Nothing is ever permanent with the QE’s because they were doomed from the start. The “dollar” system can never be refined and remade to its prior station because it was irrevocably broken on August 9, 2007. All that QE’s have done is to create reverberation within the downward channel which may, in the end, only exacerbate the degree of imbalance that weighs on the inevitable shift.
Having previously explained the 175,846,629,768 reasons why former Fed Chair Ben Bernanke would join Citadel - the most-levered hedge fund in the world and alleged conduit of fed put protection; we thought it intriguing to note what billionaire Citadel Ken Griffin had to say about Bernanke and his policies just 2 years ago...
The entire global financial system resembles a colossal spiral of debt. Just about all economic activity involves the flow of credit in some way, and so the only way to have “economic growth” is to introduce even more debt into the system. Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again.
At some point, maybe sooner than later, the US economy will re-enter recession. Historically, that's the time when the Fed would lower interest rates in attempt to spur economic growth. But today, interest rates are already at 0%. That's what's so dangerous for the Fed about its current ZIRP policy -- it leaves no gunpowder left in the low-interest-rate bazooka. The Fed will enter its next battle defenseless. This is clearly a situation the Fed wants to avoid, so raising rates - soon - is an urgent priority. But... practically, can the Fed (and other central banks) really raise rates now without killing the already-moribund global economy?
Sentiment in general remains poor and all the focus is on gold's weakness in dollar terms, despite gold's strong gains in euro terms in 2014 and so far in 2015. Poor sentiment is of course bullish from a contrarian perspective and suggests all the froth has been washed out of the gold market.
Just as the S&P appeared set to blast off to a forward GAAP PE > 21.0x, here comes Greece and drags it back down to a far more somber 20.0x. The catalyst this time is an FT article according to which officials of now openly insolvent Greece have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, but were told that no rescheduling was possible. The result if a drop in not only US equity futures which are down 8 points at last check, but also yields across the board with the German 10Y Bund now just single basis points above 0.00% (the German 9Y is now < 0), on its way to -0.20% at which point it will lead to a very awkward "crossing the streams" moment for the ECB.
Several years ago, Zero Hedge first, and to our knowledge only, reported that when it comes to unofficially executing trades in the equity market the NY Fed - through a slightly more than arms-length arrangement - does so using Chicago HFT powerhouse Citadel. In other words, while Citadel was instrumental in preserving the smooth, diagonal ramp in stocks since 2009 and igniting upward momentum just as everyone else stared to sell when the Markets Group of the NY Fed called, it was also paid handsomely: after all, nobody checks the Fed's broker commission statement. In fact according to some, indirect Fed compensation to what is the world's most leveraged hedge fund has been in the billions over the past decade. Well, now it's payback time, and as the NYT reported overnight, the Brookings Institution favorite blogger, former Fed Chairman Ben Bernanke, has joined none other than Citadel as an advisor.
Back in November we chronicled the (quiet) death of the Petrodollar, the system that has buttressed USD hegemony for decades by ensuring that oil producers recycled their dollar proceeds into still more USD assets creating a very convenient (if your printing press mints dollars) self-fulfilling prophecy that has effectively underwritten the dollar’s reserve status in the post WWII era. Now, with oil prices still in the doldrums, oil producers are selling off their USD assets in a frenzy threatening the viability of petrocurrency mercantilism and effectively extracting billions in liquidity from the system just as the Fed prepares to hike rates.
Yanis Varoufakis’ publisher, Public Affairs Books, posted a promo for an upcoming book by the Greek Finance Minister, due out only in 2016 that reveals a few things that haven’t gotten much attention to date. Varoufakis simply analyzes the structure of the EU and the eurozone, as well as the peculiar place the ECB has in both. Some may find what he writes provocative, but that’s beside the point. It’s not as if Europe is beyond analysis; indeed, such analysis is long overdue. Indeed, it may well be the lack of it, and the idea in Brussels that it is exempt from scrutiny, even as institutions such as the ECB build billion dollar edifices as the Greek population goes hungry, that could be its downfall. It may be better to be critical and make necessary changes than to be hardheaded and precipitate your own downfall.
Stanley Druckenmiller, the man who achieved the impossible 30%+ annualized returns during more than 30-years period active trading career just gave an interview and shared his market views.
Can you arbitrage time? Can you buy and sell time? We think that you can from the perspective of time horizons. In our view, financial markets are operating on the wrong time horizon – one that is too long (thanks to central banks ZIRP/NIRP and credit creation) - although there are signs that this is beginning to change.
To maintain its hegemony, the U.S. must by all means prevent the emergence of rival powers and impede possible current as well as future threats that could emanate from oil states. The ideal condition for enforcing its own goals at a low cost would be the fragmentation of antagonistic power centers through ethnic and religious strife, civil wars, chaos and deep-seated mistrust in the Middle East – always following the well-known premise of ‘divide and rule.’ In fact, we are currently experiencing tremendous changes towards such a chaotic state of affairs.
There appears to have been a shocking lapse in security surrounding the Easter weekend heist. The security lapse reflects badly both on the company and on the police. Holding tangible assets outside of the fragile banking system is a risky exercise, if the manner in which those assets are stored is not thoroughly secure and fully insured.
- As reported here first a month ago: The $9 Trillion Short That May Send the Dollar Even Higher (BBG)
- As an instant target for foes, Clinton may struggle to get message heard (Reuters)
- Emerging Stocks Rally 11th Day as Aussie Weakens on China (BBG)
- Puerto Rico, Investors Enlist Ex-IMF Officials (WSJ)
- Dollar’s Rise Reshuffles Global Economy (BBG)
- Indonesia eyes regular navy exercises with U.S. in South China Sea (Reuters)
- Banca Monte dei Paschi Breaches Exposure Limits to Nomura (WSJ)
- European Bond Buyers Find Negative Doesn’t Necessarily Mean Bad (BBG)