DEC 15 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
Despite all the ominous press being devoted to the
soon-to-be-inverted yield
curve, it’s not always clear
why such a thing matters...
Despite all the ominous press being devoted to the
soon-to-be-inverted yield
curve, it’s not always clear why such a thing matters. In other words, how,
exactly does a line on a graph slipping below zero translate into a recession
and equities bear market, with all the turmoil that those things imply?
The answer
(which is both simple and really easy to illustrate with charts) is that banks
– the main driver of our hyper-finacialized society – still make at least some
of their money by borrowing short and lending long. They take money that’s deposited into savings
accounts and short-term CDs (or borrowed in the money markets) and lend it to
businesses and home buyers for years or decades. In normal times long-term
rates are higher than short-term to compensate lenders for tying their money up
for longer periods. The banks earn that spread, which can be substantial if
borrowers make their payments.
When the
yield curve flattens and then inverts - that is, when short rates exceed long
rates - banks lose the ability to make money this way. They lend less, which
restricts building and buying and spooks the broader markets.
So, here’s the flattening,
apparently soon-to-invert yield curve:
See Chart:
And here’s how bank stocks are behaving in response. The following chart is for the BKX bank stock ETF that
includes all the major US banks…
See Chart:
Note how it was stable for the first nine months of the year
and then fell off a cliff
as it became clear that the yield curve really was going to invert.
See Chart:
Reuters conducted a poll of bond analysts that illustrates
how fast things are changing:
The U.S. Treasury yield curve
will invert next year, possibly within the next six months, much earlier than
forecast just three months ago, with a recession to follow as soon as a year
after that, a Reuters poll showed on Thursday.
The two-year Treasury yield is forecast to rise to
3.20 percent in the next 12 months, from around 2.78 percent on Wednesday, according to the Reuters poll of more than 70
bond market strategists taken Dec. 6-12. The 10-year bond yield was expected to
rise to 3.30 percent from about 2.90 in a year.
While that would put the yield
spread between the two-year and 10-year Treasuries in a year around where it is
now, at around 10 basis points, about 40 percent of respondents forecast that
gap to be zero or negative in the next 12 months.
Just in the last three months,
the yield spread has collapsed by two-thirds from just over 30 basis points.
That has coincided with one of the most tumultuous periods on global equity
markets since late August.
Thirty of more than 40 strategists who answered an
extra question expect the 2s-10s yield spread to become negative in the next 12
months, including 15 who said within the next 6 months. Half of 26 strategists in the poll expect a U.S.
recession to follow that inversion within the next two years.
While there is no set pattern on
how long it takes for a recession to hit once the yield curve has flipped, it
took about 18 months before the last deep recession about a decade ago.
The
conclusion: Sentiment in the bond market – and by
implication the broader economy – took a huge hit in the past couple of months.
[ZH: As
did the market's expectations for the Fed rate trajectory]
See Chart:
And since in a fiat currency system sentiment is everything, it should be no surprise that banks are down and taking the
rest of the stock market along for the ride.
…
…
----
----
HOW FAUX
CAPITALISM WORKS IN AMERICA
Stars
in the Night Sky
The U.S. stock
market’s recent zigs and zags have provoked much squawking and
screeching. Wall Street pros, private money managers, and Millennial
index fund enthusiasts all find themselves on the wrong side of the market’s
swift movements. Even the best and brightest
can’t escape President Trump’s tweet precipitated short squeezes.
See Chart:
The stars in the
night sky tell us this is the latter. For example, when peering out into
the night sky even the most untrained eye can identify the three ominous stars
that are lining up with mechanical precision.
These
stars include a stock market top,
followed by a monster
corporate debt buildup, and a fading economy.
In short, the stock market’s latest break is presaging a corporate credit
crisis and global recession.
See Chart:
Bad Habit
At best,
spending more than one makes, like smoking or swearing, is a bad habit.
However, spending more than one makes with no intention to pay it back is a
moral failing. What’s
more, running up untenable levels of government debt with the implied intent of
inflating it away at the expense of the citizenry is downright evil.
See Chart:
https://www.zerohedge.com/sites/default/files/inline-images/3-Federal-Debt-768x466.png?itok=VFpBdctv
How
Faux Capitalism Works in America
Our guess is that the real squawking from investors won’t begin until
mid-2019. That’s about the time corporate America becomes acutely aware
that pumping gobs of borrowed money into grossly overvalued stocks was an act
of financial suicide.
