Japan Is Struggling

More data on my favorite black swan candidate for 2012
Friday, July 27, 2012, 8:53 PM

In a prior piece this year, I proclaimed Japan to be my favored candidate to be the black swan of 2012. By this I mean that a financial accident in Japan that would create massive havoc in the world markets seems even more likely to me than something originating in Europe.

The reason is precisely because all eyes (and efforts) are focused on Europe, leaving Japan out of focus and unattended, so to speak. This is practically a requirement for a crisis spot; crises never seem to arise in the place everybody is already watching. Japan is nicely out of focus and therefore a good place for us to keep our eyes trained upon.

In the most recent podcast with Mish, we discussed the fact that Japan had recently posted its largest first half trade deficit in history. Then Mish asked if Japan's current account had slipped into negative territory yet, as that event will accelerate the pace at which Japan's looming structural insolvency will arrive.

While discussing the current account, a normally obscure economic term, seems a bit wonkish, it is really quite important. So let's start there, with a definition as a refresher for myself and perhaps an introduction for others. » Read more


I'm Keeping My Fingers Crossed for a Quiet Summer

But be prepared for something else
Tuesday, June 26, 2012, 11:01 PM

I am hoping for a quiet summer so that all of us north of the equator can enjoy the warm, lazy months of July and August in peace and quiet. But I am concerned that this may not come to pass.

The daily drumbeat of bad news from Europe covers all fronts and is relentless. Rumors abound, confusion reigns, downgrades happen weekly and sometimes daily, unemployment is up, the economy is slipping, and it is entirely unclear if anybody there knows what to do.

Even as the stock markets somehow magically finding their footing on each new rumor turning back at each critical zone of support, while gold continues to languish, I find myself increasingly bearish as all the new data comes in on both the unfolding European credit crisis and the slowing global economy.

Here's the troubling information out of Europe: » Read more


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Off the Cuff: Building Bailout Rumors

All eyes are turning to the Fed to bailout Europe
Thursday, June 7, 2012, 11:55 AM

In this week's Off the Cuff with Mish & Chris podcast, Mish and Chris tackle:

  • Rumors of Bailouts in Europe
    • Germany looks like it may be willing to compromise, and many pundits are hinting that the US may pitch in.
  • A 'Nannycrat' Future for the EU 
    • The clamor for more central authority is increasing, but will the populace vote for it?
  • A New Drachma Backed by Silver?
    • An interesting proposal worth considering...

The situation in Europe continues to drive market sentiment, as does increased speculation that -- to prevent contagion from crossing the Atlantic -- the Fed is preparing to ease again. With all of the machinations being discussed, there really is nothing new in terms of actual progress. The proposals being considered (like the new Spanish "FROB") are simply shell games designed for optical purposes, nothing more. The key question remains unanswered at this point: Who will take the colossal losses on Europe's bad debts? » Read more