Archive - May 30, 2015

What happens if the Fed actually stop reinvesting TSY holdings after they reach lift-off? Net supply will on the private market will increase accordingly and market volatility will force the FOMC to reassess their fleeting exit strategy...again

You can’t build a solid economy on the jelly of unaffordable housing, unpayable debts, and unsustainable asset prices. But that’s what we’ve got. The only way to get down to something more reliable... more real... and healthier... is to wash away the financial glop and goo that has accumulated during the last 30 years.

In simple terms, if the system is ever under duress again, money market funds can lock in capital (meaning you can’t get your money out) for up to 10 days. This is just the start of a much larger strategy by the Fed to declare War on Cash.

Game theorists know that a Plan A is never enough. One must also develop and put forward a credible Plan B – the implied threat that drives forward negotiations on Plan A. Greece’s finance minister, Yanis Varoufakis, knows this very well. Many people in Europe seem to believe that Varoufakis, an experienced game theorist but a political neophyte, does not know how to play the cards that Greece has been dealt. They should think again – before Greece walks away with the pot.

Successive rounds of government bond monetization have worked to destroy the Treasury, JGB, and EU core markets while the post-crisis regulatory regime has seen dealers back away from providing liquity in the secondary market for corporate credit just as the very same monetary policy that broke government bond markets has led to an explosion of new issuance from corporate borrowers, creating the potential for a self-feeding catastrophe in the event of selloff in corporate bonds.

The primary job of modern American regulators is to protect entrenched status quo interests. Protecting the public doesn’t even factor into the equation.

Just days after David Cameron's "I promise a referendum" victory in the British elections, which JPMorgan warns now looks likely to happen as early as 2016, France's far-right National Front party has called for an in/out referendum on the EU at the same time as the UK holds its vote. As EUObserver reports, Florian Philippot, an MEP and the party’s deputy head wrote to French President Francois Hollande this week, "the time has come to ask everybody in Europe Yes or No - if they want sovereignty to decide on their own future."

Combination of important events/data and large move in last two weeks, the dollar may pullback/consolidate in the days ahead.

Warren Buffet isn’t one of the richest men in the world with the flair for making a fast buck or two for nothing.