With everyone focusing on the "Holy Grail" deal between Russia and China, and debating who got the upper hand in the 30 year price delivery arrangement, a just as notable story is that quietly overnight Goldman's China team just took China to the cleaners. In a flurry of reports covering everything from Chinese banks to property developers to the Chinese, Goldman effectively mirrored what Hugh Hendry said several years ago when he correctly concluded that China is drowning in overcapacity, and concluded that a "two year property downcycle is imminent."
One of Portugal's biggest companies - Espirito Santo International SA - is in a "serious financial condition" according to a central bank driven external audit by KPMG identified "irregularities in its accounts." Rather stunningly, the details are nothing short of ponzi-like as WSJ reported in December that Espírito Santo International was highly leveraged and had been relying heavily on selling debt to an investment fund held by the financial group (i.e. funding debt issuance in one entity with another) and overvaluing hard-to-value assets (ring any bells?). However, the 'ponzi-like' maneuver, as WSJ concludes shows that while legal and in line with regulatory rules, highlights how corporations, including banks, used financial gymnastics to survive the region's financial crisis. Given the massive domestic bank demand for sovereign paper, one has to wonder if the sudden 60bps spike in Portuguese bond risk is a signal that all is not well in the European periphery.
Just as we saw yesterday, a pre-open buying panic in stocks has been triggered by a selling scramble in JPY against the USD (which ramped the pair to the crucial 200DMA). Treasury yields are following suit (10Y bounced off 2.50%) and pushing higher (30Y above yesterday's high yields). The USD is well bid (on EUR weakness) and precious metals are modestly lower. Copper is under pressure. Just remember how yesterday's pre-open run-stop ended...
Western companies have buybacks that only reward shareholders here and now; the East actually spends capex to invest into the future. Case in point: today's "holy grail" gas deal announcement, which in addition to generation hundreds of billions in externalities for both countries over the next three decades will result in an immediate and accretive boost to GDP, to the tune of $55 billion for Russia and $20 billion for Beijing.
- Eric Holder proves he is no US banker puppet by smashing another foreign bank: BNP Falls as U.S. Probe Said to Cost More Than $5 Billion (BBG)
- Fuld Was Top CEO When Fed Last Raised as New Neutral Era Beckons (BBG)
- Tymoshenko loses her magic in Ukraine presidential race (Reuters)
- GOP Sees Primaries Taming the Tea Party (WSJ)
- Heard that one before: Russian troops preparing to leave Ukraine border area (Reuters)
- Vietnam riots land another blow on the global supply chain (FT)
- Heard that one before too: Bank of England minutes show some members closer to voting for rate rise (Reuters)
- BOJ Refrains From Easing With Signs Japan Weathering Tax Rise (BBG)
- Miner Freeport Pressured by Water Costs as Copper Prices Slide (WSJ)
- Talks to end Thai crisis inconclusive, new round called (Reuters)
- Japan Court Blocks Reactor Restarts (WSJ)
Another right of perfectly round number supports: while the Shanghai Composite once again dipped below 2000 overnight to as low as 1991 only to close modestly higher, and the Nikkei followed suit, also sliding below the psychological support level of 14,000 to an intraday low of 13,964 only to close just above 14,000 if in the red, it was the USDJPY that has suffered the most technical pain when shortly after 2:30 am eastern time, the USDJPY dropped by nearly 40 pips, hours after the BOJ indicated that not only is it happy with where in the QE process it stands, but hinted there may well be no more QE, and certainly nothing imminent . In the process, the USDJPY fully smashed the 200 DMA, with the next key parallel support being the 200DMA in the EURJPY at 138.08 (which was at 138.34 last). When that too gives way, it is a straight line to double digits in the USDJPY, and the countdown to the end of the Abe regime begins in earnest.
Just one day after the FBI issues arrest warrants for 5 Chinese military officials, Caixin reports that Fang Fang - the former CEO of JPMorgan Asia - has been arrested in Hong Kong by the Independent Commission Against Corruption (or anti-graft agency). Coincidental timing we are sure; and while details are sparse, the arrest appears linked to the hiring of the children of Chinese officials. Bloomberg reports that Fang declined to comment after being released on bail (under restrictions not to leave Hong Kong).
