April 18th, 2015
We've long argued that the implications of the shift away from a global economic order that has prevailed since the end of WWII are far reaching and may include the demise of what has largely been a unilateral political and economic system characterized by the dominance of US foreign policy and Western notions of politics and capitalism. Now, it appears as though de-dollarization and the end of US hegemony may have gone viral because, as The NY Times reports, a US “retreat” from the world order it has largely shaped was the unspoken topic de jour at this year’s spring meeting of the IMF and World Bank in Washington.
Extreme optimism - whether in the form of stock valuations, consumer spending, or happiness surveys like the one mentioned below - tends to be followed by corrections; because to get to an extreme point in a data series, extreme behavior is usually required. That is, a lot of really optimistic investment decisions have to be made to push financial markets to cyclical highs, and these kinds of moves tend to exhaust themselves and produce big moves in the other direction. Hence the 2008 low following the 2007 high.
We have never, ever, seen the long- and short-end of the Treasury yield curve so anti-correlated.
BANZAI7 F&B WARNING...
The conservative German daily Die Welt, well-known for its unflinching support for Israel, recently published an article stating “with near certainty” that the Federal Republic of Germany, or West Germany, helped finance Israel’s nuclear program in the 1960s. The Welt report comes after former Israeli President Shimon Peres (who was the head of Israel’s nuclear-weapons program at the time of its inception in the 1950s) denied that funding for Israel’s nukes came from Germany earlier this month.
It appears the re-election of Rahm Emanuel as Chicago Mayor has done nothing to assuage concerns about the city's insolvency. As Emanuel's victory became more assured, credit risk (measured by the spread between Chicago Muni yields and Treasury yields) has soared from 180bps to over 240bps. Furthermore, it has accelerated even more since the April 7th election. Recent statements by S&P that if the city fails to articulate & implement a plan by the end of 2015 to sustainably fund pension contributions, or if it substantially draws down reserves to fund contributions, they will likely lower the rating; has not helped (given that Moody's already have Chicago at Baa2 - just 2 notches above junk).
At some point, maybe sooner than later, the US economy will re-enter recession. Historically, that's the time when the Fed would lower interest rates in attempt to spur economic growth. But today, interest rates are already at 0%. That's what's so dangerous for the Fed about its current ZIRP policy -- it leaves no gunpowder left in the low-interest-rate bazooka. The Fed will enter its next battle defenseless. This is clearly a situation the Fed wants to avoid, so raising rates - soon - is an urgent priority. But... practically, can the Fed (and other central banks) really raise rates now without killing the already-moribund global economy?
A Full Analysis and Step-by-Step Guide for EU Area Residents To Aid In Escaping the Upcoming Bank Bail-ins & Capital ControlsSubmitted by Reggie Middleton on 04/18/2015 12:21 -0400
This may take you the entire weekend to digest, but if you are an unsecured creditor/lender (have a checking, savings or demand deposit account) to a euro zone bank, I would consider it your fiduciary responsibility to yourself to sit down and parse this piece with care and aplomb!
"The last time China suffered such pace of capital outflows was during 2012 when $165bn of capital left during the last three quarters of that year. And before then it was during the Lehman crisis," JPM notes, in yet another sign that Beijing is stuck between a rock and a hard place as it battles to maintain the dollar peg in the face of slumping economic growth.
What will happen to the markets when the Western welfare states finally go broke? It will make 2008 look like a picnic.
So the fundamental case for a 20-year bull run as BMO is calling for and certainly many other banks seem to be onboard with that is not looking great YTD. In fact, most perma bulls have shy’d away from even mentioning fundamentals other than to say that generally they aren’t looking great but don’t worry the Fed is still engaged. And so we feel its a worthwhile exercise to have a look at the technicals.
After trending sharply higher in recent months, the US dollar has entered a consolidative range against most of the major currencies.
With Greece teetering on the edge of insolvency and forced to raid pension and most other public funds, ahead of another month of heavy IMF repayments which has prompted even the ECB to speculate Greece should introduce a parallel "IOU" currency, a white knight has appeared out of nowhere for Greece, one who may offer $5 billion in urgently needed cash. The white knight is none other than Vladimir Putin.
The endgame has indeed arrived. At the very least, the international elites seem to think success is within their grasp, for they now openly expose their own criminality. But they do so in a way that attempts to divert blame or to rationalize their actions as being for the "greater good." All signs and evidence point to what the IMF calls the "great global economic reset.”" The plans for this reset do not include U.S. prosperity or a thriving dollar.
In yet another ripped from the movies-screen-esque event, Beijing was brought to a standstill today as a massive Interstellar-like sandstorm covered the Chinese capital in thick blanket of red dust, sparking social media discussions of the end of the world. As RT reports, The China Meteorological Administration issued a yellow sandstorm alert – the third-most serious danger level, which given the images below, makes us wonder just WTF it takes to get to a level 1 sandstorm...