Juggling Dynamite

“There’s no transactions, M&A doesn’t need to happen at this point the banks aren’t lending anyway, companies don’t trust the banks anymore as they don’t believe they have credit line and this is what deleveraging looks like,” Peter Toogood, director of investment, Old Broad Street Research: “this is what everyone chose, don’t be surprised that this is the result”.

I agree with the meat of this assessment, although I doubt that stocks have yet fully discounted the new, lower growth environment. Once that happens however, I think cash will have good reasons to move back into income paying equities.Here is the direct link.

We have been writing about the anatomy of secular bear markets for the past 10 years. They are a much different beast than a secular bull as shown in the chart below. The Italian stock market is retesting the same level as its 2002 and 2009 bottoms, with Spain following close behind. Will this bottom hold for a third time? or does this secular bear push to a fresh cycle low? The next few months will tell. This also bodes poorly for other global stock markets (like North America) which are highly correlated (with some time lags) to other global stocks, and are still some 40-50% above their prior cycle lows.  Decoupling anyone?

Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

A reader sent me this clip and I think it is refreshingly honest about the state of the world’s current problems. For all the academic dissertations, and political posturing, the problem is remarkably simple: too much debt, can’t be paid back.  Whether it is on households, corporations, governments or central banks, more debt is just more debt and it will not fix a debt crisis. Debt holders have to face the fact that they are not getting back a loaf.  And spenders have to face the fact that they are much poorer than they think and cannot afford all that they have come to expect.

William White, Chairman of the Economic Development and Review Committee, Organization for Economic Co-operation and Development (OECD) speaks on panel, entitled “Which Way Forward: Reflections on Global Turmoil and the Role of Markets, Governments, and Civil Society” at the Institute for New Economic Thinking’s (INET) Paradigm Lost Conference in Berlin. April 12, 2012.  Here is a direct link.