The Debt Party is Over . . . .

[errolanderson]

Group . . . What we may be witnessing in markets this week is a total shift in global debt mentality. Failure in the U.S. bond market last week set off an earthquake in equity markets..

Bond markets are effectively debt markets. Given the market washout, Trump is scrambling to place the blame on the U.S. Fed for hiking rates at the wrong time. But the real culprit for recent market implosion (IMO) was likely Trump’s draconian tariff strategy (IMO). Yes, central bank policies built this global debt bomb. But tariff strain may be the lighter fluid for it to blow.

There is no way China will back down even if it lowers their standard of living. This ensures a possible multi-year trade war that may be impossible to win.

If I sound pissed, I am . . . . Our so-called leaders and their egos are now threatening to impale global economies in a serious prolonged recession, if not a depression.

The stock market is now imploding and bond markets are imploding . . . This is an extremely rare situation.
What it means is . . . The debt gig is up.

Interest rates can’t go up despite all the banker rhetoric. And the easy street for bank profits may hit a serious detour. Realize, my opinion may not be your opinion, but we are all impacted by decisions of our elected leaders.

Regards
Errol

[GDR]

So if equities are taking a beating and bonds falling apart where are the big guys going to park the money? Will gold reverse it's direction and become the safe haven it used to be or has China's currency problems affected golds future too much. Can't sit on cash very long but where do you invest it in an uncertain time?

[iceman]

Alway enjoy reading your posts Errol.

So many questions about how something will operate in a bear market. Ie passive ETFs, Algos, central banks. Now we have trades wars. Maybe even that little yellow currency will get its day in the sun again.

Interesting times we live in.

Iceman

[iceman]

Also Errol.
Do you think we will see any tightening in the credit?

[Rareearth]

Good post Errol
I’m not so sure that interest rates can’t go up though, ? It doesn’t make sense I agree, but...

[errolanderson]

Also Errol.
Do you think we will see any tightening in the credit?

Iceman, thanks . . . An opinion, but yes, credit will no-doubt tighten. It may not be from rising rates however. Sense a whole paradigm shift coming in credit as rules for credit are apt to stiffen.

[grassfarmer]

Alway enjoy reading your posts Errol.

Ditto.

[macdon02]

Group . . . What we may be witnessing in markets this week is a total shift in global debt mentality. Failure in the U.S. bond market last week set off an earthquake in equity markets..

Bond markets are effectively debt markets. Given the market washout, Trump is scrambling to place the blame on the U.S. Fed for hiking rates at the wrong time. But the real culprit for recent market implosion (IMO) was likely Trump’s draconian tariff strategy (IMO). Yes, central bank policies built this global debt bomb. But tariff strain may be the lighter fluid for it to blow.

There is no way China will back down even if it lowers their standard of living. This ensures a possible multi-year trade war that may be impossible to win.

If I sound pissed, I am . . . . Our so-called leaders and their egos are now threatening to impale global economies in a serious prolonged recession, if not a depression.

The stock market is now imploding and bond markets are imploding . . . This is an extremely rare situation.
What it means is . . . The debt gig is up.

Interest rates can’t go up despite all the banker rhetoric. And the easy street for bank profits may hit a serious detour. Realize, my opinion may not be your opinion, but we are all impacted by decisions of our elected leaders.

Regards
Errol

Not to take away from your comments but only to add I'm with you on Trump being wrong on rates, they've been going up since Q4 '15 so its not the increases that are causing the setback. I'll call it a setback for now until we take out the lows earlier this year in Jan/ Feb. I see it as the final flush to get everyone offside and will be watching nasdaq to lead out of the hole. IF this is the launchpad hold on as i see a bitcoinesque final push coming that'll break USA. The only thing keeping me thinking this way is the troika all broke from highs in different months and there is Nowhere else to go. I suspect tarrifs aren't the cause as when beans got hit wheat and corn for the most part ignored it. This is just another flush in equities but make no mistake there'll be govts defaulting on this bond deal. It's the end of a 34 yr run going back to'85. Cue the inflation after default. The bonds are the key and that's bigger then Trump or any leader imo ...... bonds are not a market i ll ever short but I'll buy equities before yr end because when it comes to them you buy fear

[furrowtickler]

Not surprised at all , the cost of everything was getting way out of touch with reality coupled with way too much cheap credit = financial bomb

[macdon02]

DJ +320 at 1230am .... Think there's money pouring in as it looks cheap from across the pond? Or are the shorts getting it? This is nutz ... totally awesome but nutz. Need another 400 points to call it over. If this is foreshadowing what's to come in grains, if you don't have an order in you'll miss out. HAVE A NUMBER IN MIND WHERE IT'S TIME TO REDUCE RISK!! Your long next year's production unless your in the Ritchie bros catalog. I'm not saying fwd sell what you don't have but if you got something in the bin know where you want out ahead of time then stick to it. This environment provides opportunity but it'll cut you down just as fast. I don't think any number we've seen in the last 5 years is out of the question between now and July. Volatility is like a pendulum, the faster it gets moving the opposite reaction is more exaggerated. I suspect this'll ripple through every market as bonds come undone. It's just too much money through a very small door. This won't happen again in our lifetimes

[hobbyfrmr]

DJ +320 at 1230am .... Think there's money pouring in as it looks cheap from across the pond? Or are the shorts getting it? This is nutz ... totally awesome but nutz. Need another 400 points to call it over. If this is foreshadowing what's to come in grains, if you don't have an order in you'll miss out. HAVE A NUMBER IN MIND WHERE IT'S TIME TO REDUCE RISK!! Your long next year's production unless your in the Ritchie bros catalog. I'm not saying fwd sell what you don't have but if you got something in the bin know where you want out ahead of time then stick to it. This environment provides opportunity but it'll cut you down just as fast. I don't think any number we've seen in the last 5 years is out of the question between now and July. Volatility is like a pendulum, the faster it gets moving the opposite reaction is more exaggerated. I suspect this'll ripple through every market as bonds come undone. It's just too much money through a very small door. This won't happen again in our lifetimes

I am definitely not an expert on any markets. It sounds to me like you are describing stock market volatility in which I would agree with you.
The only association I can remember with grain price increases are to oil prices. When oil was $90-100/barrel grain prices were profitable. I don’t remember the stock market values at that time.
I note the Aussie drought, Political drama in Brazil and other situations that should increase our grain prices but I am firmly convinced that the grain industry must not allow farmers too much profit. I genuinely hope you are right.

[errolanderson]

The LIBOR (London Inter-Bank Offered Rate) rate is surging of-late. This is the rate banks lend between themselves.

A surging LIBOR rate is also an indication that global credit markets are tightening up. In 2008, the surging LIBOR rate seized global credit markets. This also had an immediate impact ocean freight as lack of credit dry-docked container ships.

Bottom line . . . If credit liquidity between banks begins to seize up, global trade slows, prices drop.

Suspect the VIX volatility index will continue to surge given these incoming uncertain credit market issues. This will have a direct impact on commodity prices. ie: further fallout in crude oil prices?

The central bank lifeboat has already sunk, so markets will have to figure it out on their own this time around.

[bucket]

The LIBOR (London Inter-Bank Offered Rate) rate is surging of-late. This is the rate banks lend between themselves.

A surging LIBOR rate is also an indication that global credit markets are tightening up. In 2008, the surging LIBOR rate seized global credit markets. This also had an immediate impact ocean freight as lack of credit dry-docked container ships.

Bottom line . . . If credit liquidity between banks begins to seize up, global trade slows, prices drop.

Suspect the VIX volatility index will continue to surge given these incoming uncertain credit market issues. This will have a direct impact on commodity prices. ie: further fallout in crude oil prices?

The central bank lifeboat has already sunk, so markets will have to figure it out on their own this time around.

Someone finds a new angle to keep the party going.....and I think 2008 had good grain prices....it also scrapped alot of smaller inefficient vessels on the ocean and created an economy for shipbuilding....

Too bad the boats contracted to come to the west coast to haul grain were not being loaded at lower rates and less demurrage...

[Rareearth]

So if interbank rates go up, and liquidity is the issue, expect interest rate hikes? Or will Trump actually be able to influence the Fed rate not too? If they hold rates and other countries increase the USD will go lower which is what Trump wants s well?

Does the CRB index follow or correlate with interest rates or crude pricing?


Lots of ? Marks I know,

[biglentil]

Grain prices will be strong at some point 1 billion Canuckstan bucks per bushel. The dollar isn't worth the paper its not printed on. The ones who have been trained in keynseyian economics who have had it all wrong up to now will be most in shock.