Archive - Mar 2014

"Europe faces 25 years of Japan-style stagnation," warns George Soros in this brief Bloomberg TV interview, adding that without deeper integration, "it’s an incomplete association of nations and it may not survive." While claiming that the financial crisis may be over they now "face a political crisis," with the voluntary association cracking due to the creditors (Germany) being in charge. However, he hopes "Ukraine is a wake-up call to Europe, because Russia has emerged as a rival to the European Union." Putin, Soros worries, "has a very different idea of what a society should be like... he has a blind spot - he believes people can be manipulated and cannot resist." That's not the case according to Soros, who exclaims "people do believe in freedom."

With all eyes focused on China (which is quiet for now), Japanese bond futures just collapsed over a point on very heavy volume only to be instantly lifted back to a modest loss in what appears to be a flash-crash - rather than a fat-finger (jamming June JGBs down to 2-month low prices). Gold, meanwhile, is continuing its day-session rally and has topped $1370 - it's highest since September 19th. US equities are holding gains for now as JPY is bid (i.e. JPY crosses are tumbling).

"I don’t think they’ve solved anything. I think they’ve compounded the underlying problems that caused the last crisis, and so now the next crisis will be that much worse because of what the central banks did, in particular the Federal Reserve...The Fed is building an economy that is completely dependent on that cheap money. And so if you take it away, the economy implodes, but if you don’t take it away, then it’s worse." The idea is to preempt capital controls - "get out the window before it slams shut!"

Australia just added the 3rd most full-time jobs ever in a month according to the Aussie Bureau of Statistics. That is 16-times the average monthly gain since 1978. Of course, rather than shrug it off as some idiotic aberration as the nation suffers under the crushing blow of a collapsing commodit market and shrinking China, "traders" bid AUDJPY to the moon (which sparked a mini-rally in US equity futures).

News about Bitcoin suddenly seems to be everywhere. The severe technological and security problems that have led to the outright collapse of Mt. Gox – the largest bitcoin exchange globally - on top of the stunning spike in bitcoin prices by more than five-fold late last year and spectacular collapse (then some rebound!) since, some high-profile arrests in the Bitcoin universe, and a swath of regulators and government officials beginning to weigh in on the subject have pushed Bitcoin and digital currencies into the headlines enough to warrant Goldman Sachs discussing it.

At the onset of the derivatives collapse in 2007/2008 it would have been easy to assume that most of America was receiving a valuable education in normalcy bias. As much as we are for people waking up to the nature of the crisis, there comes a point when those who are going to figure it out will figure it out, and the rest are essentially hopeless. The cultism surrounding the U.S. economy and the U.S. dollar is truly mind boggling, and by “cultism” we mean a blind faith in the fiat currency mechanism that goes beyond all logic, reason and evidence.

Globalization is certainly at the heart of what it means to become a trading partner with another country. I’ll scratch your back if you scratch mine. But, what happens when the itching continues or the scratcher starts scratching himself in an unlikely place rather than where he’s supposed to?

Chernobyl and Fukushima Studies Show that Radiation Reduces Animal and Plant Numbers, Lifespan, Fertility, Brain Size and Diversity … and Increases Deformities and Abnormalities

Ukraine, we are told, is infamous for its colorful proverbs and as the title suggests Citi's Matt King warns that emerging market (EM) bond investors may yet become familiar with more of them in coming weeks. Unfortunately Ukraine’s importance is greater than its economic or even geopolitical significance would suggest. Risk premia everywhere have been compressed by the prolonged force-feeding of central bank liquidity. EM in particular has benefited from enormous inflows. However, for developed market (DM), King believes even a serious deterioration in Ukraine still feels unlikely to really derail the serene march tighter we see in spreads – but even so, he warns there are some broader implications of the EM woes which investors would do well to be aware of as "drunkards know no danger".

The profane alliance between big banks, big corporations, and big government has created the Big Brother surveillance society we are living under today. And 95% of the populace is either willfully ignorant or perfectly happy with a boot stomping on their face forever. We have willingly become hopelessly enslaved while believing we are free. A population unable or unwilling to think critically doesn’t comprehend the extreme danger to our civil liberties from the unwarranted intrusion into our private lives by a surveillance police state bent on bribing, coercing and silencing dissent, truth and First Amendment rights.

In what Democrats must be hoping is not a bellwether for the mid-term elections, Republican David Jolly won a closely watched special election in a battleground district in Florida yesterday. As WaPo reports, Democrats and Republicans spent millions of dollars with Jolly favoring repealing and replacing Obamacare, which was a central focus of the campaign, while his Democratic opponent did not. The race was close (Jolly won by 3,400 votes of the 183,000 cast), but as WaPo notes, the Florida result is likely to raise Democrat concerns (especially considering the Democrat's money advantage in the race).

The Fed is playing a very dangerous game here. It was way behind the curve on deflation and economic weakness going into the crash of 2008. Today, it continues to worry about deflation when the clear signs show that inflation is already on the rise.

Three weeks ago, John Kerry came, saw, and launched a blitz-diplomatic campaign which promptly resulted in, well, Russia annexing Crimea. Now it is the turn of that other foreign policy titan, neo-con John McCain, to complete Kerry's job and finally launch the GDP-boosting World War III. He may have the chance to do that as soon as Thursday, when he, along with other senators, is slated to travel to Ukraine to "show support for the government there." Or, said otherwise, to show support for the government that is in power thanks to an illegitimate and deadly coup that took place just over two weeks ago, despite the formal signing of a memorandum, endorsed by all Western powers, that stipulated a peaceful transition as well as presidential elections in the coming months. When presented like that, one almost thinks back to the roaring success that was the US endorsement of the Egyptian Muslim Brotherhood regime (where the US too had zero involvement, repeat zero involvement) that also took over following a violent coup. As well as the largely predictable countercoup that overthrew said regime.

The Fed and the other major central banks have been planting time bombs all over the global financial system for years, but especially since their post-crisis money printing spree incepted in the fall of 2008.  Now comes a new leader to the Eccles Building who is not only bubble-blind like her two predecessors, but is also apparently bubble-mute. Janet Yellen is pleased to speak of financial bubbles as a “misalignment of asset prices,” and professes not to espy any on the horizon. Actually, the Fed’s bubble blindness stems from even worse than servility. The problem is an irredeemably flawed monetary doctrine that tracks, targets and aims to goose Keynesian GDP flows using the crude tools of central banking. Not surprisingly, therefore, our monetary central planners are always, well, surprised, when financial fire storms break-out. Even now, after more than a half-dozen collapses since the Greenspan era of Bubble Finance incepted in 1987, they don’t recognize that it is they who are carrying what amounts to monetary gas cans.

The last few days have seen credit markets weaken drastically, Treasuries rallying, precious metals bid, and copper prices collapsing... but amid all of that stocks are "staying the course." Perhaps the following 3 charts of the last few days will explain where that magical bid is coming from...