Tag: Recession

Ticking Time Bomb: Is This Powell’s “Subprime Is Contained” Moment?

Authored by Sven Henrich via NorthmanTrader.com,

I’m of the long standing view that Fed chairs have one prime responsibility above all others: Keeping confidence up, and if it requires to sweet talk problems then that’s what it takes.

The often classic quote by Ben Bernanke of “subprime is contained” right before it blew up in everybody’s face being a prime example.

Is the Fed that blind to reality or just on an elaborate marketing mission to ensure that nobody panics and sells stocks? I leave that judgment to the reader.

But I can see differing messaging coming out the Fed when people are in office and when not.

Take corporate debt for example.

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This ‘catastrophe’ could be Trump’s downfall, Nobel-winning economist says

Via Marketwatch

‘[Trump] will surely try to stick to his public narrative, which has worked so well for so long. But a severe recession may be his undoing. And even before economic catastrophe strikes, the public may begin paying more attention to his aberrations — and to contagious new counter-narratives that crowd out his own.’

That’s Nobel-winning economist Robert Shiller explaining in an editorial for the Guardian published on Monday how a downturn in the economy could be what finally marks the ruin of Trump’s turbulent presidency.

“During a recession, people pull back and reassess their views. Consumers spend less, avoiding purchases that can be postponed: a new car, home renovations and expensive holidays,” Shiller continued. “Businesses spend less on new factories and equipment, and put off recruiting.”

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The Geopolitical Consequences of a Coming Recession

Guest Post by Antonius Aquinas

Irian Military

With the recent ominous inversion of the 2-10 year yield curve and its near infallible predictive recessionary power, the consequences for the economy are plain to see, however, what has not been spoken of by pundits will be the effect of a recession on US foreign policy.  If a recession comes about prior to November 2020, or if economic indicators such as GDP plummet even further, the chances of a Trump re-election is extremely problematic even if the Democrats nominate a socialist nut case such as Bernie Sanders or Pocahontas.

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FOURTH TURNING ECONOMICS (PART TWO)

In Part One of this article I laid out the unsustainable economic conditions which will drive the next phase of this Fourth Turnings and detailed the economic factors which drove the previous three American Fourth Turnings.

Image result for fourth turning crisis

Strauss and Howe, when writing The Fourth Turning in 1997, did not know the exact circumstances and events which would propel the next Turning. But their study of economic and demographic trends along with the attitudes of generations and historical precedents in prior Fourth Turnings, led them to conclude the driving factors of this Crisis would be debt, global disorder and civic decay.

As I watch what is currently happening in this country and around the world, it is evident to me they nailed it. The volcanic eruption in 2008 unleashed a torrent of molten lava, which continues to flow along channels of distress, but is currently threatening to burst free of these channels and wreak worldwide financial and physical devastation. A multitude of possibilities described by Strauss and Howe below are already happening or will happen in the next few years.

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MANIAS DIE HARD

EVERY time we’ve reached this level in history, a recession followed shortly thereafter. We have already experienced the longest economic expansion in history. We will enter this next recession with the highest level of debt in history and a Fed with very few bullets left in their gun. So now must be the best time ever to buy stocks at all-time highs, when every valuation reading points to a 50% decline. Go for it baby!!! And don’t forget to buy on margin.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” ― Charles MacKay, Extraordinary Popular Delusions and the Madness of Crowds  

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U.S. Officials Meet in Secret Over Junk-Loan Frenzy as Recession Alarms Flash

Via The Street

The Financial Stability Oversight Council, a panel of top U.S. regulators charged with preventing future financial crises, met Thursday to discuss the past decade’s surge in corporate borrowing, much of it by companies with junk-grade credit rating. An economic downturn likely would bring a wave of credit-rating downgrades and debt defaults that could ripple across markets.

U.S. Treasury Secretary Steven Mnuchin on Thursday led a secret meeting of top U.S. financial regulators on the risks to global markets from the recent surge in corporate borrowing — a growing concern as fears mount that the economy might be headed for a slowdown or a recession.

