Capital Markets

Tyler Durden's picture

As The "Sanctions War" Heats Up, Will Putin Play His 'Gold Card'?





The topic of ‘currency war’ has been bantered about in financial circles since at least the term was first used by Brazilian Finance Minister Guido Mantega in September 2010. Recently, the currency war has escalated, and a ‘sanctions war’ against Russia has broken out. History suggests that financial assets are highly unlikely to preserve investors’ real purchasing power in this inhospitable international environment, due in part to the associated currency crises, which will catalyse at least a partial international remonetisation of gold. Vladimir Putin, under pressure from economic sanctions, may calculate that now is the time to play his ‘gold card’.

 
Tyler Durden's picture

You Asked For It, And Here It Is: The First GDP Downgrade Due To The Polar Vortex 2.0





BMO Capital Markets economist Sal Guatieri notes that the BMO Economics team has lowered its U.S. fourth quarter gross domestic product (GDP) growth estimate to 2.5% from 2.8% due to weaker housing starts and a view that November’s activity could get chilled by polar vortex 2. While October was relatively warm, November has been anything but. However, he does not expect the sort of massive hit that GDP suffered in the first quarter of 2014 due to cold weather.

 
Tyler Durden's picture

Confidence Lost - (Or When Words No Longer Matter)





Words, numbers, earnings and more at one time had a believable meaning. But that was a very long time ago. So long – even the news media seems to have forgotten what the meaning of words like business, free markets, capitalism and others once meant. Now it's nothing but a televised version of crony styled capitalism cheerleaders rolled out one after another in such procession P.T.Barnum would be proud. The problem is the more they talk – the more people tune out. For no amount of words stated matter any longer. Nor do the myriad of “charts” “reports” or so-called “facts” they hold up as evidence. No one is listening or watching. And what’s worse? Nobody now cares.

 
Tyler Durden's picture

And This Is How Central-Planning Broke Housing





First, they broke the capital markets. Then, the money-printing central-planners broke the housing market too. Here, in under 200 words, is a real-life case study of just how they did that.

 
Tyler Durden's picture

Venezuelan Bonds Are Collapsing, FinMin Denies Devaluation Looming





While talking heads proclaim - incorrectly - that low oil prices are unequivocally good for the US economy, it is very much not the case for oil producers around the world. Most notably, Venezuela - which 'needs' oil prices above $100 to maintain its socialist utopia - and currently ranks at a lowly 100th on the world's prosperity index, is in grave trouble if this trend continues. Venezuelan bonds plunged to new record lows today as oil prices hit fresh cycle lows, strongly suggesting default or currency devaluation is imminent. However, as is usual (think Mexico) Finance Minister Rodolfo Marco Torres ruled out devaluation even as oil price drop exacerbates country’s finances. As one analyst noted, "there's broad understanding that in the absence of any corrective policy measures that these guys are going to be in serious trouble." It appears they already are. The Maduro government desperately needs a rise in oil prices, but Saudi Arabia has so far rebuffed calls for an emergency meeting as it pursues a strategy of waiting out higher cost competitors. OPEC does not plan on meeting until Nov. 27. That is still an eternity for a country that is beginning to unravel.

 
Tyler Durden's picture

The 1937 Recession





This Austrian School interpretation of events fits the facts rather better than the monetarist account.  The lesson for policymakers today is uncomfortable.  For, on this view, if there is a parallel with the 1930s, the damage has already been done.  It was done when the Fed allowed funds available for investment in capital markets to balloon, not this time through unsterilized gold inflows but through its QE experiment. 

 
Tyler Durden's picture

The Fed’s Paint-By-The-Numbers Delusions About The Labor Market





At the end of the day, it is overwhelming clear that the headline jobs number is thoroughly and dangerously misleading because there has been a systematic and relentless deterioration in the quality and value added of the jobs mix beneath the headline. It has no value whatsoever as an index of labor market conditions, labor market slack or even implied GDP growth. The truth is, in an open global economy the quantity of labor utilized by the US economy is a function of its price - not the level of interest rates or the S&P 500. Currently, wage rates on the margin are too high, but the Fed’s ZIRP and money printing campaigns only compound the problem. They permit the government to fund with ultra low-cost bonds and notes a massive transfer payment system that keeps potential productive labor out of the economy, and thereby props up bloated wages rates; and it enables households to carry more debt than would be feasible with honest interest rates and competitively priced wage rates, thereby further inhibiting the labor market adjustments that would be required to actually achieve full employment and sustainable growth.

