‘Vote For Gold’
"You have to choose, as a voter, between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."
In the last month not a day appears to pass without some news about a glitch, malfunction, or full-blown fire, affecting the ironically named Boeing Dreamliner (resulting in the stock soaring to daily all time highs). Today promises to be no different, with not one, not two, but three separate incidents impacting the airplane. Reuters reports that Qatar Airways has taken one of its 787 Dreamliners out of service following what it described as a "minor" technical issue. "Minor" as in a burnt-out indicator light, or "Minor" as in the plane nearly fell out of the sky burnt to a crisp? The distinction can be important.
Is Vladimir Putin, tired with Edward Snowden recasting himself as Tom Hanks in the Moscow transit terminal, about to send the NSA whistleblower packing, bound and gagged, and gift wrapped back to Obama? It increasingly appears so. Reuters reports that, in a sudden and abrupt shift to the previously defiant tone out of Putin, Russia's FSB federal security agency and its U.S. counterpart, the FBI, are in talks over the fate Edward Snowden, who is stuck at a Moscow airport, Russian President Vladimir Putin's spokesman said on Friday. Dmitry Peskov said the Kremlin was not involved in talks over the 30-year-old American, who is wanted by the United States on espionage charges.
- The Citadel-SAC connection (BBG) - just wait until the Citadel-FRBNY connection emerges
- Letter backs Yellen for Federal Reserve role (FT) - or said otherwise, the Democrats would like the Fed to rule (and monetize deficits) for ever
- Obama, Republicans gear up for bruising U.S. budget fight (Reuters)
- Up for Debate at Fed: A Sharper Easy-Money Message (WSJ)
- UBS to Pay $885 Million to Settle U.S. Mortgage Suit (BBG), Banks shiver as UBS swallows $885 million U.S. fine (Reuters)
- Japan finmin Aso: CPI shows gradual shift to inflation from deflation (Reuters)
- Japan's PM calls for high-level talks with China (Reuters)
- Holder Targets Texas in New Voting-Rights Push (WSJ)
- Another Nightmareliner incident: Probe opened as Air India Boeing Dreamliner oven overheats midair (Reuters)
- Samsung Boosts Capital Spending as High-End Phone Demand Slows (BBG)
With regard to the disastrous Macondo oil well rupture that ended in 11 deaths and triggered the largest US offshore oil spill of all time (and uncountable ongoing ecological impacts), Halliburton has 'graciously' decided to plead guilty to destroying evidence. 'Guilty?' we hear you ask? When has any large US corporation not just settled in order to not be forced to admit guilt? Well, as Reuters reports, "their willingness to plead to this may also indicate that they'd like to settle up with the federal government on the civil penalties." The maximum statutory fine for this apparent midemeanour? $200,000! Or 0.0007% of expected revenues for 2013. Well, that'll teach 'em for sure - they won't be destroying evidence again, eh?
According to media reports, the People's Bank of China is considering phasing out the dollar as the reference currency or peg for the yuan, and to start using gold as the reference point.
The reports have not been confirmed officially, but there has been official comments to that effect in recent years and Chinese academics have advocated backing the renminbi or yuan with gold.
Beijing's possible move to back the yuan with gold would be a strategic move in order to, lessen the risk of inflation, increase the yuan’s attractiveness as an investment medium and create faith in the yuan as a reserve currency.
Goodbye sweet blue-eyed prince. It's been bittersweet. Just out from Bloomberg and Reuters:
- SAC CAPITAL ADVISORS INDICTED BY FEDERAL GRAND JURY IN NEW YORK
- COHEN'S HEDGE FUND, SUBORDINATES SUBJECT OF CRIMINAL INQUIRY
- U.S. SEEKS TO FORCE SAC TO FORFEIT ILLEGAL PROFITS STEMMING FROM FRAUD
- U.S. SAYS THAT FROM ROUGHLY 1999 TO 2010, SAC OBTAINED AND TRADED ON INSIDE INFORMATION TO BOOST RETURNS, FEES
Perhaps now is a good time to retreat to the hockey rink behind 9 feet of electrified fence, before the TV newsvans arrive at 72 Cummings Point road. As for what happens to the 5-10% of daily NYSE volume traditionally associated with the SAC, we will find out soon enough.
- The Department of Justice has opened an initial probe into the metals warehousing industry (WSJ)
- Obama Says Budget Debate a Battle for Middle Class Future (BBG)
- Death Toll From Spanish Train Crash Hits 77 (WSJ)
- ‘Fabulous Fab’ takes to witness stand (FT)
- Banks Said to Weigh Suspending Dealings With SAC as Charges Loom (BBG) - what about Anthony Scaramucci?
