recovery

BlackRock's Fink Warns Housing More "Unsound" Now Than During Last Bubble

More than half a decade after the collapse, and with talking heads proclaiming the recovery as strong as ever and the Fed remarking on the housing market's foundational pillar to that recovery, BlackRock's CEO Larry Fink has a few words of warning for the exuberant - the US housing market is "structurally more unsound" today that before the last financial crisis. As the data comes in weaker and weaker, despite hopes for a post-weather bounce, the fact that the US housing market is "more dependent on Fannie and Freddie than we were before the crisis," is a problem for the US taxpayer and - unlike Mel Watt's 'free credit for everyone' approach to expanding the GSE's role, Fink says with strong underwriting standards, ownership of affordable homes can again become a foundation for American families. So Watt's easy 'Subprime 2.0' or Fink's hard 'American Dream'.

David Rosenberg And Goldman Sachs Refuse To Pay $250,000 To Listen To A "Fee-Deflating" Bernanke

The days of Bernanke's "non-Giffen good" speech circuit may come to an end far sooner than the ex-Chairsatan wishes: "UBS and Goldman Sachs considered his fees too high." Others were quick to point out the obvious:"You can spend $250,000 for Bernanke’s time at a private dinner, or you could just sit down and read what people like Janet Yellen and Mark Carney have to say," David Rosenberg said"... Indeed, this is one deflation which we are confident the Fed Chairman wishes he was 100% certain he could stop in 15 minutes. Sadly, like in the case of everything else relating to Bernanke, when paying for smoke and mirrors it is only a matter of time before everyone, even the uber-richer poseurs, realize that the product they are buying is nothing but a cheap commodity.

VIX Slammed To 2014 Lows

In a greatly ironic moment for capital markets, minutes ahead of the Fed's Bill Dudley speaking about "low volatility in markets is a cause for concerns, indicates complacency," VIX just collapsed in a pile of "we don't need no stinking protection" volatility selling to its lowest level since December 2013 and almost its lowest since April 2013 recovery lows.

Goldman Kills The China Recovery Story, Says "Two Year Property Downcycle Imminent"

With everyone focusing on the "Holy Grail" deal between Russia and China, and debating who got the upper hand in the 30 year price delivery arrangement, a just as notable story is that quietly overnight Goldman's China team just took China to the cleaners. In a flurry of reports covering everything from Chinese banks to property developers to the Chinese, Goldman effectively mirrored what Hugh Hendry said several years ago when he correctly concluded that China is drowning in overcapacity, and concluded that a "two year property downcycle is imminent."

Portugal's Largest Bank "In Serious Financial Condition" Auditor Warns

One of Portugal's biggest companies - Espirito Santo International SA - is in a "serious financial condition" according to a central bank driven external audit by KPMG identified "irregularities in its accounts." Rather stunningly, the details are nothing short of ponzi-like as WSJ reported in December that Espírito Santo International was highly leveraged and had been relying heavily on selling debt to an investment fund held by the financial group (i.e. funding debt issuance in one entity with another) and overvaluing hard-to-value assets (ring any bells?). However, the 'ponzi-like' maneuver, as WSJ concludes shows that while legal and in line with regulatory rules, highlights how corporations, including banks, used financial gymnastics to survive the region's financial crisis. Given the massive domestic bank demand for sovereign paper, one has to wonder if the sudden 60bps spike in Portuguese bond risk is a signal that all is not well in the European periphery.

Where The CapEx Is: Russia To Invest $55 Billion In Gas Deal, China Another $20 Billion

Western companies have buybacks that only reward shareholders here and now; the East actually spends capex to invest into the future. Case in point: today's "holy grail" gas deal announcement, which in addition to generation hundreds of billions in externalities for both countries over the next three decades will result in an immediate and accretive boost to GDP, to the tune of $55 billion for Russia and $20 billion for Beijing.

Nikkei 14,000 Holds, Shanghai 2,000 Holds, But USDJPY 101 Breaks Bad

Another right of perfectly round number supports: while the Shanghai Composite once again dipped below 2000 overnight to as low as 1991 only to close modestly higher, and the Nikkei followed suit, also sliding below the psychological support level of 14,000 to an intraday low of 13,964 only to close just above 14,000 if in the red, it was the USDJPY that has suffered the most technical pain when shortly after 2:30 am eastern time, the USDJPY dropped by nearly 40 pips, hours after the BOJ indicated that not only is it happy with where in the QE process it stands, but hinted there may well be no more QE, and certainly nothing imminent . In the process, the USDJPY fully smashed the 200 DMA, with the next key parallel support being the 200DMA in the EURJPY at 138.08 (which was at 138.34 last). When that too gives way, it is a straight line to double digits in the USDJPY, and the countdown to the end of the Abe regime begins in earnest.

