Business

Instead of allocating capital to expensive tail risk bets on direct asset class collapse (in equities, credit, and commodities), it appears, just as we detailed previously, the 'smartest money in the room' is "betting" indirectly on a stock market crash through eurodollar options.

As we previously detailed, the costs of tail risk protection in credit and equity markets are soaring (and perhaps the crash in global financial stocks and spike in systemic credit risk supports that concerning possibility).

By EconMatters 

The China currency debate in financial markets is rather interesting right now with many market ramifications. A rapid depreciation in the Chinese currency could lead to an Asian currency market crisis. I can see both sides of the current debate of a rapid devaluation versus a prolonged drawn out devaluation of the currency.

The current financial system is on borrowed time.

This is not fear mongering. It is fact.

The system almost went down in 2008. Since that time, every major decision made has been to double down on the very same bad ideas that created 2008.

Those bad ideas:

1)   Excess debt driven by loose money policy.

2)   Moral hazard (not allowing those who make terrible choices in the banking industry to fail).

3)    Increased Centralization of the economy.

Ten days ago, when Deutsche Bank stock was about 10% higher, the biggest German commercial bank declared war on Mario Draghi, as we put it, warning him that any further easing by the ECB would only push stocks (with an emphasis on DB stock which has gotten pummeled over the past few months) lower. What it got, instead, was a slap in the face in the form of a major new easing program when the Bank of Japan announced it is unveiling negative rates just three days later.

Citi bank strategists have warned that the global economy is trapped in a “death spiral” that may lead to weakened oil prices, recession and a serious equity bear market.  Analysts at the bank have dubbed the oil crisis “Oilmageddon” and say that a global financial crash worse than than the post World War II era may be on its way. Cnbc.com reports: “The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said in a report on Thursday. “Stronger U.S.