en The Real 'Fear' Index Just Went To '11' <p><em><strong>A funny thing has happened below the surface of the markets since late last year.</strong></em> As first The Fed, then The BoJ, and The ECB respectively saw their credibility crushed into a mumbling excuse pool of elite utterances as global bond yields crashed along with global growth and inflation expectations, <strong>professional investors have been busily buying crash protection</strong> (carefully masking their buying by managing &#39;normal&#39; risk measure like VIX through endless nefarious cash, ETF, and Futures manipulation). But now, a week after <a href="">&#39;Black Swan&#39; bets soared ahead </a>of the central-plan-destroying Brexit vote, <strong>the real &#39;fear&#39; index has spiked to unprecedentedly high levels</strong>.</p> <p>With VIX flip-flopping to and fro at the whim of every fast money trader...</p> <p><a href=""><img src="" style="width: 600px; height: 432px;" /></a></p> <p>&nbsp;</p> <p>Deep out of the money, and &#39;Black Swan&#39; bets have been building...<strong> </strong></p> <p><a href=""><img height="314" src="" width="600" /></a></p> <p><em><strong>&quot;It&#39;s a black swan type of put,&quot; </strong></em>said Steve Sosnick of Timber Hill LLC. <em><strong>&quot;It&#39;s very possible there will be an extreme result, and people like to have insurance against a low-probability, high-outcome event.&quot;</strong></em></p> <p><u><strong>Smashing the SKEW Index - the real &#39;Fear Index&#39; to 11 on the Spinal Tap amplifier of historical financial crises...</strong></u></p> <p><a href=""><img height="310" src="" width="600" /></a></p> <p><em>As a reminder, Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options. <strong>Generally, a rise in skew indicates that &#39;crash protection&#39; is in demand among institutional investors</strong> (institutional/professional investors are the biggest traders in SPX options).</em></p> <p>In other words, <em><strong>professionals have rotated from &#39;normal&#39; risk protection to &#39;extreme&#39; risk protection at the largest pace on record all the while fooling the mainstream investor who sees a declining VIX and continues to pick up pennies in front of the steamroller.</strong></em></p> <p><a href=""><em>As we explained previously,</em></a><strong><em> </em>an unusual move in the skew index (which historically oscillates approximately between a value of 100 and 130) is especially interesting&nbsp; when it diverges strongly from the VIX</strong>, which measures at the money and close to the money front month SPX option premiums.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 313px;" /></a></p> <p>Basically what a &#39;low VIX/high skew&#39; combination is saying is:<em><span style="text-decoration: underline;"><strong> &#39;the market overall is complacent, but big investors perceive far more tail risk than usually&#39;</strong></span></em> (it is exactly the other way around when the VIX is high and SKEW is low).</p> <p>In even simpler words, a surprising increase in realized volatility may not be too far away...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="965" height="499" alt="" src="" /> </div> </div> </div> Black Swan Bond Institutional Investors Volatility Wed, 29 Jun 2016 16:30:00 +0000 Tyler Durden 564748 at Who Said It? Bernie, Donald, Or Hillary? <p><a href=""><em>Submitted by Michael Shedlock via,</em></a></p> <p><strong>It&rsquo;s quiz time.</strong></p> <p>I will list a statement. You decide who said it.</p> <p>The correct answer is either Bernie Sanders, Donald Trump, or Hillary Clinton.</p> <p><u><strong>34 Statements &ndash; Who Made Them?</strong></u></p> <ol> <li>I do not believe in unfettered free trade. I believe in fair trade which works for the middle class and working families.</li> <li>I will take on corporations that take their jobs to China.</li> <li>I think NAFTA has been a disaster.</li> <li>Instead of passing such trade deals again and again, we must develop trade policies which demand that American corporations create jobs here, and not abroad.</li> <li>TPP is a death blow for American manufacturing.</li> <li>I&rsquo;m for free and fair trade.</li> <li>We need to bring manufacturing jobs back home where they belong.</li> <li>Globalization has torn down the barriers that have formerly separated the national from the international markets.</li> <li>The top priority of any trade deal should be to help American workers.</li> <li>I heard it about NAFTA. I heard it about CAFTA. I heard it about permanent normal trade relations with China. Here is the fact. Since 2001, we have lost almost 60,000 factories and millions of good-paying jobs.</li> <li>Maybe we should have a trade policy which represents the working families of this country, that rebuilds our manufacturing base, not than just representing the CEOs of large multinational corporations.</li> <li>We must end our disastrous trade policies (NAFTA, CAFTA, PNTR with China, etc.) which enable corporate America to shut down plants in this country and move to China and other low-wage countries.</li> <li>This wave of globalization has wiped out our middle class.</li> <li>NAFTA was the worst trade deal in history, and China&rsquo;s entrance into the World Trade Organization has enabled the greatest jobs theft in history.</li> <li>I think corporate America has to start investing in this country and create decent paying jobs here.</li> <li>It is a lot cheaper for the American companies to set up plants in China, hire Chinese workers at 50 cents an hour, 75 cents an hour, whatever it is, and have them build the product for the Chinese markets than it is to pay American workers $15 an hour, $20 an hour, provide health insurance, deal with the union, deal with the environment.