There is a myth prevalent today that the gold price always falls when interest rates rise. The logic is that when interest rates rise it is more expensive to hold gold, which just sits there not earning anything. And since markets discount future expectations, gold will even fall when a rise in interest rates is expected. With the Fed's Open Market Committee debating the timing of an interest rate rise to take place possibly in September, it is therefore no surprise to market commentators that the gold price continues its bear market. Only the myth is just that: a myth denied by empirical evidence.
It's shaping up to be a rough year for CEOs at Europe's most notorious rate rigging, scandal laden investment banks. Just three months after Brady Dougan left Credit Suisse and barely 30 days since Anshu Jain and Jürgen Fitschen tendered their resignations at Deutsche Bank, Barclays has shown CEO Antony Jenkins the door.
As the strong dollar prices out the South American buyers who have been largely responsible for Miami's booming condo market, developers look East for a savior.
Spin revolving door, spin...
If the United States and China are supposed to be such “great friends”, why are both sides acting as if war is in our future? There were years of diplomatic troubles before Japan finally made the decision to launch a “surprise” attack on Pearl Harbor. Right now, it appears we are moving into a similar period of diplomatic trouble with China.
There are large signs of stress now present in the credit markets. You might not know it from today's multi-generationally low interest rates, but other key measures such as liquidity and volatility are flashing worrying signs. While some may hope that rising yields are signaling a return to more rapid economic growth, or at least that the fear of outright deflation has lessened, the more likely explanation is that something is wrong and it’s about to get... wronger.
"The Fed is allowing the [market] tail to wag the [monetary policy] dog... The Fed's credibility itself is at stake... they have backed themselves into a very tight corner... the tightest ever... The hope today is that the current era of easy monetary policy will have no deep economic ramifications. Such thinking, though, may prove to be naive... All retirees’ security is thus at risk when the massive overvaluation in fixed income and equity markets eventually rights itself."
- White House denies Obama said strong dollar a problem (Reuters)
- Lira Falls to Record Amid Stock Rout as AK Party Loses Majority (BBG)
- Bond-Market Game of Chicken With Fed Is Riskier Than Ever (BBG)
- Xetra Dax enters correction territory (FT)
- China trade shrinks amid slowing demand (FT)
- Greek government eyes compromise with lenders, rules out snap polls (Reuters)
- If You Think Greece’s Crisis Will End Soon, Think Again (BBG)
- China growth data ‘overstated’ due to data error (FT)
- Calpers to Cut External Money Managers by Half (WSJ)
In the ironically titled "Paying For The Past" presentation, none other than Dick Fisher, Al Greenspan, and Larry Lindsey appear to have crossed the Rubicon of denial, lies, and deception to the dark-side of accepting reality. As Bill Holter asks, why exactly would these former Federal Reservists hint that, mathematically, logically, intuitively and in real life, IT'S OVER! Do they now realize what the crazy gold bugs have been saying all along is true and the day of reckoning is very close at hand. They must be trying to get "out in front" of what is coming so they're on the record for historical and "legacy" purposes. Nothing else makes any sense.
Having missed for a record 5 months in a row, Dallas Fed Manufacturing Outlook collapsed further in May to -20.8 (against expectations of -12.4). Thisis the 5th drop in a row (only ever seen in a recession) and 6th monthly miss in a row (never seen before) as it appears Former Dallas Fed Fisher was talking crap once again when he said "net, low oil prices were good for Texas." Despite Consumer Confidence indicating, somehow, that Texans are the most confident in a year (up from 121 to 130 in May), business survey continues to point to notable weakness with employment collapsing, hours worked crashing, and production plunged. However, on a bright note, expectations for the future jumped from -5.9 to +4.9 - hope springs etermal eh?
While yesterday most markets were closed and unable to express their concerns at the very strong showing of "anti-austerity" parties in Spain's municipal election from Sunday, then today they have free reign to do just that, and as a result European stocks are broadly lower, alongside the EURUSD which dripped under 1.09 earlier today, with Spanish banks among the worst performers: Shares of Banco Sabadell, Bankia, Caixabank and Popular were down 1.8 to 2.3% earlier this morning, and while the stronger dollar was a gift to both the Nikkei and Europe in early trading, after opening in the green, Spain's IBEX has since slid into the red on concerns of what happens if the Greek anti-status quo contagion finally shifts to the Pyrenees.
With US markets closed for the Memorial Day holiday, and some of the key European markets likewise shuttered for public holiday including the UK, Germany and Switzerland, it is difficult to find where one can observe or trade the weekend's newsflow, which is once again centered on developments in Europe, where on Sunday Spanish Prime Minister Mariano Rajoy’s People’s Party suffered its worst result in a municipal election in 24 years while Greece continues to threaten with default 5 some years after it should have officially pulled the plug.
Stanley Kubrick's highly-disturbing film-version of A Clockwork Orange takes place in a dystopian futuristic London and exposes the extreme battle of good versus evil. Extracting out the violence, we can’t help but notice the symbolic similarities of the motif-ridden story with the 2008 financial market fallout and subsequent attempts at economic rehabilitation. The film forces us to consider how much liberty we are willing to give up for order, and how much order we are willing to give up for liberty. The central idea of the film has to do with the freedom of the individual to make free choices, but free choice becomes problematic when it undermines the safety and stability of society. It reminds us of the markets price discovery mechanisms (or lack thereof).
Hersh has pissed off some very powerful people and institutions with this story, and that means the inevitable media pushback to discredit his reporting is already underway... He got the same hostile reaction from his media colleagues when he broke his biggest story of his career: The 1974 exposé of the CIA’s massive, illegal domestic spying program.
Ben Bernanke’s skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the “honest” part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.