While the current racially charged events take place and garner almost all of the news coverage, don’t forget that the world is in a place of great fragility. The economies before Brexit were weak and the uncertainty that is now prevailing could end up causing a great many unforeseen consequences.
We are in a period, in my view, of fertile ground for ‘black swan’ event(s)! I urge everyone to keep their eye on the greater picture, don’t follow the ‘news’ blindly.
Eveyone seems to be completely focused on the terrorism activity and potential for more coming from various sources and conditions. While everyone has their eye on that ball, and with justification, the financial situation has definitely taken a turn for the worse today!
A decent sized junk bond fund froze redemptions today. This is a fund with over 700 million in customer money and now no one can get to their dough. Why? Well appears that to meet current redemption requests the fund would have to ‘fire sale’ bonds to meet them. Thus, the entire fund would suffer, or so they logic goes. Remember junk bonds are high risk and now we see that even junk bond funds can be extremely high risk, at least if you want to access your money.
This is significant folks. There is a ton, trillions, of dollars in bonds, bond funds and interest rate derivatives (especially high risk) and should interest rates go up – which the FED is promising – you could very likely see a tsunami of bond fund redemptions and not just in the junk class. When rates go up the value of the bonds declines…so if an investor wants to avoid punitive losses they would sell – right? Well that might not be as easy as you would think and todays actions by just one fund paves the way for a catastrophic event to unfold. Kind of like someone yelling fire in a theater and there is only one exit…not many get out and the rest burn!
Terrorism, the violent kind, can kill tens if not hundreds at once – a truly terrible thing and sad. Another financial crisis could undo our system and indeed bleed over into the entire world at large. Gridlock and panic would ensue with no one able to get to their money. Makes gold and cash look pretty enticing doesn’t it?
Let’s see if the financial monkeys can keep a lid on this deal…stay tuned as this develops.
The latest data from China shows that they are headed down the same path the U.S. has been on vis a vis their economy. Seems that the powers that be over there are trying to convert the ‘growth engine’ of the economy from one fueled by real estate (speculation) and industrial growth to one driven by consumption and services–sound familiar? Well that is all and good and the kool aide will last for a while, probably a good while, but then it will dry up, just as it has done here over the past – what 30 or 40 years?
We have moved from an economy/nation that produced things to one that consumes them and we rely heavily on the service sector for the economic numbers! Look where that has gotten us as a country, in debt-perhaps beyond belief, tricky unemployment (where people that have just given up are no longer counted in the numbers), college kids that have a hard time finding jobs to pay off student loans…and the list goes on and on…
So when the kool aide stops in China, my opinion only, the shocks will be felt globally…perhaps even more than when our kool aide quit flowing in 2007/8.
Some bond funds are beginning to accumulate cash, some as high as 10% of assets, which doesn’t sound like much but when you are talking billions, it adds up! These money managers are starting to get ‘defensive’ in light of the FED’s talk of raising interest rates which will cut the value of bonds…Of course, they will still have 90% tied up in what could become some serious money losing paper! For most of us these are not huge considerations unless you have shares in any of these bond funds.
No one knows when this rate increase will occur, just that it is inevitable. The timing is still somewhat up in the air, or at least that is what the FED would have us believe. Read the article here.
Gerald Celente is talking with Naomi Prins, who was just speaking to the FED Board…she has some very interesting insights! Click here to read the article
The markets are a bit nervous and the volatility is way up. Gold is up 12.00 and the Dow up almost 200. Greece is running out of time to work out some type of agreement with the EU, IMF etc…In some ways I think that default might be in Greece’s best interest, not so much the EU. For the EU it would seem to be a failed experiement perhaps. Only time will tell the full impact of a default by Greece on the world’s financial system. If you believe the MSM, nothing at all will happen-just a lot of hoopla over nothing. Greece’s debt outstanding is trivial if compared to IMF outstanding debts etc. Really the question is, will this deal a huge blow to confidence in the system? As I said we will see. Read the latest article here and here and here
They say the IMF never leaves the table yet that is what appears to have happened as their negotiatiors have left the table. The MSM seems to be setting Greece up for a fall…read it here
This article points out the skewed playing field that we are investing on. Orchestrated by the FED to bring on PROSPERITY! When this unravels, I think it will make the Great Depression look like a picnic in the park! Read here
According to the Greek authorities their exit from the Euro would be catastrophic. Of course, the other side of the argument-the EC officials-counter that it wouldn’t be that bad. It becomes more and more likely that Greece will leave the EC and go it alone. How this will affect the currencies and economies globally is yet to be seen! Read this article here.
Obviously the Government makes all the rules and can and will change them when it suits their needs. In the most recent ‘adjustment’ The Bureau of Economic Analysis is preparing the change the way GDP is calculated. Apparently the government is not happy with the most recent GDP numbers since they were down.
So now they want to adjust the calculations to hopefully prevent publishing ‘down’ quarters??? For me these calculations, including the unemployment calculations, have been changed so many times over the past 20 or 30 years they don’t really have a realistic picture of the economy anymore. I suppose I stopped believing this stuff back in the late 80’s.
Read the article here.