Goldman Warns That Market Valuations Are at Their Highest Since 1900

 

  • Returns likely to be lower across all assets in medium term
  • Risk scenario sees inflation jump that ushers ‘fast pain’

A prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to translate into pain for investors, according to Goldman Sachs Group Inc. Continue reading

The subprime mortgage is back: it’s 2008 all over again

State income loans, otherwise known as “liars loans”.

 

Apparently the biggest banks in the US didn’t learn their lesson the first time around…

Because a few days ago, Wells Fargo, Bank of America, and many of the usual suspects made a stunning announcement that they would start making crappy subprime loans once again!

I’m sure you remember how this all blew up back in 2008.

Banks spent years making the most insane loans imaginable, giving no-money-down mortgages to people with bad credit, and intentionally doing almost zero due diligence on their borrowers. Continue reading

The Deflation Monster Has Arrived

 

 

As we’ve been warning for quite a while (too long for my taste): the world’s grand experiment with debt has come to an end. And it’s now unraveling.

Just in the two weeks since the start of 2016, the US equity markets are down almost 10%. Their worst start to the year in history. Many other markets across the world are suffering worse.

If you watched stock prices today, you likely had flashbacks to the financial crisis of 2008. At one point the Dow was down over 500 points, the S&P cracked below key support at 1,900, and the price of oil dropped below $30/barrel. Scared investors are wondering:  What the heck is happening? Many are also fearfully asking: Are we re-entering another crisis?

Sadly, we think so. While there may be a market rescue that provide some relief in the near term, looking at the next few years, we will experience this as a time of unprecedented financial market turmoil, political upheaval and social unrest. The losses will be staggering. Markets are going to crash, wealth will be transferred from the unwary to the well-connected, and life for most people will get harder as measured against the recent past. Continue reading

The China Syndrome: The Coming Global Financial Meltdown

The 1979 film The China Syndrome took its name from the darkly humorous notion that a nuclear reactor meltdown in the U.S. would burn straight through the Earth to China. (wikipedia: The China Syndrome)

In today’s world, the financial meltdown in China has burned straight through the global financial system to the U.S. financial markets. The mainstream financial media is delighted to promote the many links between the U.S. and Chinese economies when the two economies are feeding each other’s expansion in a tightly coupled virtuous cycle. Continue reading

Interest rate rise: turning point looms for US debt binge

With a $4tn mountain of debt maturing over the next five years, corporate America’s reliance on cheap cash is about to get tested.

With the prospect of steadily higher interest rates in the coming years as the Federal Reserve gradually tightens policy, US companies that tapped global markets for inexpensive finance over the past four years will soon face a different environment.

But as rates turn higher, investors may see the flip side of cheap financing. Analysts warn companies will begin defaulting in greater numbers, particularly in the energy sector, which has found itself in the line of fire as commodity prices languish. Continue reading

Germany’s first Islamic bank opens in Frankfurt

A follow-up story from a previous post discussing the license being granted:

 

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Germany, home to 4 million Muslims, just got its first lender that adheres to Sharia law. Charging interest is prohibited, but some analysts see little difference to the way normal banks operate.

If, according to the Koran, trade is permitted but charging interest is the work of Satan, that would make most Western bankers more than a little devilish.

But tacking a fee onto the funds it lends out is not how Germany’s first Islamic bank, the Kuveyt Turk (KT) Bank, which opened in Frankfurt on Monday, will be making its money. Continue reading

The Global Credit Market Is Now A Lit Powderkeg

And markets are totally unprepared

The financial markets have had a bit of a tough time going anywhere this year.

2015 stands in relative contrast to largely upward stock and bond market movement over the past three years.  What’s different this year and what are the risks to investment outcomes ahead?

Continue reading

There Will Be No 25-Year Depression

What we have here is not a failure of Capitalism, but a failure of experimenting with Socialism that is now resulting in the breakdown of society.

As geopolitical analyst and expert, JR Nyquist, once put it, America has fallen victim to Crony Capitalism, which is different than Capitalism itself.

