Royal Bank of Scotland to investors: 'Sell everything'

For anyone interested, I just read Bill Gross' monthly investment letter from earlier today in which he covers what I have posted about: Bill Gross Investment Outlook March 2017

"But our highly levered financial system is like a truckload of nitro glycerin on a bumpy road."

If you read that and you focus on "imminent so and so," I think you may as well be sticking your fingers in your ears and closing your eyes and being intentionally obtuse. You should pay attention to the credit / leverage numbers he points out, what is behind it, and his advice to focus on the return of your money right now rather than the return on your money, because of that levered mess.

 

This was part of my post day after the election:

Trump will get the blame instead. Out of all the horrible things he is going to end up deserving the blame for, it will actually be the thing whose seeds were sown well before he ever planted his orange bloviating ass in the oval office. This traces to the advent of the Federal Reserve, but really ramped up and went berzerk in the mid to late 1990s when Alan Greenspan got a god delusion. Since then, they have taken a burgeoning debt mess they alone created, and rather than ever allowing a deleveraging (which would have serious economic consequences) they have dug the hole deeper -- making the debt that much greater as they have gone along. They are all in now, and it will have to end a very messy deleveraging / credit crisis -- with them losing control over their grip on the cost of borrowing. Maybe they can find more quantitative easing to try to keep kicking the can down the road, rather than facing reality when it happens. There is an end of the rope somewhere though on debasing your currency to create a false economy -- this is the story of money throughout the history of civilization.

 

Just quoting this. so it is there when they reverse course yet again (they were going to hike 3 times 2 years ago. ... no wait. ... that was last year. ... no wait, it's this year). They had to back off each time because markets began to buckle each time. That is going to happen again.

By their own BS inflation measure, they have already exceeded their "target." The actual economy people are living in is suffering from stagflation. Yet they are dithering at hundreds of basis points below where rates should be, and after a measly 25 basis point hike (not that I am complaining about it -- we need 400 basis points, but I'll settle for anything after the last decade!), she was still talking dovish in an attempt to not freak out markets.

It won't make a difference. They are eager to raise, but the economy is incredibly weak. Right before they hiked (after telegraphing it for 2 weeks, because it has ZERO to do with "data dependence" and everything to do with trying to keep from losing all credibility), the Atlanta Fed lowered its first quarter GDP estitmate to 0.9 percent. Their "data" says the economy is sputtering.

They are lost and hiking and praying now.

And they have created debt messes everywhere that can't handle even anohter 100 basis points without it creating a black swan, so that was an incredibly dumb post. I get it, they are eager to try to get out of the corner they backed themselves into. But there is no way out. By the time the 30-year is at 3.5 percent, it will be game over. There is a credit crisis coming .You'll see QE4 (or something even more desperate than that), as I said in the post you quoted, because it is all they know. And you won't be reviving this thread, of course.

In the mean time, they still have cover -- as my posts have pointed out, you still have the ECB buying $80 billion Euros of assets a month (more than a trillion dollars being released into the casino a year), the BOJ exceeding even those purchases and both of them pinned at a negative overnight rate. The central banks work in concerts. It isn't just about the Fed. So maybe things don't collapse tomorrow. But this is borrowed time. When they hiked in December 2015, there was two days of quiet before emerging markets started buckling, markets started falling and they backed off their bullshit and got dovish again. You are being premature. Even if they get through this, there isn't another 50 basis points (or two of their hikes) before they are done.

Jim Rickards had it right the other day: The Fed is Getting Ready to Raise into Weakness

 

Well, supposedly a hiking cycle is bad for those silver dollars. Yet, silver rallied 2.5 percent on the news.

That is because markets don't believe we are getting normalized rates -- they know it isn't possible without them creating a crash. The Fed has also lost all credibility over the last 3+ years by doing their boy who cried wolf act over and over again -- trying to prepare the addicts for the drugs being taken away. ... and then doing nothing. Three 25 basis point hikes over a time period they were throwing out hundreds of basis points to see how bad the freakout is going t obe.

The thing cranberry was so gleefully waiting to post (which everyone has known about for 2 weeks, because they came out with megaphones), wasn't about their 25 basis points (while they sit in a $4.5 trillion balance sheet and other central banks are still adding to their balance sheets to keep the credit flowing). It was about whether she is back to threatening a complete end to the party.

And the answer was a resounding no -- she sounded as dovish as ever. No steady hikes. No plan to try to unwind the balance sheet (which is the real beast). For three years, they have been gently preparing markets for normalization. With each rate decision that they did zilch after endless bullshit in the run up preparing everyone, I didn't rush to post on here, the way cran just did, for what it is worth. The posts would have been wastred. They have spent three years and have raised a total of 75 basis points -- we need an overnight rate of 4+ percent to even be ahead of the inflation THEY say we aer seeing, and they are sitting below 1 percent. They are being ridiculously accomodative still, and markets don't believe they are ever going to put the brakes on the cheap credit.

I think those markets are being complacent. The Fed isn't in control. So the event that triggers the credit crisis they have created is going to come out of nowhere. I am happy for the 25 basis points. 3/4 of one percent is better than half a percent -- the longer this goes on, the bigger the hole they dig. But let's be real. They haven't normalized. And let's give it some time to see if all of the leverage and debt they have created can even handle a small tick up without the defaults starting.