Nouriel Roubini, Kyle Bass, Hugo Salinas Price, Charles Nenner, James Dines, Jim Rogers, David Stockman, Marc Faber, Jim Rickards, Paul Craig Roberts, Martin Armstrong, Larry Edelson, Gerald Celente and Others Warn of Wider War
With almost metronomic regularity, Japan will gush forth a headline proclaiming the ever-closer time when all the nation's retirees savings will be greatly rotated to the stock market and away from the nation's largest bond market in the world. This week was no exception; however, as Nikkei Asian Review reports, it appears the "all-talk" has turned to action...The Government Pension Investment Fund and other public pensions sold about 1.8 trillion yen ($17.4 billion) more in Japanese government bonds than they bought in the first three months of the year, fueling speculation that the GPIF may be rebalancing its portfolio sooner than expected. It seems rotating away from government bonds (which the GPIF has been worried about since 2011) into junk bonds and junk stocks is a far better use of 'wealth' - we can only imagine the GPIF risk models just got switch to '11'. As we explained last year, Japan's Plan B is not only not a panacea, but it is a House of Bonds Cards that would not survive an even modest gust of wind, and an even more modest contemplation into its true internal dynamics. We would urge Messrs Abe and Kuroda to come up with a fall back plan to the fall back plan before it, once again, becomes too late.
"There is a debt problem in America..." warns Lynette Khalfani-Coz (askthemoneycoach.com) in this brief CNBC interview, expanding in the huge debt loads from mortgaging cars to student debt that Americans soak up every day in ever greater amounts. And then Steve Liesman rolls in "debt is always pointed out as a negative thing, when in fact debt is the great bridge between working hard and playing hard in this country." Then Liesman really hangs himself, "this country has been built on consumer debt," he proudly states (as if it was some badge of honor) adding carefully that "too much of it is negative thing." - well Mr Liesman... one look at the current debt load might suggest that American consumers built that 'bridge to playing-hard' just a little too far. As Khalfani-Cox admirably retorts, "excessive debt levels are simply unsustainable... It is not the job of the consumer to play the role of financial hercules... why should we have to prop up the US economy?"
With the Fed tapering and both China “I don't think the markets are discounting what’s really happening in China,” and Japan’s currencies likely to weaken, the net impact on the U.S. will be deflationary, Kyle Bass warned in a recent presentation. That trend will be accelerated by the improvement in the balance of trade for the U.S., which had its current account deficit shrink due to increased hydrocarbon production. Bass warns, the crucial moment will come when the U.S. reports a sub-6% unemployment rate, meeting the target it has set for normalizing its monetary policy by ending QE and raising rates. He predicted that will come in July. That will be the Fed’s “worst nightmare,” he said. Raising rates would stifle growth and recreate unemployment problems, which would be disastrous politically, according to Bass.
It is not too early to ask how the present US business cycle expansion, already more than five years old, will end. The history of the last great US monetary experiment in “quantitative easing” (QE) from 1934-7 suggests that the end could be violent. Autumn 1937 featured one of the largest New York stock market crashes ever accompanied by the descent of the US economy into the notorious Roosevelt Recession. As we noted previously - it's never different this time...
From fears of Argentinian devaluations (and a 26-year-old running policy) to Japan's structural collapse; from Europe's false hope to China's bubbles; and from the Fed taper to the US hydrocarbon revolution, Hayman Capital's Kyle Bass provides a broad-based presentation of global risks and opportunities in the clip below. The Q&A is where Bass comes alive and is well worth the price of admission for a hedge fund manager unafraid to discuss the possibility that the status quo is unsustainable. Bass sums it all up perfectly succinctly, "proceed with caution."
Here’s something you don’t see very often: For a day and a half this week, the Japanese government’s benchmark 10-year bonds attracted not a single successful private sector bid. At today’s artificially-depressed yields, no one wants this paper — except of course the Bank of Japan, which is buying up the bonds with newly-created yen. In a world of markets rather than manipulations, this kind of imbalance would be an automatic short candidate. Actually, this kind of imbalance would never occur and as one trader noted "I know this could end badly."
