Archive - Jun 19, 2015

Gold aided by a softer dollar, the Greek debt debacle and the U.S. Federal Reserve chairperson, Janet Yellen’s dovish comments from this week’s monetary policy statement.

The fox is guarding the henhouse at America's colleges and universities as accreditors slap a seal of approval on schools with subpar graduation rates, clearing the way for government aid to flow where it shoudln't and further imperiling the US taxpayer in the process.

History tells us two related facts. Central banks are always defeated by markets in the end, and central bankers have a touching faith that next time they will retain control over markets. But if we accept the lessons of history, we must dismiss complacency over systemic risk to the financial system. We can go even further, and begin to expect that of all the risks that will eventually trigger a widely expected financial crisis, it will be an old-fashioned bear market in bonds.

The amount of hate crawling through his soul must be mind-numbing.

Yesterday evening, after what had been a dramatic surge in the Greek bank run which has resulted in over €3 billion in cash withdrawn through Thursday night, the Greek central bank requested an emergency cash dispensation from the ECB under the country's Emergency Liquidity Assistance program, just one day after the ECB granted the latest €1.1 billion expansion in the ELA. Rarlier today, in an unscheduled session, the ECB did as requested, however it granted Greece far less than the amount it sought, and according to MarketNews reports, the ECB gave Greece just €1.8 billion in addition funds.

We are running dangerously low on "conspiracy theories"

As the carnage began last night in China we noted the extreme levels of volatility the major indices had experienced in recent weeks. By the close, things were ugly with the broad Shanghai Composite down a stunning 13.3% on the week - the most since Lehman in 2008 (with Shenzhen slightly better at down 12.8% and CHINEXT down a record-breaking 14.99%). To put this in context, Chinese stocks lost almost $1 trillion in market cap last week - 10% of its GDP!

On the heels of Thursday's move by Belgium, France, and Austria to freeze Russian state assets in connection with the disputed Yukos ECHR ruling, Moscow vows to retailiate in kind, while the chairman of the former Yukos holding company pushes the US to join Europe in enforcing the arbitration court's decision. 

There is hardly a better signal that inflection points in asset classes have been reached than major shifts in capital in/outflows. As a reminder, Bank of America has practically made a career of dragging out the old "great rotation" canard every time there has been a, well, great rotation, out of bonds and into stocks for the past 4 years... only to always top (and bottom) tick said capital flows. Overnight it did it again, when it reported that based on EPFR data, bond funds just suffered the biggest weekly outflow in 2 years of some $10.3 billion matched by a $10.8 billion inflow into stock funds: the largest since March.

Since 1929, the Dow Jones Industrial Average has rarely ever been so close to a 52-week high while the Dow Transports AND Dow Utilities were so close to a 6-month low. Following this kind of divergence, the median return for the DJIA and DJT was negative on all time frames, from 1 month to 1 year. Things were particularly bad – and consistently so – at the 3-month marker.

Tom Hayes told prosecutors in 2013 that UBS Group AG distributed "an instruction manual on fixing Libor" to suit their trading positions. The Swiss bank’s e-mailed “Guide to Publishing Libor Rates,” which was shown to jurors by prosecutors in London Thursday, included an instruction for traders to adjust their submissions depending on their “delta/fixing position.” “If 3m Libor” exposure “is 4,125 this means we are receiving” and “therefore we want to increase the fixing by 25 basis points,” according to the internal UBS guide. “If the number is negative then vice-versa.”

While the ECB is deciding the fate of Greece whether or not it will hike Greek ELA yet again in another emergency meeting (according to preliminary Reuters reports the answer is yes), Greek PM Tsipras is speaking live at the St. Petersburg International Economic Forum, just meters away from the "isolated" Putin. Live webcast after the jump.

The troika is tightening the screws on Greece and its ailing banks. With deposit flight running above €1 billion per day, the ECB may look to tie future ELA cap increases to austerity concessions in a move that would appear to support Yanis Varoufakis' implicit suggestion that the troika is colluding to exploit deposit outflows to force political change in Athens.

• Greek PM optimistic on debt deal as banks bleed (Reuters)
• Greek central bank chief says banking system stable (Kathimerini)
• ECB Said to Confer on Emergency Greek Aid Amid Cash Flight (BBG)
• More tax "avoidance": Citigroup to shift European retail banking HQ to Dublin (Reuters)
• Florist's tip led police to Charleston shooting suspect (USAToday)
• Asian shares edge higher on Fed caution, China sell-off intensifies (Reuters)
• Toyota in damage control mode after American exec arrested (Reuters)
• Venezuela Oil Loans Go Awry for China (WSJ)