Here is my prediction for the New Year. Pony up your's.
The story of 2015 will be ALL about Global Economics
I'm going to go out on a limb here and make a call. One is usually wrong when they do this as events which are inevitable often have a way of teetering on the precipice for a long time before they fall. But I think the time is now. But then again maybe not if we sign the taxpayers up for another round of 10 trillion in corporate bailouts. We will see and you can have fun poking me in the ribs this time next year
The biggest story of 2015 will NOT be about Climate Change, renewable energy, melting ice caps, rising temperatures, or any of a host of other sundry topics floated constantly by the main stream media to entertain us. Nope. It is time for the next set of chickens to come home to roost - as the saying goes.
It is time for our next step down in the early days of our march towards the collapse horizon. In other words the latest financial bubble is going to burst and the fallout from this necessary and unavoidable event will bring home to many what has been explained to them many times and that which they have not been able to get their heads around. Namely that the game of buying our way out of this crises is not possible. We are more than broke. We are living on our children's future earnings to keep this ship afloat. Almost nothing requiring massive expenditures in the future will be affordable barring a hardnosed decision (the triage thing) to let another part of the global civilization die.
So my prediction is that we will enter the next global financial crises this year and it has a good probability of equaling our last one. The dominos are going to fall. All of the Euro countries are heading for hard times with the Southern band of Greece to Portugal suffering the worst. France and Germany will not be immune. Great Britain will see serious problems. Russia and Eastern Europe will suffer significant recession/deflationary events. China will slow dramatically as well as Japan.
The Emerging market countries are going to get absolutely hammered. It will take time but this will bleed back to the US which is going to be in the process of dealing with the mess caused by plummeting oil and gas prices.
Some very interesting reading on the state of global finance's.
http://www.theautomaticearth.com/the-biggest-economic-story-going-into-2015-is-not-oil/he US dollar will keep rising more or less in and of itself, simply because the Fed has ‘tapered QE’, and much of what happened in global credit markets, especially in emerging markets, was based on cheap and easily available dollars. There’s now $85 billion less of that each month than before the taper took it away in $10 billion monthly increments. The core is simple.
This is not primarily government debt, it’s corporate debt. But it’s still huge, and it has not just kept emerging economies alive since 2008, it’s given them the aura of growth. Which was temporary, and illusionary, all along. Just like in the rest of the world, Japan, EU, US. And, since countries can’t – or won’t – let their major companies fail, down the line it becomes public debt.
One major difference from the last emerging markets blow-up, in the late 20th century, is size: emerging markets today are half the world economy. And they’re about to be blown to smithereens. Sure, oil will play a part. But mostly it will be the greenback. And you know, we can all imagine what happens when you blow up half the global economy …
http://www.theautomaticearth.com/were-not-in-kansas-anymore/But as I’ve discussed many times already, oil is just the spark that sets the world ablaze. The fuel is energy credit, junk bonds, leveraged loans, collateralized loan obligations. And it will spread to adjacent instruments, and then to just about everything, because shorts and losses will have to be covered with any asset that can be sold, loans called in, margin calls issued, etc. Many of these items will end up being valued at 20-30 cents on the dollar at best, and since the whole edifice was built on leveraged credit, those valuations will in many cases mean a death in the family.
http://www.cnbc.com/id/102261689Oil has become the new housing bubble:
The same thing that happened to the housing market in 2000 to 2006 has happened to the oil market from 2009 to 2014, contends well-known trader Rob Raymond of RCH Energy. And he believes that just as we witnessed the popping of the housing bubble, we are in the midst of the popping of the energy bubble. “It’s the outcome of a zero interest rate policy from the Federal Reserve. What’s happened from 2009 to 2014 is, the energy industry has outspent its cash flow by $350 billion to go drill all these wells, and create this supply ‘miracle,’ if you will, in the United States.”
“The issue with this has become, what were houses in Florida and Arizona in 2000 to 2006 became oil wells in North Dakota and Texas in 2009 to 2014, and most of that was funded in the high-yield market and by private equity.”
http://www.zerohedge.com/news/2014-12-14/oils-crash-canary-coal-mine-9-trillion-crisisThe Oil story is being misinterpreted by many investors. When it comes to Oil, OPEC matters, as does Oil Shale, production cuts, geopolitical risk, etc. However, the reality is that all of these are minor issues against the MAIN STORY: the $9 TRILLION US Dollar carry trade. Drilling for Oil, producing Oil, transporting Oil… all of these are extremely expensive processes. Which means… unless you have hundreds of millions (if not billions) of Dollars in cash lying around… you’re going to have to borrow money.
Borrowing US Dollars is the equivalent of shorting the US dollar. If the US Dollar rallies, then your debt becomes more and more expensive to finance on a relative basis. There is a lot of talk of the “Death of the Petrodollar,” but for now, Oil is priced in US Dollars. In this scheme, a US Dollar rally is Oil negative. Oil’s collapse is predicated by one major event: the explosion of the US Dollar carry trade. Worldwide, there is over $9 TRILLION in borrowed US Dollars that has been ploughed into risk assets.
Energy projects, particularly Oil Shale in the US, are one of the prime spots for this. But it is not the only one. Emerging markets are another. Just about everything will be hit as well. Most of the “recovery” of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more “risk assets” (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.
If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system. And that’s assuming NO increased leverage from derivative usage. The story here is not Oil; it’s about a massive bubble in risk assets fueled by borrowed Dollars blowing up.
The last time around it was a housing bubble. This time it’s an EVERYTHING bubble. And Oil is just the canary in the coalmine.
http://www.nakedcapitalism.com/2014/12/did-wall-street-need-to-win-the-derivatives-budget-fight-to-hedge-against-oil-plunge.htmlSo. A global financial crises similar in scope and scale to the circa 2008 mess. Government defaults abounding, banks and too-big-to-fail companies getting bailed out on the taxpayers backs, a large rise in unemployment globally, deflation in some locations, etc. All the fun stuff.
In the face of this type of crises dealing with climate change will take a back seat. It will be all about the politics of finding a path back to economic growth.
Anyway that is my take on the next year. What is your's???
