No Growth Means Market Crash, Regardless of Fiscal Cliff Deal
Biderman on the markets.
here is no way sustainable economic growth is at all possible in the United States, Europe and Japan over the near term under current government policies of providing citizens with all sorts of economically unfeasible cradle-to-grave entitlement programs. And without sustainable growth there is no way stock prices will remain as high as they are for very much longer.
Video below.
History of Market Crashes
Some 25 years ago, Wall Street saw its biggest one-day percentage slide ever sparking familiar worries about small investors and depressions. The long-term damage wasn’t as severe as the 1929 crash, but the 1980’s bubble pop was spectacular by any measure. Here’s a look at 10 other great market crashes and some of their unusual consequences. Courtesy Market Watch. Full article here.
Black Friday deja vú
With Spain having experienced a “mini” Black Friday two days ago, although people still believe this is a local problem, here we present you out favourite documentary of the “real crash”.
With Valencia insolvent, make sure to watch the other problematic regions of Spain namely; the Islands, Castilla la Mancha, Andalucia and Catalonia, as the crisis goes into phase two. Remember, just like the Asian crisis in the late 90′s, it all started as a local problem, and then became a global problem.
Video below.
Homes: The Case Of M2V And The Elusive Recovery
Guest post by Lance Roberts.
“Chance has put in our way a most singular and whimsical problem, and its solution is its own reward.” – Sherlock Holmes
Very much like Sherlock Holmes, analysts everywhere are analyzing each and every data point relating to housing hoping that it is “the” conclusive bit of evidence that proves the long awaited housing recovery has arrived. The recent spate of housing numbers, while improved over recent months, have bolstered those calls that the bottom is “in” and a“recovery” has begun. The mystery of the “elusive recovery” continues.
We have been very vocal that while we may have indeed seen the “bottom” the ensuing “recovery”may be a far more elusive. (See here, here and here) However, there are three major clues that housing will continue to elude recovery for quite some time – global drag, employment and the velocity of money.
Clue 1: Global Drag
It is entirely understandable why everyone wants housing to recover. From a homeowners standpoint, particularly the 1/3 of Americans who are underwater in their mortgage, a recovery in housing gives them not only a psychological boost but also the options of selling, which offers mobility, or simply refinancing to lower monthly payments. Economists and other financial analysts believe that a recovery in housing is needed to boost economic growth from the large multiplier effect of each dollar invested in the overall economy. However, residential investment today, as a percentage of GDP, is far less impactful than it has been in the past. Currently residential investment is near the lowest levels on record as a percentage of economic growth.
News That Matters
Ft.com
France is pressing the EU to adopt a financial stability package to stem the eurozone crisis, believing negative market reaction to the €100bn bailout of Spain’s banks shows the need for more comprehensive action. Ahead of the EU summit due on June 28, Paris is set to propose a package of measures to put the European Central Bank in charge of bank supervision and to use the European Stability Mechanism, the new €500bn eurozone rescue fund due to come into force next month, to recapitalise banks directly. http://www.ft.com/intl/cms/s/0/a732fdbe-b553-11e1-ad93-00144feabdc0.html#axzz1xe4lV9a0
Bankers’ bonuses across the European Union are set to be limited by law, with many bank lobbyists admitting in private that they have lost the fight against a European Parliament initiative to limit the size of bonuses relative to salary. Some banks still hope to increase the proposed ratio from 1:1 to 2:1 or beyond, while others are trying to limit the restriction to upfront cash bonuses, excluding deferred payouts. But many bankers now accept the principle of a ratio as inevitable. http://www.ft.com/intl/cms/s/0/9b023d40-b57e-11e1-b8d0-00144feabdc0.html#axzz1xe4lV9a0
Moscow forcefully rejected on Wednesday Hillary Clinton’s accusation that Russia was supplying Syria with helicopter gunships that could be used against civilians, as Syria announced it had “cleansed” the rebel town of Haffa of armed fighters. Speaking in Tehran, Sergei Lavrov, Russia’s foreign minister, said Moscow was instead “completing contracts that were signed and paid for a long time ago. All of them are contracts for what are solely air defence systems.” http://www.ft.com/intl/cms/s/0/5f277e60-b561-11e1-ad93-00144feabdc0.html#axzz1xe4lV9a0
Spain’s property crash
Expect more of this in Spain, as the country falls further into the abyss. In Spain, you can’t just hand over the keys to the bank and move on. This is what they are trying to bail out….
Video below.
The World in Depression 1929-1939 and Now
Somehow we have had that deja vú feeling for a while now. Remember reading Kindleberger’s classical book on the Great Depression? From Voxeu.
The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.
Both the existence of these parallels and their tragic nature would not have escaped Charles Kindleberger, whose World in Depression, 1929-1939 was published exactly 40 years ago, in 1973.1 Where Kindleberger’s canvas was the world, his focus was Europe. While much of the earlier literature, often authored by Americans, focused on the Great Depression in the US, Kindleberger emphasised that the Depression had a prominent international and, in particular, European dimension. It was in Europe where many of the Depression’s worst effects, political as well as economic, played out. And it was in Europe where the absence of a public policy authority at the level of the continent and the inability of any individual national government or central bank to exercise adequate leadership had the most calamitous economic and financial effects.
News That Matters
Ft.com
Some of Europe’s biggest fund managers have confirmed they are dumping euro assets amid rising fears over a possible Greek exit from the eurozone and single currency turmoil. The euro’s sudden fallthis month caught many investors by surprise. Europe’s single currency has lost 5 per cent in the past three weeks after barely moving against the US dollar for much of the year. On Thursday, the euro hit a fresh 22-month low at $1.2514. http://www.ft.com/intl/cms/s/0/92f5c37a-a5a1-11e1-a77b-00144feabdc0.html#axzz1vr0JKlSp
Europe’s political leaders need to make a “brave leap” towards greater fiscal union to address the eurozone’s deepening debt crisis, the head of the European Central Bank urged on Thursday. Mario Draghi said his institution may have bought the eurozone time through its massive injection of cash into Europe’s banking system and sovereign bond markets but now it needed to embrace much closer integration. http://www.ft.com/intl/cms/s/0/281e032c-a5b6-11e1-b77a-00144feabdc0.html#axzz1vr0JKlSp
Wholesale brokerages including Knight Capital and Citadel suffered trading losses that could top $100m as a result of computer glitches in Nasdaq OMX’s software on the morning of Facebook’s trading debut last Friday. Problems with the exchange’s trading software meant the brokers were unable to calculate their precise shareholdings in the social network through more than two hours of share trading, people close to the firms said. http://www.ft.com/intl/cms/s/0/68cc8164-a5c5-11e1-a3b4-00144feabdc0.html#axzz1vr0JKlSp
All news below.
Austerity & Extremism
As Spain’s finance minister, De Gunidos, comments are crossing the wires; “Budget cuts and economic growth are incompatible”, maybe it is time to recall what austerity really means. More austerity, more misery. From Azizonomics:
I noted yesterday that anything the government gives you, the government can take away, and that dependency on government services — which might be withdrawn — leaves citizens weak and unfree.
One cause for the withdrawal of government that I neglected to mention (intentionally, as I hoped someone would pick it up in comments) was the matter of austerity. While the example I was bouncing my ideas off — of denying treatment to smokers or the obese — remains theoretical, the withdrawal of government services and spending as a result of austerity is very much a reality, especially in Europe.
Inside story of the Global Financial Crisis
Toxic assets, derivatives, mispricing of risk, Bear Sterns, Lehman Brothers and much more.
Simply must watch video by Frontline.
Money, Power and Wall Street.
Videos below.
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