Just to point it out, in 1999 pretty much none of retailers were shorting E stocks. In 2007 bellow 1% retailers were shorting housing/stocks. In 87 Noone (from what numbers hold) even instituations were shorting markets. Few months after those dates, crashes have come and laster a while, while retailers lost between 30-70% equity/balance on avarage those that were bought/long. Right now we have EM crisis in front of our eyes, and i could found only 1 single trader aside to myself that is heavily shorting EMs on FF forums, which keeps with aligment that crowd is usually on wrong side of crisis. Either that or i didnt do enough research on forum and there are more, but what i can asume is that majority of people on this forum has defenetly more knowledge than regular retailer invested in stocks and bonds thats for sure, so perhaps the crowd ratio is not 80% in terms of crisis/credit spread/eat cycles but maybe closer to 95+% in terms of investment flows. Who knows it could be. I am just surprised that there is pretty much almost noone shorting since last year on those markets. Or perhaps i shouldnt be, becouse history tells us so.
- #20,682
- Edited 6:05am Jan 21, 2016 5:51am | Edited 6:05am
- Joined Nov 2012 | Status: Trader | 12,211 Posts
So lets see. Here is map plan for Rubble hyperinflationary collapse, along with some few other EM currencies within 5-10 years.
Currently new lows on RUB, with current interest rate at 17% currency is still collapsing, which is pretty much cap for hikes, i dont believe it can go any higher than 17, considering weekly repo rate, between 17 and 18 is absolute maximum.
The worst thing is that there are even consideration for RCB to cut rates this year as economy is in recesion, now that would really turn on inflation and push curency even lower, the same lunacy that is also coming from Canadian central bank. So considering that rates are capped (or even gona go lower) and Oil prices are there to stay, and RUB is now not pegged anymore, it means that there is nothing preventing RUB to hit hyperinflation. It would be impossible to throw 300 bil of current reserves to prevent currency to slide further, becouse now that currency is on open FX market, 300 bil would be eaten quickly, considering how quickly China burnt 600 bil of FX reserves and failed to stop the slide. Currently inflation is running at 15% which for any country is unsustainable on long term, so in order to preven country from knee capping rates should be eating inflation for at least 7% to bring it to level where economy can sustain it on long term without severe pay check cuts, but that would means that rates would had to fly above 20%.
The thing is that noone in Putins cabinet is delusional. Belousov and Glazny both confirmed that they believe Oil will not see 50 bucks on Brent side ever in near future. They know the game. Now with that saying it does put rather a black picture on current goverment becouse they should warn citizens in coming really bad economical situation in future, if one listens to speeches there are only advantages expained but noone is giving clear indication of what will happen in regards to inflation/RUB/imports/housing/pay checks. It is rather hard to give such warning on broad media side becouse it could quickly scare investors and population from RUB and create panic, but there are still ways to do it more gently. For example the way Chile did in 72-4 announcing to citizens to buy extra supplies for their inventories, to open loans to broader population even with higher rates applied, to cap money outflows from country etc. And then now you have even bigger problem that is Iran, which just started to flood markets with additional Oil and RUB felt it emidently. Russia obviously cannot stop Iran from flooding becouse its in their best interest to do so as thats their main income. The whole sanctions were very precisely lifted against Iran to strike on Oil further, i find it hilarious that certain geopolitical "experts" call sanctions lift the biggest success of Obama administration, where in actuality it was all exactly happen for a reason right on this year. As Russia was esentially kicked out SWIFT at least on loans and direct access banking side, it means that loans will have to be payed emidently this year, which acounts to current numbers 120 bil, meaning that there will be direct cut from FX reserves plunging them by 1 third. On good side that means that most of external loans will be covered, which will largely reduce service of debt, but it will then prevent any additional loans to get on board, which means that budget will have to be "austrian" fitted, nearly 0 offbudget expenses. This is ofcourse all on paper, this has never happened in history, what in reality happens is that internal banking sector will give out credit and loans on expense of currency, meaning BOJ style QE, which will further drove RUB down. I dont see way around it, with low Oil price this is just as sure to happen as US QE is.
Most citizens do not understand that once country hits over 10% inflation you should start seeking a shelter, if you take monetary systems of history 95% once you had runaway inflation for few years, it ends with currency collapse. Even that 10% doesnt seem that large number its the currency that gets cut to prevent that 10% to rise further, which really means that the actual number to look for is not CPI but currency value, either vs gold or vs items. Taken as example 1992-4 there was 13% inflation in Russia on CPI, while currency had almost 1000% inflation rate. Same in Venezuela today.
Then we have the actual elephant in the room, which is ticking time bomb, that is corporate debt of Russian companies. Once economy stalls for long enough those debts will go rotten, the same way that corporate debt took down Argentina, and current Russian figures go above 500 bil, which is more than reserves+capital reserves inside country. What in reality happens is that most companies actually dont go under, same as in Argentina didnt, what happens is that they simply increase prices to follow inflation and to cover their debt payments, which adds on negative side for customer or resident further pushing item inflation.
