Mish's Global Economic Trend Analysis |
Checking Back In Regarding a "Sure Thing" Posted: 29 Dec 2015 11:01 AM PST Several readers sent emails prior to the Fed hike on December 16 that the stock market would collapse immediately following a rate hike. I commented on that sentiment in Knowing the Unknowable; Reflections on the Fed Hike. Here's a snip. "Epocalypse" NowChecking Back In I gave "Epocalypse" more than the few days he asked. The end of the week would have been the 18th. It's now the 29th. This is what I see. Curiously, the market is right where the market closed on the day of the hike. Anyone who bought short-term CALLs or PUTs expecting high volatility lost money. The rate hike was the most telegraphed Fed move in history. No one had any advantage in knowing the Fed would hike. I can list up with more reasons than most as to why the markets are over-valued and pension plans extremely vulnerable. For example ...
Nothing above is a timing indicator. And as we have seen, a rate hike is not a precise timing indicator either. Had a serious decline started on the day of the Fed hike, "Epocalypse" would have been nothing more than lucky, but he likely would have thought he was a genius who "knew" something. Can an "Epocalypse" start tomorrow? Sure, why not? But it could also start a month from now or six months from now. We could also see a slow drift down for years like Japan. We could even see stocks do nothing for years while valuations catch up to smoothed earnings. The one thing we do know is history suggests stocks are hugely over-valued. But I don't know when valuations matter. No one does. Mike "Mish" Shedlock |
Posted: 29 Dec 2015 09:29 AM PST Austerity and Bail-Ins Fan Populist Flames The Italian economy is growing, albeit barely. But Italy is still saddled with massive amounts of debt. Citizens are upset about a recovery that has passed most of them by. For example, youth unemployment is a whopping 39.8%. That's a lot of potential voters rightfully upset about things. For them, promises are many, and gains are nonexistent. Topping off the discontent, Italy Bank Rescues Spark Bail-In Debate as Anger at Renzi Grows. In 2013, Sergio Picinotti, a 63-year-old unemployed man living with his elderly mother, invested much of their nest egg of €40,000 in a bond issued by Banca Etruria, their local bank based in the medieval Tuscan city of Arezzo.Italy's 5-Star Movement to Challenge Renzi With the above bailout and unemployment backdrop, it should not be surprising to see the eurosceptic Five Star Movement on the Rise. When the populist Five Star Movement burst into Italian politics in 2009 during the financial crisis, it was defined by uncompromising protests and the burly, sardonic figure of its leader, the comedian Beppe Grillo.Get Your Money Out of Italian Banks Now! The goal is always to bail out the banks at any expense, especially that of taxpayers. The bail-ins in December are a huge warning shot at what's highly likely in 2016. If you have money in weak banks after this mess, you are crazy. Cyprus, Greece, and Italy have all provided warning shots. I have been warning about these setups for years. And in 2016, banks can go right after depositors if necessary. It will be very interesting to watch target2 imbalances (a measure of capital flight) following this bail-in debacle. The political scene looks interesting as well. Renzi's days may well be numbered. If the Renzi government falls, it's highly likely it will be to a eurosceptic party. In this regard, Greece was a sideshow. Italy is the real deal. Mike "Mish" Shedlock |
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