Nassim Nicholas Taleb on the Real Financial Risks of 2016
First, worry less about the banking system. Financial institutions today are less fragile than they were a few years ago. This isn’t because they got better at understanding risk (they didn’t) but because, since 2009, banks have been shedding their exposures to extreme events. Hedge funds, which are much more adept at risk-taking, now function as reinsurers of sorts. Because hedge-fund owners have skin in the game, they are less prone to hiding risks than are bankers.
Warning From UBS: “Buy Gold”, A 30% Bear Market Is Coming!
As Wall Street axioms (Santa rally, January effect, as goes January etc.) are rapidly falling by the wayside at the start of 2016, following a chaotic but return-less 2015, the UBS analysts who correctly forecast last year’s volatility are out with their forecast for 2016. It’s simple – Sell Stocks, Buy Gold.
UBS Technical Analysts Michael Riesner and Marc Müller warn the seven-year cycle in equities is rolling over.
Political Correctness Is About Control, Not Etiquette
Political correctness is not about being nice. It’s not simply a social issue, or a subset of the culture wars. It’s not about politeness, or inclusiveness, or good manners. It’s not about being respectful toward your fellow humans, and it’s not about being sensitive or caring or avoiding hurt feelings and unpleasant slurs.
But you’ve heard this argument, I’m sure. PC is about simple respect and inclusiveness, they tell us. As though we need progressives, the cultural enforcers, to help us understand that we shouldn’t call someone retarded, or use the “N” word, make hurtful comments about someone’s appearance, or tolerate bullies. And we already have specific individuals charged with insuring that good manners are instilled and upheld: they’re called parents.
The China Syndrome
Oh, don’t look, don’t look at all! Just close your eyes and tap your heels together three times…
That’s what some of the coverage of China’s market failures reminds us of. Magical thinking.
We’ve been reporting on the hollowness of the Chinese Miracle for years. It became apparent to us long ago that China’s stated double-digit industrial growth year after year was bogus. We wrote about it but few others did. Even when China began to build whole empty cities, most of the mainstream media…
Bond Market Problems Have Financial Crisis Twist
There are signs that the problems in junk bonds are not contained.
The sell off in the market for high yield debt, or junk bonds, is now hitting a type of structured bond that is similar to the type that blew up in the financial crisis. Prices of the riskiest portions of collateralized loan obligations (CLOs) have fallen 50% as of the end mid-December since mid-year, and are now trading at $0.25 for every dollar that investors have put in the structured bonds.
They’re not alone. Recently a number of credit funds have halted investor redemptions and announced they were liquidating, including a mutual fund at Third Avenue Capital. Part of the problem is the bust that is going on in the junk market due to the drop in oil and gas loan prices. Energy companies make up a significant portion of market for risky corporate debt.
Saudi Arabia, Squeezed by Low Oil Prices
Pressured by low oil prices and costly wars in the Middle East, Saudi Arabia announced a sharp reduction in its 2016 budget to control a worsening deficit, which is steadily draining the kingdom’s financial reserves.
The official Saudi news media reported that the Finance Ministry would cut spending, adopt new taxes and reduce price subsidies for fuel, water and power.
A World with Too Much Crude Oil
The most destructive oil crash in a generation is giving ship owners a billion-dollar windfall.
With the Organization of Petroleum Exporting Countries abandoning output limits in a drive for market share, ships that carry as much as 2 million barrels a trip are in demand to haul crude from the Middle East to Asia and North America. While oil prices fell about 35% in 2015, average earnings for these carriers jumped to $67,366 a day, the most since at least 2009, according to Clarkson Plc, the world’s largest shipbroker.
“The stars are aligned for us right now,” Nikolas Tsakos, the chief executive officer of Tsakos Energy Navigation Ltd., said in an interview at Bloomberg’s New York offices, adding that falling oil prices will likely stimulate demand and cargoes next year.
Migrant Crisis Raises Tensions regarding Border Controls in Europe
Chancellor Angela Merkel said on Wednesday she wanted to stem the flow of refugees into the European Union while at the same time keeping open borders within the bloc, days after Denmark imposed passport checks on people entering from Germany.
Merkel, who last November marked a decade in office, starts 2016 facing renewed pressure from her own conservatives to reduce the influx of asylum seekers arriving in Germany, after a record inflow of over 1 million last year sapped their support.
“It is very important to me that we achieve both a noticeable reduction in the flow of refugees … and at the same time preserve the free movement of people within the European Union,” she told reporters at a conference of her Bavarian allies, the CSU.