The Housing Bubble

“Deficits don’t matter, Reagan proved it” — Vice President Dick Cheney

The fraud republican party, sooner it dies, better for the humanity.

TRUMP!!

I think you may have stumbled on to something as a theme song for Hillary. A song also on the page the Cheryl Lynn song was on. Carl Carlton, She’s a Bad Mamajama:

https://m.youtube.com/watch?v=6QIw1BQIvT4

What say you Lolas?

William Kristol spent all weekend volunteering his time with the Wounded Warriors Project.

Crocodile tears.

Was the Arab Spring a good thing?

I have been in Loveland the whole week, went to Cheyanne. I did notice lots of young people here and there are hardly any blacks or browns. Btw Denver is one of the best airports.

What have you done with the poors are olds in Colorado??

The Economist
Finance and economics
Buttonwood
Picnic for the bears
Fears of deflation and recession hit markets
Jan 16th 2016

GLOOM seems to have descended at the start of 2016. Equity markets have had the worst start to the year in at least two decades. The great and the good have queued up to warn of the dangers ahead.

George Soros, a fund manager, said the Chinese financial environment reminded him of 2008, when the financial crisis was at its height. Larry Summers, a former American treasury secretary, declared in the Financial Times: “The global risk to domestic economic performance in the US, Europe and many emerging markets is as great as any time I can remember.” George Osborne, Britain’s chancellor, spoke of a “cocktail of threats” facing the global economy.

The chart shows a number of indicators of concern, from rising credit spreads (the interest-rate premium paid by risky borrowers) to slumping stockmarkets in the emerging world. Investors have many worries. The first is that the Chinese economy is weaker than the GDP statistics suggest. Falling commodity prices, the collapse in the Baltic Dry index (which tracks the cost of shipping bulk goods) and the sluggish growth of global trade can all be seen as signs of weakness. Given China’s importance to global growth, this means that 2016 may turn out to be yet another year when growth disappoints.

Mr Soros sees a parallel with 2008 in the rapid credit growth in China and other emerging markets. If growth slows, borrowers may be unable to repay their debts. Similarly, emerging-market companies that have borrowed in dollars may be in trouble if their currencies depreciate. Asian nations might be forced to devalue if China lets the yuan fall sharply (see Free exchange).

The second concern is that the Federal Reserve might have miscalculated when it pushed up interest rates in December—the first increase since 2006. The employment numbers in America may still be strong, as December’s muscular payroll numbers showed, but the labour market is a lagging indicator. The Atlanta Fed’s nowcasting model suggests that GDP growth in the fourth quarter was just 0.8% at an annualised rate. Manufacturing looks weak: the purchasing managers’ index has been below 50 (which signals contraction) for two straight months.

A related worry is that the global economy has become over-dependent on the stimulus provided by low interest rates and quantitative easing (QE). Such policies may have saved the world from another depression, but they have not led to a return to pre-crisis growth rates. Moreover, by pushing up asset prices, they have spurred inequality. Nor has the problem of high debt levels been eliminated; the debt has simply been shifted from the private to the public sector. A swift return to what used to be thought of as “normal” interest rates (3-4%) would prove crippling.
…

Picnics are socialism.

“I am a militaristic person” — Donald Trump, New Hampshire, 1/16/2016

Bear market is here—expect another 15% plunge: Technician
Amanda Diaz
18 Hours Ago
CNBC.com
More downside ahead for S&P 500?

Stocks were hit by a rush of selling this week that landed all major indices back in correction territory. The S&P 500, Dow and Nasdaq are down a respective 12 percent, 12.7 percent and 12.4 percent from their 52-week high. As investors weigh on whether stocks will resume their bull run, one technician warns there could be significant downside ahead.

“Our 2016 outlook was ’stealth bear market is revealed’ and we think very quickly that it’s becoming apparent that we are in a bear market,” Jonathan Krinsky, MKM Partners’ chief technician, told CNBC’s “Fast Money” recently. “The S&P 500 is now down more than 11 percent from its May high.”
…

BloombergBusiness
Mideast Stocks Plummet as Iran Plans to Boost Crude Exports
Tamim Elyan
Yaacov Benmeleh
Deema Almashabi
January 16, 2016 — 9:56 PM PST
Updated on January 17, 2016 — 6:43 AM PST
An Iranian technician works on an offshore oil platform in the Gulf waters
Photographer: Behrouz Mehri/AFP Photo/Getty Images

Abu Dhabi shares tumble, enter so-called bear market
Iranian stocks buck regional decline as sanctions eased

Stocks across the Middle East tumbled as the easing of sanctions against Iran raised the prospect of a surge in oil supplies to a market already reeling from the lowest prices in more than a decade. Shares in Tehran gained.

