Volcker Rule - Who cares? I know we are supposed to care more about this convoluted rule, but we just can’t. The concept that somehow “prop” trading brought down the banks seems silly. The idea that market making desks were a dangerous part of the equation is ludicrous. They could have fixed this with a few simple changes, but that would have meant some blame would have had to be shifted onto the regulators...
“The only thing we have to fear is fear itself.”
The FSB's first chairman was Mario Draghi, current President of the European Central Bank, while its current chairman is Mark Carney, Governor of the Bank of England. The inclusion of Financial Market Infrastructures means that large parts of the global financial system is susceptible to bail-in and could potentially be bailed-in including exchange traded funds.
Everywhere you look these days, central planning just can't stop reaping failure after failure. First it was Japan's Q3 GDP rising just 1.1%, well below the 1.9% in the previous quarter and the 1.6% expected, while the Japanese current account posted its first decline since of €128 billion (on expectations of a JPY149 billion increase) since January. What's worse, according to Asahi, Abe's approval rating tumbled to 46% in the current week, down from the low 60s as soon as early 2013, while a former BOJ member and current head of Japan rates and currency research, Tohru Sasaki, said that the high flying days of the USDJPY (and plunging of the JPY respectively) is over, and the USDJPY is likely to slide back to 100 because the BOJ would not be able to expand monetary easing by enough to repeat this year's "success." He definitely uses that last word rather loosely.
Regardless of the arbitrage opportunities available to "all cash" buyers, who would be happy to park some cash in real estate, the fact that ultraluxury foreclosures are soaring also means that even the "1%" is starting to succumb to reality and beginning to feel the pressure of a financial reality in which only the "too biggest" can never fail. So what are the properties in question? The photo gallery below, courtesy of RealtyTrac, shows just where any given $5 million + property stopped making its mortgage payments.
Judging by HuffPo's latest polls, the current administration is going to need a bigger boat (of vote-garnering transfer payments) to stand a chance in 2014... or, of course, we see another epic fail in January when the debt-ceiling debacle rears its (mostly ignored by the stock market) head and once again the Republicans are painted into an awkwardly responsible corner. One thing is clear, the voters are becoming less 'entrenched' in their faith in hope-and-change (or more distracted from their dismal reality).
Don`t fall in love with market exposure as even Wall Street Sharks get eaten alive in financial markets.
"Just be long. Pretty much anything. So here’s how I understand things now that I am no longer the last bear standing. You should buy equities if you believe many European banks and their sovereign paymasters are insolvent. You should buy shares if you put a higher probability than your peers on the odds of a European democracy rejecting the euro over the course of the next few years. You should be long risk assets if you believe China will have lowered its growth rate from 7% to nearer 5% over the course of the next two years. You should be long US equities if you are worried about the failure of Washington to address its fiscal deficits. And you should buy Japanese assets if you fear that Abenomics will fail to restore the fortunes of Japan (which it probably won’t). Hey this is easy… And then it crashed"
- Hugh Hendry
Despite every effort to sell as much JPY as possible to lift stocks and create the best run for the S&P since 2004, the algos failed (by pennies) but with solid gains nevertheless just to disprove all the good news is bad news believers - for now. While the NASDAQ managed a green close on the week (though underperformed today), stocks couldn't quite make it all back today but broke the 5-day losing streak. Treasuries ended the day unchanged and 10-13bps higher on the week. The USD dollar lost considerable ground this week (-0.5%) but it was safe-haven Swissy that stood out as the last 4 days are the best run in 5 months. Gold and Silver ended the week -2% or so and despite the intraday swings relatively flat today. All-in-all, stocks and JPY carry were in charge today as bonds and commodities were not playing at all. VIX dropped the most in 2 months back under 14% as the front-end drop removed the inversion.
