This time is different - check; Moral Hazard - check; Easy Money - check; Overblown growth stories - check; No valuation anchor - check; Conspicuous consumption - check; Ponzi finance - check... and, of course, Irrational exuberance: check!
This week, markets are likely to focus on US ISM Nonmanufacturing, services and composite PMIs in the Euro area (expect increases), ECB’s Monetary Policy Decision (expect no change in policy until further ahead), and Congressional testimony by Fed’s Yellen.
Court challenges to constitutionally dubious laws that have been introduced since the WTC attack, as well as to the highly questionable activities of the national security apparatus, have been regularly stopped in their tracks with the argument that the plaintiffs 'lacked standing'. In the case of the indefinite detention provision this argument is especially bizarre, since all those who will acquire 'standing' in the future will no longer have access to the courts – the very thing the plaintiffs tried to challenge. This seems hardly compatible with how a nation of laws is supposed to operate, but as Rothbard pointed out, the State will always find a way to transcend its limits.
Capture, corruption, irreparable harm--and little hope for change.
Of the economic reports and events in the week ahead, we identify four potential drivers and emphasize one--the ECB meeting.
It is May Day, which means half the world - the half where welfare contributions to one's standard of living are off the charts - celebrate labor, or rather the lack thereof, by taking a day off. Which means virtually all of Europe is closed, as are Eurex and Euronext futures, and most European markets expect the UK. In light of the non-existent volume, futures are relatively unchanged despite the latest Chinese Mfg PMI disappointment (50.4, below the 50.5, expected but just above the prior print of 50.3), and of course yesterday's US GDP debacle which helped push the DJIA to a record high. The good news is that with volume even more miserable than usual, the few momentum ignition algos that are operating will have a field day with the now standard low-volume levitation that happens like clockwork if the news is bad, and also happens just in case if the news is bad.
America’s massive prison system is creating a long list of unintended consequences, some of which will effect all of us in the coming years. To help explain just how bad things have gotten, we’ve compiled this list of the most stunning facts and statistics on the America’s prison system today.
During her testimomy to the House Financial Services Committee, SEC's Mary Jo White confidently proclaimed (despite her questioner doubting her beliefs):
US SEC CHAIR MARY JO WHITE RESPONDS TO MICHAEL LEWIS BOOK IN TESTIMONY, TELLS CONGRESS "THE MARKETS ARE NOT RIGGED"
"Investors should be protected from shisters," blasted the committee member, as he took White to task..
While the law has been something the US government and General Motors have been willing to 'bend' or break in the past (absolute priority 'shifts' in bankruptcy), we suspect this latest move by Mary Barra's new GM will do more PR damage. Simply put, as many suspected given Barra's testimony and comments in the past, Reuters reports that General Motors Co will ask a bankruptcy court to block any litigation of the alleged deaths associated with the ignition switch problem since they are related to the automaker's pre-2009 bankruptcy. Of course, as we noted here, the Feds are probing the company over whether they knowingly committed bankruptcy fraud.
The woman at the center of the IRS-Tea-Party-Targeting debacle is back in the limelight once again as the House Ways and Means Committee voted 23-14 to formally ask the Justice Department to investigate the ex-IRS official. As Fox notes, this appears to be an escalation by the Republicans to confront Lerner over her role in the agency's controversial practice of singling out conservative groups seeking tax-exempt status for extra scrutiny. On another front, a separate committee will vote Thursday on whether to hold her in contempt of Congress for twice refusing to testify on the scandal. Democrats called the move "unprecedented." The question, of course, is just how more 'da fifs' can she plead.
And all it took for the FBI, the SEC and now the DOJ to figure out the casino was rigged all along, was for a Michael Lewis book to do their job for them.
- DOJ PROBING HIGH SPEED TRADING FOR INSIDER TRADING: REUTERS
U.S. Attorney General Eric Holder confirms Justice Department investigation into high-frequency trading. http://t.co/ERuwcHcGLt
— WSJ Breaking News (@WSJbreakingnews) April 4, 2014
Suleyman Aslan is the CEO of Turkey's second largest bank; so imagine how shocked police were when, as Bloomberg reports, they raided his home and found $4.5 million cash stashed in shoeboxes and bookshelves. When asked why the funds weren't deposited at the bank he ran, he said that would mean declaring their origin and registering them officially...something he clearly preferred not to do. Add to this a massive 44% surge in non-monetary gold exports (and who knows how much gold smuggled - once again preferring not to explain its origin) and it appears increasingly clear 'wealth' is being extricated from the increasingly totalitarian nation before confiscations begin following the 'successful' elections this weekend for the ruling AKP party.
- GM enters harsh spotlight as Congress hearings begin (Reuters)
- Facebook's Zuckerberg earns $3.3bn through share options (BBC)
- Sheryl Sandberg has sold more than half her stake in FaceBook (FT)
- Chinese Dragnet Entangles Family of Former Security Chief, Zhou Yongkang (WSJ)
- NHTSA chief: GM did not share critical information with U.S. agency (Reuters)
- Citigroup uncovered rogue trading in Mexico, fired two bond traders (Reuters)
- Corporate America’s overseas cash pile rises to $947bn (FT)
- Thai anti-government protester killed, rekindling political crisis (Reuters)
- China Milk Thirst Hands U.S. Dairies Record 2014 Profits (BBG)
- Caterpillar accused of ‘shifting’ profits (FT)
- New iPhone 6 screens to enter production as early as May (Reuters)
In the WSJ’s February 24th exposé of the turmoil at the helm of Pimco, we saw a curious bit about tension at “the Beach” increasing in the summer of 2013. During this period, according to the Journal, conflict between then co-CIOs Bill Gross and Mohamed E-Erian became apparent to staff, and Gross restricted trading at the firm. We wanted to see what insights a quantitative analysis of Pimco Total Return Fund (PTTRX) could offer about the summer and Total Return’s recent performance, a topic of increasing scrutiny amongst the investment community.
Not a week seems to pass without some banker or trader committing suicide. Today we get news of the latest such tragic event with news that 28-year old Kenneth Bellando, a former JPMorgan banker, current employee of Levy Capital, and brother of a top chief investment officer of JPM, jumped to his death from his 6th floor East Side apartment on March 12.