In a post entitled 'Mugabenomics: Inflation in UK Higher than in Zimbabwe,' Guido Fawkes points out how the Liberal Democrats Vince Cable once warned that Quantitative Easing (QE) was “Mugabenomics.” This was prior to coming to power and a swift u-turn which would make even the most slippery politician proud. Remember when Vince Cable warned that Quantitative Easing (QE) was “Mugabenomics”? Vince flip-flopped on that even before he joined the coalition. Guido Fawkes then reminds its readers about the time when George Osborne said “Printing money is the last resort of desperate governments when all other policies have failed.” Alas as the blog rightly warns, "In government Osborne has overseen the printing of more money than any other Chancellor in British history. A quarter of the national debt – all this government’s overspending – has been bought by the Bank of England via QE." “So it is not a shock that inflation in Zimbabwe (3.63%) is now lower than inflation in the UK (3.66%, August 2011-July 2012).” Those who have been warning about this monetary madness for some years are gradually being proved right
While Government Pretends America Values Freedom of the Press, Real Journalists Are Treated As Terrorists
- Madrid Protesters March Again as Spain Braces for Cuts (Bloomberg)
- Euro Can Bear Fewer Members as Czech Leader Calls Greeks Victims (Bloomberg)
- Chinese Industrial Profits Fall 6.2% in Fifth Straight Drop (Bloomberg)
- China pours $58bn into money markets (FT)
- Beijing vows more measures on Diaoyu Islands (China Daily)
- Noda vows no compromise as Japan, China dig in on islands row (Reuters)
- Politico’s Paul Ryan Satire: The Joke’s on Them (Bloomberg)
- Electoral Drama Shifts to Ohio (WSJ)
- German opposition party targets banks (FT)
- Fed action triggers fear of new currency wars (FT)
- Ex-Credit Suisse CDO Boss Serageldin Is Arrested in U.K. (Bloomberg)
- Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit (Bloomberg)
America Was Founded on Courage ... What Hapened?
The opposition seen in Germany in response to Mr Draghi’s preparedness to buy sovereign debt implies that current posturing in Spain will not wear well with the politics of signing a Memorandum of Understanding in Germany. As Goldman notes, the more the Spanish administration indulges domestic political interests and is perceived to be taking undue advantage of external support, the more explicit conditionality is likely to be demanded. This would add to any existing tensions, given Spain’s opposition to conditionality. This is disappointing partly because it is avoidable if Spain were to accept the external support on the terms currently available. Spain will have the opportunity in the coming weeks and months to demonstrate that it wishes to avoid these incipient risks. But we, like Goldman, continue to believe that some of the incentives created by Mr Draghi's preparedness to act could prove difficult to resist- and will thus delay any real game-changer that is priced in.
Two signs that fear and instability have reached critical mass are capital flight and capital controls. Capital flight is people and enterprises moving their capital (cash and liquid assets) to an overseas "safe haven" to avoid devaluation of the currency or confiscation of their capital/assets. (Devaluation can be seen as one method of confiscation; high taxes are another.) Capital controls are the Central State's way of stemming the flood of cash leaving the country. Why do they want to stop money leaving? If we think of each Central State as a neofeudal fiefdom, we understand the motivation: citizens are in effect serfs who serve the State and its financial nobility. If the serfs move their capital out of the fiefdom, it is no longer available as collateral for the banks and a source of revenue for the State. Once capital has drained away, borrowing and lending shrink, cutting off the revenue source of the banks (financial nobility). Since financial activity also declines as cash is withdrawn from the system, the State's "skim"--transaction fees, sales taxes, VAT taxes, income taxes, wealth taxes, etc.--also declines. Both the State and its financial nobility are at increasing risk of decline and eventual implosion as capital flees the fiefdom. The Central State imposes capital controls as a means of Elite self-preservation.
With newsflow today non-existent, and the market acting somewhat bizarrely (i.e., not soaring on endless revenue misses and GDP forecast cuts, and in fact, selling off) we take this opportunity to share some philosophical "deep thoughts", although not from Jack Handey, but from the latest issue of the Edelweiss Journal.
It’s Not Terrorism When WE Do It ….
Every now and then we prefer to sit back and let some of the smartest money speak, especially when said smart money agrees with us. In this case, we hand the podium over to none other than Paul Singer's Elliott Management, which after starting with $1.3 million in 1977 was at $19.8 billion most recently. No expert networks, no high frequency trading, no "information arbitrage", no crony capitalism and pseudo monopolies of scale, and most certainly no bailouts: Singer did it all the old fashioned way: by picking undervalued assets and watching them appreciate. The timing is opportune because while Elliott has much to say about virtually everything in their latest 20 pages Q2 letter, it is the billionaire's sentiment vis-a-vis US Treasury debt that may be most critical, and may be the catalyst that resulted in today's abysmal 10 Year bond auction. To wit: "long-term government debt of the U.S., U.K., Europe and Japan probably will be the worst-performing asset class over the next ten to twenty years. We make this recommendation to our friends: if you own such debt, sell it now. You’ve had a great ride, don’t press your luck. From here it is basically all risk, with very little reward." There is little that can be misinterpreted in the bolded statement. And while many have taken the other side of the Fed over the past 3 years, few have dared to stand against Paul Singer because if there is one person whose opinion matters above most, certainly above that of the Chairsatan, it is his.