Saudi Arabia’s Tadawul All Share Index dropped 5.4 percent to its lowest level since March 2011. Abu Dhabi’s ADX General Index fell into a so-called bear market. The Bloomberg GCC 200 Index, which tracks 200 of the six-nation Gulf Cooperation Council’s biggest companies, traded at 9.5 times estimated 12-month earnings, the lowest in almost seven years. Iran’s TEDPIX Index climbed 0.9 percent, according to data on the bourse’s website, extending Saturday’s 2.1 percent advance.
…

Not unfair, and neither are comparisons of Hillary to Stalin.

America isn’t a country, it’s a game.

hahahahhaa. “Professor” Butthurt J. Obsession.

He’s more of a Mussolini… dat insecurity and constant need for external validation.

Comparisons of Hillary to the Wicked Witch of the West are grossly unfair to the latter.

Isn’t it disingenuous to leave out that it is simply a temporary pause? not that you are rational or objective or anything.

“call to ban Muslims from America”

You should at least start with the truth, which you didn’t do.

‘And it is not just in the context of Palestine and Israel that Mrs. Clinton demonstrates either gross ignorance, or gross dishonesty. Her essay also contained these pearls of wisdom: “We must work with our friends and partners to deny ISIS territory in the Middle East, dismantle the global infrastructure of terror, and toughen our defenses at home. We can’t just contain ISIS – we must defeat ISIS.”

‘Is that really the U.S.’s goal? Garikai Chengu, a researcher at Harvard University, suggested in September of 2014 that ISIS “is made-in-the-USA, an instrument of terror designed to divide and conquer the oil-rich Middle East and to counter Iran’s growing influence in the region.”

I’m traveling this weekend and I have a TV on. The only news channel is Fox. Newt Gingrich is leading a segment called ISIS in America. Before that there were very attractive blonds in short skirts holding puppies while a non-stop crawl across the bottom went on about Islam this and that. I’m sure I am going to be told we need a 100 year war against bee stings. This is why I don’t have TV. at home

nobody will watch that boring debate.

Democrats hide presidential candidates in weekend debates

Posted January 14, 2016 - 7:24pm

The Democrats, on the other hand, have scheduled only four debates. While the first one in October was on a Tuesday, the last two have taken place on Saturday nights when far fewer people have been watching. The November debate drew roughly a third of the viewers of the first Republican debate, and the only December debate took place on December 19, smack-dab in the middle of holiday shopping season and (even worse) the opening weekend for the latest “Star Wars” film.

When asked about the date for the December debate, Sen. Sanders spokesman Michael Briggs joked that Christmas Eve must have been booked. Democratic candidate Martin O’Malley, who lags considerably behind in the polls and could use increased exposure, said he thought the scheduling was due to “a false sense that they have to circle the wagons around the inevitable front-runner.”

Even left-leaning publications such as The Nation have pointed out that the DNC’s poor strategy has kept its candidates out of the limelight, and says the party “needs to schedule more debates on more nights when more Americans are watching.”

That won’t happen in time for the next Democratic debate, in Charleston, S.C., on Sunday night. That day features two NFL playoff games and is a full month before the South Carolina primaries.

After looking at the debate calendar, the only plausible conclusion is that Ms. Wasserman Schultz and the DNC are playing “hide the ball” with their candidates — because they don’t want people to see their candidates.

Trump or no Trump, can you really blame them?

http://www.reviewjournal.com/…rial-democrats-hide-presidential-candidates-weekend-debates - 172k -

Motels, cabs, overflowing warehouses of chinese cell phones and…………. chicken.

Anything else to add?

e-chipolte ?? LOL…That was funny Ben…

Are you a Trump slogan bot?

Barney Saunders is not a socialist because he doesn’t advocate state ownership, only leasing.

Dortmund police official Kim-Ben Freigang said the suspects told the police that “such persons must be stoned.”

