Macro

(New York)

In what shocked us as a very eye opening statement, a number of funds are saying the market now is more fragile than before the Financial Crisis. According to one so-called tail fund, or funds that invest for profiting when there is a big market reversal, “The financial system is a lot more fragile than it was in 2007 … Leverage is up on every single metric, in just about every category, and debt has increased. The more you indebt someone, the more fragile they become, especially with variable interest rates”, says hedge fund manager Richard Haworth.


FINSUM: These kind of funds are always warning about the next catastrophe, but somehow their warnings seem more prescient right now.

(New York)

If you have been reading the news, you will have seen that many are starting to worry that a recession is on the way. While the economy still seems to be in good shape, at the fringes are some data that could foretell a period of contraction. The question is how sharp a contraction might come at the end of this long bull market and economic cycle. Well, Wall Street economists think that the contraction will be slow rather than a steep drop off. Most economists see solid global growth this year of between 3-4%, but thereafter is when things could get dicey.


FINSUM: The big troubling sign to us is that both the US and Europe, which were on different cycles, both seem to be slowing this year, which could portend a recession sooner rather than later.

(New York)

For anyone who thinks a trade war might not hurt the US economy, or that one may be easy to win, this is an important story. Robert Shiller, famed economist, just said a trade war with China would cause quick and devastating damage to the US economy. “It’s just chaos … The immediate thing will be an economic crisis because these enterprises are built on long-term planning, they’ve developed a skilled workforce and ways of doing things”. Shiller says that even if tariffs don’t directly affect the economy, many companies will lose their confidence to plan and invest. “It’s exactly those ‘wait and see’ attitudes that cause a recession”, says Shiller.


FINSUM: So we imagine that a trade war would be very disruptive and would undermine the confidence of US companies as it would destabilize the ground on which industry has been built for the last 25+ years. However, the US has put itself at the raw end of trade deals for many years and claiming some ground back may be positive in the long-term.

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