Archive - May 4, 2015 - Story

"China’s capital account might be closed—but it’s not that closed. Between 2003 and 2012, $1.3 trillion slipped out of mainland China—more than any other developing country... GFI says the most common way money leaks out in the developing world is through fake trade invoices. The other big culprit is “hot money,” likely due to corruption—which GFI gleans from inconsistencies in balance of payments data. In China, both activities have picked up since 2009." Just like in the U.S., the so-called government “stimulus” in China achieved nothing more than to stimulate an oligarch crime spree. Hence the global boom in $100 million real estate, art and everything extremely high-end. As intended, the bailouts and stimulus on a global basis went directly to the 0.0001%.

Since we last updated the state of Saudi Arabia's reserve stash, things have gone from bad to worse. It appears the battle to crush US Shale producers is taking its toll as The FT reports, Saudi Arabia is burning through its foreign reserves at a record rate as the kingdom seeks to maintain spending plans (and thus social stability) despite lower oil prices. All the time The Fed remains 'easy', no matter how negative US Shale cashflows are, the muppets will buy their debt and keep the mal-invested market alive. Saudi reserves are now their lowest in almost 2 years (but they have plenty more to chew through to out-wait The Fed).

"...this is a real problem... because today’s American is simply a shell of a citizen none of the criminal atrocities creates even a stir from us. Sure we all read about these atrocities and we are angered in the moment but it passes rather quickly and we fall back into our self-induced ignorant bliss."

Fourteen years after the PATRIOT Act was rushed into law, it is clear that sacrificing liberty does little or nothing to preserve security. Instead of trying to fool the American people with phony reforms, Congress should repeal all laws that violate the Fourth Amendment, starting with the PATRIOT Act.

And just as things in Baltimore were quieting down...

"At an extreme, investors could borrow RMB 85.7 for every RMB 100 of collateral in their portfolios. That suggests the theoretical ability to increase margin finance loans from the current 1.7 trillion yuan to as much as 9.4 trillion yuan," Bloomberg reports, citing a new note from Macquarie on China's margin-fueled equity rally. Meanwhile, Shanghai Securities News is reporting that at least two Chinese brokers are raising margin trading requirements, news we suspect will not go over well with China's legion of rabid day traders.

The world economy is in the grips of a dangerous delusion. As the great boom that began in the 1990s gave way to an even greater bust, policymakers resorted to the timeworn tricks of financial engineering in an effort to recapture the magic. In doing so, they turned an unbalanced global economy into the Petri dish of the greatest experiment in the modern history of economic policy. They were convinced that it was a controlled experiment. Nothing could be further from the truth.

Speculative bets on rising Brent crude oil prices reached a new record last week but under the surface futures and options market positioning among managed money accounts is flashing a very red warning signal...

In what was perhaps the most uneventful Ira Sohn book-talking conference in years, some of the biggest hedge fund names came, and as expected, talked their book. There were few surprises, perhaps with the exception of David Einhorn who may have pulled an Ackman and revealed his disdain for Pioneer Natural Resources, which sent the name and the fracking sector lower if only briefly. Indicative of the broader state of the "market" Einhorn was also the only person who pitched a short.

For the first time in more than ten years, the IMF believes the yuan is close to fairly valued. This comes as the fund considers the yuan for SDR inclusion later this year and as China attempts to promote the currency to a more prominent role in the global economy. Meanwhile, Bill Gates says that although he "loves the dollar" he'd "put his bet on yuan."

...lots of bills...

It's not easy being a millionaire in the New Normal.

Leak Mead is the largest reservoir in the country when at capacity. On May 2, the water level was down to 1,078.9 feet above sea level, the lowest since it was being filled in May 1937. If the water level is below 1,075 feet elevation – 4 feet below today’s level – by January 1, 2016, it will trigger a federal water emergency... and water rationing.

Just two weeks ago we pointed out the fact that The Fed had seemingly ignored Congressional demands for details with regard the 2012 FOMC Statement leak. Now we know why they missed the deadline:

*YELLEN SAYS SHE MET WITH MEDLEY GLOBAL ANALYST IN JUNE 2012, SAYS SHE DIDN'T GIVE MEDLEY CONFIDENTIAL INFORMATION

So she met with the analyst that leaked the statement... but didn't say anything? The Justice Department has opened a formal investigation into the FOMC leak (and we suspect sworn testimony coming).

With social unrest on the rise, knowing more about the judicial system is crucial for everyone...