I guess they don’t want to join the rainbow, hold hands and sing Kumbaya,

Fundamental transformation means we need to break a few eggs to make the omlette.

I’d take Bernie over Hillary any day. At least he seems to have some basic principles and concern for the 99%.

If it includes a prebate to protect people at the bottom and doesn’t add to the deficit, then it must raise taxes on people in the middle.”

At this point Huckabee starts blowing his dog whistle.

She said it’s not a convenient store of value, in that it’s not very convenient to obtain, transport, and store hundreds of thousands of dollars in cash *, but that she’s surprised more Europeans haven’t done it due to negative interest rates.

Apparently the usual suspects (zerohedge, Santelli) have decided this one is worthy of selective outrage. I guess they’ve taken it to mean that inflation is coming, although that certainly didn’t seem to be her point.

* Sounds like an argument for bitcoin, to me.

When using a credit card to purchase something, one is actually asking for permission to buy that thing.

I get a lot of “special offer extended” emails.

Curtis Mayfield & the Impressions — We’re A Winner:

https://www.youtube.com/watch?v=5jJEy9US-gc

Peyton is a class act.

Did you see what he did with that game ball?

Trump is too big to fail.

BloombergBusiness
China’s Stock Strategists Are Bracing for a Deeper Bear Market
Bloomberg News
January 17, 2016 — 4:38 PM PST
Updated on January 17, 2016 — 6:39 PM PST
An investor uses a computer terminal to check stock prices at a securities company in Beijing. The stock selloff is a setback for President Xi Jinpingas his government attempts to shore up growth and control the gradual globalization of China’s markets.
Photographer: Wang Zhao/AFP/Getty Images

There will be little let up for investors in China’s beleaguered stock market.

That’s the consensus of strategists interviewed last week as the benchmark Shanghai Composite Index fell into a bear market on waning confidence that the government can manage the country’s transition to a new growth model and to a more freely-traded currency.

Analysts from Bocom International Holdings Co. and Wells Fargo Funds Management say the index may drop 14 percent from Friday’s close to 2,500. Zhongtai Securities Co. sees the gauge losing as much as 300 points, or 10 percent, before bottoming out. Phillip Securities and Central China Securities Co. expect more selling pressure even after the Shanghai Composite sank 3.5 percent to 2,900.97 on Friday, falling 21 percent from its December high.
…

The Wall Street Journal
Markets
China’s Securities Czar Casts Wide Blame for Market Turmoil
Xiao Gang blames volatility on immature market, inexperienced investors, flawed mechanisms and inappropriate supervision
Jan. 17, 2016 5:27 a.m. ET

What’s wrong with China’s stock market?

Just about everything, according to a statement from Xiao Gang, the country’s chief securities regulator, delivered at a national meeting of Chinese securities officials and posted on his agency’s website
Saturday.
…

China expected to post worst annual growth in 25 years
by Sophia Yan
January 17, 2016: 9:04 PM ET
Student hit hard by China stock market

Ouch! As global markets nervously look on, China is expected to post its worst annual economic growth in 25 years, according to a CNNMoney survey of economists.

Gross domestic product is predicted to have expanded by 6.9% in 2015, compared with the previous year, based on the survey’s median estimates. Growth for the last quarter is also estimated to come in at that rate.

That would represent China’s weakest yearly growth since 1990, and falls a hair below the government’s target of 7%. For 2016, economists are forecasting even weaker growth of 6.5%, according to the survey.

The official GDP data will be published by China’s National Bureau of Statistics on Tuesday.

After years of breakneck expansion, the world’s second-largest economy is now cooling fast, partly because of government efforts to shift China’s growth engine away from manufacturing and toward the services sector.

“We expect growth to hit bottom in 2016,” with choppy waters likely to remain over the next few years, said Xingdong Chen, an economist at the bank BNP Paribas. But “the service industry will continue to overtake growth in manufacturing, mining and public utilities,” he said, a move experts suggest is necessary for continued economic health.
…

China’s Economy Grew About 1% In 2015
Gordon G. Chang
Contributor
I write about Asia, especially the Chinese economy.

Tuesday, China’s National Bureau of Statistics releases its first estimate of 2015 gross domestic product.

Premier Li Keqiang on Saturday said growth last year came in around 7% for 2015, which was his target, announced last March.

Analysts polled by Reuters peg growth at 6.9%, which would be the lowest rate in 25 years.

