"China... across the board... is preparing for something big in currency markets... The world has an unease about the dollar system... former President Hu of China said 'the dollar is a product of the past'."
- Once-Unthinkable Criminal Pleas by U.S. Banks Get Investor ‘Meh’ (BBG)
- The E-Mail That Helped Catch Barclays: ‘ISDAfix Is Manipulated’ (BBG)
- CFTC Said Preparing ISDAfix Probe Talks in Weeks: Credit Markets (BBG)
- Islamic State takes control of Syria's Palmyra in westward advance (Reuters)
- Tensions High as Greece Gets Smallest Aid Rise Yet (BBG)
- The Rise of the $50,000 Rental (BBG)
- U.S. says South China Sea reclamations stoke instability (Reuters)
- First Hanergy Now Goldin: Hong Kong Stocks Drop Like Stones (BBG)
We have all read the latest crop of media articles challenging gold’s investment relevance. The typical approach to bearish gold analysis is to attribute hypothetical fears to gold investors, and then point out these concerns have failed to materialize. Sprott believes the investment thesis for gold is a bit more complex than simplistic motivations commonly cited in financial press. We would suggest gold’s relatively methodical advance since the turn of the millennium has had less to do with investor fears of hyperinflation or U.S. dollar collapse than it has with persistent desire to allocate a small portion of global wealth away from traditional financial assets and the fiat currencies in which they are priced.
“A depression is coming? Let’s put interest rates at zero. The economy is still in trouble? Let’s have the central bank print trillions in new securities. The banks are not lending? Let’s change the accounting rules and offer government guarantees and funds. People are still not spending? Let’s have negative interest rates. The economy is still in the tank? LET’S BAN CASH TRANSACTIONS!”
A cashless society is promising to have very tangible costs to our liberties and future prosperity.
China Officially Launches Critical Local Government Debt Swap — But Is The PBoC Really Just Issuing Treasury Bonds?Submitted by Tyler Durden on 05/19/2015 22:30 -0400
China has pitched its local government debt swap program as a way for heavily-indebted provinces to deleverage. Now that the program is officially off the ground, what are the implications for banks and for the PBoC?
If you happen to be particularly adept at wielding a sword and believe strongly that stiff penalties for crime play an important role in deterring future misdeeds, you might consider joining Saudi Arabia’s Ministry Of Civil Service as a “Perpetrator Of Retribution.”
"The borrowings of governments, households, companies and financial firms have risen in almost every big country around the world since the year 2000, relative to their GDP," The Economist notes. Here, graphed, is the evolution of the world's debt addiction from 2000 to 2014.
Central bank liquidity lines like those the Fed used to bailout the world seven years ago have become a fixture of the post crisis financial system. Since 2009, China has essentially blanketed the globe with yuan liquidity lines, inking swap agreements with nearly three dozen countries with the primary goal of increasing the degree to which the renminbi is used in international trade.
Even as the establishment of new supranational lenders suggests the US-dominated multilateral institutions that have characterized the post-war world are proving unable to meet the needs of modernity, both Congress and the President have stymied IMF reform measures, sending a message to China and others that US hegemony will not die without a fight.
- The fake: Avon-Offer Hoax Shows It’s Easy to Put One Over on SEC’s Edgar (BBG)
- And the real: US buyout group TPG snaps up UK discounter Poundworld (FT)
- El Niño near-certain to last through summer: U.S. climate center (Reuters)
- Oil Sands Land Becomes Alberta’s Hot Real Estate as Oil Rebounds (BBG)
- SEC a stumbling block in banks' forex guilty pleas: sources (Reuters)
- Pimco’s Stocks Chief Maisonneuve to Leave as Funds Closed (BBG)
- Bank of America’s Woes Test ‘Fixer’ CEO (WSJ)
- Puerto Rico Governor, Lawmakers Agree on Revenue Proposal (BBG)
Was that it for the "reflation" aka Bund-rout trade? One look at German bonds this morning and the sharp, panic selloffs seen in recent days are completely gone making one wonder if the ECB is done selling Bunds the CTAs who were riding the momentum train have all been squeezed out of their long positions and now the trend back to -0.20% can resume only to be followed by another abrupt 6-sigma move as the ECB once again sells inventory to buy itself more monetization runway. As a reminder, the ECB has to buy debt until September 2016 and it won't be able to if the 30-Year Bund is at -0.20% in a few months (or weeks).
According to Fitch, nearly 40% of credit in China is outside bank loans, meaning that between forced roll-overs, the practice of carrying channel loans as "investments" and "receivables", inconsistent application of loan classification norms, and the dramatic increase in off balance sheet financing, the 'real' ratio of non-performing loans to total loans is likey far higher than the headline number.
Want to know where the USD is headed? Call Riyadh!
- Amtrak train in Philadelphia wreck was traveling at twice speed limit (Reuters)
- The engineer has no recollection of the crash and “no explanation” for what happened (WSJ)
- Taliban claim attack on Afghan guesthouse that killed 14 (Reuters)
- Chicago’s Junk Rating From Moody’s Puzzles Investors (BBG)
- House votes to end spy agencies' bulk collection of phone data (Reuters)
- Wesley Clark: The Penny-Stock General (BBG)
- AOL’s Armstrong to Leave $213 Million Richer After Verizon Deal (BBG)
It has gotten to where just the lack of a rout in Bunds or any other government issue is enough to activate the "bullish" outside stop hunting algo, which is probably why ES has jumped overnight in another illiquid, newsless session. Curiously, Bunds shave not sold off even though the EUR has jumped sharply by almost 100 pips overnight to a 3 month high also on no news (with some amusing acrobatics by the USDJPY alongside) traditionally a bearish indicator for the Dax and thus the S&P. Perhaps the algos are just late, or maybe the "weak dollar is good for stocks" thesis has been activated, but in any event this morning's ramp higher in the ES will continue until all upside stops are hunted down by Virtu and crushed mercilessly.