Investors in European Bonds are running over each other all in an effort to front run what the Big Banks have been begging the ECB to begin a bond buying program. It is hilarious as European yields are already ridiculously low right now, how much lower do they think these yields can go?
Ebola Devastates West Africa: Revenues Down; Markets Not Functioning; Projects Canceled; GDP Plunges 4%Submitted by Tyler Durden on 08/27/2014 17:01 -0400
The market, in its infinitely rigged wisdom, has concluded that the worst Ebola outbreak in history is a non-event, even though it has put virtually all of western Africa on indefinite lockdown, and as Reuters reports, is "causing enormous damage to West African economies and draining budgetary resources." In fact the damage from Ebola to Africa is already so acute, it is expected that economic growth in the region will plunge by up to 4 percent as foreign businessmen leave and projects are canceled, according to the African Development Bank president said. Revenues are down, foreign exchange levels are down, markets are not functioning, airlines are not coming in, projects are being canceled, business people have left - that is very, very damaging," African Development Bank (AfDB) chief Donald Kaberuka said in an interview late on Tuesday.
Just in case futures buying algos forgot what the regurgitated "catalyst" that activated the overnight ramp was, the ECB was kind enough to remind everyone that the main event over the past 12 hours was the Deutsche Bank leak that while the ECB will not announce outright QE any time soon, thus denying the rumor spread in the past weak by the likes of Citi and JPM, the formerly preannounced and thus already priced-in (by the EURUSD which was about to take out 1.40 a few months ago) ABS purchase program, or as DB called it "private QE" is about to be unleashed. The ECB confirmed this earlier this morning when it announced that it had appointed BlackRock, the world’s biggest money manager, to advise on developing a program to buy asset-backed securities. In other words, Europe's largest public-sector hedge fund has just hired the world's largest private-sector hedge fund to "fix things."
- Islamic State executes soldiers, takes hostages at Syria base (Reuters)
- Buffett Burger King Funds Flip Obama’s Inversion Calculus (BBG)
- Equities Reach Record $66 Trillion as S&P 500 Hits 2,000 (BBG)
- Central Banks Playing Own Version of Plaza-opoly With FX (BBG)
- Russia court closes McDonald's branch for 90 days (Reuters)
- Finland Says NATO an Option After Russia ‘Violates’ Border Laws (BBG)
- Netanyahu Hit With Domestic Criticism Over Gaza Truce (BBG)
- Biggest Danish Fund Readies for Rate Shock as Exit Narrows (BBG)
- Nonprofit Hospitals' Profits Fall (WSJ)
The latest IMF data also shows that in July, the National Bank of Kazakhstan added 45,000 ounces to its official gold reserves, taking its total holding to 5.1 million ounces. As well as Kazakhstan, other countries in the region have also actively been increasing official gold reserves this year including Azerbaijan, Kyrgyzstan and Tajikistan. Currency wars are set to intensify in the coming months.
"Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly.... Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy... The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them"...
Mark Spitznagel: "Mises will ultimately be right yet again about the inevitable final collapse of the current asset boom brought about by credit expansion. The term “black swan” (the surprising, unforeseen event) used for bursting financial bubbles has been and will remain a misnomer - we can and, indeed, should expect such tumults to occur at some point as a consequence of massive central bank intervention and economic distortion."
Ron Paul: "As to the unwinding of this mess, I’m convinced that when the current expansion ends it will be abrupt, gigantic, and worldwide. The 43-year expansion of Fed credit and debt, delivered to us by a fiat dollar standard, and held together artificially by an undeserved trust will end badly."
Despite all the massive monetary pumping over the past six years and the lowering of interest rates to almost zero most commentators have expressed disappointment with the pace of economic growth. This should not be surprising though, since, any policy, which artificially boosts demand, leads to consumption that is not backed up by a previous production of wealth. This means that monetary pumping leads to the squandering of real wealth. All this however, can be reversed by shrinking the size of the government and by the closure of all the loopholes of the monetary expansion.
While in July margin debt did dip modestly from near all time highs hit back in June when total margin debt was virtually tied with the previous record, at $464 billion, it was that other metric tracked by the NYSE, namely Investor Net Worth, calculated by subtracting margin debt from the notional represented in free credit cash accounts and credit balances in margin accounts, that was the notable highlight in the July report: at a negative $182.1 billion, a decline of $6.3 billion from the prior month, investor Net Worth has never been lower.
It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
Today, the world economy is in uncharted territory. Never before has the developed world carried this much debt. Never before have the central banks of those same countries expanded their balance sheets so much. Never before has so much sovereign debt been outright monetized. Never before have major financial institutions been officially designated as “too big to fail” and thereby been granted special license to assume gigantic risks. Dr. Lacy Hunt, economist and current executive vice president of Hoisington Investment Management Company, expects the macroeconomic situation to get worse from here...
The zombification of corporate America is nowehere more evident than the yield-starved demand that has enabled companies with the lowest of the low credit ratings to raise debt capital and stay alive far beyond their 'natural' lifespan. As WSJ reports, investors are gobbling up some of the riskiest debt from junk-rated European companies at the fastest pace in years. The riskiest tranche of that debt - so-called second-lien, or junior, loans - amounts to $3.3 billion, almost double the amount raised at the same stage last year and the most over the same period since 2007. The reason is simple - Central Banks - "If you have more demand than supply then you end up with a loosening of terms and potentially more leverage and more aggressive structures." This is 'mal-investment' writ large, and at least as bad as during the 2007 bubble.
India, Pakistan Intensify Shooting Across Border; Iran Downs Israel Drone; ISIS Seizes Military AirportSubmitted by Tyler Durden on 08/24/2014 12:07 -0400
Since in the New Normal no geopolitical events appear to have any adverse impact on risk and asset prices (because the central banks are always there to protect investors should the market "plunge" by say 5%) with general newsflow completely irrelevant on what has been a straight line up in the S&P since the announcement of QE4 in December 2012, one might as well see how much further geopolitical events can be pushed further before it all crashes. In other words, time for this weekend's geopolitical update which covers everything from India, Pakistan, Iran, Israel, Iraq, Syria and Qatar.
Janet Yellen has essentially confirmed QE’s demise; good riddance. Unfortunately, I don’t think that is the final end of QE in America, just as it hasn’t been the end time after time in Japan (and perhaps now Europe treading down the same ill-received road). The secular stagnation theory, that we think has been fully absorbed in certainly Yellen’s FOMC, sees little gain from it because, as they assume, the lackluster economy is due to this mysterious decline in the “natural rate of interest.” Therefore QE in the fourth iteration accomplishes far less toward that goal, especially with diminishing impacts on expectations in the real economy, other than create bubbles of activity (“reach for yield”) that always end badly. What Krugman and Summers call for is a massive bubble of biblical proportions that “shocks” the economy out of this mysterious rut, to “push inflation substantially higher, and keep it there.” In other words, Abenomics in America. Japanification is becoming universal, and the more these appeals to generic activity and waste continue, the tighter its “mysterious” grip.
Another day, another brilliant scheme from the think-tank that is the G-20: prevent systemic collapse from TBTF banks loaded up with record amounts of debt by forcing them to... issue more debt.