Saturday, July 2, 2016

Globalization Is Burning. Like The Fourth of July

This was the week that lit the fuse on Globalization...this will be a lesson in Exceptionalism...

"Brexit Is A Wimpy Crisis For U.S. Stocks"
"It's Just A Matter Of Time For New Highs"
"The U.S. Stock Market Has Declared Independence From Brexit Fear"

Deflation acceleration. Check.
Global Financials Hammered. Check.
Oil rollover. Check.
Global race to debase. Check. 
Yuan devaluation. Check.
Chasmic U.S. risk divergence. Check.
Short-covering. Check.
Mass complacency. Check.
Manic blow-off. Check.

Fireworks lit. Check.

Brexit monkey hammered Globalization, and accelerated the ever-growing forces of global deflation. So Central Banks (ECB/BOE) took CasinoNomics to level 11 pushing gamblers farther out onto the risk curve amid unprecedented global risk. Every other risk indicator diverged from stocks and "yield"...

The function of negative and 0% long bond yields is to push gamblers further out onto the risk curve. All part of CasinoNomics and the fake wealth effect:

U.S., Japan, Germany, UK 10 year Treasury yields

"Did you say take more risk?"

Yield-seeking is the order of the day, so stoned gamblers responded in kind and piled into junk bonds, dividends stocks, and Municipal Bonds. I mean "safe havens":

Junk bonds:

Unfortunately, Globalization is a zero sum game, so the ECB/BOE actions came at the expense of Japan and China both of which saw their economies become less competitive at a time when they can least afford reduced exports. The Japanese Yen strengthened the most since 1998 aka. the Asian Currency Crisis. And China reversed policy this week, indicating the gloves are off and further devaluation is not just inevitable, but planned...

Yuan (rate of change) with S&P:

Global Financials got monkey hammered by the lowered interest rates...

Deflation and Deutsche Bank:

And the rest of the world ex-U.S. was not all that impressed...

The noose is as tight as it can get...
S&P downside gaps with World ex-U.S.: