PPCC. PIsitófilos Creditófagos. Primavera 2020

[Derby]

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/060220-gulf-region-to-suffer-worst-recession-in-2020-due-to-oil-crash-coronavirus-iif

Gulf region to suffer worst recession in 2020 due to oil crash, coronavirus: IIF

Economy of six-member GCC to contract 4.4% in 2020
Oman's economy to shrink the most
Oil GDP will contract 5.3% due to OPEC+ cuts

"Brent oil prices are expected to remain in a range of $40-$50 a barrel over the medium term, well below the fiscal breakeven oil prices for the six GCC states," the IIF said. "Under such prolonged oil prices, the deficits could remain large despite continued fiscal adjustment."

GCC oil revenue is projected to plunge to $200 billion in 2020 from $326 billion in 2019, the institute said.

"Saudi Arabia, Kuwait, Qatar, and the UAE, with large public foreign assets, are better placed to accommodate large deficits than Bahrain and Oman," the IIF said. "While Bahrain can count on financial aid from its neighbors as a cushion against external pressure, Oman is emerging as an increasingly vulnerable spot in the region in light of its mounting debt."

[Derby]

https://www.fuw.ch/article/albert-edwards-the-stock-market-is-just-ignoring-the-economic-shock/

Albert Edwards: «The stock market is just ignoring the economic shock»

What’s the Fed’s problem from your view?

There was a lot of criticism for bailing out Wall Street at the expense of Main Street, they were criticized for doing this already in 2008 and 2009. Now it seems they do the same thing again. Always when you go into a recession, there is a shock. Have you ever seen that the market just ignores the shock? This time the recovery even started before we had the blow of the deep recession. Markets are high on liquid drugs.

Now, as the Fed is even buying junk bonds, what does that mean for the corporate sector?

We have a debt time bomb in the US. They try to support the corporate sector. But as often, profits are privatized, losses are nationalised. This is what’s happening time and time again. Let me be clear, people are fed up with this boom and bust credit cycle. When I joined Kleinwort Benson, we had a huge loan book to the US that had to be written off. The U.S. companies were leveraging up in the late 80ies, then in 1991 despite one of the shallowest recession the US has ever seen, massive bankruptcies and defaults occurred in the corporate sector because of excess leverage.

What does that mean for the current recession?

It will be much worse. The IMF said 2017 in its Global Financial Stability Report that in the next recession 20% of all US companies would default. The Fed created this corporate debt bubble and now, instead of letting companies go bust, the central banks are trying to bail them out by buying corporate bonds. In the 2008  crisis the central banks wriggled out their responsibility and blamed the commercial banks. This time, under the cover of Covid-19, they are wriggling it out again in my view.

What has changed?

Now we see the central banks almost directly financing the government. In Q2 the US issued 3 trillion dollars of government bonds and the Fed promised to buy it all. That’s a massive change.

Will markets continue to rally?

Yes, it could go higher. The key resistance point was 3000 points where the 200-day moving average was. But keep in mind that the bond market isn’t really buying it at all. The 5-year Treasuries has been between 0,3 and 0,4% which is the lowest level since the beginning of March. Bond markets haven’t really bought into this cyclical recovery at all.

What are the biggest risks?

The next big macro challenge for the equity market will be the realization in the next couple of months that the US is going into outright deflation with core CPI inflation year-on-year going negative.

You see rather a risk of deflation than a risk of inflation?

Both headline and core CPI inflation will go negative will go negative. I know the discussion that both supply and demand side got a hit but the recent data shows that the core CPI will fall below zero. In March CPI fell 0.4, it was only the fifth month of decline for the first time since the 1980ies. That’s huge. My calculation is that we see another couple of months like that and then we see deflation

The stock market doesn’t share this view.

The equity market is sort of trying to look through of the 50% decline in GDP in Q2 and the collapse of profits. Forward earnings in the S&P 500 (SP500 3114.07 1.08%) will go back from 175 to 100 $ or less per share. That would take the forward P/E ratio to 30 which would be a record.

