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Money Is Bailing Out of Canada
Money Is Bailing Out of Canada
The floodgates opened in December. Perhaps it had something to do with oil, Canada’s number one export product, whose price went into free-fall in November and triggered extensive bloodletting in the Canadian oil patch. Or perhaps foreign investors got spooked by something else.
Until then, they’d been sanguine: from January through November, they’d added C$72.5 billion in Canadian securities to their holdings. But in December, they suddenly dumped C$13.5 billion – the most in 18 months.
That included C$8.5 billion in Canadian government and corporate bonds, according toStatistics Canada, which defines bonds as debt with an original term to maturity of more than one year. This wholesale dumping of bonds was partially offset by an increase of C$2 billion in money market instruments. They went looking for the safety of short maturities.
And as Canadian stocks fell a barely perceptible 0.8% in December, these frazzled foreign investors who’d splurged on Canadian equities from January through November by adding another $32.3 billion to their holdings, suddenly dumped C$7.0 billion of their shares, the most since February 2013.
But it wasn’t just foreign investors who got frazzled in December. Canadians too ran scared and sent C$13.9 billion of their hard-earned money across the border – the most since December 2000!
…click on the above link to read the rest of the article…
Greece Exposes The Global Economy’s Achilles Heel
Greece Exposes The Global Economy’s Achilles Heel
The new Greek political party, known as Syriza, the Coalition of the Radical Left, has done the unthinkable: they’ve dared to speak the truth.
In this case, the truth is perfectly captured by the blunt assessment by the new Greek finance minister, Yanis Varoufakis, who recently declared “I’m the finance minister of a bankrupt country.”
Such honest assessments are not supposed to be uttered in politics, no matter how true they may be. And so, as you can imagine, the machinery of the defenders of the status quo is in quite a lather over the whole affair. And it’s doing everything it can to minimize and marginalize the new Greek government.
One editorial in the Financial Times summed up the establishment view quite well, I thought, putting its contempt for those who dare to simply state what is true right on the table:
Athens plots a daring escape from the troika
Feb 2, 2015
Syriza is as radical as any party to take power within the eurozone. Hardly any of Greece’s new cabinet have experience of government; predictably, its first week was studded with chaotic interventions, including a clumsy blunder into EU-Russian relations. Syriza’s rhetoric is still more suited to a university seminar than a serious programme of government.
(Source)
To summarize, the European establishment considers Syriza to consist of radicals with no experience in government who are acting chaotically as they blunder about brandishing immature rhetoric more suited to young students than the serious business of governing.
…click on the above link to read the rest of the article…
How Much Longer Can Central Banks Push Bonds to Absurdity?
How Much Longer Can Central Banks Push Bonds to Absurdity?
Central banks around the world have fallen all over each other lowering their benchmark interest rates. On Tuesday, the Reserve Bank of Australia was the latest, cutting its cash rate to an all-time low of 2.25%. It didn’t mince words: “A lower exchange rate is likely to be needed to achieve balanced growth in the economy.” A rare admission of escalating the currency war. The Aussie dollar immediately swooned.
Two weeks ago, the Bank of Canada suddenly cut its overnight interest rate by 25 basis points. Other central banks have chimed in. Japan’s rate has been at zero for years. “Negative deposit rates” have infected a number of central banks, including the ECB.
In this environment, the Fed is talking about raising rates from zero to next to zero, but the markets are not following its hints and are trying to force it to back off.
Ten-year government bond yields in Japan and Germany dropped closer to zero, before bouncing off in a sharp rally to 0.39% and 0.31% respectively. This is called the “Japanification of Germany.”
Back in August 2013, when 10-year JGBs still yielded around 0.8%, I wrote, Why I’m Deeply Worried About Japan – And Why Betting On The Collapse Of JGBs Is A Horrible Idea, which has become a leitmotif. Japan’s fiscal situation has deteriorated since, but JGBs have risen and yields have dropped, with shorter maturities sporting “negative” yields. JGB shorts have been kneecapped. Inflation is 2.4% as measured by the all-items index, and 3.1% for goods. Financial repression has become the rule.