Indicators for the year, however, point to a number in the low single digits, perhaps 1%.
…

Markets
China’s High Stock Valuations Worry Investors
Even after drop in mainland shares this year, price-to-earnings ratios are much higher than in U.S. and Europe
By Chao Deng
Jan. 17, 2016 1:15 a.m. ET

HONG KONG—The plunge in Chinese stock markets this year has already grabbed global attention. Judging by the frothy prices at which shares there still trade relative to their earnings, they could have further to fall.

The main index of Shanghai, China’s biggest stock market with a total value of $3.7 trillion, has already dropped 18% this year, to its lowest level in more than a year. Still the median stock traded in Shanghai is valued at 24 times the profit analysts expect the company to generate this year.
…

MAYHEM
What are China’s stocks really worth? No one knows for sure
When will I see you again? (Reuters/Bobby Yip)
Written by Richard Macauley
Obsession
China’s Transition
3 hours ago

Last Thursday (Jan. 14), the Shanghai Stock Exchange briefly fell below even the lowest point of last year’s rout. And yet by the day’s close, it was up by a neat 2%.

It is unlikely that such a miraculous turnaround came from a change in investor sentiment. More likely is the possibility that the government stepped in to force regulators and major funds to buy stocks and prop up the market, as it did last year.

But subsequent falls in the stock market have proven that the government is either unable or unwilling to provide an artificial floor for share prices. And that raises the question: How far could China’s stocks fall?

In a normal market, an answer could be sketched out by assessing the extent to which stocks are overvalued, and there are a couple of ways to do that. But it is worth noting that China’s stock markets don’t appear to have any link to real-world economics, making an attempt to guess their potential movements essentially an academic exercise.
…

Business
Plunging China stocks: 2,500 points is possible, says analyst
China’s battered stock market may be headed for another major drop to 2,500 points very soon, says an analyst from spread betting firm IG. This prediction marks a 13 per cent downside from current levels.
By Tang See Kit, Channel NewsAsia
Posted 18 Jan 2016 12:08
Updated 18 Jan 2016 12:54
Investors look at screens showing stock market movements at a securities company in Beijing.
AFP PHOTO / FRED DUFOUR

SINGAPORE: With the selloff in Chinese shares showing no signs of stopping, one analyst is predicting that the battered stock market may be headed for another major leg down to 2,500 points very soon.

In early trade on Monday (Jan 18), the Shanghai Composite index was last seen flat at 2,903.33 points, after swinging between gains and losses at the market open.

Last Friday, the key index fell more than 3 per cent to close at its lowest level since December, and officially entering bear market territory. Two days prior to that, the Shanghai Composite fell below the key psychological level of 3,000 points.

The last time the index went below that key support level was in August 2015, when a summer market rout wiped out US$5 trillion of value. Following that, mainland authorities stepped up efforts to stem selling and revive investor confidence by unleashing an unprecedented slew of supportive measures.

However, renewed volatility since the start of 2016 has wiped out the gains from the government-led recovery. Analysts attributed the markets’ dismal start to persistent investor concerns over the health of the world’s second-biggest economy, turbulence in the Chinese yuan as well as a perceived botched effort by Chinese authorities to manage the stock market via a “circuit breaker” mechanism.

The circuit breakers, which came into effect on Jan 4, was scrapped four days after implementation, and market watchers have criticized the newly-minted system for amplifying panic among investors.

“Bad policies such as the scrapped circuit breakers really damaged people’s confidence in the government’s ability to handle the capital markets,” Angus Nicholson, market analyst at spread betting firm IG, said in a telephone interview. “Economic data also show that the economy clearly hasn’t recovered just yet and that has amped up risk selling.”
…

Political Science
One Weird Trait That Predicts Whether You’re a Trump Supporter
And it’s not gender, age, income, race or religion.
By Matthew MacWilliams
1/17/2016

If I asked you what most defines Donald Trump supporters, what would you say? They’re white? They’re poor? They’re uneducated?

You’d be wrong.

In fact, I’ve found a single statistically significant variable predicts whether a voter supports Trump—and it’s not race, income or education levels: It’s authoritarianism.

That’s right, Trump’s electoral strength—and his staying power—have been buoyed, above all, by Americans with authoritarian inclinations. And because of the prevalence of authoritarians in the American electorate, among Democrats as well as Republicans, it’s very possible that Trump’s fan base will continue to grow.

