This chart is straightforward: It’s outstanding credit as a percentage of GDP. Broadly speaking, this is a measure of how leveraged the US economy is. It was in a sedate 130%–170% range as the economy industrialized in the late 19th and early 20th centuries. It popped higher in the 1920s and 1930s before settling down again. Then came the 1980s. Credit jumped above 200% of GDP and has never looked back. It climbed steadily until 2009 and now hovers over 350%. Absurd doesn’t do this situation justice. We are mind-bogglingly leveraged.
No one knows, however, one needs to think about it, because what is beyond questioning is this: We. Are. Here. And precisely at this confluence of possibilities, as in: Either we “dodge-the-bullet.” Or, the light of what seemed was at the end of the proverbial tunnel is actually a bullet-train and the “market” is straddled across the track doing its best imitation of a deer stuck in the headlights.
And so, in a report released on Tuesday “The Balanced Bear – Part 1: Low(er) returns and latent drawdown risk” this now bearish Goldmanite warns that in the medium-term, the two likely scenarios are either i) a “slow pain” deflation scenario of low yields and high valuations “which persist as macro is stable but there are less windfall gains from rising valuations and less carry – as a result, returns are likely to be lower across assets”, or ii) a “fast pain” drawdown scenario in which there is “either a material negative growth or inflation/rate shock, or a combination of both, which drives a drawdown in 60/40 portfolios.”
……And elevated valuations increase the risk of drawdowns for the simple reason that there is less buffer to absorb shocks. The average valuation percentile across equity, bonds and credit in the US is 90%, an all-time high. While equities and credit were more expensive in the Tech Bubble, bonds were comparably attractive at the time. The current valuation percentile is most comparably to the late ’20s, which ended in the Great Depression, and the ’50s.
As a government campaign tackling excessive leverage and financial risks chokes off some sources of buyer funding, such as consumer loans, developers could also find that credit is tighter next year. As dozens of cities maintain their curbs on property sales, new mortgages have dipped and funds for building have slowed. JPMorgan Chase & Co. sees a 6 percent decline in home sales in 2018.
Al-Hariri’s fall from grace came about because the Saudis were unhappy regarding his reluctance to directly confront Iranian influence, best demonstrated by Hezbollah’s unilateral participation in the civil war in neighboring Syria. The Saudis, who forced through a resolution at the Arab League last weekend declaring Hezbollah a terrorist organization, would like to have its political wing out of the government completely, an impossibility given its military and political power. Riyadh is also believed to be working with the Israelis to increase pressure and create a casus belli over Lebanon to justify direct action to isolate Hezbollah. And the ultimate target is Iran.
Over the past nine months, we’ve spent a lot of time explaining all of the myriad things wrong with Bitcoin as a “currency” and also with Bitcoin as an “investment”. The former discussion is more nuanced, but the latter is straightforward: it’s not an “investment” because i) there’s nothing there, and ii) because there’s nothing there, all you’re doing is betting that you’re not the last “fool” in the chain.
Much of the world is now embroiled in an economic game similar to pinball. The stakes are becoming ever greater, the flipper buttons are being pressed ever faster, and those who are desperately attempting to keep the collapsing system going are shoving the table ever more recklessly.
Did you know that the number of retail store closings in 2017 has already tripled the number from all of 2016? Last year, a total of 2,056 store locations were closed down, but this year more than 6,700 stores have been shut down so far. That absolutely shatters the all-time record for store closings in a single year, and yet nobody seems that concerned about it. In 2008, an all-time record 6,163 retail stores were shuttered, and we have already surpassed that mark by a very wide margin. We are facing an unprecedented retail apocalypse, and as you will see below, the number of retail store closings is actually supposed to be much higher next year.
What’s happening in Hungary is replicating itself across Eastern Europe. From Poland’s refusal to tow the EU line on immigration in line with Hungary’s very successful wall to the Czech President visiting Moscow, speaking Russian exclusively and saying that Russia is ‘ten times more important’ than France is.