In the past few shows, Adams and North have documented that several governments and central banks have already surrendered to the inflation monster – including the Bank of Japan, the ECB and the Bank of England.
Adams noted that it was a matter of time until US Federal Reserve surrenders as well – despite their tough talk of fighting inflation and tightening monetary policy. If we cast our mind back over the past two years and we see a Fed Chairman either who has been lying or has no idea what he is doing.
The US now finds itself officially in recession (which will be confirmed in the coming weeks) with the prospect of raging inflation (no peak in sight). The US Federal Reserve is expected to tighten monetary policy into a recession – a prospect now seen since 1974.
The fight to combat inflation in 2022 is a greater task than 1974 and the US Federal Reserve has less wiggle room because the current debt bubble.
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Apologies to our podcast users, we have had technical issues which stopped us posting – now fixed. We will upload archive recordings when we can!
In today’s show, we review the weeks market action, starting in the US – by far the most influential market, followed by Europe, Asia and Australia. There is no place to hide. Wealth is being destroyed. And there is no end in sight. Data is flagging recession, as central banks continue to raise rates and given the astronomical debt burden out there this is a big deal.
Even conservative investment strategies are being hit. “This is a train wreck,” says Alex Dunnin, executive director of research house Rainmaker Group. “When a traditionally conservative strategy is getting the worst returns then all bets are off. It doesn’t matter where you go, almost everyone will be in pain.”
The S&P 500 notched its worst start since 1970, plunging 20.6% between January and June. The Dow had its largest first-half drop since 1962, and the Nasdaq Composite had its largest percentage decline ever. And US Stocks slipped over the five days, with the S&P 500 erasing part of its rally in the previous week. Down more than 2%, the index just endured its 11th drop in 13 weeks.
All three indexes posted losses for the week. Despite this Wall Street rallied to close higher on Friday in light trading, with investors heading into the long holiday weekend and embarking on the second half of year looking for the next market-moving catalyst. All major groups in the S&P 500 rose, while the tech-heavy Nasdaq 100 underperformed. Treasuries surged after an ugly first half as weak economic data added to recession fears.
The US economic data was frankly horrid this week. An influx of data showing softer consumer spending, sagging sentiment and subdued manufacturing suggest a US economy with a more fragile foundation, prompting several forecasters to lower their estimates for growth.
Strategists at Goldman Sachs told clients on Thursday that stocks could keep falling later this year since “equities are pricing only a mild recession” and more companies will likely begin reducing their earnings expectations. In the event of a recession, Goldman’s team sees the S&P 500 dropping to 3,600, or 4.9% below Thursday’s close.
[CONTENT]
0:00 Start 0:15 Introduction 2:23 US Weak Economic Data 8:22 GDP Forecast: Down 9:00 Bond Yields 11:00 Buying The Dip 13:50 US Markets 16:00 Oil, Gold and Silver 17:00 Euro-zone Inflation Up 19:18 European Markets 20:00 Asian Markets And China Bonds 22:25 Australian Markets 24:40 Crypto Down 25:47 Tough Times Ahead
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Digital Finance Analytics (DFA) Blog
No Escape! Recession Will Destroy Wealth. Period. [Podcast]
On The Day CBA lifted their fixed mortgage rates 1.4% I caught up with Steve Mickenbecker from Canstar to discuss the implications of this, and the broader rate landscape as borrowers are being forced to pay more. While depositors are having a small win, the impact of rate hikes is concerning.
That said, households can take some steps to try to alleviate the pressure, though one popular one, cancelling health insurance is beset with issues.
Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.
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The international club of central banks responsible for controlling inflation has backed Reserve Bank of Australia governor Philip Lowe by warning that wage-price spiral risks are “flashing red” and calling for “front-loaded” interest rate hikes to avoid 1970s-style stagflation.
If central banks failed to tame inflation and wage claims, interest rates would need to rise sharply, risking “large drops in asset prices [that] could trigger a sharp recession and financial stresses”, the Bank for International Settlements said.
The Reserve Bank of Australia has conceded the disorderly end of its yield curve control policy in November last year triggered market volatility and dislocation, alongside damage to the bank’s reputation.
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
God is supposed to be all knowing and mere humans are required to religious houses of worship in order to obtain wisdom. In today’s episode, Adams is committing blasphemy by exposing that Australia’s living God – the RBA Governor Phillip Lowe – has little idea as to what he is doing.
In the past 2 weeks, Adams has gone to the monetary house of worship, the RBA and asked them a range of detailed questions as to determine what extent do they understand the impact of their monetary policy decisions on Australian households – especially in a situation that we have the largest hyper debt bubble in Australian history.
