"The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface being balanced by very strong equity markets and upbeat employment picture. One of these sides has to be wrong..."
The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface – including weak commodities, tightening credit, retrenching consumer spending – being balanced by very strong equity markets and upbeat employment picture. One of these sides has to be wrong in its assessment of the current macro environment, and seeing both of them extending well into the future appears unlikely to us.
Editor’s Note: The tragic events in Paris, terrorism and war throughout the world, show geopolitical risk remains high. These risks will likely impact economies and financial markets and will see continuing safe haven demand for gold. “The future is uncertain and gold is the most effective insurance against that.”
The torrid October, with its historic S&P500 point rally, is finally in the history books, and at least for a select group of hedge funds such as Glenview, Pershing Square and Greenlight and certainly their L.P.s, a very scary Halloween couldn't come fast enough, leading to losses between 15% and 20%. How did everyone else fare? Below, courtesy of Deutsche Bank's Jim Reid, is a summary of what worked in October (and YTD), and what didn't.
NIRP Panic: Over Half Of European 2-Year Bonds Trade At Record Negative Yields; Italy Paid To Issue DebtSubmitted by Tyler Durden on 10/28/2015 11:53 -0500
Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe's government curve. As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!
China Officially Sold A Quarter Trillion Treasurys In The Past Year (Unofficially Much More) And What This MeansSubmitted by Tyler Durden on 10/17/2015 10:28 -0500
While to many Quantitative Tightening is a novel concept, the reality is that China (+ Euroclear) have been dumping Treasurys and liquidating reserves since January when total holdings peaked at $1.6 trillion last summer, and have since declined to $1.38 trillion. It means that China has sold a quarter trillion dollars worth of Treasurys in the past year, in the process offsetting what would have been about 25% of the Fed's QE3.
Brazil's economic recession is likely to be deeper and longer than Fitch's earlier expectations and its performance has diverged materially from those of its rating peers. Medium-term prospects also look weak compared to peers and most other large emerging markets. Fitch forecasts that Brazil's economy will contract by 3% and 1%, respectively in 2015 and 2016 before recording modest growth in 2017, with risks skewed largely to the downside.
Capital Economics "expects gold could hit $1,200 before the end of this year, rising to $1,400 by the end of 2016”
The incredibly strong demand for physical precious metals around the world continues to be obscured by institutional selling of futures contracts on the COMEX. The paper or electronic market continues to dominate the spot price for now. But rising premiums and delays for popular bullion products suggests that proper price discovery reflecting real world supply and demand may be at hand.
Moody's Downgrades France, Blames "Political Constraints", Sees No Material Reduction In Debt BurdenSubmitted by Tyler Durden on 09/18/2015 15:45 -0500
Citing "continuing weakness in the medium-term growth outlook," Moody's has downgraded France:
*FRANCE CUT TO Aa2 FROM Aa1 BY MOODY'S, OUTLOOK TO STABLE
Apearing to blame The EU's "institutional and political constraints," Moody's expects French growth to be at most 1.5% and does not expect the debt burden to be materially reduced this decade.
- Bail-ins, withdrawal limits and negative interest rates may be imposed - FT proposes a ban on “barbarous relic” cash - Central banks and banks would have citizen's wealth and people themselves “completely under their control” ...
It’s well-known that you have to make a declaration if you physically transport $10,000 or more in cash or monetary instruments in or out of the US, or almost any other country; governments collude on these things, often informally. But we've recently had some disturbing experiences crossing borders with coins...
Before China’s bursting equity bubble grabbed international headlines, and before the PBoC’s subsequent devaluation of the yuan served notice to the world that things had officially gotten serious in the global currency wars, all anyone wanted to talk about when it came to China was a "hard landing." Now that the yuan devaluation has all but proven that China has landed, and landed hard, here are the five channels of contagion.
Chinese Stocks Open Down Hard As PBOC Strengthens Yuan By Most Since 2010 & Default Risk Hits 2-Year HighSubmitted by Tyler Durden on 09/01/2015 20:21 -0500
Chinese stocks are opening lower: SHANGHAI COMPOSITE INDEX FALLS 4.6% TO 3,020.84 AT OPEN as PBOC fixes Yuan stronger for the 4th day in a row - the most in 5 years.
China credit risk has spiked to 2-year highs as traders increase positions dramatically.
"Something happened The August turbulence in global markets has produced significant shifts, including a 6.6% fall in equity prices. The currencies of emerging market countries have depreciated substantially against the G-4, while emerging market borrowing rates for sovereigns and corporates have moved higher. Global oil prices have been whipsawed as have G-4 bond yields. The speed and magnitude of these movements is reminiscent of past episodes in which financial crises emerged or the global economy slipped into recession. However, nothing appears to be breaking."