Archive - Apr 19, 2015

China may allow commercial banks to swap the local government bonds they purchase for cash loans from the PBoC, WSJ reports. The country's local governments are laboring under a debt load that totals 35% of GDP and much of it carries relatively high interest rates. A new program will allow localities to swap a portion of that debt for lower-yielding bonds. If China does indeed roll out an LTRO-like initiative, the banks which buy the new local government bonds would then be able to pledge them as collateral for cash from the central bank.

While life is not always fair, here's an elegant way to avoid unfairness when it comes to your investments

Energy companies “biding their time in the hopes they don’t have to face the music.”

The American justice system is broken. Completely and totally broken... "The Justice Department and FBI have formally acknowledged that nearly every examiner in an elite FBI forensic unit gave flawed testimony in almost all trials in which they offered evidence against criminal defendants over more than a two-decade period before 2000."

After crashing 6-7% on Friday (depending on which Chinese stock index you prefer) - all after the cash markets closed in China - thanks to today's major RRR cut, China stock futures are up 7% from Friday's US session close. However, while futures have recovered all those losses, the Shanghai Composite cash index is trading modestly lower from its Friday cash close levels (we suspect a little disappointingly to some) after recovering the entire loss from post-China-close Friday.

Nearly three years later of manipulated, artificially propped up markets floating on $22 trillion in central bank assets, Jon Corzine has had enough of waiting for a correction which almost came (and then Bullard brought up QE4) but not really. So, as the WSJ reports, the time has come for another push for Vapor Capital Asset Mismanagement LP.nearly three years later of manipulated, artificially propped up markets floating on $22 trillion in central bank assets, Jon Corzine has had enough of waiting for a correction which almost came (and then Bullard brought up QE4) but not really. So, as the WSJ reports, the time has come for another push for Vapor Capital Asset Mismanagement LP.

If you’re inclined to agree with the notion that trends in cash-based businesses are a good leading indicator when it comes to assessing where consumer spending (and thus the US economy) is headed going forward, you should expect the string of retail sales misses to continue because as Andrew Zatlin notes, spending on hookers, booze, and gambling is now sliding, forcing some escorts to take their show on the road.

With all eyes and talking heads focused on the 'weather', it seems cold, wet, snowy, and frigid are the most GDP-destructive adjectives. However, as Bloomberg reports, the drought out West is starting to infiltrate U.S. housing data, according to the chief economist of a homebuilders' group, and weakening a major part of the nation's economy.

In a fiat currency system, perception is, by definition, everything. Paper money has no intrinsic value. So the people saving it and accepting it in exchange aren’t expressing faith in the money itself but in the competence and honesty — and power — of the institutions managing it. Let that faith erode and those slips of colored paper and ephemeral computer bits revert to their intrinsic value. And on the credibility front, the trends aren’t encouraging.

Meet Zhang Shuang - Cliff-Cleaning Litter-Collector...

Financial engineering is one of the worst ills perpetuated by the Fed’s regime of cheap debt and money market subsidies for speculation. And these deformations are turbo-charged by the tax code which creates a powerful bias toward loading capital structures with tax deductible debt, and to delivering returns as lightly taxed capital gains rather than ordinary income. In fact, stock buybacks and LBOs are the bastard offspring of the IRS and Federal Reserve.

While conceding that a Greek exit from the euro would put everyone in “uncharted waters,” the ECB chief says he has the tools to combat contagion and as for shorting the euro, well, perhaps the best way to sum up Draghi’s position is to quote Clint Eastwood: “go ahead, make my day.”  

Nothing is ever permanent with the QE’s because they were doomed from the start. The “dollar” system can never be refined and remade to its prior station because it was irrevocably broken on August 9, 2007. All that QE’s have done is to create reverberation within the downward channel which may, in the end, only exacerbate the degree of imbalance that weighs on the inevitable shift.

We have never, ever, seen a larger Fed-fueled, mal-investment boom in private construction...