 
Sprott Money's picture

Ask The Expert Interview with Chris Martenson from Peak Prosperity





Chris Martenson is an economic researcher and futurist, specializing in energy and resource depletion, and co-founder of PeakProsperity.com. As one of the early econobloggers who forecasted the housing market collapse and stock market correction years in advance, Chris rose to prominence with the launch of his seminal video seminar, The Crash Course, that interconnected forces in the economy, energy, and the environment that are shaping the future, one that will be defined by increasing challenges as we have known it. Chris’s insights are in high demand by the media as well as academic, civic, and private organizations around the world, including institutions such as the U.N., the U.K. House of Commons, and the U.S. State Legislatures. So with that we’d like to welcome Mr. Chris

 
Tyler Durden's picture

Deflation Comes Knocking On The Door





For the moment capital markets appear to be adapting to deflation piece-meal. The fall in the gold price is equally detached from economic reality. While it is superficially easy to link a strong dollar to a weak gold price, this line of argument ignores the inevitable systemic and currency risks that arise from an economic slump. The apparent mispricing of gold, equities, bonds and even currencies indicate they are all are ripe for a simultaneous correction, driven by what the economic establishment terms deflation, but more correctly is termed a slump.

 
Tyler Durden's picture

"Turn Those Machines Back On" - The Day The Bond Market Died (If Only For A Few Minutes)





while the algos would have been delighted to let October 15 slide into the collective memory made obsolete by a constantly rising market (because investors are only truly angry when the market plunges not when it surges) just as the regulators made a mockery of their fiduciary responsibilities in the aftermath of May 6, and now markets are more fragile than ever as HFTs comprise the vast majority of all trades, some appear to be complaining and even, gasp, asking questions how it is possible that the $12 trillion US Treasury market traded like an illiquid Pink Sheets pennystock, or worse, the Nikkei.Here is the WSJ with some of the complaints: “It starts moving faster and faster, and you can’t point to anything."Actually, yes you can.

 
Tyler Durden's picture

Russia, China Sign Second Mega-Gas Deal: Beijing Becomes Largest Buyer Of Russian Gas





As we previewed on Friday, when we reported that "Russia Nears Completion Of Second "Holy Grail" Gas Deal With China", moments ago during the Asia-Pacific Economic Cooperation forum taking place this weekend in Beijing, Russia and China signed 17 documents Sunday, grenlighting a second "mega" Russian natural gas to China via the so-called "western" or "Altay" route, which as previously reported, would supply another 30 billion cubic meters (bcm) of gas a year to China. Gazprom CEO Miller noted that with the increase of deliveries via the western route, the total volume of Russian gas deliveries to China may exceed the current levels of export to Europe in the medium-term perspective. In other words, China has now eclipsed Europe as Russia's biggest, and most strategic natural gas client.

 
Bruno de Landevoisin's picture

Desperate Delusions or Planned Monetary Demolition?





When the wrecking ball hits, the IMF stands at the ready with the SDR composite to pick up the structural pieces......... 

 
Tyler Durden's picture

The Petrodollar Dominoes: How The Strong Dollar Is Slamming Oil Exporters (And Other BRICs)





A week ago the Russian Ruble exhibited intraday volatility that makes the JPY look quiet when it crashed to record lows then soared dramatically on intervention hopes. Since then we have had a Russian Central Bank disappointment and some jawboning which did nothing press the Ruble to record-er lows against the USD. Then today, last week's volatility in the Ruble was dwarfed when USDRUB blew past 48.5 only to be sent soaring (USDRUB lower) below 46 on hope of intervention. Russia is not alone. The Saudi Riyal has seen massive vol in recent weeks and Nigeria, another oil-producing nation, saw the Naira collapse yesterday then soar 8 handles this morning on what is confirmed intervention by the nation's central bank. It appears the strong dollar is becoming an issue for the world's oil-producing nations...

 
Tyler Durden's picture

Ritual Incantation - The Economic Gibberish Of The Keynesian Apparatchiks





The Keynesian notions of “potential GDP” and “aggregate demand” have no basis in the real world. They are revealed doctrine. They are the religion of the state’s economic policy apparatus. Its bad enough that this destructive economic religion leads to the farcical forecasting games evident in the EC’s chronic updates and slow-walks of the GDP numbers down. The evil, however, is that the Keynesian apparatchiks will not desist in their destructive money printing and borrowing until they have suffocated free market capitalism entirely, and have monetized so much public debt that the financial system simply implodes.

 
Tyler Durden's picture

Record Equity ETF Creation In October





Every day for the past several years, sometime after 3pm, bullish market participants exhale a sigh of relief when as if out of nowhere, an "unexpected" surge of buying lifts stocks into the 4 pm close. There are several explanations for what some have dubbed if not Divine, then certainly centrally-planned intervention. This is the time when ETF creation and (far less frequently) redemption takes place. As a result, in a world in which the bulk of liquidity has shifted away from single name stocks and even futures toward ETFs, trends in the creation and redemption of ETFs are key to watch to determine how the market may move purely for to technical reasons (since fundamentals died some time in 2009). Which is why we note, with little surprise, that according to SocGen, Equity ETFs posted a record level of monthly creations in October, driven by US, regional eurozone and UK indexations, perhaps explaining the relentless levitation of the market on ever lower volume especially in the latter part of the day.

 
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