Asset management, Central banking, Commodity price, Economics, Inflation, Monetary reform, Policy, Risk management, Trend following

Inflation: we passed a phase transition

In April 2012, economist Robert Wenzel[1] was invited to speak at the Federal Reserve Bank of New York. On the occasion, he told the central bankers thatvast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out.”[2]

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Asset management, Central banking, Inflation, Market trends, Stock market, Trend following

Bear market or bubble reflation: what comes next?

In March last year, I published an article looking at historical perspective on boom/bust cycles in SeekingAlpha. I suggested then that, “the (still) festering economic imbalances might get resolved along two alternative scenarios. Either we’ll have a full-blown deflationary depression that could see asset prices drop by 50% or more, or we’ll have a strong and sustained decline in the US Dollar, ” accompanied with a continued rise in equity markets. Today, the latter scenario appears more likely. Here’s why: Continue reading

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Asset management, Commodity price, Commodity risk, Energy crisis, Hedging, Inflation, Market psychology, Market trends, Oil market, Trend following

Market panics and trend following

Today global capital markets opened to unprecedented price dislocations. ZeroHedge captured the mood: “Panic Purgatory: Oil Crashes to $27%; S&P Futures Locked limit Down, Treasuries Soar Limit Up Amid Historic Liquidation.” Over the recent months I’ve posted many articles on this blog and on SeekingAlpha, basically along two themes:

1) Warning that the markets would experience great turbulence in the near future (see here: “Perfect Storm Gathering…” and

2) Suggesting that the best way to navigate through the storm is by using high-quality systematic trend following strategies (see here, “Trend Following Might Save Your Tail“).

It may be that the time of reckoning has begun But if you followed my advice and used systematic trend following, most likely you’d be having a good day today. The chart below illustrates the net positioning of my 493 I-System strategies at market open this morning: Continue reading

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Central banking, Economics, History, Inflation, Monetary reform, Stock market

Financial bubbles and their human toll

Bursting of an asset bubble can have grave consequences for the economy and the society at large – so grave, it’s worth paying attention at this point. I’ll elaborate.

In only six trading sessions from the 20th February peak, the S&P500 shed more than 12%, one of the fastest declines on record for the index (only the 1987 black Monday was worse). Only a week before this event I posted the article, “Bubbles Always Burst…”on SeekingAlpha, warning about the risk of this happening.

Whether last week marks the beginning of the bubble’s bursting remains to be seen, but this is only a matter of time. Bubbles always burst, no exceptions. But what’s important to understand is this: bubbles are meant to be burst! For guidance, let’s look again at the bursting of Japan’s own everything bubble of the 1980s. Continue reading

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Economics, Energy crisis, Inflation, Market research, Market trends, Oil market, Policy, Risk management, Stock market, Trend following

Perfect storm gathering: the three converging disruptions

In the near future, we are likely to experience severe consequences of three converging disruptions:

  1. Stock market crash
  2. Oil price shock
  3. Inflation

Since the last recession we’ve enjoyed the longest ever period of economic expansion with low interest rates, low inflation and subdued commodity prices. But this all could be coming to an end.

Bursting of the “everything bubble”

Throughout the west, unprecedented government and central bank stimulus programs helped inflate the current “everything bubble.” This is not a new phenomenon; monetary expansion always creates asset bubbles. The one thing we know is that without exception, asset bubbles ultimately burst. The examples are many and some of them made a mark in the collective conscious of entire generations, from the 1630s Tulip Mania to the 1990s dot-com bubble. Continue reading

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Asset management, Central banking, Economics, Inflation, Market trends, Stock market, Trading, Trend following

The one force moving stock prices and what it tells us about the future

Back when I traded stocks in late 1990s, I got a gnawing suspicion that beyond the nonstop noise of the news flow, there was some force pushing the rising tide, but I couldn’t discern what it was. By today I think I worked it out. The most surprising thing about it is that it’s been so hard to work out.

Stocks are principally driven by money supply

The first time I encountered an explicitly formulated hypothesis that justified my suspicions was years later while I researched for my book, “Grand Deception.” The hypothesis, relating to Russian stocks, was articulated by Bill Browder, CEO of Hermitage Capital Management in his 2006 HedgeWeek interview: Continue reading

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Central banking, History, Inflation, Monetary reform

On the other side of the financial repression dam: epic inflation

Inflation is with us – and in time it will flood the economy. Regardless of how powerful and prosperous a nation may appear in its peak, no empire ever was able to exempt itself from the elemental laws of economics any more than we can exempt ourselves of the laws of gravity.

Warren Buffett warned that for a debtor nation, inflation was the economic equivalent of the hydrogen bomb. Runaway inflations tend to emerge when an economy’s debt burden becomes unsustainable, usually as a consequence of too much government spending and too much war. Today, nearly all categories of debt in the U.S. economy are breaking records: government, corporate as well as household and student debt. Worse, the levels of delinquency have been rising and credit standards have been deteriorating over the recent months, particularly for corporate debt. Continue reading

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Asset management, Central banking, Economics, Inflation, Market research, Market trends, Policy

US jobs: everything is awesome! Is it? Let’s take another look.

A few years back in an interview with Wall Street Journal’s “Heard on the Street” program , Elliott Management’s Paul Singer said that his greatest worry was the rise of inflation that could appear suddenly. He suggested that this could come about with small changes in perception of inflation risk. Specifically, “The first whiffs of either commodity inflation or wage inflation,” said Singer, “may cause a self-reinforcing set of market events … which may include a sharp fall in bond prices, … fall in stock prices, rapid increase in commodities…

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Commodity price, Commodity risk, Economics, Energy crisis, Hedging, Inflation, Market research, Market trends, Oil market, Politics, Risk management, Trading

The coming oil price shock: could the crisis in Venezuela trigger an energy crisis?

Measured by historical standards, the price of oil has been extremely volatile in recent years. From over $114 per barrel in the summer of 2014 it collapsed more than 75% in only 18 months’ time. Then it tripled to $86/bbl in October 2018, only to drop by 40% to $52/bbl two months later. The question is, why is the oil price so very volatile? Is the market foreshadowing greater disruptions in the future? A closer look into oil supply and demand fundamentals suggests that a great crisis could be in the making – possibly with alarming repercussions.

The looming oil shortage

In 2012 a report produced by the UK Ministry of Defence predicted that oil prices would rise significantly out to 2040, and by “significantly,” they meant to $500 per barrel. From today’s perspective, this may seem farfetched. However, we should not dismiss UKMOD’s warning lightly. This could turn out to be the most important development facing humanity for decades to come. Continue reading

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Economics, Eurasia, History, Inflation, Politics

3/6: the strangulation of Russian economy in the 1990s was a deliberate IMF policy

… if the notion of billions of barrels of proven oil reserves and billions of tons of gold fills your dreams with visions of red-hot cash flow and ice-cold vodka, then Boris Yeltsin just might find some work for you. – Paul Hofheinz, Fortune Magazine, 23 September 1991[1]

The foregoing article is an excerpt from Chapter 3 of my book “Grand Deception: the Truth about Bill Browder, Magnitsky Act and Anti-Russian Sanctions.” Part 1 is here. Part 2 is here.

Shock therapy gave Russia one of the worst and longest economic depressions of the 20th century, an unprecedented humanitarian catastrophe for a peace time crisis, and a criminally inequitable privatization of public assets. The reasons why things happened this way in Russia generally aren’t well understood in the west. Even among better informed intellectuals, the failure of shock therapy is often thought to be vaguely related to some sinister flaw in the Russian society. It is what Bill Browder characterized as “the dirty dishonesty of Russia,” or “Russia’s evil foundation,” which spawned corruption and criminality of staggering proportions. In this toxic environment, the sweet fruits of western democracy and capitalism simply could not grow in spite of the generous benevolence of Russia’s western friends. Continue reading

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