…click on the above link to read the rest of the article…
Exter’s Pyramid “In Play” (And Is Martin Armstrong Right?)
Exter’s Pyramid “in play” (and is Martin Armstrong right?)
In a global debt bubble, it concerns us when the benchmark debt security still looks good value, albeit on a relative basis.
In spite of this, the consensus is (once again) calling for higher US yields and FOMC “lift off.” The two-year Treasury yield has been pricing in the latter…
…but the question is what is the long end of the Treasury curve pricing in?
Slower growth and lower inflation, most likely. Risk of global contagion, possibly. That the FOMC makes a mistake (in raising rates)…maybe that too.
The Fed might be desperate to raise rates ahead of the next downturn (how embarrassing not to) but this analyst would be surprised to see more than 1 or 2 token 0.25% increases – and that’s if things are rosy.
As we know, the narrative from central banks can change at the slightest hint of trouble, e.g. Ballard’s QE4 comment during last October’s selloff. Watch the spin as the Fed portrays lower energy prices as “transitory” and no reason to alter its desire to tighten, while the ECB’s desire to ease only grows, even though neither is achieving its mandate on prices.
Do what thou wilt shall be the whole of the law?
The key point is that you can’t normalise rates in the “Winter” phase of a long wave (Kondratieff) cycle. There is just too much debt. It’s debt that drives these cycles and eventually brings them to an end.
This is the fourth cycle since the Industrial Revolution and the longest by far. The lack of a gold standard has allowed the central banks to extend it through unprecedented credit creation.
Here is our timing of these cycles:
…click on the above link to read the rest of the article…
Three Conditions and Three Warning Signs | Mind on Money
Three Conditions and Three Warning Signs | Mind on Money.
How to Tell if the Next Financial Crisis is Upon Us.
In the last post, it was suggested that the rapid collapse in oil prices might have set up a repeat of the 2008 financial crisis. Before we all run for the bunkers and the freeze-dried food, we should know the conditions needed for a crisis to happen, and the signposts we’ll see if the crisis gets going.
For a sector correction to become a meltdown, and for that to turn into a global crisis, several preconditions need to be in place.
The first condition is a serious market sector correction.
According to some participants in the market for energy company bonds and loans, such a correction is already underway and heading toward a meltdown (the second condition). Others are more sanguine, and expect a recovery soon.
That smaller energy companies have issued more junk-rated debt than their relative size in the economy isn’t under debate. Of a total junk bond market estimated around $1.2 trillion, about 18% ($216 billion, according to a Bloomberg estimate) has been issued by energy-related companies. Yet those companies represent a far smaller share of the economy or stock market capitalization among the universe of junk-rated companies.
…click on the above link to read the rest of the article…
The Dow October 22, 2014 & Bond Bubble | Armstrong Economics
The Dow October 22, 2014 & Bond Bubble | Armstrong Economics.
The resistance in the Dow Jones Industrial Index for today stands in the mid 16700 zone on a technical basis. Targets in time for this week were Wed and Friday with the latter being the main target. ONLY a closing back above 17010 would signal that the low is in place for a broader term. This week should produce a reaction high. A closing on Friday at least below 16880 will keep the market in check. A closing BELOW 16660 will signal that a drop back into the week of Nov 3rd is possible with a new low.
Retail participation remains at record lows so this crash we will call the Rich Man’s Panic of 2014. The same trend is witnessed everywhere, including Asia and Europe. While the press was bashing the little guy saying he has missed the entire rally,
The stats show that the total size of the world stock market capitalizations closed 2013 at $54.6 trillion which was only 25% of the total world market capitalization – the rest being bonds.The bond market is larger than the stock market for various reasons. Whereas only corporations issue stocks, governments and corporations both issue fixed income securities. The U.S. Treasury is the largest issuer of bonds worldwide. Because U.S, Treasury bonds provide the bulk of reserves which are just over $30 trillion.
…click on the above link to read the rest of the article…
