Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16
The Implications of the Italian Banking Crisis Could Be Disastrous - 22nd Sept 16
TwinLakes Theme Park Summer Super 6 FREE Return Entry for Real? - 21st Sept 16
Has the Silver Bullet Run Out of Fire Power? - 21st Sept 16
Frack Sand: The Unsung Hero Of The OPEC Oil War - 21st Sept 16
What’s Happening With Gold? - 21st Sept 16
Gold vs. Stocks and Commodities, Pre-FOMC - 20th Sept 16
BrExit UK Inflation CPI, RPI Forecast 2016, 2017 - 20th Sept 16
European banks may be more important than the Fed this week - 20th Sept 16
Gold, Silver, Stocks and Bonds Grand Ascension or Great Collapse? - 20th Sept 16
Mass Psychology in Action; Instead of Selling Gilead it is Time to Take a Closer Look - 20th Sept 16
Hillary - Finally Well Deserved Recognition for Deplorables - 20th Sept 16
Fascist Business Model: Reich Economics - 19th Sept 16
Multiweek Correction in Gold and Silver Markets Continues - 19th Sept 16
Stock Market May Turn Ugly This Week - 19th Sept 16
China Is Digging Itself into a Deeper Hole - 19th Sept 16
Yellen’s Footnote 8 Would Put Interest Rates on Autopilot - 19th Sept 16
Central Bank Digital Currencies: A Revolution in Banking? - 19th Sept 16
UK Government Surrenders to China / France to Build Nuclear Fukushima Plant At Hinkley Point C - 19th Sept 16
Stock Market Correction Already Over? - 18th Sept 16
American Economics - 18th Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Two of the Biggest Problems In the Financial System Will Hit in 2013

Stock-Markets / Financial Markets 2013 Jan 14, 2013 - 03:11 AM GMT

By: Graham_Summers

Stock-Markets

This week is options expiration week: the week in which various call and put positions will expire. Wall Street is notorious for using these weeks to gun the markets this way and that in order to insure that the greatest number of puts and calls expire worthless. So expect the market to be even more volatile than usual this week.

Outside of this, the investment world is slowly emerging from its Central Bank policy induced stupor to realize two of our long-standing themes:


1) That European markets are highly overvalued based on their underlying fundamentals.

2) China has an inflation problem and cannot print money non-stop to keep its economy on track.

Regarding #1, Bloomberg ran an article over the weekend expressing concerns that the European markets are overvalued. The truth of the matter is that the entire European banking system is insolvent. There is simply no other way to describe a banking system that is leveraged at 26 to 1 with net assets at nearly 300% of GDP (Europe’s GDP is $16 trillion and its banking system is $46 trillion).

However, the mainstream media can never tell the ugly truth here (doing so would trigger a panic). So instead we’re going to see concerns voiced that Europe is “overvalued” and that European economies need to pick up because the ECB is essentially tapped out.

This is about as close as we’ll get to the media admitting Europe is bust and out of solutions. The fact that this story is already showing up in the media should be a warning that the next round of the EU Crisis is likely around the corner. Both Spain and Greece have recently admitted their banks are at negative value. Expect the news to worsen out of Europe in the coming weeks. What happens if the markets call Mario Draghi’s bluff? We’ll find out this year.

Regarding #2, roughly 30% of China’s population lives off of $2 per year. Food inflation hits this country very hard. And the Government is now stuck between a rock (a slowdown in its economy) and a hard place (higher inflation that results in mass civil unrest).

As a result of this, the Government has to focus on managing expectations both inside and outside of the country. Inside of China this means making public displays of cracking down on corruption to keep the population calm (many Chinese area beginning to ask themselves, “why should I go along with a system in which I’m not getting wealthy but corrupt officials are?” The Government is also taking measures to control prices (see the ongoing rise in Chinese imports despite the economic slowdown) in an attempt to keep inflation at bay.

Outside of China, the Government needs to send signals to the rest of the world that it will not be engaging in massive stimulus without triggering a capital run. Notice that the language coming out of the new leadership is carefully crafted: new party leader Xi Jinping has openly stated that China will not be pursuing “high” growth rates through stimulus going forward.

The message here is that “we’ll engage in stimulus, but we won’t be pumping anywhere near the amount needed to hit double digit growth.” The investment world is totally convinced China is going to pump $1 trillion or more into its economy. Chinese officials are denying this. Take note… typically when the investment world finds out it’s wrong there are serious fireworks.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Click Here Now!!!

Graham Sumers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2013 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife