• Monetary Metals
    01/28/2015 - 00:28
    It’s terrifying how fast the whole Swiss yield curve sank under the waterline of zero. Now even the 15-year bond has negative interest. The franc has reached the end.

Reuters

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California Lt. Governor: This Aggression Against Our Expropriation Of Private Property Will Not Stand, Man





It is not news that California, despite what the money laundering practices aided and abetted by the NAR at the ultra-luxury segment of housing may indicate, is and has been for the past 5 years neck deep in a massive housing glut (with millions of houses held off the books in shadow inventory), which together with a complete economic collapse of this once vibrant economy, which happened to be the world's 7th largest, led various cities to resort to the socialist practice of expropriation, or, as it is known in the US, eminent domain, whereby a citizen's rights in property - in this case their home - are forcefully expropriated with due monetary compensation, naturally set by the expropriator. It is also no secret, that Wall Street, which has the most to lose by handing over property titles on mortgaged houses in exchange for money that is well below the nominal value of the mortgage, is not happy about this draconian quasi-communist measure, and has apparently told California to cease and desist. It is, apparently news that California has had enough of these bourgeois capitalist pawns, and has decided to, appropriately enough, channel El Duderino, and to tell Wall Street that this aggression against forced socialist expropriation, by broke deadbeats, will not stand... man.

 
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GM Loses Over $49,000 On Every Chevy Volt





Watching Phil LeBlow providing Ford with a reacharound this morning reminded us of the total farce that is both the forest and the trees of the US auto industry. We have discussed the FUBAR channel-stuffing and the subprime-lending SNAFU but now, as Reuters reports, we see the ugly truth about GM's little baby "the Volt is over-engineered and over-priced". Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds. Furthermore, there are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce. Of course, with seemingly unlimited Government backing the hope can continue, funded by the US taxpayer, as GM's Volt development chief admits "It's true, we're not making money yet," but the Volt will "eventually will make money. As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around." Estimates on the cost to build a Volt range from $76,000 to $88,000, according to four industry consultants contacted by Reuters with one concluding: "I don't see how General Motors will ever get its money back on that vehicle."

 
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Gold In Euros Touches New Record High At EUR 1,360 Per Ounce





Gold has risen to new record highs in euro terms overnight in Asia when gold consolidated on last week’s 3% gains and rose above €1,360/oz for the first time.  Significant consolidation has been seen in the last year between €1,200/oz and the previous record high at €1,359.01/oz. This record high was seen almost exactly a year ago on September 9th 2011. Gold is being supported by the unrest in South Africa which continues to destabilise the mining sector. Gold Fields said this morning that some 15,000 workers were still on strike at one of its gold mines outside of Johannesburg. The tally of workers on strike at the West Section of the KDC Gold Mine is about 3,000 higher than last week. All production at the mine has been brought to a standstill. With the US job growth contracting significantly in August, investors see that the Fed will be inclined to announce QE3 at this week’s policy meeting on the 12th & 13th. US gold futures and options climbed to 6-month high 144,775 contracts in the week ended September 4, according to data from the U.S. Commodity Futures Trading Commission. Gold ETF’s grew to a record high of 72.125 million ounces on Friday. Also, Hong Kong's July gold shipments to China was almost double on the year and exports for the first 11 months were greater than 2011, suggesting China will overtake India as the world's top gold consumer.

 
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Frontrunning: September 10





  • China Output Growth Slows as Leadership Handover Looms (Bloomberg); Weak China trade data raises Beijing spending stakes (Reuters)
  • Italy Q2 GDP revised down to -0.8% year-on-year on weak domestic demand (Economic Times)
  • Troika disagreed with €2 billion in Greek "cuts" (Reuters)
  • No Greek bottom in sight yet: Greek IP, Manufacturing Output plunge compared to year earlier (WSJ)
  • France's Hollande sees 2013 growth forecast about 0.8 pct (Reuters), France plots tax hikes of up to 20 bln euros (Reuters)
  • Euro Crisis Faces Tests in German Court, Greek Infighting (Bloomberg)
  • Geithner sells more AIG stock (FT)
  • Japan infuriates China by agreeing to buy disputed isles (Reuters)
  • Euro crisis to worsen, Greece could exit euro: Swedish FinMin Anders Borg (Economic Times)
  • ‘Lead or leave euro’, Soros tells Germany (FT)
  • German MP makes new court complaint against euro plans (Reuters)
  • Obama super-Pac in push to raise $150m (FT)
 
