"Risk: NEW LOW for Net free credit at -$183b is major risk should the market drop: Net free credit is free credit balances in cash and margin accounts net of the debit balance in margin accounts. Net free credit dropped to -$183b and moved to a new low below the prior record of -$178b in February. This measure of cash to meet margin calls remains at an extreme low or negative reading below the February 2000 low of $-129b. The risk is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would exacerbate an equity market sell-off." - BofA
- Mystery Man Who Moves Japanese Markets Made More Than 1 Million Trades (BBG)
- Draghi’s Trillion-Euro Pump Finds Blockage in Spain: Euro Credit (BBG)
- Apple plays defense on iPhone 6 bending, software concerns (Reuters)
- U.S. to Shield Military From High-Interest Debt (WSJ)
- U.S. Outgunned by Extremists on Social Media Battlefield (BBG)
- Yen Weakens on Pension Fund Reform; Aussie Drops to 7-Month Low (BBG)
- Secretive Russian oil giant has no fear of sanctions (Reuters)
- Ride-Sharing Services Face Legal Threat From San Francisco, Los Angeles (WSJ)
- Putin’s Sell-Treasuries-for-BRICS Bonds Plan Has Limits (BBG)
Oil and other commodity prices have recently been dropping. Is this good news, or bad? Many people have the impression that falling oil prices mean that the cost of production is falling, and thus that the feared "peak oil" is far in the distance. This is not the correct interpretation, especially when many types of commodities are decreasing in price at the same time. We would argue that falling commodity prices are bad news. It likely means that the debt bubble which has been holding up the world economy for a very long time – since World War II, at least – is failing to expand sufficiently. If the debt bubble collapses, we will be in huge difficulty.
More than 70 per cent of the country’s coal miners were losing money and had cut salaries. Translated: widespread wage deflation, in a country where M2 is expected to grow at a double digit pace. And the really bad news: "About 30 per cent of the industry’s miners had not been able to pay their employees on time and a further 20 per cent had cut salaries by more than 10 per cent, the Economic Information Daily, a Xinhua-affiliated newspaper, reported on Monday."
Given that all the leading candidates for Global Hegemon are hastening down paths of self-destruction, perhaps there will be no global hegemon dominating the 21st century.
China may need to expand its goalseek template to include the other far more important measure of Chinese economic activity, such as Industrial production, retail sales, fixed investment, and even more importantly - such key output indicators as Cement, Steel and Electricity, because based on numbers released overnight, the Q2 Chinese recovery is now history (as the credit impulse of the most recent PBOC generosity has faded, something we have discussed in the past), and the economy has ground to the biggest crawl it has experienced since the Lehman crash. What's worse, and what we predicted would happen when we observed the collapse in Chinese commodity prices ten days ago, capex, i.e. fixed investment, grew at the slowest pace in the 21st century: the number of 16.5% was the lowest since 2001, and suggests that the commodity deflation problem is only going to get worse from here.
The dashing of youthful expectations of open-ended wealth and security for everyone with a college degree is highly combustible when combined with a popping real estate bubble, systemic corruption, the implosion of a shadow banking credit bubble and the impending global recession.
Yesterday, former Fed Chairman Alan Greenspan was the keynote speaker at KPMG’s 2014 Insurance Industry Conference Tuesday, where he answered questions such as 1) where the economy is going, 2) why, and 3) when (if ever) is it likely to improve. The answers, as reported by Property Casualty 360, are: 1) nowhere fast, 2) because nobody is willing to invest, and 3) eventually, but nobody can tell when. He listed 9 specific reasons why the "economy stinks", although surprisingly, nowhere did he mention the fact that the current and future economic disaster is all a direct result of his ruinous reign at helm of the Fed where as a result of his "great moderation" and the Fed's catastrophic monetary policies conceived mostly under Greenspan himself, the economy is now perpetually stuck in a boom-bust cycle, and where every time a bubble bursts another has to replace it or else the entire western way of life will be gone in a heartbeat.
Just when we thought centrally-planned markets could no longer surprise us, here comes last night's superspike in the USDJPY which has moved nearly 100 pips higher in the past few trading days and moments ago crossed 105.000. The reason for the surprise is that while there was no economic news that would justify such a move: certainly not an improving Japanese economy, nor, for that matter, a new and improved collapse, what the move was attributed to was news that Yasuhisa Shiozaki, who has been advocating for the GPIF to reduce allocation to domestic bonds, may be appointed the Health Minister when Abe announces his new cabinet tomorrow: a reshuffle driven by the fact that the failure of Abenomics is starting to anger Japan's voters. In other words, the GPIF continues to be the "forward guidance" gift that keeps on giving, even if the vast majority of its capital reallocation into equities has already long since taken place. As a result of the USDJPY surge, driven by a rumor of a minister appointment, the Nikkei is up+1.2%, which in turned has pushed both Europe and Asia to overnight highs and US equity futures to fresh record highs, with the S&P500 cash now just 40 points away, or about 4-8 trading sessions away from Goldman's revised 2014 year end closing target.
If you like your de-escalation, you can keep your de-escalation. To think that heading into, and following the Russia-Ukraine "summit" earlier this week there was so much hope that the tense Ukraine civil war "situation" would somehow fix itself. Oh how wrong that thinking was considering overnight, following rebel separatists gains in the southeast of Ukraine which included the strategic port of Novoazvosk and which is "threatening to open up a new front in the war" including setting up a land corridor to Russia controlled-Crimea, Ukraine's president Poroshenko for the first time came out and directly accused Russia of an "Invasion", or at least a first time in recent weeks, saying he has convened the security council on the recent Russian actions.
In addition to the countless other reason already presented here over the past year why the bond market simply refuses to sell (scarcity of "high quality collateral", shadow banking lubrication, fears over a slowing economy, reverse rotation by pension funds from stocks into bonds, etc), here is one more reason: today the spread between the 30 Year Bund and the 30 Year Treasury just hit a record wide.
As Chinese Credit Plummets US Stocks Soar On Hopes Of More PBOC Easing; But Is Conventional Wisdom Again Wrong?Submitted by Tyler Durden on 08/13/2014 22:19 -0400
Conventional wisdom, now so habituated to getting all the cheap credit it can get, did not anticipate such a dramatic collapse in Chinese credit last month, is eagerly expecting a proportional response from the PBOC, one which would potentially involve significant easing, which is precisely what US equities priced in today when they closed near the highs of the day, even as there was not a single piece of good macroeconomic news overnight. Pretty cut and dry right? Well not really. Recall that as we reported in the last week of July something odd was revealed: namely that China quietly unveiled and implemented its Pledge Supplementary Lending line, or as it is increasingly better known: China's QE.
Overview of the investment climate and the likey impact from data and events, delivered in dispassionate, even if dry prose.
Investing in oneself and enterprises one actively controls may now be the only legitimate deployment of capital that qualifies as an investment in the traditional sense - that is, capital isn't being risked in rigged gambling halls and Ponzi schemes.