Wolf Richter

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

• Impact Of Fed Tightening
  • Likely still underestimated by the market
• Funds Are Trying To Protect Stock Prices
  • A futile (in the long run) attempt to prevent losses
• Why Bond Funds Are So Risky
  • Much more dangerous than owning bonds outright
• 6% Mortage Rates Will Act As Housing's Kryptonite
  • We're not there yet, but getting closer…

Recorded Wed as the market was in full melt-down mode, Chris and Wolf Richter decode the underlying drivers of the sudden reversal, and peer into the future to predict what is most likely to happen next. Both agree that, whether stocks are briefly 'rescued' in the ensuing days, the long-awaited downward re-pricing of the 'Everything Bubble' is nigh.

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

• Commodity Carnage
  • Not just due to a strong dollar
• Argentina Is Faltering
  • Its currency is collapsing (yet again)
• More Trouble In Turkey
  • Threatening the EU banks who loaned it billions
• The Real Threat
  • Asia is where the real damage will occur

Recorded last week, Wolf Ricther explains why the real Emerging Market contagion risk lies not in Turkey, or Venezuela or Argentina or Brasil — but in Asia.

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

• Panic in Europe
  • Italy is threatening to destabilize the EU
• Central Banks Have Wrecked The Market Mechanisms
  • And tapering will reveal the damage done
• What's Better? A Debt Crisis Or A Currency Crisis?
  • It seems governments vastly prefer the latter
• Is Deutche Bank Threatening To Start A Banking Crisis?
  • Maybe. And it would set the world aflame.

With the action happening in Europe this week, from the Italian debt panic, to the new Spain PM, to Deustche Bank's worsening prospects, Wolf Richter comes on the program to make sense of the developments in real-time.

Notably, Wolf explains why the world's central banks will work with their home governments to destroy their currencies rather than start defaulting on their debts. This is path he expects the future to take:

A debt crisis is devastating, and it's devastating selectively. A currency crisis is kind of more democratic. It hits everybody. But a debt crisis, it hits the people that are recipients of government aid the most. And that's the problem in Greece and other countries, they had to go on austerity. Little bitty pensions were cut and things like that happened to save a few pennies here and there. And when it's a currency crisis, everybody gets hit and it spreads across. And I think they understand that Japan is uniquely equipped to deal with a currency crisis because it has this large trade surplus and because it sits on a pile of foreign exchange reserves. So that won't really blow up the Japanese economy where as a debt crisis would completely implode the economy, and it would wreak havoc among the people from pensioners and aid recipients and the healthcare system and everything would just collapse. And they decided that's not going to happen.

So that's how I think we need to look at what's happening in Japan. They made a decision to prevent a debt crisis. and if they get a currency crisis, fine, they'll manage that. Italy doesn't have that option. Italy doesn't have its own currency, and it can't do that, so it can get a debt crisis. And that's what happened to Greece, and that's what happened to other countries. When they get a debt crisis it's really nasty. I hope Italy can avoid this thing, but debt crises are just the worst, absolutely the worst. But if a government needs to do anything, it's avoid a debt crisis.

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

• The Coming Rude Awakening For Bonds
  • Spiking yields are about to crash prices
• Multi-TrillIon Dollar Deficits
  • The US is spending much more than it admits to
• Kryptonite For The Housing Market
  • Higher interest rates & unfavorable tax code changes
• Pension Woes
  • Most pension plans will soon be in a world of pain

Chris and Wolf marvel at the bond market's apparent indifference so far to rising rates. Rising rates, of course, mathematically mean bond prices should lower — but that hasn't happened much yet. With the 10-year Treasury nearly at 3% now, that resistance can't last for long. Especially if the Fed proceeds with its declared program of quantitative tightening this year.

Wolf explains the ticking time bond in the bond market thusly…

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

• China's Warning Shot
  • The recent Treasury gambit is classic geopolitics
• Downdraft Risk
  • Will it be possible to avoid a crash in 2018?
• Real Estate Is Looking Vulnerable
  • Key markets are running out of buyers
• Rising Oil Prices
  • A major candidate for the pin to pop this bubble

Wednesday, the markets lurched in fear as China announced it was thinking of slowing/stopping future purchases of US Treasurys. Later, a Chinese spokesman declared the story "fake news". But was it? Or was this a deliberate geopolitcal chess move meant to deliver a stern warning to America?