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Global Markets commentary and outlook

January 4, 2020

Global Markets commentary and outlook

…..’Cause I’ve had the time of my life..and I owe it all to you..

The original song from Dirty Dancing is one of my all time favourites and somehow reminds me of the Global Markets performance this year.Every conceivable asset class (except cash) posted positive returns ,thanks to the LIQUIDITY provided by global central banks.The Fed is my view moved to implement the “ high pressure economy” regime outlined in former chair Janet Yellen’s 2014 speech at the Boston Fed Reserve bank       https://www.federalreserve.gov/newsevents/speech/yellen20161014a.htm. 

Indirecly this document suggest the US central Bank has returned to the Greenspan approach to bubbles- they will deal with the consequences once it pops.

The chart below explains the LIQUIDITY story.

Gone are the good old days when Earnings used to be tailwind for market valuations.

The polarising performance of US markets.

The two stocks, Apple and Microsoft, each having a market cap of USD 1 trillion have contributed the most to 2019’s total stock-market returns and also hold that position for the entire decade.

The number of Zombie companies continue to rise along with their market caps.

The above charts were examples of distortion created by excess pumping of money.

Jerome Powell raised the bar  for raising rates significantly whereas the bar for lowering rates has gone down. More evidence that Central Bankers will tolerate higher inflation and low or negative real rates.

BOFA has a crystal ball and they see the endgame approaching .

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

Fragility in the World 2019

April 21, 2019

Fragility in the World 2019

Yemen is labelled as the most fragile country by Fragile States Index in 2019. Finland is now the least fragile country.

Source: https://fragilestatesindex.org/

(Highlights from Fragile States Index)

“This year, Yemen claimed the top position for the first time as a result of its civil war and humanitarian catastrophe. Although Yemen’s top ranking may provide cause for idle chatter, really the most attention should be given to its rapid worsening over the past decade, and the regional instability and power plays for which its population are unspeakably suffering.

In 2019, an African nation has, for the first time, ranked in the “Very Stable” category, with Mauritius ascending to join the likes of the United Kingdom and United States. Just as Mauritius this year became the first African country to break through to the Very Stable category, it is also important to recognize that Singapore became the first Asian nation to move into the Sustainable category.” 

“There is still widespread fragility and vulnerability, plenty of poverty and inequality, and conflict and illiberalism. But broadly speaking, over the long-term, the world is becoming steadily less fragile. It often takes cold, hard data — like that produced by the FSI — to demonstrate that for all the negative press, there is significant progress occurring in the background.”

J.J. Messner, Executive Director

“Two countries tied for most-worsened over the past 12 months. Venezuela has been beset by enormous turmoil, and in the wake of a contested and deeply flawed election in 2018, now finds itself with two leaders. Brazil’s internal challenges remain significant, with tumultuous politics and a new president who came to power through a campaign fuelled by harsh right-wing rhetoric.”

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

Utopian Vision

April 7, 2019

Utopian Vision

There is nothing that a human mind can’t conceive. It can shoot for the stars or dive in the ocean which twinkles in the shadows of stars and ascend back with sparkling mind bearing uncanny ambition only to float contended.  

Today, we live in fear of losing wealth, we worry what economic consequences would do to our cash, we look through a microscope and scrutinize every word, every policy, every regulation or find something to put above ‘every’ and list out the glaring negatives with a slight trace of approval. If only one could notice the lens of the microscope, would then one could tell reel and real apart. 

Such is the case of negative interest rates. It is dealt differently by different flock of loaded individuals, generally in ways which would not only prevent losses but essentially gain cash. This flock stands on one side of the transaction contemplating means to win regardless of the loss that still deliberating other doomed flock endures. Well, this is how the world works. It is a Bernoulli trial. But there exists a splash of humble wit folks floating beneath the starry sky delighted by the victory of each one and beaten down none. 

Theory? Without thinking too much, negative rates indicate that the economy is unable to generate sufficient income to service its debt. Almost always, all roads leads us back to debt sustainability levels. In order for an economic system to reduce debt, it requires growth or inflation or currency devaluation. For an economic system to exercise one of the two (growth not included), capital transfer is to be facilitated. This capital movement in negative rates environment is from the savers to the borrowers. Your invested value, the money you gave to borrowers would have a value lower than the face value. Barbaric! Savers should be the winners not the borrowers!

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

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…

World Out Of Whack: Iceland, You Won’t Believe It

April 7, 2017

World Out Of Whack: Iceland, You Won’t Believe It

The developed world is going to hell and probably deserves it. Today, I’m going to show you what should have been done both during and post the GFC. That it wasn’t, and now almost certainly won’t, is a problem for us all but that’s a story for another day.

Today, we look to Iceland and marvel at what they managed to accomplish both leading into the GFC and then coming out of it, and then we scratch our heads at the latest news just out from their central bank.

On with it then…

It was over a decade ago now when I very nearly took a flight to Reykjavik but at the last minute opted instead to go to Copenhagen, which I regret since I’m told it’s like Scotland on steroids (sounds like a blast). What clinched the decision in the end was that a scotch was about 3 times the price in Reykjavik, and since I was heading out for a wild boys week this was important in our considerations, though I’m told that in the land of fire and ice the women are indeed unbelievable.

Its history is that of an arctic backwater reliant on fishing fishing, energy, aluminium smelting, and tourism. A place with hardy living conditions and hardier people.

Between the late 90’s and 2008 they, however, went through what can only be described as a stratospheric rise from this backwater specialising in fishing to one which specialised in global finance.

Using the Irish financial model as a blueprint, Iceland decided to revamp its economy repositioning itself in the international community as a low-tax jurisdiction for foreign finance and investment.

…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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