globconnectivity

This is a correction to Bear market levels. And the new fear now is globalist connectivity

As one level after another gets left behind in the global stocks sell-off, each day the rationalisations put forward by Those Who Would Say That are forced to change.
The new excuses are (a) Chinese stock prices only represent 3% of the total ‘real’ Chinese economy (b) China is changing from a manufacturing exports to service-based economy so we can expect some short-term pain (c) banks have never been better placed to withstand shocks than now because leverages have fallen and balance sheets have shrunk (d) people in business at the sharp end of most economies are in a better position to judge than banks and  bourses, and they’re go-go with confidence (e) Jobs are growing and wages are rising (f) the US economy is sturdy and ready to move on up (g) we are still not in a stocks recession….but then later in the day when all of a sudden we were (h) that doesn’t mean the economy is in a recession (i) this is a trough of uncertainty, but when governments see it’s not filtering down to their economies, sentiment will improve again.

Most of the people now being punted forward by PRs to get their faces on the networks and lie their talking heads off are witnesses any Court of Law would call “unreliable”.

Deconstructing this crap makes shooting fish in a barrel look downright difficult.
Starting with China, the 3% figure is pulled out of the air and not a single Beijing stat is to be trusted; if the markets there leave out 97% of all economic sectors, then whatTF is the point of these bourses; while the politburo may have ambitions to become a service economy, there is not one iota of evidence that the process has even started; that does seem to be the Party’s ambition, but can somebody tell me what these services will be, and even if they can do that, is that where the world is going – global economic activity consisting of nothing more than financial paper, retail outlets, hotels and airlines and restaurants catering for the people peddling the paper, and holidays for people by air with guaranteed pick-up from gated community to resort by B2 Stealth Bomber?

Banks never stronger? Bollocks: 10% of US and 15% of eurozone banks failed the last (pathetic) stress tests, and the UK’s RBS is a basket case. Leverage levels may have been cut, but the cuts are not in any realistic sense significant. This is pure propaganda.

Big Business CEOs are go-go with bullish confidence because they’re paid to go on telly and say that: but unless they go deaf when the distributors speak, they must know that Christmas comes but once a year, and sales – for example in France and Germany – are dire. Let’s be real even if only for a few seconds: if stuff was selling out thanks to consumer demand, then deflation would be under control and savings rates globally wouldn’t be rising.

Jobs are growing – but largely at the bottom end of the market on shorter hours than most workers would prefer. And no, wages are not rising in any way apart from tiny blips here and there: when they do start to rise (if they ever do) then they have 30% of lost ground since 1994 to pick up….and that isn’t going to happen overnight.

The US economy is sturdy? Then how come it’s only Wednesday and already there’s a consensus among market opinion leaders that all further Fed rate hikes are off: the Fed tried an experiment and now they know the effect, so that’s that? The US may be able to absorb most of its output, but the rest of the world isn’t feeling at all sturdy. Otherwise, Signor Draghi wouldn’t be about to launch yet another round of QE.

A bear market is now in force all around the world. The Goforits keep saying that doesn’t mean the economies are in recession…..to which the two answers are (i) if not, why not? and (ii) take out QE as an ‘economic activity’, and the world has been in recession since 2011 – and faces a slump in 2016.

Finally, governments can already see bourse uncertainty reflected in their economies. For heaven’s sake, this is not a one-way street: the uncertainties in financial markets come from the fact that central bankers keep promising economic uptake, and it keeps not happening. The eurozone is in recession, UK manufacturing is in recession, German exports are in recession, and French exports grew 0% in December.

All these smiling quacks looking like so many serene swans in Davos are either stupid (the economists) or paddling like hell below the waterline (the BSDs). They had an answer when oil was at $80 then $60 then $40, and now they still have one when it’s down to $27: “a lot of it is due to geopolitics”. That was true between $120 and $90, but it isn’t any more.

Whatever they’re saying to the audience, they are panic-stricken and desperately trying to think of another conjuring trick. They don’t have one: the Black Magic box is empty, there are no sweeties left, and nobody is yet asking them truly searching questions about what happens when people with a serious chocolate habit want to borrow in order to feed their addiction.  ‘Globalist connectivity’ ensures that the answer is “disaster”.

All of us using hitech like to think connectivity is a good thing. But when you have been crass enough to link all your bourses, banks, bonds, economies and debt globally and inextricably, connectivity will produce an inevitable – but completely unpredictable – worst-case scenario.

Everything today is connected. The specialist commodity firms facing dire losses, the stock market margin traders having to fund holds, the debt-laden Sovereigns needing to keep rates low, the Asian price advantage and the cash-strapped Western consumer, emerging nations propping up their wobbly currencies and looking to attract investment with higher rates, EU States desperate to float into devaluation to help exports, dictatorial corporacratic politics producing extremes of Opposition….no factor is any longer a desert island.

It is my commonsense opinion that 90+% of those connectivity pressures will fall, ultimately, upon the banking system. “Never more strong than it is now to bear that onerous responsibility” is poppycock. We might just as well say that a new genus of primrose makes the species stronger than ever in the light of a forthcoming monsoon of giant hailstones.

Globally, markets are tanking. Whether this is yet the Big Choke remains to be seen. What remains certain is that all the balm salesmen will be choking on their words in the coming months.