As property values decline, and economic demand slows, cash flow quickly becomes insufficient to maintain debt payments and loans default. We saw a similar surge in bad loans heading into the 2007 debt crisis…
Another red flag from China as the number of bad loans jump the most since 2005 in the third quarter, fueling speculation that the economy may be slowing even more. Here is a direct video link.
Yesterday Japan reported that its gross domestic product fell an annualized 1.6% in the third quarter, far worse than economists’ estimates of 2.3% growth, and throwing the country into its third recession since 2011.
Of course, in perennially optimistic form, none of the 18 economists surveyed by The Wall Street Journal had forecast a contraction. See: Japan falls into recession
After 15 years of near zero interest rates (since 1999) and wave after wave of Quantitative Easing by the BOJ (since 2001), the consensus view this morning is that the Abe government was wrong to increase its sales tax last April in an effort to raise much needed revenue. Apparently the Japanese economy is far to weak to pay for its government spending and adding on even more and more debt to the most indebted country in the world is the only plan the consensus can imagine, even though debt levels have long past the realm of reasonably repayable. As usual, debt is presented as the ‘have cake and eat it too’ miracle solution.
The truth is that fiscal and monetary policies the past 15 years have repeatedly saved reckless corporations, executives, bankers and bad debts at the expense of everything else. As a result the real economy, workers, infrastructure, affordable education, proactive health initiatives, the environment, innovation–pretty much everything that actually improves and strengthens civilization–are all suffering from chronic underinvestment and lack of sufficient cash flow today. It’s long past time to admit, repent, reform and recover.
Breakingviews’ Peter Thal Larsen argues Abenomics has even more to worry about. Here is a direct video link.
Head sales guy for Morgan Stanley gives his bullish spin in this clip (a little comic relief…what else would we expect him to say?). Analysts on the buy side are not so optimistic.
“The world economy is in its worst shape in two years, with the euro area and emerging markets deteriorating and the danger of deflation rising, according to a Bloomberg Global Poll of international investors.” Here is a direct video clip.
Alibaba hype notwithstanding, the much forecast surge in household consumption and away from dependence on western exports and state ‘investment’ in the Chinese economy is not working out as bulls had promised.
“Judging by Alibaba’s blowout “Singles Day” sale this week, one could be forgiven for thinking all is well with the Chinese consumer. In fact, evidence is stacking up that shopping carts are increasingly bare.
The troubling implication is that China’s resilient spenders are succumbing to an economic downturn, which until recently has been largely confined to property and heavy industrial activity. Declining investment in these areas was bound to eventually feed through, as people working in those industries earn less. Falling home prices add to the sense of anxiety.”
Read some key stats on actual sales trends here: The Not-so-Mighty-Chinese-Consumer
Danielle was a guest today on Talk Digital Network talking with Jim Goddard about recent trends in the world economy and markets. You can listen to an audio clip of the segment here.
Over the past 8 years, free markets have increasingly been over run by inside traders, price riggers and predatory high frequency machines, in the process, legitimate investors have steadily withdrawn and the volume of shares traded has plunged. Fewer participants mean those buying have had a magnified ability to move prices up, but it also means there have been less and less willing participants with each passing year. Those who have gone along for the ride are taking victory laps and calling it brilliance, but the trick will be trying to find buyers when they look to cash out winnings. This video captures the demise of free markets and the lack of liquidity that today stalks ‘players’ at the table.
Average Trade Size (Shares per Trade) for all NMS Stocks at 10 minute intervals between 9:30 (open) to 16:00 (close) from 2006 through November 12, 2014. Here is a direct video link.