"All the Trumans – the economists, fund managers, traders, market pundits –know at some level that the environment in which they operate is not what it seems on the surface…. But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end."
Klarman is here referring to the waning days of this third and greatest financial bubble of this century. But David Stockman's take is that the crack-up boom now nearing its dénouement marks not merely the season finale of still another Fed-induced cycle of financial asset inflation, but, in fact, portends the demise of an entire era of bubble finance.
Inflation has weakened the yen by 6.8% in the past 12 months… and the cost of living in Japan is now at a five year high.
It would appear that 1.39 EURUSD is the line in the sand for Mario Draghi. As pressures build on European competitiveness, Draghi appears to have finally got sick of China buying EURs to diversify its FX reserves away from USDs. This time "whatever it takes" is to drag the EUR lower - on the back of suggestions that OMT 2.0 (new measures - double the effectiveness and just as non-existent) and guarding against deflation (not worried about inflation). The jawbone is working for now as EUR breaks down through 1.39.
Goldman Sachs, the 3rd Bank Spewing Fear, Loathing & Hatred At Bitcoin: The Paradigm Shift That Makes Bankers QuakeSubmitted by Reggie Middleton on 03/13/2014 10:24 -0500
When "Muppets" are told to bite the hand that feeds them, will they listen? Goldman, et. al. better hope and prey that they do!
This week brings a slew of central bank meetings: At the forefront will be the BOJ meeting on Tuesday where no changes to monetary policy are expected. However, we will be watching the commentary closely for hints to further monetary easing in the coming months. Goldman, and others, still expect the BOJ to provide additional stimulus in the second quarter of this year as the impact of the consumption tax hike on the economy becomes visible - it is that expectation that sent the USDJPY above 100 in late 2013 and any disappointment by the BOJ will certainly have an adverse impact on the all important Yen carry pair. In terms of the key data to watch this week, the themes of recent weeks remain the same: US activity data, with retail sales and the U. Michigan Consumer sentiment survey the main releases, European inflation trends (French and German HCPI data on Thursday and Friday, respectively), and finally external balances in EM. Within that group, the latest data points for trade and current account balances in India, Turkey and South Africa will receive the most attention.
Mainstream media discussion of the macro economic picture goes something like this: “When there is a recession, the Fed should stimulate. We know from history the recovery comes about 12-18 months after stimulus. We stimulated, we printed a lot of money, we waited 18 months. So the economy ipso facto has recovered. Or it’s just about to recover, any time now.” But to quote the comedian Richard Pryor, “Who ya gonna believe? Me or your lying eyes?” However, as Hayek said, the more the state centrally plans, the more difficult it becomes for the individual to plan. Economic growth is not something that just happens. It requires saving. It requires investment and capital accumulation. And it requires the real market process. It is not a delicate flower but it requires some degree of legal stability and property rights. And when you get in the way of these things, the capital accumulation stops and the economy stagnates.
For those who have been following the abysmal loan creation in Europe, which recently dropped to an all time low today's inflation, or rather make that deflation, data out of Europe should not come as much of a surprise. Then again, with January inflation posting the biggest drop in history, when it tumbled by a record 1.1% from December levels, even the skeptics may be stunned by how rapidly deflation is gripping the continent.
The importing of Japan's deflation continues: in January headline consumer prices as well as prices excluding food and energy rose by 0.1%, in line with expectations, and down from a downward revised 0.2% in December. The annual increase in prices rose modestly from 1.5% to 1.6%, but still below the Fed's 2.0% target. The main reason for the increase? Why the polar vortex, and specifically soaring electricity prices as a result of the surge in nat gas. "Increases in the indexes for household energy accounted for most of the all items increase. The electricity index posted its largest increase since March 2010, and the indexes for natural gas and fuel oil also rose sharply. These increases more than offset a decline in the gasoline index, resulting in a 0.6 percent increase in the energy index."
The dollar dropped a lot this week, though most would say gold and silver spiked. Gold owners have 4% more dollars and silver owners have 7.4% more. How much less are those dollars worth?
Peak Stupidity: Argentina Fines Walmart For Violating "Fair Price" Pact, Urges Citizens To Denounce "Evil" RetailersSubmitted by Tyler Durden on 02/16/2014 20:29 -0500
We take certain liberties with the title: we realize that since one is dealing with human individuals, particularly human individuals stuck in an insolvent, soon to re-default nation, stupidity can never peak per se, as the next day will without doubt bring some peak-er instance of even more profound idiocy. However, at this particular moment, this may be it. What happened is that on Friday, Argentina fined supermarket chains including Wal-Mart, the world’s largest retailer, and Carrefour for "failing to maintain adequate stocks of price-controlled goods." This happened after the country shocked everyone in late January by devaluing the peso by 18 percent, effectively wiping out the purchasing power of its population by the same amount and forcing a mad scramble by the population into retail outlets, such as Wal-Mart, where the people were desperate to convert their increasingly more worthless pieces of paper for tangible goods resulting in a "run on the Wal-Mart" and depleting store shelves of virtually all goods, price-controlled or otherwise.
Overview of the events and data that will be of interest to investors.
Japan Machine Orders Crumble At Fastest Pace In 22 Years As BOJ Board Member Warns More QE May Not Be ComingSubmitted by Tyler Durden on 02/11/2014 19:13 -0500
If you needed another reason to buy stocks, trust in the growth meme, and have your faith in Abenomics confirmed... look away. Japanese Machine orders for December just printed -15.7% in December - the biggest MoM plunge since 1992. This is the biggest miss to expectations since 2006 and what is considerably more problematic for Abe et al. is that YoY expectations of a core machine order rise of 17.4% was hopelessly missed with a small 6.7% gain (and this is data that excludes more volatile orders). While machine orders are completely irrelevant, even if on their own they portend a recession; what would be far more troubling to the Kool aid addicts is if the BOJ were to announce that just like the Fed, it too is tapering its Open-ended QE ambitions. Considering this is precisely what BOJ board member Kiuchi just did, that relentless USDJPY meltup overnight may not be such a slamdunk...
The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA) - the "global energy authority" - believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.
Many fear that a decline of between 1,500 to 2,000 points in the Nikkei to raise doubts about 'Abenomics' (i.e., hoary inflationism combined with deficit spending). We are still wondering what Abenomics is supposed to achieve. With a graying population and consequently a shrinking work force, inflationary policies seem especially ill-conceived in Japan. Maintaining the market's calm is predicated on the belief that the inflationary policy pursued by Abe/Kuroda will actually fail. Moreover, Japan's government can simply not afford higher borrowing costs, as 25% of its tax revenue is already going toward merely servicing interest costs on its current outstanding debt. In other words, Japan's government bond market is a glaring example of a Ponzi scheme and only a rising stock market maintains the media's complicitness in this mirage.
The wild volatility continues, with markets set to open well in the negative wiping out all of yesterday's gains and then some, only this time the catalyst is not emerging market crashing and burning (at least not yet even though moments ago the ZAR weakened to a new 5 year low against the USD and the USDTRY is reaching back for the 2.30 level) but European inflation, where the CPI printed at 0.70%, dropping once again from 0.8%, remaining under 1% for the fourth straight month and missing estimates of a pick up to 0.9%. Perhaps only economists are surprised at this reading considering last night Japan reported its highest (energy and food-driven) inflation print in years: so to explain it once again for the cheap seats - Japan is exporting its "deflation monster", Europe is importing it. It also means Mario Draghi is again in a corner and this time will probably have to come up with some emergency tool to boost European inflation or otherwise the ECB will promptly start to lose credibility - is the long awaited unsterilized QE from the ECB finally imminent?