</li> <li>Connect the dots. Our current trade deficit is causing the loss of over 2 million jobs. Over the last 20 years, while the US has run up over a trillion dollars in trade deficits, millions of American workers have been thrown into the streets.</li> <li>The function of trade agreements like NAFTA is to make it easier for American companies to move abroad, and to force our workers to compete against desperate people in the Third World.</li> <li>Our current record-breaking merchandise trade deficit of $112 billion is costing us over 2 million decent paying jobs. NAFTA, GATT, and Most Favored Nation status with China must be repealed, and a new trade policy developed.</li> <li>The word has to get out to corporate America, they are going to have to start reinvesting in the United States of America. They are going to have to start building the products and the goods the American people need rather than run all over in search of cheap labor.</li> <li>The TPP is horrible deal. It is a deal that is going to lead to nothing but trouble.</li> <li>I am all for free trade, but it&rsquo;s got to be fair. When Ford moves their massive plants to Mexico, we get nothing. I want them to stay in Michigan.</li> <li>The U.S. has become a dumping ground for everybody else&rsquo;s problems.<br />Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.</li> <li>When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians do nothing.</li> <li>Skilled craftsmen and tradespeople and factory workers have seen the jobs they loved shipped thousands of miles away.</li> <li>The current global trading system is distorted not only by barriers to entry in developing and emerging economies, but by the power of special interests in developed countries.</li> <li>We should focus on ending currency manipulation, environmental destruction and miserable working conditions in China.</li> <li>We&rsquo;re going to stop giving penny of your money to anybody who ships a job out to another country. We&rsquo;re going to begin to get the tax code to reflect what the needs of middle class families are so we can rebuild a strong &amp; prosperous middle class.</li> <li>Trade needs to become a win-win. People ask me, am I a free trader or a fair trader? I want to be a smart, pro-American trader. And that means we look for ways to maximize the impact of what we&rsquo;re trying to export and quit being taken advantage of by other countries.</li> <li>I believe in smart trade. Pro-American trade. Trade that has labor and environmental standards, that&rsquo;s not a race to the bottom but tries to lift up not only American workers but also workers around the world.</li> <li>It&rsquo;s important that we have an idea of how to maximize the benefits from the global economy while minimizing the impact on American workers. That includes things like real trade adjustment assistance and other support.</li> <li>It&rsquo;s important that we enforce the agreements we have. That&rsquo;s why I&rsquo;ve called for a trade prosecutor, to make sure that we do enforce them.</li> <li>What we have learned is that we have to drive a tougher bargain.</li> <li>Hillary Clinton Voted for virtually every trade agreement that has cost the workers of this country millions of jobs.</li> </ol> <p><strong>Sources </strong></p> <ul> <li><a href="" target="_blank">Bernie Sanders on Free Trade</a></li> <li><a href="" target="_blank">Trump on Free Trade</a></li> <li><a href="" target="_blank">Hillary Clinton on Free Trade</a></li> <li><a href="" target="_blank">Donald Trump&rsquo;s Jobs Plan Speech</a></li> </ul> <p><u><strong>Answers</strong></u></p> <ul> <li>Sanders: 1, 2, 4, 10, 11, 12, 15, 16, 17, 18, 19, 20</li> <li>Trump: 3, 5, 6, 7, 18, 13, 14, 21, 22, 23, 24, 25</li> <li>Clinton: 26, 27, 28, 29, 30, 31, 32, 33</li> <li>Sanders and Trump: 34 (Sanders first, Trump quoted Sanders)</li> </ul> <p>Flip a coin. <strong>As a firm believer in free trade, they are all totally hopeless.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="292" height="151" alt="" src="" /> </div> </div> </div> Bernie Sanders China Corporate America Donald Trump ETC Ford Global Economy Mexico Michigan Trade Deficit World Trade Wed, 29 Jun 2016 16:10:00 +0000 Tyler Durden 564773 at There Is Now A Staggering $11.7 Trillion In Negative Yielding Debt <p>It was not even a month ago when we <a href="">last looked at the total amount of negative yielding debt </a>around the globe, and were shocked to find that according to Fitch, for the first time in history (obviously), there was over $10 trillion in negative yielding debt. <strong>Fast forward 4 weeks later, and the grand total is now $1.3 trillion higher, or $11.7 trillion.</strong> </p> <p>The split between positive and negative yielding debt is shown in the chart below:</p> <p><a href=""><img src="" width="500" height="279" /></a></p> <p>In a report released earlier, Fitch updates on the "investors' flight to safe assets following the UK's EU referendum on June 23" and finds that the global total of sovereign debt with negative yields was a staggering $11.7 trillion as of June 27, up $1.3 trillion from the end-May total. Brexit-related concerns drove more long-dated bond yields negative, with particularly big shifts in German, French and Japanese yield curves during June. </p> <p>As <a href="">Fitch notes</a>, worries over the global growth outlook, further fueled by Brexit, have continued to support demand for higher-quality sovereign paper in June. Widespread adoption of unconventional monetary policies, including large-scale bond-buying programs and negative deposit rates, have driven the large increases in negative-yielding debt seen this year. </p> <p>The chart below highlights the monthly changes in the outstanding par amount of negative-yielding sovereign debt by maturity bucket. The biggest drivers of the total increase during June were seen in longer-dated bonds. For example, German 10-year bund yields swung into negative territory and sub-zero yields moved further out on the curve for Japan -- now out to 17 years. <strong>Also, in Switzerland, virtually all sovereign debt carried a negative yield on June 27.