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El-Erian Says Fed Made "Worst Inflation Call Ever" : https://www.zerohedge.com/markets/el-erian-says-fed-made-worst-inflation-call-ever
My Comment : Things are starting to get vedy inter resting.
Excerpts:
El-Erian said Powell "needs to ease his foot off the accelerator" in reference to the $120 billion in bond buying every month. He said there is "no reason why they [Fed] should be injecting so much liquidity," adding that the Fed should not be boosting housing prices at a time when an unaffordability crisis is emerging.
El-Erian doesn't believe peak inflation has arrived and thinks consumer price increases could remain elevated in the months ahead. His comments on Friday were not far off from remarks made at the ADIPEC energy industry forum in Abu Dhabi last month.
It's terrific to hear market realist El-Erian on mainstream media, continuing to pound the table about the Fed's terrible inflation call.
"Inflation beast is out" and gold price looks to $3K in response to Fed's policy, says mining strategist : https://www.kitco.com/news/2021-12-10/-Inflation-beast-is-out-and-gold-price-looks-to-3K-in-response-to-Fed-s-policy-says-mining-strategist.html
My Comment : I don't think the Fed can thread the needle. If they raise rates, stocks crater. If they soft petal, inflation advances.
Excerpts:
"The inflation beast has gotten out, and it's going to take a lot of effort to get it back into its cage," Ecclestone emphasized. "This will ultimately impact property markets. It's going to impact companies that are highly leveraged. We are already seeing big property crashes in China that are linked to overextended property developers."
Ecclestone pointed out that investors will look toward gold if property prices start to drop. "If inflation keeps rising, people are going to be trying to figure out where they should invest their money, particularly if property prices stop going up or start to go down," he added. "Property has been a big haven for investors for the last 30 years in most western economies. They will be looking for the next sure bet."
Ecclestone noted that most investors use gold as a savings method. "Traditionally, gold has been a hedge against inflation. There is a mistaken view that higher interest rates would impact the price of gold because supposedly people are borrowing money to buy gold which is totally a bogus construct," he said. "Most people are using gold as a savings method."
Over the next year, Ecclestone expects gold to reach $2,000 an ounce and then climb towards the $3,000 level in the next four years after that.
"Gold ultimately needs to rise because people do not have faith in keeping their money in fiat as a means of protecting their currency," he stressed. "I would not be surprised if we see gold above the $2,000 level over the next 12 months. My five-year outlook for gold is $3,000 per ounce."
Ecclestone sees silver rising back towards $30 next year and then advancing to $40 by 2026.
Jill Biden Insists POTUS's Brain Isn't Scrambled Eggs : https://www.zerohedge.com/political/jill-biden-insists-potuss-brain-isnt-scrambled-eggs
My Comment: Scrambled eggs, indeed. I would not be surprised to see Biden unable to complete his term in office. Then we'll be left with the totally [in]competent VP, Kamala Harris.
Excerpt:
GOP lawmakers have insisted that Biden, the oldest president in the history of the US at 81, take a cognitive test after multiple verbal blunders - which spox Jen Psaki has blamed on allergies according to the New York Post
***********************************************
And inflation will be defined away :
And Just Like That, Inflation Is About To Disappear? : https://www.zerohedge.com/markets/and-just-inflation-about-disappear
Excerpt:
In any case, what we though this summer was just a joke appears to be coming true, because as the BLS has reported, starting next month it will adjust the weights for its Consumer Price Index basket, which will be calculated "based on consumer expenditure data from 2019-2020." Alas, there is no further detail on this critical topic, although we will take any bet that post-revision reported inflation will drop because, well, "adjustments."
What kind of koolaid have these guys been drinking ? -
Jeremy Siegel, economics professor, says stocks are real assets and you want to hold real assets in inflationary periods.
My Comment : Idiots all. You need to hold tangible assets, not financial assets, in inflationary periods. Next they'll being saying that high interest rates and a depression are good for stocks. Of course, FOMC members believe in stocks since they've been buying stocks and making money based on their own decisions at the Fed. What a racket.
https://www.msn.com/en-us/money/news/i-think-the-fed-is-way-behind-the-curve-says-wharton-professor-jeremy-siegel/vi-AARH2tP?ocid=msedgdhp&pc=U531
Makes perfect sense -
in this upside down world. So the solution to our problems is more inflation to drive stocks higher and gold lower. I certainly would like to see all of this blow up in the Fed's face.