Currently deficit will be around 40 bil, even without Oil price raise, meaning that 40 bil will have to be liquidated from reserves, which will push RUB down, or will be created by QE which has same effect. In either case there is devaluation. So to see things a bit further that means, within 5 year peroid, if taken in acount Brent 20-30, there will be burnout of 200-300 bil (+100 considering recesion and contraction) of reserves or QE which it simply cannot end in any different scenario than a large currency devaluation, and that is taken in account that there is no further escalation of Syrian war, which would further pin the budget.
Now all those numbers are pointed if there is 0 further rate hikes by FED in 16,17 or 18. Any additional hike will further push capital from Russia and other EMs, and devalue RUB further as Brent still is worlds crude benchmark even with exit from Petrodollar last year. Stronger dollar means weaker RUB, means aswell less buck for gain on Russian oil exports. Let me state again i do not believe in such coordinated coincidences, FED hikes and Iran sanctions were precisely made to batter EMs becouse it all ties together.
Lets take that list again:
http://www.zerohedge.com/sites/defau...tightening.jpg
Pretty much every single thing on right charts has downside for Russian economy, strong USD means weak resource pricing which is largest Russian export, strong USD and capital inflows from EMs means slower global growth, which is bad for resource consumption as clearly seen in China 2015, weak China has downside on Russia as exports weaken, higher bonds means EM debt is more expensive to maintain, etc.
With that added Iran will increase supply by additional 500.000 barrels per day till end of 16, meaning that even if there is supply cut by other nations Iran will keep the difference, and the current Oil production in Iran could actually be boosted by additional nearly 1 milion barrels (1+1) in 2 years if production is recovered up to before 2007 levels, before the sanctions began. That amounts too increase of 5% worlds supply.
For anyone who thinks that oil price will rise quickly in next months, there is one simple signal to look that there is no way this is going to happen: Aramco. Saudis are in formation to sell 50% shares of it to keep the budget inline, what that means is that Saudis would only take such drastic action if they plan to keep supply at that massive scale for very long time, as otherwise they would face default and collapse. So if company that is even many times larger than Exxon grabs cash from share sell, it means that Saudis are covered for low Oil prices and budget deficit for years even decades.
Debt is set to grow, and it cannot be financed from outside, which means that even a low debt numbers are very dangerous as only currency devaluation can prevent country from defaulting. In first cold war Russian debt was only 55% and it was enough for country to call in default. Current number is 35%, and corporate debt that goes many time over that, so the actual number as it is right now doesnt even matter, becouse 17% interest rate can barely make country survive with current debt, let alone 10% increase to it, and same problem was what faced Russia in first cold war. No difference at all. Low number of debt doesnt mean anything if you cannot go in debt from international markets.
http://cdn.tradingeconomics.com/char...01m&forecast=2
Meanwhile we have possibility for Ukrainian conflict to escalate further which will add on negative side of budget.
And then there are even larger trade problems where country countries of Russia have all been forced to depeg, which is now causing pretty much if you cant call it yet hyperinflation, its large infaltion at least and droping currencies.
Anyone who is yet not heavily hedged in gold or BTC in Russia will regret in few years big time. Currently we had 100% gold price surge since petrodollar war started, which is not bad for 1 year return, it does cover whole year inflation in CPI goods not counting housing bubble or certain heavily imported goods. BTC aswell performed the same with 100% price rise, and inbetween less than that price spikes. Historical confirmation right there, gold is always the way to go with hyperinflation hedge. Probably the first main thing to go out of would be Moscow housing bubble and perhaps aswell in some other large cities (not sure how intense is there), eg sell the house, buy cheaper house somewhere else, hedge the rest for currency devaluation.
http://www.goldpriceoz.com/goldprice...rs-history.png
What will happen at the end of this petrodollar war will be very likely the largest capital/country squeeze in modern history, unless China and Russia survive the attack, which is considering all the facts highly unlikely. Basically Greece on massive scale. Squeeze the debt and system, globalists come in country buy assets up and settle their dirty asses in there for decades to come, until someone kicks them out again. This scenario was executed as from CIA report 46 times in 46 countries since petrodollar system was founded, it only failed in 2 states, that is Cuba and Chile.
Currently new lows on RUB, with current interest rate at 17% currency is still collapsing, which is pretty much cap for hikes, i dont believe it can go any higher than 17, considering weekly repo rate, between 17 and 18 is absolute maximum.