My finding is the result of a national poll I conducted in the last five days of December under the auspices of the University of Massachusetts, Amherst, sampling 1,800 registered voters across the country and the political spectrum. Running a standard statistical analysis, I found that education, income, gender, age, ideology and religiosity had no significant bearing on a Republican voter’s preferred candidate. Only two of the variables I looked at were statistically significant: authoritarianism, followed by fear of terrorism, though the former was far more significant than the latter.

Authoritarianism is not a new, untested concept in the American electorate. Since the rise of Nazi Germany, it has been one of the most widely studied ideas in social science. While its causes are still debated, the political behavior of authoritarians is not. Authoritarians obey. They rally to and follow strong leaders. And they respond aggressively to outsiders, especially when they feel threatened. From pledging to “make America great again” by building a wall on the border to promising to close mosques and ban Muslims from visiting the United States, Trump is playing directly to authoritarian inclinations.
…

Letter: Trump a great Republican, if you’re a Democrat
First Published Jan 17 2016 05:00AM
Last Updated Jan 17 2016 05:00 am

I’m not sure what all of the “brouhaha” over Trump is all about. Personally, I think he makes a wonderful Republican candidate.

First, like Reagan (who nearly tripled the national debt) and G.W. Bush (who more than doubled it), Trump’s tax plan and his plans to deport 12 million illegal immigrants, build a wall and bomb ISIS would, according to the GAO, more than double our burgeoning national debt.

Next, like the un-statesmanlike, warmongering Bush, Trump has already been declared persona-non-grata from Mexico (who he says sends us their murderers and rapists) and Great Britain (one of our strongest allies).

Of course, he wants to trample the religious rights of all Muslims and deny women their rights to fair treatment — to hell with the Constitution! Unless, of course, it’s background checks for firearms sales. Then he’ll scream for the Second Amendment.

And, like our state legislators, when it comes to health care for those who cannot afford it, he tells his followers to throw a heckler out in the cold with no jacket. True Republican empathy in action.

Yep, he’s a great Republican. And his candidacy would almost guarantee another Democrat in the White House.

Larry LaCroix
Lehi

Congressional Republicans look to distance themselves from Donald Trump
By Manu Raju, Deirdre Walsh and Ted Barrett, CNN
Updated 5:09 PM ET, Thu January 14, 2016

Baltimore (CNN)
Republicans in Congress are increasingly looking to distance themselves from Donald Trump, calling on their party to showcase a more inclusive tone and agenda than what the GOP front-runner is presenting on the campaign trail.

At the GOP’s congressional retreat here, some Republicans publicly and privately began warning that they would not unite behind Trump, highlighting the growing rift that threatens to torpedo their chances of retaking the White House and keeping control of the Senate.

“This is a time of turmoil, the likes of which we’ve never seen no matter how long we’ve been in the game,” said Sen. John McCain, the party’s 2008 presidential nominee. He said in an interview that he’d back the eventual nominee but “obviously (Trump) would not be my selection.”

“I think I prefer others who have a better grasp in my view of the challenges we face,” McCain said, adding that he will stay neutral through the duration of the primary.

Rep. Adam Kinzinger of Illinois said he “would have to do a lot of soul-searching” if Trump became the nominee, suggesting he’d need to separate himself from the top of the ticket. Kinzinger, a Jeb Bush supporter, said he was “very concerned” about the rhetoric from Trump and what it would mean in a general election.

“I think his tone has been bad — it’s not an inclusive tone,” said Kinzinger, a leading moderate. “Only 30-something percent, maybe of Americans identify as Republicans, which means to win a national election you have to reach out.”

House Speaker Paul Ryan said party leaders would back a Trump nomination, but he made a veiled critique at the divisive rhetoric espoused by the businessman. “We don’t want to have another President like this one who divides our country,” Ryan told reporters.
…

He’s an effective enrager too.

Many long-time posters here predicted prices would revert to historic norms by 2013 or so. It seems they collectively underestimated the lengths to which the Bernanke Fed would go to prop up asset prices, including housing, for an extended period of time.

Of course, Bernanke is long gone at this point; who knows where and when this will go from here?

