Tuesday, February 16, 2016

Today's Links

1---The Saudis blink first: Saudi Arabia, Russia to Freeze Oil Output Near Record Levels, Bloomberg

2--The worst depression in history?  Has the Crash of the Global Financial Markets Begun?, NC

QE Ends: the Fed’s winding down of the bond purchases in its third bond-buying programme, also known as Quantitative Easing 3 (QE3). This winding down of the QE3 started in February 2014 and ended on 29 October 2014 ...

Latest Slide

Then 2016 arrived and the markets opened on 4 January 2016.

Since then the equity markets have been in turmoil. Between 29 December 2015 and 20 January 2016, the S&P 500 has declined by about 11% (a warranted correction) and the world equity market capitalisation dropped by about $7 trillion. After 20 January 2016 and up to 5 February, the markets have recovered some, but up and down daily swings of significant sizes continue to occur.

Here are a few events since the beginning of 2016.

(i) Rumours that the Italian banking system might collapse.
(ii) Rumours that Deutsche Bank could become the next Lehman Brothers.
(iii) Chinese economy is facing a mountain of bad loans that could exceed $5 trillion.
(iv) The negative interest rate programme in Japan.
(v) The 10 Year US Treasury Rate is going below 1.80%, and moving up and down wildly.
(vi) Oil price has gone below $30 per barrel, and has moved up and down wildly.
(vii) Gold price has gone above $1,155 per troy ounce, and has moved up and down wildly.
(viii) The Baltic Dry Index, a measure of the health of world trade, crashed below 300 for the first time in its entire history.

3--Donald Trump Wasn't Wrong When He Accused the RNC of Stacking the Debate Audience 

4--Northern Thunder military exercises begin in Saudi Arabia

5---KSA, Turkey get cold feet on Syria troops

6--Russia dismisses Turkey accusations of attacking hospitals in northern Syria

7--Assad speaks:

“Any person has the right to oppose the government and its policies, call for changing the government or changing its policies, but, no one can change the State… the State is a need for all,” the President said....

“When we talk about a Syrian-Syrian dialogue, this means that we will negotiate Syrians that belong to the Syrian people, their roots are in Syria, not in the other states, if we negotiated al-Riyadh delegation, so we negotiate Saudi Arabia and we will not discuss with them the Syrian constitution, we can discuss the Saudi constitution, like the human rights in Saudi Arabia,” President al-Assad said.

8--Russia and Saudi Arabia agree to freeze oil production output

9--BOJ launches negative rates, already dubbed a failure by markets

10--There is worse to come as QE loses its impact, Henny Sender

The stock market has been ignoring the clear evidence of deteriorating margins and profitability, a form of deception encouraged by the share buybacks.”....
We are in a world where the yield curve is flattening and there is little demand to borrow other than to engage in financial engineering. Banks’ inability to earn money in that world dominated headlines last week. But it will leave other kinds of financial institutions in even worse shape, especially insurers that sold guaranteed investment contracts.

11--Dean Baker on deficit reduction

Obama hardly helped his cause by promising a pivot to deficit reduction in the weeks immediately following the passage of the stimulus. And, he created a pointless rallying point for deficit hawks with his deficit commission, which was co-chaired by Erskine Bowles and former Senator Alan Simpson. Obama certainly helped to contribute to a political environment in which deficit reduction occupied center stage even in  a context where millions remained unemployed and faced the risk of losing their homes and the inflation and interest rate concerns of the deficit hawks were nowhere in sight

12---The Red Line and the Rat Line, Seymour Hersh

13--The glorification of Antonin Scalia, wsws

14--Syria fighting escalates as ceasefire deadline approaches

15--Central Banks will NOT ride to the rescue

Out of bullets

With interest rates below zero in some cases, it's much harder for central banks to apply more stimulus if needed.

Low rates and stimulus in the form of bond purchases — using some $3.6 trillion in newly printed money in the case of the Fed — have driven up stocks worldwide.

Yet inflation has remained quiescent. U.S. consumer prices fell 0.1 percent in December. European inflation is only 0.4 percent annually, despite massive ECB stimulus.

So markets may be realizing this is one downturn where the central banks can't ride to the rescue as before.

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