End America’s central bank because it caused the crashes of 2008, 1987, and 1929 and will blunder again. That’s what many critics are saying about the Federal Reserve System (the Fed), which turns 100 on December 23. They note that on the Fed’s watch America has endured numerous bubbles, crashes, and inflationary cycles that have greatly devalued the dollar. The Fed, they say, has caused or aggravated several crashes. “If you say the goal of the Fed was to prevent calamities, then you have to say that it has been a failure,” says William A. Fleckenstein. “History and current experience,” Joe Salerno adds, “reveal to us that groups endowed with a legal monopoly over any area of the economy are prone to use it to the hilt to enrich themselves, their friends and allies.”
The Hong Kong branch of Spink & Son, a British firm originally founded in the mid-1600s, was putting a series of Bruce Lee memorabilia under the hammer. When the bidding for the first lot opened, the price immediately surpassed the auctioneer’s initial estimates. It was a frenzy. Now, we know that modern auctions are supposed to be a pure form of the free market– buyers from around the world meeting for the purpose ‘price discovery’, with the item eventually going to the highest bidder. Further, economists and university finance often teach that such markets are ‘efficient’, meaning that prices always reflect the most relevant information and are hence an accurate reflection of an asset’s value. But in reality, nothing could be further from the truth. The auction was an emotional frenzy. It’s not an efficient market. It’s full of fear, euphoria, and aggression. The stock market is the same way. Even though just about every rational metric suggests that many global markets (especially the US) are absurdly overvalued, emotional investors keep bidding prices up.
The too big to fail banks have a larger share of the U.S. banking industry than they have ever had before. So if having banks that were too big to fail was a "problem" back in 2008, what is it today? The total number of banks in the United States has fallen to a brand new all-time record low and that means that the health of the too big to fail banks is now more critical to our economy than ever. In 1985, there were more than 18,000 banks in the United States. Today, there are only 6,891 left, and that number continues to drop every single year. That means that more than 10,000 U.S. banks have gone out of existence since 1985. Meanwhile, the too big to fail banks just keep on getting even bigger.
Rebellious Fed head Lacker fired at “implicit guarantees” to bail out bank creditors. Covered liabilities, the size of US GDP.
While there was a plethora of macro data (starting with some ugly numbers out of Australia which clobbered AUD pairs overnight), China HSBC Services PMI dipping slighlty from 52.6 to 52.5, Final Eurozone PMI Services (printing at 51.2 up from 50.9 and beating expectations of the same on an increase in German PMI numbers from 54.5 to 55.7 and a decline in French PMI from 48.8 to 48.0), Eurozone retail sales declining by 0.2%, on expectations of an unchanged print, and much more (see below), perhaps the most important news of the day came from Japan which many expect will be the source of much more easing in the coming months and thus serve as marginal lever to push global fungible markets higher. However, not only did various BOJ officials for the first time in a while talk down expectations of a QE boost, but the head of the Japan GPIF said that it doesn't need to sell JGBs right now as it would "rock markets" and that instead can achieve its targeted 52% weighing as bonds mature, that it may buy foreign bonds instead to raise weighting to core target (as the Fed buys Japan bonds?), and that it will be very difficult for Japan to hit the BOJ's inflation target in 2 years. Is Japan already getting cold feet on rumors of more QE and did it realize there are only so many assets it can monetize. If so, watch out below on the EURJPY which has now priced in about 700 pips of expected BOJ QE boosting in early 2014.
Bitcoin is on fire. Mainstream media coverage is everywhere. No doubt, digital currency is a growing trend in Latin America… particularly in neighboring Argentina where the government has been nationalizing everything that isn’t nailed down. As a result, Bitcoins in Argentina frequently trade for more than 30% higher than in neighboring countries… presenting a rather interesting arbitrage opportunity. With all the mainstream attention, though, Bitcoin has been building its share of detractors. Most of these pieces roll out the same tired points– that nobody knows anything about the mysterious programmer who put it together… that it’s too volatile… etc. But, for the US investor, there is one big issue that remains entirely unclear...