Capital Markets

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The Warren Buffett Economy, Part 5: Why Its Days Are Numbered





Today’s style of heavy-handed monetary central planning destroys capitalist prosperity. Real capitalism cannot thrive unless inventive and enterprenurial genius is rewarded with outsized fortunes. Warren Buffett’s $73 billion net worth, and numerous like and similar financial gambling fortunes that have arisen since 1987, are not due to genius; they are owing to adept surfing on the $50 trillion bubble that has been generated by the central bank Keynesianism of Alan Greenspan and his successors.

 
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Global Risk Off From China To Europe To US, As Greek Impasse Hits Markets





Another day of constant Grexit chatter, and this time the futures are really starting to react as what was seen as mostly impossible for the past 4 months is now almost inevitable. The first tremors emerged when Greece announced it would not present a new proposal to the Eurogroup to unlock aid, relying instead on what has already been submitted and which the Troika said was inadequate. Then, confusing matters, a new GPO poll posted on Greece's Mega TV showed that increasingly more, or over 56% at last count, of Greece would prefer a "bad" deal with creditors than being kicked out of the Eurozone putting the future of Tsipras' cabine tin jeopardy. And then, hinting that the endgame is officially here, the FT reported that "Eurozone officials discuss holding emergency summit on Greece", suggesting a second Lehman weekend may be just around the corner.

 
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Saudi Arabia Opens Stock Market To Foreign Investment Amid Low Oil Prices, Yemen War





Facing its first current account deficit in seventeen years amid low oil prices and a war with Yemeni rebels, Saudi Arabia picks a convenient time to open its stock market to direct foreign investment. 

 
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IMF Says It Will Continue Lending To Ukraine Even After A Default, And Why This Is Bad News For Greek Gold





As we enter Sunday and what may well be the last possibility to get deal done before the "accidental" Grexit scenario is put in play, we thought our Greek readers would be interested to learn that while Lagarde's "apolitical" IMF is digging in tooth and nail against giving Greece even the smallest amount of breathing room, the equivalent of half an our of a typical daily Fed POMO notional amount, yesterday the same Lagarde said that the IMF "could lend to Ukraine even if Ukraine determines it cannot service its debt."

 
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The Warren Buffet Economy, Part 4: Why Its Days Are Numbered





After 27 years, honest price discovery has been destroyed, thereby reducing the nerve centers of capitalism - the money and capital markets - to little more than gambling casinos. Accordingly, speculative rent-seeking in the financial arena has replaced enterprenurial innovation and supply side investment and productivity as the modus operandi of the US economy. This has resulted in a severe diminution of main street growth and a massive redistribution of windfall wealth to the tiny share of households which own most of the financial assets. Warren Buffett’s $73 billion net worth is the poster boy for this untoward state of affairs. The massive and systematic falsification of asset prices which lies at the heart of this deformation of capitalism is a direct and unavoidable consequence of monetary central planning.

 
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Greek Economy In "Doomsday" Tailspin: 59 Businesses, 613 Jobs Lost Each Day, Suppliers Demand Cash Up Front





While the Greek government has wasted the past 4 months experiment with game (and hope) theory-based negotiations with the Troika, debating what reforms it should implement, what the budget surplus should be, and how much of a pension and wage haircut the local workforce should undergo just to keep the trickle of European money flowing and "allow" the IMF to repay Greek IMF obligations and the ESM to repay the ECB, the Greek economy has slammed into a brick wall because according to Greece's retailers association, about 59 businesses close down and some 613 jobs are being lost each day.

 
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How To "Measure" Risk





While investor behavior hasn't sunk to the depths seen just before the crisis, Oaktree Capital's Howard marks warns, in many ways it has entered the zone of imprudence. "Today I feel it's important to pay more attention to loss prevention than to the pursuit of gain... Although I have no idea what could make the day of reckoning come sooner rather than later, I don’t think it’s too early to take today’s carefree market conditions into consideration. What I do know is that those conditions are creating a degree of risk for which there is no commensurate risk premium."

 
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DOJ Launches Probe Of Treasury Market Manipulation





Earleir today in confirmation that a crack down on yet another market for gross manipulation is imminent, the Post reported that the Department of Justice fresh from doing all it can do prevent Vladimir Putin from blowing $10 billion in the bottomless hole that is World Cup 2018 infrastructure spending, is probing the Treasury market for possible manipulation.

 
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SEC Reads Zero Hedge, Launches Crack Down On Activist Hedge Fund "Idea Dinners"





Ten months after we asked whether "The SEC Is Asking These Hedge Funds Why They All Rushed Into Allergan Last Quarter?" we find that the US market regulator indeed reads this website on a regular basis. As the WSJ reports the SEC has answered our question, and yes: the  SEC is finally asking not only "these" hedge funds why they all rushed into Allergan, but into every other collusive activist take out target.

 
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This Is How The IMF Just Lost Its Last Shred Of Credibility





A new research paper from none other than the IMF has a unique observation for heavily-indebted countries: "It is better to live with the debt than to pay it down." 

 
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"If It Looks Like A Duck" - The Man In The Moon: Part 2





During “normal times” – an economic growth phase accompanied or generated by rising systemic leverage – central banks have incentive to promote nominal growth and inflation, which make banking systems profitable and their free-spending political overseers happy. In such times, commercial banks have fiduciary responsibilities to shareholders to constantly increase their market values, which they do by expanding their balance sheets.  Now that economies are highly leveraged, extinguishing debt would require banks to reduce the sizes of their loan books, which would shrink their market values. Thus, it seems economic policy makers never have incentive to promote debt extinguishment in the banking system, regardless of economic conditions or prospects.

 
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The Future Of India's Monetary Policy Is Now "Monsoon Dependent"





As it turns out it is not just a US "thing" to blame the weather. Enter the Bank of India, which overnight cut its benchmark rate from 7.5% to 7.25%, as had been largely expected, taking India's interest rate to the lowest since September 2013. The punchline, however, was when RBI's governor Raghuram Rajan gave his outlook for the possibility of future rate cuts, saying he would have to wait to assess monsoon rains before acting again

 
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A 10% Correction Now Or A 20% (Or More) Bear Market Later On





If U.S. equities feel brittle, they should. Yes, central bank liquidity from Japan and Europe may well push global equity markets higher.  But what we really need is a pullback – that classic 10% correction that flushes out weak hands, reestablishes the discipline of “Risk” in the “Risk-Return” equation, and shows capital markets how to do more than just follow central bank liquidity.  So watch June’s price action in U.S. stocks very carefully, because this process needs to start now.  The bull market that began in March 2009 is now an ancient bovine indeed.  After all, better 10% now than 20% or more later in the year.  The first is inconvenient.  The second is unwelcomed.

 
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