</strong></p> <p><a href=""><img src="" width="500" height="402" /></a></p> <p>&nbsp;</p> <p>As DB's Jim Reid writes, yesterday we saw the Swiss yield curve actually trade negative the whole way out the curve. The longest dated Swiss government bond due in 2064 (so 48 years) touched -0.0082% at one stage before settling at +0.011% by the close. The chart below shows the Swiss yield curve to show how remarkable this is. We’ve also added the JGB curve where the longest dated bond due in 2056 (40 year) is trading at a minuscule 6bps and the Bund curve where the longest dated 30y bond is trading at 42bps.</p> <p><a href=""><img src="" width="500" height="380" /></a></p> <p>&nbsp;</p> <p><strong>Japanese government bonds (JGBs) continue to represent about two-thirds of the global total ($7.9 trillion), while Germany and France each now have over $1 trillion in sovereign debt with sub-zero yields</strong>. Japan's negative-yielding debt total grew by about 18% during the month, while Germany and France's total grew by 8% and 13%, respectively. European negative-yielding debt increases were offset in part by an approximately $0.2 trillion reduction in the Italian total since May 31. This likely reflected investor risk aversion related to Italy leading up to and following the Brexit referendum.</p> <p>The spread of negative yields into longer-dated paper was particularly evident in June. A total of $2.6 trillion in sovereign bonds with maturities of seven years or more now trade at a negative yield. This compares with the end-April total of $1.4 trillion.</p> <p><strong>The increasing amount of long-term negative-yielding debt underscores the challenges faced by large bond investors such as insurance companies that need to match long-term liabilities with similar maturity assets. As more of the global universe of safe assets drops into negative-yielding territory, income for these investors continues to fall.</strong></p> <p>UK sovereign bonds continue to trade at positive yields across the curve, but the Brexit vote has had a dramatic effect on the UK yield curve. Following the June 23 referendum, 10-year gilt yields dropped by 44 bps to 0.93% as of June 27, according to Bloomberg.&nbsp; </p> <p><strong>The $11.7 trillion total, which includes $3.2 trillion of short-term and $8.5 trillion of long-term sovereign debt, is influenced by the dollar's exchange rate with the yen and euro</strong>. During June, the dollar rose slightly against the euro, but weakened significantly (approximately 9%) versus the yen. This had a major impact on the dollar value of yen-denominated negative-yielding debt in our latest analysis, pushing the JGB total up by approximately $0.6 trillion beyond increases that would have occurred on an FX-neutral basis.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1150" height="924" alt="" src="" /> </div> </div> </div> 8.5% Across the Curve Bond Fitch France Germany Insurance Companies Italy Japan Jim Reid Sovereign Debt Switzerland Yen Yield Curve Wed, 29 Jun 2016 15:51:16 +0000 Tyler Durden 564774 at Brexiteers 1 : 0 Scaremongers - UK Stocks Erase All Brexit Losses <p>It seems Farage was right... again...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><strong>"Can we all just grow up, stop this absolute scare-mongering nonsense?" </strong></em>Farage told CNBC on Tuesday, adding that the FTSE 100 is up 3 percent today<em><strong>. "Can we just end this complete rubbish?"</strong></em></p> </blockquote> <p>&nbsp;</p> <p><iframe src=";byGuid=3000529883&amp;size=530_298" width="530" height="298"></iframe></p> <p>&nbsp;</p> <p>FTSE 100 is now unchanged from pre-Brexit as Osborne, Cameron and the fearmongers appear to have been proved wrong.</p> <p><a href=""><img src="" width="600" height="315" /></a></p> <p>&nbsp;</p> <p>Now what? It seems like Brexit was a good thing after all, so Fruckoff? Portugaleave?</p> <p><a href=""><img src="" width="600" height="313" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="963" height="505" alt="" src="" /> </div> </div> </div> Wed, 29 Jun 2016 15:39:49 +0000 Tyler Durden 564772 at Puerto Rico To Default On July 1 After Senate Passes Bailout Bill <p>Moments ago, following the <a href="">overwhelming passage </a>of a Puerto Rico bailout bill by the US House of Representatives, Congress found itself on the edge of sending the PR debt relief Bill for the president signature, when the Senate, in a 68-32 vote, likewise passed the measure. This makes final passage of the legislation a virtual certainty as sixty votes were needed to clear the procedural hurdle, but only a majority vote is necessary on final passage.</p> <p><strong>The legislation allows Puerto Rico to restructure $70 billion in debt and establish an outside control board to steer the island's troubled finances</strong>. President Obama supports the package, and is expected to quickly sign it. </p> <p>Puerto Rico faces $2 billion in debt payments on Friday, creating an effective deadline for passing the legislation that the Obama administration was determined to meet. Treasury Secretary Jack Lew was on Capitol Hill on Tuesday to round up support for the legislation. The bill faced opponents across the political spectrum. </p> <p>The losers in this case are a group of creditors who worry their investments in Puerto Rico’s debt will be eroded fought the bill for months. </p> <p>As <a href="">The Hill notes</a>, an advertising campaign, believed to be backed by creditors, charged that the legislation was a taxpayer bailout of Puerto Rico, though no taxpayer funds would be provided through the legislation. Civil society groups in Puerto Rico also opposed the legislation, arguing an oversight board created by the measure would supersede the will of the Puerto Rican people. They received loud support on the Senate floor from Sens. Bernie Sanders (I-Vt.) and Bob Menendez (D-N.J.), </p> <p>Despite the opposition, party leaders backed the package and were able to cobble together enough support to get to 60 votes, handing a victory to Senate Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Harry Reid (D-Nev.).