Bill Blain: "Lots Of Fear About Market Bubbles, Even More Fear About Missing The Upside"
Content adapted from this Zerohedge.com article : Source
Submitted by Bill Blain of Mint Partners
Too big to fail, too big an embarassment to fail... And is China fueling complacency?
"You and I come by road or rail, but economists travel on infrastructure…."
I am indebted to Anthony Peters, a fellow scribbler, for informing us this is "Blue Monday" – officially the most depressing day of the year. I'm quite happy! I had a fantastic weekend although its tempered by my little girl going off to Australia for a year later today (she will be looking for a job in Melbourne if anyone is reading this in Oz), and this morning I had a great breakfast. What's not to like?
The story of the morning is Carillion – the UK infrastructure contractor – collapsing in a myre of debt. Their business was focused on government contracts – and it's been common knowledge it's been on the brink for months. The interim CEO warned markets they were in trouble late last year, and facing "commercial failure [on the back of] too many unprofitable contacts; we are building a Rolls Royce, but only getting paid to build a mini."
An alternative perspective on Carillion is "Too Big to Fail, but too embarrassing not to", according to an infrastructure specialist I spoke to this morning. Some kind of further continuity government support looks likely – but debt holders are going to be zeroed.
Funnily enough, UK infrastructure projects are generally pretty successful, on time, and to budget – unlike, say, the embarrassment of Germany's Berlin Airport or Stuttgart Bahnhof projects. The infrastructure business in the UK has led to constrained labour supply to other construction sectors – slowing down other parts of the economy. We'll be thinking about the unintended consequences upon the economy of Carillion later today..
What else out there this morning?
Fascinating article from ZeroHedge filtching some Citibank research . It reminds us one big risk of normalisation is the end of central bank liquidity from "$2 trillion to zero" – something we're all aware of, but are worrying less about because despite the cuts, markets keep "Melting Up". It's causing complacency. Perhaps our focus on the upside of Global Synchronised Growth is hiding the truth..
Citi are warning declining government QE distortions propping up markets have been replaced by Chinese FX reserves flooding in. China reserves stand at $3.14 trillion, and are increasing by $130 bln per annum. It's going somewhere. City say where: "China's aggressive police change after the Shanghai Accord in Feb 2016 unleashed a record 21 out of 22 positive months for the S&P", says the City report.. As a result, Citi is taking "a cautious stance on 2018".
Meanwhile, I read Morgan Stanley warning clients of similarities in Stocks between 1929, 2000 and today: the S&P Shiller PE stands at 33 – comparable to the great crash of 29. Watch out for bankers falling from the 14th floor.. (They also note Greek 10-year bonds now trade at 3.6%, (tightening from 5.3% in December) a mere week after I warned the time to really worry is when Greece yield less than the US – that time is coming…)
So as we start the third week of the year its more of the same – lots of angst about markets as bursting bubbles, and as much fear about missing further upside before they might or might not burst.
Minis are crazy expensive! Maybe he should have used tata as he example.
All my cousins work in building in the UK and they are constantly telling me how much work there is at the moment. Due to the labour shortage their wages getting pushed up by the week. Maybe an infrastructure slow down will allow home builders/commercial builders to ramp up with the labour that was being used by the gov
Radically increasing wages is a sign a crash could be coming. The labor aspect of things carries a big dollar value. When that component starts to go up quickly, ultimately prices will follow...to the point where they pop.
I agree. Rising costs are usually the reasons bull markets become bear markets
Same here buddy... :-( :-(
Cryptocurrency is prob the only thing that can save the dying fiat system worldwide at this point by allowing debt filled countries (ALL...) to transition to a new viable financial system in a way that won't overly destroy most worlds economy. If governments were smart they would build towards working with and capitalizing on the crypto space, instead of trying to destroy it. With this in mind I think regulations are coming, but in general the crypto space as a whole is going to be allowed to thrive on in the years ahead far beyond its current levels (although it will be a bumpy ride throughout). Interesting times...
Actually it is the only thing that can save the average person who is mired in debt (at least in the western countries) with stagnant wages. In the end, the fiat system failed him.
As for countries, the blockchain technology is going to serve up a whooping on them over the next few decades. Government is in the cross hair of blockchain just like the banksters.
@zer0hedge...ups and downs in the markets and even business also its common thing .every time not our in hand some times we will get a huge profits and some time we will not get ..its not a problem of ours ..the babboles grow and lean dont expect to blast..hope that its go to up ..dont be disapoint when the profits low or market down up and downs are common thing..in this time only we stand witha strong strength..the main reason for the babbole phase is the low tradings ..if investers cime and sell and buying is done based on the demand of the market..the msrket get high and we will get huge rates in market...we dont see this type of babble phases...thank you for sharing this information with us bro...
I agree with u that there must be ups and downs in market as well as business.so its common thing.
Yes...bro
QE inevitably props up assets which is the intention of central banksters....
They want people to feel the wealth "effect". It is a slight of hand since most do not cash out thus actually having any wealth. Instead, it is paper profits that disappear when things come crashing down. The banksters, however, are not the ones left holding the bag since they cashed out. It is the average person who didnt know when the rug was going to be pulled out that suffers.
This is something that has been repeated many times the last 100 years. Truly, the only way for the average person to succeed in this game is to be able to weather the ups and downs. With all crashes there is a rebound, eventually, since the banksters will end up going back into that asset. However, one might need to hang on for a long time.
The collapse of Carillion has got the government running to try to bail the smaller affected companies out many of which will not survive.
Carillion was born from the merger of smaller companies going under and seems that doing mainly government work and contracting it out was the death of them and many others.
The bubble for them has burst and the government are looking at ways to help them but for the little companies they owe millions to this might be the end - and when you consider their could be as many as 30,000 small firms owed money that is a lot of jobs, contracts, services in jeopardy
@zer0hedge is the same history here in Brazil. A lot of new companies had been created to serve the government however, since the crash and recession that fall in the country, many of them closes their door since the government didn't pay or don't extended the contract.
I think that, bubbles get everyone afraid of, even more in cryptos, but I think in that last is just a mixed of fake news and ignorance.
Honestly the times are a bit scary when it comes to money. A lot of people could get hurt depending on what happens and typically the people who do get hurt are the ones that don't deserve to while the people that caused it profit.
Part of it is a corrupt system yet another part of it is the financial literacy of the average person. Few take the time to learn about money, instead modeling what they learned growing up. If their parents were astute, this is fine. However, most parents are financial meatheads meaning their kids turn into that also.
The Internet gives people the ability to learn about anything, basically for free. A site like investopedia would help millions of they took the time to learn some of the basics.
Instead, they hand their money over to sales people dressed up as financial planners. The financial services industry is all a scam.
A key feature of bubbles is that most participants stop being indifferent during "bubble phase". It is a matter of failure to admit that regular market participants and other forms of traders have entered into a speculative exercise not supported by previous valuation techniques. In addition, bubbles are often described retrospectively after the bubble bursts. @zer0hedge
"Bubbles" are all part of the plan.
The euphoria from the run up and FOMO take over. While the banksters are well aware of this, they use it to their advantage. When they pull the plug, the average person is caught holding the cards while the banksters wait for the crash to stop so they can buy on the cheap.
It is a process used for at least the last 100 years.
As the last source of liquidity in the economy, the Central Bank is able to borrow money from banks or borrow money from the banks at the market. The Central Bank specifies interest rates to influence the markets. @zer0hedge
Re-steemed and upvoted. Have an amazing day, dude!