We charted very closely the risks of the oil price bust. We thought central banks would step in and remove the risk. They did. From there, we thought stocks would track the path of oil. As long as oil continued higher, stocks would follow and slowly global sentiment would mend. It’s happened.
When oil sustained above $40, we turned focus to the extremely negative sentiment that was weighing on markets and economies. But given the extreme views on the world, we thought things were set up for positive surprises. We said this surprise element creates opportunities for asymmetric outcomes (bad is priced-in, good … not at all). That sets up for the potential of “good times” ahead for both markets and broader sentiment.
Fast forward: Earnings expectations were ratcheted down and broadly surprised on the positive side. Global economic data has been ratcheted down and is positively surprising. It’s happening in Germany, which is a very important indicator for a bottoming of the euro zone economy. If the threat of further spiral in Europe has lifted, that’s a huge catalyst for global sentiment. When global sentiment has officially moved out of the doom and gloom camp and back to optimism the horse will have already had plenty of steps out of the barn. And we think we are seeing it reflected in stocks, especially small caps.
With this backdrop, we think everyone could benefit by having a healthy dose of “fear of missing out.” Stock returns tend to be lumpy over the long run. When we you wait to buy strength, you miss out on A LOT of the punch that contributes to the long run return for stocks.
Consider what we said on February 11th (stocks bottomed that day and are up 16% since): “We often hear interviews of money managers during periods like this, and the question is asked “are you getting defensive?”
That’s the exact opposite of what they should be asking. When stocks areup 15–20%, and acknowledging that the long–run average return for stocksis 8%, that’s the time to play Defense. When stocks are down 15–20%, that’s the time to play Offense.
The reality is most investors should see declines in the U.S. stock market as an exciting opportunity. The best investors in the world do. The same can be said for average investors.
Here’s why: Most average investors in stocks are NOT leveraged. And with that, they should have no concern about stock market declines, other than saying to themselves, “what a gift,” and asking themselves these questions: “Do I have cash I can put to work at these cheaper prices?” And, “where should I put that cash to work?”
As Warren Buffett says, bad news is an investor’s best friend. And as his billionaire counterpart says, and head of the biggest hedge fund in the world, ‘stocks go up over time.’ With these two basic, plain-spoken, tenets you should buy dips and look for value.
Broader stocks have just gone positive for the year. Small caps are still down small. Remember, when the macro fog cleared in 2010, small caps went on a tear, from down 6% through the first seven months of the year, to finish UP 27%. Don’t miss out!
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As we’ve discussed over the past few months, markets can be wrong—sometimes very wrong.
On that note, consider that the yield on the U.S. ten–year Treasury was trading closer to 2.30% after the Fed’s first rate hike last December—the first hike in nearly ten years and the symbolic move away from the emergency zero interest rate policy. The ten–year yield has, incredulously, traded as low as 1.53% since. One end of that spectrum is wrong, very wrong.
Remember, as we headed into the last Fed meeting, the ten–year yield was trading just shy of 2% (after a wild ride down from the December hike date). And the communication to that point from the Fed was to expect FOUR rate hikes in 2016.
Of course, in the face of another global economic crisis threat, which was driven by the oil price bust, the Fed did their part and backed off of that forecast—taking two of those hikes off of the table. Still, yields under 2% with even two hikes projected seemed mispriced.
So following a dramatic 85% bounce in oil prices and the threat of cheap oil now behind us (seemingly), as of yesterday afternoon yields still stood around just 1.79%. That’s more than a 1/2 percentage point lower than the levels immediately following the December hike. And that’s AFTER two voting Fed members just said on Tuesday that they should go two or threetimes this year. So with global risks abating, the Fed is beginning to walk back up expectations for Fed hikes.
Confirming that, as of yesterday afternoon, the minutes from the most recent Fed meeting have been disclosed, which now indicate that a June hike is likely assuming things continue along the current path (i.e. no global shock risks emerge).
Still, the yield on the ten–year Treasury is just 1.84%, 5 basis points higher than it was yesterday morning, prior to the Fed minutes.
Why?
The bet is that the Fed is making a mistake raising rates (at all). But at these levels for the ten–year yield, it’s a very asymmetric bet. The downside for yields here is very limited (short of a global apocalypse), the upside is very big. That makes betting on lower yields a very dangerous one, if not a dumb one. When people are positioned the wrong way in asymmetric trades, the adverse moves tend to be violent. I wouldn’t be surprised to see 2.50% on the U.S. ten–year Treasury by the year end.
