One of the defining traits of the past few years’ “recovery” has been the torrent of money flowing from big banks to favored clients, and from there into trophy properties like high-end real estate, superyachts, and fine art. This might be the first financial bubble to completely bypass the 99%. And now it’s ending...
The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China. WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other.
Who is to blame for Trump and Sanders?
In the run-up to June, financial markets continue to be trapped within multi-month trading ranges: GT5 1.2-1.8%, DXY 92-100, ACWI 380-440, SPX 1850-2100, VIX 12-20. So what are the catalysts & “trades of the unexpected” should risk assets finally breakout or breakdown?
A federal appeals court overturned a $1.3 billion judgement against Bank of America, ruling that good intentions at the outset shield bankers from fines for subsequent fraud... “Is the idea that a good state of mind initially can insulate you from fraud later on?” exclaimed one law professor, adding, "that would be a very strange and troubling doctrine...it almost seems like the 2nd Circuit fell victim to a lawyer’s trick."
Implied volatility should remain structurally elevated into and through an eventual recession (and likely bear market) before subsiding once the next sustained recovery has begun. That is precisely why we have struggled with the idea that the high-volatility regime intact since last August may truncate at less than a year. If our reasoning is correct and volatility remains structurally elevated, it follows that the recent three-month cyclical trough, as the longest such period on record, is statistically unlikely to last much longer.
"I'm Going To Stick With This Right To The End" - French President Hollande Threatens Union ProtestersSubmitted by Tyler Durden on 05/27/2016 12:23 -0400
"We can't accept that there are unions that dictate the law. This is not a moment to endanger the French recovery. As head of state, I want us to go right to the end."
In order to press his individual agenda of preserving optionality to intervene in the FX market and push the Yen lower (using increasingly more desperate measures), Japan's Prime Minister had just one task in the latest G-7 meeting: to have the Group of Seven leaders warn of the risk of a global economic crisis in the final communique issued as the summit wrapped earlier today in Japan. He failed. The reason why: "the G-7 is obviously aware of the ‘announcement effect’ the official communique has. In such a situation, warning of negative risks and sentiment can become self-fulfilling.""
There has never been a more destructive central banking policy than the Fed’s current maniacal quest to stimulate more inflation and more debt. That’s what is killing real wages and economic vitality in flyover America - even as it showers prodigious windfalls of unearned wealth on Wall Street and the bicoastal elites who draft on the nation’s vastly inflated finances. Indeed, Fed policy has had a double whammy effect on the flyover zone economy. It drove inflation up when down was needed; and its strip-mined capital from American business when increased capital investment was of the essence.
Last November, capital markets were discounting a rate hike five months later, based on Fed Funds futures. Same story today. Last November, the S&P 500 was trading near 2100. Same story today. Last November, VIX levels were around 14. Same story today. Last November, instead of waiting five months, the Fed hiked rates one month later; the S&P dropped by 10% over the next eight weeks... And as BofAML's Savita Subramanian warns, hiking during a profits recession usually hasn't ended well.
If U.S. shale stays competitive, it could trigger another round of production increases from Saudi Arabia, which is determined to do its utmost to hold on to market share even as it boasts of long-term plans to build an “oil-less” economy by 2030. The Saudi bottom line has been ravaged by years of low prices, generating huge budget deficits and debts to contractors (which the Saudi government will attempt to cover through IOUs). Nevertheless, Saudi Arabia remains uniquely positioned to weather such storms; should the price fall again, it is better-placed to retain market share than the high-cost producers in the U.S. and elsewhere.
- Oil prices ease from seven-month high to below $49 (Reuters)
- Wall Street Waits for Yellen Before Taking Off for a Long Weekend (BBG)
- Donald Trump Celebrates Clinching GOP Delegate Race (WSJ)
- Trump vows to undo Obama's climate agenda in appeal to oil sector (Reuters)
- Japan Fails in Bid to Have G-7 Warn of Global Crisis Risk (BBG)
- Valeant Rejected Joint Takeover Approach From Takeda, TPG (WSJ)
In a world where fundamentals don't matter, everyone's attention will be on Janet Yellen who speaks at 1:15pm today in Harvard, hoping to glean some more hints about the Fed's intentionas and next steps, including a possible rate hike in June or July. And with a long holiday in both the US and UK (US bond market closes at 2pm today), it is no surprise overnight trading volumes have been dreadful, helping keep global equities poised for the highest close in three weeks; this won't change unless Yellen says something that would disrupt the calm that’s settled over financial markets.
As we approach the anniversary of last year's oil - and gasoline - price lows and the base-effect goes away, the sharp pick up in gas prices is set to have a sharp upward impact on Consumer Price Inflation. It will also wreak havoc on the Fed's strategy of playing possum and not hiking as long as inflation remained "stubbornly low."In short: the Fed suddenly has a problem. Here's why.
The mainstream media mouthpieces for the establishment peddle false narratives, disingenuous storylines, and outright propaganda to keep the ignorant masses confused, oblivious to reality, misinformed, and passively submissive to the opinions of highly paid “experts” and captured fiscal authorities. We are living in hard times. The reason tens of millions of Americans are rejecting the establishment and voting for Trump and Sanders is because of economic hardship. Most Americans have been screwed over by the system and are finally getting fed up. They aren’t exactly sure who screwed them, how they were screwed, or how to stop getting screwed, but they are angry. And someone is going to pay. The status quo is beginning to get nervous. Their usual propaganda, scare tactics and misinformation campaigns don’t seem to be working.