&nbsp; </p> <p>The legislation’s advancement is also a significant victory for the Obama administration, which served as the lead negotiator for Democrats, hammering out a package with House Republicans over weeks of talks. </p> <p>Intense lobbying surrounded the bill for months on Capitol Hill, as a raft of investors in Puerto Rican debt descended on the Capitol to try and carve out the most advantageous package possible. Lawmakers were bombarded with pressure from all sides, as creditors jockeyed for optimal position in the final package, which would determine who gets paid how much from what is left of Puerto Rico’s revenue.</p> <p>What happens next? <a href="">Some more details</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>With the bill apparently set to become law, Congress will have taken steps to address a deepening economic, fiscal, and humanitarian crisis on the island. Years of economic decline had led to a mass exodus of Puerto Ricans to the American mainland, driving down its revenues and eventually leaving it without enough government funds to pay off its debt.</p> <p>&nbsp;</p> <p>The island’s status as a U.S. territory left officials there with no recourse, since a quirk in the bankruptcy code leaves territories without access to the same bankruptcy protections afforded to states and municipalities. In effect, the island needed Congress to pass a law, in an election year, to get out from under its crushing debt load. </p> <p>&nbsp;</p> <p><strong>The island has had to slash public services in an effort to stay afloat, and the White House warned that even more severe steps, like the shuttering of hospitals, could come without congressional action. </strong></p> <p>&nbsp;</p> <p>But now, the bill freezes any legislation from creditors, and allows the oversight board to step in and work towards an affordable debt restructuring package for the island. </p> <p>&nbsp;</p> <p>Liberal lawmakers griped about side provisions that relax labor regulations on the island. Democrats also were peeved that Republicans brought the bill straight to the floor without the opportunity to try and amend it.</p> </blockquote> <p>The most immediate future, however, is far simpler:</p> <ul> <li><strong>PUERTO RICO GOVERNOR SAYS COMMONWEALTH WILL DEFAULT ON JULY 1</strong></li> </ul> <p>&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1000" height="667" alt="" src="" /> </div> </div> </div> Bankruptcy Code Bernie Sanders Creditors default Obama Administration President Obama Puerto Rico White House Wed, 29 Jun 2016 15:35:51 +0000 Tyler Durden 564771 at The Prison Of Peoples - France's Le Pen Calls For European 'Spring' <p><a href=""><em>Via VoxDay blog,</em></a></p> <p><strong>Marine Le Pen writes a powerful argument <a href="">for nationalism and the end of the EU</a> </strong>in the New York Times:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>The European Union has become a prison of peoples. </strong></u>Each of the 28 countries that constitute it has slowly lost its democratic prerogatives to commissions and councils with no popular mandate. Every nation in the union has had to apply laws it did not want for itself. Member nations no longer determine their own budgets. They are called upon to open their borders against their will.</p> <p>&nbsp;</p> <p>Countries in the eurozone face an even less enviable situation.<strong> In the name of ideology, different economies are forced to adopt the same currency, even if doing so bleeds them dry. It&rsquo;s a modern version of the Procrustean bed, and the people no longer have a say.</strong></p> <p>&nbsp;</p> <p>And what about the European Parliament? It&rsquo;s democratic in appearance only, because it&rsquo;s based on a lie: the pretense that there is a homogeneous European people, and that a Polish member of the European Parliament has the legitimacy to make law for the Spanish. We have tried to deny the existence of sovereign nations. It&rsquo;s only natural that they would not allow being denied.</p> <p>&nbsp;</p> <p><strong>Brexit wasn&rsquo;t the European people&rsquo;s first cry of revolt.</strong> In 2005, France and the Netherlands held referendums about the proposed European Union constitution. In both countries, opposition was massive, and other governments decided on the spot to halt the experiment for fear the contagion might spread. A few years later, the European Union constitution was forced on the people of Europe anyway, under the guise of the Lisbon Treaty. In 2008, Ireland, also by way of referendum, refused to apply that treaty. And once again, a popular decision was brushed aside.</p> <p>&nbsp;</p> <p>When in 2015 Greece decided by referendum to reject Brussels&rsquo; austerity plans, the European Union&rsquo;s antidemocratic response took no one by surprise: To deny the people&rsquo;s will had become a habit. In a flash of honesty, the president of the European Commission, <strong>Jean-Claude Juncker, unabashedly declared, &ldquo;There can be no democratic choice against the European treaties.&rdquo;</strong></p> <p>&nbsp;</p> <p><strong>Brexit may not have been the first cry of hope, but it may be the people&rsquo;s first real victory.</strong></p> </blockquote> <p>With eloquent nationalist leaders like her, Viktor Orban, and Matteo Salvini, among others there is reason to believe it will not be the last one. The EU is immoral, unnatural, anti-democratic, and evil. The sooner it collapses, the better off everyone will be.