Insider
by
Chris Martenson
Executive Summary
- Liquidity is drying up
- Volatility is returning
- HFT has dramatically increased crash risk
- The key takeaways for investors
If you have not yet read Part 1: Credit Market Warning available free to all readers, please click here to read it first.
Financial assets are worth what someone will pay for them. A corollary of this is that you’d much rather be trying to buy or sell in markets that are deep and liquid. Thin markets provide bad prices at best, and no bids or offers at worst.
Low trading volumes are worrisome because they are usually accompanied by higher volatility. And those two can easily become dance partners that whirl each other ever faster.
There are numerous warning signs coming from all asset markets, but especially from the bond markets.
Low Liquidity
The issue of low liquidity really jumped out at me roughly a year ago with the news that the utterly broken Japanese government bond (JGB) market had gone an entire 36 hours without a single trade(!!).
Japan bond market liquidity dries up as BoJ holding crosses ¥200tn
Arp 15, 2015
The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.
The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.
Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.
(Source)
Thus comes the law of unintended consequences. The main reason for buying JGB’s by the Bank of Japan (BoJ) was to inject a lot of liquidity into ‘the system’ in hopes that the Japanese economy would take off.
While that may have happened to some (slight) extent what also happened was that …
The Warning Indicators To Watch For Trouble In The Bond Market
PREVIEW by Chris MartensonExecutive Summary
- Liquidity is drying up
- Volatility is returning
- HFT has dramatically increased crash risk
- The key takeaways for investors
If you have not yet read Part 1: Credit Market Warning available free to all readers, please click here to read it first.
Financial assets are worth what someone will pay for them. A corollary of this is that you’d much rather be trying to buy or sell in markets that are deep and liquid. Thin markets provide bad prices at best, and no bids or offers at worst.
Low trading volumes are worrisome because they are usually accompanied by higher volatility. And those two can easily become dance partners that whirl each other ever faster.
There are numerous warning signs coming from all asset markets, but especially from the bond markets.
Low Liquidity
The issue of low liquidity really jumped out at me roughly a year ago with the news that the utterly broken Japanese government bond (JGB) market had gone an entire 36 hours without a single trade(!!).
Japan bond market liquidity dries up as BoJ holding crosses ¥200tn
Arp 15, 2015
The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.
The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.
Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.
(Source)
Thus comes the law of unintended consequences. The main reason for buying JGB’s by the Bank of Japan (BoJ) was to inject a lot of liquidity into ‘the system’ in hopes that the Japanese economy would take off.
While that may have happened to some (slight) extent what also happened was that …
by
Chris Martenson
I'd like to take a break for a moment from the weakening stock market, the unfolding disaster that is Greece, etc… and share my experience from this past weekend.
I presented at the New Story Festival in CT with my wife Becca. We discussed the importance of nature connection and community, myself covering the essential knowledge that serves to light a fire to ‘do something’ and with Charles Eisenstein eloquently covering the essence of being alive in these times.
When To Be In Joy
PREVIEW by Chris MartensonI'd like to take a break for a moment from the weakening stock market, the unfolding disaster that is Greece, etc… and share my experience from this past weekend.
I presented at the New Story Festival in CT with my wife Becca. We discussed the importance of nature connection and community, myself covering the essential knowledge that serves to light a fire to ‘do something’ and with Charles Eisenstein eloquently covering the essence of being alive in these times.
by
charleshughsmith
Executive Summary
- Which power groups will determine how the war on cash is waged?
- Is it better to hold cash in savings/checking accounts, or securities accounts?
- What will likely happen with retirement accounts?
- Ways to diversify your cash risk
If you have not yet read Part 1: The War on Cash: Officially Sanctioned Theft available free to all readers, please click here to read it first.
In Part 1, we reviewed the basic elements of the war on cash, and how it benefits banks and governments but not households that don’t already own productive assets.
In Part 2, we’ll review the downside of imposing capital controls and eliminating physical cash, and discuss strategies to protect our financial assets from bail-ins and negative interest rates/fees on cash.
What Will The Wealthy And Politically Powerful Tolerate?
One of the key dynamics in this discussion is: what will the wealthy and powerful tolerate? Any policy that inhibits or harms the wealthy and politically powerful is a non-starter, and so if we align our strategies accordingly, we are less likely to suffer any negative consequences.
The wealthy and politically powerful have little need for physical cash (President John F. Kennedy famously carried no cash), so eliminating cash will probably not generate any resistance in the financial elite.
