There has been a bevy of negative news in the past 48 hours which perhaps explains why futures are fractionally in the green as of this moment.
Update: PR Governor Padilla has spoken...*PUERTO RICO GOVERNOR SAYS WON'T PAY DEBT TOMORROW, CALLS ON U.S. CONGRESS, PAUL RYAN FOR HELP, CRISIS WILL GET WORSE IF U.S. CONGRESS DOESN'T HELP
"It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates."
China’s historic post-2009 debt binge flew largely under the radar - fooling most observers into thinking the global economy was recovering rather than just re-leveraging. Now Beijing is back at it, borrowing over $1 trillion in this year’s first quarter, buying up commodities and creating the illusion of global growth. But this time the scam hasn’t gone unnoticed. Reporters, editors and money managers seem, at last, to be catching on. So think of today’s relative calm as the eye of yet another storm, and what’s coming as a return to the hyper-leveraged new normal.
Chinese President Xi Jinping recently announced that he would take command of all of China’s armed forces, including the People’s Liberation Army (PLA). Xi is already chairman of the Central Military Commission that oversees the army. He is now taking a more direct role as head of the new Joint Operations Command Center, which puts him in operational command of the PLA in times of war. The new title in all likelihood means little in terms of actual command, but it has tremendous political significance. Officially, the Chinese are reforming their military, which is logical (read why here). The roots of this change, however, lie in China’s economic crisis and the need to preserve the regime.
While the Arab countries floated themselves on oceans of petro-dollars forty years ago, they have little need for them now. So we must now turn our attention to China, which is well positioned to act as white knight to Saudi Arabia. China’s SAFE sovereign wealth fund could easily swallow the Aramco stake, and there are good strategic reasons why it should. A quick deal would help stabilise a desperate financial and political situation on the edges of China’s rapidly growing Asian interests, and keep Saudi Arabia onside as an energy supplier. China has dollars to dispose, and a mutual arrangement would herald a new era of tangible cooperation. The US can only stand and stare as China teases Saudi Arabia away from America’s sphere of influence.
In Japan, the European Union and Switzerland, where negative nominal interest rates have already been adopted, it was observed that demand for safes and cash increased. At the same time, we learn that negative rates have boosted demand for gold in Japan (sales of gold to Japanese consumers rose to 32.8 metric tonnes in 2015 from 17.9 tonnes a year earlier). According to Takahiro Ito, chief manager at Tanaka Kikinzoku Kogyo K.K.’s store in Tokyo’s Ginza shopping district, “Many customers are wagering that it’s better to turn their savings to gold as a safe asset rather than deposit money at banks that offer low interest rates."
Nuclear power is not commercially viable but has become a state-sponsored technology. There is nothing wrong with state supported technology. But we could save a lot of time and money by not pretending that it is something else.
In Davos, they chug bottles of Chateau Lafite Rothschild and plot how to pillage small nations. At Berkshire, we will eat Dilly bars and plot how to pillage the middle class. Capitalism is beautiful and crony capitalism is the end product of politicians who prostitute the laws. I don’t have the power to change the current rules, but I can certainly learn to thrive within them.
“The market does what it should do, just not always when.” – Jesse Livermore
"Not only do the five largest financial institutions in the US have a higher concentration of assets than they did before the financial crisis but it’s the largest concentration ever. So we’ve made the too-big-to-fail-problem worse because we have bigger, more systemically important financial institutions now than we did in 2007 – and nobody seems to know what to do about it... [EU banks] are acting irrationally. They’re not acting that way because they don’t believe it or they don’t understand it. So we’re still all trying to feel around in the dark as to what this means. And that means that the chance of an accident is very high."
The banquet of consequences is about to be served.
"...there clearly is a Yellen put, but over the last two meetings it's been extended to include global risk markets... I think they're acknowledging that the Fed is the world's global central banker."
Following yesterday's Yen surge in the aftermath of the disappointing BOJ announcement, the pain for USDJPY long continued, with the key carry pair tumbling as low as 106, the lowest level since October 2014 before stabilizing around 107, and is now headed for its biggest weekly gain since 2008, which in turn has pushed the US dollar to to its lowest close in almost a year as signs of slowing growth in the U.S. dimmed prospects for a Federal Reserve interest-rate increase. As a result, global stocks fell and commodities extended gains in their best month since 2010.
The mysterious ZARJPY indicator of global turmoil is flashing red once again as BofAML's Michael Hartnett warns of soaring sentiment into a potential "summer of shocks." Wall Street/Fed continues to play "cat and mouse" and (hedge fund) redemption, (central bank) repression, (market) regulation risks remain very high as the flash crash/pain trade era to continue.