mortgages, and student debt. When the recession hits,
the reduction in employment will further damage what remains of personal
savings and consumption ability. The downturn will increase the strain
on an already burdened government welfare system as an insufficient number of
individuals paying into the scheme is being absorbed by a swelling pool of
aging baby-boomers now forced to draw on it. Yes, more Government funding will be required to
solve that problem as well.
As debts and
deficits swell in the coming years, the negative impact to economic growth will
continue. At some point, there will be a realization of the real
crisis. It isn’t a crash
in the financial markets that is the real problem, but the ongoing structural
shift in the economy that is depressing the living standards of the average
American family. There has indeed been a redistribution of wealth in
America since the turn of the century. Unfortunately, it has been in the wrong
direction as the U.S. has created its own class of royalty and serfdom.
But most importantly, that is how interest rates remain low for a very
long-time.
While there is
little left for interest rates to fall in the current environment, there is no
ability for rates to rise before you push the economy back into
recession. Of course, you don’t have to look much further than Japan for a
clear example of what I mean.
The “bond
rally” was no surprise.
…
…
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Closing the book on 2018 couldn't come fast enough for the hedge fund
industry, which has had a truly abysmal year, and which saw some quite notable
casualties in the past 12 months.
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As markets are on the cusp again with only a few trading days remaining before year end it is
time to revisit the most important
chart in markets. ..
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
The US
posted the biggest November budget deficit on record as total US government
spending came in twice as much as revenue.
See Chart:
See more charts at:
SOURCE:
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There is a
strong relationship between the change in global USD-liquidity and the
performance of the global stock market, and it suggests that pain is coming for
stocks in the next 8 months.
See Chart:
One thing is certain: whatever the
"Powell Put" is today, it will certainly be triggered should the stock
market crash by that much, not only ending any Fed tightening plans, but also
launching a new round of QE.
See more charts at:
SOURCE: https://www.zerohedge.com/news/2018-12-13/collapsing-dollar-liquidity-sends-dire-signal-stocks
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“We are not aware of any
evidence the investigation the Journal is reporting actually
exists.”
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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
...while the numbers reinforce what we already
know, that the
economy is under pressure, the soft numbers indicate that there's a way to go yet before growth turns a corner. It
may be one reason why China is
appearing to play ball in the trade talks...
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Otro que va
a ir a la cárcel por mentiroso: esto crea ‘hate’ pro-WW3..play with life is dangerous
"A total of $4,700?" Nadler asked to confirm.
"That's right," the Google executive replied.
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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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Fin de mes, fin de régimen, fin del mundo Juan D Sánchez
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Sur y la de guerra del N se unen para decir
NO al terror Imp ]
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Esto
huele a pólvora y dinamita, esa que voló a Fco Franco
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BRA Cómo llegamos hasta acá? ¿Para dónde vamos? M Badaró
BRA Cómo llegamos hasta acá? ¿Para dónde vamos? M Badaró
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ALAI NET
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RT EN
ESPAÑOL
Mex: Intriga Imper anti-AMLO Trump: "¡México está pagando
por el muro!"
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Suprimir
PJ y llamar elecc de miemb de Corte Sup con apoyo de Cortes Reg
y Colegios de
Abogados del Pais. Check nexos
recient d PJ con USAID (CIA)
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Quienes juegan con
pólvora deben saber que los Chinos la inventaron.
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Tienen derecho a auto-def.. pero
los Latinos amamos la Paz y/o L neutralidad
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A mi ver deben darles ese dinero.. se ahorran
muertos USA en las embajadas
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Vi la foto inicial.. pensé que querían soplar
un pedo.. Ya les salió y apesta. Y
si los argentinos no quieren oler eso.. Por que
Nos? Eso NO es real feminism
Lean a Jessa Crispin, Why I Am Not A Feminist: A Feminist
Manifesto. A Rosa L
Hay mucho escrito
sobre real Fem que rechaza el patriarc-capit y sus abusos.
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COUNTER PUNCH
Analysis on US Politics & Geopolitics
Lawrence Davidson What
the Attack on Marc Lamont Hill Tells Us
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K Zeese - M Flowers Historic
Opportunity to Transform Trade
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
CIA
Covert Operative William Barr Nominated by Trump for Attor Gen. His Role in the
Iran Contra Affair By Larry Chin
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PRESS TV
Resume of Global News described by Iranian observers..
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