- Malaysia Says Stolen Passport User Had No Links to Terror Groups (BBG)
- Malaysia military tracked missing plane to west coast (Reuters)
- Freescale loss in Malaysia tragedy leads to travel policy questions (Reuters)
- Top German body calls for QE blitz to avert deflation trap in Europe (Telegraph)
- Firms Suffer 23% Drop in Asia Fees Amid Search for Cash (BBG)
- Putin Dismisses U.S. Proposal on Ukraine (WSJ)
- Lenovo says China strike an IBM matter, but it won't cut wages (Reuters)
- Congress to Investigate GM Recall (WSJ)
- New hedge funds face life or death battle for funding (FT)
- Muni Bond Costs Hit Investors in Wallet (WSJ)
- BOJ keeps stimulus in place, cuts view on exports in warning sign (Reuters)
- ECB Homes In on Risky Assets as Inspectors Fan Out Across Europe (BBG)
- Snowden: "The Constitution was violated" (Reuters)
Stocks in Europe failed to hold onto early gains and gradually moved into negative territory, albeit minor, as concerns over money markets in China gathered attention yet again after benchmark rates fell to lowest since May 2012. Nevertheless, basic materials outperformed on the sector breakdown, as energy and metal prices rebounded following yesterday’s weaker than expected Chinese data inspired sell off. At the same time, Bunds remained supported by the cautious sentiment, while EUR/USD came under pressure following comments by ECB's Constancio who said that financial markets misinterpreted us a little, can still cut rates and implement QE or buy assets. Going forward, market participants will get to digest the release of the weekly API report after the closing bell on Wall Street and the US Treasury will kick off this week’s issuance with a sale of USD 30bln in 3y notes.
Puerto Rico muni owners who never saw the Barron’s story or the rating firms’ downgrades are better off than those who kept up with the financial news.
Seth Klarman's comments on "The Truman Show" market and "born bulls" appeared to upset the status quo today on CNBC leaving none other than Joe Kernan and then later, Jim Cramer questioning Klarman's credentials with a passive-aggressive "when did Klarman turn negative? We should look into that..." question. We found it intriguing and wondered how much the investing public weights the differing views of these veritable titans of stock market wisdom. The answer - a market-based answer - lie in the purest measure of all... the cost of acquiring their knowledge...
China's biggest blue-chip stock index - the CSI-300 - dropped over 3% overnight and fell to its lowest level since Feb 2009. Corporate bond and trust defaults (crushing confidence in credit markets), shadow-banking collateral unwinds (crushing commodity prices), and exports collapsing (crushing dreams of a global economic recovery) are all weighing on Chinese stocks. This comes, ironically as the US equity "market" celebrates the 5 year anniversary of the Mar 2009 lows and soars to new highs in the face of turmoil. There is, of course, another outlet for China's massive money-printing - that dwarfs the Fed's - its real estate market.. and that is the bubble that the PBOC is trying to tamp down.
The "smart money" indicator is at its most extreme degree of selling since November, 2010.
European sovereign bond spreads have not batted an eyelid during the recent Russia-Ukraine crisis... and why should they, Draghi will do "whatever it takes." Even HY credit in Europe is holding up - despite an ugly squeeze wider on Friday (chatter that positioning in very long credit). But with Europe's VIX above 20, the broad European stock index is now below pre-Putin levels. What is perhaps most stunning is that while investors have piled out of German, Swiss, and French stocks in the last few days, they have backed-up-the-truck in "new normal" safe-haven Portugal. The reason proferred by some - Portugal is further from Ukraine (and less dependent on Russia's gas) - which of course is the critical swing factor for an economy that remains crushed aside from trade with Germany.
One month ago, when we last looked at the incredible amount of Chinese new loan issuance, a topic which even the mainstream media is slowly starting to circle in on as the primary source of hot money flow creation in the world, we found the highest loan notional issued by the country's semi-sovereign banks since 2009, and the largest one-month ever monthly total in the largest aggregated, Total Social Financial, series, which rose by an unprecedented CNY2.6 trillion, or over $400 billion in one month! That was just before the tremors surrounding first the potential defaults of several Chinese shadow-banking Trusts, and certainly before the first official corporate bond default which took place last week. Overnight, the PBOC released its latest, February, loan data. As expected, it reveals something else entirely.
