text: 10/17/2016 - FINANCIAL REPRESSION IS NOW "IN-PLAY"!
  Professionals, institutions, hedge funds etc have been steadily lightening up on equity markets (or simply leaving completely) leaving the public holding the bag.
  It is estimated that the $325B that will leave the US equity markets in 2016 will be replaced by an artificial $450B of corporations buying their stocks. With corporate cash flows now falling and debt burdens triggering potential credit rating downgrades, this game is quickly slowing. The central bankers are aware of this.
  TECHNICALS INDICATING AN END TO THE DEBT SUPPER CYCLE
  KONDRATIEFF CYCLE: The 55 Year generational Kondratieff Cycle shows an overdue major downturn with a cleansing of debt as part of the end to what has been termed the "Debt Supper Cycle",
  I could keep on illustrating the types of warnings we are seeing, but let me share what the central bankers are likely most concerned about regarding Correlation, Liquidity and Volatility ETPs.
  The markets have become so correlated (think of this as everyone on the same side of the boat) with asset correlations not only being higher, but the correlations themselves are becoming more correlated. While traditionally rising cross-asset volatility has resulted in volatility spikes, that is no longer the case due to outright vol suppression by central banks. While central banks may have given the superficial impression of stability by pressuring volatility, they have also collapsed liquidity in the process, leading to less liquid markets, a surge in "gaps", and "jerky moves" that are typical of penny stocks.
  The greater the cross asset correlation, the lower the vol, the greater the repression, the more trading illiquidity and wider bid ask-spreads, and ultimately increased "gap risk", which becomes a feedback loop of its own. Global central banks are now injecting a record $2.5 trillion in fungible liquidity every year – in the process further fragmenting and fracturing an illiquid market which is only fit for notoriously dangerous "penny stocks."
  Even more concerning are Volatility ETPs (Exchange Traded Products) which are derivative of some underlying asset. Volatility ETFs are particularly strange animals since you're buying a derivative (ETF) on a derivative (the futures contract) which itself is based on a derivative (the implied volatility of options) and those options themselves of course are derivatives which themselves are based on the S&P 500. Getting the picture? The folks at Capital Exploits warn:
  ….everyone is on the low volatility side of the boat, because the central banks have managed to create a sense of calm in the markets exhibited by record lows in volatility and investor have used linear thinking extrapolated well into the future assuming ever greater risk ignoring market cycles and extremes at their peril.
  Again, none of this is going unnoticed by the increasingly worried central bankers.
  Buying Corporate Bonds – DONE (ECB, BOE)
  THE "MINSKY MELT-UP"
  My long time Macro Analytics Co-Host, John Rubino concludes in his most recent writing "Flood Gates Begin to Open":
  Individual countries have in the past tried "temporarily higher rates of inflation," and the result has always and everywhere been a kind of runaway train that either jumps the tracks or slams into some stationary object with ugly results. In other words, the higher consumption and investment that might initially be generated by rising inflation are more than offset by the greater instability that such a policy guarantees.
  But never before has the whole world entered monetary panic mode at the same time, which implies that little about what's coming can be said with certainty. It's at least probable that a combination of massive deficit spending and effectively unlimited money creation will indeed generate "growth" of some kind. But it's also probable that once started this process will spin quickly out of control, as everyone realizes that in a world where governments are actively generating inflation (that is, actively devaluing their currencies) it makes sense to borrow as much as possible and spend the proceeds on whatever real things are available, at whatever price. Whether the result is called a crack-up boom or runaway demand-pull inflation or some new term economists coin to shift the blame, it will be an epic mess.
  And apparently it's coming soon.
  It is our considered opinion that the monetary policy setters are presently even more worried about the current global economic situation than we are – if that is possible?
  Japan and Switzerland amongst others are already doing it (as we previously reported) , while the ECB is also floating its own trial balloon on the same subject.