With Switzerland long dead as an offshore tax haven for US savers unwilling to fund Uncle Sam's central-planning machine (and who can blame them - isn't monetizing the deficit precisely what the Fed is for?) and with Cyprus banks, shall we say, compromised, many have been forced to look for greener tax-evading pastures, as far away as the Pacific Rim, especially that oasis of mega wealth creation, Hong Kong. Only this time the US is paying attention as SCMP reports that Hong Kong tax officials will soon be able to pass information about the finances of Americans working in Hong Kong to their US counterparts under an agreement signed yesterday as part of Washington's global crackdown on tax evasion. In other words, for tax purposes, Hong Kong is now effecitvely under IRS control.
- One-Ship Ukraine Navy Defies Russia to the End (WSJ)
- Crimea-Induced Trading Surge Stokes Moscow Exchange Rally (BBG)
- Moscow says Ukraine stops Russian crews disembarking in Kiev (Reuters)
- New images show more than 100 objects that could be plane debris (Reuters)
- Anger of Flight 370 Families Explodes in Beijing (BBG)
- Murdoch Promotes Son Lachlan in Succession Plan for Empire (BBG)
- Facebook to buy virtual reality goggles maker for $2 billion (Reuters)
- Syrian Regime Exploits Rebel Despair (WSJ)
- King Digital IPO price may not bode well for stock (Reuters)
- Rothschild in Twitter Spat as Bakries Cut Ties With Miner (BBG)
Another morning melt up after a less than impressive session in China which saw the SHCOMP drop again reversing the furious gains in the past few days driven by hopes of more PBOC easing (despite China's repeated warning not to expect much). A flurry of market topping activity overnight once again, with Candy Crush maker King Digital pricing at $22.50 or the projected midpoint of its price range, and with FaceBook using more of its epically overvalued stock as currency to purchase yet another company, this time virtual reality firm Oculus VR for $2 billion. Perhaps an appropriate purchase considering the entire economy is pushed higher on pro-forma, "virtual" output, and the Fed's capital markets are something straight out of the matrix. Despite today's pre-open ramp, which will be the 4th in a row, one wonders if biotechs will finally break the downward tractor beam they have been latched on to as the bubble has shown signs of cracking, or will the mad momo crowd come back with a vengeance - this too will be answered shortly.
The Diplomat‘s Justin McDonnell spoke with Larisa Smirnova, an expert on Sino-Russian relations and professor at Xiamen University, about the crisis in Ukraine, Russian foreign policy, and more.
It doesn’t take a rocket scientist to figure out that an unsustainable debt burden soundly tolls the death knell of a nation’s economy, and its government. Unfortunately, it can sometimes take a rocket scientist to figure out what the real numbers are; governments have a vested interest in not being transparent about their debts and interest payments. Obligations are obligations, no matter who they’re owed to. Taking this into account, total US interest payments in Fiscal Year 2013 were a whopping $415 billion... This means they actually spent approximately 26% of their available tax revenue just to pay interest last year.. much higher than the 1868 Ottoman Empire at the end of its reign...
Pre-open gold dump, USDJPY pump, check. Opening dump in USDJPY and stocks led by Momos and Biotechs, check. European close marks the bottom, check. EURJPY takes over and ramps stocks back up to highs, check. Fade into close, check. Today was an almost perfect echo of yesterday's market action with blue-chips benefitting from the weakness in Nasdaq and Russell high-beta honeys. Bonds were quite with very modest steepening. Gold and silver bounced off earlier lows but their losses mirror Copper's 1.7% rise on the week. The USD lost ground as Draghi's failed jawboning sparked EUR strength. VIX fell 1 vol to its lowest close in 2 weeks as a late-day VIX -slam failed to get SPX green post-FOMC.
This contradicts their claim to sovereign power by way of their superior intellect, business prowess, hereditary entitlement, military strength, political power, majority consensus or whatever story they can pull out of their hat.
Words matter, and the Fed’s words matter more than anyone’s. But this is the classic mistake that academic economists always make – the quasireligious belief in theory over practice, in the triumph of bloodless ideas over the market’s fang and claw. Woodford’s ideas are sweet music to the enormous egos of the academics who control the Fed: you can save the world just by stating your brilliant policy intentions. Your words will become self-fulfilling prophecies as the markets shape themselves in expectation of your mighty deeds. And so what do we get? Horror shows like Bernanke’s press conferences last summer or Yellen’s press conference last week. If the Fed was surprised by the rotten tomatoes thrown up on the stage last year, they ain’t seen nothing yet.
Chart 1 proves it is crystal clear that every time the US Federal Reserve acts to "save us" from one crisis, it directly sows the seeds for an even bigger crisis in the future.
When you ponder the implications of allowing a small group of powerful wealthy unaccountable men to control the currency of a nation over the last one hundred years, you understand why our public education system sucks. The average American has experienced a fourteen year recession caused by the monetary policies of the Federal Reserve. Our leaders could have learned the lesson of two Fed induced collapses in the space of eight years and voluntarily abandoned the policies of reckless credit expansion, instead embracing policies encouraging saving, capital investment and balanced budgets. They have chosen the same cure as the disease, which will lead to crisis, catastrophe and collapse.
Venezuela's exchange rate is a Gordian Knot of rules and regulations meant to baffle onlookers with bullshit and, we suspect, hide the hyperinflation from prying eyes just a little longer. Today's launch of SICAD II, a new currency market which allows the free-market to bid for USD (in Bolivars), appears to be an effort to provide liquidity to a black-market for dollars. SICAD II priced at 55 Bolivars today - an 88% devaluation from the official rate of 6.29.
"When you bundle bots, clicks fraud, viewability and the lack of transparency [in automated ad buying], the total digital-media value equation is being questioned and totally challenged," warns one advertising group executive as the WSJ reports about 36% of all Web traffic is considered fake, the product of computers hijacked by viruses and programmed to visit sites. This means, simply put, that marketers, who are pouring billion of dollars into online advertising, are confronting an uncomfortable reality: rampant fraud... and the fraud is only going to get worse...
Last month's exuberance-filled, and instantly extrapolated, Markit US PMI print at the lofty levels of 57.1 (proving that the weather-delayed pent-up-demand was truly back) has been dashed on the shores of ugly reality. March's print dropped to 55.5, missing expectations by the most since Feb 2013 as jobs grew at a slower pace and factory orders declined. This slowing in the US economy's growth adds to last night's weakness in Chinese growth. Given weather was not a majr issue in March, what excuse can we find for this?
Is capital adequacy really the answer to the question?
I think we are now even more strongly in a good-news-is-bad-news (and vice-versa) world. If we start seeing some strong economic data come out over the next few weeks and months, then I think the market - particularly the bond market and emerging markets - could get pretty squirrelly. Not that US stocks would be immune from this. Remember, the modern day Goldilocks environment for stocks has nothing to do with a happy medium between growth and inflation, but everything to do with growth being weak enough to keep an accommodative Fed in play. Strong growth data would augment a Common Knowledge structure that the Fed is on track to raise rates sooner and more rather than later and less, and that's no fun for anyone. Then again, if global growth data remains weak - and you really can't look at what's coming out of China, Europe, or Japan and think that the global growth story is anything but weak - that creates enough uncertainty about the Fed's path (not to mention the cover for political and economic Powers That Be to wage a full-scale media war to keep monetary policy in QE la-la land forever) to support the markets. Sounds a lot like Freedonia to me. Rufus T. Firefly for President?