If the price of oil does not go back up, this could be just the beginning. It is being reported that a whopping 35 percent of all oil and gas companies around the planet are at risk of falling into bankruptcy, and the financial institutions that have been backing these energy companies are getting very nervous.
1 in 4 Americans on verge of financial ruin (Michael W.)
That’s particularly problematic considering that emergencies happen more often than you might think. A 2014 survey by American Express found that half of all Americans had experienced an unforeseen expense in the past year — some of which could be considered an emergency. Indeed, 44% of those who had an unforeseen expense(s) had one for health care and 46% for car trouble — two items that for many Americans are must-pay items, as you need a car to get to work and your health expenses are usually not optional.
A few weeks ago, I noted “we increasingly hear assertions that ‘financial conditions have tightened.’ Now, understand that the reason they’ve ‘tightened’ is that low-grade borrowers were able to issue a mountain of sketchy debt to yield-seeking speculators in recent years, encouraged by the Federal Reserve’s deranged program of quantitative easing, and that debt is beginning to be recognized as such. As default risk emerges and investors become more risk-averse, low-grade credit has weakened markedly. The correct conclusion to draw is that the consequences of misguided policies are predictably coming home to roost. But in the labyrinth of theoretically appealing but factually baseless notions that fill the minds of contemporary central bankers, the immediate temptation is to consider a return to the same misguided policies that got us here in the first place, just more aggressively.”
If that seems far-fetched, consider that the ECB is seriously considering pulling the €500 euro note and the calls are growing louder for the Fed to drop the $100 bill. Of course officials are pitching the big bill bans as an attempt to fight crime – because only a criminal would pay with a $100. But the underlying push is for a cashless society wherein monetary authorities can effectively force citizens to spend and thereby boost the economy by simply making interest rates deeply negative.
In Syria, rather than cooperate with Russia and Iran in helping Assad’s military defeat the jihadists, the Obama administration has continued playing it cute, insisting – as Secretary of State John Kerry has said recently – that armed “legitimate opposition groups” exist separately from Al Qaeda’s Nusra Front.
There is General Electric’s sale of its appliance business to Qingdao-based Haier, Zoomlion’s bid for the heavy-lifting-equipment maker Terex Corp., and ChemChina’s record-breaking deal for the Swiss seeds and pesticides group Syngenta, valued at $48 billion.
Keynesian Black Holes (Wilson S.)
This post describes the evolutionary path driven by fiscal dynamics which have led the US economy into the Keynesian black hole. This story, told graphically, has started in the previous post and continues here by showing the post-war history of the US macroeconomy using official empirical data – the mathematical theory underpinning the story is detailed in a separate research paper. Before continuing this story, the reader should be assured that this story is new and unique and can only be told after making a truly scientific inquiry.
According to DWN, the police officer who revealed the real state of affairs during the New Year’s Eve celebrations in Cologne has not hurt the police. “The [real] damage has been caused by those who told tales out of opportunistic motives and presented the reality in pictured reality a distorted way. They not only caused the damage to the police, but to the public as well,” the article said, adding that the whistleblower who exposed the Cologne attacks is actually a real “hero.”
Gold Now? (Axel M.)
Having said that, I believe fear is under-appreciated – quite literally, although in a different sense. Fear is the plain English word for risk aversion. When fear is low, investors may embrace “risk assets,” including stocks and junk bonds. A lack of fear suggests volatility is low; as such, investors with a given level of risk tolerance may understandably re-allocate their portfolios so that the overall perceived riskiness of their portfolio stays the same. While retail investors might do this intuitively, professional investors may also do the same, but use fancy terminology, notably that they may target a specific “value at risk,” abbreviated as VaR. Conversely, our analysis shows that when fear comes back to the market – for whatever reason – ‘risk assets’ tend to under-perform as investors reduce their exposure.
Thousands told their pension savings could be at risk (westcoastjan)
Such schemes are popular with the 1.8 million small employers with fewer than 30 staff who are currently signing up under the auto enrolment programme.
“There is a risk of these schemes falling over; there is a risk that members might lose their money,” said Andrew Warwick Thompson, executive director for regulatory policy at the Pensions Regulator.
When Nixon removed the dollars convertibility into gold, many economists forecasted that the price of gold would drop. To anyone who didn’t understand gold it would make sense; if there was less demand for gold as a monetary base, the price could possibly go down. We now clearly know that this was not the case, and though gold was no longer an official monetary metal, it did not change the fact that it was a monetary metal, and a premier store of value. If the role of gold was not diminished from the government declaring that it wasn’t money, do you think it will be changed when they declare that paper isn’t money either?
How To Invest When Markets Are Volatile? (Taki T.)
Frank: We had been anticipating a period of increased volatility for some time now. We recently alerted our clients to the spreading of the high-yield bond crisis in the US, which started in the energy sector, but has already captured other sectors and is now also afflicting banks. Frankly, we weren’t expecting such a dramatic drop in such a short period of time. I am convinced that the current levels don’t represent a floor. We are likely to continue to see a year of high volatility in the financial markets with wild up- and down-swings. However, despite possible rallies in the interim, we believe that the markets will tend downward as equities were (and still are) over-valued due to being flush with cheap cash and low- to negative-yield rates. The asset bubble that the central banks have created is starting to burst. To me, the only question appears to be how quickly the bubble will “deflate”.
The Fed Is Doomed to Fail (Tiffany D.)
Over the last 16 years, in particular, I’ve watched my country derail financially. Monetary, fiscal, political, economic and financial policies in D.C. and across the various statehouses of America have emphasized debt in waging wars and in providing welfare to rich and poor alike. This welfare-warfare economy we’ve created is an inverted pyramid — top-heavy and resting on a base much too small to support the weight the politicians continually pile on top.
The 50 kilometre aerial commute allows the father of three to live in Nanaimo, B.C., where homes cost about a quarter of those in Vancouver, one of the world’s frothiest markets with average homes selling for $1.3 million. He’s encouraging some of his employees to do the same.
Employing a database of geological sea-level indicators from marshes, coral atolls, and archaeological sites around the world, the paper shows that global sea levels stayed fairly steady for about 3,000 years. Then, from 1900 to 2000, the seas rose 5.5 inches—a significant increase, especially for low-lying coastal areas. And since 1993, the rate has soared to a foot per century.
Gold & Silver
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