What Really Happened In 2015, And What Is Coming In 2016…

A lot of people were expecting some really big things to happen in 2015, and most of them did not happen. But what did happen? It is my contention that a global financial crisis began during the second half of 2015, and it threatens to greatly accelerate as we enter 2016. During the last six months of the year that just ended, financial markets all over the planet crashed, trillions of dollars of global wealth was wiped out, and some of the largest economies in the world plunged into recession. Here in the United States, 2015 was the worst year for stockssince 2008, nearly 70 percent of all investors lost money last year, and it is being projected that the final numbers will show that close to 1,000 hedge funds permanently shut down within the last 12 months. This is what the early stages of a financial crisis look like, and the worst is yet to come.
If we were entering another 2008-style crisis, we would expect to see junk bonds crashing. When financial trouble starts, it usually doesn’t start with the biggest and strongest companies. Instead, it usually starts percolating on the periphery. And right now bonds of firms that are considered to be on the risky side of things are rapidly losing value.
In the chart below, you can see that a high yield bond ETF that I track very closely known as JNK started crashing in the middle of 2008. This crash began to unfold before the horrific crash of stocks in the fall. Investors that saw junk bonds crashing in advance and pulled their money out of stocks in time saved an enormous amount of money.

This post was published at The Economic Collapse Blog on January 3rd, 2016.

THIS TIME ISN’T DIFFERENT

Last year ended with a whimper on Wall Street. The S&P 500 was down 1% for the year, down 4% from its all-time high in May, and no higher than it was 13 months ago at the end of QE3. The Wall Street shysters and their mainstream media mouthpieces declare 2016 to be a rebound year, with stocks again delivering double digit returns. When haven’t they touted great future returns. They touted them in 2000 and 2007 too. No one earning their paycheck on Wall Street or on CNBC will point out the most obvious speculative bubble in history. John Hussman has been pointing it out for the last two years as the Fed created bubble has grown ever larger. Those still embracing the bubble will sit down to a banquet of consequences in 2016.
At the peak of every speculative bubble, there are always those who have persistently embraced the story that gave the bubble its impetus in the first place. As a result, the recent past always belongs to them, if only temporarily. Still, the future inevitably belongs to somebody else. By the completion of the market cycle, no less than half (and often all) of the preceding speculative advance is typically wiped out.
Hussman referenced the work of Reinhart & Rogoff when they produced their classic This Time is Different. Every boom and bust have the same qualities. The hubris and arrogance of financial ‘experts’ and government apparatchiks makes them think they are smarter than those before them. They always declare this time to be different due to some new technology or reason why valuations don’t matter. The issuance of speculative debt and seeking of yield due to Federal Reserve suppression of interest rates always fuels the boom and acts as the fuse for the inevitable explosive bust.

This post was published at The Burning Platform on 3rd January 2016.

Why Silicon Valley May Be At “DEFCON 1” Status

Authored by Mark St. Cyr,
For anyone not familiar with the term ‘DEFCON 1′ it’s a military term used to identify the most sever military condition in the U. S. The degrees of severity range from ‘5’ being the least severe or, at general peaceful conditions, and ‘1’ representing the threat of imminent nuclear war. As I look out and extrapolate many of the warning signs that have been showing their hands over 2015 when it comes to everything ‘Silicon Valley.’ I can’t help but use this military descriptor as an overlay of what’s taking place there currently. For I truly believe as I’ve written and spoken over these last 5 years – things are really about to hit the fan.
Over the last 5 years in ‘The Valley’ (meaning everything representing tech and disrupting) there has been no other land of opportunity that lived, created, self defined, along with redefined its business metrics than the tech world. Unicorns, Non-GAAP, IPO’s, and more were the terms bandied or used to encapsulate what it was to be a ‘disrupter.’
Start a company (or idea) and make the rounds to get funded first – net profits are a trivial after thought. And for some they were an outright theory altogether. Then if you’re successful (i.e., you haven’t burned through all your start-up cash) turn your sagging or profitless business into a ‘We’re killing it!’ fairy tale using Non-GAAP accounting. Once steps one and two are complete – IPO, cash out, and buy an island, yacht, McMansion, and more with the proceeds. Boom – done – next!!!
Yes the example is over-simplistic – but it’s not far off the mark. This has pretty much been the meme and/or state of business prevalent within the Valley for quite some time. However, as I’ve stated during all of that time; without the intervention of the Fed’s QE (quantitative easing) free money enabling risk taking to supersede business fundamentals to fund and fuel speculative investments in ways that mirror the dot-com days: there would be no ‘Valley’ as it currently stands.

