Global Market Commentary, Analysis and Investments
The world’s “faith-based” monetary system is breaking down before our eyes. Don’t be caught off guard.
Last week’s euphoria over the Euro bailout turned around sharply this week on news that the political situation in Greece is worsening. That’s been the pattern for months.
The grim reality is that “rescue plans” can’t fix what’s broken. The Western nations are suffocating under mountains of debt…and there are only two known “cures”: default or inflation.
[Read more...]They just don't make earnings like they used to. In many industries, the quality of earnings has deteriorated in recent quarters.
Banks are among the worst offenders. On the downside of the biggest credit cycle in history, many banks are slowing the pace at which they're provisioning for credit losses. Some banks are even reversing their loan-loss reserves and adding these accounting adjustments to their net profits.
[Read more...]As Wall Street's big money players return from the Hamptons in the coming weeks, they will have to reassess the earnings power of their portfolio companies. Last week, Staples confirmed the message we heard from Office Depot and Office Max: the small business sector as a whole isn't very healthy. Disappointing earnings from Dell dampen the mood even further.
[Read more...]The stock market still has further to fall to catch up with the slowing economy. US GDP will keep decelerating – likely approaching a zero percent growth rate by 2011 – for the following reasons:
1. The long-term trend back towards consumer frugality and higher savings rates remains in full force. This will dampen consumer spending.
[Read more...]Credit risk always seems to come out of nowhere. But usually it comes out of somewhere…like the dirty, little recesses of a bank's balance sheet – the places where bankers hide all their unrecognized losses.
Ever since the suspension of rigorous mark-to-market accounting rules one year ago, banks have gained the ability to “time? their credit losses. This development does not feel like progress. Banks now possess the ability to defer embedded credit losses for a very long time, in the hopes that a “typical? postwar rebound in house prices and employment comes to fruition. But that's not happening. In fact, housing and employment conditions are worsening. As a result, the US banking sector has been piling up an enormous stash of unrecognized credit losses.
[Read more...]Market internals remain bearish. The rush to cut portfolio risk remains intact. Here is a two-year chart of the S&P 500 (in red) and the iShares High-Yield Corporate Bond ETF (HYG):
Print…Ready…Aim
All central banks are desperate to stop stress from building in the global banking system. Despite what they say, job No. 1 of every central bank is to do whatever it takes to prevent a disorderly collapse of banks caused by “bank runs.” These central bankers are crazy, and nothing will stop them from supporting the status quo.
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