Hello Guest

Author Topic: The Crisis Is Spreading... Are You Prepared?  (Read 830 times)

0 Members and 1 Guest are viewing this topic.

Offline Flyin6

  • Head cook and bottle washer
  • Administrator
  • *****
  • Posts: 34018
    • View Profile
The Crisis Is Spreading... Are You Prepared?
« on: February 20, 2016, 08:20:57 AM »
The Crisis Is Spreading... Are You Prepared?   
 By Justin Brill   
Saturday, February 20, 2016   
 
There has been so much bad news in the markets this year, it's getting harder and harder to keep up. In just the past several weeks, we've seen…

New 52-week lows in the major stock markets of the U.S., Europe, and Japan… new six-year lows in high-yield (or "junk") corporate bonds… new 12-year lows in crude oil… new all-time lows in U.S. shale oil and gas companies… new six-year lows in emerging markets… the third crash in China in less than a year… double-digit declines in popular bull market "darlings"… and new multiyear lows in major banks in the U.S. and Europe, among others.

And earlier this month, hedge-fund manager Kyle Bass – famous for making a fortune betting against subprime loans during the last crisis – said Chinese banks could be in big trouble…

In a letter to investors on February 10, Bass said the current crisis could ultimately cause losses in Chinese banks up to five times bigger than those seen in U.S. banks during the mortgage crisis…



Chinese banks will lose approximately $3.5 trillion of equity if China's banking system loses 10% of assets… Historically, China has lost far in excess of 10% of assets during a non-performing loan cycle. 
 

 For comparison, U.S. banks lost just $650 billion of equity during the last crisis.

Bass said he expects the massive losses to force the Chinese government to dramatically devalue the yuan…



China will likely have to print in excess of $10 trillion worth of yuan to recapitalize its system. By the time the loss cycle has peaked, we believe the [yuan] will have depreciated in excess of 30% versus the U.S. dollar. 
 

He also warned that China's foreign currency reserves have already fallen "below a critical level." He said his firm estimates China has just $2.2 trillion at most, compared with the $3.3 trillion officially reported by the government last month…



The view that China has years of reserves to burn through is misinformed. China's back is completely up against the wall today, which is one of the primary reasons why the government is hypersensitive to any comments regarding its reserve levels or a hard landing. 
 

Last week also brought Greece back to the headlines. On February 12, while tens of thousands of Greeks rioted to protest pension reforms, new data showed the Greek economy has officially fallen into recession again.

Meanwhile, gold has been booming…

The precious metal is now up almost 17% so far this year. According to Reuters, gold is on pace for its biggest quarterly gain in at least 30 years.

 Data from Bank of America Merrill Lynch analysts show investors moved money into gold and silver at one of the fastest rates since the financial crisis.

 After such a big short-term rally, we'd expect gold to consolidate a bit before heading higher again. But it's a positive sign to see gold soar while other assets – including other commodities – fall.

 It suggests the long four-and-a-half-year bear market could finally be ending. It also suggests folks are scared… and are beginning to see gold as real money again. As Robert Michele, chief investment officer at JPMorgan Asset Management, told financial news network CNBC last week…



There is a serious credit contraction underway. I think [Federal Reserve Chair Janet Yellen] should acknowledge that. I think she has to look at the capital base being wiped off the banks in this downdraft and equities: that's not supposed to be happening right now. They're supposed to be bulletproof…

And oh, by the way, gold at $1,200 an ounce, what does that tell you? It tells you that in a flight to quality, in a safe haven, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control. 
 

It's unusual to hear a high-ranking Wall Street figure speak so openly. But he's not the only one suggesting the Federal Reserve and other central banks have made serious mistakes…

In a note earlier this month, former International Monetary Fund ("IMF") economist Stephen Jen predicted that "the period of central bank 'shock and awe' operations is likely to be behind us."

Taking a page from Porter, he then added, "This will be the year that 'gravity' will overwhelm the central bank policies."

Last week, Bank of America analyst Michael Hartnett published a damning report on the "success" of the past eight years of central bank "easing."

 Hartnett noted that since Bear Stearns went bankrupt in early 2008, central banks around the world have cut rates 637 times… purchased $12.3 trillion in assets… pushed yields on $8.3 trillion of government debt to 0% or less… and pushed negative interest rates on 489 million people living in the eurozone, Switzerland, Sweden, Denmark, and Japan.

 And yet despite these unprecedented actions, the global economy is still slowing… and markets around the world are on the verge of a new bear market (or already in one).

Even the Wall Street Journal has joined in…

In an article last week, it accused the central banks of creating a "doom loop"… a vicious cycle where "low and negative interest rates continue to weaken the profitability of banks in the U.S. and [Europe]"… and "that, in turn harms sentiment and the economy itself, which spurs still more negative-rate actions."

All of a sudden, it seems the world is losing faith in the power of central banks. Or as financial blog Zero Hedge put it, "2016 is shaping up to be the year that everyone finally comes to terms with the fact that the monetary emperors truly have no clothes."
« Last Edit: February 20, 2016, 06:47:35 PM by Flyin6 »
Site owner    Isaiah 6:8, Psalm 91 
NSDQ      Author of the books: Distant Thunder and Thoren

Offline stlaser

  • Global Moderator
  • ****
  • Posts: 10205
  • Official PIA
    • View Profile
Re: The Crisis Is Spreading... Are You Prepared?
« Reply #1 on: February 20, 2016, 10:06:20 AM »
No one is prepared.....
Living in the remote north hoping Ken doesn’t bring H up here any time soon…..

 

SimplePortal 2.3.6 © 2008-2014, SimplePortal