BRIC Currency Crisis Bad for Indian Banking Stocks?

Weakness in the Indian #Rupee will most often translate into weakness for the Indian banking space as potential hawkishness forced on the #RBI in defense of the Rupee could hurt bank margins. The Rupee has weakened considerably since Russia raised interest rates to defend the slumping Ruble and more recently with China devaluing the Yuan.

Recent  topping action in the bank index could suggest a possible sell off in this space in anticipation of further Rupee weakness and potential hawkishness from the RBI. Just going back to August 2013 banks corrected over 30% when the Rupee fell to over 68 Rupees to the dollar and the RBI embarked on some serious tightening raising the overnight lending rate from 7% to 9%.

BRIC currency crisis bad for Indian banking stocks? http://t.co/SFzBN5BwiL pic.twitter.com/GvUnswEwGO

— samuelR (@RajveerRawlin) September 7, 2015

The dominoes keep falling one after another

Lets take a look at a few charts courtesy yahoo finance and market watch.com. First we started with the well over 95% crash in the Baltic dry index (#bdi).

Then we had a over 40% plunge in #gold and #silver prices as symbolized by the respective ETF's:




This was matched by over a 40% plunge in base metals:



Followed by the dramatic over 50% plunge in #oil:


This has translated into a rout in the junk bond market:

Which will most certainly nail banks which have exposure to this toxic stuff:


No surprise then at the flight to quality bid emerging in US treasuries and the #dollar:




And carry trade liquidation should start any moment with a bid for the Japanese #Yen:


All in all we have sown the seeds for the great depression of the 21 st century and the U.S Fed and its fellow central banks can do absolutely nothing about it.

The dominoes Keep falling one by one http://t.co/lfL8gIu1o2 pic.twitter.com/wAkJpkNixp

— samuelR (@RajveerRawlin) September 8, 2015

Deflation to trigger junk bond rout?

The deflationary collapse of oil is clearly threatening to take down other risky asset classes with it, most notably of late the junk bond market


the makings of a brand new financial crisis!

Collapsing Oil price flat out deflationary

The recent 40% decline in oil the past 6 months is flat out deflationary. Look at the popularly traded oil ETF. This taken together with the collapse in other industrial commodities has generated a major deflationary signal. The collapse in the Euro also lends further support to the deflationary theme emerging.




The last time oil approached it's cost of production was just before the financial crisis of 2008. Just a matter of time before the collapse in gold, silver, copper, oil and other industrially sensitive commodities spreads to other risky asset classes like stocks.

Disconnect between the Rupee and the Indian Stock Market Indices

Yes falling commodity prices help narrow our current account deficit and are positive for the Indian market which is correcting lower from recent highs:


These developments are however even more positive for the Rupee taken together with positive foreign institutional flows, so why is the Rupee breaking down in the face of a surging stock market?
Global Dollar strength on fears of upcoming deflation?

Here is some data to consider:
2008 GDP - 9.5%, Dollar/Rupee - 42, Stock market Peak January - 6350, P/E -24, 3 month return from Jan 08  < -30%
2015 GDP - 7.5%, Dollar/Rupee - 68, Stock market Peak in March - 9119, P/E -24, It remains to be seen how much of a decline will occur, as of now -20.0%.

Disconnect between the Rupee and the Indian Stock Market http://t.co/fYMwKrnIPN pic.twitter.com/z3A462djla

— samuelR (@RajveerRawlin) September 5, 2015

Vix is warning trouble ahead?

While the S&P is at new highs


The Vix is not making new lows, on the other hand it is threatening to break out significantly higher

 This suggests the upcoming market sell off will be far worse than the October pull back.

long bonds signalling onset of deflation?

30 yr long bond yields about to break below 3% in the U.S despite all the QE withdrawal talk confirming the onset of deflation. Chart courtesy yahoo finance.

Deflationary Crash in 2015?

http://finance.yahoo.com/news/predictors-29-crash-see-65-112657959.html

QE forever wont stop deflation

QE in Japan, QE in Europe, QE in the US, there is no stopping deflation though.
Look no further than the recent strength in the dollar, break out in the US Volatility Vix index and an absolute collapse in several industrial commodities like crude oil, copper and silver.

Markets to get a reality check?

http://finance.yahoo.com/news/-ugly--economic-reality-will-slam-stocks--kee-135902248.html

Will be interesting to see how stock markets perform in the absence of QE

http://theeconomiccollapseblog.com/archives/from-this-day-forward-we-will-watch-how-the-stock-market-performs-without-the-feds-monetary-heroin

Are we staring down at the great depression of the 21 st century?

Some key Indicators are painting a tell tale sign of another great depression:
Lets take a look at a few charts courtesy yahoo finance and marketwatch.com:
1) Despite all the talk of interest rates going up from a phase out of the FED's #QE policies bond prices have moved up with yields about to head down in a big way:


2) The baltic dry index (#bdi) despite its recent rally is over 95% below its all time peak it hit in 2008. Global shipping woes despite a so called economic recovery!


3) #Gold continues to spiral down and is well over 40% down from its all time high's:



4) The #dollar is becoming king again as the #Euro collapses which could result in the liquidation of carry trades:




5) #Oil has absolutely collapsed down over 50% from highs it hit just a year ago:




These developments taken together with ongoing bear markets in several key asset classes , new lows for the velocity of money and surging margin debt make the great depression (#greatdep) of the 21 st century inevitable.

Here Comes the Next Great Depression http://t.co/cQF4NjqdgY pic.twitter.com/HX39QHBcAv

— samuelR (@RajveerRawlin) September 4, 2015

More Signs of Upcoming Deflation

The baltic dry index continues to break down
http://www.bloomberg.com/quote/BDIY:IND/chart

Despite all talk of QE Tapering US bonds are rallying and yields on long bonds are plummeting


The dollar index  is holding the 80 level and refusing to go down 
http://stockcharts.com/h-sc/ui?s=$usd

Signs of Upcoming deflation

Some telling signs of deflation despite the 5 year plus QE induced rally:

First, Gold has collapsed almost 40% from its all time highs of $1975 plus an ounce and doesn't appear to be recovering anytime soon: (Chart courtesy, Yahoo finance)


Second, the baltic dry index is down over 95% from its highs of near 12,000 in 2008, if there has been real growth and economic recovery why are shipping rates collapsing?(Courtesy stockcharts.com)


Thirdly, Abenomics has not succeeded in keeping deflation out of Japan: The Nikkei is still down over 70% from its all time highs (Chart courtesy, Yahoo finance)


Last but not the least the deflationary spiral in China is getting out of control: The Chinese market is down over 65% from its highs (Chart courtesy, Yahoo finance)

Bottom line: Deflation is alive and kicking and is going global in short order, beware those low volume stock market rallies