Just look to General
Electric, IBM, and Citigroup for an early indication of the
forthcoming catastrophe. For instance, over the last decade GE
spent $46
billion buying back its shares. In 2016 and 2017 alone, at a
time of mushrooming debt, GE pumped $24 billion into share buybacks.
See Chart:
GE wasted $46 billion on buying back its shares – with nothing to show
for it except a collapsing share price. This was an astonishing misallocation
of capital – very likely the company will eventually have issue new
shares to prop up its equity, at prices far below the prices it paid for
buying them back. [PT]
Over this time, the price of these shares dropped from about
$30 to $16. And even with Thursday’s 7.3 percent boost, on word of a
surprise JPMorgan upgrade, GE shares trade at $7.20. In other words,
shares GE bought back during the early part of 2016 have lost 75 percent of
their value. What to make of it?
The
2008 financial crisis helped clarify how faux capitalism works in America. That when the big
corporations and the big banks get in trouble, the people on top quickly
absolve culpability while appropriating public funds from their friends at the
Treasury for the purpose of private bailouts. This, in effect, socializes
the losses across bottom rungs of society and concentrates profits across the
top.
No doubt, the aftermath of the great corporate stock buyback
craze of 2009 to 2017 will be a text book example of faux capitalism in action. First, massive
financial bailouts will be disseminated to crony banks and corporations with
purpose and intent. Then, a colossal river of monetary liquidity from the
Fed will be diverted into credit markets, and into direct stock purchases of
government preferred corporations.
Bailout progression –
it continues until it cannot continue anymore, i.e., until
the “running out of other people’s money” moment arrives. [PT]
The size and scope of these fiscal and monetary bailouts
will utterly dwarf the TARP, ZIRP, and QE policies of the last crisis.
Assuming this doesn’t blow up the Treasury’s balance sheet, or vaporize what’s
left of the dollar’s value, a certain end effect will take shape. The
middle class will be reduced to a notch or two above poverty, and wealth will
be further concentrated into fewer and fewer hands.
We don’t like it. We don’t agree with it. But we can’t stop
it. This is the world we live in. A world where justice has been
debased and rectitude has been sullied.
…
…
----
----
"The
downgrade and fallen angel risks look pretty elevated at the moment for both US
and European high grade corporates raising the prospect of a disorderly
transfer of risk between HG and HY markets."
These art is full acronyms that one must know:
Yield Yield commonly refers to the dividend, interest or return the investor receives
from a security like a stock or bond, and is
usually reported as an annual figure. To investopedia yield refer to the interest and dividend income earned on the
fund, but not the increase (or decrease) in share price. Basically, a RETURN
is the gain or loss on an investment, where the yield refers to the income returned on the investment.
Relation between yield and return
vs. capital growth: A positive return
is a profit on an investment, and a negative return is a loss on an investment. It is related to capital
growth. Yield is the income
returned on an investment, such as the interest received from holding a
security. ... Furthermore, Yield measures the income, such as interest and
dividends, that an investment earns and ignores capital gains.
High-yield market. A market for
junk bonds (bonds that pay a high
level of interest but have a high
risk of not being repaid). Notice the diff with high yield bond:
For Investopedia: A high-yield bond is a high paying bond with a lower credit rating than investment-grade corp
bonds, Treasury bonds and
municipal bonds. Because of the higher risk of default, these high-yield bonds pay a higher yield than investment grade
bonds.
Difference between HG and HY markets:
HG is related to bonds as spread of debt growth.
It is also known as High yield bond spread. In a
year Billions & trillions of USD are been accumulated as dept . Forbes said
that “over the last four quarters amid aggressive share-repurchase activity,
businesses raised a net $1.76 trillion of debt in the financial markets”
As stated above High-yield markets includes
all type of junk bonds (that includes the HG or High yield bond spread.)
To Investopedia High yield bond
spread -also known as a junk bond, is a
type of bond that offers a high rate of interest because of its high risk of default.
A high yield bond has a lower credit rating than government
bonds or investment-grade corporate bonds, but it has higher interest
income or yield draws invest on it.
BBB Better Business Bureau: Institution
(recognized by FED & business community)
that investigate customer
complains of dishonest business practices.
