The Atlantic City casino industry implosion continues. Following the second, and final, bankruptcy of AC's "state of the art" Revel Casino a month ago, as well as the shuttering of Atlantic Club hotel Casino and the Showboat hotel casino, the grim corporate reaper has come for one of the most prominent boardwalk casinos of all: Trump Plaza. "Trump Plaza Hotel & Casino will shut its doors for good in mid-September, according to state officials who were briefed Friday by lawyers for the casino."
We previously noted the "miracle" of China's PMI, and the lack of statistical validity and consistency in the government's survey; but this simple graphical illustration exposes exactly why the widely-celebrated China PMI number upon which so much current optimism is being grounded may be entirely misplaced...
The first big wave of embracing a liberal international economic order - relatively free trade, rising international capital flows and rapidly growing global economic integration - resulted in something remarkable. Between 1870 and 1914, there was a 45-year span of rising living standards, stable prices, massive capital investment and prolific technological progress. In terms of overall progress, these four-plus decades have never been equaled — either before or since. Then came the Great War. It involved a scale of total industrial mobilization and financial mayhem that was unlike any that had gone before. In the case of Great Britain, for example, its national debt increased 14-fold.
“The fundamental problems are not solved and everybody knows it,” Maximilian Zimmerer, CEO of Allianz, said at Bloomberg LP’s London office. The “euro crisis is not over,” he said. “There is only one country where the debt level last year was lower than 2012 and this is a signal the debt crisis can’t be over, only a recognition of the debt crisis has changed,” Zimmerer said on July 9. “If the debt levels are not going down in the end we will have a problem, that is for sure.”
Having already warned that looming political uncertainty is not at all priced-in to US equities, Goldman's Alec Phillips points out that legislation was introduced earlier this week (July 7) in the US House that would attempt to revamp the FOMC's monetary policy process. The bill would require the FOMC to justify to Congress each policy decision relative to a Taylor rule specified in the legislation. While Goldman, do not expect the bill to get very far, but the issue does appear to be a growing focus for some lawmakers and we expect further action on it in the near term.
It’s time to think like a contrarian. Why? Because capital markets seem as bulletproof as one of those up-armored military personnel carriers you see in war zones. So what could really rattle stock, bond and commodity markets over the next 3-6 months? The go-to answer, steeped in history, is geopolitical crisis, where the logical hedges are precious metals, volatility plays, and possibly crude oil. Look deeper, however, and other answers emerge.
Brent Johnson, of Santiago Capital, provides a brief but broad overview of the state of the state in the world's precious metals markets (and monetary policy implications). Often accused of "waiting for armageddon", Johnson is quick to note that he would love to be wrong... "If I thought it possible to carry out the next 40 years the same as the last - by sticking to the status quo - I'd do it." But it's not... and no matter how many "say it isn't so" you hear from the mainstream, it is inevitable (when not if). Simply put, he warns, if you do have to have capital markets exposure - make sure you have insurance - you need it now more than ever.
"The state-controlled fiat money system is the main cause of the international financial and economic crisis." This system, Thorsten Polleit warns, is based on the ability of banks to create money literally out of nothing. It is, in principle, a “large-scale fraud system” because today’s money is “intrinsically worthless and not redeemable”. This has damaging consequences for the overall economic development.
The UK had feared whiplash from sanctions on Russian oligarchs but this 'boomerang' is too much to bear... As Bloomberg reports, “We’re seeing a lot less Russian surnames on the booking sheet," at London's Mahiki, a Polynesian-themed nightclub in upmarket Mayfair where a bottle of Cristal Champagne goes for $719 - and Russian customers are being supplanted by revelers from countries including China and Nigeria. “The Russian market was like a Champagne fountain,” notes on ereveler, "The money was coming into the top and flowing down..." but not so much anymore...
Silver closes at a 4-month high as the grey metal closes green for the sixth week-in-a-row. This is the longest winning streak since the highs reached in April 2011 as safe-haven buying and CCFD unwinds are squeezing the shorts and dragging Silver +10% year-to-date (just behind gold).
"We’re in a world where there are very few unambiguously cheap assets...If you ask me to give you the one big bargain out there, I’m not sure there is one." But frustrating as the situation can be for investors hoping for better returns, the bigger question for the global economy is what happens next. How long will this low-return environment last? And what risks are being created that might be realized only if and when the Everything Boom ends?
Fast forward to 1 minutes 6 seconds into the clip (equivalent to 4:22am local time, and where every second is equvalent to 6 seconds in real-time) to see what the 6.8 magnitude earthquake, which we reported earlier, was all about. Luckily, this time, it was nothing to write home about. Let's hope it stays that way for all future earthquakes as well, or otherwise Abe will have much bigger problems on his hands than just a flaccid "third arrow."
The Russell 2000 closed down almost 4% from last Thursday's early close - its worst week in 3 months (and in the red year-to-date). The Nasdaq miraculously scrambled back to unchanged from Payrolls but all major indices closed red for the week. Away from stocks, the USD closed unchanged (with notable CAD weakness and JPY strength). Treasury yields tumbled 13bps on the week - the most in 4 months. Gold and silver rose 1.3% on the week to new 4-month highs (6th green week in a row) as WTI Crude slumped back under $101 (-3.3% on the week). VIX rose around 2 vols back above 12 as "most shorted" stocks plunged over 5% - the biggest weekly drop in 25 months! VIX was slammed lower late-on to give the impression of confidence in stocks into the weekend but credit was notably not buying it at all.
The US is tapering, with the Fed knowing any further monetization of private sector bonds will lead to a crash in the already illiquid bond market; Japan is stuck with its massive QE, jawboning every day a rumor that first appeared in November of 2013 (and which sent the USDJPY 500 pips higher and has so far been nothing but a lie) that it may do more, but has unleashed such a firestorm of imported inflation, plunging real wages and collapsing exports that there is nothing Abe or Kuroda can do to boost the Nikkei "wealth effect" or halt what now appears an almost certain 2014 recession. Europe, too, saw a rumor emerge in November 2013 that it would also launch QE, however it won't: instead the ECB just went NIRP and is threatening to do ABS purchases, which just like the OMT pipedream will never happen simply because there aren't enough unencumbered assets to monetize (most of which are already have liens with local banks) while an outright QE would require redrafting Article 123. So what is a world starved for "outside money" to do? Why make up another rumor, this time focusing on the last possible source of QE: China.