Archive - Dec 2013

A month ago, the Bank of England's Cunliffe dismissed UK realtors' fears of a central bank-driven bubble in housing, by stating confidently that "it is not a boom or a bubble. It is a market correction, albeit a fairly quick one." But now, the man really in charge of the liquidity pedal, the BoE head Mark Carney has proclaimed:

• BOE'S CARNEY SAYS CONCERNED ABOUT POTENTIAL DEVELOPMENTS IN UK HOUSING MARKET
• BOE'S CARNEY: WANTS TO AVOID HOUSING MARKET MOVING TO 'WARP SPEED'

In the speech at the New York Economic Club, Carney went on note that this BoE-created bubble could be popped by raising capital requirements against the housing sector if need be; but we suspect the faster way to pop the momentum-chasing hot-money frenzy will be to pass the foreign homebuyers' capital gains tax.

While Newport Beach Lamborghini dealerships may be engaging in marketing gimmicks such as exchanging the 'explosively volatile' Bitcoins for Teslas; the true Bitcoinaires opt for something more internally combustible...

Commemorating 100 Years of Central Banking Fraud...

The quarterly Flow of Funds report by the Fed has been released and the latest household net worth numbers are out. While not nearly quite as dramatic as last quarter's wholesale dataset revision, which saw all of America suddenly worth $3 trillion more primarily due to a change of how "pension entitlements" (formerly "pension reserves") are calculated (more more in the full breakdown from September), with the resulting total net worth rising to a total of $74.8 trillion, according to the just released data, in the third quarter, US housholds, or rather a very tiny subset of them, saw their net worth rise once again, this time to $77.3 trillion from a revised $75.3 trillion.

Yesterday, a 33-year old Indian man got hit by the proverbial bus in Singapore’s Little India neighborhood. That was the catalyst. What transpired for the next several hours was a full blown riot... the first of its kind since 1969. Singapore has had years of tensions building. These issues are commonplace. Ideological differences. The wealth gap and economic uncertainty. Immigration challenges. They’re the same issues, for example, that have plunged much of Europe into turmoil, including the rise of a blatantly fascist political party in Greece. And these same issues exist, in abundance, in the Land of the Free… where a number of serious ideological divides are becoming obvious social chasms. And if it can happen in Singapore - one of the safest, most stable countries on the planet, it can happen anywhere. Even in a sterile American suburb.

While the second-derivative hopers and primary budget surplus believers cling to the faith that Stournaras talking about recovery is enough to bring the depressing Greek nation out of its slumber, the fact is that Greek deflation has never been worse. However, it gets worse... as a recent study by CFR finds that countries are most at risk of defaulting the year they turn a positive primary budget - meaning they are no longer reliant on their creditors. Simply put, the Greek government has far less incentive to pay, and far more negotiating leverage with, its creditors once it no longer needs to borrow from them to keep the country running - this makes it more likely, rather than less, that Greece will default sometime next year. Beggars, once again, become choosers.

The Obamacare enrollment portal is the gift that keeps on giving endless examples of government incompetence. The latest comes from Bloomberg which informs us that "there’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have, after about 1 in 4 enrollments sent to insurers from the federal website had garbled included incomplete information." Still that particular glitch was not enough to prevent Obama from taking full credit for a "fixed" website after somehow the White House managed to calculate that sign ups soared to 100,000 people, and have taken off since the "fix."

As the country's leaders search the world for funding, and in spite of the seemingly acquiescent removal of barriers from the government buildings by the police, the situation in Ukraine appears to growing more out of control:

• *UKRAINE'S TOP PROSECUTOR SAYS PROTESTS VIOLATE LAW
• *PROTESTS ENTAIL 'SEVERE CRIMINAL RESPONSIBILITY:' PROSECUTOR
• ARMED MASKED MEN SEIZE KIEV PARTY HEADQUARTERS OF JAILED OPPOSITION LEADER YULIA TYMOSHENKO-EYEWITNESS
• TYMOSHENKO PARTY SPOKESWOMAN SAYS RAIDERS TOOK COMPUTER SERVER, BLAMES POLICE; POLICE DENY INVOLVEMENT

As we warned previously, the nation's funding situation remains "precarious" and headlines will crow of consiliatory discussions, this action appears to be anything but - as perhaps the Ukrainian elite fear the same kind of "success" that the people's coup in Thailand appears to be having. Ukraine's CDS has reached its highest in 4 years.

No tsunami or earthquake but Entergy's Arkansas nuclear facility is offline...

*ENTERGY: ARKANSAS NUCLEAR ONE OFFLINE AFTER TRANSFORMER FIRE
*ENTERGY SAYS UNIT 2 OFFLINE, UNIT 1 REMAINS ONLINE

Reassuringly, Entergy explains there was "no damage to the actual nuclear reactor," for now.

First, delayed Bill auctions due to "technical glitches"... Now the first POMO of the day delayed by 15 minutes. Is Central Planning proving to be a touch problematic, or is this merely a slight disturbance in the farce?

The FSB's first chairman was Mario Draghi, current President of the European Central Bank, while its current chairman is Mark Carney, Governor of the Bank of England. The inclusion of Financial Market Infrastructures means that large parts of the global financial system is susceptible to bail-in and could potentially be bailed-in including exchange traded funds.

Technically, "High Yield" is no longer the appropriate name for the riskiest credit issuance since the average coupon has declined to where Investment Grade used to trade in the years before the New Normal. It is therefore only appropriate that as part and parcel of this record high yield bond issuance surge levering the riskiest companies to the gills with low interest debt, that there is also a scramble between underwriters to become as competitive as possible. And, sure enough, as Bloomberg Brief reports, "the underwriting fees disclosed to Bloomberg on U.S. junk bond deals average 1.276 percent for the year to date, the lowest since our records began. The prior low was set in 2008, when fees averaged 1.4 percent." 2008... that was when the last credit bubble burst on unprecedented demand for junk bonds: we are confident the bubble apologists will find some other metric with which to convince everyone that reality, and the Fed's Stein, have it all wrong.

Inflating serial asset bubbles is no substitute for rising real incomes. Why are we stuck with an economy that only generates serial credit/asset bubbles that crash with catastrophic consequences? The answer is actually fairly straightforward.

Silver prices are up over 1.5% this morning and gold +0.6% as the PMs play catch-up to Friday's post-NFP 'goldilocks' performance in stocks. Whether this is also fallout from Baidu's Bitcoin decision is unclear but gold did spike in early Asia trading.

The rate on the 10-year Treasury bond has risen dramatically. Is it priced in to stocks? Does it mean recovery, at last?