Minutes after last week's Swiss National Bank shocker, jokingly we mused: "Will be ironic if Soros was long EURCHF." As it turns out, we were almost correct, and according to the WSJ, Soros Fund Management, which manages more than $25 billion for investor George Soros, was betting against the Swiss franc in the fall before it removed those bearish positions. Why did the Soros so conveniently take off a bet which, with leverage, could have resulted in massive losses for his hedge fund? The WSJ says he did so after "viewing the risk as too high relative to potential gains, said people close to the matter." Well as long as "people close" think Soros did not have input directly from the Swiss central bank, or perhaps the occasional hint from Kashya Hildebrand, then one can't help but marvel at the octogenarian's impeccable timing.
If we had to put all our money on one trader, just one individual trader, we would do it without hesitation. The recipient? This guy.
- ECB to decide on bond-buying plan to revive euro zone (Reuters)
- Draghi Is Pushing Boundaries of Euro Region with QE Program (BBG)
- Investors Wonder Whether ECB Will Do Enough (WSJ)
- Treasuries Drop With Bunds Before ECB; U.S. Futures Rise (BBG)
- European shares hit seven-year high (Reuters)
- At least eight civilians killed in shelling of Ukrainian trolleybus (Reuters), both sides blame each other
- OPEC Will Blink First in Battle With Shale Drillers, Poll Shows (BBG)
- China Injects $8 Billion Into Banking System (WSJ)
- New York says Barclays not cooperating in 'dark pool' probe (Reuters)
Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
The entire commodity complex is seeing major contagion-like price declines in early trading. WTI Crude is back below $65 for the first time since May 2010 - now down 16% since the initial leaks of OPEC's decision last Wednesday. Gold and Silver are getting whacked and copper has plunged below 300 - back at its lowest since June 2010. The news over the weekend that Brevan Howard is liquidating its $630 million commodity hedge fund following recent poor performance is also likely not helping as what looked like late-Friday margin call liquidations are extending notably this evening.
New Global Crisis Imminent Due To “Poisonous Combination Of Record Debt And Slowing Growth", CEPR Report WarnsSubmitted by Tyler Durden on 09/29/2014 06:52 -0500
A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report will warn on Monday. It warns of a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation”. The total burden of world debt, private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent after the crisis struck in 2009 and 215 per cent in 2013. “Contrary to widely held beliefs, the world has not yet begun to delever and the global debt to GDP ratio is still growing, breaking new highs,” the report said. Luigi Buttiglione, one of the report’s authors and head of global strategy at hedge fund Brevan Howard, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt.”
- Maliki digs in as U.S. pushes for new Iraq government (Reuters)
- Ukraine's forces say close to taking rebel-held Donetsk (Reuters)
- Anger Over Michael Brown Shooting Leads to Looting (WSJ)
- German Economy Backbone Bending From Lost Russia Sales (BBG)
- Kinder Morgan to Consolidate Empire (WSJ)
- Early Failure to Detect Gaza Tunnel Network Triggers Recriminations in Israel (WSJ)
- You’ll never guess how much BuzzFeed raised from Horowitz (FT)
- The dumb money is now chasing Chinese oligarchs: Norway’s Wealth Fund Buys $576 Million of Mayfair Area (BBG)
- Clinical trial to start soon on GSK Ebola vaccine (Reuters)
- No drone skeet shooting any time soon (WSJ)
- Anti-Euro Party’s Le Pen Gains Supporters, French Poll Shows (BBG)
- Carney Renews BOE Low-Rate Pledge to Fight Slack in Economy (BBG)
- Bank of England hints at 2015 rate rise (Reuters)
- ECB bond-buying intact and ready after court decision-Coeure (Reuters)
- Canada scraps millionaire visa scheme, dumps 46,000 Chinese applications (SCMP)
- Scrap this then? Vancouver facing an influx of 45,000 more rich Chinese (SCMP)
- China's January Exports Power Higher, Up 10.6% (WSJ) ... and nobody believes the number
- Emerging-Market Shakeout Putting Reserves Into Focus (BBG)
- Wall Street's most eligible banker Fleming waits for suitor (Reuters)
- Kazakh Devaluation Shows Currency War Stirring as Ruble Dips (BBG)
With Trader Monthly magazine having, ironically, gone out business long ago, all those traders whose egos demanded that their insider trading connections put them at least in one of the iconic "Top X under X" league tables, pardon, rankings, had to bide their time in expectation of one day when their prowess to frontrun others or move markets with repeated calls to 555-7617 (with or without references to Anacott Steel) would be appreciated by such sterling Wall Street "experts" as Anthony Scaramucci. Well, for this year's crop of some 30 traders under 30, the day has arrived. And while Forbes may not be Trader Monthly, the amusement, the hubris and the behind the scenes dealing to appear in such a list, sure are still the same...
- Dot Com part deux: Investors are showing increasing hunger for initial public offerings of unprofitable technology companies (WSJ)
- Poll Finds GOP Blamed More for Shutdown (WSJ)
- House, Senate Republicans Offer Competing Plans on Debt-Limit, Government Shutdown (WAPO)
- Obama, Republicans aim to end crisis after meeting, hurdles remain (Reuters)
- US Rethinks How to Release Sensitive Economic Data (WSJ)
- Chinese East Oil Fuels Fresh China-US Tensions (WSJ)
- ECB Agrees on Swap Line With PBOC as Trade Increases (BBG)
- China September Auto Sales Surge 21% on Japanese Rebound (BBG)
- JPMorgan Taps Taxpayer-Backed Banks for Basel Rules (BBG)
There exists a super-Bernanke who proved also a super-Hollande, a gentleman who Japanese Prime Minister Shinzo Abe cannot compete with: his name is Robert Mugabe, the president of Zimbabwe. When he took power, he seized the farmlands of one social group to give them to another social group. Afterwards, in part because the new social group did not manage the farms that well, the economy took a turn for the worse. Therefore, the state issued some bonds to finance its spending and asked the central bank to issue some money to buy this government debt. But they printed big time and turned the printing press into something of a cosmic proportion. According to Professor Steve Hanke from John Hopkins, monthly inflation was 80 billion percent, so per year it is a 65 followed by 107 zeros. This is what we call Mugabenomics, the conjunction of (i) state-forced wealth transfer between two social groups along with (ii) the monetisation of the debt. As we shall see below, Mugabenomics, or at least its mild version implemented now in the Western hemisphere, has drastic consequences on the final episode of the global financial crisis.
"Having faith in policymakers' ability to provide a perpetual put may yet prove to be a serious error; and, with interest rates stuck at zero, investors' ability to easily earn back losses remains severely impaired," is the not so subtle manner in which, Reuters reports, Brevan Howard, which manages $40 billion (and has never had a losing year) describes the current shambles of a market. "Tail risks, which have haunted the markets for the last five years, appear to have receded for the time being, but have by no means disappeared," they go on to say, noting that while policymakers promise to do "whatever it takes," investors betting that actions by policymakers will prop up financial markets indefinitely will face problems as "policy hyperactivity coupled with investor apathy could lead to significant and persistent price moves in multiple capital markets." But that's just an absolute return $40bn fund manager's view as opposed to a day-trading fast money trend masher or asset-gathering index-tracker.
Federal Reserve Bank of New York, Lexington Partners; Tudor Investment, Brevan Howard, Goldman Sachs, UBS, Bank of Korea; BNP Paribas, Fidelity Investments, Deutsche Bank,, Freeman and Co., Bank America, National Bureau of Economic Research, FDIC, Interamerican Development Bank; 4 hedge funds, BTG Pactual, Gavea Investimentos; Reserve Bank of Australia, Federal Reserve Bank of San Francisco, Einaudi Institute, Bank of Italy; Swiss National Bank; Pension Real Estate Association; Goodwin Proctor, Penn State University, Villanova University, Shroeder’s Investment Management, Premiere, Inc, Muira Global, Bidvest, NRUCF, BTG Asset Management, Futures Industry Association, ACLI, Handelsbanken, National Business Travel Association, Urban Land Institute, Deloitte, CME Group; Barclays Capiital, Treasury Mangement Association, International Monetary Fund; Kairos Investments, Deloitte and Touche, Instituto para el Desarrollo Empreserial de lat Argentina, Handelsbanken, Danske Capital, WIPRO, University of Calgary, Pictet & Cie, Zurich Insurance Company, Central Bank of Chile, and many, many more.
Just as the ever soaring Argentina default swaps indicated that a technical default for the Latin American country - one which would eventually morph into a second full blown default in a decade - was all but inevitable (and previews extensively here), the twisting and turning multi-year story of Argentina vs its "vulture" holdout creditors got its latest dramatic installment last night. Shortly after market close, the Second Circuit court of appeals once again override last week's critical order by Judge Griesa that Argentina promptly pay everyone or face monetary exclusions, lumping together any and all agents who facilitated the ongoing isolation of the holdout hedge funds from the broader group which in Griesa's view had pari passu status throughout.
We have discussed the CRIC cycle a number of times - especially with regards Europe - but it seems the never-ending story of Crisis-Response-Improvement-Complacency has struck once again as Morgan Stanley notes when complacency becomes pervasive, it usually gives way to a renewed crisis. Complacent financial markets appear to be looking through the fact that the global economy remains stuck in a 'twilight zone' between expansion and recession. Dismissing weak PMIs in China and EU, markets have feasted in QEternity and OMT and this has, as expected, affected European policy-makers (e.g. ongoing disagreements over the details of the much-anticipated negative-feedback-loop-breaking banking union; and Spain/Italy's 'belief' they can avoid an ESM 'austerity' program). This feels eerily like the March/April period when post-LTRO improvements induced euphoria in traders and governments/ECB to relax prematurely and as Brevan Howard explains below - every major developed economy is facing significant downside risks - no matter how enthusiastic markets appear to be.