What a joke ! -
Social spending plan will help ease pain from record-breaking inflation: White House : https://www.msn.com/en-us/news/politics/social-spending-plan-will-help-ease-pain-from-record-breaking-inflation-white-house/ar-AARHs4j?ocid=msedgntp
My Comment: What idiots. Do they actually believe handing out free money at taxpayer's expense is going make things better ? Wait till the tax bill comes due and see if it becomes easier to pay more taxes.
Excerpt:
The Biden administration also used the new numbers as an opportunity to tout the "Build Back Better" social spending plan, which it says will ease the financial squeeze many are facing despite good signs from other economic indicators.
Evergrande default implications
Evergrande Has Finally Defaulted: Here's What Happens Next | ZeroHedge : https://www.zerohedge.com/markets/evergrande-has-finally-defaulted-heres-what-happens-next
My Comment : I think this should be considered a very big deal and yet the markets are not reacting. Also, the Fed could be tightening into a global slowdown.
Excerpts:
For now, Chinese authorities are signaling that they plan to ring-fence Evergrande and limit contagion rather than orchestrate a rescue as they’ve done during past crises. Whether and how they can do that, will determine if 2022 is a year of recovery and normalization - as JPMorgan wrote in its year ahead outlook - or a global depression.
So far, containment efforts haven’t assuaged investors. While pain has so far largely been contained to China’s smaller offshore credit market, that’s little consolation for developers that have relied heavily on international investors to raise funds. Borrowing costs have spiked for companies with the weakest balance sheets, including Kaisa and Fantasia Holdings Group Co.
In total, Bloomberg calculates that Chinese borrowers have defaulted on a record $10.2 billion of offshore bonds this year, with real estate firms making up 36% of that.
“There is extreme stress in the market,” with about half the developers in the country in deep financial distress and pricing in high default risk, said Jenny Zeng, co-head of Asia Pacific fixed-income at Alliance Bernstein.
But most importantly, as noted earlier, China is desperate to limit the fallout on the broader housing market, in a country where real estate accounts for about a quarter of economic output and as much as 75% of household wealth as we have noted for half a decade. China’s housing slump has intensified in recent months after sales plunged and home prices fell for the first time in six years.
Contract sales by the country’s top 100 developers plunged 38% in November from a year earlier to 751 billion yuan, sharper than the 32% drop in the previous month, according to preliminary data from China Real Estate Information Corp.
As we explained in detail recently, any slowdown in real estate could have a ripple effect not only on China’s economy but on global growth. China’s growth slowed in the third quarter, with signs there will be more pain to come.
The Federal Reserve last month warned that fragility in China’s commercial real-estate sector could spread to the U.S. if it deteriorates dramatically. China’s real estate sector makes up almost half of the world’s distressed dollar-denominated debt.
The bottom line, however, was summarized best by China Beige Book: "while direct fallout from the Evergrande bankruptcy - which has been telegraphed for months - won't be the problem, the problem is having a billion Chinese watch this play out, then expecting them to spend afterward."
More recommendations from the Hedgelesshorseman -
THH – Tax Loss Silly Season: “Sell Button” Thrown Away : https://www.thehedgelesshorseman.com/gold-silver-stocks/tax-loss-silly-season-sell-button-thrown-away/?utm_source=rss&utm_medium=rss&utm_campaign=tax-loss-silly-season-sell-button-thrown-away
Gold has been 'shockingly stable': It's a long-term play as U.S. dollar rolls over, says Jeffrey Gundlach : https://www.kitco.com/news/2021-12-08/Gold-has-been-shockingly-stable-It-s-a-long-term-play-as-U-S-dollar-rolls-over-says-Jeffrey-Gundlach.html
Excerpts:
"It's likely that we will see economic problems with just a few rate hikes from the Fed — four rate hikes or so. It's 1% or 1.5% on the Fed funds rate that breaks the economy," he said.
The bond market is already signaling red flags. "Since March of this year, the bond market seems to be sniffing out a weaker economy coming … One should expect economic problems sooner rather than later. My base case is we'll start to see trouble by the second half of 2022," Gundlach noted.
For gold to rally, the U.S. dollar needs to roll over. "The dollar has been a cap on gold. I do think that when the dollar heads down, gold will go up."
Gundlach continues to hold gold as a long-term play, adding that the last time he bought the precious metal was in September 2018 at around $1,180 an ounce level.
"But it certainly has not been rewarding at all this year compared to the other things from commodities," Gundlach commented.
Gundlach's long-term dollar view is "strongly bearish," with expectations of a weaker USD in the second half of 2022 or 2023 due to twin deficits in the U.S.
