Recession warnings

[Mercury]

Tell you what though, we could use a bit of Iron Lady action in the UK these days.  The current lot have to be the most ineffectual collection of space wasters to ever warm the benches of Westminister.  MT would have the UK out already with a deal that was lopsided to the UK.  Like her or hate her you can't deny, she got **** done.

[Mercury]

So Eurozone CPI numbers come in below last time and below consensus and a whisker above contraction.  Dax and FTSE100 didn't like it and no wonder.  After all the QE, NIRP and tedious press conferences stating that the ECB "stands ready to do whatever is necessary...bah, bah, bah!" the key objective of driving inflation (like that is really a good thing for consumers...) is actually going into reverse.  Unprecedented global stimulus produced anemic real economy results but goosed the stock and bonds markets.  The system ought to have crashed in 2007/08 and triggered the much needed reset but that didn't suit the elites so here we are again, except this time it is much, much worse...  And some people want it to continue ad infinitum but eventually there has to be a reckoning and the longer it goes on the more painful it will be, and I don't just mean financially!

[Mercury]

So Eurozone CPI numbers come in below last time and below consensus and a whisker above contraction.  Dax and FTSE100 didn't like it and no wonder.  After all the QE, NIRP and tedious press conferences stating that the ECB "stands ready to do whatever is necessary...bah, bah, bah!" the key objective of driving inflation (like that is really a good thing for consumers...) is actually going into reverse.  Unprecedented global stimulus produced anemic real economy results but goosed the stock and bonds markets.  The system ought to have crashed in 2007/08 and triggered the much needed reset but that didn't suit the elites so here we are again, except this time it is much, much worse...  And some people want it to continue ad infinitum but eventually there has to be a reckoning and the longer it goes on the more painful it will be, and I don't just mean financially!

[dmedin]

5 minutes ago, Mercury said:

The system ought to have crashed in 2007/08 and triggered the much needed reset

Tyler Durden, is that you? 🤔

[Mercury]

On 07/10/2019 at 09:52, dmedin said:

The next 'crash' is being calmly organized and put in place, piece by piece.  Hell, they even pay agitators to raise up the crowds of protesters and striking union members.  The question is, who is going to profit from all the carefully orchestrated suffering this time?

Crikey I though you were Tyler...

[Mercury]

Hmm, how often does an all time low in employment last for a long time?  And what happened in the 1970s through to the early 1980s I wonder...  

https://www.bbc.co.uk/news/business-50820280

[dmedin]

4 hours ago, Mercury said:

Hmm, how often does an all time low in employment last for a long time?  And what happened in the 1970s through to the early 1980s I wonder...  

https://www.bbc.co.uk/news/business-50820280

 

Very high employment means lots of people with cr@p jobs.  Basically it just means that nobody (government or business) is investing in productive assets, because that entails a long-term commitment whereas a spiv can be laid off with a month's notice.

As soon as the masters of international finance call in their chips, these jobs will be the first to go along with waves of house repossessions.

Edited December 17, 2019 by dmedin

[Mercury]

On 17/12/2019 at 16:17, dmedin said:

As soon as the masters of international finance call in their chips, these jobs will be the first to go along with waves of house repossessions.

More likely the leading data, which traders obsessively focus on, as does the Fed, US NFP will be hit initially by big corporates cutting costs as earnings continue their downward trajectory and easy money evaporates, thus eroding the share buyback ****.  A double hit to stock prices with prices at all time high valuations.  The issue of recession on main street and stock price deterioration is not necessarily linked but one key link is the sentiment driver of job losses.

I think 2020 will be the year the corporates start to cut costs to balance the book, which will in tern ensure a recession that will drive the corporates into worse trouble, that is the cycle...

On 17/12/2019 at 16:17, dmedin said:

Basically it just means that nobody (government or business) is investing in productive assets,

Add to this the uncertainty caused by the US Presidential election and ongoing trade war bias shown by the Trump administration and it is not surprising investment has dried up and is set to remain dry.

So no investment and deteriorating employment on top of already down trending economic data and a manufacturing recession, oh oh!

Check the following out:

https://www.fuqua.duke.edu/duke-fuqua-insights/cfo-survey-half-us-cfos-expect-recession-2020-election-looms

https://www.cnbc.com/2019/12/12/60percent-of-big-us-corporations-say-head-count-reduction-is-coming-in-2020.html

 

[Mercury]

https://www.bbc.co.uk/news/business-51060580

"unprecedented levels of promotional activity".  Don't know about anyone else but the sales were off the charts this year and many started months before Christmas.  Not exactly the consumer strength we are having shoved down out throats by big bank paid economists...

