Posts Tagged ‘credit crunch’

CHINA’S CREATIVE ACCOUNTING: USING DEBT AS A TOOL FOR ECONOMIC DEVELOPMENT

CHINA’S CREATIVE ACCOUNTING: USING DEBT AS A TOOL FOR ECONOMIC DEVELOPMENT

Courtesy of Ellen Brown, at Web of Debt 

China may be as heavily in debt as we are. It just has a different way of keeping its books — which makes a high-profile political ad sponsored by Citizens Against Government Waste, a fiscally conservative think tank, particularly ironic. Set in a lecture hall in China in 2030, the controversial ad shows a Chinese professor lecturing on the fall of empires: Greece, Rome, Great Britain, the United States . . . .

"They all make the same mistakes," he says. "Turning their backs on the principles that made them great. America tried to spend and tax itself out of a great recession. Enormous so-called stimulus spending, massive changes to health care, government takeover of private industries, and crushing debt."

Of course, he says, because the Chinese owned the debt, they are now masters of the Americans. The students laugh. The ad concludes, "You can change the future. You have to."

James Fallows, writing in the Atlantic, remarks:

“The ad has the Chinese official saying that America collapsed because, in the midst of a recession, it relied on (a) government stimulus spending, (b) big changes in its health care systems, and (c) public intervention in major industries — all of which of course, have been crucial parts of China’s (successful) anti-recession policy.”

That is one anomaly. Another is that China has managed to keep its debt remarkably low despite decades of massive government spending. According to the IMF, China’s cumulative gross debt is only about 22% of 2010 GDP, compared to a U.S. gross debt that is 94% of 2010 GDP.

What is China’s secret? According to financial commentator Jim Jubak, it may just be “creative accounting” — the sort of accounting for which Wall Street is notorious, in which debts are swept off the books and turned into “assets.” China is able to pull this off because it does not owe its debts to foreign creditors. The banks doing the funding are state-owned, and the state can write off its own debts.

Jubak observes:

“China has a history of taking debt off its books and burying it, which should prompt us to poke and prod its numbers. If we go back to the last time China cooked the national books big time, during the Asian currency


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Meredith Whitney Sees Bleak Second Half in Stock Market, Small Business Credit Crunch, Double Dip in Housing

Meredith Whitney Sees Bleak Second Half in Stock Market, Small Business Credit Crunch, Double Dip in Housing, Says European Banks in Worse Shape

meredith whitneyCourtesy of Mish

Meredith Whitney is concerned about financial reform that will punish banks just for the sake of doing something. This she says, will hamper small business lending right at a time state and local cutbacks will cost 1-2 million jobs.

The Wall Street Journal covers this in The Small Business Credit Crunch

Over the next 12 months, disappearing state and local government jobs will prove to be a meaningful headwind to an already fragile economic recovery. This is simply how the math shakes out. Collectively, over 40 states face hundreds of billions of dollars in budget gaps over the next two years, and 49 states are constitutionally required to balance their accounts annually. States will raise taxes, but higher taxes alone will not be enough to make up for the vast shortfall in state budgets. Accordingly, 42 states and the District of Columbia have already articulated plans to cut government jobs.

So the burden on the private sector to create jobs becomes that much more crucial. Just to maintain a steady level of unemployment, the private sector will have to create one million to two million jobs to offset government job losses.

Herein lies the challenge: Small businesses continue to struggle to gain access to credit and cannot hire in this environment.

Unless real focus is afforded to re-engaging small businesses in this country, we will have a tragic and dangerous unemployment level for an extended period of time. Small businesses fund themselves exactly the way consumers do, with credit cards and home equity lines. Over the past two years, more than $1.5 trillion in credit-card lines have been cut, and those cuts are increasing by the day. Due to dramatic declines in home values, home-equity lines as a funding option are effectively off the table. Proposed regulatory reform—specifically interest-rate caps and interchange fees—will merely exacerbate the cycle of credit contraction plaguing small businesses.

If banks are not allowed to effectively price for risk, they will not take the risk. Right now we need banks, and particularly community banks, more than ever to step in and provide liquidity to small businesses. Interest-rate caps and interchange fees will more likely drive consumer credit out of the market and many community banks out


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GARY SHILLING’S FAVORITE 2010 TRADES

GARY SHILLING’S FAVORITE 2010 TRADES

Courtesy of The Pragmatic Capitalist  

The New Mutate Britain Exhibition One Foot In The Grove Is Launched

Gary Shilling has become infamous in the last few years for predicting the credit crunch and the bear market.  The bearish investor still believes deflation is the dominant force at work and that the credit crunch is in the process of unfolding.  But he isn’t bearish about everything.  The following are his 6 buys:

  1. Buy treasury bonds – the safehaven trade will return.
  2. Buy income-producing securities – high quality dividend names will be a safe place to hide.
  3. Buy consumer staples and foods – consumers won’t stop buying the necessities.
  4. Buy ’small luxuries’ – consumers are trading down.
  5. Buy the U. S. dollar – still the world’s safehaven currency.
  6. Buy eurodollar futures.