Gold and Silver Delivery Requests Near 1 Year Highs Prompting Cash Settlements : https://schiffgold.com/exploring-finance/gold-and-silver-delivery-requests-near-1-year-highs-prompting-cash-settlements/
Also :
Hedge Funds Are Driving Price Action In The Gold Market : https://www.zerohedge.com/commodities/hedge-funds-are-driving-price-action-gold-market
My Comment : Physical delivery (also see above article) is the only way to break the paper gold market
Excerpt:
Conclusion: How Will Hedge Funds Respond to the Fed?
Hedge Funds certainly trade using technical analysis, which is why Fib targets and round numbers (e.g. $1,800) prove to be such difficult resistance points. Over time, the physical market has pushed prices up, but the short-term move is dominated by hot money. How long until Hedge Funds call the Fed’s bluff? More importantly, how long until there isn’t any physical to back the paper contracts because it’s been delivered and then removed from the vault?
Astute investors should keep the long-term picture in mind. The short-term gyrations can be immensely frustrating, but gold and silver are not Bitcoin. They are not vehicles to get rich quick because that would disqualify them as safe-havens. Remember, what goes up quickly, can come down quickly. Stay the course, trust the fundamentals, use the CFTC analysis to explain the short-term price movements, and understand the protection provided by physical precious metals.
The CBs and Inflation -
Credit Bubble Bulletin : Weekly Commentary: Dow 36,000 and Policy Mistakes : http://creditbubblebulletin.blogspot.com/2021/11/weekly-commentary-dow-36000-and-policy.html
My Comment : These excerpts are from Doug Noland's weekly Credit Bubble Bulletin.
Excerpts:
They’re in this mess together; created it together; and are now trapped together. As a group, they will dismiss rapidly mounting inflationary risks, choosing to remain locked in ultra-stimulative monetary policies. And together they will disregard manic markets and precarious financial imbalances.
It’s not difficult to discern why they would adopt such an approach. Global fragilities have turned acute. China’s Bubble is faltering, with contagion spreading to key EM markets. And last week, we observed acute instability afflict developed bond markets, including the UK, Australia, New Zealand, Canada and even U.S. Treasuries. They’re petrified of bursting Bubbles.
The big central banks this week signaled they will push back again rising rate expectations and market yields – essentially intervening in the markets to quash market adjustment to surging inflation risk. I have major issues with this. For one, market discipline is today all we have between reckless fiscal and monetary policies and any hope for a future without financial and economic chaos. Financial conditions must tighten, or inflation will run wild. Secondly, today’s artificially low rates and manipulated market yields are fueling precarious Bubbles and market manias
Do they honestly believe they can print $4.8 TN in 112 weeks without unleashing powerful inflationary dynamics?
The Fed and the global central banking community today inflict great harm as they proceed on the greatest monetary policy blunder the world has ever experienced.
It’s readily apparent what Trillions of monetary inflation do for securities, crypto, and other asset prices – for speculation and feeding a mania. The euphoria of a record equities market run and Dow 36,000.
. And there’ll be a huge price to pay for ongoing aggressive Fed support for manic markets. Perhaps even a larger cost to a bond market that cannot adjust to surging inflation because central banks believe it’s within their mandate to manipulate markets. This week’s market action only solidifies my view that when markets eventually do adjust, it’s bound to be violent.
Crash coming soon ? -
My Comment : It's been a one way market for so long. It's dangerous to bet against the Fed, but inflation may tie the Fed's hands on money printing.
"We're Near The Very End": Lawrence Lepard On Bitcoin, Gold & The Coming Crash : https://www.zerohedge.com/markets/were-near-very-end-lawrence-lepard-bitcoin-gold-coming-crash
Excerpts:
The market is insanely overvalued, but until now has proven that what is insane can become more insane. So you can't short it. Frankly all price signals are broken and we could be in a "crack up boom".
I do see signs of weakness (Evergrande, yield curve heading toward inversion, Fed reducing QE won't help). Personally I think we are near the end and close to a crash, but I have thought that for some time and have obviously been wrong.
Inflation coming in hot and being persistent is probably the most likely catalyst. Inflation will reduce profit margins and will make the current multiples look even more insane. Catalyst: psychology changes. Technically upward momentum has slowed. I think we are very near the end.
Gold was up over 50% in a two year window. It is down 15% in the past year. It is crazy and partly due to price suppression by the Central Banks, but they cannot hold it down forever and the next run will take it to new all time highs quickly in my opinion.
