JP Morgan has warned that another financial crash could be round the corner as the decade of ultra-loose money comes to an end.
Central banks have purchased roughly $15 trillion (£11.3 trillion) of financial assets since the crisis, but the Wall Street bank’s head of quantitative and derivatives strategy Marko Kolanovic said this will start to unwind next year in a move that could “potentially cause a financial crisis”.
Dubbing the hypothetical crash the “great liquidity crisis”, he said that outflows – or lack of new inflows – from undoing stimulus could lead to “asset declines and liquidity disruptions” that in turn trigger a crash.
Gold and the S&P 500 are currently in a tight race.
For Bloomberg Intelligence analyst Mike McGlone, this translates into good news for the yellow metal.
“Running neck and neck with the S&P 500 in a tightening cycle should favor gold in most scenarios,” the commodities strategist wrote in a report released Friday.
… “With the record-setting stock market barely beating gold, the metal may be worthy of greater attention,” he said.
“Despite all of the attention on stocks, gold may be looking ahead to a more favorable endgame at a steep discount to historical highs with inflation brewing, a potential dollar peak and the lowest CBOE Volatility Index ever.
Bridgewater Associates founder Ray Dalio said Tuesday he is not a believer in cryptocurrencies.
“Bitcoin today you can’t make much transactions in it. You can’t spend it very easily,” Dalio said on CNBC’s “Squawk Box.”
“It’s not an effective storehold of wealth because it has volatility to it, unlike gold,” the hedge fund founder added. “Bitcoin is a highly speculative market. Bitcoin is a bubble.”
Toys R Us could file for bankruptcy as soon as this week, according to sources familiar with the matter.
The sources noted that the bankruptcy plans are not definite, and both its plans to file and its timing could change.
…Addressing the retailer’s debt load prior to the crucial holiday season could give its major vendors such as Mattel and Hasbro clarity into the company’s long-term viability to help ensure the toymakers continue to stock its shelves throughout the holiday.
PG View: If you missed our special report on the death of brick-and-mortar retail and the broader implications, you can view it HERE.
MarketWatch/Myra P. Saefong/09-08-17
Gold is trading at its highest price in a year, and the yellow metal might already have the fuel to test levels last seen in 2013.
…“All of the ingredients to break $1,400 are there—our debt is out of control and our deficit could skyrocket, especially with infrastructure plus military spending” on the back of a possible confrontation with North Korea, said Jeb Handwerger, editor of GoldStockTrades.com, which offers a newsletter focusing on mining exploration companies.
“We could be maybe weeks away from that $1,400 breakout, which could signal a new uptrend in gold not seen in many years,” he said. Gold prices haven’t traded above $1,400 since 2013. They also hit a high of about $1,687 that year.
Handwerger pointed out that a “major breakout” at $1,400 for gold could “lead to a reversal of the outperformance of stocks over gold into a market that favors precious metals and commodities over stocks.”
PG View: Gold is already outperforming the S&P500 and DJIA year to date . . .
European markets might just be the epicenter for the “bubbly elements” that have left Lloyd Blankfein “unnerved.”
The Goldman Sachs Group chief executive alluded Wednesday to the risk of the protracted era of low interest rates fueling bubbles as investors turn to stocks from corporate bonds for income. Taking a closer look shows that the difference between European stock dividends and yields on low-grade debt, which inverted in 2013, recently widened in favor of stock dividends to the most since at least 2005.
…It’s all adding up to growing angst over excess exuberance for risky assets, even for Blankfein.