The similarities between 2007 and 2014 continue to pile up. And you know what they say - if we do not learn from history we are doomed to repeat it. Just like seven years ago, the stock market has soared to all-time high after all-time high. Just like seven years ago, the authorities are telling us that there is nothing to worry about. Unfortunately, just like seven years ago, a housing bubble is imploding and another great economic crisis is rapidly approaching.
During the course of its massive money printing campaign after the financial crisis of 2008, the Fed drove the 30-year mortgage financing rate down from 6.5% to 3.3% at its mid-2012 low. The ostensible purpose was revive the shattered housing market which had resulted from the crash of its previous exercise in bubble finance. But what it really did was touch off another of those pointless “refi” booms which enable homeowners to swap an existing mortgage for a new one carrying a significantly lower interest rate and monthly service cost. Such debt churning exercises have been sponsored repeatedly by the Fed since the S&L debacle of the late 1980s.
After a selloff as violent as that of last night, usually the overnight liftathon crew does a great job of recovering a substantial portion of the losses. Not this time, which coupled with the sudden and quite furious breakdown on market structure, leads us to believe that something has changed rather dramatically if preserving investor confidence is not the paramount issue on the mind of the NY Fed trading desk. Nikkei 225 (-2.38%) suffered its worst week since March'11 amid broad based risk off sentiment following on from a lower close on Wall St. where the Nasdaq Biotech index suffered its largest intra-day decline since August 2011. Negative sentiment carried over into European session, with stocks lower across the board (Eurostoxx50 -1.17%) and tech under performing in a continuation of the recent sector weakness seen in the US. JP Morgan (JPM) due to report earnings at 7:00AM EDT and Wells Fargo (WFC) at 8:00Am EDT.
So from MF Global's "vaporized" commingled client assets to Basel's "evaporated" toughened derivatives rules, the banks are indeed "very happy." And now back to perpetuation the illusion that the system is stable.
- Russia says expects answers on NATO troops in eastern Europe (Reuters)
- Dealers say GM customer anxiety rising, sales may take hit (Reuters)
- China Unveils Mini-Stimulus Measure (WSJ)
- Londoners Priced Out of Housing Blame Foreigners (BBG)
- New earthquake in Chile prompts tsunami alerts (Reuters)
- Ukrainian Billionaire Charged by U.S. With Bribe Scheme (BBG)
- Chinese Investments in U.S. Commercial Real Estate Surges (BBG)
- Old Math Casts Doubt on Accuracy of Oil Reserve Estimates (BBG)
- US secretly created 'Cuban Twitter' to stir unrest (AP)
- One-Ship Ukraine Navy Defies Russia to the End (WSJ)
- Crimea-Induced Trading Surge Stokes Moscow Exchange Rally (BBG)
- Moscow says Ukraine stops Russian crews disembarking in Kiev (Reuters)
- New images show more than 100 objects that could be plane debris (Reuters)
- Anger of Flight 370 Families Explodes in Beijing (BBG)
- Murdoch Promotes Son Lachlan in Succession Plan for Empire (BBG)
- Facebook to buy virtual reality goggles maker for $2 billion (Reuters)
- Syrian Regime Exploits Rebel Despair (WSJ)
- King Digital IPO price may not bode well for stock (Reuters)
- Rothschild in Twitter Spat as Bakries Cut Ties With Miner (BBG)
For some inane reason, about a year ago, there was a brief - and painfully boring - academic tussle between one group of clueless economists and another group of clueless economists, debating whether Too Big To Fail banks enjoy an implicit or explicit taxpayer subsidy, courtesy of their systematic importance (because apparently the fact that these banks only exist because they are too big in the first place must have been lost on both sets of clueless economists). Naturally, it goes without saying that the Fed, which as even Fisher now admits, has over the past five years, worked solely for the benefit of its banker owners and a few good billionaires, has done everything in its power to subsidize banks as much as possible, which is why this debate was so ridiculous it merited precisely zero electronic ink from anyone who is not a clueless economist. Today, the debate, for what it's worth, is finally over, when yet another set of clueless economists, those of the NY Fed itself, say clearly and on the record, that TBTF banks indeed do get a subsidy. To wit: " in fact, the very largest (top-five) nonbank firms also enjoy a funding advantage, but for very large banks it’s significantly larger, suggesting there’s a TBTF funding advantage that’s unique to mega-banks."