When Abe, Kuroda, and their merry men unveiled their latest idea - Abenomics - the world's macro tourists piled in and spent every waking second convincing the rest of the world's suckers that this time was different for Japan. We, along with Kyle Bass and a short list of other realists, warned "be careful what you wish for." It seems tonight's data is the best example yet of the print-and-grow rock and inflate-and-die hard place that Abe finds himself between. Multi-year highs in inflation (pressing on to the BoJ's target) combined with a total collapse in household spending (lowest in 27 months). Abe is cornered; and JPY and the Nikkei are confounded for now.
Get long 'Depends' may be the most befitting headline for tonight's massive macro miss in Japan. For the 3rd quarter in a row, Japanese GDP missed expectations with a meager +1.0% annualized growth (versus a +2.8% expectation), and a tiny 0.3% Q/Q change vs expectations of a 0.7% increase, this is the biggest miss and slowest growth since Abe retook the economic throne after his chronic-diarrhea-prone first attempt to save the nation. No matter how hard they try to spin this, there's no silver lining as consumer and business spending missed expectations notably and the only Tokyo snow fell just last week so long after the quarter was over... and this is before a tax hike that is aimed at showing how fiscally responsible the nation and not simply an insolvent ponzi scheme alive through the good graces of the greater fools of leveraged carry trades.
COMEX inventories are collapsing, how much longer until we get a "run" on the Comex?
Back in the years just before the previous housing bubble burst (not to be confused with the current, even more acute one), one person did the math on subprime, realized that the housing - and credit bubble - collapse was imminent, and warned anyone who cared to listen - almost nobody did. That man was Kyle Bass, and because he had the guts to put the money where his mouth was, he made a lot of money. Fast forward to 2014 when subprime is all the rage again and the subprime bubble is bigger than ever: it may comes as a surprise to some that in 2013, subprime debt was one of the best performing fixed income instruments, returning a whopping 17% in a year when most other debt instruments generated negative returns. And this time, while Kyle Bass is busy - collecting nickels (each costing a dime) perhaps - it is someone else who has stepped into Bass' Cassandra shoes: that someone is Jeff Gundlach. “These properties are rotting away,”
Nouriel Roubini, Davos Speakers, Kyle Bass, Larry Edelson, Charles Nenner, James Dines, Jim Rogers, Marc Faber, Jim Rickards and Martin Armstrong Warn of Wider War
"When I talked to the head of deliveries, and I said what if like 4% of the people want delivery? -- He says oh Kyle, that never happens"
While the topic of rehypothecation and the shortage of physical gold is well covered here at Zero Hedge (and the ever-changing COMEX gold vaults' inventories), it appears the concept of the exploding "leverage" or default risk of the COMEX has now hit the mainstream media. As BNN reports, veteran trader Tres Knippa, pointing to recent futures data, says "there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion." As he goes on to explain to a disquieted anchor, "the underlying story here is that the people acquiring physical gold continue to do that. And that’s what is important," noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying. Knippa's parting advice, buy physical gold; avoid paper.
While the Fed pays lip-service to its increased transparency, the volumes of caveats and wordsmithing we exposed last week continue to surge. The problem is becoming worse for the Fed and is showing up in the oddest correlation to the Fed Balance Sheet we have found yet. As Deutsche Bank's Thorsten Slok shows, as the 'unemployment rate' approaches the 6.5% 'threshold', FOMC statements have surged in their verbiosity. Simply put, as Slok quantifies, it is becoming more and more difficult for the Fed to explain (away) what it is doing (and more and more expensive). And another thing we can look forward to: when the Fed's balance sheet hits $1 quadrillion in a few short years, at the current pace of expansion the FOMC statement will be 25,000 words, or the equivalent of a 100 page book.