Equity 1 Group
Pushing back the frontiers of economic ignorance and restoring sound financial foundations, one family at a time.

Aug
20

There is currently a lot of focus on Turkey, and for good reason, but Turkey is really only a second or third derivative of the global macro story…

SaxoBank  |  Steen Jakobsen

Turkey represents the catalyst for a new theme, which is “too much debt and current account deficits equals crisis”.

In that sense, we have come full cycle from deficits and debt mattering in the 1980s and ‘90s but not in the ‘00s and ‘10s post- the Nasdaq crash and great financial crisis under the biggest monetary experiment of all time.

In our view, the order of sequence for this crisis is as follows:

1. The debt cycle is on pause as first China and now the US have deleveraged and ‘normalised’.

2. The stock of credit or the ‘credit cake’ has collapsed. First it was the ‘change of the change of credit’, or the credit impulse, which tanked in late 2017 and into 2018. Now it is also the stock of credit. Right now, global M2 over global growth is less than one, meaning the world is trying to achieve 6% global growth with less than 2.5% growth in its monetary base… the exact opposite of the 00’s and ‘10s central bank- and politician-driven model. Read the rest of this entry »

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Aug
20

These are not “goldbugs” talking about a $12,000 to $60,000 gold price, but conventional finance guys.

MonetaryMetals    |

Last week, we discussed the tension between forces pushing the dollar up and down (measured in gold—you cannot measure the dollar in terms of its derivatives such as euro, pound, yen, and yuan). And we gave short shrift to the forces pushing the dollar down. We said only that to own a dollar is to be a creditor. And if the debtors seem in imminent danger of default, then creditors should want to escape this risk. The dollar is not redeemable so there is no way to be paid in full for the debt represented by the dollars. The only way to opt out of credit risk entirely is to trade one’s credit paper for gold. That is to buy gold. We said that Federal Reserve insolvency is not imminent.

And then we went on to the case for a rising dollar. It was good timing, as the dollar went up from 25.7 milligrams of gold to 26.5 by Thursday (that’s a drop from $1,210 to $1,175 for those of you who insist on measuring steel meter sticks with rubber bands, lighthouses from the decks of ships that are slowly sinking in stormy seas, and gold in dollars).

Traders’ Consensus

This week, Keith sat at a table with a hedge fund trader. The trader does not think of gold as money, is not into gold other than as a trade along with all other asset classes, and probably would not describe himself even as a libertarian or Austrian. He is, however, very smart and very good at what he does. Read the rest of this entry »

Aug
20

Perhaps the single most dangerous move an asset class can make is a “false breakout.”

PhoenixCapital  |  Graham Summers

See the source image

A false breakout occurs when an asset breaks out of a consolidation pattern, only to reverse. The reason why this development is so dangerous is because the reversal is typically both sharp AND violent as momentum chasers and trend-based algorithms “panic sell.”

I bring this up because we may have just witnessed a false breakout in the single most important asset in the world: the US Dollar. Read the rest of this entry »

Aug
20

Soaring Student-Loan Debt Thwarts Potential Homeowners

BloombergOpinion  |  Danielle DiMartino Booth

Image: Student Loans Are Starting to Bite the Economy

It’s that time of year, when students prepare to head back to the classroom. For many taking the next step in higher education, the question is increasingly, “Is it worth it?”

Millions of millennials have already put off settling down because of the rising costs of servicing college debts to the detriment of economic growth.

Student loans are now the second-largest category of household debt in America, topping $1.4 trillion and trailing only mortgages at $9 trillion. And while Korn Ferry puts the average starting salary for a 2018 college graduate at $50,390, up 2.8 percent from 2017, the just-released July Consumer Price Index report shows the inflation rate rose 2.9 percent over the last 12 months. Does the phrase “treading water” come to mind? Read the rest of this entry »

Aug
20

A 95 percent plunge!  Socialism Anyone?

BloombergNews  |  Eduardo Thompson

Venezuela Adds to Chaos With One of Biggest Currency Devaluations EverSee the source image

Venezuelans use cash to light stove… Hmmm, Weimar Republic anyone?

(Bloomberg) — Venezuelan President Nicolas Maduro carried out one of the greatest currency devaluations in history over the weekend — a 95 percent plunge that will test the capacity of an already beleaguered population to stomach even more pain.