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We talked this week about the way markets are set up for a significant positive perception shift. It’s been led by oil, which had its third consecutive close above $40 today. Yields are another key brick in the foundation that may be laid tomorrow.
As oil prices have been a threat to the global economic and stability outlook over the past few months, yields have also been sending a negative signal to markets. The yield on the German 10-year got very close to the all-time lows this week, inching closer to the zero line (and negative territory). And U.S. 10-year yields, following the Fed’s last meeting, have fallen back from 2% down to as low as 1.68% — just 30 basis points above the all-time low of July 2012, when Europe was on the edge of a sovereign debt blow-up. And remember, this is AFTER the Fed has raised rates for the first time in nine years.
So yields have been signaling an uglier path forward, if not deflation forever in places like Japan and Europe. Of course, the move by Japan to negative interest rates in January was a strong contributor to the perception swoon about the global economy. But a key component in Japan’s move, and in the coordinated actions by central banks over the past two months, has been the threat from the oil price bust. And that is now on the mend. Oil is up 58% from its February low.
Still, global yields are hanging around at the lows.
Tomorrow we get euro zone and U.S. inflation data. As we’ve said, when expectations and perception has been ratcheted down so dramatically, we can get an asymmetric outcome. Earnings expectations are in the gutter. Economic growth expectations are in the gutter. Same can be said for expectations on the outlook for inflation data. In a normal world, hotter than expected inflation is a bad signal for the risk-taking environment. In our current world, hotter than expected inflation would not be a good signal, it would be a very good signal. It would show the economy has a pulse.
Yields in the two key government bond markets are set up nicely for a bottom on some hotter inflation data.
Tuesday, German yields touched 7.5 basis points. Remember, earlier in the month we talked about what happened the last time German yields were this low.
Bond kings Bill Gross and Jeffrey Gundlach said it was crazy. Bill Gross called the German bund the “short of a lifetime” (short bonds, which equates to a bet that yields go higher). He compared it to the opportunity when George Soros broke the Bank of England and made billions shorting the British pound. Gundlach said it was a trade with almost no upside and unlimited downside.
They were both right. In the chart below you can see the explosive move in German rates (in blue) away from the zero line. In the chart below, you can see the 10-year German bond yields moved from 5 basis points to 106 basis points in less than two months — a 20x move. U.S. 10 year yields (the purple line) moved from 1.72% to 2.49% almost in lock-step.
On the move down on Tuesday, the yield on the German bund reversed sharply and put in a bullish outside day (a key reversal signal). Could it have been the bottom into tomorrow’s inflation data?
Coincidentally, the U.S. 10-year looks like a bottom may be in as well.
U.S. yields have a chance to break this downtrend tomorrow on a hotter inflation number.
As we said yesterday, in addition to oil, these are very important charts for financial markets and for the global economic outlook. A bottom in these yields, as well as the continued recovery in oil will be important for restoring confidence in the global economic outlook.
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Intervention has been the common theme we’ve discussed for the better part of the past two months. And this week, that theme is heating up.
We’ve explained why oil at $30 has posed a threat to the global financial system and global economy. And we explained the parallels of the systemically threatening (current) oil price bust and the 2007-2008 housing bust. But we also noted the key differences, and why and how this “cheap oil” problem could be easily solved, unlike the housing bust.
As we headed into this past weekend, we talked about the threat that the oil bust poses to the global financial system (not too dissimilar from the housing bust), and we talked about the prospect of central bank intervention over the thinly traded U.S. holiday (Monday).
Both the Bank of Japan and the European Central Bank did indeed go on the offensive, verbally, promising more action to combat the shaky global financial market environment.
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The result was a 9.5% rally in the Japanese stock market from Friday’s close. And all global markets followed suit. Within the white box in the chart below, you can see the central bank induced jump in the Nikkei (in orange) and the S&P 500 futures (in purple).
Source: Billionaire’s Portfolio
This is purely the influence on confidence by the two central banks that are now driving the global economic recovery (the BOJ and the ECB). However, the potency of the verbal threats and promises has been waning. Big words have marked bottoms along the way over the past several years for stocks, and the overall ebb and flow of global risk appetite. But it’s becoming more evident that real, bold action is required. And given that it’s cheap oil that represents the big risk to financial stability at the moment, we’ve argued that central banks should outright buy commodities (particularly oil). And we think they will.