The worst thing is that there are even consideration for RCB to cut rates this year as economy is in recesion, now that would really turn on inflation and push curency even lower, the same lunacy that is also coming from Canadian central bank. So considering that rates are capped (or even gona go lower) and Oil prices are there to stay, and RUB is now not pegged anymore, it means that there is nothing preventing RUB to hit hyperinflation. It would be impossible to throw 300 bil of current reserves to prevent currency to slide further, becouse now that currency is on open FX market, 300 bil would be eaten quickly, considering how quickly China burnt 600 bil of FX reserves and failed to stop the slide. Currently inflation is running at 15% which for any country is unsustainable on long term, so in order to preven country from knee capping rates should be eating inflation for at least 7% to bring it to level where economy can sustain it on long term without severe pay check cuts, but that would means that rates would had to fly above 20%.
The thing is that noone in Putins cabinet is delusional. Belousov and Glazny both confirmed that they believe Oil will not see 50 bucks on Brent side ever in near future. They know the game. Now with that saying it does put rather a black picture on current goverment becouse they should warn citizens in coming really bad economical situation in future, if one listens to speeches there are only advantages expained but noone is giving clear indication of what will happen in regards to inflation/RUB/imports/housing/pay checks. It is rather hard to give such warning on broad media side becouse it could quickly scare investors and population from RUB and create panic, but there are still ways to do it more gently. For example the way Chile did in 72-4 announcing to citizens to buy extra supplies for their inventories, to open loans to broader population even with higher rates applied, to cap money outflows from country etc. And then now you have even bigger problem that is Iran, which just started to flood markets with additional Oil and RUB felt it emidently. Russia obviously cannot stop Iran from flooding becouse its in their best interest to do so as thats their main income. The whole sanctions were very precisely lifted against Iran to strike on Oil further, i find it hilarious that certain geopolitical "experts" call sanctions lift the biggest success of Obama administration, where in actuality it was all exactly happen for a reason right on this year. As Russia was esentially kicked out SWIFT at least on loans and direct access banking side, it means that loans will have to be payed emidently this year, which acounts to current numbers 120 bil, meaning that there will be direct cut from FX reserves plunging them by 1 third. On good side that means that most of external loans will be covered, which will largely reduce service of debt, but it will then prevent any additional loans to get on board, which means that budget will have to be "austrian" fitted, nearly 0 offbudget expenses. This is ofcourse all on paper, this has never happened in history, what in reality happens is that internal banking sector will give out credit and loans on expense of currency, meaning BOJ style QE, which will further drove RUB down. I dont see way around it, with low Oil price this is just as sure to happen as US QE is.
Most citizens do not understand that once country hits over 10% inflation you should start seeking a shelter, if you take monetary systems of history 95% once you had runaway inflation for few years, it ends with currency collapse. Even that 10% doesnt seem that large number its the currency that gets cut to prevent that 10% to rise further, which really means that the actual number to look for is not CPI but currency value, either vs gold or vs items. Taken as example 1992-4 there was 13% inflation in Russia on CPI, while currency had almost 1000% inflation rate. Same in Venezuela today.
Then we have the actual elephant in the room, which is ticking time bomb, that is corporate debt of Russian companies. Once economy stalls for long enough those debts will go rotten, the same way that corporate debt took down Argentina, and current Russian figures go above 500 bil, which is more than reserves+capital reserves inside country. What in reality happens is that most companies actually dont go under, same as in Argentina didnt, what happens is that they simply increase prices to follow inflation and to cover their debt payments, which adds on negative side for customer or resident further pushing item inflation.
Currently deficit will be around 40 bil, even without Oil price raise, meaning that 40 bil will have to be liquidated from reserves, which will push RUB down, or will be created by QE which has same effect. In either case there is devaluation. So to see things a bit further that means, within 5 year peroid, if taken in acount Brent 20-30, there will be burnout of 200-300 bil (+100 considering recesion and contraction) of reserves or QE which it simply cannot end in any different scenario than a large currency devaluation, and that is taken in account that there is no further escalation of Syrian war, which would further pin the budget.
Now all those numbers are pointed if there is 0 further rate hikes by FED in 16,17 or 18. Any additional hike will further push capital from Russia and other EMs, and devalue RUB further as Brent still is worlds crude benchmark even with exit from Petrodollar last year. Stronger dollar means weaker RUB, means aswell less buck for gain on Russian oil exports. Let me state again i do not believe in such coordinated coincidences, FED hikes and Iran sanctions were precisely made to batter EMs becouse it all ties together.
Lets take that list again:
http://www.zerohedge.com/sites/defau...tightening.jpg
Pretty much every single thing on right charts has downside for Russian economy, strong USD means weak resource pricing which is largest Russian export, strong USD and capital inflows from EMs means slower global growth, which is bad for resource consumption as clearly seen in China 2015, weak China has downside on Russia as exports weaken, higher bonds means EM debt is more expensive to maintain, etc.
