Update: PR Governor Padilla has spoken...*PUERTO RICO GOVERNOR SAYS WON'T PAY DEBT TOMORROW, CALLS ON U.S. CONGRESS, PAUL RYAN FOR HELP, CRISIS WILL GET WORSE IF U.S. CONGRESS DOESN'T HELP
Low interest rates attempt to buy time. The idea is to bring consumption forward until the economy heals on its own as capital projects are completed. But those projects never began this time. The end result is ever-higher debt that borrows more and more from the future. Unfortunately, it borrows from the future without making the future any brighter through solutions to root causes of economic ailments. At some point, the “future” becomes “today”.
Everything that the classical economists saw and argued for – public investment, bringing costs in line with the actual cost of production – that’s all rejected in favor of a rentier class evolving into an oligarchy. Financiers in the 1% are going to pry away the public domain from the government and privatize it so that they get all of the revenue for themselves. It’s all sucked up to the top of the pyramid, impoverishing the 99%. “As long as you can avoid studying economics, you know what’s happened. Once you take an economics course you step into the brainwashing of an Orwellian world.”
Those who thought the situation in Greece was solved after prime minister Alexis Tsipras suddenly caved in to creditors’ demands need think again. Greek tax revenues are running well under expectations. A default looms in July unless the creditors give more money to Greece so that Greece can pay back the creditors. As convoluted as that sounds, that’s precisely the way this madness works. The creditors demand still more austerity but Tsipras said “no”. Instead, Tsipras seeks an emergency meeting, but European Commission president Donald Tusk said “no” to that proposal.
A new generation of revolutionary central bankers must be called to arms for all of our sake. Their battle cry: We commit to never returning rates to zero or below again, to never let be money be free and forever ensure there is a true cost associated with borrowing. Release the markets to set interest rates now and forever! Will it work? Stranger things have been known to succeed in capitalistic economies with competitive and freely functioning markets.
In a few moments, a major showdown will take place in Congress when on the same table Valeant's outgoing CEO Michael Pearson will sit next to Valeant's most prominent investor Bill Ackman and also the former CFO, Howard Schiller, who the company recently tried to scapegoat for most of the problem that sent the stock price of VRX crashing 85% from its summer 2015 highs.
For those who thought that the world's biggest company losing over $40 billion in market cap in an instant on disappointing Apple earnings, would have been sufficient to put a dent in US equity futures, we have some disappointing news: with just over 7 hours until the FOMC reveals its April statement, futures are practically unchanged, even though the Nasdaq appears set for an early bruising in the aftermath of what is becoming a disturbing quarter for tech companies. Instead of tech leading, however, the upside has once again come from the energy complex where moments ago WTI rose above $45 a barrel for the first time since November after yesterday's unexpected 1.07 million barrel API inventory drawdown.
With the Fed decision just one day away, followed the very next day by the increasingly more irrational BOJ, stocks had no desire to make significant moves and overnight's boring session was the result, as European stocks and U.S. index futures rose modestly but mostly hugged the flatline while Asian declined 0.2% for a third day as raw-material shares declined and Tokyo equities slumped before central bank meetings in the U.S. and Japan this week. China’s stocks rose the most in almost two weeks, up 0.6% but failed to rise above 3000 on the Shanghai Composite, in thin trading.
Update: after widening by 2bps earlier, Malaysia CDS is now +4 at 167bps and starting to move as macro "analysts" finally catch up on the entire story and comprehend the implications.
Malaysian CDS rose to near 3-month highs and the Ringgit has spiked over 300 pips - back near recent lows - after the Malaysian slushfund government investment fund 1MDB is reportedly in default. This is exactly the scenario we laid out last week that initially sent the currency lower and CDS higher, as the Abu Dhabi sovereign wealth fund has by all appearances started a potential waterfall default on Malaysian sovereign debt (due to cross-default triggers at the sovereign).
Take away Saudi Arabia’s oil and all that’s left are a couple of Islamic shrines and a lot of sand and hot air.
With the Urbancorp bankruptcy filing, and the first official canary death in Canada's real estate "coal mine", we anticipate that the near future for Canada's real estate sector will be a far more volatile one. Excluding Vancouver of course: that particular Chinese money laundering hub will continue humming until the locals finally decide they have had enough of having their city sold to criminal Chinese oligarchs.
A central tenet in the thesis by analysts about the oil markets rebalancing has been that as prices declined, oil companies would be forced into bankruptcy. That in turn would lead to declining production, and eventually a rebalancing of supply and demand in the market, followed by higher prices. That process is already taking longer than many expected, and it looks like more time is needed. That additional time to balance the market is being driven by an unexpected factor; bankrupt oil companies are still pumping.
There’s no respite in sight.
If you had to make a sudden visit to the emergency room, would you have enough money to pay for it without selling something or borrowing the funds from somewhere? Most Americans may not realize this, but this is something that the Federal Reserve has actually been tracking for several years now.
It has gotten so bad for the cash-strapped Islamic State terror group that ISIS has resorted to killing its injured fighters so that their organs can be extracted and sold on the black market abroad. "Doctors were threatened to take out the body organs of a wounded ISIL militant," the Arabic-language al-Sabah newspaper reported citing a source in the Iraqi city of Mosul.