One likely outcome is that inflation, which already was forecast to reach 1 million percent this year, will get fresh fuel from the measures. Prices are currently rising at an annualized rate of 108,000 percent, according to Bloomberg’s Café con Leche index. A massive exodus of Venezuelans fleeing the crisis to neighboring countries will likely increase and with it, tensions and restrictions like the ones seen over the past few days.

The official rate for the currency will go from about 285,000 per dollar to 6 million, a shock that officials tried to partly offset by raising the minimum wage 3,500 percent to the equivalent of just $30 a month. While Maduro boasted in Friday night’s announcement that the International Monetary Fund wasn’t involved in the policies, aspects of the moves bore a resemblance to a classic orthodox economic adjustment, albeit with some confusing twists.

Maduro’s new strategy for managing the economy is a desperate response after years of disastrous policies that undercut growth, sent prices soaring and turned what had once been one of Latin America’s wealthiest countries into a dysfunctional nation that’s spawned a refugee crisis. Pressure is mounting on him to right the ship as calls for his overthrow grow six years after he took over for the late Hugo Chavez. Earlier this month, Maduro started a fresh crackdown on his opponents after a failed attempt to assassinate him using an aerial drone.

Read the rest of this entry »

Aug
17

Meanwhile student loan delinquencies remain stubbornly just above 10%, a level they hit 6 years ago and have failed to move in either direction.

See the source image

ZeroHedge  |  Tyler Durden

Total household debt hit a new record high, rising by $82 billion to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier according to the NY Fed’s latest household debt report. It was the 16th consecutive quarter with an increase in household debt, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008.  Overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013.

Mortgage balances—the largest component of household debt—rose by $60 billion during the second quarter, to $9.00 trillion. Credit card debt rose by $14 billion to $829 billion; auto loan debt increased by $9 billion in the quarter to $1.24 trillion and student loan debt hit a record high of $1.41 trillion, an increase of $2 billion in Q2. Read the rest of this entry »

Aug
17

The overall coin market has lost more than $600 billion in value in the last 8 months. On Tuesday, one of the top posts on the popular bitcoin forum of Reddit was information for suicide prevention hotlines.

See the source image

YahooFinance  |  Daniel Roberts

The cryptocurrency market is seeing angry shades of red this week.

On Tuesday, the 20 largest cryptocurrencies by market cap all fell by 4% to 10%, with ether, token of the smart contracts platform Ethereum, taking the biggest hit, down to about $250, its lowest price of 2018. Ether was above $1,200 in January.

By Wednesday morning, coins were rallying slightly. But volume remained low, a possible sign that coins have still not seen the worst of this correction. Read the rest of this entry »

Aug
17

But the cryptocurrency has come under fire from some observers who say there is a lack of detail on exactly how its value will be guaranteed by oil reserves.

Venezuela economy crisis

Express  |  Harvey Gavin

VENEZUELA is to make its homegrown cryptocurrency, the Petro, an official currency alongside the bolivar as the South American nation continues to battle hyperinflation which has left it on the brink of economic collapse.

President Nicolas Maduro announced state-owned oil giant Petroleos de Venezuela (PDVSA) will begin using the digital token from Monday, August 20.

In a television address, the Venezuelan leader revealed the country would soon have two units of currency: the digital Petro and the ‘sovereign bolivar’, ABC International reports. Read the rest of this entry »

Aug
17

The five-digit inflation has earned Venezuela comparisons to the hyperinflation of Zimbabwe and Weimar Germany from the International Monetary Fund.

NewYorkTimes | By Nicholas Casey

Read the rest of this entry »

Aug
01

From London to Sydney and Beijing to New York, house prices in some of the world’s most sought-after cities are heading south.

BloombergNews  |  By Lucy Meakin and Jack Sidders in London, Emily Cadman in Sydney, Emma Dong in Shanghai, Oshrat Carmiel in New York and Natalie Wong in Toronto.

Tax changes to damp demand, values out of kilter with affordability and tougher lending standards have combined to undermine the market. That could have wider implications because the world’s wealthy have been buying homes on multiple continents, meaning a downturn in one country could now pose more of a threat to markets elsewhere, according to the International Monetary Fund.

These charts explain the cracks appearing in some of the world’s most exclusive and desirable property markets. Read the rest of this entry »