IG either Investor Group 0r Interest Group. Here Invest
Grade based on bond-debt
“From HG and HY markets” = from HG
bond market to Corp to high yield market
MEANINGS:
1- If JP Morgan said there is
“a disorderly transfer of risk between HG and HY markets.” means that the Econ
don’t work.. Capital do not reproduce as expected. The chart below show that
Index Debt Grow in 2002 & 2018 are similar (not HY) : https://www.zerohedge.com/sites/default/files/inline-images/IG%20BBB%20morgan%20stanley.jpg
[[ You may notice that
In other indexes the debt is much, much higher
]]
…
2- If JPMorgan said “some
$176 billion in A-rated debt was downgraded into BBB territory” = hubo fraude.. or: there is a heavy wave of commodity-related "fallen angels." [ los
angelitos acusados y guilty of mal-practice han aumentado. No se esperaba
fraude de A-graded Corp?: “fallen angels”, se les llama. The chart below show the rise of fraud up to
the 4 Quarter (when QEs -quantitative
easy: Free Fed Money are given to them. I guess it didn’t happen yet). Does FED
need it for WW3 or fraud is too usual that nobody cares
about. Fact: angels recycle USD & our fake Econ] https://www.zerohedge.com/sites/default/files/inline-images/BBB%20downgrades%20dec%2014%202018.jpg
…
…
Open it: there are
many charts here:
----
----
"The market may be bad, but I slept like a baby last night. I woke up every hour and cried..."
This morning stocks opened down as concerns of global
economic weakness rose from China.
But, it may actually be more of the “Grinch (aka The
Fed) That Stole Christmas” this year.
While the Fed’s rate hikes do indeed raise borrowing costs
and slow economic growth, it is the extraction of liquidity from the markets
which is most important. As shown in the chart below,
the Fed is now reducing their flows by $50 billion each month. This is in
direct contrast to the billions they were injecting previously which
corresponds with the markets decade-long bull market despite weak revenue
growth due to a sluggish economic expansion.
See Chart:
But it is no longer just the Fed. On Thursday, the European
Central Bank made two important announcements.
- They will stop adding to its stock of government and corporate bonds at the end of December, and;
- They are seeing signs of weaker inflation and economic growth.
In other words, as world markets are beginning to struggle
as the driver of the decade-long bull market is being removed.
Dana
Lyons had an interesting point earlier this week on the bout of
selling.
“Specifically, regardless of the closing performance, the past 4 days
have seen the S&P 500 drop at least 1.89% each day on an intra-day basis.
That is just the 11th streak of such selling pressure in the S&P 500 going
back to 1960, and the first since 2008. If we relax the parameter a bit to
4 straight intraday drops of at least 1.7%, we observe 17 occurrences
going back to 1960. Many of them occurred at interesting market junctures.”
See Chart:
I agree with Dana that it is hard to imagine we are at a
cyclical low when we were just pegging all-time highs a few short weeks ago. As
noted by Barbara
Kollmeyer, Jeff Gundlach may have this right:
“DoubleLine
founder Jeff Gundlach, who told clients Tuesday evening that the S&P 500
could take out February’s 2018 low due to a growth slowdown hitting company
profits.
‘Many
equity markets are down over 20%, which some people call a bear market,’
Gundlach said in his latest webcast, according
to Reuters. ‘I don’t really define bear markets as a certain fixed
arbitrary percentage. I think of it more as mood. And certainly, the setup for the equity markets looked like a bear market
going into the middle of this year…the global equity market which is
strongly in a bear market at the present time.’
While the Fed could certainly reduce, or even eliminate, their rate hike campaign, the extraction of liquidity is a much more problematic issue. Combined
with still elevated valuation, weaker economic growth, and declining profit
growth, it is highly likely that [ What? cut it ]
For now, “we have our stocking hung with care in hopes that Saint Nick will soon
be there,” but don’t be surprised if you
wind up with a “big lump of
coal.”
