“Simply put, easy money has created multiple bubbles that have been blowing in all directions.
“Meanwhile, easy money has undermined the old strategy of asset allocation, setting investors up for a nasty surprise when the bubbles burst.
“”In excess of $13 trillion of global bonds have negative yields; in effect, investors are paying issuers to take cash investments,” says Iain Wilson, Advisor at NEM Ventures. “As we embark on another round of Central Bank interest rate cuts, possibly combined with more radical QE programs, we should consider the knock-on effects of ultra-low rates on asset prices. Globally, a whole range of traditional asset classes, such as stocks, bonds, property, and credit have seen huge price appreciation and history tells us that asset price booms rarely end well.”
“……the hunt for yield is much more aggressive than before.
“”Meanwhile, central bankers are running out of “bullets,” ie policies to cope with the situation, as the global economy gets divided by trade and currency wars.”
“The leaders of Corporate America are cashing in their chips as doubts grow about the sustainability of the longest bull market in American history. Corporate insiders have sold an average of $600 million of stock per day in August… August is on track to be the fifth month of the year in which insider selling tops $10 billion. The only other times that has happened was 2006 and 2007…”
https://edition.cnn.com/2019/08/26/investing/stock-market-insider-selling/index.html
“After the U.S. and China announced tit-for-tat tariff increases Friday, trade barriers are near a level which could tip the global economy into recession, according to Chetan Ahya, chief economist at Morgan Stanley.
““We view risks of further escalation as meaningful,” Ahya wrote in a note to clients published Sunday evening.”
“Optimism across the UK’s dominant service sector fell sharply in the three months to August, according to a new survey, in news that will worry policymakers as Britain flirts with recession… The mood in the business and professional services was particularly subdued…”
https://www.cityam.com/optimism-across-uks-dominant-service-sector-tumbles-in-second-quarter/
“Germany’s economy is on the brink of recession after business confidence plunged to its lowest level in seven years. The ifo Institute, a Munich-based research group, said:
““Worry lines among German business leaders are getting deeper and deeper.” Its monthly confidence index fell to just 94.3 points in August, down from 95.8 in July, the weakest reading since November 2012.”
“India’s government will receive a 1.76 trillion-rupee ($24.4 billion) windfall from the central bank, which it may use to cut borrowings and recapitalise banks to help spur economic growth…
“The transfer, which rivals the stimulus that some Group of 20 nations pumped into their economies during the global financial crisis, comes amid a slowdown in the growth of India to a five-year low, depressed consumer spending and reports of tens of thousands of job losses in the auto industry.”
“For a long time, 7 yuan per dollar was considered a psychologically important level — but the onshore exchange rate weakened past that level in early August for the first time since the global financial crisis of 2008, and has remained above 7 since.
“The breach prompted the U.S. Treasury Department to designate Beijing as a currency manipulator.”
https://www.cnbc.com/2019/08/27/china-economy-pboc-could-be-trying-to-shore-up-the-yuan-rmb.html
“Singapore’s government cut its forecast for economic growth this year to almost zero, and weak export data have stoked fears of a recession.
“The nation has already been rocked by the high-profile collapse of water treatment firm Hyflux Ltd. “We could see a tide of distressed debt in Singapore,” said Shaun Langhorne, a restructuring lawyer and partner in Singapore at Hogan Lovells Lee & Lee…”
“Indonesia has a raft of emergency stimulus options available to bolster Southeast Asia’s biggest economy if global conditions worsen, Finance Minister Sri Mulyani Indrawati said.
“The government is prepared to boost spending and “re-activate” measures used during the global financial crisis to shore up domestic growth if necessary…”
“There is mounting speculation the BOJ may be forced to join other major central banks in expanding stimulus as early as next month to protect economic growth as the U.S.-China trade war continues to drag on Japan’s export-reliant economy.
“Toshihide Endo, commissioner of the Financial Services Agency (FSA), said sliding global bond yields and the BOJ’s prolonged ultra-loose monetary policy were only among various factors weighing on regional banks’ profits.”
“”There’s always been a concept: too big to close,” Mr Orr [RBNZ Governor] said.
“”[But] Nothing’s too big to fail.
“”And so with the large banks, the four major banks in NZ are the four large Australian banks.
“”And if any one of those closed it would bring the rest down.””
https://www.afr.com/world/pacific/nothing-s-too-big-to-fail-warns-rbnz-governor-20190826-p52kr1
“Argentina is in danger of not being able to pay back its debts after nearly two decades of being bailed out by the International Monetary Fund (IMF).
“Officials from the US-based group flew to Argentina to assess the country’s current $56bn (£45bn) bailout and whether it should still keep giving the country more money. IMF officials arrived in Argentina on Saturday and are still discussing with policy makers over whether it should withhold a $5.3bn instalment due next month…”
https://uk.finance.yahoo.com/news/argentina-in-danger-of-not-paying-back-its-debts-064643668.html
“Global bond yields are tumbling. The ten-year UK government bond yield fell below 0.5 per cent last week for the first time and the German curve is negative across all maturities.
“Does this suggest the global economy is headed for a prolonged slump? Is deflation on the horizon?”
“The report’s authors note that monetary policy has run its course in a world where interest rates have reached the limits below which they can decrease much further.
“As for fiscal policy — the realm of governments — it is not nimble enough in case of severe crisis because it depends on lengthy political debates and its impact takes time to materialise.”
“There are three negative supply shocks that could trigger a global recession by 2020. All of them reflect political factors affecting international relations, two involve China, and the United States is at the centre of each.
“Moreover, none of them is amenable to the traditional tools of countercyclical macroeconomic policy.”
https://www.neweurope.eu/article/the-anatomy-of-the-coming-recession/
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