Should we really see deflation, what would be the consequences for currencies? A fight for devaluation?

Absolutely, a currency war will be part of fighting a deflationary bust, especially in the US. Nobody wants to have a strong currency. Switzerland has been one of the leaders in this war but now others will join, acting much more aggressively.

For example by introducing negative interest rate? When will the Fed take such measures?

Probably within the next six months. Ahead of the US presidential election, we will see aggressive actions. In the next months it will be clear that the economy is slipping into deflation. As soon as this is acknowledged, the strong dollar will no longer be acceptable. Currently the dollar is 35% overvalued versus the Euro and 55% over the yen. This is tolerable while the US has a much stronger economy and inflation than anybody else. It is absolutely intolerable now as the US slips into deflation.

Are negative interest rates a sensible tool?

I agree with the view that it will be counterproductive because of the impact on banks and investments. But the number one priority is to avoid deflation, not to protect the banking sector and the money market mutual funds.  US president Trump will eventually be more aggressive in terms of his reaction towards the weakness in the US economy. A trade war with Europe is an increasingly likely outcome.

At the same time, equity markets are decoupling from the real economy as fast as never before. Is this a worrying sign?

Indeed, equity markets seem to be able to brush off the real economy and the earnings decline. Neither is the market taking fully on board the drop in inflation. The main reason for that is that central banks have crossed the Rubicon in terms of monetization and fiscal and monetary cooperation. This will lead to higher inflation at some point, I would say in the next 3 to 5 years. At that point, we get to the end of the ice age in terms of secular stagnation. But as I said, in the meantime, we get a deflationary bust. I think, bond yield will start to move lower very quickly indeed over the next couple of months. I would be surprised if the equity market was able to shrug off the Japanification of the US.

Which in turn is not good for equities.

On the one hand, if the bond yield is going below zero, why can’t equity market go even higher, a bull would say. But what I would say that because you have US the corporate sector with these huge debts, whether or not the Fed is buying corporate bonds doesn’t stop these companies going bust. The Fed might  delay it for a while, as companies can raise more liquidity in the bond market. But there is still a problem in the first place. You could be liquid  but be insolvent. Excessive debt is toxic debt for companies, because outright deflation means revenue growth is stagnating or going negative. Companies can’t deal with this excessive debt on the balance sheet, that what’s happened to the Japanese corporate sector. They got zombified.

(...)There is still abundant liquidity in the market. Could that prevent the deflation?

Not in the CPI, but maybe in asset prices temporarily. But equities cannot survive on liquidity alone. It could cover things up, but eventually you need the fundamentals coming through. It’s a whole new world. Nobody knows how deep the whole recession will be. The Atlanta Fed is now predicting a collapse in GDP of 50% in Q2. Equity markets do not care for the moment.

What will be the trigger for them to realise?

Who knows. Currently, markets are trading at 12-month forward P/E of 22 to 23 times. The record was 25 times during the tech bubble in early 2000.

So we are very close to that levels.

Yes, very close. Just imagine that most regular forecast forward earnings in the S&P 500 of 100 dollars a share. That would mean that at current prices the valuation goes up over 30 times. This is pretty mad. It‘s just an example of how markets are manipulated by central banks through quantitative easing. It’s so extreme, such a grotesque distortion that it’s almost embarrassing.

Central banks had to support the market to avoid a worse crash.

Sure, nobody could predict the coronavirus recession. But eventually it helped policy makers to cross the Rubicon and to take much more aggressive fiscal and monetary measures even faster and without resistance. They would have done it anyway but in a normal crisis, it would have taken much longer, and equity markets would have fallen much more sharply before these extreme measures would have  been tolerated by the general public.

What’s the point for central bankers to cross the Rubicon?

Central banks built up a bunch of bubbles they can’t allow them to fall back to earth. They have to keep on printing money and now financing huge deficits. Previously in the US, the UK and Europe, quantitative easing has offset fiscal tightening. Now it’s more in the same direction. Money printing helps to finance directly government deficit. And in the recovery phase, it might be the universal basic income, the Green Deal, the social security deficit… any fiscal problem will be solved by printing money.

The next step would be helicopter money?

Eventually, if necessary it will be. But you might not need to get that far. Monetary experts say currently we do not even have proper monetization but the central banks  could buy government bonds directly if necessary.

(...)We have never seen so much political pressure on central banks before.

Sure, people are angry and as a result, populists are being elected. The equation is simple: Either central banks do now what populist leader want, or the leaders find other central bankers who do the job for them.

Will central banks ever be independent again?

No, they will be in service of the governments. I think that once you show populist leaders and the general public that financing that huge government deficit through money printing, they will be required to do it again and again and again until eventually it creates rapid inflation.

Like a vicious circle.

Initially most commentators will say, «what’s the problem doing it? It hasn’t created inflation so far.» Do you remember the last crisis? All the stuff we have been told about austerity, that we have to cut back government deficits and that there is no magic money tree. The consensus view now is that is all rubbish. Now they use the magic money tree. Monetary and fiscal policy are now one and this will lead to the end of the Ice Age, but not before a final deflationary bust.

[Derby]

https://ritholtz.com/2020/06/gdp-update-52-8/

GDP Update: -52.8%


Source: Federal Reserve Bank of Atlanta

Ok, this is now getting a little scary:

The real time GDP running estimate of US economic activity is half of what it was 3 months ago. As of June 1, the Atlanta Fed is now casting that economic activity in the United States, as measured in GDP, is minus 52.8%.

Given the extent of the collapse in demand that has accompanied quarantines and shelter-in-place orders, this is not a surprise. Still, when you see the number in print, it still has the capacity to shock.

Understand, this is a snapshot of GDP on any given day. This is not GDP for the year, not even for the quarter — it reflects the moment, and not a longer time period.

Still, I never expected to see anything like this in my lifetime . . .

[Derby]

https://www.wsj.com/articles/global-stock-markets-dow-update-6-03-2020-11591157329

U.S. Stocks Climb as Hopes Build for More Stimulus

Stocks rose Wednesday as social unrest across the U.S. showed signs of calming and investors bet economic activity will improve with the ebbing of coronavirus infections and additional government stimulus.

The S&P 500 rose 1%, and the Dow Jones Industrial Average added about 391 points, or 1.5%. The technology-heavy Nasdaq Composite gained 0.5%, climbing to within 2% of February’s all-time high.

[Derby]

https://www.marketwatch.com/story/nearly-25-of-americans-have-no-emergency-savings-and-lost-income-due-to-coronavirus-is-piling-on-even-more-debt-2020-06-03

Nearly 25% of Americans have no emergency savings: Lost income due to coronavirus is piling on even more debt

There’s growing concern among many people that the economy won’t restart in time to save them from paying the rent, their mortgage or going hungry

[mpt]

https://www.fuw.ch/article/albert-edwards-the-stock-market-is-just-ignoring-the-economic-shock/

deflacion, solvencia, guerra de divisas y socializacion de perdidas; un completo

pero no pasa na, volvemos a las andadas; por ejemplo: chollos para los amigos, pagar intereses con el unico motivo de ocultar deuda
https://www.elmundo.es/economia/macroeconomia/2020/06/03/5ed7d299fc6c83c9578b45ff.html

El ministro asegura que ya tiene diseñado el nuevo sistema concesional para poder abordar "proyectos prioritarios" que garanticen el "equilibrio de los riesgos y la viabilidad"

seguro que el psoe-up montan un artilugio estupendo que el pp sabra aprovechar

y aqui un estupendo ejemplo de financiarizacion de la vida, con muchas lecturas entre lineas tambien y que dejo a la imaginacion de cada cual
https://elpais.com/cultura/2020-05-30/circo-del-sol-del-esplendor-a-la-ruina-en-tan-solo-tres-meses.html

[saturno]

