With the Dow still above 18,000 and the dollar surging, is the world now headed into the next financial crisis?
A portion of today’s note from Art Cashin: Check Your Rabbit’s Foot – Here’s the opening of a Bloomberg column that’s getting passed around this morning:
Next year ends in a 7. If you’re superstitious or a little loose with statistics, that makes us due for another financial crisis. The biggest one-day stock drop in Wall Street history happened in 1987. The Asian crisis was in 1997. And the worst global meltdown since the Great Depression got rolling in 2007 with the failure of mortgage lenders Northern Rock in the U.K. and New Century Financial in the U.S.
You can’t really mark the next crisis down on your calendar, of course. The point is that crackups come fairly regularly. And some of the prerequisites for the next one do seem to be falling into place.
The International Monetary Fund may have gotten things about right in its annual Global Financial Stability Report, which was issued in October. It doesn’t sound an alarm but expresses concern. Short- term risks have actually abated, the IMF says, pointing to rebounding commodity prices, which help some key emerging markets, and the prospect of easier money in developed markets. But, it says, “medium-term risks continue to build.” It cites the unsettled political climate, which makes entrenched problems harder to tackle; some weak financial institutions in developed markets; and heavy corporate debts in emerging markets.
Risks that aren’t acute can build for a while before triggering a crisis. What’s indisputable is that debt, the tinder of almost every financial conflagration, is growing rapidly. At 225 percent of world gross domestic product, combined public and private debt outside the financial sector “is currently at an all- time high,” the IMF says. Debt fuels growth but also makes borrowers brittle. Debtors keep owing money even if they lose the ability to repay. If they default, their lenders are damaged and sometimes default on their own obligations, and so the dominoes fall.
And you thought the election was all you had to worry about.
Overnight And Overseas – In Asia, Tokyo rose smartly as the yen weakened a bit. Hong Kong was up moderately as a large typhoon threatens. India is also up while Shanghai closed mixed.
… The dollar firms slightly against the pound and the euro. Gold is up a smidge but base metals mostly lower. Crude eases back and may dip below $51, as the contract expires today. Yield on ten year continues to flirt with the 200 DMA.
Consensus – … The two candidates go head to head again at Al Smith Dinner. High risk of a gaff. Stay wary, alert and very, very nimble. Have a wonderful weekend!
***KWN has now released the powerful audio interview with Gerald Celente and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO RELEASED: This Indicator Now Says The Price Of Gold Is Headed Above $1,700 CLICK HERE.
***KWN has also now released the extraordinary interview with John Embry and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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