</p> <p>The globalists are the Nazis of the 30s and 40s and the Communists of the Cold War. They are the enemy of Man. As Le Pen aptly notes, &quot;more and more, the destiny of the European Union resembles the destiny of the Soviet Union, which died from its own contradictions.&quot;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>One thing is certain: Britain&rsquo;s departure from the European Union will not make the union more democratic.</strong> The hierarchical structure of its supranational institutions will want to reinforce itself: Like all dying ideologies, the union knows only how to forge blindly ahead. The roles are already cast &mdash; Germany will lead the way, and France will obligingly tag along.</p> <p>&nbsp;</p> <p>Here is a sign: President François Hollande of France, Prime Minister Matteo Renzi of Italy and acting Prime Minister Mariano Rajoy of Spain take their lead directly from Chancellor Angela Merkel of Germany, without running through Brussels. A quip attributed to Henry Kissinger, &ldquo;Who do I call if I want to call Europe?&rdquo; now has a clear answer: Call Berlin.</p> <p>&nbsp;</p> <p><u><em><strong>So the people of Europe have but one alternative left: to remain bound hand-and-foot to a union that betrays national interests and popular sovereignty and that throws our countries wide open to massive immigration and arrogant finance, or to reclaim their freedom by voting.</strong></em></u></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="510" height="343" alt="" src="" /> </div> </div> </div> Councils European Union Eurozone France Germany Greece Henry Kissinger Ireland Italy Nationalism Netherlands New York Times Wed, 29 Jun 2016 15:15:18 +0000 Tyler Durden 564769 at The FED Finds a Good Excuse to Extend and Pretend Through Brexit <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><a href=" The FED Finds a Good Excuse to Extend and Pretend Through Brexit Article"><br /></a></p> <h1><a href=" The FED Finds a Good Excuse to Extend and Pretend Through Brexit Article"><span style="text-decoration: underline;"><em>The FED Finds a Good Excuse to Extend and Pretend Through Brexit</em></span></a></h1> <p><span style="color: #0000ff;"><a href=""><br /> </a></span></p> <p><span style="color: #0000ff;"><br /> <a href=""><span style="text-decoration: underline;"><em><strong><span style="line-height: 20.8px;">Written by Nathan McDonald (CLICK FOR ORIGINAL)</span></strong></em></span></a></span></p> <p>&nbsp;</p> <p><a href=""><img src="" width="710" height="473" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">Brexit has happened. Those who are not happy with this reality are making their voices heard; yet, so too are those who are overjoyed to have their liberty and freedom back in their own hands. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">This divide is glaringly obvious and has been the highlight of the news reel since last week's vote. There has been a flood of articles relating to the matter, and for good reason. This is a historic event and a move that slaps the global elites squarely in the face, something that rarely happens throughout our history. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">Regardless, turbulent times are ahead for the global markets, as this move was considered a "black swan" event, one that was not expected by many, even by those who hoped it would happen. Even Nigel Farage, one of the leaders of the "Leave" campaign, suspected that the vote would be close, but didn't hold out hope that they would win. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">Therefore, it is no surprise to find that the FED is also shocked by this turn of events. They, along with many others, did not expect this to happen - but never fear! They will take advantage of the situation and use it as a full-blown excuse as to why they once again cannot act and raise interest rates. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">Brexit has essentially given Janet Yellen a perfect excuse as to why she cannot raise rates. The FED has been jawboning about a raise in rates once again over the past few months, something that I have highlighted time and time again. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p>This MOPE is a constant theme at just about any press conference the FED attends. They must keep people thinking that they have some sort of power, that they can unravel this mess they have created in the fiat markets. The fact is they cannot, and they know this.</p> <p style="margin: 0in; margin-bottom: .0001pt;">If Brexit didn't occur, then the FED would have simply found another excuse to not raise rates. That, or they would have just engaged in more extend and pretend, pushing the idea down the road just a little further as they so often do. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">Either way, near-rock bottom interest rates are here to stay as the U.S. dollar strengthens vs the pound and the Euro. As the elites say, never let a good crisis go to waste. Don't worry - the FED isn't. </p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <p style="margin: 0in; margin-bottom: .0001pt;">&nbsp;</p> <h1 style="padding: 0px; margin-top: 0px; margin-bottom: 0.25em; line-height: 1.15; font-size: 24px; font-weight: normal; font-family: Roboto, sans-serif; max-width: 90%;"><em style="margin: 0px; padding: 0px;"><span style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 20.3333px; line-height: 17.3333px;">Please email with any questions about this article or precious metals</span></em><em style="line-height: 1.15; margin: 0px; padding: 0px;"><span style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 20.3333px; line-height: 17.3333px;">&nbsp;</span><strong