 

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How it all works in crony heaven – until it doesn’t anymore – via bastiatinstitute.org

 

 

Good and Bad News

Today, we have bad news and good news. The good news is that there will be no 25-year recession. Nor will there be a depression that will last the rest of our lifetimes.

The bad news: It will be much worse than that. On Monday, the Dow rose another 43 points. Gold seems to be working its way back to the $1,200 level, where it feels most comfortable.

Old People Are Dead Wood

First, people are getting older. Especially in Europe and Japan, but also in China, Russia and the US. As we’ve described many times, as people get older, they change. They stop producing and begin consuming. Continue reading

J.P. Morgan’s Dimon warns next crisis will bring even more volatility

It’s not a matter of ‘if’, but ‘when’… and here’s your latest confirmation.

 

LONDON (MarketWatch) — You ain’t seen nothing yet, when it comes to market wreckage from a financial crisis, according to J.P. Morgan boss Jamie Dimon.

In his annual letter to shareholders, the bank’s chief executive warned “there will be another crisis” — and the market reaction could be even more volatile, because regulations are now tougher.

Continue reading

Things Are Unraveling At An Accelerating Rate

Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed?

Though quantifying this perception is more interpretative than statistical, I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events.

The Greek debt crisis began in 2011 and reached a peak in 2012. The crisis was quelled by new Eurozone/IMF loans to Greece, and European Central Bank chief Mario Draghi’s famous “whatever it takes speech” in late July, 2012. Continue reading

Swiss Franc ‘Nuclear Explosion’ Spreading, Credit Suisse, Saxo Hurt

Credit Suisse Group AG (CSGN) and Saxo Bank A/S joined an increasing number of European financial companies warning that the Swiss central bank’s surprise decision to abolish its currency ceiling may dent earnings.

Credit Suisse, Switzerland’s second-biggest bank, indicated Monday that currency swings may hurt profit. Denmark’s Saxo Bank said some clients might not be able to settle unsecured amounts, which might cause undisclosed losses.

The full force of the decision won’t be known for months and is “closer to a nuclear explosion than a 1,000-kilogram conventional bomb,” Javier Paz, senior analyst in wealth management at Aite Group, said in an e-mail Tuesday. “The aftermath is like a black hole that can suck massive amounts of credit from currency trading as we have known it.” Continue reading

Bank of America warns of ‘lethal’ damage to China’s financial system as deflation deepens

‘Deflation, Devaluation, and Default’ loom in China this year. The denouement for Shanghai’s bourse will not be pretty, says the US bank.

China is at mounting risk of a financial crisis this year as growth sputters and deflationary pressures trigger a wave of defaults, Bank of America has warned.

The US lender told clients that a confluence of forces are coming together that threaten to chill the speculative mania on the Shanghai stock exchange and to expose the underlying fragility of China’s $26 trillion edifice of debt.

“A credit crunch is highly probable,” said the bank in a report entitled “Deflation, Devaluation, and Default”, written by David Cui and Tracy Tian.

Continue reading

The $75 trillion shadow hanging over the world

Global shadow banking assets rose to a record $75 trillion (£46.5 trillion) last year, new analysis shows.

The value of risky investment products, mortgage-backed securities and other non-bank entities increased by $5 trillion to $75 trillion in 2013, according to the Financial Stability Board (FSB).

Continue reading

Faber: We’re In a Worse Position Than 2008

A credit boom in countries such as China means that the world is in a worse position than it was in 2008 when a global financial crisis tipped the world into recession, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC.

“If I am telling you that we had a credit crisis in 2008 because we had too much credit in the economy, then there is that much more credit as a percent of the economy now,” Faber said. Continue reading

Detroit’s Default May Spark U.S. Death Spiral of Debt

Debt is deadly, and it’s made even worse with rising interest rates that can prevent you from eliminating the load. What happens with rising interest rates is that more of the payments go toward the interest and less to the principal. In fact, it’s what I call a death spiral of debt that worsens as rates move higher.

When individuals face excessive debt, often the solution is to reduce spending and adhere to a strict repayment program. Continue reading