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Russell Napier – The Solid Ground Fortnightly – The Asian Arms Race and the ‘Weaponization of Finance’ – Hard to Mistake, Harder To Take

October 29, 2018

Russell Napier – The Solid Ground Fortnightly – The Asian Arms Race and the ‘Weaponization of Finance’ – Hard to Mistake, Harder To Take

An important update on market by Russell Napier ( I have highlighted some read portion)

There are those in financial markets who believe that Mike Pence’ s bellicose speech at The Hudson Institute a few weeks ago was merely sabre rattling ahead of the US mid-term elections. Sadly your analyst could not disagree more. That speech, reported in the last Solid Ground newsletter, has now been followed by the United States’ threat to withdraw from the Intermediate-Range Nuclear Forces Treaty (INF) with Russia. For those who still believe this has nothing to do with China, the US President made it clear on October 22nd that the withdrawal from the INF is as much about countering a threat from China as it is about countering a threat from Russia:
“Until people come to their senses, we will build it up…” “It’s a threat to whoever you want and it includes China, and it includes Russia, and it includes anybody else that wants to play that game. You can’t do that. You can’t play that game on me.”
This has huge geo-political implications and clearly huge investment consequences for those countries in Asia supposed to accept the new United States missiles that will stop China ‘playing that game’. Can the United States’ Asian allies accept US missiles and remain free to trade openly with China, invest in China and accept investment from China?Still unconvinced? The following is a lengthy extract from an interview between Nick Robinson of the UK Radio 4 Today Programme and Professor Matthew Kroenig.

…click on the above link to read the rest of the article…

Russell Napier: “Turkey Will Be The Largest EM Default Of All Time”

August 14, 2018

Russell Napier: “Turkey Will Be The Largest EM Default Of All Time”

Regular readers of the Fortnightly will know that The Solid Ground has long forecast a major debt default in Turkey. More specifically, the forecast remains that the country will impose capital controls enforcing a near total loss of US$500bn of credit assets held by the global financial system. That is a large financial hole in a still highly leveraged system. That scale of loss will surpass the scale of loss suffered by the creditors of Bear Stearns and while Lehman’s did have liabilities of US$619bn, it has paid more than US$100bn to its unsecured creditors alone since its bankruptcy.

It is the nature of EM lending that there is little in the way of liquid assets to realize; they are predominantly denominated in a currency different from the liability, and also title has to be pursued through the local legal system. Turkey will almost certainly be the largest EM default of all time, should it resort to capital controls as your analyst expects, but it could also be the largest bankruptcy of all time given the difficulty of its creditors in recovering any assets. So the events of last Friday represent only the end of the beginning for Turkey. The true nature of the scale of its default and the global impacts of that default are very much still to come.

Strong form capital controls produce a de facto debt moratorium, and very rapidly investors realize just how little their credit assets are worth. A de jure debt moratorium at the outbreak of The Great War in 1914 bankrupted almost the entire European banking system – it was saved by mass government intervention.

…click on the above link to read the rest of the article…

Russell Napier: The Rising Dollar Will Trigger The Next “Systemic Banking Crisis”

May 7, 2018

Russell Napier: The Rising Dollar Will Trigger The Next “Systemic Banking Crisis”

Fresh off his successful call earlier this year that the US dollar would strengthen in the coming months, macroeconomic strategist and market historian Russell Napier joined MacroVoices host Erik Townsend to discuss why he favors deflation and why he has such a bullish view on the US dollar.

Echoing David Tepper’s concerns that the equity highs for the year might already be in, and that a 10-year yield above 3.25% could lead to market chaos, Napier said he sees interest rates rising sharply in the coming months as the dollar strengthens – a phenomenon that will push the US back into deflation.

Napier’s thesis relies on one simple fact: With the Fed and foreign buyers pulling back, who will step into the breach and buy Treasurys?

The answer is – unfortunately for anybody who borrows in dollars – nobody. In fact, the Fed is expected to allow $228 billion in Treasury debt to roll off its balance sheet this year.

Fed

This “net sell” will inevitably lead to higher interest rates in the US, as well as a stronger dollar. And once the 10-year yield reaches the 4% area, signs of stress that could be a lead up to a global “credit crisis” could start to appear.

We know what the Federal Reserve plans to sell this calendar year, $228 billion. We know what the rise in global foreign reserves is, and about 64% of that will flow into the United States’ assets. Slightly less of that will flow into Treasuries. $228 billion, at the current rate at which foreign reserves are accumulating, we are not going to see foreign central bankers offsetting the sales from the Fed.

…click on the above link to read the rest of the article…

Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking

January 7, 2016

Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking 

It’s Not a Pet, It’s a Falcon: How the decline of the RMB destroys belief in central banking and a successful reflation
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;

      – The Second Coming- W.B. Yeats

First catch your falcon, as the formidable Mrs Beeton might have said if she was in need of a method of catching her main course (see Mrs Beeton’s Book of Household Management 1861- ‘Recipe for Jugged Hare’).

Having caught your wild falcon, you can now begin the training process. You are attempting to impose your will upon a creature that, in its wild state, catches, kills and devours other birds. This is creative destruction in its rawest form as those acts of savagery provide the fuel to keep our falcon flying. Taming such wild forces is not easy, whether they be birds of prey or the desires, wishes, greed and fear of millions of people determining prices through their supply and also their demand.

Let’s get some advice from the field of falconry for our central bankers, and the other handmaidens of state control, as they seek to impose their wishes on the will and acts of millions-

‘Falconry is a great sport, but there is a lot of time involved. You will want to have enough time to train your bird. If you don’t have the time, or the willingness, then you might as well not do it at all. If you are one of those people who is not patient, falconry may not be for you. You should not take up falconry if you want the falcon as a pet, or something to show off.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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