- DAX’s ‘Brilliant’ Run Sends Red Flag as German Index Tops Record (BBG)
- U.S. military warned of possible Islamic State attacks at home: report (Reuters)
- Russia Faces First Recession Since 2009 as Banks Add to Oil Pain (BBG)
- Dodgy Home Appraisals Are Making a Comeback (WSJ)
- U.S. Corporate Bond Sales Pass $1.5 Trillion for Annual Record (BBG)
- Basic Costs Squeeze Families (WSJ)
- China Orders Stricter Checks on Local Debt as Sales Surge (BBG)
- Draghi Powerless on ECB Path Toward QE Without Reforms (BBG)
Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.
Gold Repatriation Stunner: Dutch Central Bank Secretly Withdrew 122 Tons Of Gold From The New York FedSubmitted by Tyler Durden on 11/21/2014 09:25 -0400
A week ago, we penned "The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed", in which we got, for the first time ever, an admission by an official source, namely the bank that knows everything that takes place in Germany - Deutsche Bank - what the real reason was for Germany's gold repatriation halt after procuring a meager 5 tons from the NY Fed. Some took offense with this pointing out, correctly, that the gold held at the NY Fed in deposit form for foreign institutions had continued to decline into 2014 even despite the alleged German halt. Well, today we finally know the answer: it wasn't Germany who was secretly withdrawing gold from the NYFed, contrary to what it had publicly disclosed. It was the Netherlands. Why did the DNB decided it was time to cut its gold held at the NY Fed by 122 tons? "It is no longer wise to keep half of our gold in one part of the world," a DNB spokesman said.
- Moar central banks! Asian Stocks Rise Amid Stimulus Speculation; Topix Jumps (BBG)
- Syria rebels in south emerge as West's last hope as moderates crushed elsewhere (Reuters)
- Bufett's Berkshire to Buy Duracell Business From Procter & Gamble in $3B Deal (AP)
- Weak Demand, Real-Estate Slump Signal Headwinds for China (WSJ)
- China Slowdown Deepens as Leaders Said to Mull Cutting Target (BBG)
- Saudis Reject Talk of OPEC Market Share War as Oil Slides (BBG)
- Oil Tankers Stream Toward China as Price Drop Sparks Boom (BBG)
When a central bank buys an asset directly (often government bonds), it drives up the price of this asset, the demand for which increases. But the prices of the other asset classes increase only if the economic agents that have sold the first assets to the central bank use the money received to buy these other asset classes. This transmission of increases in asset prices to all asset classes is therefore unstable, since it depends on the behaviour of investors and savers. There is therefore no stable monetary policy "risk channel"; the only asset prices that are controlled by central banks in the longer run are those of the assets that central banks buy directly... hence Japan has now resorted to buying Japanese stocks directly.
The global economy is like a jetliner that needs all of its engines operational to take off and steer clear of clouds and storms. Unfortunately, as Nouriel Roubini tells The Guardian, only one of its four engines is functioning properly: the Anglosphere (the United States and its close cousin, the United Kingdom). As Roubini continues, the question is whether and for how long the global economy can remain aloft on a single engine. Weakness in the rest of the world implies a stronger dollar, which will invariably weaken US growth. The deeper the slowdown in other countries and the higher the dollar rises, the less the US will be able to decouple from the funk everywhere else, even if domestic demand seems robust. But it's not just the rest of the world that is decoupling from US growth... as the following uncomfortable chart shows, so is a crucial pillar of monetary policy transmission, consumer wealth perception, and economic stability - the US housing market itself.
We are not exactly sure which is scarier: that total financial assets amount to about 500% of world GDP or that about $75 trillion in financial leverage is just sitting there, completely unregulated and designed with one purpose in mind: to make billionaires into trillionaires (with taxpayers footing the bill of their failure).
"While monetary weapons can be a good first step to remedying an economic crisis, they are clearly not enough on a standalone basis to return an economy to stability and growth. My concern is that there has been an almost total academic capture of the mechanism of the Fed and other central banks around the world by neo-Keynesian thinking and hence policymaking, while the executive and legislative branches of the government have turned a blind eye to the necessary reforms. So while the plan has thus far worked brilliantly for Wall Street, what central bankers have succeeded in doing is preventing, or at least postponing, the hard choices and legislative actions necessary by our politicians to fully implement a sustainable and prosperous future for our children—and theirs...Today I view the world as “risk-uncertain,” and in these instances I recommend the armored vehicle."
The market environment is turning sour...
The bell has rung for Pavlov’s dogs twice before, but the meat of higher inflation has not been delivered. Now the bell is ringing for the third time. With the key driver of inflation events well beyond US shores, the inability of the Fed to generate the meat of inflation will be much more apparent on this occasion. After five and a half years of QE there is still no meat for the dogs: real rates of interest are rising rapidly and almost all financial market instruments are overvalued. If you believe that the correct price for financial market instruments is the price decreed by the Federal Reserve, you need to look at the chart above and ask yourself a simple question, ‘With inflation expectations back at 4Q 2009 levels, what evidence is there that QE works?’
There's something we 'regular' citizens wrestle with that the elites never seem to: a sense of moral duty.
Today US activity will be very light given the Columbus Day holiday. As DB summarizes, we have a relatively quiet day for data watchers today but the calendar will pick up tomorrow and beyond with a big focus on inflation numbers amongst other things. Indeed tomorrow will see the release of Germany’s ZEW survey alongside CPI prints from the UK, France and Spain. Wednesday’s data highlights will include the US retail sales for September, the Fed’s Beige Book, CPI readings from China and Germany, US PPI, and the NY Fed Empire State survey. Draghi will speak twice on Wednesday which could also be a source for headlines. On Thursday, we will get Industrial Production stats and the Philly Fed Survey from the US on top of the usual weekly jobless claims. European CPI will also be released on Wednesday. We have the first reading of October’s UofM Consumer Sentiment on Friday along with US building permits/housing starts. Yellen’s speech at the Boston Fed Conference on Friday (entitled “Inequality of Economic Opportunity”) will also be closely followed.
Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon - devoid of other things to worry about - warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D.C., and delivered a mostly upbeat message: in fact when he said that the industry was "very close to resolving too big to fail" we couldn't help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger "because no one is paying attention to it." He said the system is "huge" and "growing." Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives) amounts to over $70 trillion globally.
Violence Erupts As Hong Kong's Leader Threatens To Use "All Necessary Measures To Restore Social Order"Submitted by Tyler Durden on 10/04/2014 17:00 -0400
Having tried (unsuccessfully) to break up the pro-democracy protesters in the heart of Hong Kong using local triad gangs (as opposed to the optics of actual police), it appears the Chinese government is rolling back from its "wait-and-see" approach and becoming more aggressive once again. Hong Kong's Chief Executive Leung Chun-ying, as DPA reports, demanded protesters end their blockade of major roads by Monday, or the government will take "all necessary measures to restore social order." Tensions continue to rise, with clashes breaking out sporadically, as the protesters have broken off talks with the government. As fears of another Tiananmen square debacle loom, former Hong Kong governor Chris Patten noted, "I cannot believe it would be so stupid as to do anything like send in the army."
You have heard of the "No Fly List", right? Well, now the Tories are pledging that if they win the next election in the UK they will establish a list of “extremists” that will have to have their social media posts “approved in advance by the police” before they post them. There are also plans to ban “extremists” from broadcasting and speaking at public events. The stated goal of these proposals is to crack down on terrorism, but in the process the civil liberties of the British people are going to be flushed down the toilet. To help explain, below is a list of 72 types of Americans that are considered to be “extremists” and “potential terrorists” in official U.S. government documents.