No aplica sólo a Francia (es sólo por el "símbolo" que ésta encarna )


France has turned into one of the worldwide threats to free speech
By Jonathan Turley, opinion contributor — 07/06/19 10:00 AM EDT The views expressed by contributors are their own and not the view of The Hill

https://thehill.com/opinion/civil-rights/451813-france-has-turned-into-one-of-the-worldwide-threats-to-free-speech

The sad irony of France leading efforts to curb free speech is powerful. Once the bastion of liberty, France has now become one of the greatest international threats to free speech. It even led a crackdown on the free press with criminal investigations. For years, we have simply watched from our side of the Atlantic and dismissed these trends as a European issue. With these new laws, however, it is a global issue. The invasive species of this acron is about to be unleashed on the worldwide web.

XThanks

[Derby]

https://wolfstreet.com/2020/06/01/rents-in-the-most-expensive-cities-drop-oil-patch-gets-hit-too-but-massive-gains-in-other-cities/

Rents in the Most Expensive Cities Drop. Oil Patch Gets Hit Too. But Massive Gains in Other Cities

Are the Work-from-Home-Folks Moving to Cheaper Pastures?

In the most expensive rental markets in the US, rents are declining, and did so even in May which normally is a fairly strong month for rents. And there may be some reasons. Zumper in its June rent report:

“It seems the pandemic has shifted the demand for apartments away from the most expensive cities, since usually demand picks up as we head into summer, but now the opposite is true. As more and more companies move into remote work, many renters don’t want to pay the big city price tag when they are unable to use the amenities and are looking for more affordable options outside of large, metropolitan areas.”

An anecdote in support of this theory fell into my lap the other day when I was talking with a guy from Google’s ad sales division who wanted to get me excited about spending money on Google ads. In the call, he said that he was working from home, like most Googlers, and that he’d moved from the San Francisco Bay Area back to St. Louis, now that he doesn’t need to be near the office in Redwood City. He wasn’t alone apparently, and landlords with vacancies are adjusting by cutting their asking rents.

San Francisco remains the most expensive rental market in the US – though there are zip codes in Manhattan and Los Angeles that are even more expensive than the most expensive zip code in San Francisco. But it’s less expensive than it was.

[saturno]

[Cadavre Exquis]

Tres páginas al azar de la revista sobre el inmobiliario de elEconomista de hoy (la portada, una de las intermedias y la última):

La economía mundial paralizada dos meses largos por la COVID-19, lo de USA (que no es para estar asustadísimos sino lo siguiente), Alemania, en quien todos confiaban para salvar los (in)muebles, que resulta que hoy se han levantado de la cama y se han dado cuenta de que tienen un déficit tremendo tras la pandemia, ...

Pero aquí, salvo un pequeño bache en la inversión residencial en la Costa del Sol, todo en orden y no hay nada de qué preocuparse, y no solo eso, si miramos a nuestros vecinos del norte, resulta que todavía tenemos margen para subir los precios de los locales en la capital un 565% ... 

Veremos a ver por donde sale todo esto, porque dudo mucho que el castillo de naipes aguante mucho más tiempo antes de venirse todo abajo.

Saludos.

[Derby]

https://www.elconfidencial.com/espana/2020-06-03/los-nacimientos-en-espana-descienden-casi-un-30-en-una-decada-y-2019-registra-la-cifra-mas-baja-desde-1941_2622645/

La natalidad sigue bajando en España: 2019 alcanza cifras de posguerra

La cifra de nacimientos en España sigue la tendencia a la baja y desciende casi un 30% desde 2009, con solo 359.770 el último año

[senslev]

Los futuros del NQ han estado a 30 puntos de máximos (sin embargo el ETF QQQ sí que ha tocado justo los máximos) y el ES ha tocado los 3129.75. EL Dow a 800 puntos de 27000 que es zona de resistencia (como los 3130 del SP500). Los indicadores de sentimiento put/call ratio y el de breath con señal de warning bastante clara, lo que no quiere decir que justo mañana empiece a corregir, aunque tiene sentido para llegar a la reunión de la Fed del día 10 con todo de putísima madre y si no, pues un par de trillones más, 2000$ a cada ciudadano en USA para que compre Tesla y Netflix y listo.

