Friday, January 15, 2016

A 2008 REDO?

Nah.  2008 was all about a world-wide mis-priced credit bubble bursting and people who should have known better screwing things up to a fair-thee-well and then, through mis-guided regulation making the recovery even more questionable.  This one could be worse  If the other day was a stinker, today was a charnal house.  What has happened here is a collapse of a free-money driven economy coupled with a once in a life time collapse in the commodities market highlighted by oil that nobody saw coming.

Now there's a bit of the chicken or the egg thing here.  Did the commodities collapse because of the global economy or is it the other was around?  Who cares?  It is what it is and there are no signs that the decline--especially in the equities market--is going to turn on a dime anytime soon.  We have often argued that the greater part of any economic advancement in the past few years was as a result of the flooding of the capital markets with liquidity created by the world's central banks.  I think as we look at what is going on today we have been proven correct,  The massive deleveraging which we now see could have profound and lasting implications that could make 2008 seem like a cake walk.    Unfortunately, couple with this extreme economic reversal the fact that we are now living in a world of greatly heightened danger on a geo-political front which was not present 8 years ago.  The lack of world leadership has made our risk profiles even more worrisome.  Sometimes you can't just not say, "I told you so," despite the sadness and anger that such a recognition brings.

The DOW closed down nearly 400 points today led by Oil and financials.  What really worries me is that move in financials indicates a degree or irrationality that may be slipping into the market as the financials have reported relatively good results for the quarter especially in light of the overall economic climate.  Once again, it is being made clear that most people, even those charged with understanding banks, haven't a clue.  We shall talk about this more next week.  And those who would disagree with the process do so for the wrong reasons, expressing thoughts such as, "Our overall economy is doing well; the banks should be OK"  No, dumbos, the economy is NOT doing well; every number that was released today save one, stank.  Next month's employment number will also, unless I am very much off-base, disappoint hugely.  We are headed for below 2% growth revisions by the bucket full and with that will come social disruptions on a considerable scale.

Scarier yet, comes Billy the Dud today talking about being "on track..." what ever the hell that means, and seeing nothing to make him think of revising his forecasts.  When we have such men...

It's a holiday on Monday Over Here which is probably a good thing, but we are at a very fragile time. How Asia and Europe open will probably shape the week but again, my greatest fear is to whom do the markets look to to lead?  Right now, it isn't the U.S...and there has never been anyone else.

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