What would happen, for example, if a large number of holders decided to sell a high yield bond ETF all at once? In theory, the ETF can always be sold. Buyers may be scarce, but there should be some price at which one will materialize. But we can’t get away from depending on the liquidity of the underlying high yield bonds. The ETF can’t be more liquid than the underlying, and we know the underlying can become highly illiquid.... no investment vehicle should promise more liquidity than is afforded by its underlying assets. Do these recent promises represent real improvements, or merely the seeds for subsequent disappointment?
After three days of unexpected market weakness without an apparent cause, especially since after 7 years of conditioning, the algos have been habituated to buy on both good and bad news, overnight futures are getting weary, and futures are barely up, at least before this morning's transitory FX-driven stop hunt higher. Whether this is due to the previously noted "blackout period" for stock buybacks which started a few days ago and continues until the first week of May is unclear, but should the recent "dramatic" stock weakness persist, expect Bullard to once again flip flop and suggesting it is clearly time to hike rates, as long as the S&P does not drop more than 5%. In that case, QE4 is clearly warranted.
"I'm not sure [European QE] is going to do anything - certainly, nothing that's good. The fundamental problem here, as I see it anyway, is that the European banking system is still broken... I think, increasingly, bankers are discomforted more than anything else (it's not just the ex central bankers but increasingly the people that are still holding the levers)... they are starting to ask whether they have somehow been backed into a place where they don't really want to be.... Unfortunately, [it] is getting bigger and bigger. There is a possibility at least that this whole exercise could end very badly."
It is a centrally-planned "market" and everyone is merely a bystander. Last night, following a dramatic China PMI miss, which as previously reported tumbled to the worst print since early 2014 and is flashing a "hard-landing" warning, the Shanghai Composite first dipped then spiked because all a "hard-landing" means is even more liquidity by the PBOC (which as we suggested a month ago will be the last entrant into the QE party before everyone falls apart). Then, this morning, a surprise beat by the German (and Eurozone) PMI was likewise interpreted by the algos as a catalyst to buy, and at this moment both European stock and US equity futures are their session highs. So, to summarize, for anyone confused: both good and bad data is a green light to buy stocks. In fact, all one needs is a flashing red headline to launch the momentum igniting algos into a buying spasm.
Fortescue's refinancing effort, which many investors believe was hampered by collapsing commodity prices, wasn't actually a failure the company's CEO says. Besides, it was all Janet Yellen's fault.
It appears Japanese policy-makers are getting inspiration from Hollywood for their latest economic 'fixes'. Having begun the building of a giant 'Game of Thrones'-esque ice-wall to hold back the radiation leaking from Fukushima (only to fail miserably); AP reports the latest cunning plan from the Japanese is to build a Pacific-Rim-esque "massive, costly sea wall to fend off tsunamis." The $6.8 billion, 250-mile-long, 41-foot-high concrete barrier public works project is seen by some as a necessary evil, and by others as a jail... Perhaps The UN's head of Disaster Risk Reduction summed it up best - "There's a bit of an over-belief in technology as a solution."
A shift in the mutual fund industry's stance towards grossly overvalued private tech startups may be embedding risk into the retirement accounts of unsuspecting Americans, suggesting that the rather creative valuations VCs and founders place on the latest app may be imperiling your 401k. It's called "chasing unicorns."
Greece – faced with illiquidity, insolvency and a potential banking collapse – is running out of time and appears to be on the back foot as its international creditors refuse to countenance any debt restructuring, rescheduling or forgiveness.
"That is between December and February €22bn of deposits likely left the Greek banking system and of this €10bn or 45% went under the mattress. What is clear is that the Greek banking system cannot withstand another big wave of deposit outflows."
"Because the Bank of Japan gobbles up dramatic amounts of debt, the cost of financing government spending stays low. It’s been said that a country that issues debt in its own currency cannot go broke. Theoretically that may be correct: the central bank can always monetize the debt, i.e. buy up any new debt being issued. But in practice, there has to be a valve."
Debt saturation and debt fatigue = diminishing returns on central bank tricks. The diminishing returns manifest in three ways: the gains from each round of central-bank tricks are declining, the periods of stability following the latest “save” are shrinking and the amplitude of each episode of debt crisis is expanding.
That the unraveling is speeding up is not just perception - it’s reality.
As Americans, we tend to be pretty full of ourselves, and this is especially true of our young people. But do we really have reason for such pride? According to a shocking new report from the Educational Testing Service, Americans between the ages of 20 and 34 are way behind young adults in other industrialized nations when it comes to literacy, mathematics and technological proficiency. Even though more Americans than ever are going to college, we continue to fall farther and farther behind intellectually. So what does this say about us? Sadly, the truth is that Americans are stupid.
- Israelis vote as 'King Bibi's' reign hangs in the balance (Reuters), Factbox: Main candidates in Israel's election (Reuters)
- Iran Can Add Million Barrels a Day of Oil If Sanctions Halt (BBG)
- Kremlin rules out handing back Crimea to Ukraine (Reuters)
- Saudi Arabia Needs More Oil to Feed Local Refinery Expansion (BBG)
- How Lafarge’s CEO Went From Holcim Merger Architect to Obstacle (BBG)
- When Yellen Gets Less Predictable She’s Getting Back to Normal (BBG)
- Iran nuclear talks intensify as sides face tough issues (Reuters)
- Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age (BBG)