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Preview Of The Action-Packed Week Ahead And Overnight Recap





Suddenly the delicate balancing of variables is once again an art and not a science, ahead of a week packed with binary outcomes in which the market is already priced in for absolute perfection. Per DB: We have another blockbuster week ahead of us so let's jump straight into previewing it. One of the main highlights is the German Constitutional Court's ruling on the ESM and fiscal compact on Wednesday. On the same day we will also see the Dutch go to the polls for the Lower House elections. Thursday then sees a big FOMC meeting where the probabilities of QE3 will have increased after the weak payrolls last Friday. The G20 Finance Ministers and Central Bank Governors will meet on Thursday in Mexico before the ECOFIN/Eurogroup meeting in Cyprus rounds out the week on Friday. These are also several other meetings/events taking place outside of these main ones. In Greece, PM Samaras is set to meet with representatives of the troika today, before flying to Frankfurt for a meeting with Draghi on Tuesday. The EC will also present proposals on a single banking supervision mechanism for the Euro area on Tuesday. If these weren't enough to look forward to, Apple is expected to release details of its new iPhone on Wednesday. In summary, it will be a good week to test the theory that algos buy stocks on any flashing red headlines, no longer even pretending to care about the content. Think of the cash savings on the algo "reading" software: in a fumes-driven market in which even the HFTs no longer can make money frontrunning and subpennyiong order flow, they need it.

 
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Guest Post: Junkie Recovery





If the point of quantitative easing was to provide enough  liquidity to keep the massive, earth-shatteringly large debt load serviceable, then quantitative easing succeeded — but the “success” of sustaining the crippling debt load is that it remains a huge burden weighing down on the economy like a tonne of bricks.  This “success” has turned markets into junkies, increasingly dependent on central bank liquidity injections. After QE3 will come more and more and more easing until the market has either successfully managed to deleverage to a sustainable level (and Japan’s total debt level as a percentage of GDP remains higher than it was in 1991, even after 20 years of painful deleveraging — so there is no guarantee whatever that this will ever occur), or until central banks give up and let markets liquidate. Quantitative easing’s “success” has been a junkie recovery and a zombie market.

 
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The Next (Lack Of) Trading Casualty: Nomura's Brand New $270 Million Trading Floor





Over the past several months (and years) we have been warning that the ongoing collapse in trading volumes, in part due to the lack of faith in capital markets that now have all the integrity of a rigged Vegas casino from the 1960s, in part due to investors' need to monetize assets in a world in which wages simply refuse to keep up with prices, will have not only irreversible implications on the shape of market structure, but also substantial consequences when it comes to the layout of modern banks, and associated up and downstream variables, such a jobs, real estate, support professions, municipal taxes and much more. Nowhere is this more evident (for now at least) than in the massive corporate reorganization taking place at Nomura's American division, which among many other things is about to lose its brand new $270 million trading floor even before a single trader set foot in it.

 
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Wall Street Analysts Respond To Mario Draghi





Confused by the implications of Draghi's pre-leaked speech? Don't worry, you are not alone. As the following sampling of opinions by Wall Street experts via Reuters confirms, opinions range from the positive to the negative, to the completely clueless.

 
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In Greece, It's The Police Vs The Riot Police





As unemployment (broad and youth) goes from the sublime to the ridiculous in the troubled nation, Reuters is reporting that tensions are rising - even among the Police themselves. "They make us fight our own brothers," one riot-policeman urged with regard the Greek police protesting austerity cuts and preventing riot-police from leaving to secure other demonstrations this weekend. The government plans to slash police pay in a new round of spending cuts worth nearly EUR12bn over the next two years, which the police, firefghter, and coast guards will be prtesting later today in Athens. How soon before TROIKA demands 8 days a week and 99% taxation - as the hair-trigger on the gun they are holding to their own head becomes more and more sensitive.