HERE THE WEEKEND READING LIST:
ECONOMY
& FED
- Bad Communication All The Way Around by Jonathon Trugman via NY Post
- How Meng Wanzhou’s Arrest Might Backfire by Tyler Cowen via Bloomberg
- The Economy Faces Big Risks In 2019 by Neil Irwin via NYT
- It Is Not About Trade War – It’s Global Debt Saturation by Daniel Lacalle via dlacalle.com
- Yield Curves, Economics & Markets by Musings On Markets
- IMF Issues Stark Warning On Leveraged Loans by Pedro Da Costa via Forbes
- The Fed Is About To Try A Tricky Balancing Act by Greg Robb via MarketWatch
- Fears About The Economy Are Overblown by Gad Levanon via MarketWatch
- Fed’s Long History Of Bowing To Presidential Pressure by Scott Burns via FEE
- Snake Oil Economics – Bad Math Behind Trump Policies by Gregory Mankiw via Foreign Affairs
- Small Business, The Casualty Of Rising Rates by Mitchell Gunter via Washington Times
- Americans Are Friendly Fire Victims Of Trade War by Allan Golombek via RCM
----
MARKETS
- Gundlach: “Scared To Look At It” by Tyler Durden via ZeroHedge
- 2018 Forecasts: Who Nailed It & Who Didn’t by Shawn Langlois via MarketWatch
- It’s The Bullish Bear Market by Michael Santoli via CNBC
- I’ve Been High by Eric Cinnamond via EricCinnamond.com
- Did Stocks Hit A Bottom by Dana Lyons via The Lyons Share
- How To Lock In A Return On A Bond Fund by William Baldwin via Forbes
- No Ones In Charge by William Watts via MarketWatch
- Stock Market Risks Going Into 2019 by Barbara Kollmeyer via MarketWatch
- Birds Of A Feather – Get Plucked Together by DataTrek Research via Zerohedge
- 3-Ways To Reduce Risk In A Portfolio by Susan Dziubinski via Morningstar
- What A Shutdown Could Mean For Stocks by Chris Matthews via MarketWatch
----
MOST READ
ON RIA
- Bond Rally Was No Surprise by Lance Roberts
- Shiller Is Worried About Housing Again by John Coumarianos
- Top 10-Reasons We Could Be Heading Into A Bear Market by Doug Kass
- 3-Really Big Lies By Financial Advisors by Richard Rosso
- Will Santa Visit Broad & Wall by Lance Roberts
- What Caused Powell To Flinch by Michael Lebowitz
- Why Another 50% Correction Is Possible by Lance Roberts
WATCH
Danielle
Dimartino-Booth – Quill Intelligence, LLC
https://youtu.be/uUGDgpRfGBs
…
Peter Atwater –
Financial Insyghts https://youtu.be/i25_05C8Lg0
…
----
RESEARCH /
INTERESTING READS
- The Market’s “Long-Term” Is Changing via Fundamental Capital via Seeking Alpha
- US Banks Haven’t Behaved Like This Since 2009 by Jeffrey Snider via Alhambra Partners
- Netflix Christmas Movies – Appalling Economics by Aaron Brown via RCM
- Yep, Bitcoin Was A Bubble & It Popped by Noah Smith via Bloomberg
- Your Love Of Index Funds Is Economically Terrible by Michael Brush via MarketWatch
- Tales From The “Trading” Crypt by Shawn Langlois via MarketWatch
- Do American’s Marry For Love Or Money – An Answer by Quentin Fottrell via MarketWatch
- Oil Prices And The Global Economy by John Stepek via MoneyWeek
- 7-Questions To Ask In A Volatile Market by Brett Arends via MarketWatch
- Low Rates And “Good” Are A Delusion by John Hussman via Hussman Funds
“The market may be bad, but I slept like a baby last night. I woke up
every hour and cried.“ – Anonymous
…
----
----
US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds
& corruption. Urge cambio
"It basically feels like my pay has dropped each year due to normal cost-of-living
increases"
----
----
Smashed
with a virtual hammer...
[[ The focus should be the
Hillary: the queen of fraud ]]
----
----
"...I am explaining this because numerous Agents have expressed the need for you to know McCabe’s
and Mueller’s pattern of “target and destroy” has been utilized on many others,
without regard for policies and laws."
[[ The focus should be the Hillary: the queen of
fraud ]]
----
----
"Congress
must pass a STRONG law that provides GREAT healthcare and protects pre-existing conditions."
----
----
"ultimately
both parties should start over."
[[ We
don’t want both parties over & over. Both are evil and we don’t want to
vote for lesser evil. That is anti-democratic suppression of political freedom. ]]
----
----
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
Afghanistan, Iraq,
Syria
See Map:
The
New Yorker: "The United States has built a dozen or more bases from Manbij to Al-Hasakah,
including four airfields, and
American-backed forces now control all of Syria east of the Euphrates, an area
about the size of Croatia."
