Bank of England

Good news! Bad news is again great for stocks, and overnight we had just the right amount of bad news from Japan, China and Europe to send stocks surging on the first day of the final quarter.

• Asia shares rally, but on track for worst quarterly loss in four years (Reuters)
• Global Rally Shows Relief at End of $11 Trillion Stocks Meltdown (BBG)
• Glencore Extends Rebound as Turmoil Shows Signs of Easing (BBG)
• Putin wins parliamentary backing for air strikes in Syria (Reuters)
• China Cuts Minimum Home Down Payment for First-Time Buyers (BBG)
• German Unemployment Unexpectedly Rises in Sign of Economic Risks (BBG)
• Japan Industrial Output Slide Hints at Recession (WSJ)

In yet another indication that manipulation may well be unspoken (or perhaps even spoken) policy at the BOE, new details regarding the UK Serious Fraud Office's investigation into emergency liquidity auctions conducted during the crisis suggest the central bank may have played a direct role in rigging the bids.

This is an important story and shows how China and Russia are increasingly close and strong allies who are flexing their muscles and asserting themselves as rival superpowers to the U.S.

• Commodities in crisis as Asian shares tumble and shipper files for bankruptcy (Reuters)
• Global Rout Eases as S&P 500 Futures Advance With Oil, Glencore (BBG)
• Chinese Stocks Decline Most in a Month in Hong Kong on Economy (BBG)
• India cuts interest rates by more than expected (BBC)
• Glencore Rebounds as $50 Billion Plunge Is Seen as Excessive (BBG)
• How Congress May Have Saved Goldman Sachs From Itself (BBG)

The divergence theme is likely to strengthen in the week ahead.  

In considering NIRP, Central bankers are failing to address an even greater potential problem, which could easily become cataclysmic. By forcing people into paying to maintain cash and bank deposits, central bankers are playing fast-and-loose with the public’s patient acceptance that state-issued money actually has any value at all. There is a tension between this cavalier macroeconomic attitude and what amounts to a prospective tax on personal liquidity. Furthermore, NIRP makes the hidden tax of monetary inflation, of which the public is generally unaware, suddenly very visible. We should be in no doubt that increasing public awareness of the true cost to ordinary people of monetary policies, by way of the debate that would be created by the introduction of NIRP, could have very dangerous consequences for the currency.

Earlier today yet another "very serious policy maker" confirmed that cash as we know it, may be on the endangered species list - again, a necessary precondition to make global NIRP effective - when overnight former Bank of England central banker, Charles Goodhart, told a London audience that bills such as the Swiss National Bank’s 1,000-franc note and the European Central Bank’s 500-euro note should be abolished, adding this "move that might also prove beneficial by trimming interest rates."

• Global Markets Rebound on Yellen Speech (WSJ)
• Obama and Putin to meet; Syria and Ukraine vie for attention (Reuters)
• Obama to host China's President Xi amid simmering tensions (Reuters)
• Don't Fall for It, Xi! Chinese Take to Web to Scorn U.S.—and China, Too (BBG)
• Yellen Confirms Fed Still on Track to Raise Rates This Year (BBG)... but is still China dependent?
• Abe's New Economic Plan Confounds Analysts (BBG)
• It's All `Perverted' Now as U.S. Swap Spreads Tumble Below Zero (BBG)

When risk sold off last week in the wake of the Fed’s so-called “clean relent,” it signalled at best a policy mistake and at worst the loss of any and all credibility. Tonight, Yellen gets a do-over.

Palladium surged 6% yesterday. The move appeared to be a short squeeze and may be the precursor for the long awaited move higher in gold and silver.

• Stocks slip for fifth straight day, euro holds steady (Reuters)
• VW recall letters in April warned of an emissions glitch (Reuters)
• VW Cheating Scandal Threatens to Ensnare BMW as Probe Widens (BBG)
• Pope Francis set to address fractious U.S. Congress (Reuters)
• Norway Cuts Rates to Record Low to Save Economy From Oil Slump (BBG)
• Taiwan Cuts Rate for First Time Since 2009 as Exports Falter (BBG)
• Janet Yellen to speak at UMass on Thursday (Daily Collegian)
• A Big Bet That China’s Currency Will Devalue Further (NYT)
• Debt Relief for Students Snarls Market for Their Loans (WSJ)

• Global Stocks Steady Despite China Slowdown (WSJ)
• European Recovery Saves Markets From China Gloom as Stocks Rally (BBG)
• Pope starts U.S. trip with tone of conciliation (Reuters)
• FBI Said to Recover Personal E-Mails From Hillary Clinton Server (BBG)
• Volkswagen chief faces grilling by board over diesel scandal (Reuters)
• 'European Detroit' Fear Grips VW Company Town as Scandal Widens (BBG)
• Berlin finds itself caught up in Volkswagen scandal (FT)

Quantitative easing, as this policy is known, has bailed out bonus-happy banks and made the rich richer.  Banks have been the biggest beneficiaries, with their 20- or 30-times leveraged balance sheets. Asset managers and hedge funds have benefited, too. Owners of property have made out like bandits. In fact, anyone with assets has grown much richer. All of us who work in financial markets owe a debt to QE.

Non-bombasitc overview of the investment climate.  No, the sky is not falling.  This is not the end of days.