[dmedin]

My strong conviction is that the world's elites will not allow another recession because the public are still angry about 2007/8: https://uk.reuters.com/article/us-usa-election-inequality-poll/majority-of-americans-favor-wealth-tax-on-very-rich-reuters-ipsos-poll-idUKKBN1Z9141

 

If there's another 'big crash' then socialists and fascists will sweep to power all over the West.

[Mercury]

2 minutes ago, dmedin said:

My strong conviction is that the world's elites will not allow another recession because the public are still angry about 2007/8

There is nothing anyone can do to stop it, when it comes.  Gordon Brown learned that the hard way.  Take a leaf out of King Canute's book...

3 minutes ago, dmedin said:

If there's another 'big crash' then socialists and fascists will sweep to power all over the West.

Marxism has been roundly defeated in the UK at least.  Can't speak for other countries but the UK is not intrinsically Marxist so no worries for us...  Personally I think a change of the political order is desirable, the political elites and their billionaire backers have had their noses in the trough for too long.  However I doubt it will lead to the rise in the kind of extremism the liberal elite owned MSM would have us believe is the case.  The bogeyman is a time honoured mechanism for keeping people from demanding change.  Didn't work in the UK nor in the US, doubt it wil work in the EU for much longer but the Bogeyman doesn't have to be Chairman Mao!

[dmedin]

7 minutes ago, Mercury said:

There is nothing anyone can do to stop it, when it comes.  Gordon Brown learned that the hard way.  Take a leaf out of King Canute's book...

Marxism has been roundly defeated in the UK at least.  Can't speak for other countries but the UK is not intrinsically Marxist so no worries for us...  Personally I think a change of the political order is desirable, the political elites and their billionaire backers have had their noses in the trough for too long.  However I doubt it will lead to the rise in the kind of extremism the liberal elite owned MSM would have us believe is the case.  The bogeyman is a time honoured mechanism for keeping people from demanding change.  Didn't work in the UK nor in the US, doubt it wil work in the EU for much longer but the Bogeyman doesn't have to be Chairman Mao!

 

Free market 'classical liberalism' certainly isn't the answer - neither are deregulation and privatization, both of which have been proved disastrous in recent years.

For example, per Adam Smith, if you read his Wealth of Nations you find he wasn't in favour of nearly half as much of the BS that 'classical liberals' advocate for in his name.  Even Ricardo acknowledged the labour theory of value.

Edited January 10, 2020 by dmedin

[Mercury]

2 minutes ago, dmedin said:

For example, per Adam Smith, if you read his Wealth of Nations you find he wasn't in favour of nearly half as much of the BS that 'classical liberals' advocate for in his name.

So often the case.  You can say the same of Keynes and Friedman...  Certainly the Central Bankers are amping up the theories of these guys.  An Austrian! An Austrian!  My trading account for an Austrian!

[Mercury]

Serious though, if you consider this from a purely stock market perspective rather than a wider economic perspective can anyone say that the stock market is performing as it was originally designed to?  That is to provide capital for business expansion and a sensible returns, mostly in dividends to investors?

It seems to me that it is more about Wall St. firms getting rich (not that that hasn't always been the case) and VC firms cashing in (typically on a worthless loss making proposition...).  I believe it will all end very badly and hopefully we will see significant reform rather than revolution.  It is already being discussed by luminaries such as Druckenmiller and Tudor Jones, who are smart enough to read the tea leaves and get on the right side of things...

In the meantime, the crash, when (not if) it comes will be an opportunity for us meager retail traders.  Don't even need to trade Stocks short, just invest in Gold and Silver!

[Mercury]

The bad news coming think and fast and this despite the Christmas busy period...  Given my personal experience of excessive pre Christmas sales I wait with baited breath for the Christmas period retail figures...

https://www.bbc.co.uk/news/business-51089118

https://www.bbc.co.uk/news/business-51090008

This last one is quite illustrative of the structural issues connecting local government, property owners and tenant businesses.  This is a perfect storm or overvaluation of property leading to excessive rates and rents and in an environment where the consumer is both shopping more online and reducing their spending...

https://www.bbc.co.uk/news/business-51089167

[dmedin]

I must say, this capitalism business seems to be full of fraud, corruption and constantly prone to crisis.  Can't humanity invent a better system?

[dmedin]

On 10/01/2020 at 14:48, Mercury said:

will be an opportunity for us meager retail traders.  Don't even need to trade Stocks short, just invest in Gold and Silver!

