2016, By The Ghost Of Christmas Yet To Come

2015 is ending in one fine flux, on a bittersweet melody after the whipsaw love-hate years of “taper tantrums” since June 2013 which it was first broached.

30 months later in December 2015, the FED gauges that the US economy is strong enough to withstand life not just without QE but slightly higher interest rates, as things are starting to look fragile for the rest of the world, more alarmingly in the growth engines of the BRICS which have  been long seen as the pillars of global growth for the past decade.

As confusion and stress reign across asset classes, investors are unable to think too hard about the future except that their pockets will feel the pinch of higher financing rates if they need those US dollars which impact on asset returns and thus, asset prices eventually. The world sits on a the cusp of a deflationary spiral on collapsing commodity prices with oil prices dipping to a new 7 year low, with nickel prices at 12 year lows, as China cuts their growth target for 2016 to 6.6%, a sub 7% number that markets find unacceptable although it is impossible to find better GDP growth projections anywhere else in the world except for India, which fiddled with their computation methods earlier this year to conjure a 7.4% growth number for 2016.

A Lonelier Place

It would not be unreasonable to see the world as a lonelier place in 2016, divided in opinions ranging from politics, to refugees, to the economy, to central bank policies.

Fault Lines

  1. Central bankers have broken ranks and each off in pursuit of their own agenda; smaller central banks at the mercy of global giants who have the liberty of monetary easing without the threat of outflows while the EM central banks risk economic damage if they attempt stimulus which ultimately results in an impasse for those dependent on growth, healthy inflation and USD liabilities.
  2. Refugees and more refugees coming from the Middle East, Africa and Asia has divided societies in Europe and Northern America as the protests grow in Holland and vigilante groups amass in Finland, worsening the economic prospects for Europe, especially, as this year’s economics Nobel laureate, Angus Deaton, sees it.
  3. Terrorism that just would not go away, dividing societies against each other and springing up recently in the US and 3 incidents in France this year, pales in comparison to the daily attacks in Afghanistan and Africa where the recent attack on the Afghan international airport would be the most audacious to date because we have grown numb to the thousands slaughtered in Nigeria and also because we do not hear a lot about what happens inside China that they do not want us to know about.
  4. Politics has taken on a new twist as we have some major votes coming up – the US Presidential elections for one … and UK’s EU referendum another… The stance on refugees and terrorism etc will be wedge between polarised voters in polarised societies.
    2016, By The Ghost Of Christmas Yet To Come
  5. The regulators had their go and banks paid up hefty fines. Now its class action time with investors divided against their bankers as the blame game grows – Citigroup sued by failed hedge fund over 2008 crisis trades, 25 civil securities and antitrust class action cases alleging that big banks are rigging U.S. Treasury auctions , The Public School Teachers’ Pension and Retirement Fund of Chicago in the largest class action suit accusing banks of market-rigging in a multi-billion derivatives market, Credit Suisse and six other banks are enmeshed in a proposed class-action antitrust lawsuit accusing the banks of manipulating currency rates to reach a $2 billion settlement against their plaintiffs comprising of investment funds, hedge funds and others.
    It can only be the beginning of a lifetime of distrust from here.

Christmas Yet To Come Themes

Divisions and fault lines running across the world, as it has always been. The themes of today will remain and will not go away tomorrow, themes an optimistic substitute for the word problems and yet a possible misnomer because problems can be solved whilst themes cannot.

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