Capital Markets

"Crude Cheap, Gold Fair, Stocks Rich"

Gold, crude oil and U.S. equities are dollar denominated, are notional inflation hedges, and have reliable long term price records. Two anomalies pop out in the relative value across this threesome...

"We're Living In A Gambling Society" BlackRock's Larry Fink Urges CEOs To Stop "Short-Termist" Thinking

As the ongoing collapse in economic productivity continues in America, and Alan Greenspan's concerns grow, the call for an end to the diversion of corporate spending to instantly shareholder-friendly actions comes from an unusual source. Larry Fink - CEO of the largest asset manager in the world - has unleashed a letter to 500 CEOs around the world  - telling them that "the effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” bucking the dividend/buyback trend that investors are demanding. As NYTimes notes, the shortsightedness that pervades corporate America is just a symptom of a larger issue. "This is not just a corporate problem," Fink explains, "It's a societal problem, we’re currently living in a "gambling society."

Frontrunning: April 14

  • Shale Oil Boom Could End in May After Price Collapse (BBG)
  • Oil above $58 on U.S. shale output report, Mideast (Reuters)
  • Ackman Says Student Loans Are the Biggest Risk in the Credit Market (BBG)
  • Alibaba Disputes U.S. Group’s Claim it Tolerates Fake Goods on Taobao (WSJ)
  • Petrobras takes steps to avert a technical default (FT)
  • Yen’s Drop Is Approaching Its Limit, Says Abe Adviser Hamada (BBG)
  • 'Slicing and dicing': How some U.S. firms could win big in 2016 elections (Reuters)
  • Fed official warns ‘flash crash’ could be repeatedv (FT)

Days Of Crony Capitalist Plunder - The Deplorable Truth About GE Capital

GE’s announcement that its getting out of the finance business should be a reminder of how crony capitalism is corrupting and debilitating the American economy. The ostensible reason the company is unceremoniously dumping its 25-year long build-up of the GE Capital mega-bank is that it doesn’t want to be regulated by Washington as a systematically important financial institution under Dodd-Frank. Oh, and that its core industrial businesses have better prospects. We will see soon enough about its oilfield equipment and wind turbine business, or indeed all of its capital goods oriented businesses in a radically deflationary world drowning in excess capacity. But at least you can say good riddance to GE Capital because it was based on a phony business model that was actually a menace to free market capitalism. Its deplorable raid on the public purse during the Lehman crisis had already demonstrated that in spades.

5 Things To Ponder: Don't Fight The Fed

Randolph Duke: Money isn't everything, Mortimer.
Mortimer Duke: Oh, grow up.
Randolph Duke: Mother always said you were greedy.
Mortimer Duke: She meant it as a compliment.

"Do Not Worry! Do Not Panic!" Warns Hong Kong Exchange CEO Ahead Of Today's Market Open

As everyone settles down in anticipation of another session of parabolic Hong Kong euphoria driven by desperate housewife traders, or a manic plunge straight down, none other than the CEO of the Hong Kong Exchange, Charles Li, found some time to pen a blog post to give "a little advice to investors", providing vivid aphorisms "Investment is like swimming: if you do not enter the water, you will never learn to swim" and to caution speculators that the opportunity is "not to quickly make a  fortune, but ... to provide long-term wealth preservation and appreciation" and that there is also such a thing as risk as everyone scrambles to chase the latest bubble breakout. His blog post's punchline: "Do not worry!  Do not panic!" We doubt anyone will panic, at least not until the selling begins.

Guest Post: Russia's Central Bank Governor Is Way Smarter Than Ours

It wouldn’t be a first, but it would certainly be a – bigger – shock. That is to say, the Bank of England hijacked the head of Canada’s central bank some time ago, but, while unexpected enough, that would pale in comparison to the US hiring the present razor sharp and fiercely independent Governor of the Russian central bank, Elvira Sakhipzadovna Nabiullina. It would still seem to be a mighty fine idea, though. Not that we think it will happen. Yellen is obviously neither; she’s a cog in a machine that huffs and puffs and pumps and dumps to make sure her overlords in the blissful world of US finance make ever more profit no matter how bad things get in American society.

Frontrunning: April 8

  • Shell Will Buy BG Group for $70 Billion in Cash and Shares (BBG)
  • IMF warns of long period of lower growth (FT)
  • Wall Street sanguine as it heads into worst earnings season in six years (Reuters)
  • Switzerland First With 10-Year Bond at Negative Yield (WSJ)
  • U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices (BBG)
  • Rahm Emanuel Re-Elected as Mayor of Fiscally Ravaged Chicago (BBG)
  • Oil falls on U.S. stock build, record Saudi output (Reuters)
  • White South Carolina policeman charged with murdering black man (Reuters)
  • German Factory Orders Drop for Second Month (BBG)
  • A third of Republicans support Iran nuclear deal (Reuters)

Frontrunning: April 7

  • Israel, U.S. Lawmakers Press Case Against Iran Nuclear Deal  (WSJ)
  • Rand Paul tries to broaden libertarian appeal (Reuters)
  • Fewer Oil Trains Ply America’s Rails (WSJ)
  • Chicago voters go to polls in first ever mayoral runoff (Reuters)
  • FedEx to buy TNT to expand Europe deliveries (Reuters)
  • Mohamed El-Erian Has Most of His Money in Cash (BBG)
  • In Surprise Move, Australia Holds Rates (WSJ)
  • Oil falls as Iran, China discuss more supply (Reuters)

Virtu's Second Attempt At Going Public Reveals Why FX Trading Is Now Impossible

The question on everyone's lips: which asset class was responsible for Virtu's trading perfection for yet another year.  It wasn't stocks because adding across the firm's America, EMEA and APAX equity product lines, Virtu revenues actually declined, from $201 million in 2013 to $195 million in 2014. It also wasn't commodities, where revenue dropped by almost $2 million in 2014 to $93.1 million.The answer is...

Meet The New Recession Cycle - It's Triggered By Bursting Bubbles, Not Surging Inflation

Today’s clueless Keynesian central bankers essentially believe that they can keep the pedal-to-the-metal until a 1970’s style inflationary spiral arises. But none is coming because  the worldwide central bank money printing spree of the last two decades has generated massive excessive capacity and malinvestment all around the planet. What is coming, therefore, is not their father’s inflationary spiral, but an unprecedented and epochal global deflation. So the central banks just keep printing, thereby inflating the asset bubbles world-wide. What ultimately stops today’s new style central bank credit cycle, therefore, is bursting financial bubbles. That has already happened twice this century. A third proof of the case looks to be just around the corner.

 

Greece Said To Prepare "Grexit", Drachma, Bank Nationalization Plans

"Greece is drawing up drastic plans to nationalise the country's banking system and introduce a parallel currency to pay bills unless the eurozone takes steps to defuse the simmering crisis and soften its demands," The Telegraph reports, contradicting officials' "categorical" denial that the country faces a cash crunch and possible default as early as April 9. Will the curtain finally fall on the long-running tragicomedy that is the Greco-Euro standoff? 

"It's Not Bearish, It's Simply Sane"

In all the annals of investing, few seemingly innocuous phrases incorporate as much by way of grave implication as those four words, “a shift to banknotes”. 2008 was bad. With central bank policy now at the outer reaches of the possible and even of the theoretical, the outlook is certainly uncertain. Not wishing to participate in the terminal stages of a momentum-driven bubble is not bearish so much as simply sane.