One year earlier than required, the German government approved plans to force creditors into propping up struggling banks across Europe. As WSJ reports, Germany "leads the way" in Europe by implementing European rules quickly and "creates instruments that allow the winding-down of big systemically relevant institutions without putting the financial stability at risk." What this means is that taxpayers (theoretically) will not be on the hook (though in reality we are sure the mutually assured destruction defense will be played - especially if Deutsche runs into problems) but as German authorities explain, "This ensures that in times of crisis mainly owners and creditors will contribute to solving the crisis, and not taxpayers." As a gentle reminder - creditors includes depositors... remember Cyprus?
"Smile, we're on camera..."
Highlighting increasingly dangerous conditions within the city, a new study published Monday by Northwestern University’s Department of Environmental Studies revealed that approximately 75 percent of the air in Chicago is now composed of bullets.
While we enjoyed the hours of amusement formerly micro-cap company Cynk Technology (CYNK, with Mr. Marlon L. Sanchez serving as President, CEO, CFO, Secretary, Treasurer & CAO) provided us today, we must sadly conclude that the company is nothing but a fraud. And it is nothing short of a testament to just how broken this excuse for a market is that a company with no assets, no revenues, no website, and one employee can go from zero value to nearly $5 billion in market cap in a few days , adding 150%, or over $2 billion in market cap today alone. That said, the question always is: who is next. Who is the company that is as big a fraud as CYNK and will generate as great a profit in as short a time. For the easiest possible answer we simply found out who the company's "auditor" is (that would be Messineo & Co, CPA LLC of located at the following address) and then we backed into which other companies also use this auditor for their own fraudulent purposes. The full list is below.
Stocks trod water for most of the day until the Fed said they would take the punhbowl away and that markets were complacent and that triggered buying in stocks, bonds, and gold. VIX was the catalyst (just as we saw at the actual FOMC meeting) and we would not be shocked to see a major volume dump after-hours in VXX (as dark pools unload their manipulations). The Dow ripped higher, desperate to reach 17,000 and prove that 'wealth' was back - but failed (although it did manage to get back to unch from the payrolls). Treasury yields limped higher, spiked higher on FOMC then dumped to the low yields of the day by the close (0-1bps lower on the day). Precious metals leaked lower into FOMC but spiked notably after with gold closing near 4-month highs. Oil was sliding into the minutes and did not bounce to close at its lowest in 2 months. VIX did its best to remind everyone that when the FOMC speaks, it's always good market news.
Forget irrational exuberance; ignore exorbitant privilege; dismiss the idea that The Fed's actions are for Main Street not Wall Street... the following image says everything you need to know about "the recovery"...
A nervous peace prevails in the financial markets as central banks sit on their throne, fingers at the ready on the liquidity switch. As UBS' Bhanu Baweja notes, most volatility buyers have been 'rolled' into their graves. As they have explicitly targeted risk premia in addition to rates, a lot more hangs on the monarchs of monetary policy today than it has in previous cycles. While growth and inflation are both low, they are not necessarily uncertain; and although every crisis is different, certain patterns tend to repeat and certain events have reliably driven volatility higher.
Bubbles and panic happen. A bubble is a situation where markets ignore fundamentals, even if debtors are unsound. For too long, markets failed to raise funding costs for countries with unsustainable policies. And a panic is a situation where markets also ignore fundamentals, but this time to the detriment of sound debtors.
As usual the initial knee-jerk reaction (in this case lower in stock prices and higher in bond yields) has been faded rapidly and despite Fed warnings over investor complacency (and real economic uncertainty not being priced in), investors are buying bonds and stocks with both hands and feet (for now)... Gold is spiking higher as the USD drops.
1 minutes, 555 words, and Fed-whisperer Jon Hilsenrath declares that based on the FOMC minutes, QE is dead and now the uncertainty is all about rate-hike timing. Crucially, given the Fed's concerns over complacency, Hilsenrath explains, "while they don't expect rates to get very high because of lingering headwinds to the economy, they also don't want to give the public too much comfort that they'll remain near historically low levels far into the future."
Having continued to taper, expressed no fear of inflation, and been nothing but confident that Q1 was nothing-but-weather at the press conference, the FOMC Minutes shows:
*SOME FED OFFICIALS SAW INVESTORS AS TOO COMPLACENT ON RISKS
*FED SAW INSUFFICIENT INVESTOR UNCERTAINTY ON ECONOMY, RATES
*FOMC SEES QE ENDING WITH $15 BLN CUT IN OCT. IF OUTLOOK HOLDS
Strange not a mention of the surge in Treasury fails but this appears as close to a "sell" as the Fed will give...
Pre-FOMC Minutes: S&P Futs 1964, Gold $1323.50, 10Y 2.59%, Oil $102.22, JPY 101.75
It appears "reach for yield" has consequences after all - and remember how exuberant the market (stocks) were after PR managed to get that bond off earlier in the year? Quietly behind the scenes and away from the exuberant stock market trading headlines of the mainstream media, Muni bond markets are in turmoil. Thanks to the 'shenanigans' in Puerto Rico - after lawmakers last month approved a bill allowing some public corporations to restructure debt - PR bonds have collapsed to record lows (and dragged a number of large Muni funds with them).
A repeated theme on financial-TV in recent weeks is that there cannot be a recession without a yield-curve inversion first because in each of the last 6 recessions stretching back 50+ years, short-term rates rose above long-term rates before the recession. However, if you study the period after The Great Depression and even in Japan's last 25 years (that are the best examples of balance sheet recessions), it is very common to have a recession without a yield curve inversion first. In-fact, there were 6 of them following The Great Depression into the 1950's.
10 Year Auction Spooked By Looming Minutes, Tails 1.1 Bps, Still Prices At Lowest Yield Since June 2013Submitted by Tyler Durden on 07/09/2014 - 13:13
Ahead of the FOMC Minutes, many seem to have taken a cue from DB's bond trading recos, and taken a flier on today's just concluded reopening of $21 billion in 10 Year paper (technically 9 year 10 month), which probably explains why the 10 year paper just priced at 2.597%, a rather gappy 1.1bps tail to the 2.586% When Issued. Still, pricing at just under 2.60%, this was the lowest 10 Year high yield in over a year, since the 2.21% in June 2013. Considering the recent surge in negative repo rates, expect any freely floating paper to be promptly mopped up despite the apparently weak auction.