The Crash of 2015: It’s Here

A CNBC anchor after trying to explain hedging against the volatility of stocks indexed to the Volatility Index.

A CNBC anchor after trying to explain hedging against the volatility of stocks indexed to the Volatility Index. The end is near now.

Screw it, I’m calling it. I’ve been watching the so-called “markets” of China, the United States and a couple dozen other countries fall off a cliff, get up, stagger upward, fall off another cliff, and repeat. I’ve been listening to the chattering class say over and over again, this is normal, seen this before, everybody buy the dip. I’ve been watching the zombie oil-fracking revolution in this country go into spasms, jerking a few feet forward, a few feet back, gasping for breath, while the cheerleaders agree: perfectly normal, blood pressure okay, reflexes good, lend them more money. This is not normal, it is not okay, it is the Crash of 2015. Continue reading

Financial Doomsday Clock “One Minute to Midnight”

Midnight in the Market

Watching the Great Bubble of China deflate. What happens in China does not stay in China.

The hair-on-fire headline reads, in full: “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control.” But here’s the thing — the headline does not appear in a hair-on-fire, Chicken-Little website such as (one might slanderously call) Zero Hedge, David Stockman’s Contra Corner, Wolf Street or (dare I append this name to the list of Titans?) The Daily Impact. It appears on the website of  one of the world’s top mainstream newspapers, Britain’s  The Daily Telegraph. And here’s the subhead: “China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations.”

Worried yet? Don’t be. It’s way too late. Continue reading

The Crash of 2015: Now Arriving at Gates 3,7,12,19…..

This is where stock and gas prices are going. To see the panic index, turn your screen upside down.

This is where every component of the world economy is going. To see the panic index, look at your screen in a mirror.

If the world economy were an airline, what we’d be seeing now is hundreds of late and cancelled flights, missing airplanes, bankruptcies, thousands of staff layoffs and millions of unhappy customers. (Whoa, that was supposed to be a metaphor!) If we were in a hub airport of this airline, every incoming flight would be a tattered, smoking airplane with flat tires and bullet holes bearing more bad news from shell-shocked passengers. Some examples:

International Arrivals:

From China: The Shanghai Composite Index lost 13.4 percent of its value in July. That’s more than a correction and would have been a crash if the government had not a) halted trading in half the stocks listed, b) forbade the selling of large blocks of shares, and c) bought most of the shares that were sold. Continue reading

The Crash of 2015: On Track, Behind Schedule

As demonstrated in Paris in 1895, what matters is not whether the train wreck was on time. What matters is that it’s a wreck. (Wikipedia Photo)

As demonstrated in Paris in 1895, what matters is not whether the train wreck was on time. What matters is that it’s a wreck. (Wikipedia Photo)

The dominoes are toppling, just as we have been expecting for nearly a year now, but slower than we thought. The fact-resistant strain of humans (Thank you, Borowitz Report) now in charge of the world are trying to use vast amounts of money to counteract gravity, and, counterintuitively, succeeded in slowing the dominoes’ fall. But not for long.

To review our expectations of last summer: the hideous decline rate of fracking wells (of up to 90% in three years) was forcing frackers to borrow huge amounts of money to put up large numbers of new wells at a breakneck pace in order to preserve the illusion (it was always an illusion) of a revolution in American oil leading to prosperity and “energy independence.” On average, it cost the frackers over $4 to get $1 of revenue in the door during the first quarter of this year. A year ago, with oil commanding $100 a barrel, they were still spending $2. As the old joke goes, the only way to make any money when you’re losing on every transaction is to make up for it with volume. But since most of the money spent was capital expenditure — i.e. new wells — their operating statements showed profits and nobody looked at the balance sheets. Continue reading

Oil Money: Too Dumb to Fail


Bankers on the trading floor at CITI make a market in the latest derivatives of derivatives. (Photo by Mike Licht/

We interrupt the Crash of 2015 for a brief word from some people who are not participating, on the belief that the oil boat — having been hit by two icebergs, dwindling resources and plunging prices — is not sinking, it is merely bobbing in a trough between two lovely crests. We will return to the previously scheduled sinking as soon as these folks discover once again that no matter how much stupidity and cash you pump into a ship with an enormous hole in the hull, you can’t save it. Continue reading

The Crash of 2015: Going Global


First you get some stowaway yelling avbout being “king of the world.” Then there’s this iceberg….

Just in the past week, the headlines have been coming like triphammer blows: in Bloomberg News, “Something has gone wrong with the global consumer,” (according to JP Morgan); in International Business Times, “G7 Finance Ministers to address faltering global growth;” in London’s Telegraph, “HSBC fears world recession with no lifeboats left;” in, “Clock running out for struggling oil companies;” and even in the mainstream vanilla Washington Post, a column by Robert Samuelson predicts “China’s coming crash,” then puts a question mark at the end to make sure we don’t worry too much.