Por otra parte tengo cierto sentimiento de hartazgo; lo llamaría síndrome del Día de la Marmota, así que igual es buena señal y  empieza a corregir algo y tal (capitulando que estoy). Don't fight the Fed.

Nasdaq100 a < 1% de máximos. ES cerca de cerrar gap en 3110 aprox.(recorrido hasta 3130), a ver si llegan de un p**a vez y se dan la palmadita en la espalda los bancos centrales.

[Saturio]

y aqui un estupendo ejemplo de financiarizacion de la vida, con muchas lecturas entre lineas tambien y que dejo a la imaginacion de cada cual
https://elpais.com/cultura/2020-05-30/circo-del-sol-del-esplendor-a-la-ruina-en-tan-solo-tres-meses.html

El otro día les decía que no sabían ustedes la cantidad de mierda que había y que ni Blas ganaba dinero con la explotación de su negocio y por los comentarios que se hicieron luego, creo que no me entendieron.

Al Circo del Sol sólo le pasa una cosa. Hay que pagar los sueldos de los artistas, los publicistas, los guionistas, los maquilladores y los contables, hay que pagar la publicidad, los seguros, los trajes, los decorados, la iluminación y los gastos de transporte de las giras...y si ponen el precio de la entrada que corresponde a esos costes no va ni el Tato a verlos. Tras haber trabajado mucho en su imagen puede que algunas administraciones locales pongan pasta para que el Circo vaya a su pueblo y dar un poco de lustre y se complemente quizás el dinero de las entradas. El resultado son años de pérdidas. No uno ni dos ni tres, diez, quince...los que sean. Cada año 5 millones, 10 o 30. ¿Cómo se sobrevive a eso?. Con una deuda creciente para compensar pérdidas, primero bancaria y luego a los proveedores.
La película tiene diferentes variaciones de guíon. Puedo escribir una con el Circo del Sol. La locura por el "crecimiento" de los negocios supone que para crecer cada vez la ganancia marginal sea menor y más riesgosa (por ejemplo irnos de gira a Australia). Pero esto último es un invento mío, para que vean que hay muchas posibles vías de meterse en esos líos.

La situación del Circo del Sol es la de cualquier negocio. Y no me refiero a grandes empresones del mundo corporativo (aunque también) me refiero a cualquier negocio de más o menos andar por casa.

[Saturio]

En el caso de un conflicto convencional y nuclear táctico es Europa la que quedaría arrasada, puesto que el potencial terrestre y aéreo ruso y de sus aliados es superior al de la OTAN. Por ejemplo, solo el 1º  Ejercito de Tanques de la Guardia tiene tanto potencial como todo el ejercito de tierra español desplegable, que son ocho brigadas -4 pesadas y tres ligeras mas la UME que tiene entrenamiento de brigada de infantería ligera-, que es el segundo más grande de la UE detras del Italiano y por delante del francés y muy por encima del alemán. Ya ni les hablo de la fuerza aérea.  En tres semanas estarían en Madrid. Es así de crudo y de fácil de cara a decidir. ,

El PIB de Rusia es 10 veces menos que el de la UE.
Da igual el ejército que tengas si no tienes dinero para desplegarlo y mantenerlo operativo.

Esto me ha sorprendido.
No se necesita dinero si nacionalizas todo. Necesitas poder económico, y creo que Rusia tiene, puede hacer las armas, la gasolina y el pan para mantener el despliegue, así que no necesita el dinero para pagar a empresas de servicios externalizados.
No quiero discutir si es mejor o peor estatal o privado, en eso ya estamos "agree to disagree", por favor, solo si tiene la posibilidad, que luego los tanques se caigan a cachos, las mitad de balas no disparen o el pan esté podrido es otro problema y otra discusión.