China
China Isn’t the First to Fumble a Stock Panic
5 Jan 13, 2016 1:23 PM EST
By Stephen Mihm

The Chinese authorities’ seemingly capricious decision last week to trigger circuit breakers, and then to rapidly remove them, added to the chaos in the country’s stock exchanges and intensified unease about the world’s second-largest economy and its commitment to free markets.

China’s Managed Markets

China has been roundly criticized for its hit-or-miss approach to keeping excessive volatility in check. Yet it may be worth recalling that similar mechanisms to halt trading when share prices drop or rise too precipitously are in place in many countries, including the U.S., and were developed over more than a century of trial and error.

The current system, which briefly suspends trading on the New York Stock Exchange in the event of swings between 7 percent and 13 percent and shuts the market for the day when the swings reach 20 percent, resulted from the so-called Black Monday crash of 1987. Before then, closures of the stock exchange took place, but in a more ad-hoc fashion: the five-day hiatus in 1933, imposed alongside Franklin Roosevelt’s famous bank holiday during the depths of the Great Depression; and the lengthy closure throughout the fall of 1914 at the outbreak of World War I.

Those circumstances, however, differ from the recent turmoil in China because the suspensions and shutdowns were triggered by events unrelated to normal day-to-day trading (for 1987, a computer glitch, and in the other two cases, political, economic and foreign crises).

Instead, the best parallel for the China meltdown is the very first closing of the New York Stock Exchange during the panic of 1873. That incident, like the one in China, took place against the backdrop of huge overinvestment in infrastructure (mostly railroads, heavily subsidized by the federal government) and a highly leveraged financial sector.

In the summer of 1873, a few ominous tidings had snowballed into a more serious panic on Wall Street. Still, until September of that year, most market watchers remained confident that a crisis could be averted.

Then came the collapse of Jay Cooke and Co., one of the leading investment banks. When news reached the floor of the New York Stock Exchange, the traders became unhinged. The New York Tribune reported that “a monstrous yell went up and seemed to literally shake the building in which all these mad brokers were confined.”

The trading floor became the backdrop for scenes of desperation, as stocks found no buyers and prices plummeted. Still, most traders resisted closing the exchange: a broker who floated the idea on Friday, Sept. 19 was “hooted at and reviled” by his fellows, the Tribune reported.

By the next day (the stock exchange operated on Saturday during this era) the mood had shifted. A delegation of brokers went to Vice-Chairman M.A. Wheelock, demanding that he halt trading. He demurred, arguing that only the Governing Committee could shutter the exchange.

Traders then took matters in their own hands. They huddled around a large oval table and passed a resolution that declared the exchange closed, giving authority to the Governing Committee to reopen it. Faced with this rebellion, the committee officially halted trading — for the first time in the history of the exchange.

The closure was controversial. But many observers thought there was no other option. Indeed, after shuttering the exchange, Wheelock told a reporter that he believed it should have been closed a day earlier: “If it had been done, the majority of the firms that suspended this morning would have been rescued from ruin, and millions of dollars saved.”

President Ulysses S. Grant arrived in New York a few hours after the closing, as did Secretary of the Treasury William Richardson. The city’s leading financiers begged the federal government to intervene, and it did: Richardson began buying federal bonds on Monday to inject liquidity into the market.

For most market observers, pragmatism trumped idealism. The New York Times, for example, argued that the only way to halt the panic was to shut the site of the brokers’ “suicidal struggle” until the storm had passed. “It is not necessary now to discuss the question of whether the remedy was not worse than the disease, or whether the evil would have not cured itself, had it been allowed.”

In any case, the remedy worked. On Monday, the Times reported that the panic had begun to subside “in consequence of the wise expedient of closing the Stock Exchange, and of the favorable results following the actions of the Government.”

The exchange reopened Tuesday, Sept. 30, and prices moved upward. The makeshift circuit breaker had worked, though stock prices would decline again in the ensuing weeks, but without the same level of hysteria that had accompanied the original panic.