When you add these concerns to longer standing ones about wild gyrations in the world’s stock and bond markets; the advent of peak oil in pretty much every oil-exporting country in the world; the onset of the effects of global climate change in California, the Middle East, North Africa, Brazil and elsewhere; it becomes apparent that optimism ought to be listed as a disorder requiring medical intervention. Continue reading

New U.S. Recession Already Here

** ARCHIV ** Hostess Kim Sturmhoefel geht am 19. Maerz 2004 am Microsoft-Stand auf der Cebit in Hannover eine Treppe hinab. Dem Software Hersteller droht eine Strafe der Europaeischen Union wegen Verstosses gegen EU-Wettbewerbsregeln in der erwarteten Rekordhoehe von 497 Millionen Euro. Am Mittwoch, 24. Maerz 2004, will Wettbewerbskommissar Mario Monti die Entscheidung verkuenden. (AP Photo/Joerg Sarbach) ---     Hostess Kim Sturmhoefel steps down some stairs at the booth of U.S. software giant Microsoft at the Cebit 2004 in Hanover, northern Germany, March 19, 2004. The European Union treathened Microsoft with an expected record fine of 497 million euro (US$ 612 million) for alleged antitrust abuses. An EU decision is expected Wednesday, March 24, 2004. (AP Photo/Joerg Sarbach)

We hear every day from the bean counters whose jobs require them to play in the Don’t-Worry-Be-Happy Band, whose favorite numbers (by which I mean their favorites, not ours) are “Recovery is Bustin’ Out All Over,” “Happy Days are Here Again,” and “When I am a Rich Man.” The other, independent bean counters are hard to hear amid the blaring brass, but if you pay attention you can hear what they’re yelling: the next recession has already started.

When the federal government reported yesterday on the growth of retail sales last month, there wasn’t any. Growth, that is. Continue reading

Credit Scoooooooooore!

Don’t worry about the bill, we’ll think of something. In the meantime, please, keep spending. Your country needs you to.  (Photo by Jason Rogers/Flickr)

Don’t worry about the bill, we’ll think of something. In the meantime, please, keep spending. Your country needs you to. (Photo by Jason Rogers/Flickr)

I don’t know why we worry so much, when American ingenuity has always risen to the occasion, every single time, to snatch victory from the jaws of success. Once again, American financial engineers have analyzed the problem — the central problem of the American economy — and after having a couple of beers have come up with the solution. Brilliant. Prosperity is at hand.

These particular engineers are employed by Fair Isaac, who is not a handsome English squire, but the oddly named company that assigns the credit scores upon which 90% of all personal lending decisions — from credit cards to car loans to rental contracts — are based. Continue reading

Forbes: “Shale Oil Boom Goes Bust”

This happy fracker -- a Halliburton employee at a site in North Dakota’s Bakken play -- obviously hasn’t got the memo yet. It’s over. (Wikipedia photo)

This happy fracker — a Halliburton employee at a site in North Dakota’s Bakken play — obviously hasn’t got the memo yet. It’s over. (Wikipedia photo)

Yes, Forbes, the magazine of the Masters of the Universe has uncharacteristically published some discouraging words about the only good news the American economy has had to celebrate in many decades.

Oil output from the most productive U.S. shale fields is expected to drop off next month by 57 million [sic — they mean thousand] barrels of crude daily from April to May, the U.S. Energy Information Administration said Monday. That would represent the first monthly decline in more than four years, according to Reuters.

And then there’s Bloomberg Business, a more objective reporter of what’s going on in American industry, with the headline: “Shale Oil Boom could End in May After Price Collapse.”

Output from the prolific tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May, the Energy Information Administration said Monday. It’s the first time the agency has forecast a drop in output since it began issuing a monthly drilling productivity report in 2013.

Yet even after admitting that it’s over in the shale patch, the Pollyannas insist that it’s only for a while, until reduced supply brings prices back up and everybody starts doing exactly what they were doing before. How shall we put this? Continue reading

US Repeals Laws of Mathematics


“And so this proves that, for purposes of the U.S. economy, one plus one no longer equals two, but a seasonally adjusted, annualized integer to be announced and subsequently revised.” (Photo by Ed Brambley/Flickr)

It’s official: As we do not believe in climate change, because to do so would expose us to unacceptably harsh expectations, so we have ceased to believe in arithmetic, for the same reason. This mindset (can we call it that, since the “mind” part seems to be absent?), once the province of right wingnuts, has been adopted by the government of the United States so that, unfettered by the iron logic of numbers and their former, simplistic relationships (you know, addition, subtraction, that sort of thing), the government can proclaim its own brand of creationism — job creation, wealth creation, money creation and above all creation of the myth of the robust and immortal recovery. Continue reading