Lord Overstone said it best. “No warning can save people determined to grow suddenly rich.” Case in point - CYNK Technology Corp, a listed company that as of this morning has a market capitalization in excess of $1 BILLION. According to official filings, the social media development company had one employee, no website, no revenue, no product, and no assets. What has effectively united this company with prudent investors is today’s central banker. Hyper-aggressive monetary policy has side effects. Getting out of this mess is not going to be easy, and it’s going to be messy.
Global banking regulators are considering new measures that would make it harder for banks to understate the riskiness of their assets. The BIS decision, as WSJ reports, to end the long-standing treatment of all government bonds as automatically risk-free, is clearly being priced into European banking stocks (as we noted here). Since the financial crisis European banks have backed up the truck on their domestic sovereign bond issuance (most especially Italy and Spain) - draining every fund to buy over EUR1.8 trillion of these 'risk-free' assets. However, that party is potentially ending as The Basel Committee panel is looking at barring banks from assigning very low risk levels to certain types of assets, a tactic some lenders have used to reduce their capital requirements; which could force banks to raise billions of dollars in extra capital.
You know it has become a farce when...
First it was burgers, then waiters, traders, and recently earnings-report-writers; but now it's iPhones. The endless pressure to raise minimum wages, demand bathroom breaks, expect to sleep, and tolerable breathing standards have finally culminated in China's FoxConn - manufacturer of the iPhone - to use a 'robot army' to build the new model. As The Daily Mail reports, The firm has pledged to have a million robot workers by the end of the year - and CEO Terry Gou has revealed the robots, dubbed 'Foxbots', are in the final stages of testing.
Washington can’t stop lying. Don’t be convinced by last Thursday’s job report that it is your fault if you don’t have a job. Those 288,000 jobs and 6.1% unemployment rate are more fiction than reality. What you can take away from this is the opposite of what the presstitute media would have you believe. For the most part economists have turned a blind eye. Economists serve the globalists. It pays them well. The corruption in present-day America is total. No one serves truth and liberty. America has left us. We now have the tyranny of the Orwellian state that rules, not by the ballot box and Constitution, but by force and propaganda.
The Russell 2000 had its worst day in almost 3 months. The S&P retraced all of its gains from the 'great' jobs report (on heavy volume). The Dow desparately clung to that critical indicator of economic wealth/health - 17,000 & Treasury yields slipped further - back below Thursday's lows. So every headline-writing muppet that correlated equity strength with a belief in the headline jobs data is now shown up as once again - as we noted on Thursday, it appeared bond traders read the jobs report and stock traders read the headlines. Is good news, bad news - or are equities actually comprehending that the jobs report was actually bad news away from the propaganda. Gold rallied back close to unchanged, silver dropped. The USD sold of early gains back to unch. TWTR dropped for the 3rd day in a row as camera-on-a-stick bounced 5% as options started trading. "Most shorted" stocks dropped their most in 3 months. VIX rose over 1 vol to 11.5 (its highest close since June and biggest %age gain in 3 months).
The man who assisted and "consulted" Gordon Brown (a man so clueless about finance he didn't and still doesn't have any idea what a carry trade is, let alone one in gold) the man who was Chief Manager of the Bank of England's reserves (all reserves) when Britain commenced its gold dumping campaign intended to, as usual, bail the big banks whose gold shorting trades had gone horribly wrong, the man - John Nugee - is the same man tasked with making the London gold fix fair, efficient, transparent and unrigged. One can't make this up.
As China's anti-corruption crackdown continues, the crony-capitalists are slowly exposed. As EJ Insight reports, the son-in-law of former PBOC governor and former Tianjin mayor Dai Xianglong bought millions of dollars of shares (via offshore entities) ahead of Beijing's decision to allow mainland residents buy Hong Kong stocks directly. It appears the Chinese have learned a lot from the West.
Boeing has had a tough week or two - the scandal over Ex-Im bank - its cheap funding source of competitive advantage, this weekend's train derailment of Boeing fuselages, and now, in Barcelona, a 767 and an Airbus A340 battle for the same airpsace coming within a few hundred feet of total carnage. We can only hope Janet Yellen's 'macro-prudential' policies will be less of a near-miss of the total collapse in risk assets we suspect is coming...
"Here in one of the "fly-over" zones of America - 200 miles north of New York City - the financial economy is mythical realm like Shangri-La and the real economy is somewhere between the toilet and a rat hole. Under the tyranny of chain stores, there really is no true local commercial economy. The few jobs here are menial and nearly superfluous to the automatic workings of the giant companies..." Never has a society entered an epochal transition with such unpreparedness. Never has a society appeared so childishly decadent.
100% of people have a view on Thomas Piketty's "Capital In The 21st Century" - for better or worse - confidently spewing supportive anecdotes of what they think he said and what they believe he means... But, as WSJ reports, people who spent hard-earned (or government-subsidized) money to buy his socialist tome have only read 2.4%. It appears few - if any - made it past page 26... Perhaps they would all be better off reading this.
Hurricane Arthur may have been, pardon us Jamie Dimon, a "tempest in a teapot" fizzling quietly in the Atlantic, but halfway around the world, a far greater storm is currently picking up speed and barreling toward Japan. As Reuters reports, Typhoon Neoguri, described as a "once in decades storm" is set to rake the Okinawa island chain with heavy rain and powerful winds. Typhoon Neoguri was already gusting at more than 250 km an hour (150 mph) and may pick up still more power as it moves northwest, growing into an "extremely intense" storm by Tuesday, the Japan Meteorological Agency (JMA) said. "In these regions, there is a chance of the kinds of storms, high seas, storm surges and heavy rains that you've never experienced before," a JMA official told a news conference. "This is an extraordinary situation, where a grave danger is approaching."
In Wenzhou - dubbed the capital of China's private businesses - nearly 90 per cent of loan guarantors have failed since the start of the credit crisis arising from the underground banking system, according to the media. As SCMP reports, although their services are critical for the economic system and the millions of small firms - that provide the majority of the mainland's jobs - hundreds of loan guarantee groups are creaking under the weight of bad loans and are simply unable to bear any more. "It could become the last straw that breaks the camel's back," exclaims the head of a local law firm, "without the privately owned small businesses, China's economy won't have a future." But PMIs are up so everything's fine?
So far the 21st Century has not been especially kind to equity investors. Yes, markets usually do bounce back, but often in time frames that defy optimistic expectations. Thhe real (inflation-adjusted) purchasing power of that $1,000 is currently, over 14 years later, only $218 above break-even. That equates to a 1.39% annualized real return.