The Cure Is Worse Than The Disease

Today we look back to the recent past with singleness of purpose.  Context and edification for the present economy is what we’re after.  We have questions... How come the recovery has been so weak?  Why is it that, nearly seven years after the official end of the Great Recession, the economy’s still mired in a soft muddy quagmire?  Squinting, focusing, and refocusing, there’s one particular week that rises above all others.

In Latest Blow To Hedge Funds, Largest US Life Insurer Is Redeeming Most Of Its Investments

Moments ago we the latest confirmation that the hedge fund business model is indeed suffering through an existential battle when MetLife Inc., the largest U.S. life insurer, said was seeking to exit most of its hedge-fund portfolio after a slump in the investments. According to Bloomberg, the insurer is seeking to redeem $1.2 billion of the $1.8 billion in holdings, a process that may take a couple of years to complete.

In Latest Blow To Hedge Funds, AIG Redeems $4 Billion; CALSTRS Says "2 And 20" Model Is "Off The Table"

The pain for hedge funds is only just starting: Chris Ailman, who runs investments at CALSTRS, said in a Bloomberg Television interview from the Milken conference that the hedge fund industry’s two-and-twenty fee model is “broken” and “off the table” for large institutional investors. And then the latest blow to the suddenly struggling industry came overnight from none other than the firm which started the bailout regime, AIG, which following its earnings report announced that the insurer - burned by losses on hedge funds - has submitted notices of redemption for $4.1 billion of those holdings. “As of today, we have received $1.2 billion of proceeds from those redemptions."

Frontrunning: May 3

  • Global stocks slide as yen, euro gains question policy potency (Reuters)
  • U.S. Index Futures Signal Stock Losses as AIG Drops on Earnings (BBG)
  • EU Sees Weaker Growth in Eurozone and Wider EU as China Slowdown Weighs (WSJ)
  • Euro Set for Longest Run of Gains Since 2013 as Fed Focus Fades (BBG)
  • German Bonds Advance as EU Cuts Euro-Area Inflation Outlook (BBG)

A Terrible Start To 2016 Turns Absolutely Brutal For Odey Who Refuses To Stop "Fighting The Fed"

what until now was merely a terrible start to the year has turned absolutely brutal for Odey's European fund, which is now down nearly a third, or 31%, in the first four months of the year, wiping out almost half a decade of trading profits in his flagship hedge fund in less than four months. Is he ready to throw in the towel? Not even close: the billionaire who delights in fighting the Fed, is convinced he will have the last laugh: "The disconnect between travelling and arriving may be coming home to roost. It will make the retreat from Moscow appear painless."

Institutionalized Lying - Why Central Bankers Never See Bubbles

Every day there is more confirmation that the casino is an exceedingly dangerous place and that exposure to the stock, bond and related markets is to be avoided at all hazards. In essence the whole shebang is based on institutionalized lying, meaning that prouncements of central bankers, Wall Street brokers and big company executives are a tissue of misdirection, obfuscation and outright deceit. And they are self-reinforcing, too.

The Fed Sends A Frightening Letter To JPMorgan, Corporate Media Yawns

Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”

Bernanke's New Helicopter Money Plan - Sheer Destructive Lunacy

Bernanke has been a charlatan and intellectual lightweight all along but the gist is that the US economy is wanting for some non-existent ether called “aggregate demand”. And that this ether is something the Fed can easily create by handing an open-ended spending account to politicians, and one that would never have to be repaid or even serviced with interest! It puts you in mind of the medieval theologians who endlessly debated as to the number of angels which could fit on the head of a pin. The trouble is, there is not such thing as angels. Nor is there any such thing as economic growth or wealth that can be conjured by politicians spending Bernanke’s utterly counterfeit money.

For Mario Draghi, None Of This Was Supposed To Happen

It'll be four weeks tomorrow that Draghi fired his quadruple bazooka and yet European markets are in apathetic mode. We show the returns of our usual selection of global assets since the cob the night before the last ECB meeting on March 10th. Perhaps markets haven't been helped by a renewed but unrelated fall in Oil (Brent -9.1%, WTI -6.3%) since this point but it's noticeable that outside of commodities the worst performers have generally been areas of the market that Draghi tried to help.