Aug 21 2021 ND SIT EC y POL Part 1
ND denounce-neoliberal debacle y propone State-Social + Capit-compet in Eco
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they documented with graphics
BEWARE AN "INSTABILITY CASCADE": ONE BANK WARNS THAT STOCKS ARE ABOUT TO HIT RECORD FRAGILITY
by Tyler Durden
"Stability breeds fragility, particularly when (i) the stability is grounded in the tight grip of central banks, who force investors into low-conviction, momentum-driven positions, and (ii) those central banks turn less
Back in late 2017, Bank of America's derivatives strategists made a remarkable, if hardly original, observation - the bank said what everyone knew but was afraid to voice namely, that "In Every Market Shock Since 2013 Central Banks Have Stepped In To Protect Markets."
See Chart:
https://cms.zerohedge.com/s3/files/inline-images/central%20banks%20bailout.jpg?itok=gHu4mYgG
Since then, the market's Pavlovian response to unconditional central bank intervention has gotten so embedded in the collective trader psyche that neither fundamentals, nor adverse news matter any more as everyone is convinced that central banks will step in the moment there is another dip in risk assets. In fact, on Friday another BofA strategist, Michael Hartnett, wrote that in the past 18 months "the Fed has bought $4 trillion bonds, twice the amount the US spent on War in Afghanistan past 20 years as it, and other global central banks, have spent $834 million every hour buying bonds since COVID." Add to this that the US government has spent $875 million every hour in ’21 and one gets a staggering number of $1.7 billion spent between central banks and the US government to prevent even a modest market correction.
Of course, one wouldn't know this by looking just at the S&P500 which on Friday again closed just a hair away below its all time high.
Which brings us back to the topic of market fragility, initially popularized by BofA back in 2017 and one which the bank's derivatives team addressed again last week, noting that after the latest ramp higher which is on the verge of breaking core records, "history suggests caution against this calm backdrop, as similar periods of extremely steady grinds higher have preceded large fragility shocks."
As BofA's Benjamin Bowler writes, echoing many of the same observations made by Goldman's Rocky Fishman, "swelling taper talk and the rise of the Delta variant have failed to make a meaningful mark this summer on the US equity market, which continues its steady drift higher at low realized vol." To demonstrate this point, in the chart below Bowler and team show that the S&P has now gone 200 trading days (it was 196 as of Monday) without a 5% pullback, making this the 5th longest streak in 50yrs. Notably, in the post-GFC era, the two previous such streaks both ended in the "large fragility events" of the Aug 2015 yuan devaluation and the Feb 2018 Volmageddon.
See Chart:
The S&P 500 has now gone 196 trading days without a 5% pullback
https://cms.zerohedge.com/s3/files/inline-images/5%25%20pullback%202.jpg?itok=ErTOVtBV
Meanwhile, underscoring the complacency in the market, the index is on track to a near-record number of all-time highs in 2021.
See Chart:
Expanding this analysis from stocks to balanced portfolios, BofA notes that the two largest fragility shocks in the history of 60/40 portfolios - Feb-18 and Mar-20 - were both preceded by near record risk-adjusted returns, similar to what we are seeing today, "suggesting momentum chasing and depressed volatility are two of the key drivers of today’s fragile markets." Needless to say, while implied vol may be a somewhat elevated, real vol is near record lows while momentum chasing... well, just take one look at what happens to any meme stock du jour.
See Chart:
Strong returns on low vol breed fragility
https://cms.zerohedge.com/s3/files/inline-images/fragility%20events.jpg?itok=Zs5Zf-X6
The bottom line, as Bank of America concludes is that "history suggests caution against this calm backdrop, as similar periods of extremely steady grinds higher have preceded large fragility shocks." Echoing what he wrote 4 years ago, Bowler repeats the most important mantra of modern markets, namely that "stability breeds fragility, particularly when (i) the stability is grounded in the tight grip of central banks, who force investors into low-conviction, momentum-driven positions, and (ii) those central banks turn less accommodative, a prospect that is now upon US investors."
Bowler's advice: watch Jackson Hole (26-Aug), August payrolls (3-Sep), and the 22-Sep FOMC meeting for potential risk off catalysts, although as the BofA strategist warns "fragility can also be triggered by seemingly innocuous events" when they reach a point of peak instability, triggering a liquidation cascade.
Our only counterargument here is that even, or rather especially IF, stocks indeed crumble as the market instability finally manifests itself into a selloff, the most likely outcome is that the Fed will step in even more forcefully, with many expecting that Powell will buy single stocks and equity ETFs during the next crisis, and thus refuse to sell expecting an even bigger bounce after the next Fed bailout. And since the Fed has now staked its entire reputation on not allowing what was once a market and is now merely a policy vehicle to give the impression that all is well, to crash ever again, these cynical skeptics are likely right inexpecting an even more powerful meltup just after the next crisis strikes.
