So, . . . anyone who has read DonDiego's comments on the economy and investing over the last 6 months or so, . . . if, indeed, anyone has read his comments, . . . knows that poor old DonDiego has low expectations for the economy and investments dependent upon a robust economy.
Today DonDiego came across an article titled A Market Collapse Is On The Horizon. The author, Gail Tverberg, concludes with some potential problems possible in 2016:
******quote***
__Problems with a slowing world economy are likely to become more pronounced, as China’s growth problems continue, and as other commodity-producing countries such as Brazil, South Africa, and Australia experience recession. There may be rapid shifts in currencies, as countries attempt to devalue their currencies, to try to gain an advantage in world markets. Saudi Arabia may decide to devalue its currency, to get more benefit from the oil it sells.
__Falling oil prices are likely to cause numerous problems. One is debt defaults, both for oil companies and for companies making products used by the oil industry. Another is layoffs in the oil industry. Another problem is negative inflation rates, making debt harder to repay. Still another issue is falling asset prices, such as stock prices and prices of land used to produce commodities.
__Debt defaults are likely to cause major problems in 2016. As noted in the introduction, we seem to be approaching the unwinding of a debt supercycle. We can expect one company after another to fail because of low commodity prices. The problems of these failing companies can be expected to spread to the economy as a whole. Failing companies will lay off workers, reducing the quantity of wages available to buy goods made with commodities. Debt will not be fully repaid, causing problems for banks, insurance companies, and pension funds.
__The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible. It is possible that this approach will lead to depositors losing what appear to be insured bank deposits.
__All in all, 2016 looks likely to be a much worse year than 2008 from a financial perspective. The problems will look similar to those that might have happened in 2008, but didn’t thanks to government intervention. This time, governments appear to be mostly out of approaches to fix the problems.
***endquote***
DonDiego suggests the interested reader, if any, take a look. He found it an interesting read, especially the short term prediction that oil may fall to $10 and the reason why. (The exception is her final "Conclusion" in which she makes a screwy analogy of the economy to thermodynamics; DonDiego says one can skip that.)
[Oh, and the concerned reader need not worry about poor old DonDiego. As he reported months ago in this forum he sold pretty much all his positions in the stock market at the end of August 2015, with the exception of a Canadian mining company as a hedge against inflation and/or Government mismanagement of the economy, almost a sure thing.)
Today DonDiego came across an article titled A Market Collapse Is On The Horizon. The author, Gail Tverberg, concludes with some potential problems possible in 2016:
******quote***
__Problems with a slowing world economy are likely to become more pronounced, as China’s growth problems continue, and as other commodity-producing countries such as Brazil, South Africa, and Australia experience recession. There may be rapid shifts in currencies, as countries attempt to devalue their currencies, to try to gain an advantage in world markets. Saudi Arabia may decide to devalue its currency, to get more benefit from the oil it sells.
__Falling oil prices are likely to cause numerous problems. One is debt defaults, both for oil companies and for companies making products used by the oil industry. Another is layoffs in the oil industry. Another problem is negative inflation rates, making debt harder to repay. Still another issue is falling asset prices, such as stock prices and prices of land used to produce commodities.
__Debt defaults are likely to cause major problems in 2016. As noted in the introduction, we seem to be approaching the unwinding of a debt supercycle. We can expect one company after another to fail because of low commodity prices. The problems of these failing companies can be expected to spread to the economy as a whole. Failing companies will lay off workers, reducing the quantity of wages available to buy goods made with commodities. Debt will not be fully repaid, causing problems for banks, insurance companies, and pension funds.
__The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible. It is possible that this approach will lead to depositors losing what appear to be insured bank deposits.
__All in all, 2016 looks likely to be a much worse year than 2008 from a financial perspective. The problems will look similar to those that might have happened in 2008, but didn’t thanks to government intervention. This time, governments appear to be mostly out of approaches to fix the problems.
***endquote***
DonDiego suggests the interested reader, if any, take a look. He found it an interesting read, especially the short term prediction that oil may fall to $10 and the reason why. (The exception is her final "Conclusion" in which she makes a screwy analogy of the economy to thermodynamics; DonDiego says one can skip that.)
[Oh, and the concerned reader need not worry about poor old DonDiego. As he reported months ago in this forum he sold pretty much all his positions in the stock market at the end of August 2015, with the exception of a Canadian mining company as a hedge against inflation and/or Government mismanagement of the economy, almost a sure thing.)