Unfortunately, in their most recent email, the RBA has expressed dissatisfaction at the number of questions I am posing! They obviously don’t like scrutiny.
What Adams has picked up from the email correspondence is that the RBA does not have a good real-time gage over disaggregated household cash position and thus, in the view of Adams, they are largely flying blind as to the real position of households and what the impact of monetary policy will be.
This is critical to know if you are basing your financial decisions on the statements of the RBA.
Go to the Walk The World Universe at https://walktheworld.com.au/
So, as we approach the halfway mark through the year, it’s important to note that U.S stocks are on track to mark their worst first half of the year in more than 50 years. The S&P 500 is down around 18% year-to-date, on track for its worst first half of any year since 1970, and the NASDAQ closer to 30% as the Fed tightens monetary policy in its fight against the highest inflation in decades. So relative to holding cash since the start of the year, stocks have been trashier.
Bonds, which investors typically count on to counterbalance stock declines in their portfolios, have fared little better: The U.S. bond market, as measured by the Vanguard Total Bond Market Index fund, is down 10.8% for the year to date, putting it on pace for its worst performance in modern history.
That said of course the value of cash is being deflated in real terms by high inflation, so its not perfect, but lessons from history suggest that sometimes it’s a reasonable holding place, until markets bottom. And with investor expectations fluctuating between continued high inflation and an economic downturn caused by a hawkish Fed, few believe the market’s volatility will dissipate anytime soon. Remember that on Thursday, Fed Chair Jerome Powell said the central bank’s focus on curbing inflation was “unconditional”, adding to fears about more interest rate hikes.
[CONTENTS] 0:00 Start 0:15 Introduction 1:15 Worst First Half 2:30 Inflation Control Unconditional 4:10 Leading Indicators 9:30 More FED comments 13:14 US Market 14:15 Oil 16:54 US Bank Stress Tests 19:30 European Markets 20:58 Asian Markets 23:10 Australian Markets 27:40 Crypto and Harmony 29:50 Conclusion and Close
The latest edition of our finance and property news digest with a distinctively Australian flavour.
Go to the Walk The World Universe at https://walktheworld.com.au/
Join us for a live discussion about the current state of the economy, with a specific focus on Australian property with Leith van Onselen, the Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
The RBA reported on their yield curve control today, and Phil Lowe spoke about rising mortgage rates – how high will they go – and what are the consequences?
You can ask a question live via the YouTube chat.
Go to the Walk The World Universe at https://walktheworld.com.au/
The RBA is beset with issues, paying money to the banks due to the Term Funding Facility, negative equity on its balance sheet, and a more rigorous review than they wanted, which given their recent failures (no cash rate rise until 2024) is warranted.
Does it retain any credibility?
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
This week, The U.S. Federal Reserve announced an interest rate hike of 75 basis points, its largest increase since 1994, the Swiss National Bank unexpectedly lifted rates by 50 basis points on Thursday, while the Bank of England on the same day raised its interest rates by 25 basis points, hiking for its fifth consecutive meeting. The main outlier is the Bank of Japan, which stuck with its strategy of pinning 10-year yields near zero at its policy meeting earlier Friday. However, this has done little to ease worries that inflation and rate hikes are going to curb economic growth for years to come.
And It was one of the most dramatic weeks in the short history of the cryptocurrency market, bookended by the type of announcements investors fear the most from a counterparty: We’re sorry, but we just can’t return your money right now. It all started late Sunday, when a sort of crypto shadow bank called Celsius Network suspended withdrawals from depositors who had been enticed by sky-high interest rates that, in retrospect, were likely too good to be true. By the end of the week, on the other side of the world in Hong Kong, the digital-asset lender Babel Finance also froze withdrawals.
Just as Bear Stearns’s hedge funds were among the first to reveal problems from the subprime mortgage crisis, the “cockroach theory” springs to mind: If you see one of those nasty bugs scurrying across the floor, chances are there are plenty more hiding behind the fridge or under the sink. Wealth destruction is now a thing.
[Content]
0.00 Start 0.15 Introduction 2:10 Federal Reserve Inflation Battle 3:30 GDP Forecast Down 7:25 US Markets 10:00 European Markets 11:20 Asia Pacific Markets 11:40 Japan Bond Crisis 13:05 Australian Markets 18:00 Crypto Winter 23:30 Crypto Traders Turn On Each Other 29:05 Conclusion and Close
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The trauma in the markets are centered on recession talk, as central banks push rates higher. But do they know what they are doing, or will they simply continue until something breaks?
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