The idea of “collapse”, social and financial, comes with an incredible array of hypothetical consequences ranging from public dissent and martial law, to the complete disintegration of infrastructure and the devolution of mankind into a swarm of mindless arm chewing cannibals. In an age of television nirvana and cinema overload, I have found that the collective unconscious of our culture has now defined what collapse is based only on the most narrow of extremes. If they aren’t being hunted down by machete wielding looters or swastika wearing jackboots, then the average American dupe figures that the country is not in much danger. Hollywood fantasy has blinded us to the tangible crises at our doorstep. In 2012, we still await that trigger event, which I believe will be the announcement of QE3 (or any unlimited stimulus program regardless of title), and the final debasement of the dollar. At the beginning of this year, I pointed out that we were likely to see such an announcement before 2012 was out, and it would seem that the private Federal Reserve is right on track. Last month, the Fed announced that it was formulating a plan to “expand its tool kit”.
According to the latest Centro de Investigaciones Sociológicas (CIS) poll, Spanish Prime Minister Mariano Rajoy’s popularity has sunk to the point where 77.9% of the country’s electorate has little or no confidence in him. The survey still shows Rajoy’s conservative Popular Party (PP) ahead of the Socialist Party, however, by 6.7 per cent – eight percentage points down from the PP’s historic election win eight months ago. Ironically, during his entire his political campaign, and during his time as leader of the opposition, Rajoy’s fundamental message was that the country needed “a shot of confidence” to overcome its economic woes. Rajoy’s promises to implement swift and credible policies that would restore confidence in Spain were pivotal to his landslide electoral victory last November. However, the complete U-turn his Administration begun only days after taking office has left many feeling betrayed. Broken promises aside, his distant and elusive manners have only added to the detriment of his public image.
While Roach vs Meyer was an outstanding battle - played out face-to-face in the CNBC Squawk Box cage - the Academic vs Acumen drama playing out between Jeremy 'sluggish' Siegel and Bill 'the bond' Gross on Bloomberg TV is far more entertaining. The constant fall-back to age-old textbook definitions of mean-rerting reality and old normal 'expected' returns ran head first into the sage practitioner world of Gross's 'end of equities' call. While Siegel claims Gross 'totally misunderstands' the real-world citing his Dow 5000 call from 2002; Gross rips back with a swift kick to the credibilities with his: Siegel is "tilting at windmills and he belongs back in his Ivory Tower."
Corporations may or may not be people, but money has always talked, and the wealthy certainly do have a lot of excess cash lying around which they would rather prefer spending in hopes of generating the highest IRR possible by influencing the outcome of the presidential race. Below is a look of the uber-rich who have contributed at least $1 million to the major PACs as disclosed to the Federal Election Commission.
In 10 Years, Peak Cesium Levels Off West Coast Could Be 10 Times Higher Than at Coast of Japan
Normal. 7bps instaswings in 10Y Treasury yields and 10 point S&P 500 e-mini futures (ES) dips and rips makes perfect sense. In a desperate bid to get back to VWAP and to hold off a fifth day of red closes in the cash S&P 500 (most in two months), equities were ramped up into the green in the last few minutes of the day only to be sold into hard (on heavier volume and larger average trade size) ending the day down 0.02 points at 1341.45. Quite a day as the 10Y auction and FOMC minutes made for a tempest in a teapot close to close (but cardiac arrests for many intraday). HYG (the high-yield bond ETF) was outperforming most of the day and provided the 'target' for the ramp at the end of the day as VXX dumped (thanks to a more-than 1 vol snap lower in VIX - sell that short-dated vol!!!) and TLT was stable. Oil's surge (inventories) accelerated as the USD leaked lower after its post-FOMC spike and Gold/Silver/Copper all pushed higher also. We can only assume that the post-FOMC drop of around 10pts in the S&P 500 was what many investors believe is enough to prompt swift action by the Fed to NEW QE - though between Oil's move and Treasury yields rising post the the auction (and more post FOMC), broad risk assets actually signal a slightly higher ES - though we suspect the utter collapse in cross-asset-class correlations is the signal that coordinated QE hopes are indeed fading and that the algos late-day reaction (rip) to Treasuries will be recalibrated to new reality soon enough. Cash S&P 500 ended up bouncing off its 50DMA and while ES ended the day +1.25pts, VIX dropped a much higher beta 0.75vols to close just below 18% - wth Treasury yields up 1-2bps by the close.