Super Mario Noose Tightens As Another Monte Paschi Derivative Emerges; Investigation Into Bank Of Italy OpenedSubmitted by Tyler Durden on 01/30/2013 12:43 -0500
As we have been reporting over the past ten days (most extensively here and here), the one European scandal that gets virtually no coverage on this side of the Atlantic, remains the escalating fiasco involving Italy's third largest bank, Banca dei Monte Paschi, which gets worse by the day due to its extensive political implications - the bank is seen domestically as the domain of the frontrunning centre-left candidate, something Berlusconi reminds his followers at every opportunity, but also will likely ensnare the head of the ECB as we predicted a week ago when we noted the aggressive attempts by the Bank of Italy, which was headed by the former Goldmanite at the time, to wash its hands of having had anything to do with the BMPS fiasco (and thus by implication indemnify that other Goldmanite, Mario Monti). As it turns out, and as Bloomberg reports today, the Bank of Italy did know of Monte Paschi's dirty laundry as long ago as 2010, but more importantly, and hence the title, the Italian law (and we use the term loosely) is now in play: "Prosecutors in Trani, Italy, opened an investigation into the Bank of Italy and market watchdog Consob’s supervisory activity on Monte Paschi, consumer group Adusbef said in an e- mailed statement today." Adding fuel to the fire is the just blasted headline from Reuters that Monte Paschi is now under investigation in Siena under law on company responsibility for crimes committed by staff, and suddenly life for the ECB head, not to mention the "stabeeleetee" of the banking sector looks quite problematic.
While the overnight session has been relatively quiet, the overarching theme has been a simple one: currency warfare, as more of the world wakes up to what the BOJ is doing and doesn't like it. The latest entrants in global warfare: Taiwan, whose central bank overnight said it would step in the FX market if needed, then Thailand, whose currency was weakened on market adjustment according to Prasarn, and of course South Korea, where the BOK said that global currency war spreads protectionism. Last but not least was China which brought out the big guns after the PBOC deputy governor Yi Gang "warned on currency wars." To wit: "Quantitative easing for developed economies is generating some uncertainties in financial markets in terms of capital flows,” Yi, who is also head of China’s foreign-exchange regulator, told reporters. “Competitive devaluation is one aspect of it. If everyone is doing super QE, which currency will depreciate?” “A currency war, a series of tit-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong, who previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.” Which brings us to the fundamental question - if everyone eases, has anyone eased? And is there such a thing as a free lunch when central banks simply finance global deficits while eating their soaring stock market cake too? The answer, of course, is no, but we will cross that bridge soon enough.
"Return = Cash + Beta + Alpha": An Inside Look At The World's Biggest And Most Successful "Beta" Hedge FundSubmitted by Tyler Durden on 01/23/2013 21:31 -0500
Some time ago when we looked at the the performance of the world's largest and best returning hedge fund, Ray Dalio's Bridgewater, it had some $138 billion in assets. This number subsequently rose by $4 billion to $142 billion a week ago, however one thing remained the same: on a dollar for dollar basis, it is still the best performing and largest hedge fund of the past 20 years, and one which also has a remarkably low standard deviation of returns to boast. This is known to most people. What is less known, however, is that the two funds that comprise the entity known as "Bridgewater" serve two distinct purposes: while the Pure Alpha fund is, as its name implies, a chaser of alpha, or the 'tactical', active return component of an investment, the All Weather fund has a simple "beta isolate and capture" premise, and seeks to generate a modestly better return than the market using a mixture of equity and bonds investments and leverage. Ironically, as we foretold back in 2009, in the age of ZIRP, virtually every "actively managed" hedge fund would soon become not more than a massively levered beta chaser however charging an "alpha" fund's 2 and 20 fee structure. At least Ray Dalio is honest about where the return comes from without hiding behind meaningless concepts and lugubrious econospeak drollery. Courtesy of "The All Weather Story: How Bridgewater created the All Weather investment strategy, the foundation of the "risk parity" movement" everyone else can learn that answer too.
We have long argued that when it comes to the deplorable and insolvent state of modern "developed" societies, the fault lies as much at the bottom, as at the top: the bottom, in this case, being the economic establishment in both academia and 'practice' that peddles a voodoo pseudoscience as a legitimate explanation for the unpredictable happenings in irrational world, meant to give people an illusory sense of control, and which works until it doesn't and fails spectacularly, at which point "the top", or the central banks conceived to smooth reality when it does not conform to economist models (and to facilitate wealth transfer from the poor to the rich of course), have to step in and fill gaping holes some $20+ trillion wide - see: 2008/2009 (all the while, the transfer of wealth from the middle class to the wealthy, by way of that invisible tax known as inflation continues). And while it has proven easy for the shamans of this voodoo class to fool the general population time and again (use big words, speak loudly and with confidence, mock any opposing voices as not having a Ph.D. or a Nobel prize in economics... "act as if") in their infallibility and superiority or that they have even the faintest clue what it is they are talking about, the reverse has also turned out to be true. And as the case of one Mr. Baptista da Silva from Portugal has shown, there is nothing easier than for an economist to con other economists. Or, rather, one fraud to con a whole lot of other frauds.
