- Hilsenrising interest rates Business Feels Pinch of Swift Rate Rise (WSJ)
- Yellen Betting Defies 100-Year Jinx of Fed No. 2 Never Elevated (BBG)
- No sign of cyber leaker Snowden on flight to Cuba (Reuters)
- Back to the Future 2 is finally coming: Honda Sees ‘Flying Sports Car’ Making Profit by Decade’s End (BBG)
- Europe’s Richest Person Kamprad to Move Back to Sweden (BBG)
- Li’s Shock Treatment to China Lenders Evokes Ex-Reformer (BBG)
- In India, Gold-Related Shares Melt Down (WSJ)
- Citigroup Opens in Iraq to Tap $1 Trillion of Oil Spending (BBG)
- France warned on budget deficit (FT)
Turns out that for Europe, Cyprus was a "bail-in" template after all, and following an agreement reached early this morning, Europe now has a joint failed-bank resolution mechanism. Several hours ago, EU finance ministers announced that they had reached agreement on the principles governing the imposition of losses on creditors in bank 'bail ins'. Having already agreed to establish "depositor preference" in the pecking order of creditors at risk, the stumbling block to agreement was the availability of flexibility at the national level to complement the bail in with injections of funds from other sources. Under the compromise achieved overnight, once a bail in equivalent to 8% of total liabilities has been implemented, support from other sources can be used (up to 5% of total liabilities) with approval from Brussels. So investors (i.e. yield chasers) will foot the cost of bank bailouts? Maybe on paper. In reality, last night's agreement is the usual fluid melange of semi-rigid rules filled with loopholes designed to benefit large banks whose impairment may be detrimental to "systemic stability". To wit, from the FT: "While a minimum bail-in amounting to 8 per cent of total liabilities is mandatory before resolution funds can be used, countries are given more leeway to shield certain creditors from losses in defined circumstances." In other words, here is the bail in regime... which we may decide to ignore under "defined circumstances."
- Scalpel in Hand, Chinese Premier Li Stirs Reform Hopes (Reuters)
- Obama Sets Conditions for Keystone Pipeline Go-Ahead (FT)
- World’s Most Indebted Households Face Rate Pain (BBG)
- SAC Probers Weighing 'Willful Blindness' Tack (WSJ)
- Draghi Says ECB Ready to Act, Calls for Investment Over Tax (BBG)
- U.S. Tops China for Foreign Investment (WSJ)
- Basel Presses Ahead With Plans to Limit Bank Borrowing (FT)
- Gillard Ousted as Australia PM by Rival Rudd (FT)
- Japan Economic Strength Will Show in Stocks, Nishimura Says (BBG)
The unintended consequences of a centrally-planned world continue to peek through at the most unexpected of place, as moments ago the Indian Ruppe just plunged to a new all time record low against the USD, with the USDINR rising over 60 for the first time, triggering stops and overriding any potential USD selling intervention that the RBI may have attempted just below the resistance level which took place 59.985 according to Reuters.
Reuters reports that Japan's public pension fund, the world's largest with a pool of $1.1 trillion, and which until recently was the mystery buyer ex machina that was supposed to buy up the Nikkei past 16,000 and on its way to 20,000, 30,000 and more (a dream that fizzled as quickly as it appeared following our explanation that buying stocks means selling bonds), may start buying real estate to boost returns in a move that could involve tens of billions pouring into cities such as London and Paris. Or New York.
And What About Your Smart Meter?
- Here come the rolling blackouts: Obama takes on power plant emissions as part of climate plan (Reuters)
- Walking Back Bernanke Wished on Too Much Information (BBG)
- As previewed last week: Bridgewater "All Weather" is Mostly Cloudy, down 8% YTD (Reuters)
- U.S. Said to Explore Possible China Role in Snowden Leaks (BBG)
- Coeure Says No Doubt ECB Loose Monetary Policy Exit Distant (Bloomberg)... so a "recovery", but not at all
- U.S. steps up pressure on Russia as Snowden stays free (Reuters)
- Texas' Next Big Oil Rush: New Pipelines Ferrying Landlocked Crude Expected to Boost Gulf Coast Refiners (WSJ)
- Singapore Offsets Bankers as Vacancies Fall (BBG)
- Asian Stocks Fall as China Sinks Deeper Into Bear Market (BBG), European Stocks Rally With Bonds as Metals Advance (BBG)
- Qatar emir hands power to son, no word on prime minister (Reuters)
While we explained - in detail here - the copper-financing-deals that are among the epicentric drivers of the credit crunch in China, there is an (albeit smaller) missing link. The so-called 'Wealth Management Products' that are discussed widely and yet little understood are basically higher yielding vehicles pitched to a greater-fool retail audience with the goal of reducing banks' risk at the behest of the PBOC. Of course that is not how these stuffed-to-the-gills-with-risky-development-projects deals are pitched to the investing public but they have allowed banks (and implicitly local governments) via the infinitely virtuous loop below to fund any and all things construction-based... until now. It seems that losses (step 5), risks (step 3), and illiquidty (step 6) are breaking the loop very rapidly and therefore implicitly lowering credit creation (and therefore growth) or driving credit demand even further into the shadows.