The Fed featured on Frontline -
The Power of the Fed : http://www.pbs.org/wgbh/frontline/?utm_source=promourl&utm_medium=direct&utm_campaign=frontline_2018
My Comment :
It's amazing that the Fed has been allowed to create huge bubbles in RE, stocks, and bonds. Sheila Bear referred to the stock market as a no lose casino. Grantham talked about moral hazard where Wall Street keeps the profits if it wins and it gets bailed out if it loses. When the market corrects, it will be one for the record books and with the Fed's money printing now creating a lot of inflation, they will not be able to bail out the stock market with more money printing. You can watch Frontline online at the link above. If the Fed tries to bail put the next financial crisis, they will have to print many Trillions of $. Meanwhile the national debt just keeps expanding exponentially.
Somethings wrong with this picture -
Ethereum hits new all-time highs as analysts point to inflation-hedge appeal
VS
Gold price falls to new session low following record high in ISM service-sector data
Cryptos are insane and dangerous -
If you bought $1,000 of this in March, you'd have $3.5 million today : https://www.kitco.com/news/2021-11-01/If-you-bought-1-000-of-this-in-March-you-d-have-3-5-million-today.html
AND
'Squid Game' Crypto-Scam Exposed, COIN Crashes 100% After Explosive Gains : https://www.zerohedge.com/crypto/squid-game-cryptocurrency-soars-40000-week
China Will Not Be Able To Offset Its Property Bubble Easily : https://www.zerohedge.com/economics/china-will-not-be-able-offset-its-property-bubble-easily
My Comment : China's RE is the pin that will burst the global finance bubble
Excerpts:
China’s real estate problems are three:
1) The massive size of the sector,
2) its excessive leverage, and
3) the amount of developer debt in the hands of average households and retail investors.
According to The Guardian, “China’s real estate market has been called the most important sector in the world economy. Valued at about $55tn, it is now twice the size of its US equivalent, and four times larger than China’s GDP”.
Considering construction and other real estate services, the sector accounts for more than 25% of China’s GDP. Just to consider other previous examples of property bubbles, the average size of the sector was somewhere between 15 to 20% of a country’s GDP. And none of those economies managed the excess of the property sector.
Property bubble-driven growth always leads to debt-driven stagnation.
Waypoints On The Road To Currency Destruction (And How To Avoid It) :
https://www.zerohedge.com/markets/waypoints-road-currency-destruction-and-how-avoid-it
My Comment : This article has a section on Basel 3 and its affect on gold
Gold price sharply down after hotter U.S. inflation data : https://www.kitco.com/news/2021-10-29/Gold-price-sharply-down-after-hotter-U-S-inflation-data.html
My comment : Totally illogical. Gold as an inflation hedge ?
Excerpt:
(Kitco News) - Gold prices are sharply lower and headed for a bearish weekly low close in early U.S. trading Friday. U.S. inflation data that came in hot, rising U.S. Treasury yields and a rebound in the U.S. dollar index on this day are all working against the precious metals markets bulls. December gold was last down $24.10 at $1,778.00 and December Comex silver was last down $0.27 at $23.85 an ounce.
I also think RE is in a huge bubble
'Aggressively' hold gold & real estate as Fed's QE is a 'failed experiment,' says Danielle DiMartino Booth : https://www.kitco.com/news/2021-10-27/-Aggressively-hold-gold-real-estate-as-Fed-s-QE-is-a-failed-experiment-says-Danielle-DiMartino-Booth.html
My Comment : Fed cannot fight "stag" and "flation" simultaneously
Excerpt:
And with higher-than-expected inflation and slower growth, Fed's options are quite limited, DiMartino Booth added. Raising rates could slow the economy down, while keeping rates too low could trigger sticky inflation.
"They're boxed in because the economy is already slowing. They either tighten, or they don't. Both are policy errors. We had a flash recession. It lasted all of two months. So they've kept policy inappropriately too easy for much too long," she stated.
Giving trillions of dollars directly to households is what really hyper-charged inflation over the last 19 months.
"What distinguishes the great financial crisis is that the Fed was able to go at it alone in 2009, 2010, 2011. This time, they needed fiscal money as well. And we're heading into midterm elections. And I think Washington's dysfunctionality is on full display. And there's certainly no reason the GOP would want to help the economy headed into 2022 and the November midterm elections. So the Fed might not be able to go at it alone if the economy does slow."
Based on the current economic environment, the Fed could be forced into tightening, including raising interest rates.