As China's major trading partners try to control rising public pension and health care costs, they may not realize they also have an important stake in China's ongoing struggle to fashion a safety net for its own rapidly aging population. Many observers assume China has no pensions or healthcare insurance for the 185 million people over the age of 60 (13.7% of population), the highest official retirement age for most workers. They may well believe this explains why Chinese families save so much–more than 30% of household income–and therefore spend less on consumer goods, including imports from trading partners.
On May 10, 2000 a GATA delegation consisting of Reg Howe, Frank Veneroso, Chris Powell and Bill Murphy met with Denny Hastert, The Speaker of the House in the United States Congress; Spencer Bachus, the Chairman of the House Subcommittee on Domestic and International Monetary Policy; and Dr. John Silvia, the Chief Economist of the Senate Banking Committee. We presented each of them our 100 page "Gold Derivative Banking Crisis" document and personally delivered it to the staff of every House and Senate Banking Committee member.
You truly have to be mentally challenged if you follow the gold/silver market action and cannot appreciate something is very amiss, as per the confused Mitsui gold people, as brought to your attention the other day.
The IMF’s Il Houng Lee, Murtaza Syed, and Liu Xueyan have published a very interesting and widely noticed study called “Is China Over-Investing and Does it Matter?” In it they argue that there is strong evidence that China is overinvesting significantly. China’s investment rate is so high, that even ignoring the tremendous evidence of misallocated investment, unless we can confidently propose that Beijing has uncovered a secret formula that allows it to identify high quality investment in a way that no other country in history has been able, there is likely to be a systematic tendency to wasted investment. The extent of Chinese overinvestment – even if we assume that it has not already caused significant fragility in the banking system and enormous hidden losses yet to be amortized – requires a very sharp contraction just to get back to a “normal” which, in the past, was anyway associated with difficult economic adjustments. It is hard to imagine how such a sharp contraction in investment will itself not lead to a sharp drop in GDP growth.
It’s Not a Tax or Spending Problem … It’s a Devolution Into Lawlessness
The Lie that Prosecuting Bank Fraud Will Destabilize the Economy Is What Is REALLY Destroying the EconomySubmitted by George Washington on 12/22/2012 23:38 -0500
Failing to Prosecute White Collar Crime Guarantees a Weak and Unstable Economy … and Future Financial Crashes
The BRICS (Brazil, Russia, India, China and South Africa) bloc has begun planning its own development bank and a new bailout fund which would be created by pooling together an estimated $240 billion in foreign exchange reserves, according to diplomatic sources. To get a sense of how significant the proposed fund would be, the fund would be larger than the combined Gross Domestic Product (GDP) of about 150 countries, according to Russia and India Report. Many believe the BRICS countries are interested in creating these institutions because they are increasingly dissatisfied by Western dominated institutions like the World Bank and the International Monetary Fund (IMF).
Five years ago, every American would have considered a trillion-dollar budget deficit a national tragedy. If you believe the CNBC parrot show, NOT having a trillion-dollar deficit is now a sure sign of the Apocalypse. I speak of course of the cleverly dubbed “Fiscal Cliff,” which panicked CNBC apologists are required to mention no less than 5,000 times a day. Creating the illusion of economic growth is easy if you can print money. It’s a prank you can play on an entire country. Cut the value of the currency in half and the economy’s size will appear to double. If it doesn’t, you’re in recession (whether you know it or not). Cavemen probably understood this concept better than America’s best economic minds.
Americans Have Less Access to Justice than Botswanans … And Are More Abused By Police than KazakhstanisSubmitted by George Washington on 11/28/2012 14:57 -0500
U.S. Scores Towards the Bottom of All North American and Western European Nations
Who owes what to whom?
Of all the hollow and uninspired elections that this country has suffered through over the past several decades, one might think that at some point long ago the American public would have finally struck a plateau of disenfranchisement; that we could sink no further into despondency, that there is a saturation limit to the corruption of our voting process. Unfortunately, there has been no such luck. We have to say that in all honesty we have never seen more people gut jumbled and disgusted with our electoral system than we have in 2012. In 2012, it will not be about voting. It will not be about “winning”. It will not even be about getting to the next election. It will be about survival. We're sorry to say that the idea that one man will do less damage than the other is a naïve sentiment. Democrat? Republican? Obama? Romney? The crimes and calamities wrought will be exactly the same. Take a look into our crystal ball and see the future. Here is how the winner will destroy America.