This post was published at Zero Hedge on 01/03/2016 –.

Yuan Movements Highlight China’s Attempt to Halt 10th Month of Export Contraction; Major Currency War Coming Up?

Chinese manufacturers see further deterioration in business conditions, down 10 consecutive months as noted in the latest Caixin China General Manufacturing PMI release.
Operating conditions faced by Chinese goods producers continued to deteriorate in December.
Adjusted for seasonal factors, the Purchasing Managers’ Index, operating conditions in the manufacturing economy registered below the neutral 50.0 value at 48.2 in December, down from 48.6 in the previous month. Business conditions have now worsened in each of the past 10 months. That said, the latest deterioration was modest overall.
Production declined for the seventh time in the past eight months, driven in part by a further fall in total new work. Data suggested that client demand was weak both at home and abroad, with new export business falling for the first time in three months in December. As a result, manufacturers continued to trim their staff numbers and reduce their purchasing activity in line with lower production requirements. Meanwhile, deflationary pressures persisted, as highlighted by further marked declines in both input costs and selling prices.

This post was published at Global Economic Analysis on Sunday, January 03, 2016.

Ending The Year With A Whimper

Lots of chop for markets as we wound down a so-so year.
Setups are forming and traders will return this coming week so volume will pick back up and if all goes well, leading stocks will begin to breakout higher with markets following as this bull market continues on.
The metals continue to act poorly and do not yet look to have put in their major lows, but they are getting closer to major support.
I’m also starting a new round of my Real-Time Trading group starting the first of the year.
We’ve done well over the past 3 months nailing the waves up and down doing swing trading, since that’s all that Mr. Market has given us.
Hopefully the new year will give us a more sustained move but we just have to wait and see about that.
Either way, we will be making some money, it’s just a matter of how active we have to be to do so.

This post was published at GoldSeek on Monday, 4 January 2016.

Nassim “Black Swan” Taleb On The Real Financial Risks Of 2016

Authored by Nassim Nicholas Taleb, publish op-ed via The Wall Street Journal,
Worry less about the banking system, but commodities, epidemics and climate volatility could be trouble
How should we think about financial risks in 2016?
First, worry less about the banking system. Financial institutions today are less fragile than they were a few years ago. This isn’t because they got better at understanding risk (they didn’t) but because, since 2009, banks have been shedding their exposures to extreme events. Hedge funds, which are much more adept at risk-taking, now function as reinsurers of sorts. Because hedge-fund owners have skin in the game, they are less prone to hiding risks than are bankers.
This isn’t to say that the financial system has healed: Monetary policy made itself ineffective with low interest rates, which were seen as a cure rather than a transitory painkiller. Zero interest rates turn monetary policy into a massive weapon that has no ammunition. There’s no evidence that ‘zero’ interest rates are better than, say, 2% or 3%, as the Federal Reserve may be realizing.

This post was published at Zero Hedge on 01/03/2016 –.

Insider: ‘Very Sophisticated High Net Worth Investors Are Buying Up Physical Precious Metals’

According to the CEO of one of the world’s top primary producers of silver, looming precious metals shortages could drive the price of gold to $5000 and silver to $100 over the next three to five years. Keith Neumeyer, who oversees First Majestic Silver and is also the Chairman of mineral bank First Mining Finance, says that with commodity prices in capitulation mining companies around the world are either reducing operations or outright shutting down, the consequence of which will be a supply crunch across the industry and a resurgence in precious metals prices.
And Neumeyer isn’t the only one who sees the trend developing. Well known investment billionaires like George Soros and Carl Icahn are rushing into gold. Soros is so convinced that a paradigm shift is in the works that after warning of financial collapse and violent riots in America he sold his holdings in major U. S. banks and allocated more of his portfolio into gold mining firms.

This post was published at shtfplan on January 3rd, 2016.