What about the marked deterioration in living standards (i.e. life outside the markets) that comes with all crashes and recessions?  We have to buy the dips because companies generate all the wealth and jobs (apparently).  If companies can't get funding there will be nobody to create jobs and build stuff

[Mercury]

8 minutes ago, dmedin said:

What about the marked deterioration in living standards (i.e. life outside the markets) that comes with all crashes and recessions? 

Not sure what your point is?  Are you suggesting that traders have a moral imperative to support the never ending bull market to stave off a recession that will cost people their jobs?

[Mercury]

Another retail administration in the UK:

https://www.bbc.co.uk/news/business-51176418

And a major shopping centre owner is looking shaky after a failed merger attempt with Hammerson last year:

 https://www.bbc.co.uk/news/business-51173668

If you look at a chart of long term mortgage and US 30 year treasury rates you will see a direct correlation and it doesn't take a genius to see one major reason why property prices have soared during this time.  A lot of people take about the ongoing Bond bull market, now in it's 35th year, in similar terms as the hype in stocks, although it gets a lot less press coverage.  Just as with stocks there are bond bears around and it is a fallacy that bond prices go up when stocks fall.  In fact it is often the case that a bond market reversal presages a stock market crash, which is certainly what occurred in the late 80s.

Another interesting factoid is that the Fed tends to raise base rates into a market top and cut into a trough.  This is perhaps intuitive as the are supposed to act to stave off or soften recessions (not so much financial markets although the thinking seems to be that these are two sides of the same coin these days, which they are not).  If you look at a chart of Fed rates with recessions overlaid you can see the pattern in most cases was rate rises and cuts just before the recession bit.  Of course the recession gets called well after it actually occurs so we could already be in one and the Fed have started to cut after recent "normalisation" rises and are currently signalling more cuts.  Why would the Fed be cutting again if the economy is strong one has to ask?  Answer is that the economy is less than strong and the Fed knows it so they try to get ahead of it and cut to stave off the recession.  History, via the chart below, tells us they fail...  Add this to the bond inversion indicator and the fact that stocks and bonds are in cloud cuckoo land and certainly central bank rates are too (I mean negative rates..!) and it is only a matter of when not if.  Sometime you can have a recession without a GDP recession.  Sometime you can have a mere correction in the stock exchange during a recession I think we are going to get the lot this time.  Look out below! 

<a href='https://www.macrotrends.net/2015/fed-funds-rate-historical-chart'>Source</a>

[dmedin]

3 minutes ago, Mercury said:

Another retail administration in the UK:

 

Fear not, BoJo will shore up British business by stumping for great business deals in Africa!

[Mercury]

12 minutes ago, dmedin said:

Fear not, BoJo will shore up British business by stumping for great business deals in Africa!

🐷🕊️

[Mercury]

Does anyone on the Forum run a private company?  If you do you might have notices changes to bank charges on your business account.  Now I see UK banks are dialing up the overdraft interest rates to 40%.  Small businesses often have difficulty getting formal loans so overdraft is vital for day to day cash flow but at 40% watch how fast small businesses fold!  At least it ought to kill of the so-called "zombie businesses".  However as private small business is the vast majority of the economy... 

☠️

https://www.bbc.co.uk/news/business-51206067

[dmedin]

9 minutes ago, Mercury said:

Does anyone on the Forum run a private company?  If you do you might have notices changes to bank charges on your business account.  Now I see UK banks are dialing up the overdraft interest rates to 40%.  Small businesses often have difficulty getting formal loans so overdraft is vital for day to day cash flow but at 40% watch how fast small businesses fold!  At least it ought to kill of the so-called "zombie businesses".  However as private small business is the vast majority of the economy... 

☠️

https://www.bbc.co.uk/news/business-51206067

 

 

British business is struggling ... so the answer is to 'kill all the zombies'

Yes, because what we really need are millions of unemployed people ... that will definitely be good for wealth generation.

[dmedin]

Pretty soon the plebs are going to see what the Tory vision for post-EU Britain really is.

A future of insecure, sporadic and poorly-paid employment for the many.  A return to feudalism and kissing rich people's feet for one's daily bread. 

[Mercury]

1 minute ago, dmedin said:

British business is struggling ... so the answer is to 'kill all the zombies'

Yes, because what we really need are millions of unemployed people ... that will definitely be good for wealth generation.