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WHAT IS THE CULPRIT(S) FOR RECENT EQUITY WEAKNESS?
...all of the above. [ See Charts ]
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Seudo democ duopolico in US is obsolete; it’s full of frauds & corruption.
"You can make claims that this is a partisan swipe, but be reminded that I also accurately predicted that President Trump would not be re-elected just days into the Covid pandemic..."
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US TRAVEL AGENCIES' AIR TICKET SALES AGAIN SURPASS $4 BILLION DESPITE DELTA FEARS
"While airlines and organizations watch the new COVID-19 variants to determine the impact on travel, we anticipate new bookings and ticket sales to follow a similar pattern to prior years."
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NYC RESTAURATEURS: IT’S NOT OUR JOB TO ENFORCE VACCINE MANDATES
“My question is, why aren’t they doing this at Home Depot, why aren’t they doing this at CVS, Why aren’t they doing this at Stop & Shop? Why are they picking on the only place that people can congregate
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BIDEN AND PELOSI SET TO IMPOSE TAX HIKES ON SMALL BUSINESSES
Despite Biden's pledge, his tax hikes will hit small businesses...
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AUSSIE COPS PLEDGE TO UNLEASH "FULL FORCE" AS LARGE ANTI-LOCKDOWN PROTESTS TURN VIOLENT
"this is not about stopping free speech,
this is about stopping the spread of the virus,"
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US-WORLD ISSUES (Geo Econ, Geo Pol & global Wars)
Global depression is on…China, RU, Iran search for State socialis, D rest in limbo
IRAN'S HUGE CASPIAN GAS FIND IS A GEOPOLITICAL GAMECHANGER
... Iranian gas will be able to supply at least 20 percent of Europe’s gas needs... with technical and financial assistance from Russia and China...
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What is the future of USD?
BRETTON WOODS & THE SPOLIATION OF EUROPE
There is nothing inevitable or necessary about the dollar standard...
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MAPPING THE OVERSEAS MILITARY BASES OF UN SECURITY COUNCIL MEMBERS
Analysing a country's military presence overseas is a good way to gauge its global influence...
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EUROPE BRACES FOR ANOTHER US-INDUCED MIGRATION CRISIS
Authored by Finian Cunningham via The Strategic Culture Foundation,
President Joe Biden vowed “America is back” when he took office, meaning that Washington would realign with and respect European allies under its global leadership after the years of Trump discord.
Yeah, America is back alright. Causing mayhem and political headaches for its supposed European partners.
Regarding the Biden administration and its unctuous professions of transatlantic unity, the European governments must be wondering... WITH FRIENDS LIKE THAT WHO NEEDS ENEMIES?
The U.S.-led military interventions in Afghanistan, Iraq, Libya and Syria have already shaken the European Union to the core with political crisis from the destabilizing influx of migrants from war zones.
Let’s recapitulate: much of the strain from the migration pressure on the EU stemmed from Washington’s illegal wars in Asia, the Middle East and North Africa. Wars, admittedly, that the European NATO allies assisted in prosecuting.
The European Union is set to incur another massive migration wave from Afghanistan. With a population of 38 million and an estimated five million internally displaced, the numbers of Afghans seeking to make their way across EU borders could surpass the waves of refugees previously seen from Syria, Iraq, and Libya as well as Afghanistan during the past six years.
WITH FRIENDS LIKE THAT WHO NEEDS ENEMIES?
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SPUTNIK NEWS : https://sputniknews.com/
- Afghan Gov't Was Working on Peaceful Power Transfer, Ghani Resignation Ahead of Kabul Fall - Report
- US Facing Great Humiliation Because of Afghanistan, Trump Tells Alabama Rally
- Russian Soyuz Carrier Rocket With 34 OneWeb Satellites Launched From Baikonur
- Al-Aqsa 'Is a Red Line': Hamas Vows Strong Response to 'Any Attack' on the Mosque
- Russian Soyuz Carrier Rocket With 34 OneWeb Satellites Launched From Baikonur
- Watch: Multiple Rockets Strike Central Gaza Strip Causing Power Outage
- US State Dept Recently Hit by Cyberattack, Serious Breach 'Possible'
- Iran Backs 'Decisive Response' to Sanctions & Threats, Will Expand Defense Beyond Borders
- No Demonstrations Against Taliban in Kabul, Situation 'Fine', Russian Ambassador
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