Russia must get aggressive in the economic war. You can win this economic contest in 24 months, if certain special zones in Russia simply are allowed to copy Swiss banking rules and regulations, as wealth will always flow to secure locations where taxes are low. You know what banking privacy and security did for Switzerland, it made a poor country with few natural resources the wealthiest nation in the world.
Recall Lenin’s quote: “The capitalists will sell us the rope with which we will hang them.” Today, of course, the capitalists don’t even sell the rope; they give it away, for nothing. But what’s not to like? Stock investors are getting rich. Bondholders are making money. The government can spend as much as it likes. And the voters are bamboozled by it; they think it helps make the economy work better. This is going to be a hard habit to break. So, here’s the gist of my conclusion: Governments won’t break the habit of getting something for nothing. It will break them. But how?
This time is not different. The excesses being built up in the markets today will eventually revert just as they have been at every other peak in market history. The only question, of which no one has the answer to, is exactly when this occurs. With this in mind, there are 10-basic investment rules that have historically kept investors out of trouble over the long term. These are not unique by any means but rather a list of investment rules that in some shape, or form, has been uttered by every great investor in history.
What can strike a balance between the opposing forces operating on the euro-dollar exchange rate? No one can say for sure, but one thing is certain: Whereas the profits from playing transatlantic interest-rate differentials may run to 1% or 2% per year, investors can easily lose that amount in a single day – or even an hour – by buying the wrong currency when the trend turns. As we know from decades of Japanese and Swiss experience, selling a low-interest-rate currency simply to chase higher US yields is often a costly mistake.
Borrowing in USD was risk-on; buying USD is risk-off. As the real global economy slips into recession, risk-on trades in USD-denominated debt are blowing up and those seeking risk-off liquidity and safe yields are scrambling for USD-denominated assets. Add all this up and we have to conclude that, in terms of demand for USD--you ain't seen nuthin' yet.
Ahead of The Fed's 'impatience' today, and amid a tumbling EUR, the oldest central bank in the world has decided it is time to go further into the illustrious ranks of NIRP/QE'ers:
*RIKSBANK CUTS KEY RATE TO -0.25%, TO BUY GOVT BONDS FOR SK30 BLN
So as opposed to Denamrk's roundabout QE, Sweden just jumps in and monetizes that debt direct by expanding their QE program and shifts from small NIRP to bigger NIRP. All this while suggesting the labor market is strengthening and inflation has bottomed out. The reaction - SEK is plunging and OMX surges.
Currently, a new form of danger arises. The Keynesian pettifoggers at the Fed have painted themselves into an epochal corner. After 78 months of ZIRP they have no idea about how and why they got here; and now, mired deep in the lunacy of free money, they are clueless about where they are going next. There is not a chance the US economy has decoupled from the rest of the world. The great credit-driven boom was universal and fueled by out of control central banks. Now comes the bust phase, and these same money printing central bankers have no clue what to do about it.
Hedge Fund Manager Fears "Sudden, Pervasive Loss Of Faith" In Markets; Says "It's A Truly Scary Time"Submitted by Tyler Durden on 03/17/2015 17:45 -0400
First it was Sam Zell, warning "it's very likely that something has to give here." Then George Soros upped his market hedge drastically, followed by Carl Icahn's "worry about excessive money printing," adding that he was "very nervous" about US equity markets. "Financial markets are euphoric," warned Stan Druckenmiller, warning that "market participants are pricing in hardly any risks," and Crispin Odey explained "there are consequences to CB actions," stating that "we have front-row seats to an imminent market shock." And now hedge fund manager Andy Redleaf (who predicted "there is going to be a panic in credit markets," in 2007) has come out with the most ominous of warnings yet among the billionaire crowd... "I think it is a truly scary time."
While the west huffs and puffs, and threatens to unleash even more "costs" on Russia in the form of additional sanctions which will assure that Europe's latest deflationary recession is even more acute, an "isolated" Russia is looking to outside, and to the east, and as part of its most recent de-dollarization initiative, the Moscow Exchange announced it has started trading Chinese Renminbi-Russian Ruble currency futures.
The Bond bubble is not only an overcrowded trade, a bubble of historic proportions but it will cause the entire crash of the financial system.
The Best "Democracy" Money Can Buy: For Every Dollar Spent Influencing US Politics, Corporations Get $760 BackSubmitted by Tyler Durden on 03/16/2015 18:37 -0400
Between 2007 and 2012, 200 of America’s most politically active corporations spent a combined $5.8 Billion on federal lobbying and campaign contributions. What they gave pales compared to what those same corporations got: $4.4 Trillion in federal business and support. Here is the visual representation of this stunning finding: for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government.
With the bond market appearing ripe for a dramatic correction, many are wondering whether a crash could drag down markets for other long-term assets, such as housing and equities. Bond-market crashes have actually been relatively rare and mild. According to our model, long-term rates in the US should be even lower than they are now, because both inflation and short-term real interest rates are practically zero or negative. Even taking into account the impact of quantitative easing since 2008, long-term rates are higher than expected. Regarding the stock market and the housing market, there may well be a major downward correction someday. But it probably will have little to do with a bond-market crash.
Italian Bad Debt Hits Record $197 Billion As Bank Lending Contracts For Unprecedented 33 Consecutive MonthsSubmitted by Tyler Durden on 03/16/2015 13:53 -0400
For the third largest issuer of sovereign bonds in the world, Italy - the country all eyes will focus on once Greece and/or Spain exit the Eurozone - when it comes to NPLs things are going from bad to worse because as Reuters reported earlier, citing ABI, gross bad loans at Italian lenders continued to rise, totalling 185.5 billion euros ($196.5 billion) in January from 183.7 billion euros a month earlier.As the chart below shows, Italy now has over 10% of its GDP in the form of bad debt. And just as bad, even as NPLs rose, total debt issuance contracted once more, lending to families and businesses decreased 1.4 percent year-on-year in February, the 33rd consecutive monthly fall.
Along with a massive revision for January (from +0.2% to -0.3%), February's Factory Output fell 0.2% (missing expectations for the 3rd month in a row). This is the 3rd drop in a row for factory output - the worst run since 2009. Overall industrial production missed for the 3rd month in a row but managed a meager 0.1% rise on the back of the biggest rise in utility output ever. Auto vehicles and parts production tumbled 3.0% MoM.
It's a total shock that maniacs who borrow nearly 100% on interest only terms to lose rental money to speculate on housing capital gains would love low interest rates. And with the lowest mortgage rates in Australian history, coinciding with the sloppiest lending standards in Australian history, combining with the highest property prices in Australian history, added to the highest household debt to income ratio in Australian history, what would you expect the biggest idiot of a treasurer in Australian history to do?