Source: Billionaire’s Portfolio
In 2009, despite the evaporation of global demand, oil prices spiked from $32 to $73 in four months after China tapped its $3 trillion currency reserves to snap up cheap commodities. Within two years, oil was back above $100.
China’s role in the commodity market was a huge contributor to the recovery in emerging markets from the depths of the global financial and economic crisis. Brazil went from recession to growing at close to 8%. Many were saying emerging markets had survived the recession better than advanced markets, and that they were driving the global economic recovery. And Wall Street was claiming a torch passing from the developed world to the emerging world as the future of growth and leadership.
How are emerging markets doing now? Terrible. Not surprisingly, it turns out the emerging market economies need a healthy developed world to survive. And now with the additional hit of the plunge in commodity prices, Venezuela (heavily reliant on oil exports) is very near default. Brazil and Russia are both in recession. The longer oil prices stay down here, Venezuela will be the first domino to go, and others will follow. With that, we expect intervention to come. And as you can see in the response to the Nikkei overnight, it will pack a punch – and if it’s bold, a lasting one. Remember, as we said last week, historical turning points for markets often come from some form of intervention (public or private policy).
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When housing prices stalled in 2006 and then collapsed over the next three years, the subprime lending schemes quickly became exposed.
Mortgage defaults led to a banking crisis. Due to the highly interconnectedness of banks globally, the problems quickly spread to banks around the world. A banking crisis led to a global credit freeze. When people can’t access credit, that’s when it all hits the fan. Companies can’t meet payroll, don’t have the liquidity to make new orders. Jobs get cut. Companies go bust. Finally, the microscope on overindebtedness of consumers and corporates, turns to countries. Deficits leads to debt. Debt leads to downgrades. Downgrades leads to defaults.
For the most part, defaults were averted because central banks and governments stepped in, in a coordinated way, to backstop failing banks, failing companies and failing countries. From that point, continued central bank stimulus has 1) enabled banks to recapitalize, 2) foiled additional shock events, and 3) restored confidence to employers (to hire), to investors (to invest) and to consumers (to spend again).
As we’ve discussed in the past two weeks, persistently low oil prices represent a risk on par with the housing bust. And in recent days we’re seeing the signs of another global financial and economic crisis creeping uncomfortably closer to a “part two.”
As we’ve said, this time would be much worse because governments and central banks have exhausted the resources to bailout failing banks, companies and countries. But central banks, namely the Bank of Japan and/or the European Central Bank do have the opportunity to step-in here, become an outright buyer of commodities (particularly oil), as part of their QE programs, to avert disaster. But time is the oil industries worst enemy and therefore a big threat to the global economy. The longer policymakers drag their feet, the closer we get to the edge of global crisis — a crisis manufactured by OPEC’s price war.
Unfortunately, there are the building signs that the market is beginning to position for the worst outcome…
Key bank stocks in Europe are trading at levels lower than in the depths of both the global financial crisis (2009) and the European sovereign debt crisis (2012).
Source: Reuters, Billionaire’s Portfolio
The credit default swap market for key industries is sending up flares. This is where default insurance can be purchased against a company or country – and the place speculators bet on a company’s demise. Billionaire John Paulson famously made billions betting against the housing market via credit default swaps. Now the fastest deteriorating companies in Europe are banks. And the fastest deteriorating companies in North America are insurance companies (a sector that tends to have investments in high yield debt … in this case, exposure to the high yield debt of the oil and gas industry).
Source: Markit
The early signal for the 2007-2008 financial crisis was the bankruptcy of New Century Financial, the second largest subprime mortgage originator. Just a few months prior the company was valued at around $2 billion.
On an eerily similar note, a news report hit this morning that Chesapeake Energy, the second largest producer of natural gas and the 12th largest producer of oil and natural gas liquids in the U.S., had hired counsel to advise the company on restructuring its debt (i.e. bankruptcy). The company denied that they had any plans to pursue bankruptcy and said they continue to aggressively seek to maximize the value for all shareholders. However, the market is now pricing bankruptcy risk over the next five years at 50% (the CDS market).
