The Obituary On Bad Calls

“Bad calls” – assumptions are assumptions

So we have a decelerating China, collapsing commodity prices, and lower global manufacturing creating currency wars by all countries in a vain attempt to boost exports – plus geo political risks in Turkey, Brazil and not to mention the Middle East problems – not only with refugees throughout Europe – but the impact of Russia and Iran siding with the Assad Government – against U.S. – England – France and Saudi Arabia – with uncertainty over when – or even if – the Federal Reserve will hike interest rates.

Yes what a fucked up mess at present.

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Where did I go wrong?

The reasons were obvious – to me anyway – why certain events should happen in logical sequence.

My assumption on the Fed Reserve having the balls to address past policy failures was wrong.

As they say – ‘a leopard does not change its spots’ – Yellen is no different to the twats that preceded her.

This by its very nature means that the global situation will continue to get worse – the perfect storm buildup continues unabated.

The days of dark economic disaster have started – the shit has hit the fan and the splatter is starting to hit the teflon coated countries of Germany, United Kingdom and United States.

Yes each has their own separate cross to bear and each country has skeletons in the closet that have been hidden by political agenda.

So we are here – October 1st and what do we have to show for the misguided economic policies of the world central bankers – nothing – zilch – sweet FA.

Their collective ignorance is encased in gold covered turds that have sunk to the bottom of the cesspool – clueless that the low interest rate environment has aided no one except the rich – even to the pointless argument espoused by Yellen – made mid month that the Fed policies has not widened the wealth gap – did she omit to look at the increase in consumption of food stamps in the U.S. – over the past several years continually increased YoY- did she omit to actually look at the underemployment rate and those that dropped out of the employment data circus?

If one looks at the Pension Funds these themselves are in a crisis – funds invested elsewhere – at higher risk – rather than in gilts (1) investing in emerging markets and junk bonds – same applies to the ‘savers’ in society – banished to the scrap heap of seeking greater returns gambling on the stock market or illiquid State bonds.

Free capital – investment funds has suffered up to USD 11 trillion in losses on world stock markets – where do they turn for safety and security- none other than the bond markets (2) – the worst mistake they can make.

Why – well the September 2015 setup has been accomplished by the Fed. Refusing to acknowledge the obvious they denied interest rate increases and Yellen’s stupidity in implying that the Fed will ‘do whatever it takes – even negative interest rates’ was abundantly stupid and foolish – pushing capital into an already illiquid bond market – investors are ‘gambling’ on no rate increases until 2016.

The Bond Bubble is blowing bigger.

We have China set-up for a hard fall – the depression they had to have – the necessary re-jigging of their economy and the world media and stock market Bulls cannot see through the data bullshit pushed out by China and the PBoC. (3)

China’s official and Caixin PMI’s – confirmed the economy remains in contraction, even if it is no longer in freefall mode.

The Markit final September print was 47.2, the lowest since March 2009 while the Composite PMI was the lowest ever.

Then with Europe – which is actually now in deflation – disappointing PMI was as expected – the Euro area manufacturing PMI came in at 52.0 in September, in line with the expectations – between August and September – the Euro area manufacturing PMI fell by 0.3pt from 52.3 to 52.0

German manufacturing PMI fell on the month (53.3 to 52.3), as did the Italian (53.8 to 52.7) and Spanish prints (53.2 to 51.7).

France, recently downgraded by S&P – where the manufacturing PMI strengthened from 48.3 to 50.6 – against the whole Euro area trend.

From Goldman Sachs – “The PMI breakdown across subcomponents in September was weak. Both manufacturing output and employment fell, by 0.4pt and 0.5pt respectively. The order-to-stock difference fell marginally by 0.9pt in September, reflecting a weakening in new orders and an increase in stocks of finished goods.”

Goldman paid particular attention to Spain where the recent miracle “recovery” has now fizzled and the economy appears to have entered the downward phase of the dead cat bounce.

Global PMI’s – manufacturing index declining.

image

Chart courtesy of JPMorgan. Click on to enlarge.

Looking at the global trend – is it no wonder that demand for commodities has dropped?

A catalyst to the broader stock markets was the rebound in Glencore stock – managed to wipe out its entire 27% Monday plunge – as analysts – defended the company.

image

Chart courtesy of Bloomberg.

Okay looking at that chart it is a WTF moment.

Who in their right mind would gamble on commodity prices remaining stable?

Does anybody really see what is going on here?

It is obvious – please take the time to read all posts in ‘Sinking Feeling’ series – the irrational has even happened in that India has entered the currency wars by reducing their rates by 0.5 percent – and this appears from their Central Bank comments – to be a preparation for a reduction of GDP in 2017.

In the series ‘Sinking Feeling’ I have listed all countries that have huge problems- add to that mix Indonesia and Malaysia. All of these Countries have severe problems now – any one of them may fail at any time due to the strengthening of the USD.

And where are the Credit Agency reports on the individual countries in the Eurozone?

These were to be released – why delayed?

If one looks at the Euro area – it does not look pretty and each country has their own internal problems – whether that be austerity measures – unemployment – foreign exchange housing loans blowing up through EU quantitative easing – immigrants internally – refugees externally.

At the end of the day it will boil over – not a matter of if – a matter of when.

1. http://www.bloomberg.com/news/articles/2015-10-01/world-s-biggest-pension-fund-hires-asset-managers-for-junk-bonds

2. http://www.bloomberg.com/news/articles/2015-10-01/in-shadow-of-fed-liftoff-treasuries-top-all-other-investments

3. http://www.bloomberg.com/news/articles/2015-10-01/charting-the-markets-china-factory-data-sends-global-equities-higher

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