All you need to read and some more.
European stocks are trading lower as North America enters the market with participants coming to terms with the political events of the weekend. The collapse of the Dutch government has clouded the future for fiscal harmonisation in the Eurozone and the outperformance of the far-right in the French Presidential elections has highlighted the discontent of the populous with mainstream politics. As such, all European bourses are trading significantly lower, with the Bund seen trading higher by around 70 ticks. European government bond yield spreads against the German 10-yr reflect the caution, with the Dutch/German spread widening by over 10BPS and the Spanish yield holding above 6% for most of the session.
Another political bump in the road?
So far, 2012 has been a banner year for the stock market, which recently closed the books on its best first quarter in 14 years. But Casey Research Chairman Doug Casey insists that time is running out on the ticking time bombs. Next week when Casey Research's spring summit gets underway, Casey will open the first general session addressing the question of whether the inevitable is now imminent. In another exclusive interview with The Gold Report, Casey tells us that he foresees extreme volatility "as the titanic forces of inflation and deflation fight with each other" and a forced shift to speculation to either protect or build wealth.
On April 16, Argentine president Cristina Fernandez de Kirchner announced that her Argentine government would expropriate and re-nationalize YPF, an energy company operating mostly in Argentina founded by its government in the 1920s and de-nationalized in the 1990s. Repsol, a Spanish company that owns (owned) 57% of YPF called the act “illegal and unjustified” and vowed to sue. As Paul Brodsky and Lee Quaintance of QBAMCO note, in times past such expropriation would surely be an act of war. FdeK’s timing was brilliant, to re-nationalize the Spanish-controlled energy company when Spain’s economy and funding are teetering means the Spanish government and businesses domiciled there lack the clout to make demands of Euro confederates. The political calculus among leaders of sovereign governments reduces to short-term domestic political benefits vs. threats of economic or military retaliation but with regard to natural resources, the QBAMCO pair critically note, the bigger implication that it is sovereign vs sovereign as the paper bets representing global production and resources that we call “capital markets” is in jeopardy of becoming a sideshow. Baseless paper money, fractional banking, revenue shuffling, financial returns, ever-increasing debts, unwarranted confidence building, nominal output growth and politicians posing as policy makers cannot sustain the most basic needs of societies.
All morning we have been blasted with 2011 deja vu stories how the IMF panhandling effort has finally succeeded, and how Lagarde's Louis Vuitton bag is now full to the brim with $400 billion in fresh crisp US Dollars bills courtesy of BRIC nations, and other countries such as South Korea, Australia, Singapore, Japan (adding $60 billion to its total debt of Y1 quadrillion - at that point who counts) and, uhh, Poland. From Reuters: "The Group of 20 nations on Friday were poised to commit at least $400 billion to bulk up the International Monetary Fund's war chest to fight any widening of Europe's debt crisis." We say deja vu because it is a carbon copy of headlines from EcoFin meetings from the fall of 2011 in which we were "assured", "guaranteed" and presented other lies that the EFSF would surpass $1 trillion, even $1.5 trillion on occasion, any minute now. Alas, that never happened, and while we are eagerly waiting to find out just what the contribution of Argentina will be to bail out Spanish banks (just so it can expropriate even more assets from the country that rhymes with Pain), we have one simple question: does the I in the IMF stand for Idiots? Why? Because this is merely yet another example of forced capital misallocation, only this time at a global scale.
Over the past month, the world has finally awakened to the reality that when it comes to easing, there is more than just one central bank (i.e., the Fed). in fact, as we have been showing since early this year, the bulk of the easing over the past 5 months has happened elsewhere, primarily in Europe with LTRO 1+2, and subsequently at the BOE, and more recently at India and Brazil. Yet some holdouts still remain. One of these naturally is China, which everyone would love to see cut RRR or even the benchmark rate, yet which as recent CPI data has shown still has lingering packets of inflation precisely where it hurts: food (and of course recall China's Schrodinger economy). Which leaves Japan, which already eased more a few months back when it expanded its LSAP program... but it is never enough. Needless to say strategists, in their quest to shake any and every central banker here or there for some free money, have been seeing imminent BOJ easing in the form of yet another Y5 trillion LSAP any second now. Yet it is one thing for bankers to do what they are programmed to do, which is demand more free money, it is something very different when politicians step in and defuse the myth that any central bank is even remotely independent, especially when reelection is at stake. As Bloomberg points out this morning, the fight for the BOJ's "independent" balance sheet is starting to get lethal.