 
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Frontrunning: September 6





  • Draghi Credibility At Stake As ECB Tries To Save The Euro (Bloomberg)
  • Clinton Returns to Back Obama (WSJ)
  • Taxi fares up 17% in New York City (Toronto Sun)
  • High Speed Scandal: Ferrari Incident Rocks China (Daily Beast)
  • China’s Richest Man Benefits From Thirst For Soft Drinks (Bloomberg)
  • China August export growth seen weak, imports slow (Reuters)
  • Death to PowerPoint! (BusinessWeek)
  • Sweden surprises with interest rate cut (WSJ)
  • IMF demands greater clarity on Irish austerity plans (Reuters)
  • At Abercrombie & Fitch, Sex No Longer Sells (Bloomberg)
  • And the best for last: California Treasurer Backs Law to Ban Costly Long-Term Bonds (Bloomberg) -> legislating low, low yields
 
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Gold’s Rise To Continue Above $2,500/oz On Negative Real Interest Rates





Gold prices languished from 1980 to 2000 and had declining correlations with debt levels because GDP growth was sufficient to mute fears about budget and deficit issues. The current economic recovery has been too weak to support a sustained rise in real rates above the 2% level that has acted an inflection point for gold prices. With energy and food inflation deepening and soon to affect consumer price indices, interest rates may have to rise significantly in order to restore real interest rates above 2%.  This is with ex Federal Reserve Chairman Volcker did in the late 1970’s - when he increased interest rates to above 15% in order to protect the dollar and aggressively tackle inflation. It is unlikely that similar ‘hawkish’ monetary policy would be implemented by the Bernanke Fed today. It is unlikely that they would and even doubtful if they could – given the appalling fiscal situation and levels of debt in the US and global economy.  A continuing succession of higher real gold prices above the inflation adjusted high, or real record high, of $2,500/oz is likely until we see interest return to more normal levels and zero percent interest policies are supplanted by positive real interest rates.

 
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Frontrunning: September 5





  • The bankers are coming: Banker Plan Would Fund Super-PACs to Sway U.S. Senate Elections (Bloomberg)
  • Risk Increases of Prolonged World Slowdown, BOJ’s Miyao Says (Bloomberg)
  • Spain Seeks to Stem Its Banking Crisis (WSJ)
  • Deadly shooting mars new Quebec premier's victory rally (NBC)
  • Democrats Keep Tax-Raising Focus On Top 2% Of Households (Bloomberg)
  • Merkel Swings Into 2013 Election Mode Evoking Crisis, China (Bloomberg)
  • Europe’s money market funds future in focus (FT)
  • Pressure Mounts on ECB to Bring Down Bond Yields (Reuters)
  • Swiss bank vows to hold franc down (FT)
  • Australia economy still solid in Q2 despite GDP miss, but threats mount (Reuters)
  • Clinton Brings to Beijing Plea for Maritime Solution (Bloomberg)
  • The End of a 1,400-Year-Old Business (BusinessWeek)
 
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German 10 Year Bond Auction Suffers Technical Failure





This morning, Germany attempted to sell €5 billion in 1.5% 10 Year bonds. It sold just €3.61 billion directly to investors (who had submitted a less than auction clearing €3.91 billion in bids), forcing the German Treasury to retain 27.8% of the auction, €1.39 billion: the highest retained amount since November 2011 when it was 39%. For one reason or another: the yield was too low at 1.42% (compared to the 1.634 average), there was much more supply elsewhere, fears of what the ECB will do tomorrow, or who knows - the real bid to cover was a paltry 0.79 (all in BTC 1.09 including government retention) compared to 1.57 at the last auction and a 1.31 average at the past 4 auctions. In other words the auction was for all technical reasons, a failure, and only the second such "failure" of 2012. The immediate reaction was Bund futures down 22 ticks at 143.28 vs 143.70 before auction as the market digested the surprising disappointment, with the German 10-year government bond yield up 2.4 basis points at 1.41 percent vs 1.37 percent before auction. In summary, if the Germans needed any more reasons that funding the insolvent Eurozone at all costs up to an including debt monetizations, which may result in failed bond auctions for German itself, are not in their best interest, they just got one. The good news: in an email sent out immediately by the German Finance agency, the bond sale was "not a risk to the budget." Wouldn't want a failed bond auction to jeopardize the budget now.

 
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Guest Post: Does the Iranian Government Have A Right To A Nuclear Bomb?





The heightening tension between the United States government and Iran’s is based off of the fallacious notion that nuclear weapons have a legitimate purpose outside of killing enormous amounts of people.  Yet they have no other real purpose in the end.  Governments possess nuclear weaponry because there is little recourse for state-sanctioned murder.  The millions of innocent lives that stand to be vanquished off the face of the Earth have little meaning to the power-tripping political elite.  So while the Iranian government’s pursuance of nuclear weapons should be condemned, the United States government, the Israeli government, and others capable of waging nuclear war are in no place to criticize.

 
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