It's a post by a man who I consider to be an excellent observer of the world economy. He supports his views clearly, and they are easy to digest, even if one is not a student of economics and/or markets.

http://www.ftense.com/2015/03/us-stocks-something-wicked-this-way.html

 

Nobody and I mean nobody predicted 50 dollar oil.

It's having a rather dramatic effect on...everything, both economic and socio.

Perhaps the intention?

I'd be a lot more worried if I were a part of the gentry class of say Brasil or Russia than the United States.

Brasil is in a full twist right now with run away inflation and negative growth (and no water). The Real is collapsing to the point where it looks like it will see 4:1 before 2.75:1, and then 5:1. The chart looks awful. Brazil refuses to uncouple itself from a commodity based economy.

I thought they were finally ready with a confident new generation but say hello to the new boss, same as the old boss.

The USD is so strong right now that if you have some and you're really worried, you could make a basket of 3 currencies as a hedge and never really have to sweat again...the £ is always a good option!

Or, buy real estate. Preferably west coast or Washington, D.C.

that's what all the Chinese are doing lol

 

Part (2)

The Canadian dollar is hideously undervalued right now, right? A basically conservative government which runs a tight ship. a knowledge and industrial based economy with endless good stuff in the ground and in her seas and rivers.

Canada is looking like Nirvana right now. Once in a lifetime?

Same for Australia. Just kinda far from everywhere (good for them!)

 

Corroborative evidence of serious concern, from another respected source.

http://www.theguardian.com/business/2015/jan/30/uk-fund-manager-devastating-recession-crispin-odey

 

http://www.bhpbilliton.com/home/inv...mResultsfortheHalfYearEnded31December2014.pdf


^^^ for those with patience, you can read in plain English the Australian reasons for why the conventional wisdom that drops in US rig counts will lead to higher oil prices is dead wrong. Australian public companies are much more frank in their annuals than their other western counterparts. Much different regulatory climate....

OPEC into full panic mode because of this report and are going to have an unscheduled meeting in the few days because of it.

Interesting.


I'm stuck on energy prices (specifically: oil) because nobody predicted 50 dollar oil. Nobody.

 

While I agree that the sharp drop in oils prices was unexpected, "conventional wisdom" is currently wrong about many aspects of the world economy, including oil prices. Demand is down significantly, yet anyone conventionally interpreting various government and MSM reports would have been caught by surprise. (Baltic Dry Index, while not a perfect economic indicator, is currently at all-time record lows!)

It is conventionally assumed, based in part on so-called "stress tests" (it would be hilarious if it weren't so deadly serious), that systemically important Western banks are now stable (if not strong), and that they will be able to handle another major crisis. This is complete fiction, as the recent 7b Euro shortfall discovered in an Austrian bank so vividly illustrates.

The very same derivative time-bomb that caused such a panic in the last crisis is even more problematic now. Furthermore, as central banks continue to inject into the system enormous amounts of money (aka "credit" or "liquidity") that has been conjured up out of thin air, and have artificially suppressed interest rates for years (further distorting markets), it is a certainty that when the impending crisis unfolds in earnest, those in power will be helpless to prevent, or even ameliorate it in any serious way.

It may not happen next week, next month, or even six months from now. But another crisis is on the near-horizon, and there is no way to avoid it.

Fasten your seat belts.

 

Furthers the argument for bottoms up, fundamental research. I'm happy holding my portfolio of micro caps, special situations and work outs for a long, long time should the market experience a significant correction.

From a macro, US-centric perspective, I'd argue that much of the corporate investment and insider selling is simple mean reversion following a ~5 year period of moral (read: optic) constraints.

I have no personal opinion on the doomsday scenarios that @TonyC presents (macro isn't my thing), but I certainly agree that the US and world central bankers are far more hamstrung in terms of available monetary policy levers today than at any point in the recent past. Bernanke, Paulson & Co. were already stretching for an unconventional playbook. In a world now barely status post QE with still ultra low interest rates, their options are significantly limited.

 

You make good points regarding the scary scenario: that the sudden crash in oil was mostly (it can never really be entirely) based on a sudden, historical drop in real demand. It was a cold winter and it didn't matter one little bit.

We'll see.

 

You're right. I bet Paul Volcker quietly weeps himself to sleep each night as the fed loudly pumps endless amounts of free liquidity into the system.

Anyone 35 and under thinks 3 to 5% mortgage rates and 11% revolving credit is perfectly normal. And, it is their normal because interest rates have been at these levels for their entire adult life.

Back to oil (Hope I'm not stuck...on stupid). The Nixon Shock in 1971 had the (un)intended consequence of destabilizing the fringe oil producing nations of the Middle East and we've been sending our armies and navies to region for close to 40 years now to help maintain the free flow of oil.

I think we got a little tired of this paradigm and have now arrived at a point where we have defacto energy independence. I wonder if this is a new paradigm? What happens to Europe?

 

And leading the (central bank) lemmings over the cliff is Japan. Creating "money" out of thin air and directly juicing the stock market in order to make it appear that everything is rosy. Of course the Fed is doing the same, just a bit more discreetly.

I mean, seriously, you couldn't make this stuff up…

BOJ officials used to be cautious about purchasing ETFs, worried that it could distort market activities and put the central bank’s own financial health at risk. But under pressure from politicians following the global financial crisis, the bank changed its stance in late 2010.

“We led the cows to water, but they didn’t drink it, even though we told them it tasted good,”Miyako Suda, who was a board member then, wrote in a 2014 book discussing monetary easing at that time. “So we thought we should drink it ourselves, showing them it was tasty.”

http://www.zerohedge.com/news/2015-03-11/how-boj-stepped-143-times-send-japanese-stocks-soaring

 

Ha! What a line. The Japanese are writing the book on unconventional monetary policy.

Based on their results for the last 15 years, I'd agree that it doesn't appear to have been too successful.

 

Long live the Japanese. May they be prosperous and multiply and continue beefing up their coast guard and arming their democratic asian neighbors against China.

http://mobile.reuters.com/article/idUSKBN0M62B920150311?irpc=932
http://freebeacon.com/national-security/photos-show-china-military-buildup-on-island-near-senkakus/