Author: hfoelsing

Posted on

Geldzug: FOUND: THE NEW GLOBAL GROWTH SECTOR – INSOLVENCIES

3rd October 2016

Arminius monitors bond defaults on a global basis, not only because of the disruption which they cause to financial markets and the banking sector, but also because of the lasting damage which they inflict on the real economy. Chart 1 below shows how bond defaults have risen sharply in the last eighteen months.

Most of the increase in defaults so far is a direct consequence of the halving of oil prices in 2014. Many US shale oil producers had funded their development expenditures by issuing junk bonds when oil was over USD$100 per barrel and with oil at USD$50 they no longer had sufficient cash flow to meet their obligations. The red dots in the chart below represent US shale oil producers and they account for a majority of the defaults in 2015 and 2016 – but not all of them… [see more]

Posted on

Geldzug: HOW THE NEXT PRESIDENT’S “FISCAL SHIFT” WILL MOVE INVESTORS

22nd September 2016

On 21 September the US Federal Reserve decided not to raise interest rates, but fourteen of the seventeen board members indicated that they expected one more rate rise in 2016. This has pretty much telegraphed to financial markets that, so long as economic statistics remain reasonable, the Fed will go for a rate rise at its December meeting.

This December is an excellent time for a rate rise, regardless of the state of the US economy, because it is a period of low public scrutiny. It has the advantage of being after November’s Presidential election but before the inauguration of the new President on 20 January 2017. Hence a rate rise at this time is much less controversial: the Fed is unlikely to attract criticism from either the lame-duck incumbent or his not-yet-installed replacement… [see more]

Posted on

Geldzug: FRACK-TIONALLY LOWER OIL PRICES

15th September 2016

It is now two years since oil prices halved in the second half of 2014. The chart below reminds us that this fall was far less severe than the oil price collapse during the GFC, when prices recovered very quickly. Why aren’t prices beginning to recover now?

The causes of the two price falls were very different. The 2008 collapse was triggered by factors outside the oil market – specifically, the GFC’s liquidity crisis which shut down bank lending and trade finance, followed by lower demand as a result of the recession in developed countries. But when central banks pumped up liquidity, global oil demand recovered… [see more]

Posted on

Geldzug: EXPENSIVE MARKETS = DANGEROUS MARKETS

31st Aug, 2016

Our proprietary metrics indicate that the US and Australian share markets are very expensive at present. Although we are confident of the sound statistical basis of our metrics, it is reassuring to know that we are in good company: in recent months several very successful global investors have warned that US equities are over-priced, or have stated very clearly that they have taken out portfolio protection. For example:

  • Legendary hedge fund managers George Soros and Paul Tudor Jones have both increased their short positions on the S&P500.
  • Carl Icahn said in June, “I don’t think you can have zero interest rates for much longer without having these bubbles explode on you.”
  • In late July Jeff Gundlach, founder of DoubleLine, said, “Sell everything. Nothing here looks good.”
  • Only this month Paul Singer, who manages USD$28 billion, warned that “the ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large.”… [see more]