There’s a coda to the story that should give pause to anyone who believes that circuit breakers, whether old school or new school, can avert disaster. In 1873, the stock market panic subsided. On the other hand, the larger economy, burdened by massive overinvestment in railroads and other industrial ventures and dangerous levels of debt, slipped into one of the worst depressions the country had ever endured. It lasted until 1879.
…

Opinion Review & Outlook
The China Panic
Policy disarray is leading to fears of a deeper economic slide.
A stock market in Huaibei, Anhui province, east China on January 7.
Photo: Zhengyi Xie/Cpressphoto/ZUMA Press
Jan. 7, 2016 7:39 p.m. ET

Have China’s leaders lost the plot? With stock-market gyrations, a weakening currency and mixed signals on reform, Beijing’s reputation for technocratic competence is depreciating faster than the yuan. This has global markets on edge, to say the least, as the likelihood of a “hard landing” for the Chinese economy grows.

This week’s Chinese stock crash was worsened by new circuit breakers. Halting trading is seldom a good idea, and in this case the thresholds were set so low that on Thursday the market opened for less than half an hour before the brakes kicked in. A frozen market can’t find a natural bottom so more investors panic, which has radiated through global markets in stocks and commodities. Late Thursday China’s securities regulator said it would suspend the circuit breakers starting Friday, which is good news.

The stock market is also hostage to the opaque politics of Beijing. The Communist Party’s boosterism when stock prices more than doubled from late 2014 to early 2015 left it vulnerable to public anger after June’s initial crash. Fearful of being blamed for investors’ losses, officials forced government-linked institutions to buy and hold stocks to support the market. Now those holdings hang over the market, and fears they might be sold contributed to this week’s crash.

In August the People’s Bank of China (PBOC) suddenly announced a new method of setting the yuan’s daily fixing rate and allowed the currency to fall by 1.9% in a day. That poorly orchestrated move sparked fears of competitive devaluation.

Central bank officials reassured investors that the PBOC would keep the exchange rate stable and that there would be no large devaluation. But the yuan’s sudden fall over the past few days has reignited those fears. The Chinese currency has fallen 5.8% against the dollar since August.

Assumptions that Beijing would deploy fiscal and monetary stimulus to keep GDP growth at the target 7% rate have also proved wrong. A Communist Party magazine quoted General Secretary Xi Jinping last Friday speaking against stimulus: “China cannot rely on extensive development and strong stimulus to achieve these targets, otherwise the country will repeat the old path, and then create new contradictions and problems.”

The PBOC has also sent mixed signals on monetary policy. While officials say they have plenty of tools to support the economy, in practice the central bank has only replaced liquidity lost as capital leaves the country. Real interest rates are relatively high.

But monetary easing is complicated by capital flight. The U.S. Federal Reserve’s interest-rate rise last month has caused the dollar to strengthen, and aggressive PBOC easing could exacerbate capital outflows and put more pressure on the yuan. China’s reserves stand at $3.3 trillion, but it used $108 billion defending the yuan in December, the biggest monthly drop since 2003. In theory capital controls should limit money leaving, but China’s wealthy can bypass them.

Meanwhile the slowing economy has exposed the excesses of the post-2008 credit boom. In response to the global panic, Beijing deployed $586 billion in stimulus, largely on infrastructure. It also encouraged lending for housing construction and purchases, creating a bubble in smaller cities. The borrowing pushed China’s debt-to-GDP ratio above 240% from 160% in 2007. Star banking analyst Charlene Chu predicted last year that nonperforming loans will top 20% of total assets during this deleveraging cycle.
…

Posted January 7, 2016 - 10:42pm
World stock markets slide as panic in China spreads
By Simon Denyer and Renae Merle
Washington Post

BEIJING — Global stock markets fell for a sixth day Thursday as another collapse in China’s ailing share market spread like contagion across the world.

It all began on Thursday in a flash.

Chinese stocks traded for less than 30 minutes, slumping 7 percent before triggering the second emergency market closure this week and generating talk of a crisis.

In Europe, the FTSE 100 index fell 2.5 percent in early London trading, while Germany’s Dax index slipped 3.5 percent.

In the United States, stocks fell more than 2 percent. The Dow Jones industrial average, which tracks 30 blue-chip stocks, and the Standard &Poor’s 500, a broader measure of the market, were both down about 2.3 percent. The tech-heavy Nasdaq suffered the deepest losses, falling 3 percent.

The selloff was widespread, even hitting tech giants Apple and Amazon, which were down 4 percent and 3.7 percent respectively.

JPMorgan Chase slid 4 percent, while Nordstrom tumbled 5.5 percent.

Against a backdrop of a weak economy and, some argue, an overvalued currency, confidence in China had long been in short supply.

