Daily Digest

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Daily Digest 2/25 - The Future Is Flooded, How To Invest When Markets Are Volatile

Thursday, February 25, 2016, 11:03 AM

Economy

Recession 2016: In Some States, A Very Deep Economic Downturn Has Already Arrived (Aaron M.)

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.

Speculative Half-Cycles Tend To Be Completed Badly (Aaron M.)

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.”

Bank Runs In The Age Of NIRP: Home Safes Jumping Off The Shelves In Japan (Aaron M.)

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.

Putin "Prepared to Use Tactical Nuclear Weapons" If Turkey/Saudi Invade Syria (Arthur Robey)

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.

China is buying up American companies fast, and it's freaking people out (Arthur Robey)

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.

Witch-hunt for whistleblowers? German police 'probing cops' who leaked Cologne sex assaults (Arthur Robey)

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.

Gold Bashing Now Pure Counterfactual Propaganda (Capt DC)

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.

Vancouver Island’s hinterland attracts affordability refugees desperate to buy a family home (westcoastjan)

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.

The Future is Flooded: Seas Rising Faster Than They Have In 28 Centuries (PBD)

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

Click to read the PM Daily Market Commentary: 2/24/16

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

3 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4064
Repost Of Today's News

Negative interest rates: More bad news for savers

MarketWatch-4 hours ago
based founder and editor of DepositAccounts.com, says his readers have been reaching out to him, nervous about the implications of negative interest rates.
 

Japanese institutions spend up big on foreign securities as negative ...

Reuters-9 hours ago
The BOJ's decision to introduce negative interest rates last month drove down domestic bond yields, with Japanese government bonds (JGBs) of up to 10 years ...
 

China urged to tolerate much higher fiscal deficit

MarketWatch-4 hours ago
Japan also recently introduced negative interest rates. Central-bank holdings of bonds and other assets in the U.S., Europe and Japan are stretched.

China could raise budget deficit to 4% of GDP : central bank official

China Daily-12 hours ago
In an article published by " The Economic Daily ," director of the central bank ' s surveys and statistics department Sheng Songcheng said the deficit increase ...

Bad Loans No Barrier in China

Bloomberg-14 hours ago
New advances soared to a record 2.51 trillion yuan ($384 billion) in January and the specter of soured debt is looming large: Credit Binge. Chinese bank loans ...

Shanghai stocks close down over 6% on economy worries

Yahoo News - ‎8 hours ago‎
"The economy hasn't shown signs of stabilisation and policies are still coming out one after another," Central China Securities analyst Zhang Gang told AFP. China's economy grew 6.9 percent in 2015, its slowest pace in 25 years, and policymakers have ...

China Feb official factory PMI seen shrinking for 7th month

Reuters-9 hours ago
Banks dished out a hefty 2.51 trillion yuan ($384.23 billion) of new loans last ... to take on new debt to expand, with persistently sluggish demand at home and ...

Citi downgrades 2016 global growth forecast to 2.5 percent

Reuters-13 hours ago
They said they anticipate more policy easing from the European Central Bank and Bank of Japan, but "suspect this will provide only limited stimulus." They noted ...

Ontario's net debt expected to exceed $300 billion in Thursday's ...

CTV News-3 hours ago
Progressive Conservative Leader Patrick Brown says interest payments on Ontario's debt are over $11 billion a year, and wants to see "immediate action" in the ...

Alberta's 2016 budget deficit could top $10 billion, finance minister ...

Edmonton Journal-16 hours ago
The steep and prolonged collapse of world oil prices has doubled Alberta's deficit projection for next year to more than $10 billion, Finance Minister Joe Ceci ...

Biggest Wave Yet of U.S. Oil Defaults Looms as Bust Intensifies

Bloomberg-13 hours ago
Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, didn't pay interest on their bonds last week. They have until ...

Pennsylvania's skyrocketing public pension tab gets a tote board in the Capitol

PennLive.com - ‎20 hours ago‎
Barry Shutt unveiled a public pension debt clock that, second-by-second, is now available for passers-by in the East Wing Rotunda to take in and - whether they totally understand it or not - see the relentless nature of this problem. "I just wish that ...

The $400-billion US money-fund exodus with banks in its crosshairs

The Globe and Mail-21 hours ago
Investors are poised to pull as much as $400-billion from U.S. money-market funds that buy such debt, known as commercial paper, JPMorgan Chase & Co.

European Banks' $200 Billion Oil Slick

Bloomberg-2 hours ago

That's more than the U.S. banks' estimated $123 billion of outstanding loans and .... an investment spree supported by debt was quickly followed by a collapse in ..

Illinois budget battle leads Moody's to downgrade several state ...

Washington Post-2 hours ago
An epic budget battle in Illinois led Moody's Investors Service to downgrade the credit ... [George Mason student shares debt struggles at congressional forum].

Puerto Rico needs restructuring to avoid cascading defaults: Treasury

Reuters - ‎12 minutes ago‎
"As the cascading defaults and litigation unfold, there is real risk of another lost decade, this one more damaging than the last," Weiss said. A legislative solution for Puerto Rico, battling with $70 billion debt, may be edging closer. Legislation to ...

Detroit's pension shortfall raises red flags about bankruptcy plan ...

Michigan Radio-3 hours ago
“There were concerns coming out of the bankruptcy about the pension system and ... said Eric Scorsone, a municipal finance expert at Michigan State University.

 

HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 760
Saudis worried about Putin's tactical nuke warning

The warning shared in the article that Arthur linked (Risking nuclear war for al Qaeda? by Robert Parry) is one that seems to have created a stir among many of the Saudi and Emirati students at my school.

On Tuesday, one young man asked me in class - when we were discussing a completely different topic - if I thought that the conflict in Syria was going to be the beginning of World War III. While students do ask random things at random times, the urgency of his question struck me.

I started mumbling something about in the long run maybe, etc. etc., when he politely interrupted and said, “no, I mean soon," and then he proceeded to tell basically what Parry claims in the article above, namely that Putin/Russia has threatened/warned Erdogan/Turkey - and indirectly Saudi Arabia - that Russia is prepared to use tactical nuclear weapons if Turkey or KSA invade Syria.

At the time, I didn’t really know why he was so agitated on this particular week, and so I asked some of the students from Gulf states about it later on and they confirmed his fears. Apparently it's being widely discussed by people in Saudi Arabia & the UAE and this murmuring started over the weekend. The Parry article was published last Thursday, 18 Feb.

Whether true or not, I’m not sure if Putin's supposed warning became a hot topic in KSA because of Parry's article or if it has also leaked through some other channels. A discussion of it is not really found in the English version of Al-Arabiya, the most popular Arabic-language online news source, at least among the young Arabs that I know, except as an opening reference in this editorial (Russia’s monopoly on intervention in Syria).

In any case, the perspective of these young Arabs and their families, and the Parry article, are a couple of other pieces in the Syria puzzle.

Edit: And a good reminder of how lackadaisically the world stumbled into World War I.

efarmer.ny's picture
efarmer.ny
Status: Bronze Member (Offline)
Joined: Jan 7 2012
Posts: 60
Operation Northern Thunder

I thought the threat of tactical nukes was old news. I first heard about it a week ago, and that news source attributed it to the large scale military operation being done in Northern Saudi Arabia.

The conspiracy theory conjecture was that this exercise was a prelude to the invasion of Syria.

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