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 lack of faith in central bank trustworthiness is spreading. First Germany, then Holland, and Austria, and now - as we noted was possible previously - Texas has enacted a Bill to repatriate $1 billion of gold from The NY Fed's vaults to a newly established state gold bullion depository..."People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold," and the Bill includes a section to prevent forced seizure from the Federal Government. Is this the first step down a road to secession?
"We have a problem with this, and that is central bank hubris. They now think that they are omnipotent, because, essentially the government has said we are going to pass over all control of the economy to the central banks, they say to everybody else including financial market participants that “you don’t know, you don’t understand, we have our models and they are right”. And that kind of hubristic approach is when you sow the seeds of your own destruction."
It all started when Scotland Yard arrived in a house in Hounslow, on the western fringes of London, where Nav Sarao was arrested on one late April morning. Wait, this wasn't some dramatic perp walk out of a glass tower in Canary Wharf? No, for one simple reason: Sarao lived his parents. He also didn't know how to drive. And so begins one of the most fascinating profiles of a modern day financial mastermind: instead of tailored Saville Row suits, thundering parties, booming Bugattis and the occasional jaunt to the Riviera, Nav was the antithesis of a Wall Street. He was, in the words of Bloomberg which has created a fascinating profile of the young trading guru, "pathologically frugal" in fact "Sarao was so frugal it was almost an eccentricity."
We need to wake up....and FAST!!!
When we first exposed in February how yet another bank - Bank of America - has been quietly preserving the post Glass-Steagall world in which cash depositing taxpayers are on the hook for a bank's stupidity, some shrugged it off and looked to stress test to solve all the problems. However, it appears - for once - the SEC is not willing to just ignore the bank's actions. Just as JPMorgan's CIO Office, aka the London Whale, took advantage of fungible, taxpayer-insured funding in the form of excess US deposits over loans, to corner the US credit market (in what was clearly a directional prop trade); so, as WSJ reports, The SEC is investigating whether BofA broke rules designed to safeguard client accounts, potentially putting retail-brokerage funds at risk in order to generate more profits using large complex trades.
Today, we find precisely how and why Sarao was singled out: he not only ratted out the parasitic trading strategies of the real culprits behind the broken market, the massive HFT firms (such as Virtu which just went public just a day before the Sarao charges were filed) which gave the "regulators" no choice: one of them had to be put away for good, but found a way to capitalize on the algos' stupidity, and actually make money by beating them at their own game. As such, regulators and exchanges such as the CFTC and CME had no choice but arrest him and prevent him from trading ever again!
"One day while Sarao is busy trying to trick the U.S. stock market into falling, the market collapses, more sensationally than it has ever collapsed. And instead of digging some hole in Hounslow in which he might hide for a decade or so, or fleeing to Anguilla, where he has squirreled away his profits, he stays in his parents’ home and keeps right on spoofing the U.S. stock market -- and then is shocked when people turn up to accuse him of wrongdoing. He’s not some kind of exception to the standard operating procedure in finance. He’s a parody of it."
- Just How Leaky Is the Fed? More Than You May Realize (BBG)
- Republican Presidential Candidates Spar Over Party’s Future (WSJ)
- Euro Area Seeks Greece Roadmap to May Agreement (BBG)
- The $320 Billion Bogey Needed to Placate U.S. Stock Market Bulls (BBG)
- Seeking Obamacare alternative, Republicans eye tax credits (Reuters)
- Gundlach Says Market Hasn’t Seen Full Impact of Fed Moves (BBG)
- EU meets on migrant crisis as shipwreck corpses brought ashore (Reuters)
- Canada’s Own Oil Pipeline Problem (WSJ)
Nearly three years later of manipulated, artificially propped up markets floating on $22 trillion in central bank assets, Jon Corzine has had enough of waiting for a correction which almost came (and then Bullard brought up QE4) but not really. So, as the WSJ reports, the time has come for another push for Vapor Capital Asset Mismanagement LP.nearly three years later of manipulated, artificially propped up markets floating on $22 trillion in central bank assets, Jon Corzine has had enough of waiting for a correction which almost came (and then Bullard brought up QE4) but not really. So, as the WSJ reports, the time has come for another push for Vapor Capital Asset Mismanagement LP.
2010 Contrarian Prediction of the Disastrous Consequences of ZIRP & Free Money Policy In the Banking System, Year 5Submitted by Reggie Middleton on 04/17/2015 10:41 -0400
In 2010, contrary to nearly every pundit, analyst and economist popularly published, I proclaimed ZIRP would starve the banks. Fast forward 5 years and banks are looking famished and things are getting worse 'casue more bailouts are coming before we finish ending the last bailout program (ZIRP) - The Federal Reserve has decided to let U.S. banks make limited use of municipal bonds to meet liquidity requirements
Suddenly the narrative that “everything is awesome” is showing to not be as “awesome” as it was first proclaimed. Merely a few months have passed since the ending of QE and praises of awesomeness everywhere are morphing into questions more akin to “Oh no: not again!” And with that we are now watching those who pushed, pulled, and levitated that narrative scramble desperately to push another narrative back onto the stage that worked so many times before: “Every sell off over the last 6 years has shown to be a profitable buying opportunity.” i.e., Just buy the dip (JBTFD). Yet it would seem these dips; are far different.
Jon Corzine had an illustrious career in investment banking, rising to the very top of Goldman Sachs, until he got pushed out in 1999. He subsequently decided to try his luck in politics, and was eventually elected as a Senator from New Jersey in 2001, then Governor in 2006. After losing to Chris Christie in 2010, Corzine was promptly hired as the CEO of MF Global. He was back in the game of finance - and with something to prove. While the majority of voters in New Jersey breathed a sigh of relief, the clients of MF Global could not imagine the disaster that would unfold.
Past: Scarily Prescient Analysis of @Grexit meets Present: Analysis of the Goldman Hedge meets Future: Goldman DisintermediationSubmitted by Reggie Middleton on 02/20/2015 16:12 -0400
A literal Tour de Force, likely the most indepth, practical analysis of the Grexit situation as you will ever read. This is why I like blogging... You can never find stuff like this in the mainstream media.
Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."
"I’m tired of being outraged!"