WARNING: We Are Heading For A Market Shock In September or October
The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.
“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.
As the market sets sail into what historically has been the most treacherous month of the year (September) – a number of my analog and comparative charts continue to flash warning signals as they extend themselves up to resistance (UST:SPX ratio), into historical extremes (Apple), and into possible momentum downturns (2007/2012 SPX Analog).
Apple continues to defy gravity with its parabolic run over the past year. If past is prologue, this parabolic performance chase of the largest market-cap company in the world will mark a major equity market top when the tide turns. It is not a question of if – but when – and the pronounced head and shoulders formation on the…
“I don’t think Bernanke wants to make Jackson Hole into a policy-signaling event,” preferring to “reserve that for the FOMC meetings,” said Feroli, chief U.S. economist at JPMorgan Chase & Co. (JPM) in New York.
Two years ago, Bernanke said in his speech that the FOMC “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”
The committee didn’t announce a second round of quantitative easing at its September meeting, though; it waited instead until November 3 of that year.
Dutch caretaker Prime Minister Mark Rutte, seeking a return to power after Sept. 12 elections, said he would block a third aid package for Greece and defended austerity as the only way out of Europe’s debt crisis.
“We’ve helped twice and now it’s up to the Greeks to show that they want to stay within the euro,” Liberal leader Rutte, 45, said in a debate between the four main party leaders in Amsterdam last night broadcast on RTL television. “The Netherlands has been severely hit by the debt crisis and the solution is to lower taxes, get government finances in order and make room for investment.”
Real estate agents in Australia who assured everyone for years there was no housing bubble and home prices would only ever go up because there was a “shortage of houses” are now telling everyone who is stuck in a house they cannot afford that they have prices too high.
What this means of course is real estate agents are selling few homes, thus making little in commissions so they need prices to come down. What the agents don’t realize is this is the beginning of a trend and home prices, some drastically reduced already, still have much further to fall.
China is entering a “danger zone” where a financial crisis may become more likely because of increases in loans and property prices coinciding with an aging of the population, a Bank of Japan (8301) official said.
“If a demographic change, a property-price bubble, and a steep increase in loans coincide, then a financial crisis seems more likely,” BOJ Deputy Governor Kiyohiko Nishimura said in a speech for a conference in Sydney, posted on the central bank’s website today. “And China is now entering the danger zone.”
Today’s data add pressure on the government to step up policy easing to reverse a slowdown that may extend into a seventh quarter. On an inspection of Guangdong province from Aug. 24 to 25, Premier Wen Jiabao said difficulties in stabilizing the expansion are “still relatively large” and called for measures to promote export growth to help meet the country’s annual economic targets, the Xinhua News Agency reported.
“The economy is slowing faster than what had previously been expected,” said Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong. The profit outlook is for “further weakness throughout the year,” he said.
Industrial companies’ profits in the first seven months of the year declined 2.7 percent to 2.7 trillion yuan, according to today’s statement. That compares with a 2.2 percent drop in the first half and a 28.3 percent gain in the same period in 2011.
Bank of America and Deutsche Bank AG this month reduced their forecasts for full-year economic expansion to 7.7 percent, which would be the slowest pace since 1999. Wen in March set a target of 7.5 percent.
Company profits are declining amid falling prices, higher costs and slower demand.
Xinjiang Goldwind Science & Technology Co. (2208), China’s second- biggest maker of wind turbines, said last week that first-half profit slumped 83 percent as competition intensified and market growth slowed.
German business confidence fell for a fourth straight month in August as the sovereign debt crisis curbed growth in Europe’s largest economy.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 102.3 from 103.2 in July. That’s the lowest reading since March 2010. Economists predicted a decline to 102.7, according to the median of 37 forecasts in aBloomberg News survey.
MADRID: Spain will use up to around 60 billion euros ($75 billion) of a rescue package aimed at helping recapitalise its fragile banking system, Economy Minister Luis de Guindos said in an interview published Monday. In June, consultancy firm Oliver Wyman said Spain’s banks would need as much as 62 billion euros of extra capital from the 100 billion euros of funds made available under a European rescue package.
- Budget Hole Undermines Spain’s Plans
- Spain Deficit Pain Bites Consumers as Rajoy Steps Up Cuts
- Spain revises down growth for 2010, 2011
- Bundesbank chief: ECB bond buys could be addictive
- Spain to use around 60 bln euros to prop up banks – report
- Pennsylvania Turnpike is billions of dollars in debt
- New Euro Bailout Fund Could Fall Short