The Greenspan Housing Bubble Lives On: 20 Million Homeowners Can’t Trade-Up Because They Are Still Underwater

One of the most deplorable aspects of Greenspan’s monetary central planning was the lame proposition that financial bubbles can’t be detected, and that the job of central banks is to wait until they crash and then flood the market with liquidity to contain the damage. In short, China didn’t “save ” America into a housing crisis; the Greenspan Fed printed America into a cheap debt binge that ended up impairing the residential housing market for years to come. In any event, for those Millennials who do manage to accumulate a down payment by the time they are in their early 30s there is precious little starter home inventory available.  The Greenspan mortgage debt serfs from the previous generation are blocking the way. Monetary central banking is an economy wrecker.  Here is just one more smoking gun of proof.

The Modern Investor's Manifesto

The stock market is filled with people who know the price of everything, but the value of nothing.” – Philip Fisher.

A 51-point personal perspective on some of the challenges facing today’s investor...

Jobless Claims And The Issue Of "Full Employment"

Last week, the number of first-time jobless claims dropped below 300,000 which has not happened since before the onset of the financial crisis. Not surprisingly, the media and economic analysis exploded with commentary that this is a sure sign that the economic recovery is afoot. Such a recovery will lead to stronger employment, higher wages, rising interest rates and a continuation of the bullish stock market cycle. However, is that really the case?

Fed President Says It Is Fed's Fault Markets Ignore Fundamentals

Equity markets are not happy about the Fed's Charles Plosser's economic exuberance ("3% growth no matter the weather" which is 20% above consensus of 2.5%) and his 'good-news-bad-news' monetary policy hawkishness ("may need to raise rates sooner rather than later"). But perhaps the most crucial part of his speech this morning was what the headlines notably left out. Plosser admonished his global central bank brethren: "if central banks do not limit their interventionist strategies and focus on returning to more normal policymaking aimed at promoting price stability and long-term growth, then they will simply encourage the financial markets to ignore fundamentals and to focus instead on the next actions of the central bank." Simply put, he warned, "central bankers have become too sensitive and desirous of managing prices in the financial world.."

Deutsche Bank: "Perhaps The Fed And Other Central Banks Are Controlling The Market Too Much These Days"

"Perhaps the Fed and other central banks are controlling the market too much these days with their guidance. In the old days central banks used to like to create an element of surprise to ensure that markets didn't become complacent. With the crisis fresh in people's minds, with the stock of debt still huge and with the recovery still so uncertain they feel they cannot risk creating too much uncertainty at the moment. " - Deutsche Bank

Italian Bad Loans Surge 26% YoY To Record High (59th Month In A Row)

Welcome to the recovery. For the 59th month in a row, the stock of bad loans across Italian banks rose (up ~26% YoY). At EUR 164 billion, this is a new record high and remains the biggest problem for Italian banks (non-performing loans now make up a reord 8.6% of total lending) as they suggest in their reports that profitability is improving. If that was not enough to have you piling cash into the heart of Europe's periphery, then the 22nd month of declines in loans to the private sector should do it. Despite a pick up in mortgage loans, private credit creation tumbled 3.1% YoY in April... not exactly the quasi-Keynesian dream that record low rates would suggest as transmission mechanisms remain entirely plugged.

Former Prime Minister Of Malaysia Accuses CIA Of Covering Up MH-370 Disappearance

It has been over two months since Malaysian flight MH-370 disappeared and still not a single credible trace of its final resting place has been found. Since then, there have been absolutely no actionable leads, and it increasingly appears as if the plane fell off the face of the earth.  In short: "nobody knows." Or so the conventional wisdom goes. One person, however, who thinks someone may know more than they are letting on is none other than the man who was the Prime Minister of Malaysia from 1981 to 2003, Mahathir Mohamad, and who in a blog post earlier today has some rather provocative questions and thoughts. His conclusion, after noting that "planes like MH370 "don't just disappear" is that CIA and Boeing may be hiding information about missing MH370.