Archive - Sep 2014 - Story

Everywhere...

With China's property developers slashing prices, piling on incentives, and still seeing sales slump; it is no surprise that demand from the top to the bottom across Asia is falling. As Reuters reports, even Singapore's Sentosa Cove (the man-made island resort billed as Asia's Monte Carlo) is eerily silent as the billionaires seem to be staying away with prices down over 20-30% in the past year. New mortgage business is down over 40% as "the rential can't even cover the mortgage anymore." As one analyst notes, "the tables have turned," adding rather ominously that, "The way prices have fallen, it's as if there is a global financial crisis."

And for tonight's menu of disastrous Japanese economic data, we have (drum roll please)... Auto sales. Overall auto sales fell 9.1% YoY to 333,471 - the lowest in 3 years. Minicars dropped a stunning 15.1% YoY according to the Japanese auto dealers association. The response - rather obvious by now - to this terrible news... a 35 pip vertial ramp in USDJPY which can mean only one thing - the Nikkei 225 rallied 150 points... On a side note, following disappointing PMIs, China fixed the Yuan at 4-month lows.

Capitalism gets into deep trouble when the price of financial assets becomes completely disconnected from economic reality and common sense. What ensues is rampant speculation in which financial gamblers careen from one hot money play to the next, leaving the financial system distorted and unstable - a proverbial train wreck waiting to happen. That’s where we are now.

...subject to change indeed...

A lack of strategy is a glimmer of hope. Perhaps the president will finally stop listening to the neocons and interventionists whose recommendations have gotten us into this mess in the first place! Here’s a strategy: just come home.

If after months of Eurasian axis formation, one still hasn't realized why in the grand game over Ukraine supremacy - not to mention superpower geopolitics - Europe, and the West, has zero leverage, while Russia has all the trump cards, then today's latest development in Chinese-Russian cooperation should make it abundantly clear.  Overnight, following a grand ceremony in the Siberian city of Yakutsk, Russia and China officially began the construction of a new gas pipeline linking the countries. The bottom line to Russia - nearly half a trillion after China's CNPC agreed to buy $400bn in gas from Russia's Gazprom back in May. In return, Russia will ship 38 billion cubic meters (bcm) of gas annually over a period of 30 years. The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world's largest fuel network in the world.

While NATO is happy to provide Russia with geographical advice, we thought the following map of "the world" will help explain President Obama's increased use of the term "isolated" when it comes to Russia...

As if the fearmongery and vitriol of UK, Europe and the US were not enough, the Middle-East's 'allied' leaders are now opining on the threat of ISIS. As FOX News reports, The king of Saudi Arabia has warned that jihadists could target the United States and Europe if leaders across the globe do not react to growing terrorist threats as Islamic State militants make advances across Iraq and Syria. "If neglected, I am certain that after a month they will reach Europe and, after another month, America," blasted King Abdullah, adding Cameron-esquely, "they know no humanity." Of course, this is quote ironic given the Saudi's funding of various terror groups throughout the region.

The violent protests that raged yesterday have turned deadly as clashes between riot police and anti-government protesters left 3 dead and at least 470 injured according to The WSJ. The military, who are acting as mediators between PM Sharif and opposition leader Imran Khan have warned both sides that they neither support the others view or sanction further use of violence to suppress crowds. Mr. Khan exclaimed to the people, "if you want to be free, if you want to have a real democracy, the time has come;" as another protester noted "the police were brutal, but that is good because whenever blood is shed in a movement, it turns into a revolution." Meanwhile, the so-called "soft-coup" as WaPo refers to it continues to harden (threatening $3bn of US aid) as Prime Minister Sharif is left with fewer and fewer options.

• Off balance sheet vehicles?  Check
• Conflicted bank "research" recommending muppets buy stock while soliciting banking fees from same stock?  Check
• Hoping to sell debt on to muppets?  Check
• Chinese corruption? Check
• State bailout of failed bank? Check

Does the use of leverage (properly defined) and derivatives (properly defined) create trading risks that wouldn’t be there if you just bought the Vanguard 60/40 fund and called it a day? Sure. But we believe risk-balancing strategies mitigate far more dangerous risks to a public pension portfolio – particularly an over-reliance on equity markets. Public pensions are complex entities whose liability structures are often many times greater than the size of their investment portfolios. The common practice to resolve this dilemma has been to pursue an equity-dominated asset structure that has greater chances of achieving the required return to make the entire structure work. The problem is that equities are themselves leveraged, but it’s hidden leverage and thus hidden risk.

Just 3 months ago, as Americans celebrated Memorial Day, the spot price of gold jerked $20 higher (then plunged) as gold futures closed. Today, as Americans celebrate Labor Day, the liquidity-less market for spot gold just dropped $6, ripped back and settled lower in the space of a few minutes (with bids and offers fully crossed for a few minutes) as someone clearly forgot to tell the machines that the market is closed...

You didn't build that... Unions did. Vice President Joe Biden gave a 'rousing' Labor Day speech this morning explaining that "Unions did, in fact, build the middle-class... and that built The United States of America as we know it."

“Political power grows out of the barrel of a gun.” While some quotes are indelibly linked with certain politicians - in this case, Mao Zedong - in many other cases, what leaders say can sound the same, no matter what end of the political spectrum they sit on. WSJ Real Time China blog asks can you tell some of his other musings apart from those of U.S. President Barack Obama? Or current Chinese President Xi Jinping?