Lehman Brothers

Frontrunning: August 5

  • Turkey says coalition to launch 'comprehensive battle' against Islamic State (Reuters)
  • Buffett’s Celebration Tempered by 50th Anniversary Stock Slump (BBG)
  • SEC Set to Approve CEO Pay-Gap Disclosure Rule (WSJ)
  • Greece wants full bailout, not bridge loan, ruling party says  (Reuters)
  • Stocks Rise Fueled by Strong European Corporate Earnings and Chinese Data (WSJ)
  • JPMorgan Reclaims Place Among U.S.'s Top 10 Biggest Stocks (BBG)
  • Eurozone retail sales fall sharply in June (MW)

"This Is The Largest Financial Departure From Reality In Human History"

We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history. Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder…

The IMF Experts Flunk, Again

The IMF failures in Greece bring back vivid memories of the Asian Financial Crisis of 1997-98... As the Indonesian episode should teach us, the IMF’s management can be very political and often neither trustworthy nor competent. Greece offers yet another chapter.

"Say A Little Prayer" Bill Gross Warns, "Zombie Corporations Now Roam The Real Economy"

Having exposed the reality that the world's capital markets are a manipulated shell game, Janus' Bill Gross has a message for the perpetual bulls in his latest letter to investors - "say a little prayer." Gross continues, "low interest rates are not the cure – they are part of the problem," warning that ZIRP has enabled, "a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s 'creative destruction' – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled." As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward...

Why NATO Fears 'Grexit'

As far as transatlantic security is concerned, the danger posed by the Grexit is not confined to the questions it raises over Greece's NATO membership, or the security ripple effects caused by the Greek economy's collapse. Grexit's danger lies in the fact that it serves as a symbol of the reversal of transatlantic institutions' fortunes in their attempts to build and maintain a hegemonic political, economic and military order in Europe.

The Importance Of RMB Internationalization

The Fed's QE policies of recent years have, for all intents and purposes told the world that “the dollar is our currency and your problem.” And, in recent years, the dollar has been a genuine problem for a number of emerging countries. Following this traumatic event, and the change in the perception of US stability, China went around the world and invited the likes of Brazil, Indonesia, South Africa, Turkey and Korea to shift some of their China trade away from the dollar and into renminbi. China started doing this in 2011 and, as we see it, the renminbi’s attempt to become a trading currency is potentially one of the most important financial developments. Yet no-one seems to care.

Signs Of Financial Turmoil Are Brewing In Europe, China And The United States

As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe. Slowly but surely, we are starting to see the smart money head for the exits. As one Swedish fund manager put it recently, everyone wants “to avoid being caught on the wrong side of markets once the herd realizes stocks are over-valued“.