For the first time since early 2010, the risk of European investment grade credit is lower than that of the US. As BofA notes, recall that the European sovereign crisis escalated in the first part of 2010, as Greece had to be bailed out for the first time, and concerns spread to other countries in the periphery. However, that European spreads have now recovered - after trading at times more than 60bps weaker than US spreads - reflects more on differential technicals (flows) than fundamentals (reality). Credit spreads are currently driven mainly by technicals; this is not to say that technicals in the US credit market are not strong – they are – only that European technicals are stronger. Furthermore, with now completely divergent central banks, BofAML believes that European technicals are going to remain stronger for longer. As they conclude, "relatively stronger US fundamentals lead to relatively weaker technicals," - or put another way "good news is bad news" for US credit markets...
Remember how small Greece was and how it wasn't relevant to US stocks... until suddenly it got close to breaking up the EU and the world's markets slumped. Remember how small subprime was? Remember how Lehman was not a 'big' bank? We hear the same "why would that impact us?" chatter now about the China rehypothecation scandal and we suspect the outcome will be just as dramatic a "whocouldanode" moment for many. The problem, as this chart so simply explains, is "more warrants than the volume of the underlying physical commodities have been issued in the repo business" and that is a problem for every foreign bank that was tempted into China's carry trade (which is "every" bank).
Bail-ins or deposit confiscation can now be used in the UK, EU, U.S. and G20 countries. Investors and savers best get prepared for the coming bail-in era. After Cyprus, which country will be the next to suffer bail-ins?
Having previously admitted its an idiot and a liar over Greece forecasts, constantly missed world expectations with a much more rosy picture of hockey-stick-like growth than actually occurs, and now Ukraine's insanely optimistic assessments; we thought it only fair to point out that, yet again, Christine Lagarde has been forced to say "we got it wrong." This time the IMF underestimated UK growth - a year after blasting the nation's planners for "playing with fire" by cutting its budget spending. As Bloomberg reports, pressed on whether she had apologized to Chancellor of the Exchequer George Osborne, Lagarde stopped short of saying so and said “Do I have to go on my knees?”
Eurozone recessions, unemployment fiascos, toppling banks, crashing auto sales... didn’t exist, sez the Stoxx 600. But then an ugly thing happened.
Der Spiegel deemed it was the “end of capitalism”, while Die Welt described Mr Draghi as Europe’s Bismarck and as a near autocrat beyond control. Throughout history, currency debasement has been the easy option for emperors, kings, queens and governments. It is the easy option of central banks and of Goldman's Draghi today.
Haris Theocharis, the Troika-supported general secretary of Greece’s public revenues was forced to resign following press leaks about "government discontent" at his handling of tax issues - most notably the retroactive taxation of gains on Greek government bonds. As KeepTalkingGreece notes, Theocharis was a hardliner, a devoted supporter of the loan agreements and their implementation and kept loading the Greek taxpayers with new burdens and exorbitant fines. However, the resignation of the country's top tax-collector is "a cause of serious concern," according to EU spokespersons.
- Inside the White House's decision to free Bergdahl (Reuters)
- Dimon’s Raise Haunts BNP Paribas as U.S. Weighs $10 Billion Fine (BBG)
- Jobs Are on the Line as Banks' Revenue Slides (WSJ)
- Wall Street Adjusts to the New Trading Normal (WSJ)
- Nothing like objective, intense probes: GM recall probe to clear senior execs, finds no concerted coverup (Reuters)
- ECB ready to cut rates and push banks into lending to boost euro zone economy (Reuters)
- China Should Resist Further Stimulus, IMF Says (BBG)
- Carney Finds Ally in Draghi as Key Rate Kept at 0.5% (BBG)
- Assad wins Syria election with 88.7 percent of votes (Reuters)
Why low inflation in Europe is not caused by too high of interest rates and why a 10-15 bp cut in rates will not succeed.
It would appear there is only so much the Greek people will stand for. With a fragile coalition increasingly tilting to a more euro-skeptic (give us more money or else) perspective, the cleaning ladies of Greece have exploded onto the streets with great vengeance and furious rebukes at the riot police. The reason for this chaos - they were asked to clean up this mess in the finance ministry...
“I say to all those who bet against Greece and against Europe: you lost and Greece won. You lost and Europe won.” - Jean-Claude Juncker...
[Spoiler Alert: No, it's not over yet]
The officially released agenda of the prestigious Bilderberg club meeting (attendees listed here) is not true, claims Russia Today show host Daniel Estulin, a longtime watcher of the ‘secret world govt’ group. He says he obtained the real agenda for this year’s gathering in Copenhagen. An insider leaked the list of talking points for the ongoing Bilderberg conference to the investigative journalist last week, he said. The list has nine items, seven of which he shared... from Nuclear diplomacy and the disturbing rise of Nationalism; it was a focus on Barack Obama's foreign policy that drew our attention most closely...
The Keynesians have failed. Japan has proved it. It’s only a matter of time before the rest of the world… and the markets catch on.