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Tag Archives: recession

  • Blog

    At The End Of The Day, It’s All About Confidence

    And sentiment in the markets is now souring. Bigly.
    by Adam Taggart

    Friday, May 10, 2019, 3:00 PM

    24

    We’ve been shining a bright light on the technical compression seen in the major stock indices, indicative that a major breakout move is coming — one we’ve argued is much more likely to happen to the downside.

    Well, with the recent fizzling of the principal storyline supporting the bullish narrative — an imminent trade deal with China  — our predicted downside breakdown finally occurred this week.

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  • Insider
    Wikimedia

    Why This Better Work

    Because if it doesn't, the aftermath looks terrifying
    by cmartenson

    Friday, April 19, 2019, 4:20 PM

    15

    Executive Summary

    • China's critical role in keeping the party going (and why China is in a weaker position this time)
    • Despite current stock prices, the economic data is awful and fast getting worse
    • A recession is near-unavoidable at this point
    • What to do if you're not in the top 0.1%

    If you have not yet read Part 1: It's 2016 All Over Again. Or Is It?, available free to all readers, please click here to read it first.

    I know that it seems as if the US equity markets cannot ever go down and, truthfully, those indexes receive a ton of help from the Fed, the media, and from corporate buybacks. 

    The trouble, as always, when it begins will not be detected in the large, successful companies first.  Amazon and APPL will be among the last to go down.

    The trouble will start at the outside and work its way inwards.  This “outside in” phenomenon is pretty robust and it has not yet been repealed by the interventionistas at the Fed.

    In the US we might look to the small cap stocks to give way first, and I think they have.  It's in that universe where we will find an outsized majority of the zombie companies. 

    From a fundamental standpoint the small caps are a certified balance sheet mess.  Their net debt has been on a 40-degree, ruler-straight rise since 2010 even as their EBIDTA has risen at only a 10-degree trajectory.  The current gap is eye popping.

    This is a huge increase in debt, and it makes these companies especially vulnerable to any economic downturn or rise in interest rates.

    Accordingly, while all eyes are on the Nasdaq powering to a brand new all time high, the small caps in the Russell 2000 are definitely not making new highs and seem to be sneaking out the back door.

    If you are looking for a place to short US equities at the index level, the small caps are the …

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  • Podcast

    David Stockman: The Undrainable Swamp & The Inevitable Recession

    What the future of the post "Peak Trump" era holds
    by Adam Taggart

    Tuesday, March 5, 2019, 8:10 PM

    5

    Love it or hate it, the potency of the Trump Administration is on the wane, soon to be stuck in the mire of the Swamp it has deepend instead of drained, while the economy falls into one hell of a recession — so claims former Regan-era Cabinet member and Congressman David Stockman.

    In his new book Peak Trump, Stockman notes how the wide divergence between Trump the campaigner and Trump the president appears to be proving to be his undoing.

    Rather than fight to dismantle the institutions he railed against as a candidate — most notably the Deep State and the Federal Reserve — Trump has embraced them.

    Now, when this latest asset bubble bursts (and Stockman believes the markets saw their peak back in Fall 2018), Trump will 'own' that. Having chosen to tie his administration's success to the rising price of the S&P 500 since taking office, he won't be able to foist the blame of a market crash on his predecessors.

    Similarly, the Deep State — especially the military industrial complex — is experiencing a bonanza under the Trump administration. As a result, the Swamp is deeper than it has ever been.

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  • Insider

    Off The Cuff: Bad Assumptions = Bad Outcomes

    Both the market & the Fed are making dangerous assumptions
    by Adam Taggart

    Thursday, February 28, 2019, 8:20 AM

    11

    In this week’s Off The Cuff podcast, Chris and Wolf Richter discuss:

    • The Market Is Making Some Dangerous Assumptions
      • Right now it’s confident the Fed won’t hike this year. But will that be the case?
    • A Rate Surprise Would Shock The Markets
      • But the massive rebound seen since Jan supports hiking
    • Higher Rates Would Help The Fed Address The Coming Recession
      • Yet another reason rates can still go up
    • But There’s No Guarantee The Fed Can Ride To The Rescue
      • One day its stimulus will stop working, no matter how large

    There’s been a lot of releases from the Federal Reserve lately which Chris and Wolf deconstruct here. Wolf is of the mind that the markets are interpreting the Fed’s recent dovish moves as complete capitulation. He’s not so sure about that — he thinks the Fed will raise rates if given the opportunity. And the massive market recovery since the start of the year is giving it more and more validation for further hikes. So Wolf warns that the market could be in for a nasty surprise should the Fed hike later this year.

