Juggling Dynamite

Another morning another farcical levered ramp in risk markets purportedly on the revelation that the US central bank will not be hiking policy rates soon because the economy is weak.  News this is not.

Evidence of the global slowdown has been plentiful and mounting for months. In classic non-confirmation, transportation stocks are bucking the broader Dow’s lead.  While the Dow 30 Index is marginally higher (.14%) on the week so far, the Dow Transport Index–the companies that actually ship things when they are demanded– remains lower on the day and -3.14% on the week.

Lest there be anyone left alive who with a straight face wants to assert that perpetual central bank ‘stimulus’ works in strengthening the real economy, we reference here the most recent chart of manufacturing from Japan (the policy grand-daddy of all QE, all the time).

Recessionary fears increase as industrial output contracts in #Japan. https://t.co/tEp9QO2dae pic.twitter.com/EZvt0gbWki

— Lakshman Achuthan (@businesscycle) October 28, 2015

After the credit-rush, consumers everywhere are looking for intelligent ways to spend less: reduce, reuse, recycle. The world is awash in the supply of most things and entrepreneurs are figuring out creative new ways to find willing buyers. This is well past serving those who can’t afford new.  Today used clothes are for the financially savvy.  See Why is Silicon Valley pouring millions of dollars into old clothes:

Venture capital firms poured hundreds of millions of dollars into fashion resale in 2015; total funding over the past five years has blown past the $400 million mark. In January, online consignment shop Tradesy raised $30 million. By the end of April, vintage luxury reseller RealReal had raised $40 million and social commerce site Poshmark had taken in $25 million. European resale shop Vestiaire Collective scored a $37 million round in September. Then came Goldman’s monster round for ThredUp, perhaps the most mainstream of the bunch. “It’s a category that’s very much winner-take-all,” …”VCs know that if they pick the winner, it’ll have a long-term sustainable advantage.”

It’s the same precursors everywhere: risky loans underwritten by governments, bubbling realty prices and precariously indebted households…the mean reversions once they start, tend to be swift and violent.

Sahil Mahtani, analyst at Deutsche Bank, likens the London real estate market to the Hong Kong property bubble and why he says it is about to burst. Here is a direct video link.