The Turkish Lira is tumbling this morning (+150pips at 2.22); rapidly devaluing back towards pre-emergency-rate-hike levels and Turkish bond yields have surged back to levels seen in mid-2009. The driver appears to be the release of several political prisoners, suggesting the President is starting to lose control and given that 'political stability' is the key factor for many of these EM debt markets. The government, however, remains adamant that an "operation" by some institutional holders of lira bonds to "threaten" Turkey's economy started after the probe into government corruption began in mid-December.
It would appear the fecal matter is starting to come into contact with the rotating object in China. Worrying headlines are beginning to mount on the back of real economic events (an actual default and a collapse in exports):
- *COPPER IN SHANGHAI FALLS BY 5% DAILY LIMIT TO 46,670 YUAN A TON
- *CHINA YUAN WEAKENS 0.46% TO 6.1564 VS U.S. DOLLAR
- *YUAN DROPS MOST SINCE 2008
Aside from that Iron ore prices are crumbling, Asian stocks are dropping, Chinese corporate bond prices aee falling at their fastest pace in almost 4 months, and all this as 7-day repo drops to one-year lows (as banks hoard liquidity).
I clearly have a very hard time reconciling a U.S. stock market making new all-time-highs almost daily, especially in the face of what most economists consider to be a weak domestic economy with negligible growth prospects. Moreover, when you layover the thoroughly stalled and certainly weaker overall global economic picture, it’s even harder to rationalize. Finally, throw into the mix the gravity of threatening geopolitical tensions between the U.S. and Russia, the two nations with the largest stockpiles of tactical nuclear weapons on earth, and the market actually welcomes it. Something majorly does not add up, well, to this Idiot anyways.
While the US may be rejoicing its daily stock market all time highs day after day, it may come as a surprise to many that global equity capitalization has hardly performed as impressively compared to its previous records set in mid-2007. In fact, between the last bubble peak, and mid-2013, there has been a $3.86 trillion decline in the value of equities to $53.8 trillion over this six year time period, according to data compiled by Bloomberg. Alas, in a world in which there is no longer even hope for growth without massive debt expansion, there is a cost to keeping global equities stable (and US stocks at record highs): that cost is $30 trillion, or nearly double the GDP of the United States, which is by how much global debt has risen over the same period. Specifically, total global debt has exploded by 40% in just 6 short years from 2007 to 2013, from "only" $70 trillion to over $100 trillion as of mid-2013, according to the BIS' just-released quarterly review.
With 40% of the portfolio in cash and having returned $4 billion to clients at year-end, Seth Klarman's Baupost Group has "drawn the line in the sand" as they reflect on the diminished opportunities in the so-called "Truman Show" market we see today. In the face of mixed economic data and at a critical inflection point in Federal Reserve policy, Klarman notes, the stock market, heading into 2014, resembles a Rorschach test - "what investors see in the inkblots says considerably more about them than it does about the market." From "born bulls" to "worry genes" and from Bitcoin to flash-mob-speculation, "there is a growing gap between the financial markets and the real economy...and the overall picture is one of growing risk and inadequate potential return almost everywhere one looks... as every 'Truman' under Bernanke’s dome knows the environment is phony."
When one studies history, all events seem to revolve around the applications and degenerations of war. Great feats of human understanding, realization and enlightenment barely register in the mental footnotes of the average person. War is what we remember, idealize and aggrandize, which is why war is the tool most often exploited by oligarchy to distract the masses while it centralizes power. With the exception of a few revolutions, most wars are instigated and controlled by financial elites, manipulating governments on both sides of the game to produce a preconceived result. Every major international crisis for the past century or more has ended with an even greater consolidation of world power into the hands of the few, and this is no accident.
According to Goldman, the median company’s EV/sales ratio is now the highest in 35 years, surpassing even the dot com bubble.