In light of all of this, DiMartino Booth advises holding gold, real estate, and municipal bonds. "I am aggressively holding onto my gold. I do like the fact that I have a lot of real estate. And my municipal bonds have treated me very well," she said.
U.S. trade deficit widens in September; inventories mixed : https://www.reuters.com/article/usa-economy-tradefigures/u-s-trade-deficit-widens-in-september-inventories-mixed-idUSL1N2RM2HC
My Comment : Over $1Trillion annualized. Got Gold ?
Excerpt:
OCTOBER 27, 20215:52 AM UPDATED AN HOUR AGO
WASHINGTON (Reuters) - The U.S. trade deficit in goods surged in September as exports tumbled, suggesting trade probably weighed on economic growth again in the third quarter.
The goods trade deficit increased 9.2% to $96.3 billion, the Commerce Department said on Wednesday. Goods exports dropped 4.7%, while imports gained 0.5%.
China's banks vulnerable
http://creditbubblebulletin.blogspot.com/2021/10/weekly-commentary-controllable.html
Excerpt:
Ample volatility as well in the cost of insuring against default for the major Chinese banks. China Development Bank CDS surged 10 Monday to 77 bps, up from 43 bps points at the beginning of September to the highest level since the pandemic crisis. China Development Bank CDS then reversed sharply lower, ending the week down at 62 bps. Industrial and Commercial Bank of China CDS traded to 78 bps (high since April ’20), up from 48 on September 17, before closing out the week at 76 bps. China Construction Bank traded to a post-pandemic high 75 bps (ended week at 74), after beginning the year at 36 bps
Not logical -
Retail sales increase due in large part to higher prices (ie inflation) and the NY Manufacturing survey declined sharply. Yet gold is selling off due to inflation driven retail sales increase
US (Nominal) Retail Sales Unexpectedly Surge In September : https://www.zerohedge.com/personal-finance/us-nominal-retail-sales-unexpectedly-surge-september
Excerpt:
However, bear in mind that today's retail sales print is 'nominal' and so perhaps reflects more on soaring inflation than consumers' willingness to spend more.
AND
New York Fed Empire State Survey disappoints as it comes in at 19.8 : https://www.kitco.com/news/2021-10-15/New-York-Fed-Empire-State-Survey-disappoints-as-it-comes-in-at-19-8.html
Excerpt:
The regional central bank said its Empire State manufacturing survey's general business conditions index fell 15 basis points to 19.8 in October. The data disappointed as consensus forecasts were calling for a reading around 27.00.
Gold down sharply, equities and bitcoin up sharply. You knew the rally in gold would not last. Yet the stagflation fundamentals are still in place.
Beijing Is Trapped: China Producer Prices Surge At Fastest Pace In 26 Years : https://www.zerohedge.com/economics/beijing-trapped-china-producer-prices-surge-fastest-pace-26-years
My Comment : Cannot fight "stag" and "flation" simultaneously
Excerpts:
China’s factory-gate prices grew at the fastest pace in almost 26 years in September, adding to global inflation risks and putting pressure on local businesses to start passing on higher costs to consumers.. The producer price index climbed 10.7% from a year earlier, the highest since November 1995, data from the National Bureau of Statistics showed Thursday, far higher than the 9.5% gain in ...
www.zerohedge.com
And so, Beijing is now trapped: if it eases, inflation - already at nosebleed levels - will soar further crushing margins and sparking a deep stagflationary recession; if it does not ease, the property market - already imploding - will crater.
Weak economy, contracting production plus strong demand could push silver price to $40 by mid 2022 : https://www.kitco.com/news/2021-10-13/Weak-economy-contracting-production-plus-strong-demand-could-push-silver-price-to-40-by-mid-2022.html
Excerpts:
Anderson explained why he is so bullish on silver. "If we have a weak economy coupled with a drive towards needing and using more silver, you're going to have base metal mines shutting down that produce silver as by-product, just as an enormous demand for silver comes to the fore," he said. "In that environment, you could easily see silver go to the $40 price range. But it is more likely we will see silver at $30 before it hits $40. I can see it hitting $40 halfway through next year."
Anderson spoke about silver as a play against the devaluation of currency, and at the same time silver's demand for industrial use. "Silver is a unique hybrid of those two things. It's what causes the volatility that silver has," he emphasized. "But going forward, the additional uses of silver in the solar panel industry, and in the electric vehicle industry, those uses are well documented too."
n terms of the biggest risk the markets are facing Anderson said, "It would be a fairly sudden deflationary implosion. We have inflated and inflated and inflated our way into higher asset prices, whether they be stocks or real estate around the world," he emphasized. "There's a very grave risk if there's any sense of tapering, or interest rate rises, or even just the hint of that or the hint of taking away some of the further stimulus. In that case, it would be natural to have a sharp, shock to the downside in equity markets, and certainly other asset markets around the world."