- Possible debris off Australia a 'credible lead' for missing Malaysia jet (Reuters)
- Maldives and Afghanistan: Theories Blossom for Airliner (BBG)
- Ukraine Military Concedes on Crimea as Russia Takes Hold (BBG)
- Asia Stocks Drop on Fed; H-Share Index Enters Bear Market (BBG)
- Scientists say destructive solar blasts narrowly missed Earth in 2012 (Reuters)
- GM’s Ignition Victims Need Help From Bankruptcy Judge (BBG)
- U.S. Alleges Inside Traders Used Spycraft, Ate Evidence (WSJ)
- God Meets Profit in Obama Contraceptive Rule Court Case (BBG)
While it has been public for a long time that i) JPM is eager to sell its physical commodities business and ii) the most likely buyer was little known Swiss-based Mercuria, there was nothing definitive released by JPM. Until moments ago, when Jamie Dimon formally announced that JPM is officially parting ways with the physical commodities business. But while contrary to previous expectations, following the sale JPM will still provide commercial gold vaulting operations around the world, it almost certainly means farewell to Blythe Masters.
Computer programs are obsolete before they even get put on the market and it’s been that way for years now. There’s also the added bonus of actually making sure that the buyers keep buying and always want the latest.
Bond Trading Grinds To A Halt: Goldman Set To Report Weakest Q1 Since 2005; Revenues Down As Much As 25% ElsewhereSubmitted by Tyler Durden on 03/12/2014 11:47 -0400
Since Wall Street has been explicitly fighting the Fed (remember: the main reason there is no volume is because nobody is selling) Wall Street has once again lost, and despite its appeals, the time to pay the piper has come. Said payment will be taken out of bank Q1 earnings which as everyone knows, will continue the declining trend seen in recent years (so much for that whole Net Interest Margin fable), but to learn just how bad, we go to the FT which reports that fixed income groups across Wall Street "are set for their worst start to the year since before the financial crisis, with revenue declines of up to 25%." The punchline: "Analysts now expect Goldman Sachs to record its weakest first quarter since 2005 and JPMorgan Chase and Bank of America are forecast to see their lowest revenues since they bought Bear Stearns and Merrill Lynch, respectively, in 2008."
Is the U.S. economy steamrolling toward another recession? Will 2014 turn out to be a major "turning point" when we look back on it? Before we get to the evidence, it is important to note that there are many economists that believe that the United States never actually got out of the last recession. In fact, that would fit with the daily reality of tens of millions of Americans that are deeply suffering in this harsh economic environment. But no matter whether we are in a "recession" at the moment or not, there are an increasing number of indications that we are rapidly plunging into another major economic slowdown. The following are the top 12 signs that the U.S. economy is heading toward another recession...
- High Stakes Limit Bid to Cow Putin (WSJ)
- Russia says can't control Crimea troops ahead of U.S. talks (Reuters)
- Crimea Crisis Haunted by Ghosts of Bungled World War I Diplomacy (BBG)
- Putin’s Ukraine Gambit Hurts Economy as Allies Lose Billions (BBG)
- Germany Says It Provided Equipment and Training to Ukraine's Riot Police (WSJ)
- China signals focus on reforms and leaner, cleaner growth (Reuters)
- China Shares in Hong Kong Decline Amid Default Concern (BBG)
- Beijing Signals New Worry on Growth (WSJ)
- European Bonds Surge on Slowing German Inflation, Ukraine Tumult (BBG)
- Ukraine tensions hit shares (Reuters)
- Debating Geithner’s Appearances in 2008 Transcripts (Hilsenrath)
- Tensions in Asia Stoke Rising Nationalism in Japan (WSJ)
- GM Investigated Over Ignition Recall Linked to 13 Deaths (BBG)
- Smartphone wars shift from gadgetry to price (Reuters)
- Some Companies Alter the Bonus Playbook (WSJ)
- London’s Subterranean Luxury Manors Lure New Breed of Lenders (BBG)
- Japan No Country for Old Farmers as 7-Eleven Takes Plow (BBG)
- Dream of U.S. Oil Independence Slams Against Shale Costs (BBG)
"The extent of unproductive investment in China today is much greater than was the case for Japan at a comparable phase of development," warns Deutsche's EM strategist John-Paul Smith, and one glance at the chart below suggests China is tracing an ominous path towards the same "lost-decade" that un-inspired Japan since the mid-80s. While the PBOC is less interested in goosing its own stock market (since ownership is so low), Chinese stocks (down 60% from 2007 highs) "seem to be saying that there is a significant risk of a major slowdown."