Still, while the systemic threat looks similar, the environment is very different than it was in 2008. Central banks are already all-in. On the one hand, that’s a bad thing for the reasons explained above (i.e. limited ammunition). On the other hand, it’s a good thing. We know, and they know, where they stand (all-in and willing to do whatever it takes). With QE well underway in Japan and Europe, they have the tools in place to put a floor under oil prices.
In recent weeks, both the heads of the BOJ and the ECB have said, unprompted, that there is “no limit” to what they can buy as part of their asset purchase program. Let’s hope they find buying up dirt-cheap oil and commodities, to neutralize OPEC, an easier solution than trying to respond to a “part two” of the global financial crisis.
Gold has been a core trade for a lot of people throughout the crisis period. When Lehman failed in 2008, it shook the world, global credit froze, banks were on the verge of collapse, the global economy was on the brink of implosion – people ran into gold. Gold was a fear-of-the-unknown-outcome trade.
Then the global central banks responded with massive backstops, guarantees, and unprecedented QE programs. The world stabilized, but people ran faster into gold. Gold became a hyperinflation-fear trade.
In the chart above, you can see gold went on a tear from sub-$700 bucks to over $1,900 following the onset of global QE (led by the Fed).
Gold ran up as high as 180%. That was pricing in 41% annualized inflation at one point (as a dollar for dollar hedge). Of course, inflation didn’t comply. Still eight years after the Fed’s first round of QE (and massive global responses), we have just 13% cumulative inflation over the period.
So the gold bugs overshot in a big way.
Why? The next chart tells the story…
This chart above is the velocity of money. This is the rate at which money circulates through the economy. And you can see to the far right of the chart, it hasn’t been fast. In fact, it’s at historic lows. Banks used cheap/free money from the Fed to recapitalize, not to lend. Borrows had no appetite to borrow, because they were scarred by unemployment and overindebtedness. Bottom line: we get inflation when people are confident about their financial future, jobs, earning potential … and competing for things, buying today, thinking prices might be higher, or the widget might be gone tomorrow. It’s been the opposite for the past eight years.
After three rounds of Fed QE, and now mass scale QE from the BOJ and the ECB, the world is still battling DE-flationary pressures. If gold surged from sub-$700 to $1,900 on Fed/QE-driven hyperinflation fears, and QE has produced little to no inflation, it’s fair to think we can return to pre-QE levels. That’s sub-$700.
We head into the weekend with stocks down 3% for the month. This follows a bad January. In fact, the stock market is working on a fifth consecutive negative month. The likelihood, however, of it finishing down for February is very low. It’s only happened 18 times since 1928. So the S&P 500 has five consecutive losing months just 1.7% of the time, historically.
It’s unimaginable that governments and central banks that have coordinated and committed trillions of dollars in guarantees, backstops, commitments and outright bailouts will stand by and let weak oil prices (rigged by OPEC) undo everything they’ve done over the past seven years to create stability and manufacture a global economic recovery.
Oil represents a systemic threat to the global economy. Just as housing created a cascade of trouble, through the global financial system, then through countries, the oil price crash can do the same.
When you see forecasts of $20 oil or lower, and some of it is coming from Wall Street, these people should also follow by telling you to buy guns and build a bunker, because that’s what you would need if oil went there and stayed there.
Not to mention, if they believe in that forecast, they should be formulating a plan for what they will do to make a living going forward, because their employers will likely go bust in that scenario.
The persistence of lower oil, especially less than or equal to $20 oil, would financially ruin the U.S. energy sector. Oil producing countries would be next, starting with Russia (and ultimately reaching the big OPEC nations). A default in Russia would create tremors in countries that hold Russia sovereign debt and rely on trade with Russia. Remember the fallout from the Asian Crisis? A default in Russia was the catalyst. Oil driven sovereign defaults would create a massive flight of global capital to safety and global credit/liquidity would dry up, again. All of this would put the world’s banks back on the brink of failure, just as we experienced in 2008. The only problem is, this time around, the global economy cannot absorb another 2008. Governments and central banks have fired their bullets and have nothing left to fend off another near global economic apocalypse.
With that, we have to believe that this crash in oil prices will not persist, especially when it’s being rigged by OPEC. Intervention now (or soon) is easy (relatively speaking) and returns the world to the recovery path. Intervention too late will require more resources than are available.
