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prevalou

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    Brexit-- Implications for Markets and Stocks

    in General Discussion

    Posted

    EU will go into turmoil as they seek to impose an un democratic federal state. So the negotiations are unlikely to be rational. So the pound will fall to par as Martin Armstrong suggests. EU will suffer runs on their banks and will be forced to lend trillions at zero percent to the banks until they are forced to impose bail ins. US stocks will do well in the turmoil as capital flees Europe. The bail ins are inevitable as the ECB will have a choice of collapsing the monetary system or a collapsing the banks per the Hayek instability hypothesis. When the banks start to fail the secrecy around derivatives will cause runs on all EU and UK banks. Europe federalizations will be agreed in crisis,  probably in secret, which will be time to buy stocks. Bail ins will cause the Euro and EU stocks to drop sharply the same as the Great Depression. That will be the time to buy EU stocks just like 1933 was the time to buy US stocks during the collapse of thousands of banks but before you knew how much money you would get back. Incidentally the flaw in bail ins is that you get equity which will quickly be worth little as banks are terrible businesses when debts are not repaid and the bad news is mostly hidden. At least in the Great Depression you got scrip from the banks which you could use to pay off your debts at par if you had debts at the same bank or sell at 25 cents on the dollar allowing others to pay off their debts cheaply. This allowed people to wipe out their debts allowing recovery which probably won't occur in the EU causing the population to suffer needlessly. This will prolong the downturn. Leave while you can. Remember the goal of these clowns is global government and such chaos is their main tool. The rosy scenario would be to federalize quickly but since this means that the squeaking socialists in each nation state will lose their plush jobs I doubt they will give up their perks easilly hence my pessimism.

     

    The question is : where are the bad loans ? Since the last crisis banks are very careful on their exposure. Even bad loans at italian banks are overcollateralized.

    Brexit-- Implications for Markets and Stocks

    in General Discussion

    Posted

    The US/ EU markets are looking for a reason to crack, and if that happens to align with Brexit then that's what folks will blame it on.

     

     

    I think there is a bit of truth this, the problem is psychological. 

     

     

    There no confidence in anything anymore? China, no. Europe, was there ever. Oil, look at a chart. Real Estate/Housing, look at where the GSEs are. Ive heard 3-4 guys say we are heading for Japan (Munger, Summners, Marks), Pick a US State... its in budget crisis....Simple things is you cant count on the old things any more and when you do that you stop making out lays of capital and start.....and thats just the financial side of things. Forget the rest of the worries that have always existed in a similar form or another.

     

    From what gather and the musings online and such....I dont know why Yellen keeps doing the same shit quarter in and quarter out....pull your reliever he got you out of the jam already.

     

     

    The Brexit thing by itself seems trivial....compounded with the rest its no wonder investors flee to bonds and bond like investments......I have no proof but I suspect that never normalizing policy(in any country) after risk of true collapse receded harmed confidence a great deal....Yellen is fighting the last war.

     

     

    http://www.zerohedge.com/news/2016-06-15/deutsche-bank-if-one-wanted-simple-indicator-broken-financial-system-then-it

     

     

    That chart makes teh Third Reich look like a better investment enviornment than Germany today....just saying.  Edit: assuming bond yeads are and indicator investor sentiment

     

    and during these hard times, Buffett accumulates PSX and maybe other investments...

    Fairfax chairmans letter 2015

    in Fairfax Financial

    Posted

    Fabulous...

     

    annual report 2013: "...these losses are significant but we consider them unrealized and expect both of them to reverse when the grand disconnect disappears-perhaps sooner than you think..."

     

    annual report 2014: :"...these losses are significant but we consider them unrealized and expect both of them to reverse when the grand disconnect disappears-perhaps sooner than you think..."

     

    annual report 2015: "...these losses are significant but we consider them unrealized and expect both of them to reverse when the grand disconnect disappears-perhaps sooner than you think..."

     

    annual report 2016: "...we have warned you many times in our annual reports of the many risks that we see and the great disconnect between the markets and the economic fundamentals. These risks may be coming to a head in early 2016..."

     

     

     

    Ray Dalio on the Future of Monetary Policy

    in General Discussion

    Posted

    Maybe there is a tendency to give up on value investing after 10 years of underperformance and embrace macro investing because there are big down moves in the market. Macro gains favor in a bear market (most of it at the bottom) while stock picking doen't interest anymore. At the top, it is the contrary : Nobody has interest in Fairfax.

    European Banking Crisis?

    in General Discussion

    Posted

     

    Yeah, I didn't say I don't believe you. But it doesn't really matter in which European bank they are. Btw. I wouldn't like to own any of those "certain eurozone countries'" sovereign bonds listed on this very page.

     

    Only comment is that I would think there will be ECB QE to buy sovereign bonds off the banks if needed.

     

    I agree with that. However, the ECB ending up with all the problematic European sovereign bonds can't be qualified as a (long-term) solution – at least not in my mind  :)

     

    Euro banks sovereign Greece debt exposure is minimal, it is my point

    “Macro” Musings II

    in General Discussion

    Posted

    I agree with that. There was a time when conventional wisdom said: "it is important to have a lot of debt in a private company because management can't rest on its laurels and has to seek growth to refund the debt".

    If I Invert: "in our societies with massive lending, people are being lazy and growth will be low for years."

    “Macro” Musings II

    in General Discussion

    Posted

    anyway, if the 1950/1970 period doesn't explain the increase in M2% GDP, it seems "lending from fractional reserves doesn't explain the massive increase in lending.

    Why is it important to know who is lending: in a borowing contract there are two concerned parts: the borrower and the lender. Why is there an obsession with the borrower ? Maybe the lender has a strong hand and can withstand a a bad credit or a recession. Nobody seems to care. Is it conventional wisdom applied ?

    “Macro” Musings II

    in General Discussion

    Posted

    so, this massive and increasing lending comes from ?

     

    An increase in the money supply multiplied by fractional reserve banking, operating over 60 years.

     

    from 1980 to 2013, us M2%gdp went from 69.4 % to 88 % (in M2 are the deposits you are mentioning). Source Worldbank. I don't see the massive increasing lending in these figures. Maybe the increase was before in the 50s, 60s ans 70s ?

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