- Iraq Army Tries to Roll Back Sunni Militants’ Advance (BBG)
- Starbucks to Subsidize Workers' Online Degrees (WSJ)
- ‘Bitcoin Jesus’ Calls Rich to Tax-Free Tropical Paradise (BBG)
- Medtronic Is Biggest Firm Yet to Renounce U.S. Tax Status (BBG), Medtronic to buy Covidien for $42.9 billion, rebase in Ireland (Reuters)
- Oil Topping $116 Seen Possible as Iraq Conflict Widens (BBG)
- Putin Seeks Paris Landmark as Hollande’s Russia Ties Defy Obama (BBG)
- GM Says It Has a Shield From Some Liability (WSJ)
- BOJ’s Bond Paralysis Seen Spreading Across Markets (BBG)
We believe Jeffrey Gundlach, et al. are wrong regarding the 10-Year Bond yield staying below 2.80% over the second half of the year.
Today's financial markets make a mockery out of sanity and logic. The difference between what SHOULD happen and what IS happening is perhaps the greatest it has been in our investing lifetimes. If you're perplexed, flummoxed, frustrated, stymied, enraged, bored, irritated, insulted, discouraged -- any or all of these -- by the ever-higher blind grinding of asset prices over the past several years, despite so many structural reasons for concern, you have good reason to be.
"The latest escalation in Iraqi tensions has introduced new event risk for global oil markets. However, current options market pricing suggests oil markets are still attaching a low probability to an oil price spike over the coming months. We believe this sanguine approach to oil price spike risk reflects the fact that the major oil infrastructure in Iraq has not (yet) fallen into the hands of the militant extremists." - Deutsche Bank
The numbers that you are about to see are likely to shock you. They prove that the global financial Ponzi scheme is far more extensive than most people would ever dare to imagine. The truth is that our financial system is little more than a giant pyramid scheme that is based on debt and paper promises. It is literally a miracle that it has survived for so long without collapsing already. But at some point a day of reckoning is coming, and when it arrives it is going to be the most painful financial crisis the world has ever seen.
Last Thursday, the European Central Bank (ECB) took the historically unprecedented step of lowering certain of its interest rates below 0%. In a report immediately following the announcement, Peak Prosperity's Chris Martenson likened the move to the policy equivalent of dropping a neutron bomb. In the days following, despite the ECB attempting to clarify its stance further, many questions still linger; most notably: What exactly will the implications of this negative interest rate (NIRP) policy be? Alasdair Macleod lays things out in black as white as much as is possible; explaining exactly what steps the ECB is undertaking, what the most probable ramifications will be, and where the highest degrees of risk now lie..."The ECB now finds itself on the cusp of this failure. Remember, there are some very big banks with gearing over 40-50 times. All you need is a fall in prices of 1%, 2%, or 3% for a few companies to go bust, and then those banks are no longer solvent. It is a nightmare scenario. It really is."
- Ukraine, Russia Fail to Reach Deal in Natural-Gas Talks (WSJ)
- Boko Haram Kidnaps More Girls in Nigeria (WSJ)
- Déjà vu: echoes of pre-crisis world mount (FT)
- Money market rates hit new low as ECB moves gain traction (Reuters)
- 'Dark Pools' Face New SEC Probe (WSJ)
- Buffett Ready to Double $15 Billion Solar, Wind Bet (BBG)
- White House-Congress rift over Bergdahl deal deepens (Reuters)
- Taxpayers Face Big Medicare Tab for Unusual Doctor Billings (WSJ)
- Lean Retirement Faces U.S. Generation X as Wealth Trails (BBG)
- Employers’ skills gap claim does not show up in US wage data (FT)
- He is holding out for the Zuckerberg overbid: Donald Sterling says LA Clippers not for sale (WSJ)
With a closing P/E ratio over 17 and a VIX under 11, Deutsche Bank's David Bianco is sticking with his cautious call for the summer. Their preferred measure of equity market emotions is the price-to-earnings ratio divided by the VIX. As of Friday's close, this sentiment measure has never been higher and is in extreme "Mania" phase. Deutsche's advice to all the summertime-'chasers' - "wait for a better entry."
As we have been reporting (and forecasting for the past several years), the Eurasian anti-US Dollar axis is rapidly taking shape, with recent events catalyzed and certainly accelerated by US foreign policy in Ukraine, which has merely succeeded in pushing Russia that much closer, and faster, to China. The latest proof of this came overnight when the FT reported that Russian companies are preparing to switch contracts to renminbi and other Asian currencies amid fears that western sanctions may freeze them out of the US dollar market, according to two top bankers. Andrei Kostin, chief executive of state bank VTB, said that expanding the use of non-dollar currencies was one of the bank’s “main tasks”. “Given the extent of our bilateral trade with China, developing the use of settlements in roubles and yuan [renminbi] is a priority on the agenda, and so we are working on it now," ... "It looks like this is not just a blip, this is a trend,” said Mr Teplukhin of Deutsche Bank.