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Time to Change Strategy

Guest Post by John Mauldin

Image result for Time to Change Strategy

My recent letters described what I think the future will look like. I hasten to add, it isn’t what I think the future should look like or what I want to see. Almost the entire developed world has painted itself into a corner.

It won’t necessarily be terrible. I don’t expect another Great Depression or economic upheaval, but we will have to adapt our portfolios and lifestyles to this new reality. The good news is the changes will happen relatively slowly. We have time to adapt.

In war movies, it’s common for the dashing leader to make bold promises like, “We will never retreat!” ahead of a glorious victory. The assumption is that retreat is bad. But real-life military strategists say retreat can be the right move. When the odds are against you, better to save your ammunition for another time. Better yet, adopt a new strategy that gives you a better chance.

My last few letters may look like retreat, but I’m just recognizing reality. There is no plausible path to stopping the world’s debt overload, much less paying it off, without a serious and painful purge. If you know of such a path, please share it with me, but I haven’t seen one. So I foresee a tough decade ahead.

Summing up:

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Recession. Revolution. Recovery.

Guest Post by Mike Krieger

– Saturn Devouring His Son (image above) is the name given to a painting by Spanish artist Francisco Goya. It depicts the Greek myth of the Titan Cronus, who, fearing that he would be overthrown by one of his children, ate each one upon their birth. 

Deny it all you want, but the global economy appears to be headed into recession. It became clear the cycle had started to turn once the FAANG stock bubble popped and the U.S. stock market plunged 20% late last year. The optimists among us insist this is merely a growth scare or blip as we saw in 2016, but that scenario looks increasingly unlikely.

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Markets Cheer a Recession?

Guest Post by Martin Armstrong

The rally in gold and the stock market together is demonstrating that eventually, we will see the alignment as it transforms from Public to Private assets. The most deranged reaction to the Federal Reserve saying they will be “patient” on any further rate moves, is just beyond all reason. But markets are not always rational – they tend to trade emotionally much of the time.

The Fed also said that it would be flexible on the path for reducing its balance sheet. The Federal Open Market Committee’s statement twice refers to “financial developments.” The actual passages Powell read the first one verbatim in his press conference

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Government shutdown exposes a harsh truth: Most Americans are unprepared for the next recession

Guest Post by Sven Henrich

The government shutdown, the longest in history, comes with a hidden revelation: Millions of Americans are financially unprepared for the next economic downturn. Worse, they are highly vulnerable, with few protections available to them.

Ten years after the financial crisis, the economic recovery has left millions behind with little to no savings, and the government shutdown serves as a preview for what will happen once unemployment rises from 50-year lows.

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2019 FROM A FOURTH TURNING PERSPECTIVE

“An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown. The president declares emergency powers. Congress rescinds his authority. Dollar and bond prices plummet. The president threatens to stop Social Security checks. Congress refuses to raise the debt ceiling. Default looms. Wall Street panics.” – The Fourth Turning – Strauss & Howe

Image result for budget impasse trump schumer

Strauss and Howe wrote their book in 1996. They were not trying to be prophets of doom, but observers of history able to connect events through human life cycles of 80 or so years. Using critical thinking skills and identifying the most likely triggers for crisis: debt, civic decay, and global disorder, they were able to anticipate scenarios which could drive the next crisis, which they warned would arrive in the mid-2000 decade. The scenario described above is fairly close to the current situation, driven by the showdown between Trump and the Democrats regarding the border wall.

It has not reached the stage where all hell breaks loose, but if it extends until the end of January and food stamp money is not distributed to 40 million people (mostly in urban ghettos) all bets are off. The likelihood of this scenario is small, but there are numerous potential triggers which could still make 2019 go down in history as a year to remember.

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BABY STEPS: You’ve Been Woke. Now Exit the Matrix.