But other forms of capital control, such as requiring retirement accounts to hold Treasury bonds and limiting transfers to other nations’ banks might…
What To Do With Your Cash Savings
PREVIEW by charleshughsmithExecutive Summary
- Which power groups will determine how the war on cash is waged?
- Is it better to hold cash in savings/checking accounts, or securities accounts?
- What will likely happen with retirement accounts?
- Ways to diversify your cash risk
If you have not yet read Part 1: The War on Cash: Officially Sanctioned Theft available free to all readers, please click here to read it first.
In Part 1, we reviewed the basic elements of the war on cash, and how it benefits banks and governments but not households that don’t already own productive assets.
In Part 2, we’ll review the downside of imposing capital controls and eliminating physical cash, and discuss strategies to protect our financial assets from bail-ins and negative interest rates/fees on cash.
What Will The Wealthy And Politically Powerful Tolerate?
One of the key dynamics in this discussion is: what will the wealthy and powerful tolerate? Any policy that inhibits or harms the wealthy and politically powerful is a non-starter, and so if we align our strategies accordingly, we are less likely to suffer any negative consequences.
The wealthy and politically powerful have little need for physical cash (President John F. Kennedy famously carried no cash), so eliminating cash will probably not generate any resistance in the financial elite.
But other forms of capital control, such as requiring retirement accounts to hold Treasury bonds and limiting transfers to other nations’ banks might…
by
Brian Pretti
Executive Summary
- What the NACM Index and the Atlanta GDPNow are telling us about the odds of returning to recession
- Bond market volatility is picking up
- Are central banks are losing their control?
- Why monitoring credit markets will be our best indicator of the next downturn
If you have not yet read Part 1: As Goes The Credit Market, So Goes The World available free to all readers, please click here to read it first.
That indicator is the current level of the National Association of Credit Managers Index. Although not wildly well known, the National Association of Credit Managers Index is an indicator deserving of attention and monitoring immediately ahead.
As per the National Association of Credit Management (NACM), the Credit Managers Index is a monthly survey of responses from US credit and collections professionals rating factors such as sales, credit availability, new credit applications, accounts placed on collection, etc. The NACM tells us that numeric response levels above 50 represent an economy in expansionary mode, which means readings below 50 connote economic contraction. For now, the index rests in territory connoting economic expansion, but the index is also sitting quite near a 6 year low. We’ve been here before in the current cycle as the economy has moved in fits and starts in terms of the character of growth:
In a prior discussion, I mentioned the slowing in the US economy in the first quarter of 2015. I highlighted the Atlanta Fed GDPNow model that turned out to be very correct in its assessment of Q1 US GDP. While the Atlanta Fed was predicting a 0.1% Q1 GDP growth rate number, the Blue Chip Economists were expecting 1.4% growth. When the 0.2% number was reported, it turns out the Atlanta Fed GDPNow model was virtually right on the mark. As of now, the Atlanta Fed GDPNow model is predicting a…
The Central Banks Are Losing Control Of The System
PREVIEW by Brian PrettiExecutive Summary
- What the NACM Index and the Atlanta GDPNow are telling us about the odds of returning to recession
- Bond market volatility is picking up
- Are central banks are losing their control?
- Why monitoring credit markets will be our best indicator of the next downturn
If you have not yet read Part 1: As Goes The Credit Market, So Goes The World available free to all readers, please click here to read it first.
That indicator is the current level of the National Association of Credit Managers Index. Although not wildly well known, the National Association of Credit Managers Index is an indicator deserving of attention and monitoring immediately ahead.
As per the National Association of Credit Management (NACM), the Credit Managers Index is a monthly survey of responses from US credit and collections professionals rating factors such as sales, credit availability, new credit applications, accounts placed on collection, etc. The NACM tells us that numeric response levels above 50 represent an economy in expansionary mode, which means readings below 50 connote economic contraction. For now, the index rests in territory connoting economic expansion, but the index is also sitting quite near a 6 year low. We’ve been here before in the current cycle as the economy has moved in fits and starts in terms of the character of growth:
In a prior discussion, I mentioned the slowing in the US economy in the first quarter of 2015. I highlighted the Atlanta Fed GDPNow model that turned out to be very correct in its assessment of Q1 US GDP. While the Atlanta Fed was predicting a 0.1% Q1 GDP growth rate number, the Blue Chip Economists were expecting 1.4% growth. When the 0.2% number was reported, it turns out the Atlanta Fed GDPNow model was virtually right on the mark. As of now, the Atlanta Fed GDPNow model is predicting a…
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