Archive - May 13, 2014 - Story

While many dismiss the impact of the "baby boomer" generation moving into retirement, the reality is likely to be far different. If the current survey is representative of that particular group, the drag on the financial markets and economy over the next decade could be quite substantial.

Just in case you were not convinced what a fragile fallacious lie the entire world's status quo has become, the Bank of Japan just provided one more straw on the camel's back of faith-based investing. As Bloomberg reports, BoJ officials are concerned that cooler-than-normal weather triggered by El Nino this summer will curb spending and weigh on an economic rebound. The Japan Meteorological Agency this week forecast a 70% chance El Nino will occur, the highest since its last occurrence in 2009, bringing lower temperatures that could continue through autumn - and, according to Dai-Ichi, could lower growth by as much as 0.9 percentage points. "We can't rule out the potential that the El Nino this summer causes unexpected damage to Japan’s economy," Nagahama said... the first pre-blamed weather forecast from a central bank we are aware of. Of course, given the dismal retail sales data this morning, we suspect a cooler-than-expected summer will be the scapegoat for a lack of economic escape velocity in the US also.

When good decisions are no longer possible, bad decisions are inevitable.

We have covered the topic of the student loan bubble extensively in the past so we won't waste more digital ink on where it comes from or what it means for the troubled US consumer, suffice to report that according to the Fed, in Q1 total Federal student loans rose by another $31 billion to a record $1.11 trillion, and up a whopping $125 billion, or 12% from this time last year.

Having questioned whether Tim Geithner leaked every Fed announcement to the banks during his tenure (but did not mention it in his memoirs) and shown that traders acted on information at faster than the speed of light (and thus were indeed aware of leaked decisions ahead of time), it should be no surprise that a new research paper has found “robust evidence” that some traders have been getting early news of U.S. Federal Reserve rate announcements and then trading on it during the Fed’s media lockup. The trading anomalies that Bernile and his colleagues spotted begin about 15 minutes before the news embargo is lifted and continue at a fairly even pace and are "statistically significant and in the direction of the subsequent policy surprise." So - are the markets rigged?

Headlines were made earlier today as Ireland’s ten year borrowing costs dropped below the UK’s for the first time in six years. Given that it only recently exited a bailout programme and not long ago was mired in the worst crisis in a generation, this is a pretty astonishing turnaround. Nor is Ireland alone. Spain and Italy can now borrow at similar rates to the USA on ten year debt. More broadly, in the past year peripheral countries borrowing costs have plummeted to levels seen before the crisis, or below, as countries begin exiting bailouts and returning to the markets. There are three key factors driving this 'bubble" and five major problems stemming from this seeming nirvana.

"New starts contracted 15% yoy (vs. -21.9% yoy in March); property sales fell 14.3% yoy (vs. -7.5% yoy); and land sales (by area) plunged 20.5% yoy (vs. -16.9% yoy previously). ... the housing market situation has undoubtedly turned quite gloomy. There has been a constant news stream of falling property prices everywhere, even in the 1-tier cities. A number of local governments, as we expected, have started to ease policy locally, especially relaxation of the home-purchase restrictions." - Soc Gen

As Europe closes with a record high DAX and a 15 year high for the FTSE-100, it seems the weakness implied by USDJPY and bonds has caught up (or down) to US equities. After bagging the 1,900 level, the S&P 500 is now down on the day and while Trannies hold green, the Russell 2000 is getting slammed (-0.8%)... but it's Tuesday!!!

Mr. Bowden, who heads the SEC’s examinations unit, speaking at a private equity conference, explained that “more than 50 percent of private equity firms it has audited have engaged in serious infractions of securities laws.” What is so incredible about the talk, is that while Bowden goes into details of shady practice after shady practice, he ultimately admits that the SEC isn’t being particularly aggressive with the private equity industry because “we believe that most people in the industry are trying to do the right thing, to help their clients, to grow their business, and to provide for their owners and employees.” What the SEC is basically admitting, is that private equity firms are also “too big to regulate” and, of course, “too big to jail.”

With another day left until the 48-hour "leave or face war" deadline imposed by the newly-independent regions of Ukraine, Interfax is reporting:

• *SIX UKRAINE SOLDIERS KILLED, 8 INJURED AFTER CONVOY ATTACK: IFX
• *ATTACK ON UKRAINIAN ARMY CONVOY NEAR SEPARATIST-HELD SLOVYANSK

This follows earlier concerns from Germany's Schaeuble who said he "can imagine" a worsening of the Ukraine crisis.

Just 2 days after the people of the Luhansk region voted for secession to Russia - despite protestation from the West and calls for delays from Putin - the self-proclaimed "people's governor" of the region has been injured in an apparent assassination attempt this morning. A car carrying Valery Bolotov was shot at and the press office reports that "he is injured and is currently in a private hospital." Of course, it is unclear who opened fire upon the governor but it certainly won't please Putin who has vowed to protect the rights of his people in that region...

Just as Russia had promised, sanctions were not effective and so they went straight to targeted bans. On the heels of The Pentagon admitting that they had "no solution" to replacing Russian rocket engines in the launch systems for US military satellites (as we have covered extensively), Deputy Prime Minister Dmitry Rogozin this morning announced:

*ROGOZIN: RUSSIA TO HALT U.S. GPS BASES IN RUSSIA ON JUNE 1:IFX
*RUSSIAN BAN ON ROCKET USE FOR US MILITARY SATELLITE LAUNCHES: IFX

He further added that Russia will not extend its partnership in the International Space Station beyond 2020 (which suggests Russia does not expect a quick resolution to the current tensions).

From January 3rd...

Goldman: "We forecast the S&P 500 will end 2014 at 1900 (+3%)"

— zerohedge (@zerohedge) January 3, 2014

Mission Accomplished (8 months early)