- Hidden Financial Bombs Are Starting To Detonate
by Dave Kranzler, http://investmentresearchdynamics.com/
… The S&P 500/Dow have started to sell-off relentlessly since the beginning of the year. This morning’s excuse was IBM and, once again, China. I guess Obama’s “America is exceptional” speech infected the brains of more people than I thought. The sell-off in the stock market surely can’t be attributable in any small way to the fact that the U.S. stock market never been more overvalued in its history. Not only is it trading at record valuation levels, the “value” of the stock market is resting on a mountain of debt and derivatives in the U.S. financial system of unprecedented size and diminished credit quality.
Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief. – William White, form chief economist of the BIS – LINK
Unpayable debt and counter-party defaulted derivatives are the hidden financial bombs that are beginning to detonate both globally and in the United States. Faux analysts like to point to the fact that consumer debt is lower now than in 2009. However, the reason the amount of stated debt declined was a result lender write-offs – not consumers repaying any debt. Now automobile and student loans are at all-time highs – over $1 trillion outstanding now in each. Unlike mortgage debt, this debt is largely unsecured (cars are collateral that depreciate quickly in value).
Well-known/regarded hedge fund titan Ray Dalio of Bridgewater Associates was in the news today warning that “if assets remain correlated, there’ll be a depression” LINK
Who am I to question Ray, but he’s got it wrong. The mistake embedded in his assertion is that economic activity is currently connected to the massive global financial bubble. Sorry Ray, but if you use unmanipulated data, the world is already in an economic depression. The price of oil, the baltic dry index, the Cass shipping and freight index (LINK a volume-based index down almost 20% since 2013), etc – measurements of actual economic activity – are reflecting a level of economic activity globally and in the United States that is suggestive of a deep recession on Main Street.