Anderson also discussed the impact a deflationary implosion would have on gold and silver. "Gold could have a sharp shock to the downside before it starts to recover very quickly and very powerfully," he said. "Silver would be that in spades. In this type of deflationary event there would be no bids on anything for a brief time period. That will be the case for silver as well. I have no idea of how far the price will fall, but it will recover very sharply as well."
Recession with Stagflation ? -
Stellar Demand For 30Y Auction As Curve Comes Crashing Down : https://www.zerohedge.com/markets/stellar-demand-30y-auction-curve-comes-crashing-down
My Comment : I certainly would like to see gold have a sustained move higher. The Fed cannot fight both "stag" and "flation" simultaneously.
Excerpt:
In short, an absolutely stellar auction and one which appears to confirm that the bear flattening is here to stay because with every tick higher in short-term rates, the long end drops as the curve prepares to flatten and then invert ahead of the coming recession which the Fed will tighten right into.
"It's A Disastrous Day" - All Hell Breaks Loose In China's Bond Markets : https://www.zerohedge.com/markets/its-disastrous-day-all-hell-breaks-loose-chinas-bond-markets
China has conflicting policy goals -
My Comment: Xi wants lower RE prices to promote his goal of common prosperity but lower RE prices are causing the $62Tillion RE bubble to burst which can cause a global recession.
"Catastrophic" Property Sales Mean China's Worst Case Scenario Is Now In Play : https://www.zerohedge.com/markets/catastrophic-property-sales-mean-chinas-worst-case-scenario-now-play
Excerpts:
Evergrande, which is facing one of the country’s largest defaults as it wrestles with more than $300 billion of debt, has already missed coupon payments on dollar bonds twice last month.
With that background in mind, let's move on to the truly chilling latest developments: it now appears that China does not need Evergrande to officially default to unleash a property crisis - one has already arrived.
we bring readers' attention to a little noticed report in Shanghai Securities News, citing China Real Estate Information Corp. research (link), which revealed that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year. According to the report:
Sept. sales totaled 759.6b yuan ($118BN), down 36.2% from September 2020 and 17.7% lower from the same period in 2019, deepening a downward spiral that started in July
Among companies, 60% of developers saw sales decrease by more than 30% y/y in Sept.
Beijing, Shenzhen and Guangzhou saw transaction volume of residential properties decline 30% y/y, while Shanghai fell 45%
We had to do a double take when we saw this because these are absolutely terrifying numbers and are, to put it bluntly, scarier than Goldman's "worst case scenario"; what's worse this sudden collapse in China's property market is taking place before Evergrande has even defaulted, an event which would lead to a glacial freeze in the property market as potential buyers hold off expecting liquidation firesales from the property giant in hopes of getting bargains. The problem is that in addition to being the world's largest asset, China's property market is also the world's largest ponzi scheme, and without constant inflow of new capital it would implode, especially when factoring in the 90 million vacant apartment which just sit inert and which would promptly be dumped by anxious owners, flooding the market with excess inventory and sending prices crashing.
Tip of the iceberg -
Default Of Second Chinese Developer Sparks China Junk Bond Meltdown As Contagion Explodes : https://www.zerohedge.com/markets/default-second-chinese-developer-sparks-market-meltdown-contagion-explodes
Excerpts:
As Craig Botham, chief China economist at Pantheon Macroeconomics said, Fantasia’s missed payment “provides a clear sign that despite piecemeal bailouts of select Evergrande assets, property market stresses remain elevated." He added that "the rot is unlikely to stop here."
Looking ahead it only gets worse: fifteen of the country’s most stressed property developers will have $2.1 billion in bond payments due this month, according to calculations by Citi, comprised mostly of coupons. If they somehow manage to avoid mass defaults, it only gets tougher in January when the bill is set to double as principal payments come due, indicating market stress may reach another maximum around that time.
Finally, the worst news is that the market contagion is starting to spread rapidly to the broader property market: overnight China reported that Shenzhen second-hand home sales crashed 80% y/y to just 1,765 units in September, the first sub-2,000 print in 12 years. Should Beijing fail to arrest this crash in the real-estate market, then all bets are off.