Given that zero economists surveyed expected any further QQE in this May BoJ statement, the market's positive knee-jerk reaction to the "unchanged" nature is odd:
*BOJ RETAINS PLAN FOR 60T-70T YEN ANNUAL RISE IN MONETARY BASE (coz it's working so well)
*BOJ SEES DECLINE IN DEMAND AFTER SALES TAX HIKE (whocouldanode?)
*BOJ SAYS EASING IS HAVING INTENDED IMPACT ON ECONOMY (crushing consumer through increasingly expensive import costs?)
The excitement must be based on them saying that "exports have leveled off more or less" and the economy is "recovering moderately." One can't help but feel like this run-stop pop will be faded very quickly... as hope is pushed to July for moar QQE.
"The CIA organised a fake vaccination program in the town where it believed Osama bin Laden was hiding in an elaborate attempt to obtain DNA from the fugitive al-Qaida leader’s family," The Guradian reports. Now, amid a deadly backlash again vaccinations and a resurgence of polio in Pakistan, the White House has promised that the CIA will never again use an immunization campaign as a tool of spycraft. While this is horrible in its own right, there is a much bigger story here. The fact that the United States holds no claim to any sort of moral high ground whatsoever.
Asia's exploding demand for methamphetamine has left them with a problem... too few cooks and not enough ingredients. As AFP reports, strong and growing demand for drugs in Asia is driving up global production of methamphetamine, with seizures in the region tripling in five years to record levels, a UN report below shows. China has had particularly severe problems, it said. In 2008, Chinese authorities seized six tonnes of methamphetamine. That figure soared to more than 16 tonnes in 2012, accounting for about 45 percent of total methamphetamine seizures for Asia that year, the UNODC said. The drug is often trafficked long distances, as we show below, adding the routes being used by drug sellers are becoming increasingly well-trodden. As demand rises, so production has increasingly shifted to Asia with 'Walter Whites' making bases in China, Myanmar, and the Philippinnes.
The Greenspan Housing Bubble Lives On: 20 Million Homeowners Can’t Trade-Up Because They Are Still UnderwaterSubmitted by Tyler Durden on 05/20/2014 - 20:16
One of the most deplorable aspects of Greenspan’s monetary central planning was the lame proposition that financial bubbles can’t be detected, and that the job of central banks is to wait until they crash and then flood the market with liquidity to contain the damage. In short, China didn’t “save ” America into a housing crisis; the Greenspan Fed printed America into a cheap debt binge that ended up impairing the residential housing market for years to come. In any event, for those Millennials who do manage to accumulate a down payment by the time they are in their early 30s there is precious little starter home inventory available. The Greenspan mortgage debt serfs from the previous generation are blocking the way. Monetary central banking is an economy wrecker. Here is just one more smoking gun of proof.
While we have done our best to expose the utterly disgusting manipulation that occurs day-in-and-day-out in the precious metals markets over the last few years (how the "fix" is manipulated, who is responsible, and the blowback from European investigations), but mainstream US media remains actively ignorant of exposing these realities (even as another 'gold-"fixer"' gets the ax today). But not the Germans. As the following brief documentary exposes "an examination of gold prices reveals machinations fit for a financial thriller." With the Germans still wanting their gold back, we suspect this German TV documentary explaining the "lack of oversight.. and serious manipulations of the gold price," will stir up more than a little public concern about ever getting it back.
Socialist-Motion Trainwreck: France Mistakenly Orders 2,000 Trains Which Are Too Wide For Its PlatformsSubmitted by Tyler Durden on 05/20/2014 - 19:13
In a time before the New Normal "fairness doctrine" where socialized companies such as GM have 60% more recalls in 5 months than they had sales in the prior year, a story such as the following would belong at best to a surreal "Polak" joke. Unfortunately, in this centrally-planned day and age, it is all too real. Reuters reports that in order to boost GDP and to cement that even under hard-core socialism France is still a manufacturing powerhouse, the French national rail company SNCF had ordered some 2000 trains for an expanded regional network from the national rail operator RFF. There was just one problem: the trains were too wide.