Markets are rigged in the derivatives markets. The prices we are working with on spot are nonsense, as a result. For every real barrel of oil there are 60,000 barrels traded in derivatives. The real business of supply of demand in the real world has little impact given the weight of the derivatives market.
Quantitative easing has made risky assets seem a lot less risky than they really are. Economies are apparently growing. Yet real world businesses are investing less today than they were in the 1980s. All the money is going into bad banks alive. Entrepreneurs are being starved of cash while banks can run all the risks they like. Risk has been redistributed.
China’s economy is impossible to decipher. China’s banks have tripled in size in nine years, while US, Japanese and European banks have stagnated and fallen away. China has been given unlimited credit. It’s created a huge bubble, which will at some point implode.
Bank assets are shrinking (Loans) in the west and Japan while stock markets are soaring. In China loans have soared sixfold in a decade. Reality will reign it all in eventually. How long can they defer a crash? Maybe another year or two, estimates Max.
Retail is migrating to the internet as the malls empty out. Amazon is eating the world. The mall owners are getting into trouble. Retailers that have strong online sales are surviving and doing well while the local stores are seeing declines. The trend started ten years ago. Department stores have had declining sales for decades. The bricks and mortar world is in turmoil with many retailers are LBO (leveraged buy out) deals now with high debts. The loans have collateral in real estate and so on, but the lenders will call in the loans eventually.
Many shareholders have a few rights when things go belly up. Some have no rights, and can’t influence financial decisions. Institutional investors are heavily in on this. Pensions are at risk, and savings. People buy shares on a short term basis. It’s casino capitalism.