Evergrande Stock Suspended Amid Default Concerns; Sending Futures, Cryptos Sliding : https://www.zerohedge.com/markets/evergrande-stock-suspended-amid-default-concerns-sending-futures-cryptos-sliding
My Comment : I wonder if Evergrande is just the tip of the iceberg
Excerpts:
Two weeks after markets freaked out about Evergrande, only to completely forget that China's property sector is about to be gripped by a major crisis, futures got dinged on Sunday night and Hong Kong stocks slumped the most in two weeks after shares in Evergrande and its property management unit were suspended from trading Monday in Hong Kong, as traders eyed a fresh debt test for the developer.
The news of the suspension sent S&P futures in the red after earlier gains, with Japan's Topix also reversing an early gain..
Condor closed up 50% today. I added another 10K shares at US$0.11 today to increase my position to 1.12M shares. Here's the Condor bullboard :
https://stockhouse.com/companies/bullboard?symbol=v.cn
Stagflation ? -
Stagflation Risk: Stephen Roach Latest Economist To Sound Alarm On '70s-Style Inflation : https://www.zerohedge.com/economics/stagflation-risk-stephen-roach-latest-economist-sound-alarm-70s-style-inflation
Excerpts:
In the interview, Roach spoke of supply chain bottlenecks shifting from one part of the supply chain to another rather than easing, a situation he called “strikingly reminiscent of what we saw in the early 1970s” and one that “suggests that inflation will stay at these elevated levels for longer than we thought.”
“We were sort of one supply chain glitch away from stagflation,” Roach said, adding, “That seems to be playing out, unfortunately.”
Roach took aim at the Fed’s easy money policies, arguing they were excessive, particularly in the face of persistent inflationary pressures.
Economist Nouriel Roubini, known for his gloomy-yet-accurate forecast of the 2008 financial crash—a prediction he made at a time of peak market exuberance—warned in a recent op-ed that the global supply chain crisis combined with high debt ratios and ultra-loose monetary and fiscal policies threaten to turn the “mild stagflation” of recent months into a full-blown stagflationary crisis.
Condor reported the following after the market close : https://stockhouse.com/news/press-releases/2021/09/29/condor-updates-on-the-pucamayo-cobreorco-hui-xf1-ac-punta-and-ocros-projects
My Comment : Now is not a good time to release good information because with the metals sliding, the market ignores good news. We'll see tomorrow, but I think Condor is a buy now, if you gradually add.
Excerpt:
Pucamayo: The Company is renewing its agreement with the local community regarding community engagement and surface access. The council of the local community filed documents in July to officially register the council with the Peruvian government authorities; we have been notified that the registration process concluded this week. The community council advise they intend to meet with the community members to consider the renewal of our access agreement. Access roads and drill pad construction will resume upon completion of the renewed community access agreement, with the maiden drill program at Pucamayo east scheduled to commence immediately thereafter.
The Company is preparing an application to the Ministerio de Energía y Minas ("MEM") to expand the current area of the Pucamayo east drill permit to the south and to the east. Horizonte Consultores were retained to assist in this application, and have completed their field work.
So, how does this logic work ? -
Potential debt default sends bond yields higher which causes US$ to strengthen. But, if the US were to default, would the US$ be worth more because of it ? Sure rates should go up to compensate for the higher risk of holding US debt (and some would say due to safe haven buying), but a higher US$ ???
Washington Worries Spark Dollar Buying-Panic; Bitcoin & Bullion Dive : https://www.zerohedge.com/markets/debt-ceiling-doubts-spark-dollar-demand-bitcoin-bullion-dive
Excerpt:
The ongoing debacle in Washington is not helping anything into quarter-end, as debt ceiling doubts have sent USA sovereign risk to cycle highs once again... that's near the highest level since the 2015 Debt Ceiling chaos
When you've got lemons, you make lemonade -
I just may be forced to buy more mining shares as the price keeps dropping. We go through these selloffs so often in the PMs. I certainly would like to see a sustained uptrend for a change. It is unwise for miners to report any good news in this environment because the market will just ignore it.
The stalemate in the House is getting serious and it just may result in neither the infrastructure nor the $3.5T reconciliation bill getting passed. Killing the reconciliation bill would be a good thing.
Senate Will Vote To Avert Shutdown; Pelosi Reschedules Infrastructure Vote After Progressives Refuse To Budge : https://www.zerohedge.com/political/senate-will-vote-avert-shutdown-pelosi-reschedules-infrastructure-vote-after-progressives
Excerpt:
Meanwhile in the House, Speaker Nancy Pelosi (D-CA) is expected to cancel a Thursday vote on the $1 trillion bipartisan infrastructure plan (BIF), because she doesn't have the votes to pass it. According to The Hill, more than two-dozen progressive Democrats are planning to vote "no" on the BIF because it's been separated from the $3.5 trillion spending package.
Is the global bubble in stocks, real estate, and bonds bursting ? I don't think we've seen the end of the downturn. There are just too many issues in play: China's property values falling and their large developers in default, higher energy costs, inflation, debt ceiling in limbo as Dems argue amongst themselves, consumer confidence down, etc, etc. It looks like the Dems could wind up with nothing and that the social spending will fail to pass if the progressives are able to force the infrastucture bill and the social spending bill to be linked. Surely they will increase the debt ceiling ... otherwise all hell breaks loose. I'll admit I was glad to see stocks take a big hit today. So, how far will the Fed allow stocks to drop before intervening ? Falling stocks make tapering less likely.
Gold is struggling today despite lower consumer confidence, $80 Brent crude, higher inflation, debt ceiling stalemate, China's property values falling along with their large developers in default, stocks taking a big hit, etc., etc. Not the ideal time to taper. I think $1550 is too pessimistic ..I'm expecting $1680-$1700 to hold.
Robert Kiyosaki warns of 'giant' October market crash as he holds gold, silver, bitcoin : https://www.kitco.com/news/2021-09-27/Robert-Kiyosaki-warns-of-giant-October-market-crash-as-he-holds-gold-silver-bitcoin.html
My Comment: FWIW. I've heard so many predictions of a market crash that it's hard to take them seriously. Some day they will be right. Even now with all of the economic problems from higher crude and nat gas prices, Chinese property values in decline with major developers in default, US debt ceiling in limbo due to Congressional stalemate, the stock market just ignores reality and keeps going higher.
Excerpt:
"Giant stock market crash coming October. Why? Treasury and Fed short of T-bills. Gold, silver, Bitcoin may crash too," Kiyosaki tweeted Sunday. "Cash best for picking up bargains after crash. Not selling gold silver Bitcoin, yet have lots of cash for life after stock market crash. Stocks dangerous. Careful."
Democrats Unveil Stopgap Funding Bill, Debt Ceiling Suspension As Goldman Warns Of Shutdown "Collision Course" https://www.zerohedge.com/political/democrats-unveil-stopgap-funding-bill-debt-ceiling-suspension-goldman-warns-shutdown
My Comment: I think option 1 is the most likely, but it does not raise the debt limit. It only kicks the can to Dec 3. If the Dems use reconciliation to pass just the debt limit, then I think the $3.5T package is in jeopardy.
Excerpt:
House Speaker Pelosi and Senate Majority Leader Schumer have announced that they plan to move forward with legislation that ties an extension of government spending authority (a "continuing resolution") with a suspension of the debt limit. A vote in the House looks likely this week. Republican leaders have reiterated their opposition to pairing the two measures and look likely to vote against the combined bills in the Senate. If Republicans block the bill in the Senate, this would leave Democratic leaders with three options between now and Sep. 30:
1. Pass a short-term extension of spending authority without the debt limit attached. The deadline to extend spending authority is Sep. 30, while the deadline to suspend or increase the debt limit is likely sometime in the last week of October. If Senate Republicans block the combined measure, Democratic leaders may opt to pass a short-term extension of spending authority--for three weeks, for example--to better align the next spending deadline with the debt limit deadline.
2. Pass an extension of spending authority and separately increase the debt limit via the reconciliation process. Democrats could increase the debt limit without Republican support if they choose. Doing so would require reopening the recently approved budget resolution and inserting "reconciliation instructions" to raise the debt limit by a certain dollar amount, which would likely need to be in the trillions to take the next deadline past the midterm election. While Republicans would prefer this option, Democratic leaders are likely to try to avoid doing this if possible, as a specific dollar amount would get more (negative) public attention than a calendar-based suspension, it would put responsibility solely on Democrats to pass the increase, and it could risk reopening the instructions for the $3.5 trillion fiscal package that is already encountering resistance among centrist Democrats.
3. Democratic leaders could stick to their plan. If Democratic leaders believe that Republicans might change their position at the last minute, they might continue along the current path. While it is hard to predict what Republicans in the Senate would do at the deadline, this path would be more likely than not to result in a shutdown October 1.
A shutdown October 1 is not the base case, in our view, because there is a fair chance that Democrats will shift strategy before the deadline.