With Thomas Piketty's book on inequality topping the charts among the book-reading common-folk, ambitious ex-bankers are enjoying the high-life in ways not even Gordon Gecko could have dreamed up. If greed is good, then this is better as former Lehman execs sell the first ".luxury" website domain names and ex-Goldmanites pitch "curated environments that optimize health" for home living with 'Vitamin-C-infused showers'. Of course, as one banker opines philosophically, "it's all about balance...it's important that people who have the capital are making it as useful as possible."
- At least 74 dead in crashes similar to those GM linked to faulty switches (Reuters)
- Obama Calls for $1 Billion Europe Security Fund; Will Increase U.S. Military Presence in Eastern Europe (WSJ)
- Euro Inflation Slowing More Than Forecast Pressures ECB (BBG)
- China accelerates as euro zone stumbles (Reuters)
- Russia says Ukraine situation worsening, submits U.N. resolution (Reuters)
- Secondary Sales Squeeze Investors (WSJ)
- Barclays Said to Start Cutting Jobs in Investment Banking Unit (Bloomberg)
- Backlash Grows on Release of Sgt. Bowe Bergdahl in Taliban Prisoner Swap (WSJ)
- For fallen soldiers' families, Bergdahl release stirs resentment (Reuters)
- PIMCO's Gross stares at record outflow (Reuters)
As we noted previously, it is likely that whatever Draghi does this week "will not deliver a significant impulse to the real economy" in Europe but while negative rates are almost guaranteed (based on the consensus), reviving the ABS market (via focused QE) is being heralded by many as a positive swing factor. Unfortunately, as SocGen explains, even if the ECB began purchasing ABS in H2 2014, the size and reach of the market is not enough to move the scale as Europe acts desperately to avoid a Japanese-style lost decade.
Destroy the market's ability to price assets, risk and credit, and you take away the essential information participants need to make rational, informed decisions. By crushing the market's ability to generate accurate pricing information to save the Status Quo from necessary repricing and reforms, the Fed and the Federal government have generated enormously destructive unintended consequences that will not respond to additional politically expedient fixes. All the other central planning fixes around the world share the same fatal flaw.
- Unstoppable $100 Trillion Bond Market Renders Models Useless (BBG)
- Afghan president fumes at prisoner deal made behind his back (Reuters)
- Spain to Unveil $8.6 Billion Stimulus Package (AP)
- How fracking helps America beat German industry (Reuters)
- Obama to Urge European Allies to Stay Tough on Russia (WSJ)
- Frenchman 'admits' Brussels shooting in video (AFP)
- Heloc Payment Jump to Take Bite Out of Consumer Spending (WSJ)
- Obama Said to Propose Deep Cuts to Power-Plant Emissions (BBG)
- Lehman Lesson Lost as Bank Lobby Gains Clout (BBG)
- WSJ reports that WSJ reporting on Icahn insider trading probe may have killed it (WSJ)
- KKR liquidates former Goldman Sachs traders-run hedge fund (Reuters)
Ahead of this Thursday's ECB meeting, speculation is rife about what Mario Draghi will announce, and as the following Nomura chart highlights most pundits are convinced that the most likely announcement is a cut in the refi and deposit rate with a probability of around 90%, an LTRO in distant third at 34%, and a full blown QE dead last with 10%. However, as SocGen predicts, which is rather aggressive in its assumptions expecting a negative deposit rate of -0.1%, a targeted LTRO to "boost lending to the private sector", and a "signal" of €300 billion in asset purchases, the bulk of this new-found liquidity will almost exclusively go to boost capital markets, and the wealth effect. As for the broader economy? "We do not expect the 5 June measures to deliver a significant impulse to the real economy."
Recently we showed that in order to goose its fading all-important housing market (to China housing is like the stock market to the US: both mission-critical bubbles designed to give a sense of comfort nd boost the "wealth effect"), China has first resorted to zero money down mortgages across various markets, and secondly to such gimmicks as "buy one floor, get one free." However, that's only part of the story. Even worse is what is not being disclosed to the general public: such as the true state of the housing market in China. Because according to a recent report on Sina, quoted on Investing In Chinese Stocks, when it comes to revealing just how bad things are domestically, Chinese developers are simply pulling a page out of biotech ETF playbooks, and simply not reporting price drops greater than 15%!
Iif there is to be a real housing recovery, households have to be formed at a much faster pace. Alas, in recent years household formation has not made a "combeack", it has crashed. In fact, according to Census Bureau data, in Q1 the number of households formed each month was 189,000, down from 1,563,000 in 2013, dropping more or less in a straight line since the article's publication!
Just as we can't eat iPods, we can't subsist on official reassurances that the Fed and inflation are both benign.
- Ukraine Rebels Outfox Army to Dent Poroshenko Troop Goal (BBG)
- Russia Withdraws Most of Forces From Ukraine Border: U.S. (BBG)
- Super-Size Me! China’s ’Mini’ Stimulus Starts Expanding (BBG)
- Option B: The blueprint for Thailand's coup (Reuters)
- Big investors replace banks in $4.2tn repo market (FT)
- Draghi Shields Catalan Independence Bid From Market (BBG)
- U.S. companies seek cyber experts for top jobs, board seats (Reuters)
- Parsley CEO Emerges as One of Youngest U.S. Billionaires (BBG)
Financial expert, Pentagon insider and bestselling author James Rickards has warned that “typical investors” may not be able to acquire physical gold when prices begin to surge hundreds of dollars a day as “massive shortages” will take place. In another fascinating interview,, Rickards said that gold will become the preserve of the “big guy” in the form of sovereign wealth funds and central banks.
Western strategists and talking heads, we are sure, will know better and continue to pitch China as the renewed engine of growth in the world and that everything will be fine... but when the country's largest property developer says, the "golden era" for China’s property market has passed, adding that "The period in which everybody makes money out of property is gone," perhaps it is time to listen? Of course, we are sure there will be an orderly exit (just as there was in CNY last night which crumbled to 19-month lows) but as China Vanke Co's Yu Liang warns, "the phase where 'whoever buys makes money' is gone." Property sepculators are frustrated that the government won't bail them out "are they tryng to kill us?" as one analyst notes "this downturn is more serious than 2008."
There can be no doubt that computer science knowledge is currently in great demand; however, we do believe that there are some signs that the boom is - so to speak - 'getting out of hand' and is beginning to reflect the effects of the technology echo bubble on Wall Street. The give-away is the size of the demand for computer science studies relative to other fields of study. The last time enrollment in computer science peaked was in the year 2000 – concurrently with the technology mania. This is obviously no coincidence. What is slightly disconcerting is that the current peak in enrollments towers vastly above that previous bubble peak.
- Yellen Concerned by Housing Slowdown She Has Scant Power to Cure (BBG)
- Because snow in Q1? Citigroup’s CFO Says Trading Revenue Could Slide 25% (BBG)
- Banks Raise Caution Flag on Trading (WSJ)
- The answer is yes: Hilsenrath asks if BOJ’s Kuroda Awakening to His Limits? (WSJ)
- Google Develops Prototype Cars for Fully Autonomous Driving (WSJ)
- Amazon Expects Lengthy Hachette Dispute (WSJ)
- Tencent $1 Billion Game Shows Global Hunt for Mobile Hits (BBG)
The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since we always look for a silver lining in a black cloud, we predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.