France

The global risk on mood (which is really anything but, and is merely an unprecedented short covering squeeze as we will report momentarily) launched by an abysmal jobs report one week ago and "validated" yesterday by the surprisingly dovish FOMC minutes, which said nothing new but merely confirmed what most knew, namely that a rate hike is almost certain to not occur until mid-2016 if ever, and accelerated by a Fed-driven collapse in the dollar which overnight has led to a historic 3.4% move in the Indonesian Rupiah the most since 2008, has pushed global stocks even higher in their biggest weekly rally since 2012, despite the start of an earnings season where virtually every single company reporting so far has stumbled on earnings reports that were far worse than even gloomy consensus had expected.

Frequent followers of the German public campaign “Repatriate our Gold“ already know how intensively we have been struggling since 2011 (and longer) with Deutsche Bundesbank to finally – after more than 50 years of external storage of Germany’s gold – get credible transparency regarding this matter. Some progress was brought about recently (2012 disclosure of the whereabouts of Germany´s gold by BuBa; 2013 partial repatriation plan announced by BuBa; 2013 and ongoing through 2015 alleged physical repatriation of approximately 200 tons to date – equaling approximately 10% of Germany’s gold abroad). But real proof and transparency is still lacking from Bundesbank’s side!

The urgency of the moment favors cooperation, while geography gives Russia major advantages in leading the fight. The highly charged political atmosphere in the U.S., in the midst of a Presidential election, only adds to the fog of war in Syria, forcing public denials and secret agreements where there needs to be utmost clarity, making military cooperation in Syria almost impossible, while raising the risks of accidental conflicts between so-called partners. Adding to the confusion is the increasingly cordial meetings between Russian and Saudi leaders.

The market is prone to temporary fits of shared enthusiasm – for emerging-market debt, for Internet stocks, for residential mortgage-backed securities, for Greek government debt. Traders need not wait to see when or whether the profits materialize. IBGYBG, they say – I’ll be gone, you’ll be gone. There are numerous routes to bezzle and febezzle...  traders borrowed money from the future. And then the future came, as it always does, turning the bezzle into a bummer.

It is erroneous to believe that free traders have been historically in favor of free trade agreements between governments. Paradoxically, the opposite is true. Curiously, many laissez-faire advocates fall into the government-made trap by supporting “free-trade” treaties. The very fact that governments are negotiating in the name of free trade should be suspicious for any libertarian or true advocate of free trade. It’s time for genuine free trade.

If you think this sounds like some kind of conspiracy theory, consider that France just banned any transaction over €1,000 Euros from using physical cash. Spain has already banned transactions over €2,500. Uruguay has banned transactions over $5,000. And on and on.

"The Saudi population, especially the younger people, are growing restless because they see what is happening in the world through social media of which they are among the highest users - that’s the only means they have to communicate. So the situation inside the country is also very fragile and the foreign policy conducted by the current regime is very perilous. It is only a matter of time because the Gulf States are ruled by oligarchies who maintain control through bribery and the sword. So this is a challenging time for the Gulf States despite all the public commentary suggesting they are immune to the uprisings."

The best headline to summarize what happened in the early part of the overnight session was the following from Bloomberg: "Asian stocks extend global rally on stimulus bets." And following the abysmal data releases from the past three days confirming that the latest centrally-planned attempt to kickstart the global economy has failed, overnight we got even more bad data, first in the form of Australia's trade deficit, and then Germany's factory orders which bombed, and which as Goldman said "seems to reflect genuine weakness in China and emerging markets in general and this will weigh on the German manufacturing sector."

For many years now, it’s been clear that China would soon be pull­ing the strings in the U.S. financial system. In 2015, the American people owe the Chinese government nearly $1.5 trillion. Of course, the Chinese aren’t stupid. They realize we are both trapped.China has recently put into place a covert plan to get back as much of its money as possible - by extracting colossal sums from both the United States government and ordinary citizens, like you and me.

News That Matters

• MOAR: Euro-Area Growth Seen Slowing in Sign More Stimulus May Be Ahead (BBG)
• MOAR: Japan's wage growth slows in August, keeping pressure on BOJ for more stimulus (Reuters)
• MOAR: Stocks, Copper, Emerging Markets Jump as Fed Delay on Rates Seen (BBG)
• And yet... Central Banks Lose Bond-Market Credibility as Woes Mount (BBG)
• World Bank cuts Asia growth forecast on China and US rates (BBC)

Following Friday's disastrous payrolls report, which confirmed all the pre-recessionary economic data and signaled that instead of approaching "lift-off" and decoupling from the rest of the world, the US economy is following the emerging markets into a slowdown in what may be the first global, synchronized recession since 2008, the market saw its biggest intraday surge since 2011 and the sharpest short covering squeeze in history, we are happy to announce that the "market" is now solidly back in "bad news is good news" mode.

When "whatever it takes" is not enough... Despite Draghi's promises and EU leaders' exuberance, European Investor Confidence tumbled to its lowest since January as the Q€ bounce has now well and truly died. While volatility has picked up over the last month and reassuring tones have been uttered by every central banker in the world, it is the real economy that appears to be weighing on confidence as Eurozone Composite PMI prints at 53.6 - its lowest since February.