RED OCTOBERFEST
Hell of a couple of weeks. And what is with gold going up with the USD? Haven’t seen that for a few years.
Last week, probably worst for equities since Lehman Fukushima.
So, after 9 years of “mission accomplished”, after almost a decade of negative and 0% interest rates in the OECD, designed only to hold the system together, creating the largest debt binge and bubble ever known to mankind, we may have a “problem” as rates move up????
You could be forgiven for thinking that the creation and subsequent bursting of central bank created bubbles was intentional.
Rising interest rates and a rising US dollar started pummelling Emerging Markets (in saying this we are starting to see attractive valuations in Asian EM’s through Platinum AM) earlier this year, as we outlined in our last note, it was only going to be a matter of time before the wave reached Developed market shores.
It’s here.
The biggest questions one should have from here is how bad will policy makers allow things to get before they reverse settings and open the QE spigots again, and, at what point will these policies not work? At this point reform/reset will be the only option.
We’re not there yet and Monday is the 29th of October, so we’ll resume our commentary when this little anniversary has passed.
For those calling an 11% correction from the top so far, “a bloodbath”, don’t forget this.
There is now a whole generation that’s never seen a proper correction. Some even wonder if economic cycles even exist.
“Passive” index ETF’s and associated synthetic derivative products manufactured since 2011 are now the fuel, in the air, about to poured on this “correction”
In good news……..
Those that were concerned about the size of the Netflix 3rd quarter cash loss of USD$859 need not worry as they tapped debt markets for another USD$2BILLION at the same time, so you don’t have to worry, plenty of great content to get from that, we’re sure.
This takes the Netflix debt position to a mere USD$8.3 billion, while rates are rising.
Its market cap is almost that of the blue chip dividend paying Disney ($176B v $157B).
Oh, and Tesla is still worth a heap more than Honda!!!
MOAB.
This got our attention from the respectable Dave Rosenberg.
Go ahead, blame Powell. Don’t tell anyone that foreign buying of Treasury debt has been cut in half this year and keep it a secret that the dollar share of world FX reserves has shrunk to a 5-year low of 62.5%. The USD role as the reserve currency is on its last legs.
This below is probably nothing too but if you start seeing Deutschebank employees starting to file out of their offices with cardboard boxes under their arms its probably too late to panic.
As well as Emerging Market (Asia) Blue Chip Companies there may be some value here too. This chart is just relevant to stocks though. If commodity prices stay stable and stocks drop by 40% then this will even things up.
Now, this, below is probably nothing too, It doesn’t include official production of the worlds largest gold producer, China. Not an ounce leaves.
Oh, and then there is this.
Yippee Ki Yay………
