Archive - Jun 2015

The situation in Greece has very little to do with politics or economics. Instead it is entirely focused on just one thing.

Having explained His vision for a new world order, The Holy See unleashed some scathing remarks towards the bankers of the world in his 183-page encyclical. Appearing to address the bank that does God's work, God's man on earth stated, "Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises." Furthermore, His Holiness called out the financial sector for having outsized influence over the political process and endorsed limiting its reach.

As so often, Mr. Tsipras makes a number of fair points. However, it seems to us that everybody is skirting the main issues. Greece cannot become a “socialist Utopia”, unless its citizens are happy with being condemned to a hand-to-mouth existence for a long, long time indeed. Whether or not Greece defaults, the one thing the government will be unable to fund is the very socialism that is its basic ideology.

The current interval, in which CAT retail sales have dropped for an unprecedented 30 months in a row (!) at an average monthly pace of -10% suggests that, when stripping away all the endless veneer and propaganda, there is nothing short of a Second Great Depression just below the surface.

Yeeeeeha!

Total rig count dropped 2 this week to 857. This is the smallest decline in rig count since Decmeber 5th 2014.

Once more Statoil is reducing its richest asset – employees – in order to keep financial losses to a minimum because of low oil prices. It will eliminate up to 1,500 more full-time jobs and 500 temporary consultant positions by the end of 2016.

In what can only be described as a shocking testimony, Greece’s former representative to the IMF, Panagiotis Roumeliotis, in front of the special parliamentary committee on the Greek debt, said that several Greek journalists were “trained” in Washington D.C. in order to support the positions of the IMF and the European Commission in Greek media.

Europe's VIX has never been higher relative to the US' VIX... ever.

Ronald Reagan is surely rolling in his grave. He is credited for much that he didn’t actually accomplish on the economic front, but his most singular real victory - decisive repudiation of the Keynesian macro-economic policy model that had produced stagflationary havoc for more than a decade - overshadows all his fiscal failures and the urban legend that he actually tamed Big Government. Needless to say, however, that 35-years ago repudiation has now been itself completely repudiated by the keynesian apparatchiks who presently rule the Eccles Building. This week Janet Yellen was at it again, displaying outright contempt for the Gipper’s crowning achievement.

A glance at a chart of 5Y Greek Govvies shows the last trade at a 16% yield, well below the worst 20% yields - suggesting yet another storm in a teacup as "markets know best." However, this is entirely wrong! Greek government bond trading has stopped... 5Y bonds have not traded since April 24th. In fact given current equity levels, 5Y yields would be closer to 22% - as bad they have been ever. The entire fixed income market in Greece has died with CDS liquidity having collapsed and only sporadic longer-dated bonds trading.

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.