Unfortunately for market bulls Shilling is generally bearish about stocks and the global economy.  His 11 sells:

High angle view of a globe on a heap of Indian banknotes and Euro banknotes

  1. Sell U.S. stocks in general – U.S. stocks are just too expensive.
  2. Sell home-builder and selected related stocks – home prices will fall 10% in 2010 and the stocks will tank with it.
  3. Sell big-ticket consumer discretionary equities -  consumers aren’t buying luxury goods due to the trade down.
  4. Sell banks & other financial institutions – the days of big bank profits and bailouts are over.
  5. Sell consumer lenders’ stocks – consumers will continue to deleverage.
  6. Sell many low- and old-tech capital-equipment producers.
  7. If you plan to sell a home or investment house, do so yesterday.
  8. Sell junk bonds.
  9. Sell commercial real estate – the real estate bubble is a slow motion train wreck.
  10. Sell most commodities – the dollar rally will crush commodities.
  11. Sell developing country stocks and bonds – there will be no decoupling.

 


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Here's how airplane crash investigations work, according to an aviation safety expert

  Here's how airplane crash investigations work, according to an aviation safety expert

Courtesy of Daniel Kwasi Adjekum, University of North Dakota

The fatal crash of Ethiopian Airlines Flight 302 has resulted in the worldwide grounding of Boeing 737 Max aircraft. Investigators are probing the crash and ...



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Zero Hedge

Nomura: "Event Risk" Has Become A Joke

Courtesy of ZeroHedge. View original post here.

For a brief period yesterday, it seemed the stock rally may stall just as the market settled into its comfortable, pre-FOMC melt up. To be sure, there were numerous catalysts to fade the current 5 month high with Nomura listing 6 reasons why stocks may fade as we enter the "pullback window." Traders were additionally spooked by yesterday’s "spot up, VIX up, VVIX up" combo, which as Charlie McElligott notes, "always raises an eyebrow from market bystanders" although in retrospe...



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ValueWalk

When Preserving Capital Is Wiser Than Growing It

By Michelle Jones. Originally published at ValueWalk.

When it comes to investment performance, slow and steady generally wins the race when stretched out over long-term horizons. Even though this practice may not seem glamorous, one hedge fund explained in its year-end letter for 2018 that preserving capital is a wise move during times of extreme volatility.

NjoyHarmony / PixabayMaverick preserves capital

In his 2018 letter to investors, Maverick Managing Partner Lee Ainslie said when they wrote their first letter more than 25 years ago, they stated that the fund’s objective was to &...



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Kimble Charting Solutions

Financials About To Let Down The Bull Market Again?

Courtesy of Chris Kimble.

If the saying So Goes The Banks, So Goes The Broad Market is true, what message are we receiving when financials have lagged the broad market for over a year?

This 2-pack looks at the XLF/SPX and EUFN/XLF ratios over the past couple of years.

The XLF/SPX ratio has created a series of lower highs for the past 12-months after peaking at (1). The EUFN/XLF ratio has created a series of lower highs for the past 18-months after peaking at (2). These falling trends look to be sending a negative divergence message to the broad markets if one believes that banks are important for bull markets.

Each ratio is near falling resistance at ...



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Insider Scoop

A Peek Into The Markets: US Stock Futures Climb Ahead Of Fed Meeting

Courtesy of Benzinga.

Pre-open movers

U.S. stock futures traded higher in early pre-market trade. The Federal Open Market Committee will begin its two-day policy meeting today. Data on factory orders for January will be released at 10:00 a.m. ET.

Futures for the Dow Jones Industrial Average climbed 103 points to 26,072.00, while the Standard & Poor’s 500 index futures gained 11 points to 2,852.00. Futures for the Nasdaq 100 index rose 27 points to 7,388.75.

...



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Chart School

Weekly Market Recap Mar 17, 2019

Courtesy of Blain.

A very good week for market bulls as the prior week’s selling was all reversed.  Last week we asked how many times can we rally on the same Federal Reserve juice.  It seems indefinitely.  Jerome Powell went on ’60 Minutes’ and talked dovish – that sparked a big rally Monday and it continued all week.  The only down day all week was Thursday when the progress on the U.S. – China trade deal seemed to hit a delay.

A meeting between President Donald Trump and Chinese President Xi Jinping will be delayed until at least April, Bloomberg News reported, indicating that a bilateral trade deal will n...



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Biotech

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Reminder: We are available to chat with Members, comments are found below each post.

 

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Assorted cannabis bud strains. Roxana Gonzalez/Shutterstock.com

Courtesy of James David Adams, University of Southern California

Medical marijuana is legal in 33 states as of November 2018. Yet the federal government still insists marijuana has no legal u...



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Digital Currencies

Facebook's cryptocurrency: a financial expert breaks it down

 

Facebook's cryptocurrency: a financial expert breaks it down

Grejak/Shutterstock

Courtesy of Alistair Milne, Loughborough University

Facebook is reportedly preparing to launch its own version of Bitcoin, for use in its messaging applications, WhatsApp, Messenger and Instagram. Could this “Facecoin” be the long-awaited breakthrough by a global technology giant into the lucrative market for retail financial services? Or will...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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