Archive - Jun 2015

For the 2nd time in a month, China's Shanghai Composite entered a correction, plunging 10% from local highs as headlines of delayed IPOs and large-scale steel 'dumping' at a loss combined with global monetary policy fireworks and European event risks. The rest of the more highly sensitive and manic Chinese equity markets are also plunging with CHINEXT and CSI-300 down over 7% in the last month (and 17% from the highs in the case of the former). Chinese stocks have gone nowhere in a month...and are now in fact notably lower in June.

It’s not difficult to see that the foundation is crumbling...

"There are clear advantages to going against the herd at the moment,” said the Head of Multi Asset at Sweden's largest fund manager.“You get more return taking less risk by not joining a herd that goes for an asset without fundamental backing.” Ultimately, investors are aware of the disconnect between fundamentals and valuations, so they’re “trigger-happy.” That means they’re ready to “reverse as soon as things shake a little,” he said adding that " the shortage of liquidity is a sign people are starting to doubt the sustainability of the current price environment."

"When I left the military, I started noticing all the other ways in which the government turned the Constitution into a punchline. And that practice has only accelerated. The American Revolution itself was predicated on the inequity of taxation without representation. Are your interests represented when they buy bombs and body scanners? Mine certainly aren’t. Yet people who define patriotism by the frequency and rapidity of their flag-waving think that we all have some collective duty to ignorantly believe whatever we’re told by the government. I disagree."

Through a series of "fairly complicated" and "quite amazing" legal maneuvers, Jim Simons' Renaissance Technologies has devised a way for employees to invest their retirement savings tax free in Medallion fund which has averaged 72% annually for the past ten years.

Pope Francis says that global warming is a fact and that a new global political authority is necessary in order to save humanity from utter disaster. The new encyclical that was scheduled to be released on Thursday has been leaked, and it is being reported that this new global political authority that Pope Francis envisions would be in charge of “the reduction of pollution and the development of poor countries and regions”.

The mainstream media is still full of articles about the alleged evils of cash, which we regard as a typical “trial balloon” launched by the powers-that-be. A salami tactic is therefore employed, not least because this ensures that there will be little protest. A new law or regulation may not be seen as overly onerous in isolation. The average citizen may well think – if he or she is even aware of the adoption of a new law: “Oh well, it is a bit creepy” or “it does make life a bit more difficult”, but “if it helps to keep us safer/more prosperous/more free/saves the planet, I can put up with it”. And so one freedom after another is taken away. If pursued to its logical conclusion, no freedom will be left in the end.

Both France and Belgium have moved to freeze Russian state assets on Thursday, prompting an angry response from Moscow and serving to further inflame tensions between Russia and Europe amid escalating violence in Ukraine and an increasingly aggressive stance towards the Kremlin on the part of Washington and NATO.

"Last Wednesday — exactly one week before the Charleston church massacre — Roof told his friends and neighbors at the park that 'he was looking to kill a bunch of people on Wednesday.'"

Don't think, buy! Here's why...

The evolution of corporate earnings in their broadest form can provide a useful indication of the subsequent performance of the US stock markets. This makes intuitive sense. Growing earnings are generally a reflection of good economic conditions which should be bullish for equities. The opposite also applies of course. But it is at key turning points that this indicator becomes particularly insightful, in our opinion even more than the actual level of the price-earnings ratio.

Greece completes stage one of the dreaded "Russian pivot" as energy ministers from Athens and Moscow ink an MOU on Gazprom's Turkish Stream pipeline. Meanwhile, Gazprom signs a deal with Shell and others to double the capacity of the Nord line, a move which will, over time, decrease the energy giant's dependence on Ukraine for transport.

Having vehemently denied teh rumor that Benoit Coeure specifically said he questioned whether Greek banks will open on Monday, The ECB has, rather awkwardly, admitted that:

*ECB SAID TO HOLD UNSCHEDULED CALL ON GREECE ELA ON FRIDAY

Given the accelerating outflows and implicit bank run today's comments will create, if The ECB does not re-up the ELA, it is indeed over for Greek banks (unless Russia or China step in over the weekend) come Monday morning.