- Canada Aims to Sell Its Oil Beyond U.S (WSJ)
- ECB Unanimity May Prove Fleeting (WSJ)
- Chinese military spending exceeds $145 billion, drones advanced: U.S. (Reuters)
- France to sell 10 warships to Russia next? BNP Executive Firings Sought by Top New York Bank Regulator Amid Probe (BBG)
- Vodafone says governments have direct access to eavesdrop in some countries (Reuters)
- Home Price Gains of 20% Vanish as Hottest Markets Cool (BBG)
- G-7 Heads Warn Moscow Before Facing Putin (WSJ)
- Barclays Fine Spurs U.K. Scrutiny of Derivatives Conflict (BBG)
- "Or Costs" - Obama Says Putin Running Out of Time Over Ukraine (BBG)
- Banca Monte Paschi Falls After Offering New Stock at 35.5% Discount (BBG)
- Inside the White House's decision to free Bergdahl (Reuters)
- Dimon’s Raise Haunts BNP Paribas as U.S. Weighs $10 Billion Fine (BBG)
- Jobs Are on the Line as Banks' Revenue Slides (WSJ)
- Wall Street Adjusts to the New Trading Normal (WSJ)
- Nothing like objective, intense probes: GM recall probe to clear senior execs, finds no concerted coverup (Reuters)
- ECB ready to cut rates and push banks into lending to boost euro zone economy (Reuters)
- China Should Resist Further Stimulus, IMF Says (BBG)
- Carney Finds Ally in Draghi as Key Rate Kept at 0.5% (BBG)
- Assad wins Syria election with 88.7 percent of votes (Reuters)
- U.S. sets new import duties on Chinese solar products (Reuters)
- U.S.-China Solar-Products Dispute Heats Up (WSJ)
- China Mulls Offshore Yuan Gold Trade in Free Trade Zone (BBG)
- Insider-Trading Probe Could Snarl a Deal for Icahn (WSJ)
- KCG Holdings Suspects Its Trading Code Was Stolen (WSJ)
- ‘Period. Full Stop’ Is the New ‘At the End of the Day’ (BBG)
- Draghi not so goof for bonds: Investors Flag Risk of ECB Disappointing After Europe Bond Rally (BBG)
- But great for stocks: Equity Traders See Draghi Turning Throttle Up on Rally (BBG)
- Unstoppable $100 Trillion Bond Market Renders Models Useless (BBG)
- Afghan president fumes at prisoner deal made behind his back (Reuters)
- Spain to Unveil $8.6 Billion Stimulus Package (AP)
- How fracking helps America beat German industry (Reuters)
- Obama to Urge European Allies to Stay Tough on Russia (WSJ)
- Frenchman 'admits' Brussels shooting in video (AFP)
- Heloc Payment Jump to Take Bite Out of Consumer Spending (WSJ)
- Obama Said to Propose Deep Cuts to Power-Plant Emissions (BBG)
- Lehman Lesson Lost as Bank Lobby Gains Clout (BBG)
- WSJ reports that WSJ reporting on Icahn insider trading probe may have killed it (WSJ)
- KKR liquidates former Goldman Sachs traders-run hedge fund (Reuters)
Ahead of this Thursday's ECB meeting, speculation is rife about what Mario Draghi will announce, and as the following Nomura chart highlights most pundits are convinced that the most likely announcement is a cut in the refi and deposit rate with a probability of around 90%, an LTRO in distant third at 34%, and a full blown QE dead last with 10%. However, as SocGen predicts, which is rather aggressive in its assumptions expecting a negative deposit rate of -0.1%, a targeted LTRO to "boost lending to the private sector", and a "signal" of €300 billion in asset purchases, the bulk of this new-found liquidity will almost exclusively go to boost capital markets, and the wealth effect. As for the broader economy? "We do not expect the 5 June measures to deliver a significant impulse to the real economy."
Has the next major economic downturn already started? The way that you would answer that question would probably depend on where you live. If you live in New York City, or the suburbs of Washington D.C., or you work for one of the big tech firms in the San Francisco area, you would probably respond to such a question by saying of course not. In those areas, the economy is doing great and prices for high end homes are still booming. But in most of the rest of the nation, evidence continues to mount that the next recession has already begun for the poor and the middle class.