Piense un poco. O es usted como Zapatero que decía que el dinero público no es de nadie.
Estamos hablando de PIB (visto por el lado del gasto en armamento, suministros y logística, por el lado de las rentas que cobran los que hacen todo eso o de la producción material de esos bienes y servicios).
El que tiene más PIB gana. Así ha sido siempre. Por eso el Norte gano al Sur en la guerra civil americana, por eso los aliados ganaron las dos guerras mundiales, por eso Roma destruyó a Cartago y por eso USA y sus aliados ganaron la guerra fría contra la URSS y sus aliados.

Pero es que la diferencia comienza ya antes de empezar. Si a tu país le cuesta el 15% del PIB mantener a tu ejército en condiciones y al bando contrario menos del 3% ya me dirás. Escalar al doble de tu capacidad operativa se te va a llevar el 30% y al enemigo el 6% y si los costes operacionales se van a otro doble, te pones en el 60% y tu enemigo está en el 12%.
Me da igual que tu industria sea pública. Si tenías unas fábricas públicas que hacían camiones para el uso que sea, ahora las vas a necesitar para usos militares y tu gente se va a quedar sin camiones para transportar el pan y la sal. Tu sistema sanitario va a tener que atender a tus heridos de guerra (militares o civiles) y no va a poder atender como antes lo hacía a todo lo demás, tus trenes, aviones, sistema ferroviario, aeropuertos que antes atendían a tu economía ahora los vas a necesitar en el esfuerzo de guerra...y si tienes 5 o 10 veces menos de todo eso que tu enemigo, ya me dirás.
Tus aviones y tanques se van a comenzar a estropear desde el momento uno de tu campaña y sin necesidad de que el enemigo ni les sople y si a ti te costaba un 15% de tu capacidad tenerlos te va a costar también un porcentaje mayor de tu capacidad repararlos o reemplazarlos.
Y eso por no hablar si pretendes abrir tú la ofensiva y llevar el frente a miles de kilómetros de distancia cuando poner en el frente cada ración de comida y cada bala te cuesta más recursos.

[el flagelador de regres]

El otro día les decía que no sabían ustedes la cantidad de mierda que había y que ni Blas ganaba dinero con la explotación de su negocio y por los comentarios que se hicieron luego, creo que no me entendieron.

Al Circo del Sol sólo le pasa una cosa. Hay que pagar los sueldos de los artistas, los publicistas, los guionistas, los maquilladores y los contables, hay que pagar la publicidad, los seguros, los trajes, los decorados, la iluminación y los gastos de transporte de las giras...y si ponen el precio de la entrada que corresponde a esos costes no va ni el Tato a verlos. Tras haber trabajado mucho en su imagen puede que algunas administraciones locales pongan pasta para que el Circo vaya a su pueblo y dar un poco de lustre y se complemente quizás el dinero de las entradas. El resultado son años de pérdidas. No uno ni dos ni tres, diez, quince...los que sean. Cada año 5 millones, 10 o 30. ¿Cómo se sobrevive a eso?. Con una deuda creciente para compensar pérdidas, primero bancaria y luego a los proveedores.

Sin querer discutirte la tesis, que te la compro (pero solo a medias), el tema del Cirque du Soleil va por otro lado; en 2015 Guy Laliberte vende el 90% del chiringo a un equipo de dos fondos de inversión y una cajita canadiense por un poquito más de 1.5B$, y estos le pagan vaciando la empresa comprada, al hacer que Cirque du Soleil emita 885M$ de deuda con la que pagar la compra, poniendo ellos sólo 630M$; https://www.moodys.com/research/Moodys-assigns-B2-CFR-to-CDS-US-Intermediate-Holdings-Inc--PR_327129 Según Bloomberg la deuda que arrastran son 900M$, o sea, que lo que ha puesto a los pies de los caballos a Cirque du Soleil ha sido que fue comprada por unos gañanes que la pagaron hipotecándola y poniéndola al borde de la quiebra al primer problema grave que hubiera sufrido.