By Doug “Uncola” Lynn via TheBurningPlatform.com

 

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‘Fallen! Fallen is Babylon the Great!  She has become a dwelling for demons and a haunt for every impure spirit……

Come out of her, my people, so that you will not share in her sins, so that you will not receive any of her plagues

– Revelation 18

 

There is an English salutation said to have been translated from a Chinese curse.  It states: May you live in interesting times. Well, like it or not, we do. There is so much insanity occurring every day, on a global basis, it is difficult to process.  So much so, that historians will one day look back on our time and scratch their heads in open-jawed, disbelief.

“Wait a minute,” they will say, “let us get this straight:”

Adam Schiff, the ranking member on the United States House Permanent Select Committee on Intelligence was overseeing an investigation into President Donald Trump’s alleged collusion with Russia because Trump was said to have obtained damaging information on Presidential Candidate Hillary Clinton; but, during the same time period, Schiff was engaged in obtaining damaging information from Russians on Presidential Candidate Donald Trump?

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Caution: Slowdown Ahead

Authored by Sven Henrich via NorthmanTrader.com,

Many of you know I keep posting charts keeping taps on the macro picture in the Macro Corner.

It’s actually an interesting exercise watching what they do versus what they say. Public narratives versus reality on the ground.

I know there’s a lot of talk of global synchronized expansion. I call synchronized bullshit.

Institutions will not warn investors or consumers. They never do.

Banks won’t warn consumers because they need consumers to spend and take up loans and invest money in markets. Governments won’t warn people for precisely the same reason. And certainly central banks won’t warn consumers. They are all in the confidence game.

Well, I am sending a stern warning: The underlying data is getting uglier. Things are slowing down. And not by just a bit, but by a lot. And I’ll show you with the Fed’s own data that is in stark contrast to all the public rah rah.

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Are We Already In Recession?

Authored by Charles Hugh Smith via OfTwoMinds blog,

If we stop counting zombies, we’re already in recession.

How shocked would you be if it was announced that the U.S. had just entered a recession, that is, a period in which gross domestic product (GDP) declines (when adjusted for inflation) for two or more quarters?

Would you really be surprised to discover that the eight-year long “recovery,” the weakest on record, had finally rolled over into recession?

Anyone with even a passing acquaintance with the statistical pulse of the real-world economy knows the numbers are softening.

— Auto/light truck sales: either down or off a cliff, depending on how much lipstick has been applied to the pig.

— Restaurant/dining sales: down.

— Tax receipts: down.

— Retail sales: flat, stagnant or down, depending on the sector and if the numbers have been adjusted for inflation/loss of purchasing power.

— Rents in high-rent regions: finally softening after years of relentless increases.

— Consumer debt: hitting new highs.

— Corporate profits: stripped of gimmickry, stagnant or down.

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An Indicator Of Peril

Authored by 720Global’s Michael Lebowitz, via RealInvestmentAdvice.com,

Thanks to Jesse Felder, we recently stumbled upon a measure of economic conditions that has reliably signaled every recession since 1948. The data point, Real Value Added, is currently in negative territory and may, therefore, be a harbinger of an economic downturn.  If it is a false signal, it would be the first in a 70-year history of observations.

720Global does not rely on any one data source to determine the pace of economic activity or to formulate recession probabilities. Instead, we analyze data from many different sources to help better understand the likely path of the economy. That said, when a single data source has an indisputable track record, we take notice and look for other corroborating evidence and bring it to your attention.

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Mauldin Warns The Next Recession May Be A Complete Reset Of All Asset Valuations

Authored by John Mauldin via MauldinEconomics.com,

Sometime this year, world public and private plus unfunded pensions will surpass $300 trillion. That is not even counting the $100 trillion in US government unfunded liabilities. Oops.

These obligations cannot be paid. A time is coming when the market and voters will realize this.

Will voters decide to tax “the rich” more? Will they increase their VAT rates and further slow growth? Will they reduce benefits? No matter what they decide, hard choices will bring political turmoil.

And that, of course, will mean market turmoil.

The Great Reset Will Cause a Horrible Global Recession

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