"Well you know if you look at the last 13 years it was up 12 out of 13 and this year isn't even over yet, so I would say its responded pretty well. But you might say well yeah what about in the last year why hasn’t it? Well, markets do these things they go up sharply and sometimes they take a rest. But the long term is something you can get a handle on, but I was never very good on short term, whether it’s the stock market or whatever, or what government will do, they are just all over the place.
To all the dozens of journos who bought tickets on Aeroflot's flight from Moscow to Havana just so they can instagram Snowden sitting in 17A using countless creative photofilters, we hope said purchase was refundable, because the plane took off and the famous NSA whistleblower was not on it.
- Stocks Fall With China in Bear Market as Bonds Decline (BBG)
- Russia defiant as U.S. raises pressure over Snowden (Reuters) ...
- and sure enough: Kerry Warns Hong Kong and Russia on Snowden (WSJ)
- Slow-Motion U.S. Recovery Searches for Second Gear (WSJ)
- PBOC Sees ‘Reasonable’ Liquidity in China’s Financial System (BBG)
- Italy's Berlusconi faces verdict in underage sex trial (Reuters)
- Fed Monetary Course Difficult for a Bernanke Successor to Alter (BBG)
- Another China central bank worry; companies push into lending (Reuters)
- Gold Miner Writedowns at $17 Billion After Newcrest Fallout (BBG)
- Snowden Faces Often-Posed U.S. Fugitive Question: Where to Run? (BBG)
Until now, we have refrained from trying to explain Fedspeak to the masses. The truth is it's not opaque. It's not indecipherable. It's simple. Or at least you can choose to believe it is, as we have. At last week’s press conference, Federal Reserve Chairman Ben Bernanke fielded questions from reporters employed by some of the world's most esteemed news organizations. Here is a summary, translated from Fedspeak into ordinary American English and heavily condensed for easy tweeting.
Moments ago Edward Snowden landed at Sheremetyevo airport in Moscow, but since the American citizen has no Russian visa he will remain in the transit zone. And as Reuters reports, we now have some details on his next destinations, at least according to an Interfax source at Aeroflot: first Havana, Cuba, and finally Caracas, Venezuela as had been speculated earlier (although this may well be misdirection). Oddly enough, no Iceland (for now).
It appears the Federal Reserve's has not had enough time to figure out just who to blame or how to wriggle out of the situation that the March minutes were prematurely released to pretty much everyone that matters in the TPTB. As Reuters reports, the Fed's Office of Inspector General said it would miss the deadline on the investigation - offering no reason why the deadline will be pushed back three months.
As reported yesterday, Greece has stormed right back to the top of the crisis charts, not only due to the previously reported news that the IMF may be withholding further payments until Greece finally gets its house in order (three years later one can forget this will happen), but because as a result of the fallout surrounding the national broadcaster ERT, the coalition government is now in tatters. Moments ago any hopes that some political stability may be preserved were crushed following news that the Democratic Left official Vassilis Economou, who spoke libe on Greek Skai TV which is still in operation, said the party decided to withdraw its ministers from the coalition govt of Prime Minister Antonis Samaras. And there goes the fake sense of calm that has permeated the south of Europe ever since last summer's nail-biting Greek elections, which concluded in the best possible way for Germany. This time around, however, the last thing Merkel needs two months ahead of her reelection is a resurgence in the peripheral crisis, timed perfectly to coincide with the end of the carry trade, which will mean only the ECB is left to pick up the pieces.