- Current account surplus recycling goes global: BRICS demand bigger IMF role before giving it cash (Reuters)
- Obama oil margin plan could increase price swings (Reuters)
- Britons Abandoning Pensions Amid ‘Outdated’ Rules (Bloomberg)
- Hedge-Fund Assets Rise to Record Level (WSJ)
- Way to restore confidence: SEC considers case against Egan-Jones (FT)
- Qatari wealth fund adds 5% Tiffany stake (FT)
- "Do we file?" Dewey Pitches Plan for Rescue (WSJ)
- French president slips further behind Socialist challenger Hollande (ANI)
- Nine U.S. Banks Said to be Examined on Overdraft Fees (Bloomberg)
- Capital Rotation: Investors fret on emerging markets and look to U.S. (Reuters)
- Verizon's Answer to iPhone: Windows (WSJ)
Within the last few minutes, Bloomberg has popped up a few rather disturbing headlines - that for all intent and purpose have been totally ignored by the trading public at large (we assume WWIII is priced in). So Asia in general is in major sabre-rattling mode tonight with the following comment: South Korea’s military will firmly and thoroughly punish North Korea for any reckless provocation, Yonhap cited Shin as saying. We choose 'not to play'.
- India Test Fires Long-Range Missile Agni-V, CNN-IBN Says
- *INDIA MISSILE TEST FLIGHT `IMMACULATE,' DEFENSE MINISTRY SAYS
- S.Korea Deploys Missiles in Case of N.Korea Provocation: Yonhap
- *N.KOREA'S KIM JONG UN CALLS FOR STRENGTHENED MILITARY, NHK SAYS
The global reliquification continues:
- BRAZIL CENTRAL BANK DECREASES BENCHMARK LENDING RATE TO 9.00%
- BRAZIL CEN BANK SAYS RATE CUT PART OF CONTINUED ADJUSTMENT
First India, now Brazil (even if the move was largely expected). When are Russia and China joining the fray?
According to the latest OPEC data, Saudi Arabia, which in its own view, is some endless pool of easily retrievable crude, yet which Phibro's Andy Hall, as well as leaked confidential docs, claim is nothing but one big lie, pumped a record 9.834 million barrels per day, an increase of just 24K barrels from February's total (based on secondary market data, not direct communication). While we salute Saudi's peak production, which has never crossed over the 10 MMBPD level, we wonder, just how and where will Saudi get the 25% extra spare crude capacity needed to fully replace Iran's embargoed oil, which however continues to flow. Or it does at least according to Iran - oil production rose in February and March, if just redirected: India and certainly China (which is currently adding to its strategic reserves as pointed out here some time ago) are delighted to buy excess Iran production. Based on secondary market sources, Iran production has declined from 3.46MM BPD to 3.35MM BPD: hardly much of an "embargo" impact.
Central Banks Favour Gold As IMF Warns of “Collapse of Euro” and “Full Blown Panic in Financial Markets”Submitted by Tyler Durden on 04/18/2012 07:40 -0400
The Eurozone could break up and trigger a “full-blown panic in financial markets and depositor flight” and a global economic slump to rival the Great Depression, the IMF warned yesterday. In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis-torn single currency could not be ruled out. It warned that a disorderly exit of one member country would have untold knock-on effects. "The potential consequences of a disorderly default and exit by a euro area member are unpredictable... If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with full-blown panic in financial markets and depositor flight from several banking systems," said the report. "Under these circumstances, a break-up of the euro area could not be ruled out." “This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse," said the report. The risks outlined by the IMF are real and are being taken seriously by central banks who are becoming more favourable towards diversifying foreign exchange reserves into gold. Central bank reserve managers responsible for trillions of dollars of investments are shunning euro assets and questioning the currency’s haven status because of the region’s sovereign debt crisis, research has found, according to the FT.... Elsewhere, gold demand in India, the world’s biggest importer, may climb as much as 25 percent during a Hindu festival next week, according to Rajesh Exports Ltd., reviving jewelry buying that was curtailed by a nationwide shutdown.
As a Korean-American, many people expected me support Jim Yong Kim's appointment to the World Bank. Here is why I do not.
- First Japan now... Australia Ready to Help IMF (WSJ)
- "Not if, but when" for Spanish bailout, experts believe (Reuters)
- Spain’s Surging Bad Loans Cast New Doubts on Bank Cleanup (Bloomberg)
- Spain weighs financing options (FT)
- Spanish Banks Gorging on Sovereign Bonds Shifts Risk to Taxpayer (Bloomberg)
- Spain and Italy Bank on Banks (WSJ)
- Chesapeake CEO took out $1.1 billion in unreported loans (Reuters)
- China preparing to roll out OTC equity market – regulator (Reuters)
- Angry North Korea threatens retaliation, nuclear test expected (Reuters)
- North Korea Breaks Off Nuclear Accord as Food Aid Halted (Bloomberg)