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The largest US banks will have to prove they can withstand the US stock market crashing by 55 per cent, Fed regulators said on Friday, outlining the parameters for annual stress tests that decide how much banks can pay out to their shareholders.

The striking scenario for a huge decline in equity prices comes as US and global stocks touched record highs earlier this week, fuelling fears of a bubble.”

https://www.ft.com/content/a262314b-f518-4e69-8db4-fa88b6729aab


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US looks to be heading towards stagflation and that will require substantial fiscal stimulus to keep the bottom half of the economy afloat. The political solution is to keep printing more money and delay the downswing while the economic solution is to let the cycle play out.

“History suggest that we will take the easy way out and we will lose control to inflation.”

https://www.livewiremarkets.com/wires/us-heading-towards-stagflation-to-avoid-recession


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Over 10 million Americans are still unemployed, and many are not too hopeful about finding work. A Pew survey found only about half of unemployed Americans are optimistic about finding a job soon.

“The pandemic and economic slowdown have also been hard on Americans’ mental health…”

https://www.businessinsider.com/pew-survey-how-unemployed-americans-feel-about-finding-work-soon-2021-2?r=US&IR=T


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Biden is well aware he has a fight [with China] on his hands that, if mishandled, could swiftly turn physical.

“Some analysts fear war with China is inevitable, sooner or later. So he is moving fast. In a first phone call to China’s president, Xi Jinping, last week, he raised concerns about trade, Taiwan, Hong Kong and alleged genocide in Xinjiang.”

https://www.theguardian.com/commentisfree/2021/feb/14/how-to-rein-in-china-without-risking-war-is-the-issue-biden-must-address


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“China has been the main driver of world economic growth over the past decade in terms of its contribution to total global GDP, but its role as an overseas investor, in physical infrastructure especially, has gone into a sharp and rather ominous decline more recently…

“This implies the severe recession into which the world as a whole (excluding China itself) has been plunged over the past year could prove even deeper and longer lasting than feared, because the China locomotive is losing steam in terms of overseas investment.

https://www.scmp.com/comment/opinion/article/3121485/chinas-overseas-investment-falling-just-when-global-economy-needs


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Unprecedented chip famine threatens business outside tech firms:

With global semiconductor manufacturing at capacity and demand at an all-time high, chip shortages are putting the squeeze on businesses around the world.”

https://www.shacknews.com/article/122760/unprecedented-chip-famine-threatens-business-outside-tech-firms


The Biden administration is assessing immediate steps to address the semiconductor shortage and plans an executive order to shore up critical supply chain items, a White House spokeswoman said…”

https://techxplore.com/news/2021-02-biden-semiconductor-crunch.html


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With global supply chains buckling under huge order volumes and a confluence of disruptive forces, shippers should prepare for 2021 to be a perpetual peak season across all transport modes, logistics experts warn.

Competition for freight space is so fierce that companies will need to pay exorbitant premiums…”

https://www.hellenicshippingnews.com/global-supply-chains-choke-under-tsunami-of-freight/


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“Is The Anti-Oil Movement Installing The Next Recession?

“…as oil demand returns, and if we follow the shallow opposition to investing in oil, we are setting up a deadly combination of a price spike and severe market volatility… And let us be clear: any spike in oil prices could easily lead to another economic collapse like the one we have been trying to pull out of because of Covid-19…”

https://www.forbes.com/sites/judeclemente/2021/02/14/is-the-anti-oil-movement-installing-the-next-recession/?sh=5faebdf75d8f


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The tide of rebellion is fuelled by empty stomachs. From bread in the Arab Spring to flour in the French Revolution, soaring food and drink prices are behind uprisings that rocked the world. The last food price crises in 2008 and 2011 provided crucial sparks in waves of unrest that spanned the globe and even toppled governments.

Policymakers may therefore be looking nervously at commodities markets as rising food prices threaten to compound the misery of the Covid crisis.”

https://www.telegraph.co.uk/business/2021/02/15/cost-food-heading-towards-crisis-levels/


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“The Guardian view on global protests

“The glaring difference between this wave of protest and that seen a decade ago is that, for the most part, activists are not seeking greater freedom but trying to defend what space they have against increasing encroachment as the authoritarian tide has risen around the world.”

https://www.theguardian.com/commentisfree/2021/feb/14/the-guardian-view-on-global-protests-passing-it-on


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The boom in US asset prices is becoming profoundly worrying.

“Great if you own Tesla shares or have a few Bitcoin lurking on your computer. But we all know that financial bubbles sooner or later burst.”

https://www.thisismoney.co.uk/money/comment/article-9256889/HAMISH-MCRAE-bubble-pops-watch-out.html


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There is a mania hovering over the investment landscape. Bonds. Digital currencies. A large part of the stock market. Certain real estate sectors. All driven to bullish extremes. Priced for perfection. Priced for disappointment…

Nearly everything indicates stock indices are overvalued.”

https://www.forbes.com/sites/greatspeculations/2021/02/12/protect-yourself-live-outside-the-bubble/?sh=6a5853ce5854


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The U.S. is patient zero for this sickness [of the markets/financial system] and as the U.S. goes, so too will much of the world

The real risk to markets is that passive flows go negative (if widespread layoffs lead workers and employers to cut their 401K contributions). If that were to happen, passive fund selling would quickly overwhelm the market.

“Such a crash could resemble 1929-1932 in magnitude but at 2021 speed.”

https://financialpost.com/financial-times/why-the-stonk-bubble-poses-major-global-risks-and-could-trigger-a-1930s-style-market-crash


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.

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