Archive - Jul 14, 2015

As if the long-suffering Greek people need more tragedy in their lives, here comes an admission from their chosen "leader" that Greece, as a sovereign nation, no longer exists: GREEK PM TSIPRAS SAYS LENDERS GIVE A MESSAGE THAT IN COUNTRIES UNDER A BAILOUT THERE IS NO POINT IN HOLDING ELECTIONS.

Just like the first IMF report, which we correctly compared to the IMF opening a Pandora's box, and with which the IMF also obliterated the careful plans of the Troika, so with this follow up, the IMF effectively crushes the Greek bailout process and literally tears Pandora's box to shreds, with the following summary assessment: "Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far."

Occupy Greece...

Despite the best efforts of some to sound the alarm, the nation is being locked down into a militarized, mechanized, hypersensitive, legalistic, self-righteous, goose-stepping antithesis of every principle upon which this nation was founded. All the while, the nation’s citizens seem content to buy into a carefully constructed, benevolent vision of life in America that bears little resemblance to the gritty, pain-etched reality that plagues those unfortunate enough to not belong to the rarefied elite. For those whose minds have been short-circuited into believing the candy-coated propaganda peddled by the politicians, here is an A-to-Z, back-to-the-basics primer of what life in the United States of America is really all about.

Retail Sales increased 10.6% YoY (smashing expectations of a 10.2% YoY Gain); Industrial Production rose 6.8% (crushing expectations of a 6.0% YoY gain); and the big daddy of goalseeked data, China GDP managed to rise 7.0% (comfortably beating expectations of just 6.8% but still the lowest since Q1 2009). Now it is up to the markets to decide if good data is bad news because it gives the government less excuses to throw more "measures" at the market; or is good data, good news as it "proves" the economic fundamentals underlying massively exponential gains in Chinese stocks (and excessive valuations compared to the rest of the world) are justified. When the data hit Chinese stocks were at the lows of the day, and for now, it appears good data is bad news as stocks are not bouncing at all.

The dollar has been a stalwart of international trade over the majority of the last century. Around the time of the formation of the Eurozone, it reached its recent peak at 71.0% of official foreign exchange reserves. Since then, its composition of global reserves has more recently dropped to a more modest 62.9% in 2014. However, the dollar is slowly losing its status as the world’s undisputed reserve currency.

In the wake of so many wasteful, inhumane and disastrous foreign policy failures, the U.S. government has been desperate to highlight some significant successes in order to justify all of these tragic foreign imperial blunders. One such supposed success relates to education in Afghanistan, an area into which some $1 billion in taxpayer money has been spent to build schools and pay teachers according to Buzzfeed. U.S. Government officials have consistently trumpeted all of the good work that has been done in this regard, but there’s one slight problem. Not only are most of the statistics complete bogus, but in many cases, a lot of this U.S. wealth that was meant to be targeted for education, has gone straight to the coffers of some of the most ruthless warlords in the county. How could this happen you ask?

As $170 billion hedge fund Bridgewater noted, "new participants are now discovering that making money in the markets is difficult," and sure enough, as WSJ reports, Asian hedge funds have suffered steep losses in June. Several hedge funds were hit with losses on longs (unable to square positions due to suspensions) as well as a dearth of effective tools to short, or bet against, Chinese stocks as they dropped, highlighting the downside of investing in an environment where managing risks is difficult and government actions are unpredictable.As the world anxiously awaits tonight's Retail Sales, Industrial Production, and crucially #goalseeked GDP, Chinese big cap stocks are continuing losses from the last 2 days. The CSI-300 - China's S&P 500 - is now down over 7% from post-intervention highs on Monday.

In a January 2013 report “Report of the Working Group to Study the Issues Related to Gold Imports and Gold Loans by NBFCs”, the Reserve Bank of India estimated that the ratio of paper gold trading to physical gold trading is 92:1. That is a lot of unbacked paper gold instruments. This has almost entirely separated the “gold price”, such as it is (the clearing price for vast volumes of paper gold “representations” with a fractional backing) from the fundamental supply and demand dynamics for actual physical gold bullion.

As Mr L. famously quipped. "Ever get the feeling you’ve been cheated?"

Europeans, even those who give not a damn for Greece, ought to beware.The Euro Summit statement of yesterday morning has nothing to do with economics, nor with any concern for the type of reform agenda capable of lifting Greece out of its mire. It is purely and simply a manifestation of the politics of humiliation in action.

World-renowned street artist Shepard Fairey - infamous for creating Obama's "Hope" image during the 2008 presidential campaign and more recently the "obey" street art - has apparently run out of it. He was arraigned today, after turning himself into Detroit police, on felony charges that he illegally tagged public and private property in the city. Detroit Police last month said Fairey set a bad example for other artists when he plastered his signature Andre the Giant posters on buildings in and near downtown.

If you’re into mysteries, there’s certainly no shortage of them around the world. Enjoying them is one thing, solving them is quite another.... Mysterious hounds and mysterious criminals certainly help keep our minds razor sharp as well as entertained. Yet, perhaps the biggest mystery in the world today involves - pension plans. Many people have them, and most people fully know what their eventual pension payout will be. Unfortunately, the average person doesn’t know how their pension plan is actually taped together, and fewer still, appreciate that the “promise” of their “eventual pension payout” is not as guaranteed as they may believe.

Moody's and Fitch are taking a hard look at student loan-backed ABS and they don't necessarily like what they see. Fortunately, Citi has some pointers on how the ratings agencies might go about avoiding downgrades.

"The International Monetary Fund has sent its strongest signal that it may walk away from Greece’s new bailout programme. Under its rules, the IMF is not allowed to participate in a bailout if a country’s debt is deemed unsustainable and there is no prospect of it returning to private bond markets for financing. The IMF has bent its rules to participate in previous Greek bailouts, but the memo suggests it can no longer do so," FT reports.

Despite everyone saying "it's a stock-picking market" (notably one of Cliff Asness' pet peeves) recent co-movements in global equities suggests once again that there is just one factor driving returns as systemic codependence surges...