Fed Vice Chair Explains Why The Fed Is Still Obsessing With Negative Interest Rates

Two months ago, and roughly 6 weeks before the Fed’s first rate hike in 9 years, Janet Yellen warned that if the “outlook worsened, the fed might weight negative rates” adding that “negative rates could help encourage banks to lend.”
Moments ago, in a speech titled “Monetary Policy, Financial Stability, and the Zero Lower Bound” delivered before the American Economic Association in San Francisco, the Fed’s second in command, Vice Chairman Stanley Fischer while discussing the equilibrium real interest rate, or r* (or the real interest rate at which the economy would settle at full employment and with inflation at 2 percent, provided the economy is not at the ZLB), unexpectedly hinted once again at the potential advent of negative rates in the US, two weeks after the Fed’s raised the interest rate to a 25-50 bps corridor except of course for December 31 when as we noted, the Fed Funds dropped to 0.12%, suggesting that banks are perfectly ok with hiking rates… except when it comes to quarter and year-end window dressing for regulatory, compliance and public filing purposes.
Specifically, Fischer discussed what steps, if any, can be taken to mitigate the constraints associated with the ZLB? His second answer: NIRP. To wit:
Another possible step would be to reduce short-term interest rates below zero if needed to provide additional accommodation. Our colleagues in Europe are busy rewriting economics textbooks on this topic as we speak-and also helping us to remember earlier discussions of negative interest rates by Keynes, Irving Fisher, Hicks, and Gesell.

This post was published at Zero Hedge on 01/03/2016 –.

The Battle Between Manufacturing And Services

Submitted by Peter Tchir of Brean Capital,
The Manufacturing Economy versus The Service Economy
As we start the new year, there is a debate raging within the market. No the debate isn’t whether there is weakness in the manufacturing economy, that is taken as a given, especially after Friday’s awful Chicago Purchasing Manager number of 42.9.
No, the debate boils down to this:
The bears will argue that
The U. S. economy has always done poorly when manufacturing has turned this weak That never before has the Fed initiated a tightening cycle with manufacturing so weak
That making matters worse, it isn’t just the U. S. that is experiencing a manufacturing slowdown, but it is global in nature
Etc.

This post was published at Zero Hedge on 01/03/2016 –.

If Companies Are Telling The Truth, Profit Margins Are About To Collapse The Most In The 21st Century

With the Fed hiking rates in order to signal a “return of confidence” to the economy, one – the most important – aspect of a recovering economy continues to be absent: rising wages.
As the following chart showing the annual growth in wages of production and non-supervisory workers (who make up 83% of the US workforce) reveals, wage growth is not only well below the Fed’s goal of 4.5%, at 1.7% it is below the Fed’s goal of 2% inflation, suggestion that on a real basis wages would be declining if the Fed had attained its 2% inflation mandate.

This post was published at Zero Hedge on 01/03/2016 –.

It Starts: Tech Trouble Mucks up Silicon Valley Real Estate Party

Yahoo tries to ‘quietly’ dump its Holy Grail property.
Yahoo has enough problems already. Hardly anything has gone right since its last big successful move, the strategic partnership in 2005 with Chinese e-commerce site Alibaba. Even as it blew billions of dollars on dozens of acquisitions over the last few years, its annual revenues shrank from $7.21 billion in 2008 to $4.62 billion in 2014, down 36% in six years, with not much hope in sight.
Management departures have been termed ‘Exodus’ by re/code. Now that its efforts to spin off Alibaba have collapsed under the tax implications (didn’t they think about this before?), Yahoo said that it would try to spin off instead its core Internet business. Whatever.
‘Activist investors’ have sunk their teeth into Yahoo with their own proposals, without much success. Its shares, after languishing in the low teens following the 2008 crisis, began soaring in late 2012 in the hopes of an Alibaba IPO that would douse Yahoo in new riches. Its shares were also dragged along by the general stock market and tech euphoria. In late 2014, they broke the sound barrier of $50 a share – but then spent 2015 careening down 36%.

This post was published at Wolf Street by Wolf Richter ‘ January 3, 2016.

Crude Oil Opens Above $38, Takes Out 1-Week Highs

With hedge fund short positions near record highs and speculators at their least bullish in almost five years, oil prices have spurted higher in the early trading as the diplomatic gloves come off in The Middle East. Despite record levels of crude inventory around the world, WTI Crude is trading above $38, up over 3% from its $37.07 close on New Year’s Eve. Algos ran the stops above last week’s highs ($38.32) but for now prices are not as excited as many would have expected. Brent, for now, is outperforming and trade 45c rich to WTI.
WTI tags last week’s highs but is holding for now…

This post was published at Zero Hedge on 01/03/2016 –.