    But he also warns that the Fed is guilty of making some shaky assumptions of its own. Here he explains why its stimulus playbook may not work as expected when the next recession arrives:

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com’s other premium content.

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  • Insider

    Tuning Into Reality

    Here's the hard data that they *don't* want you to see
    by cmartenson

    Friday, February 22, 2019, 5:48 PM

    8

    Executive Summary

    • The central banks are the key players at this stage. When they fail, the system will fail.
    • How today's Frankenmarkets are poised to collapse
    • Where we see the most convincing signs that the global economy is now falling into recession
    • Why we should expect bad times to lead to even worse decisions

    If you have not yet read Part 1: We're Living In 'The Groundhog Show', available free to all readers, please click here to read it first.

    The reason I still get angry and frustrated from time to time is because we’re just wasting very important time and resources that really ought to be dedicated to other pursuits.

    As I watch the US electorate recklessly lurch from one emotional outrage to another, I truly wonder if this is really just the emergent outcome of how events spread virally — or if it’s not something more intentional and sinister. Is this all a program designed to keep people revved up but pointed in the wrong directions?

    So if you find yourself increasingly feeling that things are really off track, that’s probably because you’ve also been paying close attention to the news. Whether by design or default, this doesn’t speak well to our ability to rally effectively to address the many massive predicaments society faces.

    As an ex-Facebook executive said about the nefarious aspects of the social media phenomenon he helped to create, “No civil discourse, no cooperation, misinformation, mistruth; you are being programmed.”

    That closely matches what I am seeing in the online world now. And it’s really unfortunate, because the stakes are so high. We really need to begin preparing for a very different future.   

    Which is hard, if not nearly impossible to do in a fractured and polarized world such as the one that’s been emerging over the past few years.

    The central banks are at the very center of it all.  The financial markets have taken on a new significance in the world and are now one of the prime, if not the prime, signaling mechanisms used by central planners to communicate with the world.

    So it's critical to understand that the most important factor in play is…

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  • Blog

    Dude, Where's My Cash?

    The growing desperation for income
    by Adam Taggart

    Sunday, February 17, 2019, 12:45 PM

    38

    A few months back, we issued a report, The Primacy Of Income, declaring the end of the era of capital gains.

    It's conclusion? Wealth accumulation over the next decade will be predominantly driven by income.

    Since issuing that report, developments have only served to underscore that prediction.

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  • Blog
    Wikimedia

    Next Stop: Recession!

    We've arrived at the end of the line
    by cmartenson

    Friday, February 8, 2019, 3:35 PM

    68

    We've enjoyed years of “recovery” since the Great Financial Crisis by literally papering over our problems with newly-printed money, instead of addressing their root causes.

    But we've now arrived at the awkward part of the story; when all of our prior mistakes finally catch up with us, and the plot heads in a much darker direction.

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  • Insider

    You vs The Recession

    To fail to plan is to plan to fail
    by cmartenson

    Friday, February 8, 2019, 3:23 PM

    2

    Executive Summary

    • The limits to central bank money printing
    • The key indicators signalling recession
    • The growing fractures in the US economy & housing market, Europe, China & global trade
    • Stepping out of the recession's path

    If you have not yet read Part 1: Next Stop: Recession!, available free to all readers, please click here to read it first.

    Here in early 2019 the central banks have already caved to the market’s December 2018 weakness by printing more money, softening their plans for reducing their balance sheets and delaying the already timid schedule for introducing new interest rate hikes.  They are panicking early and often and seem inordinately afraid of any sort of downturn in stock prices, which is a concerning matter in itself.

    So our asterisk on this claim of ours that a recession has arrived is contained in the phrase “until and unless.”  Until and unless the central banks reignite their QE booster rockets, and do so in larger-than-ever quantities, and do so by giving money to the common people (not the banks), we think that the die is cast.  The recession has arrived. 

