Monday, August 24, 2015

Jim Rickards: Contagion is Spreading Through the Markets

Jim Rickards provides this new article that talks about a point we have emphasized here quite a bit. That being that we live in a globally interconnected world now. The phrase we use here is, a problem anywhere can lead to a problem everywhere. Below are some quotes from Jim's new article.

"Look around. What’s happening is a stark reminder of the interconnectedness of markets, and the power of contagion. The emerging markets crisis of 2015 finally reached U.S. shores.
We are now living in the second age of globalization. The first age began in 1870 and ended in 1914. As is the case today, it was characterized by strong economic growth, technological innovation, and global financial linkages. That first age saw the invention of the telephone and airplane, and vast expansion of nascent networks of railroads and transoceanic shipping."
. . . . 
"The second age of globalization began in 1989 with the fall of the Berlin Wall, and has continued until today. Like the first age, this period has seen enormous technological innovation and deep financial integration. Today the inventions are the internet, derivatives and inexpensive jet travel. Still, some things never change. JPMorgan, the latest incarnation of the House of Morgan, sits in New York, distributing bonds for emerging markets to investors in London.
The great unknown is whether the second age of globalization will also come to ruin in a new catastrophe equivalent in disruptive power to the First World War. Time will tell. Yet, my dynamic systems analysis of globalization using complexity theory, and indications and warnings, says a catastrophic collapse is just a matter of time.
Only the exact time and the specific snowflake that starts the avalanche remain to be seen. This kind of systemic analysis is the primary tool we use to keep investors ahead of the catastrophe curve."
. . . . .
"Beginning a few months ago, many Wall Street analysts assured us that China’s problems were China’s problems, and would not spread outward. They told us growth in the U.S. was solid, and that emerging market collapses in Russia, Brazil, China, Turkey, and elsewhere were due to local factors and conditions that would not impact the U.S.
This Wall Street advice was nonsense at the time and that nonsense is now seen for what it was. How could the world be closely linked during the expansion phase, yet somehow de-linked during a contraction? It can’t.
The global slowdown has now come home to roost in U.S. markets. This is something we’ve been warning you about for months. We’ve consistently said that U.S. growth was too weak to support an interest rate increase, and that Janet Yellen’s continual threats to raise rates were only adding to the weakness."
My added comments: If you follow Jim Rickards you will quickly see that he does not view this huge global market selloff as just another normal correction. It's obvious he sees it as something potentially much more. We will follow it here.

Here are some tweets from Jim Rickards on his twitter feed today:

on gold

on West Shore Funds conference call

on his call that the Fed cannot raise interest rates

on the options left for the Fed now

his response indicating the market action today is important

Here is a quote from an earlier email article Jim sent out:

"In early August, China threw in the towel on tight monetary policy, but it was too late. China followed Yellen too far down a dead-end road and has no easy way out. Yellen is still talking tough on a U.S. rate hike even as U.S. markets melt down. The problem with obsolete forecasting models is that you are always the last to know what’s going on. The entire world is caught in a deflationary vortex caused by botched central bank forecasting that led to excessive ease followed by ill-timed tightening."

Added note: Twitter comment from Willem Middelkoop

With (infinite) QE and a coming collapse/Restructuring of Sovereign bonds, stocks (and hard assets like gold/real estate) are safe havens ..

Bill Holter provides this update tonight. 

His take is that the selloff is far more than the normal correction of an overbought market. He believes today was important because it may have undermined public confidence in the ability of the authorities to keep the system stable. He says confidence is the only thing holding the system together.

News note:

Independent UK - Former Gordon Brown Adviser says stock up on canned goods 

No comments:

Post a Comment