With that added Iran will increase supply by additional 500.000 barrels per day till end of 16, meaning that even if there is supply cut by other nations Iran will keep the difference, and the current Oil production in Iran could actually be boosted by additional nearly 1 milion barrels (1+1) in 2 years if production is recovered up to before 2007 levels, before the sanctions began. That amounts too increase of 5% worlds supply.
For anyone who thinks that oil price will rise quickly in next months, there is one simple signal to look that there is no way this is going to happen: Aramco. Saudis are in formation to sell 50% shares of it to keep the budget inline, what that means is that Saudis would only take such drastic action if they plan to keep supply at that massive scale for very long time, as otherwise they would face default and collapse. So if company that is even many times larger than Exxon grabs cash from share sell, it means that Saudis are covered for low Oil prices and budget deficit for years even decades.
Debt is set to grow, and it cannot be financed from outside, which means that even a low debt numbers are very dangerous as only currency devaluation can prevent country from defaulting. In first cold war Russian debt was only 55% and it was enough for country to call in default. Current number is 35%, and corporate debt that goes many time over that, so the actual number as it is right now doesnt even matter, becouse 17% interest rate can barely make country survive with current debt, let alone 10% increase to it, and same problem was what faced Russia in first cold war. No difference at all. Low number of debt doesnt mean anything if you cannot go in debt from international markets.
http://cdn.tradingeconomics.com/char...01m&forecast=2
Meanwhile we have possibility for Ukrainian conflict to escalate further which will add on negative side of budget.
And then there are even larger trade problems where country countries of Russia have all been forced to depeg, which is now causing pretty much if you cant call it yet hyperinflation, its large infaltion at least and droping currencies.
Anyone who is yet not heavily hedged in gold or BTC in Russia will regret in few years big time. Currently we had 100% gold price surge since petrodollar war started, which is not bad for 1 year return, it does cover whole year inflation in CPI goods not counting housing bubble or certain heavily imported goods. BTC aswell performed the same with 100% price rise, and inbetween less than that price spikes. Historical confirmation right there, gold is always the way to go with hyperinflation hedge. Probably the first main thing to go out of would be Moscow housing bubble and perhaps aswell in some other large cities (not sure how intense is there), eg sell the house, buy cheaper house somewhere else, hedge the rest for currency devaluation.
http://www.goldpriceoz.com/goldprice...rs-history.png
What will happen at the end of this petrodollar war will be very likely the largest capital/country squeeze in modern history, unless China and Russia survive the attack, which is considering all the facts highly unlikely. Basically Greece on massive scale. Squeeze the debt and system, globalists come in country buy assets up and settle their dirty asses in there for decades to come, until someone kicks them out again. This scenario was executed as from CIA report 46 times in 46 countries since petrodollar system was founded, it only failed in 2 states, that is Cuba and Chile.
- #20,684
- Jan 21, 2016 10:20am Jan 21, 2016 10:20am
- Joined Jan 2009 | Status: Pharaoh | 1,612 Posts
Don't have an ego. Always question yourself and your ability.
- #20,685
- Jan 21, 2016 11:08am Jan 21, 2016 11:08am
- Joined Mar 2012 | Status: turning probability into profit | 1,550 Posts
Hunting High and Low
- #20,687
- Jan 21, 2016 2:50pm Jan 21, 2016 2:50pm
- Joined Mar 2012 | Status: turning probability into profit | 1,550 Posts
Hunting High and Low
- #20,689
- Jan 22, 2016 9:18am Jan 22, 2016 9:18am
- Joined Jan 2009 | Status: Pharaoh | 1,612 Posts
Don't have an ego. Always question yourself and your ability.
- #20,690
- Jan 22, 2016 10:32am Jan 22, 2016 10:32am
- Joined Jan 2009 | Status: Pharaoh | 1,612 Posts
Don't have an ego. Always question yourself and your ability.
- #20,692
- Jan 23, 2016 1:53pm Jan 23, 2016 1:53pm
- Joined Mar 2012 | Status: turning probability into profit | 1,550 Posts
Hunting High and Low
- #20,693
- Edited Jan 24, 2016 3:25am Jan 23, 2016 4:03pm | Edited Jan 24, 2016 3:25am
- Joined Jun 2010 | Status: zero | 20,603 Posts
- #20,698
- Jan 23, 2016 4:28pm Jan 23, 2016 4:28pm
- Joined Jul 2013 | Status: Trader | 2,603 Posts
So lets see. Here is map plan for Rubble hyperinflationary collapse, along with some few other EM currencies within 5-10 years. Currently new lows on RUB, with current interest rate at 17% currency is still collapsing, which is pretty much cap for hikes, i dont believe it can go any higher than 17, considering weekly repo rate, between 17 and 18 is absolute maximum. {image} The worst thing is that there are even consideration for RCB to cut rates this year as economy is in recesion, now that would really turn on inflation and push curency even lower,...
Per aspera ad astra 