But investors also blamed ill-considered and poorly explained moves by the authorities for fueling the panic this week.

Market confidence was dented early Thursday by a sharp devaluation in the Chinese currency, which was interpreted as a sign that the authorities are becoming increasingly rattled about the nation’s ailing economy.

Weak economic data had sent share prices plunging precipitously Monday, and government intervention to prop up the market by buying shares the following day did little to restore investor confidence.

“The bottom line is the market is not supported by fundamentals,” said Andy Xie, an independent economist based in Shanghai. “People in the know want to get out.”
…

Brent oil taps under $28 a barrel as investors brace for Iran oil
Published: Jan 18, 2016 3:02 a.m. ET
Next headwind for markets: China’s GDP data on Tuesday
Reuters
The port of Kalantari in the city of Chabahar, Iran
By Biman Mukherji

Crude oil futures extended a fall below $30 a barrel on Monday, as the removal of sanctions over Iranian oil exports sparked concerns that oil prices would move even lower amid a global glut.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February (CLG6, -1.94%) were recently trading at $28.67 a barrel, down 75 cents, or 2.5%, in the Globex electronic session. February Brent crude (LCOH6, -2.00%) on London’s ICE Futures exchange fell 80 cents, or 2.7%, to $28.14 a barrel, but overnight fell to as low as $27.67 a barrel.

U.S. stock and bond markets are closed Monday for the Martin Luther King Jr. holiday, but oil futures will trade during the New York morning via Globex. Trading in all Globex contracts will be halted from 1 to 6 p.m. Eastern.

The prospect of Iran’s resumption of exports has spooked investors in oil futures, which have lost more than a fifth of their value since the beginning of the year, falling below $29 a barrel for the first time in a decade. Analysts say crude-oil prices may drift lower to $25 a barrel or lower in coming weeks.
…

“Nothing Is Moving,” Baltic Dry Index Crashes as Insiders Warn International “Commerce Has Come To a Halt”
By Tyler Durden
Global Research, January 16, 2016
Zero Hedge 16 January 2016
Theme: Global Economy

The continued collapse of The Baltic Dry Index remains ignored by most – besides we still have Netflix, right? But, as Dollar Vigilante’s Jeff Berwick details, it appears the worldwide ‘real’ economy has ground to a halt!!

Last week, I received news from a contact who is friends with one of the biggest billionaire shipping families in the world. He told me they had no ships at sea right now, because operating them meant running at a loss.

This weekend, reports are circulating saying much the same thing: The North Atlantic has little or no cargo ships traveling in its waters. Instead, they are anchored. Unmoving. Empty.

You can see one such report here. According to it,

Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving.

This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped.

We checked VesselFinder.com and it appears to show no ships in transit anywhere in the world. We aren’t experts on shipping, however, so if you have a better site or source to track this apparent phenomenon, please let us know.
…

Heard of the Baltic Dry Index? Analysts warn 70% crash of key world trade barometer to record low shows global economy is grinding to a halt
By Hugo Duncan for the Daily Mail
Published: 16:57 EST, 15 January 2016
Updated: 09:03 EST, 16 January 2016

A key barometer of world trade has crashed to a record low in a worrying sign the global economy is grinding to a halt.

The so-called Baltic Dry Index, which measures the cost of shipping raw materials such as coal, iron ore and grain, has fallen nearly 70 per cent since August to its lowest level since its introduction in 1985.

The slump – which analysts said showed ‘global trade is really suffering’ as the outlook worldwide darkens – fuelled fears that the economy is heading for the rocks.
…

Baltic Dry Index
BDIY:IND
373.00
-10.00
-2.61%
As of 07:59:24 ET on 01/15/2016.
Before it’s here, it’s on the Bloomberg Terminal.
Open 373.00
Day Range 373.00 - 373.00
Previous Close 383.00
52Wk Range 373.00 - 1,222.00
1 Yr Return
-49.66%
YTD Return
-21.97%

Baltic Dry Index falls to 373, down 10 points,
in Dry Bulk Market 15/01/2016

Baltic Dry Index is compiled by the London-based Baltic Exchange and covers prices for transported cargo such as coal, grain and iron ore. The index is based on a daily survey of agents all over the world. Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on Friday, January 15 2016, when the index dropped to 373 points.

Source: Hellenic Shipping News Worldwide