Archive - Apr 2014

Just as we should be re-assured by Shinzo Abe's declaration that the Olympics will be 'safe' in Japan (despite his incessant calls for recovery in the Japanese economy when it is actually collapsing under its own devalued currency import costs); the UN is out with a report that states it did not expect “significant changes” in future cancer rates that could be attributed to radiation exposure from the reactor meltdowns. The levels, according to their report, were much lower than Chernobyl and therefore the Fukushima nuclear disaster is unlikely to lead to a rise in people developing cancer. But... some children 'might' have received doses that could affect their risk of developing cancer later in life...

Forget sanctions; forget denouncements; forget red lines... there is only one thing that can stop Putin from taking over Europe...

Dispassionate big picture overview.  

Presenting: Japan.

The fine art of Presidential shlock...

In an excellent interview with STA Wealth's Lance Roberts, A. Gary Shilling dives into a number of issues. From four more years of deleveraging to go to five potential major shocks that will force "an agonizing reappraisal and switch to "risk off" strategies" for most long-only equity investors, Shilling is cautious; but his biggest fear is China (for these 8 reasons)...

While the general sentiment may be that Russia has put its territorial expansion plans vis-a-vis Ukraine on hold, if only for the time being, pro-Russian protesters in East Ukraine, whether premeditated or spontaneous, seem to have not gotten the memo. Earlier today, in a repeat of events that took place just as the pre-Crimea annexation plotline hit a fever pitch, dozens of pro-Russia protesters in the eastern Ukrainian city of Donetsk stormed the regional government building on Sunday and hung a Russian flag, demanding once again for autonomy from Ukraine.

A mere two weeks since former JPMorgan banker, Kenneth Bellando jumped to his death, Bloomberg reports that the former CEO of Dutch Bank ABN Amro (and his wife and daughter) were found dead at their home after a possible "family tragedy." This expands the dismal list of senior financial services executive deaths to 12 in the last few months. The 57-year-old Jan Peter Schmittmann, was reportedly discovered by his other daughter when she arrived home that morning. Police declined to comment on the cirumstances of his (and his wife and daughter's) death. This is not the first C-level ABN Amro banker to be found dead. In 2009, former CFO Huibert Boumeester was discovered with (assumed self-inflicted) shotgun wounds. 

Market consensus is that deflation remains the greatest threat to the global economy. But that's ignoring signs of impending inflation, particularly in the US.

The monetary watchdog says so...

"The global financial landscape was evolving. Ever since World War II, US bankers hadn’t worried too much about their supremacy being challenged by other international banks, which were still playing catch-up in terms of deposits, loans, and global customers. But by now the international banks had moved beyond postwar reconstructive pain and gained significant ground by trading with Cold War enemies of the United States. They were, in short, cutting into the global market that the US bankers had dominated by extending themselves into areas in which the US bankers were absent for US policy reasons. There was no such thing as “enough” of a market share in this game. As a result, US bankers had to take a longer, harder look at the “shackles” hampering their growth. To remain globally competitive, among other things, bankers sought to shatter post-Depression legislative barriers like Glass-Steagall. They wielded fear coated in shades of nationalism as a weapon: if US bankers became less competitive, then by extension the United States would become less powerful. The competition argument would remain dominant on Wall Street and in Washington for nearly three decades, until the separation of speculative and commercial banking that had been invoked by the Glass-Steagall Act would be no more."

In a further demonstration of the socially destructive and ever widening gap between the haves and have nots, we see that the affluent are buying second homes at an ever increasing clip (up 30% last year), while first home buyers recede into the abyss as private equity and Chinese buyers make purchasing a home unaffordable for the average American. Specifically, a recent study from Zillow showed that more than half the homes in seven major American cities are unaffordable based on historical standards.

China is coming under close scrutiny these days, as the leadership scurries to find new sources of economic growth and control its debt. Some analysts have reassured China watchers that the Chinese government can simply write off its bad debt, at least within the major banks, and pass it on to the asset management companies that handle that resale of distressed debt (or have it later purchased by the Ministry of Finance). Others have warned that some of the debt is serious, such as that incurred by local government financing vehicles, and are dubious about the sustainability of these entities. To worry or unwind? How much debt can China really absorb?

With all the hoopla about missing airplanes, renewed wars of the cold variety, and rigged markets, it is easy to forget that America is now officially a totalitarian state of the Orwellian kind, where the population has - involuntarily - ceded all of its privacy in exchange for... something. Because it certainly isn't security. So we are happy to provide a reminder of just this, especially since as BusinessWeek notes, it gets harder to keep track of all the bizarre ways the National Security Agency has cooked up to spy on people and governments. This may help.

The ethical problems associated with the US 'drone war', as well as the enormous blow-back potential it harbors are seemingly finally rousing Congress into asking questions. After hundreds of civilian deaths and the enormous help they have reportedly provided to Al Qaeda's recruitment drive in the regions concerned, it may indeed be time to wonder 'who is actually killed' by US drone strikes. It would surely be a case of 'better late than never', but one should actually better not get one's hopes up...