Given the US holiday, markets are likely to be thin today but there are some big news stories floating around at the moment. If the fast and furious events from the past few days in a revolutionary Egypt bear a striking resemblance to what happened in the spring of 2011, it is because they are strikingly comparable. Only this time, following the ouster of yet another US-supported "leader" by the US-supported military, the country's CDS has normalized at a level that is roughly double where it was two years ago as the implicit backing of the US looks increasingly shaky, following what was yet another bungled foreign policy venture by the Obama administration. But for now, the people are celebrating, just as they did in 2011. One wonders what happens between now and the next coup, somewhere two years (or less) hence. For now focus merely on who controls the Suez - after all that is really all that matters for the US. The other major story of yesterday, Portugal, continues to be in limbo,
"Well you know if you look at the last 13 years it was up 12 out of 13 and this year isn't even over yet, so I would say its responded pretty well. But you might say well yeah what about in the last year why hasn’t it? Well, markets do these things they go up sharply and sometimes they take a rest. But the long term is something you can get a handle on, but I was never very good on short term, whether it’s the stock market or whatever, or what government will do, they are just all over the place.
Peak collateral is just a notion - one we have discussed in detail many times (most recently here). The notion that at the time we want yield and growth we are running out of collateral which is supposed to underpin the high yielding assets and loans. Such a shortage would cause the ponzi-like growth that is necessary to sustain a bubble, to stall and then implode. We think our lords and rulers know this and have decided that it must not be allowed. And this – the need for collateral – is the reason for the endless QE. If this is even close to the mark, then recent murmurings about the Fed tailing off its bond buying will prove to be hollow. The Fed will quickly find it cannot exit QE without precipitating precisely the disorderly collapse, to which it was supposed to be the solution.
European Union Launches Investigation Into Manipulation of Oil Prices Since 2002
MERS: The Center of the Mortgage Scam
After showing Ireland's biggest banks failed to report borrowings/encumbrances, I give EVERYONE means to play credit analyst. Calculate Ireland needing another bailout right here (hint: this app probably shames your favorite ratings agency).
Thanks to the Fed's ZIRP, the investing world is on a constant reach for yield; and due to the fact that the last bubble of investor largesse (ignoring leverage and reality) was not 'punished' but in fact 'bailed-out', participants in the financial markets learned nothing. Just as the last crisis was formed on the back of an insatiable mortgage-backed security market desperate for new loans (any loans) of increasingly dubious quality to securitize, so this time it is subprime auto loans that have taken over. As a Reuters review of court records shows, subprime auto lenders are showing up in a lot of personal bankruptcy filings. At car dealers across the United States, loans to subprime borrowers are surging - up 18% in 2012 YoY, to 6.6 million borrowers. Subprime auto lending is just one of several mini-bubbles the bond-buying program has created across a range of assets; "it's the same sort of thing we saw in 2007, people get driven to do riskier and riskier things." Of course, with auto production having been the backbone of so many macro data points that are used to 'show' the real economy recovering (despite the channel-stuffing), now that the growth in auto-sales are stalling, it is for the subprime originators "under extreme pressure to hit goals" in their boiler-room-like dealings to extend loans (at ever higher rates) and securitize while the Fed 'music' is still playing. It seems we truly never learn.
It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity.
The Canadian Government Offers "Bail-In" Regime, Prepares For The Confiscation Of Bank Deposits To Bail Out BanksSubmitted by Reggie Middleton on 03/30/2013 11:12 -0400
It's not just Cyprus, and no - it's not just Canada either. I'm preparing a list of specific banks that I have 1st hand knowledge that would prevent me from keeping my money in them. Get "Cyprus'd"!!!
One of the most interesting issues of what has happened in Cyprus is where was the problem three weeks ago? There was not a mention, not a hint of anything that was wrong. All of the banks in Cyprus had passed each and every European bank stress test. The numbers reported out by the ECB and the Bank for International Settlements indicated nothing and everything reported by any official organization in the European Union pointed to a stable and sound fiscal and monetary policy and conditions. The IMF, who monitors these things as well, did not have Cyprus or her banks on any kind of watch list. In just two weeks' time we have gone from not a mention of Cyprus to a crisis in Cyprus because none of the official numbers were accurate. Without doubt, without question, if this can happen in Cyprus then it could happen in any other country in the Eurozone because the uncounted liabilities are systemic to the whole of Europe.
While this kind of 'wealth tax' has been predicted, as we noted yesterday, this stunning move in Cyprus is likely only the beginning of this process (which seems only stoppable by social unrest now). To get a sense of both what just happened and what its implications are, RBS has put together an excellent summary of everything you need to know about what the Europeans did, why they did it, what the short- and medium-term market reaction is likely to be, and the big picture of this "toxic policy error." As RBS summarizes, "the deal to effectively haircut Cypriot deposits is an unprecedented move in the Euro crisis and highlights the limits of solidarity and the raw economics that somebody has to pay. It is also the most dangerous gambit that EMU leaders have made to date." And so we await Europe's open and what to expect as the rest of the PIIGSy Banks get plundered.
Here's a Cheat Sheet to Read While You're Listening to JP Morgan's "Whale" of a Tale Testimony to Congress
Consensus suggests India is a basket case while China is recovering. We think both views are incorrect and therein lies opportunities for contrarian investors.
The 2011 changes by the FDIC to the safe harbor for "true sales" may have been the end of "Too Big To Fail."
I really need to stop being so pessimistic. I’m getting richer by the day. My home value is rising at a rate of 1% per month according to the National Association of Realtors. At that rate, my house will be worth $1 million in less than 10 years. Every mainstream media newspaper, magazine, and news channel is telling me the “strong” housing recovery is propelling the economy and creating millions of new jobs. Keynesian economists, Wall Street bankers, government apparatchiks and housing trade organizations are all in agreement that the wealth effect from rising home prices will be the jumpstart our economy needs to get back to the glory days of 2005. Who am I to argue with such honorable men with degrees from Ivy League schools and a track record of unquestioned accuracy as we can see in the chart below? These are the facts. But why trust facts when you can believe Baghdad Ben and the NAR? It’s always the best time to buy.