- How the Muslim Brotherhood lost Egypt (Reuters)
- German Business Confidence Rises for a Third Month (BBG)
- Fraternities Lobby for Tax Break Without Hazing Penalties (BBG)
- China charges Bo Xilai with corruption, paves way for trial (Reuters)
- Airbus Pushes Higher-Density A380 to Counter Luxury Image (BBG)
With the Detroit bankruptcy hearing under way (constitutional crises notwithstanding), we thought it useful to cut through the rhetoric, break-down the mutally-assured-destruction barriers, and peer into the cold-hard facts as the city looks to restructure its $18 billion in debt.
- Humans Beating Robots Most Since ’08 as Trends Shift (BBG)
- Easing of Mortgage Curb Weighed (WSJ)
- European Banks Face Capital Gap With Focus on Leverage (BBG)
- Signs Suggest China Warming to Idea of Stimulus (WSJ)
- China Coal-Fired Economy Dying of Thirst as Mines Lack Water (BBG)
- Jeans and shoes show criminal underbelly of China-EU trade (Reuters)
- How U.S. drug sting targeted West African military chiefs (Reuters)
- Japan scrambles jets after China plane flies by southern islands (Reuters)
- Apple Plots Return to Growth After Coping With Aging Lineup (BBG)
- AT&T Falls Shy of Analyst Estimates as Discounts Hurt Margins (BBG)
- SAC insider trading case takes twist (FT)
Days after Cyprus banks were bailed out (or, rather, in) in March, even if it meant the complete collapse of the local economy just to keep the country in the Eurozone and potentially the sale of the country's gold to provide its own funding toward the "common cause", the Eurogroup came out with a "Debt Sustainability Analysis" which predicted some hard times for the country but its eventual recovery. About a week later it emerged that the funding needs of the tiny island nation would be far greater than previously imagined, but for the time being, since the liquidity (if not solvency) situation had stabilized, all was well and that was one bridge that would be crossed when Europe came to it. That time may be coming fast. As Reuters reports, the Cypriot banking collapse has finally spilled over into the economy and resulted in a record collapse in local real estate values, which ranged from a 12.6% price drop in the valuation of an apartment to a 23.3% fall for office space in just the second quarter, which were the "sharpest recorded since RICS started collecting data in 2009, Loizou told Reuters."
- Biggest Banks Face Fed Restoring Barriers in Commodities (BBG)
- SAC to Employees: Cohen Didn't Read Dell Email at Heart of SEC's Case (WSJ)
- Second (and Third) liens are back, and so is 2005: As Banks Retreat, Hedge Funds Smell Profit (WSJ)
- Singapore funds benefit from Asian wealth (FT)
- 2 years later the lies haven't changed one bit - Tepco hit over slow admission of radioactive leak (FT)
- How big tech stays offline on tax (Reuters)
- Hilton Leads Rush to Africa in Fastest Boom (BBG)
- U.S. and UK fine high-speed trader for manipulation (Reuters)
- Key witness takes stand in SEC case against Goldman's Tourre (Reuters)
- Boomer Sex With Dementia Foreshadowed in Nursing Home (BBG)
- Bentley SUV gives £800m boost to UK car industry (FT)
Trends in motion tend to stay in motion. Monetary collapse is a near certainty, but here's one way to profit from crypto-currencies.
As we warned here most recently, the shadow-banking system remains the most crisis-catalyzing part of the markets currently as collateral shortages (and capital inadequacy) continue to grow as concerns. In recent weeks, between The Fed, Basel III, and the FDIC, regulators have signalled the possible intent to change risk, netting, and capital rules that could have dramatic implications on the repo markets and now, it seems, the SEC has begun to recognize just how big a concern that could be. As Reuters reports, the SEC urged funds and advisers last week to review master repurchase agreement documentation to see if there are any procedures to handle defaults, and if necessary, prepare draft templates in advance. A retrenchment in repo markets is unwelcome news for the liquidity of the underlying securities and the impact on the derivative portfolios should not be underestimated.
Spain's slow-motion implosion into an insolvent singularity has been one of the most amusing sideshows for over a year. The chief reason for this is the sheer schizophrenic and absurdist polarity between the sad reality, visible to everyone, and the unprecedented propaganda by the government desperate to paint a rosy picture. While on one hand the economic data shows very clearly the painfully obvious sad ending for this chapter of European integration, it continues to be punctuated almost daily by such amusing confidence games as Spain's Economy Minister de Guindos telling anyone who cares to listen that the labor market is improving "beyond the seasonal pick up" and that Q2 GDP would be close to zero (because 0% GDP is the new killing it). That's the good news. The bad news is that as Reuters reports, and contrary to fairy tales of unicorns and soaring 0% GDP, Spain's government is so insolvent, it was just forced to "borrow" from its social security reserve to fund pension payments.