Rick’s Picks’ Predictions for 2016

In these all-too-interesting times, it is unfortunately a safe bet that 2016 will not be a dull year. However, that doesn’t necessarily mean that everything we foresee will be bad news. To wit:
Donald Trump will be our next president, sparing Americans the disgrace of electing to the highest office in the land a woman who has known only appalling failure in her political life and whose chief character trait, recognized even by her supporters, is dishonesty Surprising everyone, Trump will carve out a reputation as the Education President. By 2018, even his worst detractors will realize that they can trust him over the education establishment to reshape our schools so that students actually learn skills needed to succeed in life. After loathing Michelle Obama and her entourage for eight years, Americans will have a love affair with Melania Trump. Mrs. Trump, who, it will soon become apparent, likes everything about America, will go on to become the most popular first lady since Jacqueline Kennedy. Fortunately for us all, Obama will leave office a few crucial yards shy of his lifelong political goal: destroying America and everything it stands for. Obamacare, the worst piece of legislation ever enacted by Congress, will be repealed in the nick of time. However, this will happen too late to spare 100 million Americans from back-to-back, 25% increases in healthcare premiums that are coming in 2016 and 2017. Two years after our groveling Apologist-in-Chief is gone, the West will decisively rout ISIS in Syria and Iraq, freeing up resources to deal seriously with al Qaeda and the Taliban. The new face of terrorism – Islamist paramilitaries armed with automatic rifles and explosives – will grow ubiquitous with attacks on an increasing number of soft targets in Europe and the U. S. Liberty itself, more than lives, will be the main casualty. After topping out in April, U. S. stocks will collapse, catalyzing a global bear market that will take four years to run its course. The Dow Industrials, currently trading around 17425, will be cut in half. Property values across the U. S. will fall commensurately, catalyzing an outright bust in California, and San Francisco in particular, that will be even more severe than the Great Depression. The U. S. dollar will continue to strength, overwhelming the efforts of the Fed and other central banks to stave off global deflation. Long-term interest rates will fall toward an eventual low of 1.64%. Investors who are positioned for this will reap huge capital gains of 35% or more. The smart money will finally get its comeuppance, with ‘private equity’ going the way of the dodo bird. Warren Buffett will be the last man standing as William Ackman, Carl Icahn and all the other glorified paper-shufflers descend into bankruptcy and disrepute. With a veto-proof Republican majority, Congress will finally overhaul and hugely simplify the tax code. This will pave the way for a genuine economic recovery during Trump’s second term. Gold, currently trading for around $1060, will make an important low near $814 in late 2016 or early 2017. The food industry, led by Chipotle, will embrace a new technology, teraherz spectroscopy, to guarantee the safety of the food chain. This will have implications not only for all sellers of food, but for hospitals, which will use the same process to accurately and instantly diagnose any of a hundred different ailments and diseases. Yet another use of this technology will be to detect explosives in shipping containers and other transport vessels. RICK’S PICKS

This post was published at Rick Ackerman on Sunday, January 3, 2015.

Even Bankruptcy Can’t Slow US Oil Production Much, it Seems

The resilience has extended the timeline in this oil bust. By Dan Dicker, Oil & Energy Insider: Is it over yet? 2015 will certainly go down as the worst year for energy stocks since 2008 – that is unless 2016 beats it for misery. Looking at certain sub-sectors, like off-shore drilling, 2016 could unbelievably make 2015 look tame.
We always knew that the bust cycle in oil prices was going to bring a lot of bad times for energy stocks – but no one imagined such carnage, even among the strongest names.
I have been focusing on what I have called ‘the survivors’ and trying to find value in the shares of names like EOG Resources (EOG), Cimarex (XEC) and Hess (HES). With off-shore drillers, I’ve imagined even more awful times ahead, but took a speculative shot with Seadrill (SDRL), looking down the road two years at the inevitable rebound in deepwater drilling.
But the resilience of many of the unconventional drillers has unexpectedly extended the timeline in this oil bust cycle, catching me by surprise. We’re operating inside this insane Catch-22: Oil prices can’t get constructive until the U. S. and other non-OPEC producers start to trim their outputs, yet oil companies continue to use efficiency gains and top line spending cuts to stay in the game and maintain production. Oil prices stay low, and drift lower. 2016 will not be happy, at least for the first several quarters.

This post was published at Wolf Street by Dan Dicker ‘ January 3, 2016.