style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 20.3333px; line-height: 17.3333px;"><span style="text-decoration: underline;"><a href=" The FED Finds a Good Excuse to Extend and Pretend Through Brexit Article">HERE</a></span></strong></em></h1> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <h1><span style="color: #0000ff;"><a href=" The FED Finds a Good Excuse to Extend and Pretend Through Brexit Article"><span style="text-decoration: underline;"><em>The FED Finds a Good Excuse to Extend and Pretend Through Brexit</em></span></a><a href=""><span style="text-decoration: underline;"><em>&nbsp;</em></span></a></span></h1> <p><span style="color: #0000ff;"><a href=""><br /> </a></span></p> <p><span style="color: #0000ff;"><br /> <a href=""><span style="text-decoration: underline;"><em><strong><span style="line-height: 20.8px;">Written by Nathan McDonald (CLICK FOR ORIGINAL)</span></strong></em></span></a></span></p> Black Swan Janet Yellen Precious Metals Reality Wed, 29 Jun 2016 15:03:00 +0000 Sprott Money 564768 at What's Driving This Ramp? The Biggest Short Squeeze In 5 Years <p>"Most Shorted" stocks are up a stunning 4.3% today. <strong>This is the biggest single-day squeeze since 2011</strong> with an almost 8% spike off Monday's lows...</p> <p>Yuuge squeeze since Monday's lows...</p> <p><a href=""><img src="" width="600" height="315" /></a></p> <p>&nbsp;</p> <p>This is the biggest squeeze in 5 years...</p> <p><a href=""><img src="" width="600" height="298" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="948" height="497" alt="" src="" /> </div> </div> </div> Wed, 29 Jun 2016 14:57:54 +0000 Tyler Durden 564767 at Scotland Is About To Have Its Own Currency And Much More: How JPM Sees Brexit Playing Out <p>Several days ago, we <a href="">showed a schematic </a>of what Citigroup thought the post-Brexit political timeline would look like. This was released before Brexit was official. </p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="270" /></a></p> <p>&nbsp;</p> <p>Now that Brexit is official, JPM's Malcolm Barr has come out with his base case forecast of "How Brexit Happens." For those following the constant drama, there is little new here, except for one thing - the thing that caused a mini scandal earlier today during the EU Summit between Juncker and Rajoy - namely the treatment of Scotland. Here JPM said that it now expects Scotland to vote for independence and introduce its own currency before Britain leaves the European Union in 2019. </p> <p>"Our base case is that Scotland will vote for independence and institute a new currency at that point (2019)," JP Morgan economist Malcolm Barr said in a note to clients on Wednesday. Scottish First Minister Nicola Sturgeon will meet European Commission President Jean-Claude Juncker on Wednesday afternoon, seeking a way for Scotland to remain in the EU. As Reuters <a href=";feedName=businessNews&amp;utm_source=Twitter&amp;utm_medium=Social&amp;utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29">reminds us</a>, Scotland voted to stay in the EU in last week's referendum, putting it at odds with the United Kingdom as a whole, which voted 52-48 percent in favor of Brexit.</p> <p>If JPM is right, it means a historic split is in store for the United Kingdom which will see Scotland split politically from England and allign itself with the EU, something which would likely inspire a fresh wave of secessionist movements across Europe. Or, as the market would say, "bullish."</p> <p><a href=""><img src="" width="600" height="338" /></a></p> <p>* * * </p> <p><em>Full note from JPM's Malcolm Barr</em></p> <p><strong>How Brexit happens - our base case</strong></p> <p>There are myriad uncertainties in how the UK’s relationship with the EU will evolve in the wake of the referendum. In our minds, however, it is useful to lay out a base case as to how we think things will play out from here. It is highly unlikely events will align exactly to this script. But it useful to go through the exercise to help identify some of the key uncertainties along the way. <br />&nbsp;<br /><strong>Phase 1 – Election of a new Conservative Leader and PM (result declared&nbsp; 9th September)</strong></p> <p>The near 125,000 members of the Conservative Party will choose from 2 candidates selected by MPs. Polling suggests approximately 75% of that group were pro-Brexit at the early stages of the campaign. It is very likely that the new Conservative leader will be elected on a platform of implementing the referendum result and taking the UK out of the EU.</p> <p><strong>Phase 2 – Article 50 (2016)</strong></p> <p>The incoming PM is likely to seek Parliamentary assent for submitting the formal article 50 request to leave the EU. With the EU refusing to begin talks before the article 50 request is submitted, our base case is this happens by the end of the year.&nbsp; Constitutional experts argue about whether this is strictly needed or whether the new PM could act unilaterally. In practise we think it inevitable that the new PM would seek a Parliamentary assent given that the referendum is not legally binding. In our view, this is the crucial point wherein Brexit could be stopped, if it is to be blocked. Enough Conservative MPs (at this stage, we guess close to 20) would need to defy the leadership to prevent a motion from passing. This would likely generate a confidence vote and possibly a new general election if it occurs. Our base case is that Conservative MPs will fall in behind the leader and implement “the will of the people” as expressed in the referendum.