    Perhaps we should introduce a second idea which is contained in the phrase “they can until they can’t.”  The central banks managed to get a bounce in the equity markets through a combination of easing financial conditions, as they say (i.e. throw more money to the markets), and jawboning. 

    This was sufficient to get a relief bounce in equity and bond markets, but it did nothing to alter the many recession indicators we’ll track for you below.  The central banks can still move the markets with their words and deed.  Someday, perhaps soon, it will be shown they can’t.  They can move markets until they can’t.  Other such times of the central banks being overwhelmed by the movement of the market tides were in 2000 and 2008.

    What sorts of things could or will swamp the levitating effects of money printing?  One is a full-blown recession that ends up crushing the various crevices that central banks cannot directly control via printing such as real estate, consumer sentiment, and zombie companies’ ability to meet debt payments.

    Another is a deflationary event that sweeps across overleveraged debt markets and causes the very worst sort of damage to a debt-based money system built on leverage; a decline in the amount of credit outstanding from one period to the next.  In other words, another 2008-2009 type of event.

    The central banks can control things until they can’t.  That’s what history says.  Perhaps something more fundamental has changed since that allows them more complete control than ever, and perhaps we should always have a few of our chips placed on that possibility, but otherwise it’s not different this time and the central banks will once again discover that credit bubbles are really fun on the way up and utterly destructive on the way down.

    We think the next recession has arrived and that it’s going to be a real doozy in terms of creating financial market panic and losses.

    Specifically, you need to watch out for…

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  • Blog
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    Is This Downturn A Repeat of 2008?

    Crashes differ, so be cautious about your assumptions
    by charleshughsmith

    Monday, January 7, 2019, 9:50 AM

    16

    Are we in a repeat of the global financial meltdown and recession of 2008-09? The sharp drop in equities is certainly reminiscent of 2008. Indeed, the December decline is the worst in a decade. Or are we entering a different kind of recession, the equivalent of uncharted waters?

    And if we are entering a recession, what can central banks and governments do to ease the financial pain and damage? We can’t be sure of much, but we can be relatively confident central banks and states will respond to the cries to “do something.”  This poses two questions: what actions can central banks/states take, and will those policies work or will they backfire and make the recession worse?

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  • Insider

    The 8 Systemic Failure Points Of The Global Economy

    The macroeconomic fault lines to monitor closely
    by charleshughsmith

    Friday, January 4, 2019, 7:06 PM

    22

    Executive Summary

    • The 8 Systemic Failure Points Of The Global Economy
    • Why The US May Weather The Next Collapse Better Than The Rest Of The World
    • The Fed's Long Game
    • Why Allowing Recession Now May Be A Policy Goal

    If you have not yet read Part 1: Is This Downturn a Repeat of 2008?, available free to all readers, please click here to read it first.

    In Part 1, we concluded the current global downturn isn’t a repeat of the 2008 global crisis; rather, it has characteristics of three types of recession: liquidity/currency mismatches, the popping of credit-asset bubbles and a business-cycle exhaustion of credit impulse, what I call a credit-demand exhaustion.

    Let’s add a potential fourth recessionary impulse: energy. Right now the world’s oil importers are feasting on a 40% decline in the cost of oil, but as Chris and other analysts (Gail Tverberg, Richard Heinberg, and Nate Hagens) have explained, we’re approaching a point where the cost of extracting, processing and distributing oil is rising as the cheap oil has been consumed.  Producers need high prices or they will stop producing. But consumers, the vast majority of whom have stagnant incomes, can’t afford high energy costs.  Beyond a rather low price point, higher energy costs trigger a recession.

    This may not be driving the current downturn, but it looms large in the background.  I see the current collapse in oil prices as a head-fake: the sharp drop makes it appear oil is abundant, but this abundance is temporary, not permanent.

    Moreover, we aren’t privy to the opinions and machinations within the world’s major central banks, but it’s clear that the U.S. Federal Reserve is diverging from other central banks, which remain accommodative while the Fed raises rates and reduces its balance sheet by $30 billion a month.

    Of the four primary central banks—the European Central Bank, the Bank of Japan, the Bank of China and the Fed—why is the Fed the one bank diverging from the other three, despite the appeals of the ECB to remain accommodative?

    I see several reasons, and the first is…

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