“A decade of ultra-easy monetary policy conducted by the world’s major central banks has fuelled this dangerous bull market. To cite one example, US equity prices have increased more than threefold since their nadir in March 2009, and the US equity bull market is in its eleventh year…
“Despite the clearest signals of gross global credit misallocation and the serious mispricing of credit risk, markets and policy-makers seem remarkably sanguine. The possibility of a violent repricing of risky assets, which could lead to large strains in the financial markets, is apparently far from their minds.
“Their complacency is surprising, particularly in the light of early warning signs… Many factors point towards a global economic recession…”
https://www.omfif.org/2019/12/signs-point-to-global-economic-recession/
“Moody’s Investor Services estimates 1 in 5 small private colleges faces “fundamental stress” due to declining revenues, rising expenses and little pricing power when it comes to tuition.
“Analysts project 15 of the colleges will have closed in 2019 — the largest number in recent memory, and three times the rate just 10 years ago.”
https://www.cnbc.com/2019/12/03/the-other-college-debt-crisis-schools-are-going-broke.html
“The oil patch is facing a reckoning in coming years when billions of dollars of debt that helped energy companies weather the prolonged commodity price slump comes due.
“Scheduled debt maturities among oil and natural gas production and services companies amount to roughly $3 billion in 2020 but will skyrocket from there to $20 billion in 2021, $41 billion in 2022 and $59 billion in 2023, according to data compiled by asset manager Angelo Gordon.”
https://www.wsj.com/articles/u-s-oil-patch-stares-down-120-billion-debt-wall-11575412192
“The bond market tells a completely different story than equities. A year ago, the 10-year U.S. Treasury yield was flirting with 3.40%; today it is 165 basis points (1.65 percentage points) lower, near 1.75%. Bonds are telling us that we are in a period of prolonged slow economic growth and little or no corporate pricing power.
“Furthermore, in the junk bond market, the spread between such bonds and the Treasury yield curve has widened by 300 basis points (3 percentage points) since May, with 100 of those coming in November. This is risk-averse behavior on the part of bond investors….
“There are few economic fundamentals beneath the equity markets. Plenty of liquidity, to be sure; the Fed has injected nearly $300 billion since September. And there is a lot of optimism. I sure hope it continues. (“Hope,” though, is not a useful investment strategy.)”
“U.S. government debt yields plunged on Tuesday after President Trump poured cold water on an imminent China trade deal, sending stocks tumbling.
“Yields, which move inversely with bond prices, are back to trading at one-month lows Tuesday. The benchmark 10-year U.S. Treasury yield fell 13 basis points to 1.704%, while the 30-year Treasury yield hit 2.156%.”
https://www.ccn.com/treasury-yields-crumble-overbought-dow-corrects-lower/
“The EU is “ready to respond” to US threats to impose tariffs of up 100% on French imports, including wine and cheese.
“The move came in retaliation to a digital tax set to hit US giants Google, Amazon and Facebook.”
https://www.dw.com/en/us-threatens-huge-tariffs-on-french-goods-over-digital-tax/a-51507868
“Lebanon’s central bank plans to slash interest rates in an attempt to ease the country’s economic crisis and is considering formalizing temporary capital controls set individually by local lenders.”
“While Iran’s sanction-battered economy has sparked protests across the nation, U.S. officials cite new intelligence suggesting Tehran’s finances are more dire than previously thought and bringing it closer to a financial crisis…
“…according to new U.S. financial intelligence, the government is scraping the barrel on foreign-exchange reserves…”
“The average reading of Hong Kong’s Purchasing Manager’s Index (PMI) for October and November combined stood at 38.9, IHS Markit said Wednesday in a report
“… stressing that the level pointed to the weakest quarterly economic performance since the London-based consulting firm started the survey on the financial hub in 1998.”
http://www.xinhuanet.com/english/2019-12/04/c_138604756.htm
“Capital investment by Chinese firms has ground to its slowest pace in three years, as a weakening economy, tight credit and prolonged trade war with the United States dent sales growth and cash reserves, a Reuters analysis showed.
“Companies are also spending more days to turn inventory into sales and eking out smaller profit gains, the analysis showed…”
“China is hurtling toward another record year of onshore bond defaults, testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt.”
“A household debt crisis may be brewing in China as the government tries to boost sluggish consumption amid a domestic economic slowdown and trade war with the United States.
“China’s household debt had ballooned to 60.4 per cent of its gross domestic product at the end of 2018, the People’s Bank of China said in its annual financial stability report last week.China’s household debt
“And for the first time, the household debt to income ratio hit 99.9 per cent, meaning that total debt is now roughly equal to total household income among the average Chinese household.”
“With [Australia’s] retail sector on its knees (the sector is forecast to grow at an anaemic 0.3% in figures due out on Thursday), wages still stagnant and serious doubts about whether the once-booming construction sector can continue to support growth, the outlook touted by the RBA on Tuesday appears quite optimistic.
“All this comes despite the economy effectively living on the life support of ultra-low interest rates.”
“South Africa’s economy contracted in the third quarter, compounding the problems facing President Cyril Ramaphosa in Africa’s most industrialised nation.
“Gross domestic product fell at an annualised rate of 0.6 per cent in the three months to the end of September, the country’s official statistics authority said on Tuesday.”
https://www.ft.com/content/e3cc7a56-15b4-11ea-9ee4-11f260415385
“The next push for the global economy may come from governments instead of central banks – and the outcome for financial markets could be messy…
“Even if a consensus is building that governments will have to enact more expansionary fiscal measures, not all may be able to do so…
“Inflation may also accelerate if governments start to stimulate economies at full employment while interest rates are already low, putting pressure on bonds…”
“Any day now, a catastrophic event caused by climate change could detonate a financial bomb that incinerates powerful companies, sends fireballs through our financial system, blasts the U.S. economy, and devastates millions of Americans.
“”This is an all-hands-on-deck moment,” warns a new paper from the left-leaning Center for American Progress. “It’s time for regulators to take decisive steps to ensure that the financial system can withstand climate-related shocks.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