</p> <p><strong>Phase 3 – Post Article 50 (2017)</strong></p> <p>Negotiations on the form of the EU exit begin soon after the article 50 request is submitted. On the EU side, the Commission will be acting on the basis of a mandate from the Council, and it appears representative from the Council will be involved on an ongoing basis. On the UK side, parties representing the constituent nations will likely be present. The EU will likely attempt to focus on the issues relating to exit in the first instance, rather than those relating to the future relationship with the UK. The UK side will likely seek to push toward the latter set of issues, and to seek as much access as possible to the single market while restricting free movement of labor.&nbsp; In our base case, negotiations on exit issues will make progress, but progress on the forward looking issues will be negligible as time passes.</p> <p><strong>Phase 4 – Decision time (2018-19)</strong></p> <p>The UK will likely spend the first year of the negotiating process seeking to establish access to the single market on terms very similar to those seen during EU membership without accepting free movement of labour or contributions to the EU budget. We doubt this will be successful. Hence the UK will ultimately be forced to choose between a “Norway” option (accepting free movement of labour, EU regulations and budget contributions in return for full access to the single market) or an arrangement which has significantly less market access. At this point in time, the latter appears more likely. This means that access to the service sector (in particular) in the EU will likely be curtailed, along with some constraints on trade in goods. To the extent that UK economic growth is very weak during the negotiating process, the relative importance of market access versus migration control will shift in favour of the latter. However, our base case is that the hit from EU exit will demonstrate itself as a persistent drag on a positive growth rate, rather than generating&nbsp; an ongoing contraction. As a result, the extent to which economic under performance will motivate a reassessment of UK priorities is ambiguous.<br />&nbsp;<br />The UK will want to see the exit from the EU completed ahead of the general election in 2020. Submitting the article 50 request in late 2016 means that the standard two year negotiating period will expire in late 2018. However, the UK will likely secure agreement to extend the discussions into 2019, as the focus shifts onto the detail of a set of sectoral arrangements which provide some access to goods sectors beyond WTO terms. Discussion on access to some sectors extending beyond the WTO baseline will likely run beyond the 2020 election, while some sectors will see a reversion to WTO rules for a period while subsequent discussions are promised.<br />&nbsp;<br />During all four phases of the above, we expect there to be clear evidence of multinational operations shifting the location of their activity out of the UK given the regulatory uncertainties. Financial services are among the sectors that will be most exposed to this process. Even if the UK begins to signal that it will compromise on other priorities in order to secure “full” access to the single market in financial services, there is a clear risk that euro-denominated activities relocate to within the EU simply to ensure continuity of relationships. In the event that it becomes clear that a given EU capital is the destination of choice, there is a possibility that this change could occur relatively quickly. The micro-economics of wholesale financial markets points toward sizeable externalities associated with the sharing of information and linkages between markets, hence its tendency to “clump” together within each time zone.&nbsp; </p> <p><strong>Scotland</strong></p> <p>Intersecting the UK's EU exit process is likely to be pressure to hold a new referendum on Scottish independence, which we expect will ultimately generate a vote shortly before the UK leaves the EU in 2019. <strong><span style="text-decoration: underline;">Our base case is that Scotland will vote for independence and institute a new currency at that point</span>. </strong>We will cover this issue in detail in a subsequent email.</p> <p><strong>Non-EU trade negotiations</strong></p> <p>As the UK’s likely exit from the EU becomes more concrete, there are three issues regarding non-EU trade. First is the need to renegotiate the UK’s trade arrangements with over 50 countries which were established while the UK was part of the EU (with the UK having signed them as part of the EU, they no longer apply once we exit). Second, the UK’s membership of the WTO has also been on the basis of its membership of the EU. The head of the WTO has stated that it is likely the UK will have to renegotiate the terms of its WTO membership, as at least some members will not be happy to simply allow UK membership to continue. Third, leave campaigners argued that the UK would be able to strike its own trade deals with countries like the US, China and India upon leaving the EU, so there may be the beginnings of some effort in that direction.<br />&nbsp;<br />All of the above issues are likely to prove intricate and time consuming. The UK starts from a position where it does not have a deep well of resources and experience within the civil service to deal with trade issues. The UK’s negotiating position in these discussions is also likely to be very weak. The simultaneous loss or scaling back of such a large number of trading relationships upon EU exit is likely to be a blow to UK exporters, meaning the need to get a successor deal is more urgent for the UK than for our trading partners. The UK may hope that progress on these issues could be made both before the EU exit is completed and before the full set of follow-on arrangements in our relationship with the EU is clear. However, our non-EU trading partners are likely to want to see the detail of the UK’s relationship with the EU before considering the detail of any bilateral deal with the UK, as there are important interdependencies between those sets of relationships.