Here are the latest items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. Today we focus on counterparty risk in derivatives contracts. And most of the following items reflect the quirky “tangibles heavy” contrarian perspective of JWR. (SurvivalBlog’s Founder and Senior Editor):
Commodities Economics:
Looking ahead, Nick Cunningham recently posted this forecast: Four Wildly Different Oil Price Scenarios For 2020
Forex:
On to foreign exchange (Forex) news: USD/CAD Continues Decline
Global Stocks and Bonds:
Moving on to the stock and bond markets, U.S. stocks hit an all-time high on Friday. JWR’s Comment: I’m definitely not in the Perma-Bull camp. What goes up must come down. So… What will be the key warning to watch for? Any upcoming interest rate increases by the FOMC. (The Fed sets the Prime Rate, and generally the Prime Rate sets the tone for the markets.)
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Here are The Wall Street Journal‘s latest numbers.
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Next, some commentary by Howard Gold: Opinion: Stocks? Bonds? Gold? Investors still have no place to go. (Here is a quote: “The CAPE ratio shows that stocks are more expensive now than at any time except right before the two biggest crashes of the past century.”)
Derivatives (Counterparty Risk):
We transition to some statistics regularly published by the BIS: Semiannual OTC derivatives statistics. This shows that the total outstanding notional value of all derivatives contracts. At the end of 2016 it was $551,489,000,000,000. Wow! $551 Trillion is several times more money than is in circulation in all of the world’s currencies, combined. That is up from $492 trillion at the end of 2015. Roughly 3/4ths of derivatives are in various interest rate plays.
As I’ve mentioned before, most of the derivatives market blossomed after the 2007 global credit crash, so it is impossible to predict how it would weather any wide swings in interest rates. (Most of the derivatives plays are focused on hedging miniscule moves in interest rates.) What if a major bank that holds derivatives goes under in the midst of a crisis? Then the counterparty risk is almost incalculably enormous. Instead of “Too big to fail”, it may be a case of Too Big to Bail.
Big Dang Global Bubble:
The Crazy Global Debt Bubble (Will it ever pop? An article by Charles Hugh Smith. A hat tip to H.L. for the link.)
Reader H.L. also suggested this: Puerto Rico’s Exodus Is Speeding the Island’s Economic Collapse. (Caution: Has auto-start video.)
Global Economy:
And here is more ominous new from a Failed Sated to the south: Venezuela devalues currency in crisis dollar sale
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Now, on to a piece that shows the power of demographic shifts: Births in Japan Fall to Record Low in 2016. JWR’s Comment: You know your country ‘s is doomed when incontinence underwear for seniors outsell baby diapers. The future for Japan? It all Depends.
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Tangibles Investing:
Moving on to tangibles, see this over at Financial Samurai: RealtyShares Poll Shows The State Of The Real Estate Industry
Provisos:
SurvivalBlog and its Editors are not paid investment counselors or advisers. So please see our Provisos page for our detailed disclaimers.
News Tips:
Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who particularly watch individual markets. And with their diligence and focus, we benefit from fresh “on target” investing news. As a result, SurvivalBlog often “gets the scoop” on economic and investing news that is probably missed (or reported late) in other news sources. Thanks!