What’s the solution? An OPEC cut in production has a way of swinging oil in the other direction dramatically. Back in 1986, just a hint of an OPEC cut swung oil by 50% in just 24 hours. This assumes that the pressure builds on OPEC and they realize that the game of chicken that they are playing with U.S. producers has put themselves, also, precariously close to an endpoint.
Alternatively, we made the case last week that either China, the Bank of Japan or the European Central Bank could step in and outright buy commodities as a policy response to their ailing economies. Both the ECB and the BOJ in the past two weeks have said that there are “no limits” to what they can buy as part of their respective QE programs. That would immediately put a floor under crude, and likely global stocks, commodities and put in a top in sovereign bonds. Remember, when China stepped in, bought up and hoarded dirt cheap commodities in 2009, oil went from $32 to above $100 again.
So what’s the latest on oil?
Chart
This morning, the threat intensified. Oil dropped 5%, trading below the very key level of $30 per barrel. It was driven by an earnings report from the huge oil and gas company, BP. It reported a $6.5 billion loss. The company followed with an announcement of 7,000 job cuts by the end of 2017. Shares of BP stock are now trading back to 2010 levels, when the company was facing the prospects of bankruptcy after the fall–out from its gulf oil spill. This is one of the largest oil and gas companies in the world trading at levels last seen when people were speculating on its demise.
With the move in oil this morning, global stocks took another hit. Commodities were hit and sovereign debt yields were hit (with U.S. 10–year yields falling below 1.9%).
While there is a lot of talk about China and concerns there, clearly oil is what is dictating markets right now.
Take a look at this chart of oil vs. the S&P 500…
You can see the significant correlation historically in the price of oil and stocks. And you can see where oil and stocks came unhinged back in July 2014. The dramatic disconnect started in November 2014 (Thanksgiving Day) when an OPEC meeting concluded. The poorer members of OPEC called for production cuts. Saudi Arabia blocked the requests. That set off the plunge in oil prices.
You can see clearly in this chart where the price of oil is projecting the S&P. And stocks at those levels suggest the scenario we described above (global apocalypse round 2).
Again, a capitulation from OPEC is probably less likely. More likely, a central bank steps in to become an outright buyer of commodities (especially cheap oil). For those that have been shorting oil (and remain heavily short), either scenario would put them out of business quickly.
At this stage, OPEC is not just in a price war with U.S. shale producers, but it’s playing a game of chicken with the global economy. We’ve had plenty of events over the past seven years that have shaken confidence and have given markets a shakeup – European sovereign debt, Greece potentially leaving the euro, among them. In Europe, we clearly saw the solution. It was intervention. Oil prices are creating every bit as big a threat as Europe was; it’s reasonable to expect intervention will be the solution this time as well.
The Fed met today—and they made no change to policy. As we all know, their words will be parsed endlessly. But the fact is, the Fed, at this point, is a side show. It’s two other central banks (BOJ and ECB), and likely policy makers in China that will dictate what stocks do, what commodities do and what the global economy does for the next year (or few).
With that, the real event is tomorrow night. The Bank of Japan will decide on their next move. And the BOJ holds many, if not all of the cards for the U.S. stock market and the global economy. Today we’re going to talk about why that’s the case.
As we said yesterday, the consensus view is that the BOJ will do nothing this week. That sets up for a surprise, which Japanese policymakers like and want. It gives their policy actions more potency.
We talked yesterday about the role central banks have played in the long and slow global recovery. To put it simply, central banks have manufactured the global economic recovery. Without the intervention, there would have been a global economic collapse and blood in the streets, still. It was all led by the Fed. They slashed interest rates to zero. They rolled out the unprecedented bond buying program that pinned down mortgage rates (putting a bottom in the housing market), and helped to recapitalize the big banks that were drowning in defaulted debt, withering deposits and an evaporation of loan demand. They opened up currency swap lines (access to U.S. dollars) with global central banks so that those central banks could fend off collapse in their respective banking sectors.
Most importantly, with all of the intervention, and after spending and committing trillions of dollars in guarantees, backstops and bailouts, the Fed clearly communicated to the public, by their actions, that they would not let another shock event destabilize the world economy. Europe was next to step up, to do the same.
When the weak members of the European Monetary Union were spiraling toward default, which would have destroyed the euro and Europe all together, the leading euro zone nations stepped in with a bailout package.