&nbsp; Put all of this together, and it is likely that the UK’s access to non-EU markets will become markedly more constrained in the wake of the EU exit for a period of years. And to the extent that the UK is able to secure “quick” deals, it is unlikely they will be on terms which are advantageous to the UK.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1920" height="1080" alt="" src="" /> </div> </div> </div> China Citigroup European Union India Reuters United Kingdom Wed, 29 Jun 2016 14:50:10 +0000 Tyler Durden 564766 at Germany Just Blew Up Italy's Bank Bailout Plan <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><strong>"You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before."</strong></em></p> </blockquote> <p>Rahm Emanuel prophetic words were quickly put to use by Italy on Monday morning, which barely waited one full day before using Brexit as the scapegoat excuse to warn that a €40 billion bailout of Italian banks is coming.&nbsp; </p> <p>As a reminder, on Monday morning the local media reported that Renzi's<br /> government was pursuing a six-month waiver of EU state-aid rules,<br /> allowing it to shore up banks without forcing investors to share losses. Two days ago, when <a href="">we first reported </a>of Italy's proposed bank rescue plan, we said that the chairman of Lower House’s Finance Commission, Maurizio Bernardo, confirmed that the government is studying options to support the banking sector, including a capital injection, and said a law decree “with measures going in that direction” could be approved by the end of this week.&nbsp; </p> <p>We pointed out that how such an intervention would be implemented was unclear; it was is also unclear how such a direct state recapitalization of Italian banks <strong>using public funds would be permitted by current EU and ECB regulations, which prohibit state bailouts of insolvent banks, </strong>although Europe has a long and illustrious history of finding massive loopholes to that particular prohibition. "Last but not least it is unclear how existing stakeholders, shareholders, bondholders and uninsured depositors, would be impaired under such a bailout."</p> <p>Well, they wouldn't, despite Europe's recent implementation of bail-in rules. That was the whole point. </p> <p>However, while Italy was hoping it would get a "pass" on using public funding, mostly Eurozone generated and thus courtesy of Germany, this appears to have hit a dead end moments ago, <a href="">when Bloomberg reported that Germany opposes any attempt </a>to shield private bank investors from losses if Italy pushes ahead with plans to recapitalize lenders. Chancellor Angela Merkel’s government says that <strong>European Union rules on handling struggling banks should apply in any rescue effort, including forcing losses on shareholders and some creditors before public money can be injected, </strong>the person said, declining to be identified because the deliberations are private. </p> <p>And just like that Renzi's entire recapitalization plan has gone up in smoke, because if there is one person in Europe who can veto an Italian bailout, it's Merkel, which is precisely what she has done.</p> <p>As Bloomberg adds, any waiver of the rules would be complicated, <strong>as Germany insists that the EU’s Bank Recovery and Resolution Directive be applied. That will mean Italy must first avoid triggering a wind-down procedure. </strong>The assumption in BRRD is that the need for “extraordinary public financial support” for a bank indicates that a bank is “failing or is likely to fail, and therefore triggers the need for resolution,” according to the European Banking Authority.</p> <p>Also according to the source, Germany isn’t pushing for banks to be wound down, according to the person. <strong>The government does, however, want to ensure that private investors are tapped before any public money is put into the banks</strong>. EU state-aid rules normally require shareholders and junior creditors to share losses.</p> <p>That, as we noted on Monday, is a dead end: currently, it is practically impossible for Italian banks to raise capital. "They are caught in a pincer as the ECB simultaneously demands compliance with tougher capital adequacy buffers, in some case demanding fresh infusions of capital three or four times.&nbsp; The banking squeeze has become politically explosive in Italy after thousands of small depositors were wiped out at four regional banks late last year. They were classified as junior bondholders, even though most of them were just ordinary savers who did not realize what was being done with their money."</p> <p>But worst of all for Renzi, Merkel's government in Berlin rejects the argument that the U.K. vote to leave the EU constitutes an “exceptional circumstance” which, under EU basic law, can allow a national government to grant aid to a company outside of the state-aid rules.&nbsp; </p> <p><strong>Which simply means that Europe will need a bigger crisis, </strong>something which can be easily arranged, because recall as we concluded last time that the biggest winner from an Italian bank bailout would be none other than the ECB's Mario Draghi under whose tenure as governor at the Bank of Italy from 2005 until 2011 is when Italy's banks loaded up on all those €360 billion in bad and non-performing loans which Italy is now desperate to eliminate or at least offset. The last thing Draghi would want is for his legacy to one remember for the collapse of the Eurozone's most insolvent banking system.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="690" height="388" alt="" src="" /> </div> </div> </div> Creditors European Union Eurozone Fail Germany Italy non-performing loans None Rahm Emanuel recovery Regional Banks Wed, 29 Jun 2016 14:41:30 +0000 Tyler Durden 564753 at