Global debt danger:
“Anyone doubting that there is a material risk that that the next global economic recession will be of the more severe than normal variety has not been paying attention to the massive build up in global debt levels over the past decade.
“Nor have they been paying attention to the unusually low interest rates at which all too much of this debt has been issued.
“That experience should have taught us that it is precisely this combination of high debt and credit risk mispricing that has the potential to cause real financial market strain when credit eventually reprices to historically more normal levels…
“If such a repricing were indeed to occur, we would, in Warren Buffet’s phrase, find out which of the financial institutions had been swimming naked by having over-lent to corporations of dubious quality at interest rates that were far too low to compensate them for default risk.
“Sadly, there is little that the world’s central banks can do to dial back the global credit bubble that they have created by their many years of ultra-easy monetary policy and massive balance sheet expansion.”
“The risk of a global trade war is rising. That could sink the US economy into a recession, bringing an end to the second-longest expansion in American history.”
“President Donald Trump is on the verge of escalating his trade war with China. By the end of this week, the Trump administration is expected to release details of plans to restrict Chinese investment in American businesses and block the ability of US businesses to sell some high-tech products to China.”
“Chinese stocks sunk into a bear market Tuesday, and analysts expect losses to deepen as concern over China’s economy, yuan weakness and a trade feud with the U.S. continue to rattle investors.”
“There may be as many as 64 million empty apartments in China. Many people buy the properties as an investment with no intention of ever moving in. Author says ghost cities show growth is driven by debt in China.”
“Iran’s capital has been racked by protests this week over a plunge in the value of the country’s currency, the rial. Crowds at one point shut down Tehran’s sprawling Grand Bazaar, an economic center and a place where the 1979 revolution gained footing.”
“UK Annual house price growth slowed to a five-year low in June, a closely-watched index revealed this morning.”
“France’s… consumer confidence index dropped to 97 in June from 99 in May… this was the weakest score since August 2016, when it marked the same 97.”
“The ranks of hedge fund managers expecting impending market chaos are growing. Greg Coffey, the former star manager at Moore Capital Management who started trading at his own firm this year, is comparing the turmoil in May to the end of dotcom bubble in 2000. Horseman Capital Management’s Russell Clark, one of the most bearish hedge fund managers in Europe, invoked memories of the financial crisis of 2008 in a letter to clients.”
“The S&P 500 Financials Index fell for the 12th straight day Tuesday, the longest losing streak on record. Coming into the year, many cited the tax overhaul and a rising rate environment as reasons for banks to rally. Instead, they’ve endured pressure from a flattening yield curve. The losses also come ahead of the final phase of the Federal Reserve’s annual stress tests and waning consumer confidence.”