Still, a year later, bigger trouble was brewing, as big countries like Italy and Spain were on the precipice of default. That’s when the European Central Bank (ECB) went “all–in”, effectively guaranteeing the debt of Italy and Spain by saying they would do “whatever it takes” to save the euro (and the euro zone).
Those were the magic words: “whatever it takes.”
That statement meant that the central bank would buy the debt of those countries, if need be, to keep them solvent, for as much and as long as needed…”whatever it takes.” That was the line in the sand. If you bought European stocks that day, you’ve doubled your money will little–to–no pain.
Similarly, Japan read from Draghi’s script a few months ago (late September of 2015) when global stocks were falling sharply and threatening to destabilize the world again. Japan’s Prime Minister Abe was in New York, and in a prepared speech, said they would do “whatever it takes” to return Japan to robust sustainable growth. Once again, the magic words put a bottom in global stocks and led to a sharp rebound.
“Whatever it takes” means, if need be, they print more money, they will support government debt markets, they will outright buy stocks, they will devalue currencies, they will do whatever it takes to promote growth and to prevent a shock that would derail the global economy. Why? Because they know the alternative scenario/the negative scenario is catastrophic.
Not surprisingly, in the past six days, with global stocks in turmoil, Draghi stepped in again. This time, he conjured up some new magic words. He said there are no limits to what the ECB can buy (as part of their QE program). Guess who followed his lead? The head of the BOJ sat in front of a camera the next day and said the exact same thing. This tells me stocks are fair game. We already know that’s the case for the BOJ. They are already outright buying stocks. But it also tells me commodities are fair game. And high yield corporate debt. Anything that is threatening to destabilize global markets and threatening to knock the global economic recovery off path—it’s fair game for the ECB and BOJ to put a floor under (i.e. by buying up assets with freshly printed currency).
What does it all mean? It means the ECB and the BOJ are now at the wheel. They relieved pressure from the Fed, allowing the Fed to begin the path of removing the emergency policies (albeit very slowly) of the past nine years. The Fed only makes this move because they believe the U.S. economy is robust enough to handle it. And, more importantly, they only start this path because they know that two other major central banks in the world will continue to provide fuel for the global economy and defend against shocks through their aggressive policies.
Now, within this monetary policy dominated world, where everyone is all–in, the policy actions have simply kept the global economy alive and breathing, they have done nothing to address the major structural problems the world is enduring: Massive debt and slow–to–no growth.
What’s the solution? There hasn’t been one. Until Japan unveiled their massive stimulus program in 2013. The potential solution: A massive devaluation of the Japanese yen.
Japan, unlike many other major central banks (including the Fed), has all of the right ingredients to achieve its inflation goal via the printing press—it has the biggest debt load in the world (which can be inflated away by yen printing), it has persistent deflation (which can be reversed by printing), and it has decades of economic stagnation (which can be reversed with hyper easy money and improvements in the global economy).
In short, they can do all of the things that other powerful central banks/economies can’t do—and it can result in a huge benefit not just in Japan but for fueling a recovery in the global economy (as capital pours out of Japan). In a world with few antidotes to the structural economic problems, this is a potential solution for everyone. So perhaps the most important ingredient for a successful campaign in Japan°they have the full support/hope/wishes of the major global economic powers (US, Europe, UK).
The Bank of Japan is targeting to run their aggressive QE program at full tilt until they can produce a target of 2% inflation in their economy. Their latest inflation data is closer to zero than 1% (still very far from 2%). So they still have a lot of work to do. They completed two years of their big, bold plan—and two years was the timeline they projected to achieve their goal. Clearly, they haven’t met the inflation goal. And they have since, as we’ve said, committed to do whatever it takes to do it, and for as long as it takes. With that, we expect more expansion to their QE program (possibly this week). And, importantly, a huge part of their success is (and will be) dependent upon higher Japanese stocks, and a weaker yen. They have explicitly said so. It’s part of their game plan.
Japan’s Prime Minister Abe was elected on his aggressive plan to end deflation. That was, and is, his priority. He hand-selected the Bank of Japan governor to carry out his plan.
Here’s the quick and dirty summary: With free–falling oil and depressed commodity prices threatening widespread defaults across the energy sector, which would soon be followed by sovereign debt defaults from oil producing nations (like Russia), don’t be surprised if we see the BOJ (and maybe the ECB) step in and gobble up dirt cheap commodities as a policy initiative. It would put a floor under stocks, commodities, and promote stability and growth.