But in September the White House announced a realignment of
its official priorities in Syria, namely to act "as a bulwark against
Iran's expanding influence." This means the continued potential and
likelihood of war with Syria, Iran, and Russia in the region is ever present,
per Stripes:
Syrian government troops and Iranian proxy fighters are to the south
and west. They have threatened to take the area back by force, in pursuit
of President Bashar Assad's pledge to bring all of Syria under government
control.
Already signs
of an Iraq-style insurgency targeting US forces in eastern Syria
are beginning to emerge.
In Raqqa, the largest Syrian city at the heart of US
occupation and reconstruction efforts, the Stripes report finds
the following:
The anger on the streets is palpable. Some
residents are openly hostile to foreign visitors, which is rare in other towns
and cities freed from Islamic State control in Syria and Iraq. Even those who
support the presence of the U.S. military and the SDF say they are resentful
that the United States and its partners in the anti-ISIS coalition that bombed
the city aren't helping to rebuild.
And many appear not to support their new
rulers.
"We don't want the Americans. It's
occupation," said one man, a tailor, who didn't want to give his
name because he feared the consequences of speaking his mind. "I don't know why they had to use such a huge number of
weapons and destroy the city. Yes, ISIS was here, but we paid the price. They
have a responsibility."
Recent reports out of the Pentagon suggests defense
officials simply want to throw more money into US efforts in Syria, which are
further focused on training and supplying the so-called Syrian Democratic
Forces (or Kurdish/YPG-dominated SDF), which threatens confrontation with
Turkey as its forces continue
making preparations for a planned attack on Kurdish enclaves in
Syria this week.
Meanwhile, Raqqa is beginning to look more and more like
Baghdad circa 2005:
Everyone says the streets are not safe now. Recent
months have seen an uptick in
assassinations and kidnappings, mostly targeting members of the security
forces or people who work with the local council. But some critics of the authorities have been gunned down, too, and at
night there are abductions and robberies.
As America settles in for yet another endless and
"indefinite" occupation of a Middle East country, perhaps all that
remains is for the president to land on an aircraft carrier with "Mission
Accomplished" banners flying overhead? [[ OR other
stup blah blah? ]]
…
----
----
An Israeli
defense delegation in Moscow this week learned the playing field has changed
dramatically...
----
----
SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
RELATED:
“This century, China has shown aspiring rulers how a single-party
regime can create a world power, and how democracy is not a necessary
precondition for extraordinary economic progress”, Buchanan wrote.
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
----
NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes &
terrorist imperial chaos
REBELION
El falso dilema del patriotismo Jorge
Majfud
----
Chile Presos políticos mapuches Raúl Zibechi
----
----
----
----
BRA Dilma Rousseff: “No basta sólo la lucha
institucional”
----
----
ALAI NET
----
----
----
----
RT EN
ESPAÑOL
----
----
----
Keiser Report "Estados Unidos y China van
camino de la guerra"
----
----
----
----
COUNTER PUNCH
Analysis on US Politics & Geopolitics
Jeffrey St. Clair Roaming
Charges: Fathers and Sons, Bushes and Bin Ladens
----
Patrick Cockburn The
Yemeni Dead: Six Times Higher Than Previously Reported
----
Brian Cloughley Principles
and Morality Versus Cash and Profit? No Contest
----
Michael Duggin Climate
Change and the Limits of Reason?
----
R Falk – D Falcone Sartre,
Said, Chomsky & Meaning of the Public Intellectual
----
Andrew Glikson Crimes
Against the Earth
----
----
Jill Richardson A
War on Science, Morals and Law
----
----
Medea B – Alice Slater Green
New Deal Advocates Should Address Militarism
----
Dan Corjescu America
and The Last Ship Space for all? The Titanic’ ships were for the
rich.. if poor wanted, they kill them. People is armed now.. could it happen the reve? In 1 US State there were
drills to check if our WMD work.. People ask bunkers..
If not
----
----
GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
----
----
----
PRESS TV
Resume of Global News described by Iranian observers..
----
----
----
----
----
----
----
----
----
----
----
----
===
No hay comentarios:
Publicar un comentario