It's all about corporate Darwinism.  The central banks have been trying to stave off the inevitable, which has had the result of keeping zombie companies afloat.  People lose jobs in a recession, it is just a hard fact.  Unless you want to try Corbyn's Marxism, which doesn't work anywhere beyond the Amish community, then the cycle is something to be planned for not Quixotically fought.  Alas the gravy years when the Blairites were in charge the idiots didn't save for the winter and now "Winter is Coming" or is maybe already here but we haven't heard the MSM tell us this is our collective heads are still in the sand.

BTW, this is coming from someone who has lost jobs during down turns...

[Mercury]

2 minutes ago, dmedin said:

Pretty soon the plebs are going to see what the Tory vision for post-EU Britain really is.

A future of insecure, sporadic and poorly-paid employment for the many.  A return to feudalism and kissing rich people's feet for one's daily bread. 

As I said it will be because of the Labour Blair/Brown government.  The Tories tried to do some belt tighening, which the Marxists labelled "austerity", in fact it wasn't and so we are still in the ****.  Big hand to Gordon for selling all the UKs gold at the bottom of the market instead of buying but then he has convinced himself that he had eliminated the boom/bust cycle.  Didn't learn form King Canoute.  The market and country and the world is rift with this kind of wrong headed thinking, what Kahneman called thinking fast.  It will all end in tears, because that is what always happens.

Interestingly, and surprisingly to me, during the UK general election Labour supporters said (on TV) that they didn't trust Labour on the economy (citing the Blair/Brown years and not saving for the rainy days) and agreeing that the country needs to tighten its belt, this is one reason Labour lost, although the seem fixated on blaming Brexit or Corbyn, not both, they can't even agree on the cause for the worst election lost since before Thatcher.  What chance they will win next time?  Maybe Labour should be hoping for a global economic meltdown that they can blame on the Tories, after all the Tories are responsible for every bust right...?

[dmedin]

There's nothing inherently wrong with businesses going bust and jobs being destroyed so long as there are new ones created and people can be helped into them.  What are the chances?  Large parts of the country haven't recovered from what happened in the 1980s.  The concentration of wealth in the south east has led to massive overcrowding and general unpleasantness.  What makes anyone think the Tories will do anything about it this time?

They say markets hate uncertainty, well what about people with homes and families?  Are they all just expected to relocate to London, rent a room in a smelly flat for an extortionate fee and 'crack on'? 

Trade off some fleeting prosperity/luxury in exchange for some stability and sustainability ... that's just a sensible thing to do.

[Mercury]

Great piece on Real Vision today.  If you are a perma-bull you will be in ecstasy.  If you are a Bear contrarian your will he on high alert, something for everyone really.

The piece is an interview with Michael Kantrowitz, chief investment strategist at Cornerstone Macro, who think the earnings decline will be reversed in 2020 so buy growth stocks.  He is expecting a pick up in all the macro economic indicators like ISM PMIs etc.  He doesn't think Oil prices can go up because all the tensions in the Middle East have not produced a sustainable Oil shock (so all clear then...).  Ultimately he states you can't forecast geopolitical events (that's the get out of jail free card!) but the main three things you can forecast: that higher interest rates; a spike in Oil prices and an earnings slow down and/or recession are "not on the cards for 2020."

He also said that there is full employment in the USA so they like consumer businesses.  Err what happens when there is 100% of anything?  The next move is down.  Last jobs data was down, during the Christmas period too (the consumer bonanza), the next one will be interesting, as will retail data post Christmas.  For the perma-bulls to be right everything has to go in the favour.  For the Bears, just one or two things need to break bad.  How about those odds sports fans?

So there it is, we can all buy Tesla, Google, Apple etc and sleep soundly...

OR be afraid, be very afraid.  Someone said, Panic is OK so long as you are first to do so...

Edited January 23, 2020 by Mercury
to add a point

[Mercury]

Interesting factoid at the end of the Real Vision piece with Michael Kantrowitz, something I have heard before elsewhere, almost 25% of the US S&P600 (small caps) are loss making, which has never happened before outside of a recession and they are also up to the eyeballs in debt.  His call is for large companies in Western economies and things Europe will recover in 2020 🤣.

Looks like the Fed is keeping those zombies going in the US too and when wage inflation bits and/or economic activity shrinks in the form of consumers deciding to tighten the belt the wheels will come off this thing rapidly.

[dmedin]

If firms reliant on low interest rates are 'zombies', what does that make rentiers who accumulate profit from high interest rates without doing any useful work?  How about 'vampires'?  They certainly suck the blood out of society. 

Edited January 23, 2020 by dmedin