Royal Bank of Scotland to investors: 'Sell everything'

I suspect you already have.

 

Yeah, the price of oil is vital to the global economy. The prices need to be more than stable, though. They need to be HIGHER and stable. In a normal economy, the higher part wouldn't be necessary -- consumers benefit from lower prices, and that SHOULD be a desirable thing. But in a debt-fueled economy, there are much different factors at work.

There is so much junk debt related to that particular industry -- I posted about this the other day. And without oil above a certain threshold level, it makes that iffy debt a potential black swan that is constantly lurking. You have a lot of producers on a treadmill (US shale producers high on that list) -- needing to service a ton of debt and unable to do that unless they can sell the oil they drill at a certain price. It is stable at the moment, but always tenuous at these prices. Interest rates are very, very low and have not risen -- yet. If (more like when -- people are keeping their heads in the sand) the yield curve stretches, though -- for example, when the 10-year bond gets up in the 3 percent area (which will still be hundreds of basis points below the natural rate of interest) -- there could be a wave of defaults and a chain reaction -- much like how housing was the black swan that caused the credit crisis in 2007. It is just one of many similar potential black swans that are out there due to the ridiculous amount of debt (and misallocated capital) that has been created globally over the last decade. There are so many areas that COULD be the catalyst that causes what is going to be a coming credit crisis.

BTW. ... Oil prices have not been in the force field you said for the last 2 years. Prices bottomed in the mid 20s last February, when on this thread I thought we were getting the catalyst that was going to put an end to the phoniness that had among other things sent US equities flying into massive bubble territory. Central banks managed to stem it, though, by frantically upping the amount of credit they created -- the ECB and BOJ stepped in very hard and went to negative interest rates and upped their asset purchases making their currencies the vessel for the global carry trades. They basically held off the inevitable (a serious deleveraging) longer. Oil has only been in the force field you are talking about for the last 10, 11 months, not the last 2 years. And it remains tenuous. The range has been more like $47 to $55. $55 is where it has hit its resistance (people were hoping it would get through as recently as a few weeks ago), and in the last several weeks it dropped quickly to the bottom of the range -- starting concerns again. It found support at that $47 mark a few days ago, but it is still hovering toward the bottom of the range. If (I am not saying it will) it cracks through there and gets into the low 40s, you will be reading about it all over again -- those prices mean the cracks in high-yield debt start becoming a major problem again. This is the tenuous situation the dangerous levels of leverage central banks have created has us in.

 

It touched 2400 on March 1. That wasn't an update. It was you being a hyena.

For what it is worth, the VIX (volatility index) hit a low not seen since 1993 yesterday. Complacency has only been lower twice since the VIX was created in 1992. The overall stock market is trading at a trailing multiple only seen a handful of times in history (actually only exceeded once). Each one ended with a crash -- precisely because they were artificial, unsustainable creations. The only time the market multiple was higher than it is right now was during the dot-com bubble -- also caused by central banks flooding the markets with too much liquidity by manipulating interest rates. It took them until last year to create enough monetary inflation to bring the Nasdaq index back to where it was then -- and that was quaint compare to what they have now done, because this is not just rate suppression, it is trillions of dollars of asset purchases to put a "put" under markets. ... until they cause a crash. Which is why you are cheerleading what is going to be a lot of misery for people when this cracks.

The amount of credit created that is chasing asset bubbles (not just the stock market) is much greater than it was during 2000 or 2007, due to the trillions of dollars that now comprise central bank balance sheets. The credit crises (multiple areas -- this goes beyond them blowing market bubbles) that is coming due to their stupidity is going to create a ton of misery. And you are too clueless to understand what you are cheerleading, unfortunately. Central banks did more than 1 trillion dollars more quantatative easing / asset buying n the first 4 months of the year. As I said multiple times, if they stepped it back up, they could blow the bubble even farther. Unfortunately, that means the misallocations of capital are even greater, which means they are precipitating a bigger, longer lasting crash, when it comes. Institutions are gambling with what they think is free money; blinded to the insane amount of risk inherent -- looming debt crises when it all implodes. A handful of stocks that money is chasing are trading at ridiculous multiples. This ends so poorly. To you it is an inexplicable pissing match. ... you check Yahoo! news, read something and run to revive this thread (with a false premise). Unfortunately, you are cheerleading a lot of misery that is coming on the back of this. It will still be a pissing match for you, when we have to deal with it -- no acknowledgment of my pointing out what they were doing all along the way and what the consequences were going to be. For me, it's just sad.

 

There is a put under the markets. We have had miserable hard economic data for the last 4 months. Every time the market tries to sell off, the computers step in and buy the dip. Why not? Free money. ... central banks either outright flooding the markets with margin / credit (the BOJ, Swiss National Bank actually buy stocks directly, or the Federal Reserve giving smoke signals that the casino is still open. The VIX (volatility index) is at historic lows. There is a sense of complacency -- they finally have broken our markets, making the participants think they only go up, not down (on the back of endless credit creation). This is going to end so poorly. Please don't get drawn in. Even if this isn't 9th inning, as I thought it might be last year, it is LATE innings. And when it ends, there is a VERY good chance it is going to end badly beyond 2007 /8.